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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1995
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COMMISSION FILE NUMBER
0-3505
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U. S. BANCORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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OREGON 93-0571730
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
111 S.W. FIFTH AVENUE, 97204
PORTLAND, OREGON (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (503) 275-6111
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
8 1/8% CUMULATIVE PREFERRED STOCK, SERIES A
(TITLE OF CLASS)
COMMON STOCK, PAR VALUE FIVE DOLLARS PER SHARE
(TITLE OF CLASS)
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
State the aggregate market value of the voting stock held by non-affiliates of
the registrant.
$4,128,621,755 at February 9, 1996
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
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CLASS OUTSTANDING AT FEBRUARY 9, 1996
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Common Stock, Par Value Five Dollars Per Share 150,907,902 Shares
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DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K into which the document is incorporated: Portions of the
U. S. Bancorp Definitive Proxy Statement dated March 11, 1996, are incorporated
by reference into Part III of Form 10-K.
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INDEX
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PART I
Item 1. BUSINESS................................................................. 1
General.................................................................. 1
Commercial Banking....................................................... 1
U. S. Bank of Oregon, U. S. Bank of Washington, West One Bank, Idaho.... 1
Commercial Activities.................................................. 1
Consumer Activities.................................................... 2
International Banking Activities....................................... 2
Trust Activities....................................................... 2
Competition............................................................ 2
Other Banking Subsidiaries.............................................. 3
Nonbank Subsidiaries..................................................... 4
Employees................................................................ 4
Monetary Policies........................................................ 4
Supervision and Regulation............................................... 4
U. S. Bancorp........................................................... 4
Banking Subsidiaries.................................................... 5
Other Subsidiaries...................................................... 7
Item 2. PROPERTIES............................................................... 7
Item 3. LEGAL PROCEEDINGS........................................................ 7
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................... 7
EXECUTIVE OFFICERS OF THE REGISTRANT..................................... 8
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.... 11
Item 6. SELECTED FINANCIAL DATA.................................................. 12
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS............................................................ 13
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............................. 39
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE............................................................... 86
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(See Part I for Executive Officers of the Registrant).................... 86
Item 11. EXECUTIVE COMPENSATION................................................... 86
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........... 86
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................... 86
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K................................................................. 86
SIGNATURES.......................................................................... 87
EXHIBIT INDEX....................................................................... 89
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PART I
ITEM 1. BUSINESS
GENERAL
U. S. Bancorp is a regional multi-bank holding company incorporated in the
state of Oregon in 1968 and headquartered in Portland, Oregon. West One Bancorp,
a registered bank holding company formerly headquartered in Boise, Idaho, was
merged into U. S. Bancorp effective December 26, 1995. At December 31, 1995, the
surviving corporation, U. S. Bancorp, had consolidated assets of $31.8 billion
and shareholders' equity of $2.6 billion. U. S. Bancorp is among the 30 largest
bank holding companies in the United States in terms of total assets. The
principal subsidiaries of U. S. Bancorp at December 31, 1995, were United States
National Bank of Oregon ("U. S. Bank of Oregon"), headquartered in Portland,
Oregon, U. S. Bank of Washington, National Association ("U. S. Bank of
Washington"), headquartered in Seattle, Washington, and West One Bank, Idaho,
headquartered in Boise, Idaho.
U. S. Bank of Oregon, U. S. Bank of Washington, and West One Bank, Idaho
are engaged in a general retail and commercial banking business. In terms of
deposits, at June 30, 1995, U. S. Bank of Oregon was the largest bank in Oregon
and the 63rd largest commercial bank in the United States. Also at that date, U.
S. Bank of Washington was, in terms of deposits, the third largest commercial
bank in the state of Washington and the 101st largest commercial bank in the
United States. At June 30, 1995, West One Bank, Idaho was, in terms of deposits,
the largest bank in Idaho and the 142nd largest commercial bank in the United
States. Other subsidiaries of U. S. Bancorp provide financial services related
to banking, including lease financing, consumer and commercial finance, discount
brokerage, investment advisory services, and insurance agency and credit life
insurance services. In addition, the investment advisor subsidiary of U. S. Bank
of Oregon, Qualivest Capital Management, Inc., advises a group of mutual funds,
the Qualivest(SM) Funds.
U. S. Bancorp's principal activities are located in the Northwest, but it
has operations throughout the Far West and, to a lesser extent, the rest of the
United States. U. S. Bancorp also actively reviews proposals for various
acquisition opportunities with which it is regularly presented. In addition to
the anticipated post-merger integrations described briefly below, U. S. Bancorp
continues to consolidate operations and facilities to lower costs and increase
efficiency while continuing to meet its corporate objectives and the needs of
regional customers. Other consolidations are described below in "Other Banking
Subsidiaries."
COMMERCIAL BANKING
U. S. BANK OF OREGON, U. S. BANK OF WASHINGTON AND WEST ONE BANK, IDAHO
U. S. Bank of Oregon, U. S. Bank of Washington, and West One Bank, Idaho
provide full-service commercial and consumer banking and a wide range of trust
services to individuals, businesses and governmental entities throughout their
respective states of operation and, to a lesser extent, in other areas of the
United States and abroad. At December 31, 1995, U. S. Bank of Oregon had banking
locations throughout the state of Oregon, including 173 full-service branches
and other banking facilities, and several consumer service centers and
commercial banking centers. Also at that date, U. S. Bank of Oregon had total
consolidated assets of $12.1 billion, total deposits of $8.3 billion and total
loans of $8.9 billion. U. S. Bank of Washington had, at December 31, 1995,
banking locations throughout the state of Washington, including 163 full-service
branches and other banking facilities. At December 31, 1995, U. S. Bank of
Washington had total consolidated assets of $7.0 billion, total deposits of $5.4
billion and total loans of $5.3 billion. At December 31, 1995, West One Bank,
Idaho had banking locations throughout the state of Idaho, including 92
full-service branches and other banking facilities, and several consumer service
centers and commercial banking centers. Also at that date, West One Bank, Idaho
had total consolidated assets of $4.7 billion, total deposits of $3.4 billion
and total loans of $2.7 billion.
Commercial Activities. U. S. Bank of Oregon, U. S. Bank of Washington, and
West One Bank, Idaho provide banking services to commercial customers in
business and industry, including customers in forest
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products, aerospace, electronic manufacturing, and agriculture (four of the
Northwest's major industries), wholesale and retail trade, finance, fishing,
transportation, general construction, and a wide range of other personal and
business service industries. The services provided include loans; mortgage and
interim construction financing on residential, industrial and commercial
properties; inventory financing; equipment leasing; acceptance financing;
commodity loans and other specialized types of credit; and cash management
services, including computerized balance and deposit reporting. U. S. Bank of
Oregon, U. S. Bank of Washington, and West One Bank, Idaho also purchase
installment obligations from retailers. Additionally, U. S. Bank of Oregon and
U. S. Bank of Washington maintain financial relationships with numerous
companies based outside the Northwest, providing lines of credit and other
financial services.
Consumer Activities. U. S. Bank of Oregon, U. S. Bank of Washington, and
West One Bank, Idaho provide financial services to individual customers
throughout Oregon, Washington and Idaho as well as, to a more limited extent, in
certain other western states. These services include accepting checking,
savings, and other time deposits, and the making of loans. The loan services
offered by U. S. Bank of Oregon, U. S. Bank of Washington, and West One Bank,
Idaho include real property loans (including for home improvements), extensions
of credit for purchases of automobiles and other consumer goods and services,
and individual lines of credit, both unsecured and secured. In addition,
customers of U. S. Bank of Oregon, U. S. Bank of Washington, and West One Bank,
Idaho have access to U. S. Bancorp's automated teller machine ("ATM") system
("U-BANK(R)"), which is among the ten largest in the United States, with
approximately 1,200 ATMs located throughout U. S. Bancorp's banking region. U.
S. Bancorp banks have issued approximately 1.3 million U-BANK(R) cards,
including more than 600,000 debit cards for customers with checking accounts. A
major purchase revolving line of credit secured by real estate is also available
from any of the banks.
International Banking Activities. U. S. Bank of Oregon international
operations include import-export transaction financing, letters of credit,
collections, remittance services, and foreign exchange services. U. S. Bank of
Oregon's International Banking Division finances trade transactions, primarily
through Oregon ports, and maintains correspondent accounts with 52 banks in 23
foreign countries. Fifty-three (53) banks in 21 foreign countries maintain
accounts with the International Banking Division. These correspondent
relationships facilitate loans, letters of credit, acceptances, collections and
exchange services abroad. U. S. Bank of Oregon's Investment Division engages in
money market loans to United States offices of foreign banks, with terms not
normally exceeding 90 days. At December 31, 1995, foreign loans outstanding with
respect to U. S. Bank of Oregon totaled approximately $9.8 million. In addition,
there were outstanding banker's acceptances in Mexico totaling $20 million,
representing a participation in a syndicated accommodation to PEMEX, the Mexican
national oil company, which matures in May 1996. U. S. Bank of Washington
provides international services through its International Banking Division
primarily for the benefit of existing customers. Such services include
import-export transaction financing, letters of credit, collections, and
remittance services. Foreign exchange services also are offered through U. S.
Bank of Washington. U. S. Bank of Washington does not have direct overseas
representation, either through representatives or foreign branch offices.
However, numerous correspondent and agency arrangements are maintained with
banks throughout the world with special emphasis on banks located in Pacific Rim
countries. At December 31, 1995, U. S. Bank of Washington maintained
correspondent accounts with 28 banks in 17 foreign countries, while 21 banks in
10 foreign countries maintained accounts with the International Banking
Division. Foreign loans outstanding at December 31, 1995, totaled approximately
$46.1 million.
Trust Activities. U. S. Bank of Oregon, U. S. Bank of Washington, and West
One Bank, Idaho offer a wide range of fiduciary services for individuals and
corporations. Each bank acts as executor under wills, as trustee under trusts
and pension and profit sharing plans, as conservator for estates of minors and
incompetents and as investment advisor to individuals, businesses and others.
Trust assets managed at December 31, 1995, by U. S. Bank of Oregon totaled over
$3.5 billion, by U. S. Bank of Washington totaled approximately $2.6 billion and
by West One Bank, Idaho totaled approximately $3.3 billion.
Competition. U. S. Bank of Oregon, U. S. Bank of Washington, and West One
Bank, Idaho compete for deposits, loans, trust accounts, and in providing other
financial services with independent, locally controlled banks, branches of
foreign banks, and banks which are subsidiaries of bank holding companies based
outside the Northwest. U. S. Bank of Oregon, U. S. Bank of Washington, and West
One Bank, Idaho also compete
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actively with savings and loan associations, savings banks, credit unions, small
local and national personal loan companies, local and national insurance
companies, local and national finance companies and other institutions such as
brokerage houses and financial units of out-of-state bank holding companies. All
of these entities are actively engaged in marketing various types of loans and
other financial services. Quality of service to customers, price of products,
range of products and services and ease of accessibility are among the principal
methods of meeting competition in the banking and financial service industries.
U. S. Bancorp emphasizes responsive service of high quality and value throughout
the organization.
OTHER BANKING SUBSIDIARIES
U. S. Bancorp's other banking subsidiaries at December 31, 1995, were U. S.
Bank of California, U. S. Bank of Idaho, National Association, U. S. Bank of
Nevada, First State Bank of Oregon, Idaho First Bank, U. S. Savings Bank of
Washington, West One Bank, Oregon, West One Bank, Oregon S.B., West One Bank,
Utah, West One Bank, Washington, and U. S. Bank (Canada), which had aggregate
deposits of $6.5 billion and aggregate loans of $5.9 billion at that date. The
activity of each of these subsidiaries was not material to U. S. Bancorp's
operations as a whole during 1995.
In connection with the merger of West One Bancorp with and into U. S.
Bancorp, it is anticipated that, over the course of the next year and subject to
all necessary regulatory and state approvals, the operations of West One Bank,
Oregon, West One Bank, Washington, and U. S. Bank of Idaho, National Association
will be merged with and into U. S. Bank of Oregon, U. S. Bank of Washington, and
West One Bank, Idaho, respectively. It is also expected that West One Bank,
Idaho will, following the integration, change its name to U. S. Bank of Idaho.
Additionally, West One Bank, Utah is expected to change its name to U. S. Bank
of Utah.
The largest of the banking subsidiaries listed above, other than West One
Bank, Oregon and West One Bank, Washington (such operations expected to be
integrated), in terms of total assets and deposits are U. S. Bank of California
and U. S. Bank of Nevada. U. S. Bank of California is headquartered in
Sacramento, California and provides full-service commercial, consumer and trust
banking services to individuals, businesses and governmental entities in its
30-county market area of northern California. At December 31, 1995, U. S. Bank
of California had 57 full-service banking offices, a commercial banking center
located in Sacramento, a real estate loan center located near Sacramento, and
other banking facilities. Also at that date, the state-chartered bank had total
assets of $2.0 billion, total deposits of $1.6 billion, and total loans of $1.4
billion. U. S. Bank of California was the twelfth largest commercial bank in
California in terms of deposits at June 30, 1995.
In February 1996, U. S. Bancorp announced that it had entered into a
definitive agreement to acquire California Bancshares, Inc. with operations
through 36 branches in the central valley of northern California and the east
San Francisco Bay Area and $1.6 billion in assets at December 31, 1995. Subject
to all necessary regulatory approvals and approval by the shareholders of
California Bancshares, Inc., consummation of the acquisition is anticipated to
occur in the second half of 1996.
U. S. Bank of Nevada provides full-service commercial, consumer and trust
banking services. At December 31, 1995, U. S. Bank of Nevada had banking
locations in southern and northern Nevada, including 26 full-service branches.
Also at that date, the state-chartered bank had total assets of $1.0 billion,
total deposits of $889 million, and total loans of $553 million. The bank was
the third largest full-service commercial bank in Nevada at December 31, 1995.
During 1995, U. S. Bancorp completed consolidations of several of its
banking operations. In August 1995, U. S. Bank, National Association was merged
into U. S. Bank of Oregon, and in November 1995, U. S. Bank of Southwest
Washington completed the consolidation of its operations and the sale of its
charter to Shorebank Corporation, a holding company for community development
banks. U. S. Bancorp has received approval from Canadian banking regulators to
proceed towards closure of U. S. Bank (Canada) and is in the process of full
liquidation of that bank. As described briefly above, further consolidations of
banking operations are expected involving West One Bancorp operations with and
into U. S. Bancorp operations.
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NONBANK SUBSIDIARIES
U. S. Bancorp's wholly-owned nonbank subsidiaries, including subsidiaries
of banks, totaled 46 companies at December 31, 1995. These subsidiaries operate
in the fields of commercial and consumer lending, insurance services, equipment
leasing, investment advisory services and discount brokerage, among others.
Among U. S. Bancorp's nonbank subsidiaries are the following:
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COMPANY OFFICE LOCATIONS
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Qualivest Capital Management, Inc. California, Idaho, Nevada, Oregon, Utah, Washington
U. S. Bancorp Securities California, Idaho, Nevada, Oregon, Washington
U. S. Bancorp Insurance Agency, Inc. Oregon
U. S. Bancorp Leasing and Financial 55 offices in 25 states
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EMPLOYEES
As of December 31, 1995, U. S. Bancorp and its subsidiaries had 14,081
full-time equivalent employees. A number of benefit programs are provided to all
eligible employees, including officers, of U. S. Bancorp and its majority-owned
subsidiaries, including: retirement and 401(k) plans, medical, dental and
long-term disability plans, life insurance, accidental death and dismemberment
insurance, a travel accident plan, paid vacations and a sick leave program.
MONETARY POLICIES
The growth of U. S. Bancorp and its subsidiaries is affected by both the
prevailing economic environment and the fiscal and monetary policies of branches
and agencies of the U. S. Government. The Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") directly influences corporate
performance through management of such factors as the reserves required of
financial institutions, the growth and contraction of the nation's money supply,
and interest rates paid by banks in their borrowings from and through the
Federal Reserve System. The Federal Reserve Board carries additional regulatory
authority over member banks and holding company activities. These powers allow
federal authorities substantial control of financial activity in general and
also of the operations of financial institutions. Monetary policies of the
Federal Reserve Board have had and will continue to have a significant effect on
the operating results of financial institutions.
SUPERVISION AND REGULATION
U. S. Bancorp. U. S. Bancorp, as a bank holding company, is subject to
regulation under the Bank Holding Company Act of 1956, as amended (the "Act"),
and is registered with the Federal Reserve Board. U. S. Bancorp is required by
the Act to file reports of its operations with the Federal Reserve Board and is
subject to inspection by the Federal Reserve Board. The Federal Reserve Board
has authority to issue cease and desist orders against holding companies and
their nonbank subsidiaries where the action of either of them constitutes a
serious threat to the safety, soundness or stability of a subsidiary bank and to
pursue criminal penalties for willful violations and civil penalties for
violations under the Act.
The Act and the Federal Reserve Board's regulations pursuant thereto
require every bank holding company to obtain the prior approval of the Federal
Reserve Board before merging with any bank holding company or acquiring
substantially all the assets of any bank, or direct or indirect ownership or
control of more than five percent of the voting shares of any bank or bank
holding company. The Act provides that the Federal Reserve Board shall not
approve any acquisition or merger which would result in a monopoly, or which
would be in furtherance of any attempt to monopolize the business of banking in
any part of the United States, or any other proposed acquisition or merger, the
effect of which may be substantially to lessen competition or to tend to create
a monopoly in any section of the country or which in any other manner would be
in restraint of trade, unless the anti-competitive effects of the proposed
transaction are clearly outweighed in the public interest by the probable effect
of the transaction in meeting the convenience and needs of the community to be
served. In
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reviewing applications, the Federal Reserve Board analyzes the financial and
managerial resources and future prospects of the companies and banks involved
and the convenience and needs of the community to be served.
The Act also prohibits a bank holding company, with certain exceptions,
from engaging in or acquiring direct or indirect control of more than five
percent of the voting shares of any company engaged in nonbanking activities.
The Federal Reserve Board is authorized to approve, among other things, the
ownership of shares by a bank holding company in any company the activities of
which the Federal Reserve Board has determined to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto. In
making such determination, the Federal Reserve Board is required to weigh the
expected benefits to the public, such as greater convenience, increased
competition or gains in efficiency, against the risks of possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices.
With a limited exception for acquisitions of financially troubled banks,
the Act prohibits the acquisition by a bank holding company of substantially all
the assets or more than five percent of the voting shares of a bank located
outside the state in which the operations of its banking subsidiaries were
principally conducted at the time it became a bank holding company, unless such
an acquisition is specifically authorized by a statute of the state in which the
bank to be acquired is located. Numerous states, including California, Idaho,
Oregon, and Washington, have enacted legislation that authorizes bank holding
companies located in all or designated states to acquire banks in the enacting
states.
In 1994, Congress enacted the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking Act"), which allows adequately
capitalized and managed bank holding companies to acquire and operate banks
across state lines beginning in 1997. Commencing on June 1, 1997, banks will be
permitted to cross state lines to merge with other banks, subject to individual
states' adoption of various nondiscriminatory opt-in and opt-out provisions. As
of February 1996, each of the states in which U. S. Bancorp operates have opted
in to interstate banking. Antitrust and anticoncentration restrictions will
apply. U. S. Bancorp's management is considering the alternatives available for
operation of its banking subsidiaries under the Interstate Banking Act.
Theoretically, U. S. Bancorp's banking subsidiaries could all be organized and
operated as a single banking institution when the law takes effect.
U. S. Bancorp, its banking subsidiaries, and its nonbanking subsidiaries
are affiliates of U. S. Bank of Oregon, U. S. Bank of Washington, West One Bank,
Idaho and U. S. Bancorp's other banking subsidiaries within the meaning of the
Federal Reserve Act. The Federal Reserve Act, the Federal Deposit Insurance Act,
and the Home Owners' Loan Act impose certain restrictions on loans by U. S.
Bancorp's banking subsidiaries to U. S. Bancorp or certain nonbank affiliates,
on purchases of certain assets by U. S. Bancorp's banking subsidiaries from U.
S. Bancorp or certain nonbank affiliates, on investments by U. S. Bancorp's
banking subsidiaries in their stock or securities and on U. S. Bancorp's banking
subsidiaries taking such stock and securities as collateral for loans. U. S.
Bancorp and its subsidiaries, as affiliates of U. S. Bancorp's national banking
subsidiaries, are also subject to certain restrictions with respect to engaging
in the issue, flotation, underwriting, public sale and distribution of
securities. Under Section 106 of the 1970 amendments to the Act and the
regulations of the Federal Reserve Board, a bank holding company and its
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit or provision of any property or service.
Banking Subsidiaries. There are various requirements and restrictions
affecting U. S. Bank of Oregon, U. S. Bank of Washington, West One Bank, Idaho,
and U. S. Bancorp's other banking subsidiaries, including the requirement to
maintain reserves against deposits, restrictions on the nature and amount of
loans, and restrictions relating to investments, branching and other activities
of the banks. U. S. Bancorp's national banking subsidiaries are subject to
regulation by the Office of the Comptroller of the Currency (the "Comptroller"),
the Federal Reserve Board and the Federal Deposit Insurance Corporation (the
"FDIC"), and are examined by the Comptroller, which is the primary supervisory
authority for national banks. West One Bank, Idaho, a state-chartered member
bank, is subject to regulation by the Federal Reserve Board, its primary
regulator, the State of Idaho Department of Finance, and the FDIC.
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Other banking subsidiaries of U. S. Bancorp may be subject to regulation by
the appropriate state regulatory agency, the Federal Reserve Board, or the FDIC.
Until its liquidation, U. S. Bank (Canada) is subject to regulation by the
Superintendent of Financial Institutions in Canada.
Each of U. S. Bancorp's national banking subsidiaries can initiate dividend
payments in a given year, without the prior approval of the Comptroller, in
amounts equal to net profits (as defined by regulation) for that year combined
with its retained net profits for the preceding two calendar years, less any
required transfers to surplus or a fund for the retirement of any preferred
stock. In addition, a national bank may not pay a dividend in an amount greater
than its net profits then on hand after deducting statutory bad debt in excess
of the bank's allowance for loan losses. The payment of dividends by U. S.
Bancorp's national bank subsidiaries may also be affected by other factors, such
as requirements for the maintenance of adequate capital. In addition, federal
bank regulatory agencies have issued policy statements which provide that
national banks, banks that are members of the Federal Reserve System (including
West One Bank, Idaho) and bank holding companies should generally pay dividends
only out of current operating earnings.
The federal banking laws contain a "cross-guarantee" provision which could
result in U. S. Bancorp or one of the insured depository institutions which it
owns being assessed for losses incurred by the FDIC in connection with
assistance provided to, or the failure of, any other depository institution
owned by U. S. Bancorp.
The FDIC Improvement Act of 1991 authorized the imposition of stricter
capital requirements on banks. If a bank is undercapitalized, the bank will be
required to develop and submit a plan for the restoration of its capital. If the
bank's efforts to restore capital are inadequate, the parent holding company, if
any, may be required to contribute additional capital to the bank, up to the
lesser of the full amount needed to bring the bank's capital level into
compliance or 5% of the holding company's total assets. Each federal banking
agency is also required to promulgate regulations and specify standards in
numerous areas of bank operations, addressing such issues as internal control
and audit systems, loan documentation, credit underwriting, interest rate risk,
asset growth, executive officer and director compensation, asset quality, and
other operational and managerial standards. These regulatory requirements have
increased and may continue to increase the cost of, and the regulatory burden
associated with, the banking business.
U. S. Bancorp's bank subsidiaries pay assessments on their domestic
deposits to the FDIC's Bank Insurance Fund ("BIF"). In addition, two of U. S.
Bancorp's financial institutions pay assessments on some or all of their
deposits at rates imposed for members of the Savings Association Insurance Fund
("SAIF"). Congress is currently considering bills that would merge the BIF and
the SAIF. The bills also propose a special assessment on SAIF-insured deposits.
Under the FDIC's risk-based insurance premium assessment system, each bank whose
deposits are insured by the BIF is assigned to one of nine risk classifications
based upon certain capital and supervisory measures and, depending upon its
classification, is assessed premiums which ranged from 4 cents to 31 cents per
$100 of insured deposits during 1995. On November 14, 1995, the FDIC board of
directors voted to lower the BIF premium range to zero to 27 cents per $100 of
insured deposits effective January 1996. The FDIC has authority to impose
special assessments from time to time.
U. S. Bancorp and its banking subsidiaries are subject to the Community
Reinvestment Act ("CRA"), which is aimed particularly at encouraging financial
institutions to give special attention to the needs of low and moderate income
areas in meeting the credit needs of the communities in which they operate. If
the regulatory evaluation of a banking subsidiary's CRA activities is less than
satisfactory, regulatory approval of the bank's or a related entity's proposed
acquisitions, branch openings, expansion of activities related to banking, or
other applications requiring Federal Reserve Board approval may be delayed until
the bank's CRA performance is deemed satisfactory by the appropriate bank
regulatory agency. U. S. Bancorp's banking subsidiaries that are subject to the
CRA each have regulatory evaluations of "Satisfactory" or better. U. S. Bank of
Oregon, U. S. Bank of Washington and West One Bank, Idaho each have current
regulatory evaluations of "Outstanding."
Activities of U. S. Bancorp and its banking subsidiaries in other countries
are also subject to restrictions imposed by the laws and banking authorities of
such countries and the Federal Reserve Board. The foregoing
6
<PAGE> 9
references to applicable statutes and regulations are brief summaries thereof
which do not purport to be complete and which are qualified in their entirety by
reference to such statutes and regulations. The information included under the
heading "Capital and Dividends" on page 34 of this report is incorporated herein
by reference.
Other Subsidiaries. Nonbank subsidiaries of U. S. Bancorp in the states of
Oregon, Idaho, Washington, California, Nevada and Utah and other jurisdictions
are subject to the supervision and inspection of various federal and/or state
regulatory agencies.
ITEM 2. PROPERTIES
The headquarters of U. S. Bancorp and U. S. Bank of Oregon is located in
downtown Portland, Oregon, in the U. S. Bancorp Tower, which was completed in
June 1983. The Tower contains approximately 751,600 rentable square feet of
space and was, as of December 31, 1995, 87% percent committed for occupancy
including approximately 270,735 square feet utilized by U. S. Bancorp and its
subsidiaries. U. S. Bancorp or U. S. Bank of Oregon own five additional
buildings located in the Portland metropolitan area, including U. S. Bancorp's
operations center. The operations facility, with approximately 360,000 square
feet of space, houses U. S. Bancorp's processing functions. U. S. Bank of Oregon
owns or leases land and buildings which house its full-service branch offices
and other banking facilities. Other U. S. Bank of Oregon and U. S. Bancorp
subsidiary units occupy leased space in various buildings throughout Oregon. U.
S. Bank of Washington owns or leases the land and the buildings which house its
full-service branch offices and other banking facilities. U. S. Bank of
Washington and its affiliates lease approximately 179,300 square feet in the U.
S. Bank Centre for its headquarters. U. S. Bank of California owns or leases the
land and buildings which house its full-service branch offices and other banking
facilities. U. S. Bank of California owned a 65,250-square-foot office building
in Auburn, California, as well as leasing a 67,600-square-foot building in
Sacramento, California which houses its headquarters. U. S. Bank of Nevada owns
or leases the land and buildings which house its full-service branch offices and
other banking facilities. U. S. Bancorp purchased an office building in Reno in
July 1993. This facility includes a six-story office building with approximately
78,350 rentable square feet of space and two stories of parking below the
building. U. S. Bank of Idaho owns or leases the land and buildings which house
its full-service branch offices and other facilities.
West One Bank, Idaho owns or leases the land and buildings which house its
full-service branch offices and other banking facilities. The West One Plaza
Building contains 266,708 rentable square feet of space and was, as of December
31, 1995, 100% committed for occupancy including the approximately 176,000
square feet utilized by U. S. Bancorp and its subsidiaries. West One Bank, Idaho
owns 2 additional buildings located in the Boise, Idaho area. West One Bank,
Oregon, West One Bank, Washington, and West One Bank, Utah each owns or leases
the land and buildings which house its full-service branch offices and other
banking facilities. West One Bank, Washington owns or leases, the land and
buildings which house its full service branch offices and other banking
facilities. In addition West One Bank, Idaho, West One Bank, Utah and other U.
S. Bancorp subsidiary units occupy owned and leased space in various buildings
throughout Idaho and Utah.
ITEM 3. LEGAL PROCEEDINGS
There were no legal proceedings requiring disclosure pursuant to this item
pending at December 31, 1995, or at the date of this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
U. S. Bancorp held a special meeting of shareholders on October 3, 1995, to
approve an Agreement and Plan of Merger dated May 5, 1995, between U. S. Bancorp
and West One Bancorp, an Idaho corporation, pursuant to which West One Bancorp
was to be merged with and into U. S. Bancorp (the "Merger"). The Merger was
approved by the following vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS AND BROKER NON-VOTES
- ----------- ---------- --------------------------------
<S> <C> <C>
81,922,525 1,275,936 677,947
</TABLE>
7
<PAGE> 10
EXECUTIVE OFFICERS OF THE REGISTRANT
All officers of the registrant are elected or appointed by the board of
directors to hold their offices during the pleasure of the board. At February 9,
1996, the executive officers of U. S. Bancorp were as follows (all positions
listed are with U. S. Bancorp unless otherwise indicated):
<TABLE>
<CAPTION>
HAS SERVED AS FIRST
AGE AT EXECUTIVE OFFICER JOINED
NAME 12/31/95 POSITION OF U. S. BANCORP SINCE U. S. BANCORP
- -------------------------- -------- ---------------------------- ---------------------- -------------
<S> <C> <C> <C> <C>
Dwight V. Board........... 51 Executive Vice President December 1995 1995
Gerry B. Cameron*......... 57 Director, Chairman of the March 1979 1956
Board and Chief Executive
Officer
Phyllis J. Campbell*...... 44 Director, President and November 1989 1987
Chief Executive Officer, U.
S. Bank of Washington;
Executive Vice President, U.
S. Bancorp
P. K. Chatterjee.......... 47 Executive Vice President June 1995 1995
Thomas P. Ducharme*....... 44 Executive Vice President and June 1994 1994
Treasurer
Gary T. Duim*............. 50 Executive Vice President January 1993 1987
Steven P. Erwin*.......... 52 Executive Vice President and July 1994 1994
Chief Financial Officer
John D. Eskildsen*........ 58 Director, President and July 1989 1959
Chief Executive Officer, U.
S. Bank of Oregon; Executive
Vice President, U. S.
Bancorp
Jeffrey T. Grubb.......... 43 Executive Vice President December 1995 1991
Arland D. Hatfield*....... 60 Executive Vice President July 1989 1987
Robert J. Lane*........... 50 Director, President and December 1995 1995
Chief Executive Officer,
West One Bank, Idaho;
Executive Vice President, U.
S. Bancorp
Charles C. Langer......... 48 Director, President and May 1991 1964
Chief Executive Officer, U.
S. Bancorp Leasing &
Financial
Daniel R. Nelson*......... 58 President and Chief December 1995 1995
Operating Officer
Paul F. Oldshue........... 44 Executive Vice President March 1995 1991
Christian R. Rasmussen.... 44 Executive Vice President December 1995 1995
Judith L. Rice*........... 48 Executive Vice President May 1990 1973
V. Lamoine Saunders*...... 54 Executive Vice President July 1994 1994
Robert D. Sznewajs*....... 49 Vice Chairman April 1994 1994
</TABLE>
- ---------------
* Member of U. S. Bancorp Executive Management Committee composed of 12 senior
U. S. Bancorp executive officers.
There are no family relationships among any of the above listed persons.
The following paragraphs describe the principal occupations, titles, and
employment of each of the above listed persons during the past five years. Many
of the above listed persons hold additional titles in other U. S. Bancorp
subsidiaries.
(a) Mr. Board has been Executive Vice President of U. S. Bancorp in charge of
Corporate, Government and Legal Affairs, since consummation of the merger
of West One Bancorp ("West One") with and into U. S. Bancorp in December
1995. Mr. Board also serves as Executive Vice President and Secretary of
8
<PAGE> 11
U. S. Bank of Oregon and U. S. Bank of Washington. For more than five years
prior to 1995, Mr. Board served as Senior Vice President, Secretary and
General Counsel of West One.
(b) Mr. Cameron was elected Chief Executive Officer of U. S. Bancorp in January
1994 and Chairman of the Board in April 1994. He served as President of U.
S. Bancorp from April 1994 until December 1995, and was Vice Chairman of U.
S. Bancorp from January 1993 until April 1994. He served as Executive Vice
President of U. S. Bank of Oregon from March 1979 until July 1993. Mr.
Cameron was elected a director of U. S. Bank of Oregon in January 1993 and
was elected Chairman of the Board in July 1993. Mr. Cameron was elected a
director of U. S. Bank of Washington in February 1988, and currently also
serves as Executive Vice President. He was President and Chief Executive
Officer of U. S. Bank of Washington from October 1991 and Executive Vice
President of U. S. Bancorp from March 1979 until January 1993, and was
President and Chief Operating Officer of U. S. Bank of Washington from
February 1988 until October 1991.
(c) Since January 1993, Ms. Campbell has been a director, President and Chief
Executive Officer of U. S. Bank of Washington and Executive Vice President
of U. S. Bancorp and U. S. Bank of Oregon. Ms. Campbell was Senior Vice
President and Area Manager for all eastern U. S. Bank of Washington
branches from February 1989 until November 1989, when she became Executive
Vice President and Manager of the Distribution Group of U. S. Bank of
Washington.
(d) Mr. Chatterjee has been Executive Vice President of U. S. Bancorp since
June 1995, managing U. S. Bancorp's Retail Lending Services Group. He also
serves as Executive Vice President of U. S. Bank of Oregon and U. S. Bank
of Washington. For ten years prior to coming to U. S. Bancorp, Mr.
Chatterjee was employed by Comerica, Inc. in Detroit, Michigan. Immediately
prior to joining U. S. Bancorp, Mr. Chatterjee was Senior Vice President in
charge of the Consumer Lending Division at Comerica, Inc.
(e) Mr. Ducharme has been Executive Vice President and Treasurer of U. S.
Bancorp since June 1994. He also serves as Executive Vice President of U.
S. Bank of Oregon and U. S. Bank of Washington. Previously, Mr. Ducharme
provided personal investment and financial advice and services as an asset
management and financial consultant. From 1988 through 1993, Mr. Ducharme
was Executive Vice President and Treasurer of Valley National Bank in
Phoenix, Arizona.
(f) Mr. Duim became Executive Vice President of U. S. Bancorp in charge of its
Corporate Banking Group and Executive Vice President of U. S. Bank of
Oregon in January 1993. He has also been Executive Vice President of U. S.
Bank of Washington since 1988, and previously managed its Commercial
Services Group.
(g) Mr. Erwin has been Executive Vice President and Chief Financial Officer of
U. S. Bancorp, and Executive Vice President of U. S. Bank of Oregon and U.
S. Bank of Washington, since July 1994. Mr. Erwin served as Treasurer of
BayBanks, Inc. in Boston, Massachusetts from 1987 until 1994.
(h) Mr. Eskildsen became a director and President and Chief Executive Officer
of U. S. Bank of Oregon in January 1993. For more than five years prior to
1993, he was Executive Vice President of U. S. Bank of Oregon and managed
its Commercial Services Group. Mr. Eskildsen became Executive Vice
President of U. S. Bancorp and U. S. Bank of Washington in April 1992.
(i) Mr. Grubb has been Executive Vice President of U. S. Bancorp since
December 1995, managing U. S. Bancorp's Trust and Investment Advisor
Operations. Mr. Grubb also serves as Executive Vice President of U. S. Bank
of Oregon and U. S. Bank of Washington. Mr. Grubb joined U. S. Bancorp in
1991, managing its insurance operations until 1994 when he became Executive
Trust Officer and Chairman of the Board of Qualivest Capital Management,
Inc. Prior to 1991, Mr. Grubb was a Division President with Progressive
Insurance.
(j) Mr. Hatfield has been Executive Vice President of U. S. Bancorp and U. S.
Bank of Oregon since October 1991 and has headed the Credit Administration
and Policy Group of U. S. Bancorp since October 1992. Mr. Hatfield has also
served as Chief Credit Officer of each of U. S. Bancorp and U. S. Bank of
Oregon since April 1993. Since 1988, Mr. Hatfield has been Executive Vice
President and Chief Credit Officer of U. S. Bank of Washington.
9
<PAGE> 12
(k) Mr. Lane has been Executive Vice President of U. S. Bancorp since
consummation of the merger with West One. Since 1987, Mr. Lane has served
as director, President and Chief Executive Officer of West One Bank, Idaho.
(l) Mr. Langer became a director of U. S. Bancorp Leasing and Financial in
March 1995 and has been President of U. S. Bancorp Leasing and Financial
since January 1989 and Chief Executive Officer since August 1993. Prior to
that date he was Executive Vice President and Manager of U. S. Bancorp
Leasing and Financial.
(m) Mr. Nelson became a director, President and Chief Operating Officer of U. S.
Bancorp upon consummation of the West One merger. For more than five years
prior to that, Mr. Nelson was Chairman of the Board and Chief Executive
Officer of West One. Mr. Nelson also serves as an Executive Vice President
of U. S. Bank of Oregon and U. S. Bank of Washington.
(n) Mr. Oldshue has been Executive Vice President of U.S. Bancorp since March
1995. Mr. Oldshue also serves as Executive Vice President of U. S. Bank of
Oregon and U. S. Bank of Washington. Mr. Oldshue joined U. S. Bancorp in
1991, where he has managed the Merchant Banking Group, including
International Banking, Investment Banking and Corporate Product Development
Divisions. During the five years prior to joining U. S. Bancorp, Mr.
Oldshue headed PacificCorp Financial Service's Broker/Dealer operations
and, prior to that, served as Executive Vice President and Manager of
Oregon Bank's Business Services Division and Treasurer of Orbanco Financial
Services Corporation.
(o) Mr. Rasmussen has been Executive Vice President of U. S. Bancorp since
consummation of the merger with West One. Mr. Rasmussen also serves as
Executive Vice President of U. S. Bank of Oregon and U. S. Bank of
Washington. From 1993 until 1995, Mr. Rasmussen served as Executive Vice
President for West One Bank, Washington in charge of its Commercial Banking
Division. From 1992 until 1993, Mr. Rasmussen served as Senior Vice
President of West One Bank, Washington heading the Seattle Business Banking
Center. For more than five years prior to that, Mr. Rasmussen worked for
Security Pacific and Rainier Banks in Seattle, Washington.
(p) Ms. Rice has been Executive Vice President of U. S. Bancorp, U. S. Bank of
Oregon and U. S. Bank of Washington and Manager of the Human Resources
Group since 1990. She was employed by U. S. Bancorp from 1973 until 1979.
She then served in various capacities with Boise Cascade Corporation's
Paper Group until January 1988. Ms. Rice rejoined U. S. Bancorp in February
1988 and was Vice President and Manager of Human Resources Planning and
Development until May 1990.
(q) Mr. Saunders has been Executive Vice President of U. S. Bancorp heading the
systems and operations areas since August 1994. He also serves as Executive
Vice President of U. S. Bank of Oregon and U. S. Bank of Washington. Mr.
Saunders served as Chief Operations Officer of Valley National Bank of
Arizona in Phoenix, Arizona from 1983 until 1992. From 1992 through 1993,
Mr. Saunders served as President of BancStar, Inc. From 1993 until 1994,
Mr. Saunders served as National Operations Manager for BancOne Corporation.
(r) Mr. Sznewajs has been Vice Chairman of U. S. Bancorp since May 1995. From
April 1994 until May 1995, Mr. Sznewajs was Executive Vice President of U.
S. Bancorp in charge of the Support and Financial Services and Products
Group. Since April 1994, he has also served as Executive Vice President of
U. S. Bank of Oregon and U. S. Bank of Washington. From 1989 until 1993,
Mr. Sznewajs was Executive Vice President and Manager of Retail Banking for
Valley National Bank of Arizona in Phoenix, Arizona. In early 1993, Mr.
Sznewajs became Chairman of Bank of America, N.A., the credit card bank of
BankAmerica Corporation.
10
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
U. S. Bancorp's common stock is traded in The Nasdaq Stock Market under the
symbol USBC. At December 31, 1995, 39 independent brokerage firms were
registered as market makers in U. S. Bancorp's common stock. Also at that date,
there were 20,668 shareholders of record of U. S. Bancorp's common stock.
Approximately 73% of those shareholders live in Oregon, Washington or Idaho
while approximately 22% of the total shares issued and outstanding are owned by
Oregon, Washington or Idaho residents. The following table presents the interday
high and low sales prices of U. S. Bancorp's common stock for each quarterly
period for the last two years as reported by Nasdaq:
<TABLE>
<CAPTION>
1995 1994
------------------------------- ------------------------------
4 3 2 1 4 3 2 1
--- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High........................ $ 36 29-1/2 27-3/4 26-3/4 $25-7/8 28-1/8 28-5/8 28-5/8
Low......................... $ 28-3/8 23-7/8 23-1/2 22 $22-1/8 25-1/4 24-1/2 23-1/2
</TABLE>
The following table represents quarterly common cash dividends declared
information for the two-year period 1995-1994:
<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
4 3 2 1 4 3 2 1
---- --- --- --- ---- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common dividends declared........... $.28 .28 .25 .25 $.25 .25 .22 .22
</TABLE>
U. S. Bancorp's common dividend payout ratio for each of its last three
fiscal years was as follows: 1995 -- 42.8%; 1994 -- 49.7%; 1993 -- 30.7%. U. S.
Bancorp's common dividend payout ratio for 1995, before the after-tax impact of
merger and business integration costs, was 34.5%. The common dividend payout
ratio for 1994, excluding the after-tax impact of the $100 million restructuring
charge, was 39.8%.
Reference should be made to Item 1 of this report on page 6 and Note 3 to
the Consolidated Financial Statements on page 56 for a description of
restrictions on the ability of U. S. Bancorp's banking subsidiaries to pay
dividends to U. S. Bancorp.
11
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with U.
S. Bancorp's Consolidated Financial Statements and the accompanying notes
presented elsewhere herein.
<TABLE>
<CAPTION>
% INCREASE
(DECREASE)
YEAR ENDED DECEMBER 31, 1995 1994 1995 TO 1994 1993 1992(1) 1991
- ------------------------------------------------------------ -------- -------- ------------ -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
EARNINGS
Interest income............................................. $2,392.5 $2,074.4 15% $1,962.2 $1,944.7 $2,099.2
Interest expense............................................ 993.1 738.7 34 698.1 825.2 1,118.4
-------- -------- -------- -------- --------
Net interest income......................................... 1,399.4 1,335.7 5 1,264.1 1,119.5 980.8
Net interest income (taxable-equivalent)(2)................. 1,449.5 1,389.5 4 1,317.5 1,169.3 1,039.5
Provision for credit losses................................. 124.1 120.1 3 106.3 148.8 155.1
Noninterest revenues........................................ 524.7 552.7 (5) 620.3 519.3 442.5
Merger and integration costs................................ 98.9 - N/M - - -
Restructuring charge........................................ - 100.0 N/M - - -
Other noninterest expenses.................................. 1,191.9 1,305.1 (9) 1,273.4 1,098.1 935.3
Total noninterest expenses.................................. 1,290.8 1,405.1 (8) 1,273.4 1,098.1 935.3
Income before cumulative effect of accounting changes....... 329.0 254.7 29 341.1 271.5 232.1
Cumulative effect of accounting changes..................... - - - - 59.9 -
Net income.................................................. 329.0 254.7 29 341.1 211.6 232.1
- ---------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Income before accounting changes............................ $ 2.09 $ 1.60 31% $ 2.23 $ 1.87 $ 1.68
Net income.................................................. 2.09 1.60 31 2.23 1.45 1.68
Book value.................................................. 16.38 15.40 6 15.23 13.45 12.72
Cash dividends declared(3).................................. 1.06 .94 13 .85 .76 .71
Average common shares outstanding (000's)................... 151,554 151,392 - 147,518 142,609 138,506
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
Return on average common equity............................. 12.90% 10.62% 15.71% 14.06% 13.74%
Return on average assets.................................... 1.09 .87 1.22 1.07 0.98
Overhead ratio.............................................. 65.38 72.34 65.71 65.03 63.11
Net interest margin......................................... 5.38 5.35 5.31 5.17 4.89
Average total shareholders' equity to average assets........ 8.63 8.35 8.01 7.50 7.14
Leverage capital ratio...................................... 7.88 7.82 7.64 7.10 6.77
Risk-based capital ratios:
Tier 1 capital ratio...................................... 8.49 8.72 8.95 8.63 7.79
Total capital ratio....................................... 11.85 11.38 11.75 11.51 10.24
Nonperforming assets as a % of loans and foreclosed
assets.................................................... .73 1.06 1.44 1.77 2.52
Allowance as a % of loans................................... 1.91 1.79 1.77 1.81 1.63
Allowance as a % of nonperforming loans..................... 336 192 144 117 83
- ---------------------------------------------------------------------------------------------------------------------------------
PERIOD-END BALANCES
Assets...................................................... $ 31,794 $ 30,609 4% $ 29,087 $ 27,875 $ 24,292
Interest-earning assets..................................... 27,883 27,004 3 25,946 24,643 21,583
Loans....................................................... 22,785 21,645 5 19,445 18,040 17,371
Deposits.................................................... 23,265 21,859 6 21,448 21,062 17,361
Long-term debt.............................................. 1,377 1,244 11 1,162 1,437 1,319
Common shareholders' equity................................. 2,467 2,343 5 2,292 1,971 1,773
Preferred stock............................................. 150 150 - 150 150 -
Full-time equivalent employees.............................. 14,081 15,388 (8) 17,340 16,273 14,746
- ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Assets...................................................... $ 30,198 $ 29,163 4% $ 27,996 $ 25,335 $ 23,658
Interest-earning assets..................................... 26,929 25,940 4 24,819 22,604 21,209
Loans....................................................... 22,165 20,336 9 18,493 17,438 17,264
Deposits.................................................... 22,019 21,486 2 20,979 18,424 16,996
Common shareholders' equity................................. 2,456 2,284 8 2,093 1,834 1,689
Preferred stock............................................. 150 150 - 150 66 -
</TABLE>
- ---------------
(1) 1992 net income includes a $59.9 million after-tax charge from the
adoption of Statement of Financial Accounting Standards (FAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
and FAS No. 112, "Employers' Accounting for Postemployment Benefits".
1992 income before accounting changes per common share on a primary and
fully diluted basis was $1.84 and $1.79, respectively. Net income per
share on a primary and fully diluted basis was $1.42 and $1.40,
respectively. Dilution was not material in the other periods presented.
1992 returns on average common equity and assets were computed before
accounting changes. After accounting changes, return on average assets was
.84% and return on average common equity was 11.25%.
(2) Includes taxable equivalent adjustment related to income on certain loans
and securities that is exempt from federal and applicable state income
taxes. The federal statutory tax rate was 35% for 1995, 1994 and 1993 and
34% for the other years presented.
(3) Dividends per share are based on historical U.S. Bancorp common cash
dividends paid.
N/M Not meaningful.
12
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and accompanying notes appearing elsewhere in this report. Each of
the items referred to in this performance review is more fully described in the
following discussion or in the Notes to the Consolidated Financial Statements
presented on pages 50 through 84 of this report.
PERFORMANCE OVERVIEW
Strong loan growth and disciplined expense control led to a 29 percent
increase in 1995 net income over 1994 results. Net income of $329 million, or
$2.09 per share, in 1995 exceeded 1994 net income of $255 million, or $1.60 per
share. These results reflect the completion of U. S. Bancorp's merger with West
One Bancorp (West One) in 1995 in a transaction accounted for as a
pooling-of-interests. All results and references to U. S. Bancorp represent
activity for the combined company, and all prior periods have been restated to
reflect the combination.
In December 1995, U. S. Bancorp merged with West One, a regional financial
services company headquartered in Boise, Idaho, creating a super-regional
financial services company doing business in six western states with over $31
billion in assets. U. S. Bancorp issued 1.47 shares of common stock for each
share of West One common stock. Net income for 1995 includes merger and
integration costs of $76.6 million (after-tax), or $.51 per share.
To facilitate the discussion of its results of operations, in the table on
the next page, U. S. Bancorp presents an additional analysis of performance to
supplement the accompanying consolidated statement of income and balance sheet.
This additional analysis of performance should not be viewed as a substitute for
the generally accepted accounting principle based financial statements presented
elsewhere in this report. There are three primary differences between the
consolidated statement of income and the operating income analysis that follows.
First, the operating income analysis presents the line items in a slightly
different order. Second, certain transactions that are nonrecurring or that are
not related to what management believes is core business, are not included in
noninterest revenues and noninterest expenses in determining operating income.
Finally, operating income is also before the provision for credit losses, other
real estate owned transactions (OREO) and income taxes. The provision for credit
losses is deducted from operating income as its amount is based on the analysis
of the required level of the allowance for credit losses and can be subject to
fluctuation due to the prevailing level of charge-offs. Management has presented
the additional analysis in the belief that it is meaningful to understand the
results and trends in operating income separately from nonrecurring
transactions, noncore activities, certain provisions and other real estate owned
transactions. Due to the format of this presentation, not all line items agree
directly to the consolidated financial statements.
13
<PAGE> 16
RESULTS OF OPERATIONS
Operating income, defined as income before the provision for credit losses,
OREO transactions, merger and integration costs, the restructuring charge, other
noncore/nonrecurring items and provision for income taxes, increased 22 percent
in 1995 as compared with 1994. The increase in operating income was attributable
to a four percent increase in net interest income and a seven percent decrease
in noninterest expense. The table below presents the trend of operating income
for the years 1995, 1994 and 1993. For detailed information on the items
presented as noncore or nonrecurring, refer to the respective discussions of
"Noninterest Revenues" and "Noninterest Expenses."
SUMMARY OF OPERATIONS
TAX-EQUIVALENT BASIS
<TABLE>
<CAPTION>
PERCENT
CHANGE PERCENT
1995 1994 ------------- 1993 CHANGE
-------- -------- (IN MILLIONS) -------- ------
<S> <C> <C> <C> <C> <C>
Net interest income........................... $1,449.5 $1,389.5 4% $1,317.5 5%
Noninterest revenues.......................... 504.7 514.7 (2) 536.3 (4)
Noninterest expenses.......................... 1,187.6 1,277.1 (7) 1,273.9 -
-------- -------- --------
Operating income.............................. 766.6 627.1 22 579.9 8
Provision for credit losses................... (124.1) (120.1) 3 (106.3) 13
OREO transactions............................. 2.9 (.8) N/M (2.5) N/M
-------- -------- --------
645.4 506.2 27 471.1 7
Noncore/nonrecurring items
Equity investment income (loss)............. 3.2 (5.4) 34.0
Gain on sale of operations and loans........ 8.9 62.9 9.3
Gain (loss) on sale of securities........... 3.0 (9.2) .5
Gain on sale of mortgage loan servicing
rights, net of accelerated intangibles
amortization............................. 1.7 1.3 40.2
Other nonrecurring noninterest revenue
items.................................... 3.2 (11.6) -
Merger and integration costs................ (98.9) - -
Restructuring charge........................ - (100.0) -
Business consolidation expenses............. (4.0) - -
Asset write-downs........................... (3.2) (18.4) (6.2)
Other nonrecurring noninterest expense
items.................................... - (8.8) 9.2
-------- -------- --------
(86.1) (89.2) 87.0
-------- -------- --------
Income before income taxes.................... 559.3 417.0 558.1
Less tax-equivalent adjustment included
above....................................... 50.1 53.8 53.4
Provision for income taxes.................... 180.2 108.5 163.6
-------- -------- --------
Net income.................................... $ 329.0 $ 254.7 29% $ 341.1 (25)%
======== ======== ======== ======== ========
</TABLE>
- ---------------
N/M Not Meaningful.
Noninterest revenues of $504.7 million, before noncore and nonrecurring
items, decreased $10.0 million, or two percent from 1994, and decreased $31.6
million from 1993. The decrease is primarily due to the disposition of a credit
reporting subsidiary and the majority of the mortgage banking business as part
of the 1994 restructuring. Excluding the effects of divested activities,
noninterest revenues were up two percent in 1995 compared with 1994, and up six
percent in 1994 compared with 1993.
Noninterest expenses in 1995 of $1,188 million, before merger and
integration costs and other noncore and nonrecurring items, decreased $89.5
million, or seven percent, from $1,277 million in 1994. Employee compensation
and benefits decreased $41.9 million, or seven percent, mainly due to a
reduction in the number of full-time equivalent employees as the result of the
restructuring program initiated in the first quarter of 1994. In addition,
regulatory agency fees decreased $18.6 million, or 34 percent, in 1995 due to
the reduction in FDIC deposit insurance premiums.
14
<PAGE> 17
The provision for credit losses of $124.1 million in 1995 included
approximately $27 million of provision related to the integration and management
of the combined loan portfolios. The allowance for credit losses at December 31,
1995 stood at 1.91 percent of period-end loans and equaled 336 percent of
nonperforming loans.
As previously discussed, the operating income presentation excludes noncore
and nonrecurring items. The company believes that it is informative to also
compute certain performance measures exclusive of these noncore and nonrecurring
items. Excluding the after-tax impact of the noncore/nonrecurring items in all
years and merger-related provisions for credit losses and income taxes in 1995,
return on average common shareholders' equity (ROE) increased 22 percent, to
16.54 percent in 1995 from 13.60 percent in 1994. On the same basis, the ROE in
1993 was 13.19 percent. The return on average assets (ROA), similarly adjusted,
increased to 1.38 percent in 1995 from 1.11 percent in 1994 and 1.03 in 1993.
These returns were calculated using the adjustments to reported net income as
indicated previously. Under generally accepted accounting principles, ROE as
reported was 12.90 percent, 10.62 percent and 15.71 percent for 1995, 1994, and
1993, respectively. ROA as reported was 1.09 percent, .87 percent and 1.22
percent for 1995, 1994 and 1993, respectively.
In December 1995, U. S. Bancorp completed its merger with West One, which
was announced in May 1995. In connection with the merger, pre-tax merger and
integration costs of $98.9 million were recognized during 1995. The costs were
incurred primarily in the fourth quarter of 1995 and consisted of (on a pre-tax
basis): severance, retention and other employment-related costs of $29.4
million; costs to eliminate redundant computer systems, premises, furniture and
equipment, and account conversion costs of $39.6 million; professional fees of
$13.9 million; and other integration costs related to the merger of $16.0
million. The staff count of the combined organizations will be reduced by
approximately 1,100 full-time equivalent employees. The merger and integration
costs will be funded out of operating cash flows with payments for severance and
employee-related expenses occurring approximately ratably over the next year. U.
S. Bancorp expects to recognize additional integration-related costs during the
first half of 1996. However, the majority of these costs were incurred in 1995.
U. S. Bancorp anticipates annual cost savings of approximately $84 million
(pre-tax) by 1997, primarily through staff reductions resulting in $36 million
in savings, consolidation of certain systems and back office support functions
for $18 million, and the elimination, consolidation or sale of certain branches
and administrative functions for an additional $30 million.
As part of the regulatory approval process for the merger, U. S. Bancorp
will divest 31 branches with deposits of approximately $720 million and loans of
approximately $465 million. U.S. Bancorp has signed a definitive agreement to
sell these branches, located mainly in Oregon, and anticipates the transaction
to close in the second quarter of 1996, to result in a pre-tax gain of
approximately $30 million.
NET INTEREST INCOME (TAX-EQUIVALENT BASIS)
Net interest income, the principal source of U. S. Bancorp's operating
income, includes interest income and fees generated by interest-earning assets,
primarily loans and investment securities, less interest expense on
interest-bearing liabilities, primarily deposits, purchased funds and long-term
debt. Net interest income is affected by the volume, interest rates and relative
mix of both earning assets and interest-bearing and noninterest-bearing sources
of funds.
15
<PAGE> 18
ANALYSIS OF NET INTEREST INCOME (TAX-EQUIVALENT BASIS)
<TABLE>
<CAPTION>
NET
INTEREST INTEREST INTEREST
INCOME EXPENSE INCOME
-------- ------- --------
(IN MILLIONS)
<S> <C> <C> <C>
1993 as reported.............................. $2,015.7 $698.2 $1,317.5
1994 increase due to:
Changes in balances......................... 86.3 19.7 66.6
Changes in rates............................ 26.2 20.8 5.4
-------- ------ --------
1994 as reported.............................. 2,128.2 738.7 1,389.5
1995 increase due to:
Changes in balances......................... 77.2 22.8 54.4
Changes in rates............................ 237.2 231.6 5.6
-------- ------ --------
1995 as reported.............................. $2,442.6 $993.1 $1,449.5
======== ====== ========
</TABLE>
Net interest income was $1.45 billion in 1995, up $60.0 million, or four
percent, from the prior year. This followed an increase of $72.0 million, or
five percent, in 1994 compared with 1993. In 1995, the growth in net interest
income resulted primarily from the increase in earning assets and, to a lesser
extent, an increase in the net interest margin.
Average earning assets in 1995 totaled $26.9 billion, an increase of $1.0
billion, or four percent, from the prior year. This followed an increase of $1.1
billion, or five percent, in 1994 from 1993. The increase in 1995 reflected the
growth in average loans, which rose $1.8 billion, or nine percent over 1994,
partially offset by a $520 million decline in average securities which served as
an additional funding source for loan growth. Average commercial loans increased
$1 billion, or 10 percent, average consumer loans increased $320 million, or six
percent, and average real estate mortgage loans were up $357 million, or 12
percent, over the prior year.
Average interest-bearing liabilities in 1995 totaled $21.7 billion, an
increase of $649 million, or three percent, from the prior year. Average
interest-bearing deposits increased $460 million, or three percent, in 1995 as
decreases in savings, NOW accounts and interest-checking were offset by a $529
million increase in money market accounts and a $506 million increase in time
deposits more than $100,000. Average short-term borrowings, including federal
funds purchased and security repurchase agreements, increased $177 million in
1995 over the prior year.
The net interest margin on interest-earning assets, which is the average
yield on interest-earning assets less the average rate paid for all sources of
funding, including the benefit of interest-free funds, was 5.38 percent in 1995
compared with 5.35 and 5.31 percent in 1994 and 1993, respectively. The average
yield on earning assets increased 87 basis points in 1995 compared with 1994.
The average cost of interest-bearing liabilities increased 107 basis points in
1995 as short-term rates increased as compared with 1994. The increase in the
cost of interest-bearing liabilities was offset by the benefit of a higher
proportion of interest-earning assets supported by noninterest-bearing sources
of funds in 1995.
16
<PAGE> 19
RATE-VOLUME ANALYSIS OF CHANGES IN NET INTEREST INCOME
The following table sets forth, on a tax-equivalent basis, a summary of the
changes in net interest income resulting from changes in volumes and rates.
Since changes in interest income and expense are calculated independently for
each line in the table, the totals in the volume and rate columns are not the
sum of the individual lines. Changes not due solely to volume or rate changes
are allocated to rate.
<TABLE>
<CAPTION>
1995 VERSUS 1994 1994 VERSUS 1993
-------------------------------- ---------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGE IN DUE TO CHANGE IN
-------------------------------- ---------------------------------
AVERAGE AVERAGE NET AVERAGE AVERAGE NET
VOLUME RATE CHANGE VOLUME RATE CHANGE
-------- -------- -------- --------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits with other
banks................................ $ (245) $ 85 $ (160) $ (72) $ 233 $ 161
Federal funds sold and security resale
agreements........................... (2,703) 3,146 443 (530) 4,295 3,765
Other short-term investments........... (1,002) 119 (883) 60 501 561
Trading account securities............. 32 852 884 (1,129) 1,078 (51)
Loans held for sale.................... (16,466) 2,041 (14,425) (28,316) 687 (27,629)
Securities available for sale.......... (10,355) 15,222 4,867 128,295 (5,754) 122,541
Securities held to maturity............ (23,240) 3,767 (19,473) (163,307) 9,108 (154,199)
Loans and lease financing.............. 151,162 192,003 343,165 150,533 16,815 167,348
-------- -------- -------- --------- ------- ---------
Total interest income.............. 77,224 237,194 314,418 86,264 26,233 112,497
-------- -------- -------- --------- ------- ---------
INTEREST EXPENSE
Interest on deposits
Savings accounts..................... (9,844) 4,311 (5,533) 3,188 (5,634) (2,446)
NOW accounts and interest checking... (3,380) 6,073 2,693 1,189 (8,378) (7,189)
Money market deposit accounts........ 15,852 59,473 75,325 7,457 15,393 22,850
Time -- $100,000 or more............. 22,777 27,604 50,381 8,225 4,763 12,988
Consumer time........................ 4,500 58,898 63,398 (24,321) (3,909) (28,230)
-------- -------- -------- --------- ------- ---------
Total......................... 14,591 171,673 186,264 3,996 (6,023) (2,027)
-------- -------- -------- --------- ------- ---------
Federal funds purchased and security
repurchase agreements................ (8,122) 38,117 29,995 16,009 32,318 48,327
Commercial paper....................... (1,577) 3,193 1,616 564 2,515 3,079
Other short-term borrowings............ 12,399 20,130 32,529 (222) 319 97
Long-term debt......................... 827 3,181 4,008 (6,655) (2,255) (8,910)
-------- -------- -------- --------- ------- ---------
Total interest expense........ 22,780 231,632 254,412 19,732 20,834 40,566
-------- -------- -------- --------- ------- ---------
Changes in net interest income......... $ 54,444 $ 5,562 $ 60,006 $ 66,532 $ 5,399 $ 71,931
======== ======== ======== ========= ======= =========
</TABLE>
The increase in interest income in 1995 was predominately due to interest
income on loans, which increased $343 million over 1994 from a combination of
higher average loan volumes and higher average rates earned. This increase in
interest income was partially offset by a decrease in interest income from
securities held to maturity as proceeds from maturing securities were used to
fund loan growth. Interest on loans held for sale in 1995 decreased from 1994,
reflecting the sale of certain mortgage loan origination offices in 1994.
Interest expense on deposits in 1995 increased $186 million over 1994, as
rates on all deposit products increased industry wide. A rising interest rate
environment also increased the cost of short-term and long-term sources of
funds.
An increase in interest income in 1994 compared with 1993 was primarily
related to volume-driven increases in commercial and consumer loans. This
increase in 1994 was partially offset by a decrease in interest income from
loans held for sale, due to the sale of certain loan origination offices in
1994.
Interest expense on deposits in 1994 decreased from 1993, primarily the
result of a lower consumer deposit rate environment in 1994 for certain deposit
products. Interest expense increased in 1994 over 1993 on
17
<PAGE> 20
federal funds purchased and security repurchase agreements due mainly to the
higher volume of these borrowings in 1994 as average deposits declined from 1993
levels.
NONINTEREST REVENUES
Excluding revenues associated with activities affected by divestitures and
noncore/nonrecurring revenues identified in the table below, noninterest
revenues of $489.5 million in 1995 increased by two percent over 1994. The
comparable noninterest revenues in 1994 increased six percent over 1993. The
principal components of noninterest revenues are shown in the table below.
<TABLE>
<CAPTION>
CHANGE CHANGE
----------------- -----------------
1995 1994 AMOUNT PERCENT 1993 AMOUNT PERCENT
------ ------ ------ ------- ------ ------ -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Noninterest revenues:
Service charges on deposit accounts... $189.5 $191.6 $ (2.1) (1)% $171.3 $ 20.3 12%
Bank card revenue, net................ 73.4 73.3 .1 -- 69.3 4.0 6
Trust and investment
management.......................... 65.8 65.3 .5 1 62.3 3.0 5
Exchange fees......................... 42.6 36.8 5.8 16 32.7 4.1 13
Insurance revenue..................... 21.4 25.4 (4.0) (16) 17.1 8.3 49
ATM revenue........................... 21.6 21.1 .5 2 17.4 3.7 21
Brokerage and other commissions....... 13.2 12.9 .3 2 18.7 (5.8) (31)
Trading account....................... 17.4 15.4 2.0 13 19.5 (4.1) (21)
All other............................. 44.6 36.9 7.7 21 43.7 (6.8) (16)
------ ------ ------ ------ ------
489.5 478.7 10.8 2 452.0 26.7 6
------ ------ ------ ------ ------
Activities affected by divestitures:
Mortgage banking income, net.......... 15.2 22.8 (7.6) (33) 50.3 (27.5) (55)
Credit reporting revenue.............. - 13.2 (13.2) N/M 34.0 (20.8) (61)
------ ------ ------ ------ ------
15.2 36.0 (20.8) (58) 84.3 (48.3) (57)
------ ------ ------ ------ ------
504.7 514.7 (10.0) (2) 536.3 (21.6) (4)
------ ------ ------ ------ ------
Noncore/nonrecurring revenue items:
Gain on sale of operations and
loans............................... 8.9 62.9 9.3
Equity investment income (loss)....... 3.2 (5.4) 34.0
Gain on sale of mortgage loan
servicing rights, net of accelerated
intangibles amortization............ 1.7 1.3 40.2
Gain (loss) on sale of securities
available for sale.................. 3.0 (9.2) .5
Nonrecurring noninterest revenue
items............................... 3.2 (11.6) -
------ ------ ------
$524.7 $552.7 $(28.0) (5)% $620.3 $(67.6) (11)%
====== ====== ====== === ====== ====== ===
</TABLE>
- ---------------
N/M Not Meaningful.
Service charges on deposit accounts decreased one percent to $189.5 million
in 1995 from $191.6 million in 1994. The decrease is related to a decline in
consumer product service charges, partially offset by increases in
non-sufficient funds and overdraft charges. All other categories of service
charges increased from the prior year. The increase in service charges in 1994
as compared with 1993 was primarily due to selective repricing of consumer and
corporate payment and cash management products.
During 1995, U. S. Bancorp sold two affinity credit card portfolios with
balances of approximately $350 million. The decrease in annual membership fee
and other income related to these portfolios included in bank card revenue was
offset by payments received from U. S. Bancorp's merchant processing partner. In
September 1995, U. S. Bancorp sold an interest in its merchant processing
service business and allocated all of its merchant contract base to a co-owned
merchant business alliance.
18
<PAGE> 21
Trust and investment administration revenues were $65.8 million in 1995,
$65.3 million in 1994 and $62.3 million in 1993. The increase reflects increased
revenue from management of employee benefit plan assets and investment advisory
fees. Exchange fees, which consist primarily of fees from letters of credit,
check orders and foreign money exchanges, totaled $42.6 million in 1995, $36.8
million in 1994 and $32.7 million in 1993. The increase over the prior years was
primarily related to letters of credit income and check order fees.
Insurance revenue decreased 16 percent in 1995 compared with 1994 due
primarily to a decrease in the sales volume of annuities as consumer investment
alternatives increased. In 1994, successful marketing of annuity products led to
a 49 percent increase in insurance revenues compared with 1993. ATM revenue was
$21.6 million in 1995 and $21.1 million in 1994 and continued to reflect the
expansion of ATM transactions available to customers and adjustment of the
pricing schedule to accommodate the new features. Brokerage and other
commissions in 1994 decreased $5.8 million from 1993, mainly the result of a
decline in customer transaction volumes. Trading account revenues increased $2
million, or 13 percent, in 1995 compared with 1994. Trading revenues in 1994
were $4.1 million less than 1993 due to less favorable financial market
conditions in 1994.
In August 1994, U. S. Bancorp sold most of the residential mortgage loan
servicing portfolio and 50 loan origination offices of its subsidiary U. S.
Bancorp Mortgage Company. Mortgage banking income in 1995 is not comparable to
prior years due to the impact of this sale. U.S. Bancorp sold its credit
reporting subsidiary, Credco, Inc., in January 1995. The decrease in credit
reporting revenue in 1994 compared with 1993 was due to a lower volume of
mortgage loan originations and refinancings.
The 1995 gain on sale of operations and loans included a $5.5 million gain
on sale of affinity card portfolios, $3.0 million gain on sales of
adjustable-rate mortgage loans and student loans, and a $.4 million gain on sale
of a bank branch. Nonrecurring noninterest revenue items in 1995 included a $5
million gain on sale of U. S. Bank of Washington's former headquarters building
and $2 million of losses incurred by U. S. Bancorp's import/export finance
subsidiary.
The 1994 gain on sale of operations included $50.8 million from the
previously mentioned sale of mortgage subsidiary assets. Gain on sale of loans
in 1994 totaled $11.2 million and related to sales of a portion of an affinity
bank card portfolio and student loans. Losses of $9.2 million were incurred in
1994 on sale of securities available for sale, the proceeds of which were
primarily reinvested to increase the portfolio yield in subsequent periods.
Included in other nonrecurring noninterest revenue items in 1994 were losses of
$3.9 million incurred by U. S. Bancorp's import/export subsidiary and $8.3
million of trading account losses related to the sale of certain collateralized
mortgage obligations.
The 1993 gain on sale of loans totaled $4.5 million and gain on sale of
operations was $4.8 million, primarily the result of the sale of U. S. Bancorp's
corporate trust business. Equity investment income (loss) consisted primarily of
gains realized on sales of partnership interests in publicly traded companies
initiated by fund managers. In 1993, a portion of the mortgage subsidiary's
mortgage servicing rights portfolio was sold for a gain of $54.8 million, which
resulted in recognition of $8.9 million of hedge income related to the
portfolios sold. In addition, during 1993, U. S. Bancorp adjusted the recorded
value of its purchased mortgage servicing rights and excess servicing fees
receivable in light of an increase in the rate of mortgage loan prepayments. The
carrying value of these assets was reduced by $23.5 million. These three
mortgage banking items combined totaled $40.2 million.
19
<PAGE> 22
NONINTEREST EXPENSES
Noninterest expenses, excluding noncore/nonrecurring expense items in both
periods detailed in the table below, decreased $89.5 million, or seven percent,
compared with 1994. Total noninterest expenses in 1995 were $1.29 billion, down
from $1.41 billion in 1994, and were $1.27 billion in 1993.
<TABLE>
<CAPTION>
CHANGE CHANGE
------------------ ------------------
1995 1994 AMOUNT PERCENT 1993 AMOUNT PERCENT
-------- -------- ------- ------- -------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Noninterest expenses:
Employee compensation and benefits... $ 602.1 $ 644.0 $ (41.9) (7)% $ 653.3 $ (9.3) (1)%
Net occupancy expense................ 85.4 86.4 (1.0) (1) 82.5 3.9 5
Equipment rentals, depreciation and
maintenance........................ 127.4 130.0 (2.6) (2) 120.3 9.7 8
Regulatory agency fees............... 35.5 54.1 (18.6) (34) 54.4 (.3) -
Telecommunications................... 33.3 35.2 (1.9) (5) 33.0 2.2 7
Amortization of intangibles.......... 18.8 22.1 (3.3) (15) 23.7 (1.6) (7)
Contract personnel................... 13.7 14.5 (.8) (6) 16.7 (2.2) (13)
Consultants.......................... 7.5 12.0 (4.5) (38) 14.3 (2.3) (16)
Servicing fee expense................ 9.6 14.4 (4.8) (33) 5.7 8.7 153
Marketing and advertising............ 33.3 35.3 (2.0) (6) 39.6 (4.3) (11)
Other taxes and licenses............. 15.7 12.9 2.8 22 14.7 (1.8) (12)
Stationery, supplies and postage..... 63.9 59.2 4.7 8 59.2 - -
Travel............................... 12.4 15.9 (3.5) (22) 18.8 (2.9) (15)
All other............................ 129.0 141.1 (12.1) (9) 137.7 3.4 2
-------- -------- ------- -------- -------
1,187.6 1,277.1 (89.5) (7) 1,273.9 3.2 -
-------- -------- ------- -------- -------
Noncore/nonrecurring expense items:
OREO transactions.................... (2.9) .8 2.5
Merger and integration costs......... 98.9 - -
Restructuring charge................. - 100.0 -
Business consolidation expenses...... 4.0 - -
Asset write-downs.................... 3.2 18.4 6.2
Nonrecurring noninterest expense
items.............................. - 8.8 (9.2)
-------- -------- --------
$1,290.8 $1,405.1 $(114.3) (8)% $1,273.4 $ 131.7 10%
======== ======== ======= === ======== ======= ===
</TABLE>
Significant improvement in the overhead ratio (defined as noninterest
expenses as a percentage of tax-equivalent net interest income and noninterest
revenues) was achieved in 1995 when the ratio reached 65.4 percent, down from
72.3 percent in 1994. U.S. Bancorp's management believes that it is informative
to compute certain performance measures exclusive of noncore and nonrecurring
items. Excluding OREO transactions and noncore/nonrecurring items from
noninterest expenses and noninterest revenues, the overhead ratio for the year
1995 was 60.8 percent, compared with 67.1 percent and 68.7 percent for 1994 and
1993, respectively.
Employee compensation decreased $35.5 million in 1995, or seven percent,
compared with 1994. These reductions reflect the decrease in full-time
equivalent employees related to the restructuring program that occurred during
1994. Employee benefits expense decreased $6.4 million, or five percent, in 1995
compared with 1994. Employee compensation and benefits expense in 1994 was $9.3
million lower than 1993. The decrease is a combination of reduced expenses due
to restructuring, partially offset by increased expenses related to several
small bank acquisitions in 1994.
Net occupancy expense decreased $1.0 million in 1995 compared to 1994 after
a $3.9 million increase in 1994 from 1993. The increase in 1994 as compared with
1993 related to occupancy of a new headquarters building by U. S. Bank of
Washington in Seattle, Washington. Equipment rentals, depreciation and
maintenance decreased two percent in 1995 compared with 1994 after a $9.7
million increase in 1994 from 1993.
20
<PAGE> 23
Regulatory agency fees declined in 1995 as the result of the reduction of
FDIC insurance premiums to an average of 4.4 cents per $100 of insured deposits
from 23.2 cents. Amortization of intangibles decreased $3.3 million, or 15
percent in 1995 compared with 1994 due primarily to the decrease in purchased
credit card relationship intangibles related to the sale of affinity credit card
portfolios in 1995, and a reduction in goodwill due to the sale of a subsidiary
at year-end 1994. Servicing fee expense decreased $4.8 million, or 33 percent,
in 1995 from 1994. The decrease is due primarily to reduction of servicing
expense related to divested affinity credit card portfolios. The $8.7 million
increase in 1994 servicing fee expense over 1993 is related both to affinity
card servicing and brokerage servicing costs. The reductions in several other
expense categories have been achieved through actions taken to implement the
restructure program as discussed below.
Business consolidation expenses in 1995 were related to additional costs
associated with consolidation of computer operations and reconfiguration of
branch support functions not related to the merger with West One. OREO
transactions in 1995 included a $2.5 million gain on sale of California real
estate. Asset write-downs in 1995 were primarily the write-down of premises
vacated by the affinity card banking subsidiary.
In the first quarter of 1994, a $100 million restructuring charge was
recorded related to a comprehensive program designed to allow U. S. Bancorp to
become a more efficient, competitive and customer-focused financial institution.
The program included staff reductions accomplished through an early retirement
opportunity for certain employees, other severance programs and attrition;
divestiture of certain business activities; and the consolidation and
integration of certain operations and facilities that no longer fit U. S.
Bancorp's corporate objectives or the needs of its regional customers. The
program called for consolidation of branch operations centers for all states
from seven to two, closure of certain branches, and other activities. As a
result, by the third quarter of 1995 U. S. Bancorp (prior to the merger with
West One) achieved its goal of reducing the overhead ratio to under 59 percent,
ahead of its 1997 target date.
The $100 million charge represented the incremental costs that resulted
from the restructuring plan. Included in the restructuring charge were $52.4
million of costs associated with enhanced retirement and other benefit programs,
$22.6 million of severance benefits, $9.5 million of expenses related to the
cost to exit certain business activities, $7.3 million related to consolidation
and integration of facilities, and $8.2 million of other cost reduction expenses
related to the program.
U. S. Bancorp offered eligible employees an early retirement incentive
program, providing a reduction in the eligible age for retirement and an
additional number of years of service toward the computation of retirement
benefits. Certain employees were eligible for voluntary severance benefits,
which exceeded standard severance benefits provided to personnel displaced in
the restructuring program. In addition, certain employees received payments for
their retention through agreed upon dates and outplacement services.
Included in asset write-downs in 1994 was the write-off of certain
capitalized expenses as U. S. Bancorp changed its policy with respect to the
capitalization of internal costs related to the development and installation of
computer software. These unamortized costs related to several projects were
written off as a charge to expenses totaling $12.1 million. Write-downs of
intangibles resulting from revaluation of certain acquired business intangibles
in 1994 totaled $3.3 million. Deferred costs totaling $3.0 million related to
agent-originated consumer loans held for sale were written off upon the transfer
of these loans to the loan portfolio and included in asset write-downs. Other
nonrecurring noninterest expense items in 1994 were anticipated expenses related
to system conversions of $6.2 million; interest accrued on pending settlements
with tax authorities of $1.2 million; and other items totaling $1.4 million.
Asset write-downs in 1993 included a $2.7 million write-down of bank premises
and a $3.5 million write-down of affinity credit card intangibles due to a
change in underlying assumptions regarding the solicitation period for potential
cardholders. Nonrecurring noninterest expense items in 1993 included reversal of
excess postretirement and other liabilities of $8 million.
21
<PAGE> 24
INCOME TAXES
U. S. Bancorp's effective income tax rate was 35.4 percent in 1995,
compared with 29.9 percent in 1994 and 32.4 percent in 1993. The effective tax
rate increased in 1995 as the level of pre-tax income increased, with a
correspondent decrease in the proportion of tax-exempt interest income. In
addition, the 1995 results include a higher level of nondeductible expenses
incurred in conjunction with the merger with West One. The decline in the
effective tax rate in 1994 from 1993 was caused primarily by the higher
proportion of tax-exempt interest income in 1994 due to the decline in taxable
income as a result of the restructuring charge. Also, in 1994, U. S. Bancorp
recorded a higher amount of tax credits associated with low income housing
investments.
FINANCIAL CONDITION
SECURITIES PORTFOLIOS
In November of 1995, the Financial Accounting Standards Board (FASB) issued
additional implementation guidance regarding the FASB's previously issued
Statement of Financial Accounting Standards (FAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". The additional guidance
provided an opportunity to reassess the appropriateness of the classification of
securities, and reclassify securities in accordance with the provisions of FAS
No. 115. Any reclassifications under these guidelines were required to be made
by December 31, 1995 and, accordingly, U. S. Bancorp reclassified approximately
$800 million of held to maturity securities to the available for sale
classification prior to that date. As a result of this reclassification, the
held to maturity securities portfolio consisted mainly of state and municipal
bonds at December 31, 1995. Reclassifications from the held to maturity category
resulting from this one-time reassessment does not affect U. S. Bancorp's intent
to hold other debt securities to maturity in the future.
Securities available for sale totaled $3.3 billion at December 31, 1995,
compared with $2.5 billion at December 31, 1994, reflecting the transfer of
securities between classifications in December 1995. The average yield on the
available for sale securities portfolio at year-end 1995 was 6.52 percent.
Securities held to maturity decreased to $865 million at December 31, 1995 from
approximately $2 billion at December 31, 1994, the result of the
reclassification of securities to the available for sale category and maturing
securities used to fund loan growth. The average yield on the held to maturity
portfolio was 7.33 percent at December 31, 1995.
The securities portfolios are managed to maximize yield over an entire
interest rate cycle while minimizing market exposure to changes in interest
rates. In the third quarter of 1994, U. S. Bancorp sold a portion of its
available for sale U. S. Treasury securities and reinvested the proceeds
primarily in collateralized mortgage obligations to improve the yield of the
securities portfolios.
At December 31, 1995, the carrying value of the securities portfolios
included $969.8 million of mortgage-backed securities (MBS's) and collateralized
mortgage obligations (CMO's), compared with $1.56 billion at December 31, 1994.
Substantially all of these securities were issued by Federal agencies or backed
by Federal agency pass-through securities.
The overall yield earned on MBS's and CMO's depends on the amount of
interest earned over the life of the security, adjusted for the amortization of
any premium or discount. Actual maturities and yields of these securities depend
on when the underlying mortgage principal and interest are repaid. Prepayment
experience is affected by changes in market interest rates, as well as loan
types and maturities, geographical location of the related properties,
seasonality, age and mobility of borrowers and whether loans are assumable.
U.S. Bancorp invests primarily in government agency-sponsored CMO's, which
effectively eliminates credit risk. The majority of CMO purchases were made at a
point in the yield curve to reduce interest rate risk. Government agency
sponsored MBS's of intermediate duration held at December 31, 1995 have minimal
credit risk and have reduced interest rate risk. Very seasoned, longer-maturity
MBS's are sometimes acquired for their stable cash flows.
22
<PAGE> 25
MATURITY DISTRIBUTION AND YIELDS OF SECURITIES
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
----------------------------------------------- --------------------------------------------
WEIGHTED ESTIMATED ESTIMATED ESTIMATED WEIGHTED AMORTIZED AMORTIZED AMORTIZED
AVERAGE FAIR VALUE FAIR VALUE FAIR VALUE AVERAGE COST COST COST
YIELD(1) 1995 1994 1993 YIELD(1) 1995 1994 1993
-------- ---------- ---------- ---------- -------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury obligations
Due within one year.............. 5.51% $ 382.6 $ 270.5 $ 135.0 -% $ - $ - $ 162.7
Due after one year but within
five years..................... 5.35 368.3 722.6 1,086.7 - - 10.0 -
Due after five years but within
ten years...................... 5.77 10.2 - - - - - -
Due after ten years.............. -- - - - - - - -
-------- -------- -------- ------ -------- --------
Total...................... 5.43 761.1 993.1 1,221.7 - - 10.0 162.7
-------- -------- -------- ------ -------- --------
U.S. government agency securities
Due within one year.............. 6.19 59.4 37.7 52.0 - - - 25.4
Due after one year but within
five years..................... 6.27 49.7 58.9 56.1 - - - -
Due after five years but within
ten years...................... 6.68 226.5 50.7 - - - - -
Due after ten years.............. 6.71 823.6 269.4 176.5 - - 116.2 116.8
-------- -------- -------- ------ -------- --------
Total...................... 6.66 1,159.2 416.7 284.6 - - 116.2 142.2
-------- -------- -------- ------ -------- --------
State and municipal bonds
Due within one year.............. 6.69 10.5 - - 7.82 60.5 68.2 79.4
Due after one year but within
five years..................... 7.66 22.1 - - 7.87 348.4 300.2 257.8
Due after five years but within
ten years...................... 9.20 6.6 - - 7.00 385.3 500.0 486.0
Due after ten years.............. 7.54 52.6 - - 8.98 18.8 62.5 113.8
-------- -------- -------- ------ -------- --------
Total...................... 7.59 91.8 - - 7.48 813.0 930.9 937.0
-------- -------- -------- ------ -------- --------
Other securities(2)
Due within one year.............. 8.47 2.0 88.7 68.6 - - - 4.6
Due after one year but within
five years..................... 7.33 43.2 55.9 146.8 4.86 52.1 .2 159.2
Due after five years but within
ten years...................... 7.13 19.2 18.1 23.8 - - 118.8 .1
Due after ten years.............. 6.05 230.4 182.9 135.6 - - - 14.3
-------- -------- -------- ------ -------- --------
Total...................... 6.32 294.8 345.6 374.8 4.86 52.1 119.0 178.2
-------- -------- -------- ------ -------- --------
Serial maturities(3).............. 7.19 969.8 753.8 856.5 - - 809.9 881.7
-------- -------- -------- ------ -------- --------
6.52% $3,276.7 $2,509.2 $2,737.6 7.33% $ 865.1 $1,986.0 $2,301.8
==== ======== ======== ======== ==== ====== ======== ========
</TABLE>
- ---------------
(1) Tax-equivalent basis. For securities carried at estimated fair value, the
weighted average yield is computed using amortized cost.
(2) Equity securities with no stated maturity date were presented as due after
ten years.
(3) Included in serial maturities are mortgage-backed securities and
collateralized mortgage obligations.
LOAN PORTFOLIO
In 1995, the average loan portfolio increased nine percent over the prior
year. Average loans grew four percent in the fourth quarter of 1995 on an
annualized basis over the third quarter. Loan growth was particularly strong in
commercial and real estate mortgage loans, and lease financing. Commercial
loans, representing 52 percent of the period-end portfolio, increased to $11.7
billion at December 31, 1995 from $10.9 billion at December 31, 1994. Average
real estate mortgage loans and leases increased in 1995 by 12 percent and 14
percent, respectively, compared with 1994. Average consumer loans increased six
percent in 1995 compared with 1994. Consumer loans at year-end 1995 were $5.5
billion, a decrease from $5.6 billion at year-end 1994, due primarily to sales
of affinity credit card portfolios totaling approximately $350 million during
1995.
23
<PAGE> 26
LOAN PORTFOLIO ANALYSIS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Loans (net of unearned income)
Commercial...................... $11,746.1 $10,863.3 $ 9,939.8 $ 9,078.4 $ 8,526.7
Lease financing................. 1,187.4 980.5 933.9 859.4 992.0
Foreign......................... 56.3 49.8 96.3 64.8 53.8
Real estate construction........ 833.0 791.4 776.6 923.4 947.7
Real estate mortgage............ 3,477.1 3,350.2 2,906.2 2,907.4 3,155.6
Consumer........................ 5,485.4 5,610.0 4,792.5 4,206.4 3,695.6
--------- --------- --------- --------- ---------
$22,785.3 $21,645.2 $19,445.3 $18,039.8 $17,371.4
========= ========= ========= ========= =========
</TABLE>
It is U. S. Bancorp's objective to maintain a loan portfolio that is
diverse in terms of type of loan, industry concentration, geographic
distribution and borrower concentration in order to reduce the overall credit
risk by minimizing the adverse impact of any single event or set of occurrences.
The Commercial Loan Distribution table below shows the commercial loan portfolio
stratified by significant Standard Industrial Code classifications. It should be
noted that within the indicated classification, there are other
subclassifications for which U. S. Bancorp's reporting system monitors industry
concentrations.
U. S. Bancorp has collateral management policies in place to ensure that
collateral lending of all types is approached on a basis consistent with safe
and sound standards. Valuation analysis is utilized to take into consideration
the potentially adverse economic conditions under which liquidation could occur.
Collateral accepted against the commercial loan portfolio includes accounts
receivable, equipment, commercial real estate and inventory. Loan to value
ratios on commercial real estate are set in conformance with the FDIC
Improvement Act of 1991 (FDICIA).
Commercial loans were primarily local middle-market credits and loans to
small businesses, and consisted of a diversified group of customers. U. S.
Bancorp's banks, U. S. Bank of Oregon, U. S. Bank of Washington and West One
Bank, Idaho, are leaders in small business lending in their respective states.
Industry concentrations are displayed in the table below.
COMMERCIAL LOAN DISTRIBUTION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1994
----- -----
<S> <C> <C>
Manufacturing........................................................ 15.1% 15.5%
Service.............................................................. 14.1 13.8
Retail............................................................... 11.7 10.7
Agricultural......................................................... 8.9 9.3
Wholesale............................................................ 8.8 10.0
Brokers, Dealers, and Insurance...................................... 5.5 5.1
Forest Products...................................................... 4.9 5.8
Transportation....................................................... 4.7 3.8
Contractors.......................................................... 4.3 4.2
Financial............................................................ 3.7 3.4
Other................................................................ 18.3 18.4
---- ----
100.0% 100.0%
==== ====
</TABLE>
Consumer lending includes installment loans, credit cards and credit lines.
Risk associated with consumer lending is managed by utilizing uniform credit
standards, credit limits, collateralization and monitoring of delinquencies. The
majority of consumer loans outstanding are concentrated in Oregon, Washington
and Idaho, where general economic trends were favorable in 1995.
24
<PAGE> 27
Real estate mortgage loans increased $126.9 million to $3.5 billion at
year-end 1995 compared with 1994, primarily due to an increase in one-to-four
family residential real estate mortgage loans. In an effort to increase home
ownership opportunities for low to moderate-income and first-time buyers, U. S.
Bancorp continued to expand its successful HomePartners loan program since the
first quarter of 1994. The HomePartners product line provides more flexible
credit guidelines and flexible down payment options for first-time and low to
moderate-income borrowers.
The majority of U. S. Bancorp's real estate mortgage loans outstanding are
collateralized by properties located in the Pacific Northwest, Idaho and
Northern California. U. S. Bancorp closely monitors the composition of its real
estate portfolio through prudent underwriting criteria and by monitoring loan
concentrations by geographic region and property type. An analysis of the real
estate portfolio is presented in the tables below.
REAL ESTATE LOANS OUTSTANDING
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------
RESIDENTIAL COMMERCIAL TOTAL
----------- ---------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Real estate construction........................... $ 351.4 $ 481.6 $ 833.0
Real estate mortgage............................... 1,289.9 2,187.2 3,477.1
-------- -------- --------
$ 1,641.3 $2,668.8 $4,310.1
======== ======== ========
</TABLE>
REAL ESTATE LOANS OUTSTANDING
CONCENTRATIONS BY STATE AND TYPE OF COLLATERAL
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------------------------------------
WASHINGTON CALIFORNIA OREGON OTHER TOTAL
---------- ---------- -------- ------ --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Residential................................ $ 503.7 $496.8 $ 465.1 $175.7 $1,641.3
Commercial
Apartment/Condominium.................... 163.4 83.9 80.3 53.9 381.5
Office................................... 216.5 45.5 226.0 153.2 641.2
Retail................................... 70.6 3.3 37.5 19.2 130.6
Hotel/Motel.............................. 170.3 78.1 175.6 67.5 491.5
Land..................................... 28.4 28.3 33.2 25.6 115.5
Other.................................... 392.0 152.5 290.4 73.6 908.5
-------- ------ -------- ------ --------
Total Commercial.................... 1,041.2 391.6 843.0 393.0 2,668.8
-------- ------ -------- ------ --------
Total...................................... $1,544.9 $888.4 $1,308.1 $568.7 $4,310.1
======== ====== ======== ====== ========
</TABLE>
ASSET/LIABILITY MANAGEMENT
Key Objective. A key objective of asset/liability management is to manage
interest rate risk due to asset and liability cash flows and market interest
rate movements. The asset/liability management committee (ALCO) is comprised of
key executives and provides oversight to the asset/liability management process
and recommends policy guidelines for board of director approval. Adherence to
these policies is monitored continuously, and decisions regarding exposure to
changes in interest rates are made when appropriate and agreed to by ALCO.
Simulation Model. An asset/liability management simulation model is used
to quantify the exposure and impact of changing interest rates on earnings. In
general, the simulation model is a dynamic tool which uses forecasting and
option adjusted cash flow analysis in order to model portfolios and the entire
balance sheet. Specifically, the simulation model: (i) captures all on- and
off-balance sheet financial instruments; (ii) anticipates balance sheet mix
changes and trends; (iii) utilizes both a standardized rate scenario set, and
25
<PAGE> 28
multiple, randomly generated rate scenarios to forecast net interest income;
(iv) includes derivative instruments used to hedge "natural balance sheet"
dynamics; and (v) simulates pro forma balance sheets, cash flows, net interest
margin sensitivity and net interest income. Interest rate sensitivity is based
on simulated impacts on net interest income for the succeeding twelve months
under standardized rising, flat and falling rate scenarios.
The simulation model combines the significant factors that affect interest
rate sensitivity into a comprehensive earnings simulation for the succeeding
twelve months. Earning assets and interest-bearing liabilities with longer lives
(duration) may be subject to more volatility than those with shorter duration.
The model accounts for these differences in its simulations. At December 31,
1995, the simulation modeled the impact of assumptions that the treasury yield
curve would: (i) increase linearly during the year by 200 basis points, or (ii)
decrease linearly by 100 basis points, and compared both of these rate scenarios
to a flat rate scenario. ALCO policy guidelines provide that the difference
between a flat rate scenario compared with higher rate and lower rate scenarios
should not result in more than a ten percent negative impact to return on
equity. Simulations as of December 31, 1995, indicated U. S. Bancorp was
positioned within these guidelines and was slightly asset sensitive. It should
be noted that the simulation model neither takes into account future management
actions that could be undertaken to alter the simulated results, if there were a
change in actual market interest rates during the year, nor does it contemplate
a change in anticipated interest rate level/volatility.
Simulation versus Gap Analysis. The matching of assets and liabilities may
be analyzed by examining the extent to which such assets and liabilities are
interest rate sensitive and by monitoring an institution's interest rate
sensitivity "gap". An asset or liability is interest rate sensitive within a
specific time period if it will reprice within that time period. The interest
rate sensitivity gap is defined as the difference between the amount of
interest-earning assets anticipated, based upon certain assumptions, to mature
or reprice within a specific time period and the amount of interest-bearing
liabilities anticipated, based upon certain assumptions, to mature or reprice
within that time period. The overriding philosophy for the year-end GAP report
is based on the contractual interest repricing date (or in the case of fixed
rate instruments, the contractual maturity date). The only exceptions are for
financial instruments that have no contractual terms (commonly referred to as
non-determinant instruments), as follows: (i) other assets, other liabilities
and demand deposit accounts are assumed to be noninterest sensitive, and (ii)
savings, interest checking and money market accounts are assumed to be
immediately interest sensitive. A gap is considered positive when the amount of
interest rate sensitive assets maturing within a specific time frame exceeds the
amount of interest rate sensitive liabilities maturing within that same time
frame.
The simulation model process provides a dynamic assessment of interest rate
sensitivity, whereas a static interest rate gap table is compiled as of a point
in time. The model simulations differ from a traditional gap analysis because a
traditional gap analysis does not reflect the multiple effects of interest rate
movements on the entire range of assets, liabilities and off-balance sheet
financial instruments, and ignores the future impact of new business strategies.
The simulation model is dynamic because it includes significant variables
(balance sheet mix, volumes, and pricing methodologies) that are identified as
being affected by interest rates. For example, the factors the simulation model
captures, which traditional gap tables do not, include: (i) rate of change
(magnitude) differentials, such as federal funds rates versus savings account
rates; (ii) maturity effects, such as refinanced loans; (iii) rate barrier
effects, such as caps or floors on loans; (iv) changing balance sheet, both
volume and mix changes; (v) floating rate loans that may be related to prime,
LIBOR, Treasury notes or other rate indices, which do not necessarily move
correspondingly with market rate changes; (vi) leads and lags that occur as
market rates change; and (vii) the effects of prepayment volatility on various
fixed-rate assets such as residential mortgages, mortgage-backed securities and
consumer loans. These and certain other effects were evaluated to develop the
multiple scenarios from which sensitivity of earnings to changes in interest
rates was determined.
26
<PAGE> 29
The above mentioned effects included in the simulation are difficult to
properly present in a gap analysis. Notwithstanding these limitations, a
traditional banking industry gap table is presented on page 28. To improve
interest rate sensitivity disclosure, the table has been modified to include the
effect of off-balance sheet instruments. For presentation purposes, (i) all
earning assets that are marked-to-market or have variable rate features are
included in the 1-30 day category, (ii) earning assets and interest-bearing
liabilities with contractual repricing characteristics are presented according
to contractual maturity. Residential real estate loans and mortgage-backed
securities are presented based on expected maturities, (iii) savings, NOW
accounts, interest checking and money market accounts, which can theoretically
be repriced at any time, are included in the 1-30 day category, (iv)
noninterest-bearing deposits are presented as noninterest/nonmarket sensitive,
and (v) off-balance sheet financial instruments reflect the most likely expected
impact for the succeeding twelve month period.
Use of Derivatives in Interest Risk Management. Off-balance sheet
financial instruments used in interest rate risk management include forward and
futures contracts and interest rate swap agreements. Interest rate swaps are
primarily used to change the floating or fixed rate characteristics of existing
assets and liabilities or to manage the repricing relationship between certain
floating rate assets and floating rate liabilities. Managing the interest rate
sensitivity position of the organization is the primary purpose. All
counterparties to these off-balance sheet financial instruments are subject to
the same credit analysis and approval applied to borrowing customers of U. S.
Bancorp.
27
<PAGE> 30
INTEREST RATE GAP ANALYSIS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
31 DAYS TOTAL 1 YEAR 3 YEARS NONINTEREST/
1-30 TO WITHIN TO TO OVER NONMARKET
DAYS 1 YEAR 1 YEAR 3 YEARS 5 YEARS 5 YEARS SENSITIVE TOTAL
--------- -------- --------- -------- -------- -------- ------------ ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earning assets
Investment activities:
Money market investments.......... $ 516.5 $ - $ 516.5 $ - $ - $ - $ - $ 516.5
Loans held for sale............... 160.0 - 160.0 - - - - 160.0
Trading securities and securities
available for sale.............. 3,556.4 - 3,556.4 - - - - 3,556.4
Securities held to maturity....... 3.2 75.1 78.3 181.0 218.5 387.3 - 865.1
--------- --------- --------- -------- -------- -------- -------- ---------
Total investment activities..... 4,236.1 75.1 4,311.2 181.0 218.5 387.3 - 5,098.0
Lending activities................ 11,282.4 4,981.7 16,264.1 3,092.5 1,356.8 1,605.1 466.8 22,785.3
--------- --------- --------- -------- -------- -------- -------- ---------
Total earning assets................ 15,518.5 5,056.8 20,575.3 3,273.5 1,575.3 1,992.4 466.8 27,883.3
Other assets........................ - - - - - - 3,911.0 3,911.0
--------- --------- --------- -------- -------- -------- -------- ---------
Total assets.................... 15,518.5 5,056.8 20,575.3 3,273.5 1,575.3 1,992.4 4,377.8 31,794.3
--------- --------- --------- -------- -------- -------- -------- ---------
Interest-bearing liabilities
Savings, NOW accounts and interest
checking........................ 4,292.8 - 4,292.8 - - - - 4,292.8
Money market accounts............. 5,544.5 - 5,544.5 - - - - 5,544.5
Time deposits..................... 1,204.5 4,169.3 5,373.8 1,445.2 416.0 182.6 - 7,417.6
Short-term borrowings............. 3,165.6 430.5 3,596.1 - 3.3 - - 3,599.4
Long-term borrowings.............. 110.8 400.1 510.9 195.7 56.3 614.1 - 1,377.0
--------- --------- --------- -------- -------- -------- -------- ---------
Total interest-bearing
liabilities..................... 14,318.2 4,999.9 19,318.1 1,640.9 475.6 796.7 - 22,231.3
Noninterest-bearing deposits........ - - - - - - 6,009.7 6,009.7
Other liabilities................... - - - - - - 936.2 936.2
Shareholders' equity................ - - - - - - 2,617.1 2,617.1
--------- --------- --------- -------- -------- -------- -------- ---------
Total liabilities and equity.... 14,318.2 4,999.9 19,318.1 1,640.9 475.6 796.7 9,563.0 31,794.3
--------- --------- --------- -------- -------- -------- -------- ---------
Interest sensitive gap.............. 1,200.3 56.9 1,257.2 1,632.6 1,099.7 1,195.7 466.8 5,652.0
Derivatives affecting interest rate
sensitivity:
Pay - floating interest rate
swaps........................... (448.2) (1,010.0) (1,458.2) - - - - (1,458.2)
Pay - fixed interest rate swaps... - - - - - (9.3) - (9.3)
Receive - floating interest rate
swaps........................... 300.0 509.3 809.3 - - - - 809.3
Receive - fixed interest rate
swaps........................... 25.0 450.3 475.3 149.7 33.2 - - 658.2
--------- --------- --------- -------- -------- -------- -------- ---------
Interest sensitive gap adjusted for
derivative instruments............ $ 1,077.1 $ 6.5 $ 1,083.6 $1,782.3 $1,132.9 $1,186.4 $ 466.8 $ 5,652.0
========= ========= ========= ======== ======== ======== ======== =========
Gap adjusted for derivative
instruments as a percent of total
earning assets.................... 3.87% .02% 3.89% 6.39% 4.06% 4.26% 1.67% 20.27%
========= ========= ========= ======== ======== ======== ======== =========
</TABLE>
LIQUIDITY
Another objective of asset/liability management is to manage liquidity.
Liquidity is the ability to raise adequate and reasonably priced funds,
primarily through deposits, as well as purchased funds and the issuance of debt
and equity capital, and is managed through the selection of the asset mix and
the maturity mix of liabilities.
Core deposits, defined as deposits other than time deposits of $100,000 or
more, are U. S. Bancorp's primary source of funding. Core deposits provide a
sizable source of relatively stable and low-cost funds. Average core deposits
and shareholders' equity, which totaled $22.8 billion in 1995 and $22.6 billion
in 1994, funded 76 percent and 78 percent of average total assets in those
years, respectively.
28
<PAGE> 31
Other sources of liquidity included purchased funds, comprised of time
deposits over $100,000, federal funds purchased and security repurchase
agreements, commercial paper and other short-term borrowings. Average purchased
funds totaled $5.3 billion in 1995 and $4.7 billion in 1994. A portion of the
remaining funding of average total assets came from long-term debt, which
averaged $1.2 billion in 1995 and 1994.
Due to management of U.S. Bancorp's asset/liability management process as
previously described and management of its liquidity position, unrealized losses
in the securities portfolio at December 31, 1995 are not expected to
significantly affect operating results or liquidity in subsequent periods.
The analysis of liquidity should also include a review of the changes that
appear in the consolidated statement of cash flows for 1995. The statement of
cash flows includes operating, investing and financing categories. Operating
activities include net income for 1995 of $329 million, which is adjusted for
non-cash items including the non-cash portion of the merger and integration
costs in 1995 and the non-cash portion of the restructuring charges in 1994.
Investing activities consisted primarily of both proceeds from and purchases of
securities, and the impact of loans made and principal collected on loans.
Financing activities present the net change in U.S. Bancorp's deposit accounts
and short-term borrowings, and also include $332 million in net proceeds from
the issuance of long-term debt. During 1995, common stock purchases totaling
$176 million were made to redeem subordinated convertible debentures
outstanding, and meet the issuance requirements of stock incentive plans, U.S.
Bancorp's dividend reinvestment plan and other corporate purposes. Cash and cash
equivalents were $2.9 billion at December 31, 1995.
The affiliate banks individually maintain liquidity in the form of
short-term money market investments, anticipated prepayments and maturities of
securities and the maturity structure of their loan portfolios. Another source
of liquidity are those securities classified as available for sale, which
totaled $3.3 billion at December 31, 1995. A bank note program is utilized by U.
S. Bank of Oregon and U. S. Bank of Washington which provides access to national
markets. Also, several U. S. Bancorp subsidiaries are members of the Federal
Home Loan Bank System which provides a stable source of attractive, alternative
funding and liquidity.
U. S. Bancorp's liquidity is enhanced by its accessibility to a diversity
of national market sources of funds. U. S. Bancorp has access to funding through
an ongoing medium-term note offering. At December 31, 1995, U. S. Bancorp had
available various uncommitted capacities, including $589 million remaining
capacity under an $800 million debt shelf registration filed in 1991, of which
$500 million has been designated as medium-term notes. At December 31, 1995, U.
S. Bancorp had $200 million borrowing capacity under a $500 million subordinated
debt shelf registration filed in 1993. In addition, U. S. Bancorp had $500
million in a committed line of credit arrangement through a syndication of
unaffiliated banks, which served as commercial paper back-up lines and provided
general liquidity for the parent company. U. S. Bancorp also had available $150
million of remaining capacity under a $300 million uncommitted preferred stock
shelf registration.
The following table summarizes U. S. Bancorp's ratings by major credit
rating agencies at December 31, 1995; such ratings are subject to revision or
withdrawal at anytime. With respect to commercial paper, an A-1 rating indicates
a very strong capacity for timely payment. The Standard & Poor's long-term
investment grade ratings range from AAA to BBB, with an A rating indicating a
strong capacity. With respect to Moody's long-term ratings, A is applied to
upper-medium-grade obligations with adequate repayment capacity and Baa (or baa)
is applied to medium-grade obligations; ratings modified by 1 rank at the higher
end of the category.
<TABLE>
<CAPTION>
STANDARD DUFF THOMSON
& POOR'S MOODY'S & PHELPS BANKWATCH
-------- ------- -------- ---------
<S> <C> <C> <C> <C>
Commercial paper................. A-1 P-1 DUFF1+ TBW-1
Senior debt...................... A A2 AA- A+
Subordinated debt................ A- A3 A+ A
Preferred stock.................. BBB+ a2 A A-
</TABLE>
29
<PAGE> 32
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
U. S. Bancorp's allowance for credit losses totaled $434.5 million at
December 31, 1995, representing 1.91 percent of loans outstanding, compared with
1.79 percent at year-end 1994. The provision for credit losses for 1995 was
$124.1 million, compared with a $120.1 million provision in 1994 and $106.2
million in 1993. The higher provisions in 1995 and 1994 reflected a combination
of loan growth and management's intention to increase the allowance for future
potential loan losses relative to loans outstanding. The provision for credit
losses in 1995 included approximately $27 million related to the merger with
West One and the integration of the combined loan portfolios. The allowance for
credit losses as a percentage of nonperforming loans was 192 percent at December
31, 1994, and increased during 1995 to 336 percent of nonperforming loans at
December 31, 1995.
The majority of net charge-offs in 1995 related to bank card and consumer
loans. Net bank card charge-offs increased from 3.03 percent in 1994 to 3.69
percent in 1995, while consumer loan net charge-offs increased to .68 percent
from .47 percent in 1994. Real estate construction loan charge-offs decreased to
$.5 million in 1995, compared with $12.1 million in 1994 and $4.9 million in
1993. The 1994 charge-offs related primarily to three commercial construction
projects in California.
Management performs a quarterly analysis to establish the appropriate level
of the allowance, taking into consideration such factors as loan loss
experience, an evaluation of potential losses in the portfolio, credit
concentrations and trends in portfolio volume, maturity, delinquencies and
nonaccruals, risks associated with standby letters of credit which guarantee the
debt of others and other off-balance sheet commitments, and prevailing and
anticipated economic conditions. This analysis provides an allowance consisting
of two components, allocated and unallocated. The allocated component reflects
inherent losses resulting from the analysis of individual loans and is developed
through specific credit allocations for individual loans and historical loss
experience for each loan category and risk classification within each category.
The total of these allocations is then supplemented by the unallocated component
of the allowance. The unallocated component reflects management's judgment and
determination of the amounts necessary for loan concentrations, economic
uncertainties and other subjective factors.
U. S. Bancorp continues to closely monitor credit risk in its loan
portfolio. U. S. Bancorp believes that its credit approval and review processes
are effective and operating in accordance with sound banking policy and that the
allowance for credit losses at December 31, 1995 was adequate to absorb
potential credit losses inherent in loans, leases, loan commitments and standby
letters of credit outstanding at that date.
A loan is considered impaired when, based on current information and
events, it is probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement. An impairment is to be
recognized by creating a valuation allowance with a corresponding charge to the
provision for credit losses or by adjusting an existing valuation allowance with
a corresponding charge or credit to the allowance for credit losses.
At December 31, 1995, U. S. Bancorp's recorded investment in loans for
which an impairment has been recognized totaled $104.0 million. Included in this
amount was $7.2 million of impaired loans for which the valuation allowance is
$3.1 million. The balance of the allowance for credit losses is available to
absorb losses from all loans, although allocations have been made for certain
loans and loan categories as part of management's quarterly analysis of the
allowance.
30
<PAGE> 33
ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Loans (net of unearned income)............ $22,785,275 $21,645,158 $19,445,296 $18,039,904 $17,371,325
=========== =========== =========== =========== ===========
Daily average loans (net of unearned
income)................................. $22,164,517 $20,336,416 $18,493,377 $17,438,194 $17,264,298
=========== =========== =========== =========== ===========
Balance of allowance for credit losses at
beginning of year....................... $ 387,559 $ 345,152 $ 327,398 $ 283,149 $ 250,610
Acquisitions (dispositions)............... (3,137) 2,542 672 18,223 3,259
Loans charged-off
Commercial.............................. 25,912 38,740 39,613 79,447 73,700
Lease financing......................... 716 1,197 6,260 10,516 6,746
Real estate construction................ 538 12,080 4,860 4,195 5,624
Real estate mortgage.................... 6,829 4,348 10,065 10,233 16,047
Consumer................................ 44,804 32,151 32,627 32,051 37,725
Bank card............................... 38,094 36,495 37,575 27,185 17,926
----------- ----------- ----------- ----------- -----------
Total............................... 116,893 125,011 131,000 163,627 157,768
----------- ----------- ----------- ----------- -----------
Recoveries of loans previously charged-off
Commercial.............................. 17,710 18,327 16,428 20,347 10,740
Lease financing......................... 593 1,163 755 1,165 1,075
Real estate construction................ 1,955 1,248 2,006 875 163
Real estate mortgage.................... 2,969 4,734 6,070 3,662 3,076
Consumer................................ 13,469 12,684 11,650 12,317 14,692
Bank card............................... 6,190 6,574 4,939 2,525 2,249
----------- ----------- ----------- ----------- -----------
Total............................... 42,886 44,730 41,848 40,891 31,995
----------- ----------- ----------- ----------- -----------
Net charge-offs........................... 74,007 80,281 89,152 122,736 125,773
Provision for credit losses............... 124,093 120,146 106,234 148,762 155,053
----------- ----------- ----------- ----------- -----------
Balance of allowance for credit losses at
end of year............................. $ 434,508 $ 387,559 $ 345,152 $ 327,398 $ 283,149
=========== =========== =========== =========== ===========
Allowance as a % of year-end loans........ 1.91% 1.79% 1.77% 1.81% 1.63%
Ratio of net charge-offs by average loan
category:
Commercial.............................. .07% .20% .25% .68% .74%
Lease financing......................... .01 - .63 .99 .62
Real estate construction................ (.17) 1.35 .35 .36 .58
Real estate mortgage.................... .11 (.01) .14 .22 .39
Consumer................................ .68 .47 .59 .64 .80
Bank card............................... 3.69 3.03 3.61 3.07 2.50
Total loans............................. .33% .39% .48% .70% .73%
</TABLE>
31
<PAGE> 34
Allocation of the Allowance for Credit Losses
The allowance is available to absorb losses from all loans, although
allocations have been made for certain loans and loan categories. The allocation
of the allowance as shown below should not be interpreted as an indication that
charge-offs in future periods will occur in these amounts or proportions, or
that the allocation indicates future charge-off trends. In addition to the most
recent analysis of individual loans and pools of loans, management's methodology
also places emphasis on historical loss data, delinquency and nonaccrual trends
by loan classification category and expected loan maturity. This analysis,
management believes, identifies potential losses within the loan portfolio and
therefore results in allocation of a large portion of the allowance to specific
loan categories. The loan category percent represents the percentage of loans in
each category to total loans.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------------- ----------------- ----------------- ----------------- -----------------
LOAN LOAN LOAN LOAN LOAN
CATEGORY CATEGORY CATEGORY CATEGORY CATEGORY
BALANCE PERCENT BALANCE PERCENT BALANCE PERCENT BALANCE PERCENT BALANCE PERCENT
------- -------- ------- -------- ------- -------- ------- -------- ------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and lease
financing......... $157.9 57% $135.5 55% $142.3 56% $166.3 55% $141.2 55%
Real estate......... 24.3 19 34.5 19 41.2 19 41.7 21 41.4 24
Consumer............ 67.2 24 63.2 26 61.0 25 60.0 24 61.3 21
Unallocated......... 185.1 -- 154.4 -- 100.7 -- 59.4 -- 39.2 --
------ --- ------ --- ------ --- ------ --- ------ ---
$434.5 100% $387.6 100% $345.2 100% $327.4 100% $283.1 100%
====== === ====== === ====== === ====== === ====== ===
</TABLE>
ASSET QUALITY
Nonperforming assets consist of loans on which interest is no longer
accrued, certain restructured loans for which the interest rate or other terms
have been renegotiated, and real estate and equipment acquired in satisfaction
of loans. During 1995, U.S. Bancorp continued to experience positive asset
quality trends. Nonperforming assets represented .73 percent of loans and
foreclosed assets at December 31, 1995, down from 1.06 percent at year-end 1994.
Nonaccrual and restructured loans, as a percent of total loans, fell to .57
percent from .93 percent at December 31, 1994.
Nonperforming real estate loans and assets totaled $92.5 million, or 56
percent, of the nonperforming assets at December 31, 1995. Loans or properties
of less than $5 million each made up 69 percent, or $114.6 million, of
nonperforming assets at that date. Of the balance, 2 loans over $10 million each
accounted for $23.6 million. Nonperforming assets at December 31, 1995 included
$60.4 million of commercial real estate loans related to properties located in
California.
At December 31, 1995, U.S. Bancorp's exposure to highly leveraged
transactions (HLT's) was $362 million of loans outstanding, with unfunded
commitments of $225 million. This compares to HLT loans outstanding of $274
million with unfunded commitments of $290 million at December 31, 1994 and HLT
loans outstanding of $239 million with unfunded commitments of $136 million at
year-end 1993. At December 31, 1995, there was one HLT loan on nonaccrual
status, and there were no charge-offs associated with HLT loans during the year.
For the years ended December 31, 1994 and 1993, there were no HLT loans on
nonaccrual status, and there were no charge-offs associated with HLT loans
during the respective years.
In addition to the loans classified as nonperforming, U. S. Bancorp has
other loans which it has internally classified, largely due to weakening
financial strength of the borrowers or concern about specific industries. These
loans, although currently performing in accordance with contractual terms, are
monitored closely by management and have been specifically provided for in the
evaluation of the allowance for credit losses. U. S. Bancorp's lending
procedures and loan portfolio, including internally classified loans, are
examined by regulatory agencies as part of their supervisory activities.
32
<PAGE> 35
NONPERFORMING ASSETS AND PAST DUE LOANS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans............................................... $118,436 $190,399 $238,479 $273,342 $332,737
Restructured loans............................................. 10,996 11,547 1,815 6,043 6,601
Other real estate and equipment owned
Other real estate owned...................................... 33,289 23,487 35,611 35,682 85,875
Equipment repossessed........................................ 3,923 5,151 4,598 5,463 14,299
-------- -------- -------- -------- --------
37,212 28,638 40,209 41,145 100,174
-------- -------- -------- -------- --------
Total nonperforming assets................................... $166,644 $230,584 $280,503 $320,530 $439,512
======== ======== ======== ======== ========
Total nonaccrual and restructured loans as a % of total
loans........................................................ .57% .93% 1.24% 1.55% 1.95%
Total nonperforming assets as a % of loans and foreclosed
assets....................................................... .73% 1.06% 1.44% 1.77% 2.52%
Allowance for credit losses as a % of total nonaccrual and
restructured loans........................................... 336% 192% 144% 117% 83%
Accruing loans past due 90 days or more........................ $ 29,968 $ 16,830 $ 17,053 $ 21,624 $ 33,423
Interest computed on contractual terms......................... 18,029 20,753 23,032 27,770 32,494
Interest recognized............................................ 3,955 6,970 9,448 9,509 5,249
</TABLE>
Past due loans are defined as loans contractually past due as to interest
or principal 90 days or more. Included in accruing loans past due 90 days or
more at December 31, 1995 were $13.2 million of bank card and consumer loans,
which are reported as past due until 180 days and 120 days, respectively, at
which time the loans are charged off. For an explanation of U. S. Bancorp's
nonaccrual policy see Note 1. Summary of Significant Accounting Policies,
Revenue Recognition (page 53).
NONPERFORMING ASSETS ACTIVITY SUMMARY
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Nonaccrual loans
Beginning balance................................................................ $ 190,399 $ 238,479
Additions........................................................................ 138,379 187,160
Payments/Returned to accrual..................................................... (136,369) (168,437)
Charge-offs...................................................................... (22,698) (47,990)
Transfer to other real estate and equipment owned................................ (51,275) (18,813)
--------- ---------
Ending balance................................................................... $ 118,436 $ 190,399
========= =========
Other real estate and equipment owned
Beginning balance................................................................ $ 28,638 $ 40,209
Additions........................................................................ 76,612 39,731
Sales............................................................................ (65,366) (48,664)
Write-downs...................................................................... (2,672) (2,638)
--------- ---------
Ending balance................................................................... $ 37,212 $ 28,638
========= =========
</TABLE>
The following table presents nonaccrual loans on both a contractually past
due and contractually current basis at December 31, 1995. Both book and
contractual balances are indicated, with the difference reflecting charge-offs
and interest payments applied to principal.
Approximately 39 percent of the total nonaccrual loan portfolio at December
31, 1995 was less than 90 days past due, including $38 million, or 32 percent,
that were contractually current. Of the nonaccrual loans that are contractually
current, loans to 8 borrowers amounted to 68 percent of the total, and there was
some uncertainty that these loans will remain contractually current.
33
<PAGE> 36
NONACCRUAL LOANS BY PERFORMANCE CATEGORY
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------------------
CUMULATIVE
CASH
BOOK PAYMENTS CONTRACTUAL
PRINCIPAL CUMULATIVE APPLIED TO PRINCIPAL
BALANCE CHARGE-OFFS(5) PRINCIPAL(5) BALANCE
--------- -------------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Contractually past due(1):
Payment not made(2):
90 days or more past due.............. $ 36,951 $ 8,277 $ - $ 45,228
Less than 90 days past due............ 3,490 - - 3,490
-------- ------- ------- --------
40,441 8,277 - 48,718
Payments made(3):
90 days or more past due.............. 35,279 35,456 14,418 85,153
Less than 90 days past due............ 4,927 - 260 5,187
-------- ------- ------- --------
40,206 35,456 14,678 90,340
Total past due................... 80,647 43,733 14,678 139,058
Contractually current(4)................... 37,789 4,662 6,027 48,478
-------- ------- ------- --------
Total nonaccrual loans........... $ 118,436 $ 48,395 $ 20,705 $ 187,536
======== ======= ======= ========
</TABLE>
- ---------------
(1) Contractually past due is defined as loans past due as to principal or
interest 30 days or more.
(2) Borrower has made no payments since being placed on nonaccrual.
(3) Borrower has made some payments since being placed on nonaccrual.
(4) Contractually current is defined as a loan for which principal and interest
are being paid in accordance with its contractual terms. All of the
contractually current loans were placed on nonaccrual due to uncertainty of
receiving future required payments.
(5) Cumulative amounts recorded since loan was placed on nonaccrual.
CAPITAL AND DIVIDENDS
U. S. Bancorp believes that a strong capital position is vital to continued
profitability and to promote depositor and investor confidence. Additionally,
under the Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA), acquisition capability, funding and the level and nature of regulatory
oversight will be dependent on the adequacy of capitalization.
The federal bank regulatory agencies have jointly issued rules which
implement a system of prompt corrective action for financial institutions
required by FDICIA. The rules define the relevant capital levels for the five
categories, ranging from "well-capitalized" to "critically undercapitalized". An
insured depository institution is generally deemed to be "well-capitalized" if
it has a total risk-based capital ratio of at least 10 percent, a Tier 1
risk-based capital ratio of at least 6 percent, and a leverage ratio of at least
5 percent.
Risk-based capital guidelines issued by the Federal Reserve Board establish
a risk-adjusted ratio relating capital to different categories of assets and
off-balance sheet exposures for bank holding companies. The guidelines require a
minimum total risk-based capital ratio of 8 percent, with half of the total in
the form of Tier 1 capital. U. S. Bancorp's Tier 1 capital is comprised
primarily of common equity and perpetual preferred stock, less goodwill and
certain other intangibles, and excludes the equity impact of adjusting available
for sale securities to market value. Total capital also includes subordinated
debt and a portion of the allowance for credit losses, as defined.
The risk-based capital rules have been supplemented by a leverage ratio,
defined as Tier 1 capital to adjusted quarterly average total assets. Banking
organizations other than those which are most highly rated are expected to
maintain ratios at least 100 to 200 basis points above the minimum 3 percent
level, depending on their financial condition.
34
<PAGE> 37
Each subsidiary bank is subjected to capital requirements similar to the
requirements for bank holding companies. At December 31, 1995, all of U. S.
Bancorp's banking subsidiaries met the risk-based capital ratio and leverage
ratio requirements for "well capitalized" banks. The banking subsidiaries'
ratios are expected to be maintained at the required levels by the retention of
earnings and, if necessary, the issuance of additional capital-qualifying
securities.
The risk-based capital and leverage ratios for U. S. Bancorp and its
significant bank subsidiaries are presented in the table below:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------
RISK-BASED
CAPITAL RATIOS
--------------------
TOTAL TOTAL LEVERAGE
ASSETS TIER 1 CAPITAL RATIO
------------- ------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
U. S. Bancorp (Consolidated)................. $31,794 8.44% 11.79% 7.89%
Bank Subsidiaries
U. S. Bank of Oregon....................... 12,106 8.64 10.49 9.61
U. S. Bank of Washington................... 7,030 8.30 10.58 8.85
U. S. Bank of California................... 2,033 10.36 12.70 7.44
U. S. Bank of Nevada....................... 988 9.46 12.18 6.98
West One Bank, Idaho....................... 4,660 9.91 11.16 7.17
West One Bank, Washington.................. 2,208 8.54 10.56 7.01
West One Bank, Oregon...................... 829 8.76 10.96 7.14
West One Bank, Utah........................ 819 10.34 11.60 7.23
</TABLE>
At December 31, 1995, common shareholders' equity was $2.6 billion. For the
year 1995, average common equity to average total assets increased to 8.13
percent from 7.83 percent in 1994. The quarterly common dividend was increased
12 percent in the third quarter of 1995, to $.28 per share from $.25 per share.
Dividends of $1.06 per share were declared in 1995, compared with $.94 per share
in 1994, based on historical U. S. Bancorp cash dividends paid. West One
declared common dividends of $32.0 million in 1995 ($.88 per West One share),
and $27.1 million in 1994 ($.76 per West One share).
In 1995, West One, before the merger with U. S. Bancorp, called for
redemption and retired approximately $50 million of 7.75% convertible
subordinated debentures. In connection with this redemption, West One purchased
in the open market 2.7 million West One common shares (equivalent to 3.9 million
U. S. Bancorp common shares) for issuance to debt holders. In 1994, U. S.
Bancorp's Board of Directors approved plans to repurchase up to 6.5 million
shares of U. S. Bancorp common stock over a five-year period.
The following tables present additional information on average balances and
tax-equivalent net interest margin, maturity and interest sensitivity of
selected loan categories, time deposits -- $100,000 or more, and certain
short-term borrowings.
35
<PAGE> 38
AVERAGE BALANCES
<TABLE>
<CAPTION>
1995 1994
------------------------------ ------------------------------
AVERAGE AVERAGE
RATES RATES
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
BALANCE EXPENSE PAID BALANCE EXPENSE PAID
--------- -------- ------- --------- -------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets
Money market investments................................... $ 259.2 $ 15.2 5.87% $ 349.2 $ 15.8 4.53%
Trading account securities................................. 174.1 10.8 6.20 173.6 9.9 5.71
Loans held for sale........................................ 155.2 13.2 8.48 385.0 27.6 7.16
Securities available for sale(1)(2)
U.S. Treasury obligations................................ 881.6 48.4 5.49 1,117.9 59.8 5.29
U.S. Government agency securities........................ 1,065.8 71.4 6.70 1,047.7 59.4 5.58
Other securities......................................... 395.5 25.1 6.35 364.3 20.9 5.73
--------- -------- ---- --------- -------- ----
Total securities available for sale................ 2,342.9 144.9 6.19 2,529.9 140.1 5.47
Securities held to maturity(2)
U.S. Treasury obligations................................ 9.8 .6 5.76 90.5 5.2 5.71
U.S. Government agency securities........................ 825.9 54.7 6.63 948.1 60.6 6.40
State and municipal bonds................................ 912.7 72.3 7.92 962.5 77.1 8.01
Other securities......................................... 84.3 4.0 4.82 164.7 8.2 5.01
--------- -------- ---- --------- -------- ----
Total securities held to maturity.................. 1,832.7 131.6 7.18 2,165.8 151.1 6.98
Loans (net of unearned income)(2)(3)
Commercial............................................... 11,344.9 1,024.8 9.03 10,360.2 807.1 7.79
Lease financing.......................................... 1,034.2 78.0 7.55 905.7 68.0 7.51
Foreign.................................................. 64.4 4.9 7.57 83.1 4.7 5.69
Real estate construction................................. 857.8 81.3 9.48 800.6 64.5 8.06
Real estate mortgage..................................... 3,391.7 289.7 8.54 3,034.9 247.9 8.17
Consumer................................................. 5,471.5 545.2 9.96 5,151.9 489.3 9.50
--------- -------- ---- --------- -------- ----
Total loans........................................ 22,164.5 2,023.9 9.13 20,336.4 1,681.5 8.27
Loan fees.................................................. - 103.0 - - 102.2 -
--------- -------- ---- --------- -------- ----
Total loans including fees................................. 22,164.5 2,126.9 9.60 20,336.4 1,783.7 8.77
--------- -------- ---- --------- -------- ----
Total interest-earning assets/interest income.............. 26,928.6 $2,442.6 9.07% 25,939.9 $2,128.2 8.20%
======== ==== ======== ====
Allowance for credit losses................................ (396.3) (361.2)
Cash and due from banks.................................... 1,852.4 1,824.0
Other assets............................................... 1,813.7 1,760.4
--------- ---------
Total assets....................................... $30,198.4 $29,163.1
========= =========
Interest-bearing liabilities
Deposits
Savings accounts......................................... $ 1,854.1 $ 45.7 2.47% $ 2,294.7 $ 51.3 2.23%
NOW accounts and interest checking....................... 2,647.8 43.7 1.65 2,885.7 41.0 1.42
Money market accounts.................................... 5,093.9 212.3 4.17 4,565.4 136.9 3.00
Time -- $100,000 or more................................. 1,806.2 109.0 6.03 1,300.5 58.6 4.50
Consumer time............................................ 5,554.2 299.4 5.39 5,450.3 236.0 4.33
--------- -------- ---- --------- -------- ----
Total interest-bearing deposits.................... 16,956.2 710.1 4.19 16,496.6 523.8 3.18
Federal funds purchased and security repurchase
agreements............................................... 2,503.2 142.0 5.67 2,698.8 112.0 4.15
Commercial paper........................................... 206.4 12.7 6.05 240.8 11.0 4.52
Other short-term borrowings(4)............................. 820.0 45.0 5.49 413.2 12.6 3.05
Long-term debt............................................. 1,198.9 83.3 6.95 1,186.6 79.3 6.69
--------- -------- ---- --------- -------- ----
Total interest-bearing liabilities/interest
expense.......................................... 21,684.7 $ 993.1 4.58% 21,036.0 $ 738.7 3.51%
======== ==== ======== ====
Noninterest-bearing deposits............................... 5,062.3 4,989.1
Other liabilities.......................................... 845.7 703.8
--------- ---------
Total liabilities.................................. 27,592.7 26,728.9
Shareholders' equity....................................... 2,605.7 2,434.2
--------- ---------
Total liabilities and shareholders' equity......... $30,198.4 $29,163.1
========= =========
Interest rate spread....................................... 4.49% 4.69%
Impact of noninterest-bearing sources...................... .89 .66
---- ----
Net interest income and margin............................. $1,449.5 5.38% $1,389.5 5.35%
======== ==== ======== ====
</TABLE>
- ---------------
(1) Yields are based on amortized cost balances.
(2) Includes taxable equivalent adjustments related to income on certain loans
and securities that is exempt from federal and applicable state income
taxes. The federal statutory tax rate was 35% for 1995, 1994 and 1993, and
34% for the other years presented.
(3) Loans on nonaccrual status have been included in the computation of average
balances.
(4) For the years 1992 and 1991, includes interest capitalized on property under
construction.
36
<PAGE> 39
AND TAX-EQUIVALENT NET INTEREST MARGIN
<TABLE>
<CAPTION>
1993 1992 1991
- ------------------------------- ------------------------------ ------------------------------
AVERAGE AVERAGE AVERAGE
RATES RATES RATES
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
BALANCE EXPENSE PAID BALANCE EXPENSE PAID BALANCE EXPENSE PAID
- --------- -------- ------- --------- -------- ------- --------- -------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 379.0 $ 11.3 2.99% $ 652.0 $ 24.7 3.80% $ 761.0 $ 46.0 6.04%
195.8 10.0 5.09 193.7 10.8 5.57 208.7 14.9 7.12
790.3 55.2 6.99 663.2 52.5 7.92 291.4 26.6 9.15
68.9 3.3 4.85 - - - - - -
186.8 10.9 5.82 - - - - - -
48.1 3.3 6.86 - - - - - -
-------- ------- ------- ---------- -------- ------- ---------- -------- -------
303.8 17.5 5.76 - - - - - -
1,223.5 67.3 5.50 820.9 50.9 6.20 464.5 36.8 7.93
2,155.2 134.1 6.22 1,827.8 133.1 7.28 1,359.1 118.8 8.74
794.5 69.6 8.76 604.6 56.8 9.40 578.5 56.0 9.69
483.4 34.3 7.10 404.0 32.3 8.00 281.3 27.9 9.90
-------- ------- ------- --------- -------- ------- ---------- -------- -------
4,656.6 305.3 6.56 3,657.3 273.1 7.47 2,683.4 239.5 8.93
9,362.5 677.6 7.24 8,624.5 670.5 7.77 8,468.8 840.0 9.92
871.8 73.6 8.44 945.6 89.7 9.49 920.8 97.5 10.59
65.1 2.8 4.31 53.5 2.7 5.02 48.8 3.7 7.54
809.1 61.3 7.57 914.6 72.0 7.87 947.1 86.1 9.09
2,935.3 249.3 8.49 3,005.4 280.5 9.33 3,359.5 311.1 9.26
4,449.5 445.9 10.02 3,894.6 427.3 10.97 3,519.3 412.8 11.73
-------- -------- ------ --------- --------- ------- ----------- -------- -----
18,493.3 1,510.5 8.17 17,438.2 1,542.7 8.85 17,264.3 1,751.2 10.14
- 105.9 - - 90.7 - - 79.7 -
-------- -------- ------ --------- --------- ------ --------- --------- ------
18,493.3 1,616.4 8.74 17,438.2 1,633.4 9.37 17,264.3 1,830.9 10.60
-------- -------- ------
24,818.8 $2,015.7 8.12% 22,604.4 $1,994.5 8.82% 21,208.8 $2,157.9 10.17%
========= ======= ========= ====== ======== =====
(333.7) (306.0) (267.8)
1,698.3 1,410.2 1,254.5
1,812.3 1,626.6 1,462.2
- --------- -------- ---------
$27,995.7 $25,335.2 $23,657.7
========= ========= =========
$ 2,166.2 $ 53.7 2.48% $ 1,634.0 $ 54.4 3.33% $ 1,168.3 $ 55.7 4.77%
2,816.2 48.2 1.71 2,374.2 58.8 2.48 2,027.8 74.8 3.69
4,285.2 114.1 2.66 3,612.0 121.4 3.36 2,896.7 147.2 5.08
1,101.8 45.6 4.14 1,374.0 67.6 4.92 2,097.7 144.1 6.87
6,002.8 264.2 4.40 5,813.5 306.2 5.27 5,894.9 403.9 6.85
- --------- -------- ------ --------- -------- ------ --------- -------- ------
16,372.2 525.8 3.21 14,807.7 608.4 4.11 14,085.4 825.7 5.86
2,156.8 63.7 2.95 2,426.1 89.0 3.67 2,644.2 157.4 5.95
224.9 8.0 3.54 246.7 10.2 4.13 242.3 15.8 6.53
420.7 12.5 2.97 348.1 15.7 4.50 439.3 25.8 5.86
1,283.3 88.2 6.88 1,347.6 102.4 7.60 1,096.4 95.3 8.69
- --------- -------- ------ --------- -------- ----- --------- -------- -----
20,457.9 $ 698.2 3.41% 19,176.2 $ 825.7 4.31% 18,507.6 $1,120.0 6.05%
======== ======= ======== ===== ======== =====
4,606.6 3,616.3 2,910.7
687.8 643.2 550.5
- --------- -------- -----------
25,752.3 23,435.7 21,968.8
2,243.4 1,899.5 1,688.9
- --------- --------- ---------
$27,995.7 $25,335.2 $23,657.7
========= ========= =========
4.71% 4.51% 4.12%
.60 .66 .77
------ ------ ------
$1,317.5 5.31% $1,168.8 5.17% $1,037.9 4.89%
========= ======= ======== ====== ======== =======
</TABLE>
37
<PAGE> 40
LOAN MATURITY AND INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------------
ONE YEAR OVER ONE YEAR OVER FIVE
OR LESS THROUGH FIVE YEARS YEARS TOTAL
-------- ------------------ --------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Loans in domestic offices
Commercial......................... $5,989 $4,015 $ 1,742 $11,746
Real estate construction........... 588 181 64 833
Foreign loans........................ 26 10 20 56
------ ------ ------ -------
Total...................... $6,603 $4,206 $ 1,826 $12,635
====== ====== ====== =======
Loans with predetermined rate........ $ 304 $1,497 $ 675 $ 2,476
Loans with floating rate............. 6,299 2,709 1,151 10,159
------ ------ ------ -------
Total...................... $6,603 $4,206 $ 1,826 $12,635
====== ====== ====== =======
</TABLE>
TIME DEPOSITS -- $100,000 OR MORE
Maturities of domestic time deposits of $100,000 or more outstanding:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
(IN THOUSANDS)
<S> <C>
3 months or less............................................. $ 877,207
Over 3 through 6 months...................................... 253,487
Over 6 through 12 months..................................... 267,886
Over 12 months............................................... 333,741
----------
Total.............................................. $ 1,732,321
==========
</TABLE>
SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
AVERAGE
DAILY AVERAGE INTEREST RATE AVERAGE
AMOUNTS ON AMOUNTS MAXIMUM INTEREST RATE
OUTSTANDING OUTSTANDING MONTH-END ON AMOUNTS
YEAR-END DURING THE DURING THE AMOUNTS OUTSTANDING
BALANCE YEAR YEAR OUTSTANDING AT YEAR-END
----------- ------------- ------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Federal funds purchased and
security repurchase
agreements
1995...................... $ 2,731,116 $ 2,503,162 5.67% $ 3,070,581 5.44%
1994...................... 3,587,664 2,698,820 4.15 3,587,664 5.55
1993...................... 2,522,471 2,156,788 2.95 2,522,471 2.90
Other short-term borrowings
1995...................... $ 692,105 $ 819,997 5.49% $ 1,254,019 5.35%
1994...................... 515,730 413,240 3.05 711,633 5.43
1993...................... 618,552 420,701 2.97 676,787 3.06
</TABLE>
38
<PAGE> 41
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) The following audited consolidated financial statements and related
documents are set forth in this Annual Report on Form 10-K on the pages
indicated:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Letter of Management......................................................... 41
Independent Auditors' Reports................................................ 42-43
U. S. Bancorp and Subsidiaries:
Consolidated Balance Sheet................................................. 45
Consolidated Statement of Income........................................... 46
Consolidated Statement of Changes in Shareholders' Equity.................. 47
Consolidated Statement of Cash Flows....................................... 48
Notes to Consolidated Financial Statements................................. 50
</TABLE>
(b) The following supplementary data is set forth in this Annual Report on Form
10-K on the page indicated:
<TABLE>
<S> <C>
Quarterly Financial Data..................................................... 85
</TABLE>
39
<PAGE> 42
(This page intentionally left blank)
40
<PAGE> 43
LETTER OF MANAGEMENT
The management of U. S. Bancorp has prepared and is responsible for the
integrity and fairness of the financial statements and other financial
information included in this annual report. The financial statements are
prepared in accordance with generally accepted accounting principles and, when
appropriate, include amounts based on management's estimates and judgment.
To meet its responsibility both for the integrity and fairness of these
financial statements and information, management maintains accounting systems
and related internal accounting controls. These controls are designed to provide
reasonable assurance that transactions are properly authorized, assets are
safeguarded and financial records are reliably maintained. The concept of
reasonable assurance is based on the recognition that the cost of a system of
internal controls must be related to the benefits derived.
Management monitors the effectiveness and compliance of its internal
control systems through a continuous program of internal audits. Management has
reviewed the recommendations of the internal auditors and Deloitte & Touche LLP,
independent auditors, and has responded in an appropriate, cost-effective
manner.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with U. S. Bancorp's management, internal auditors
and the independent auditors to review matters relative to the quality of
financial reporting and internal accounting controls and the results of the
audit. The independent auditors and internal auditors meet with the Audit
Committee, at least once a year, without management present.
<TABLE>
<S> <C> <C>
GERRY B. CAMERON ROBERT D. SZNEWAJS STEVEN P. ERWIN
Chairman and Vice Chairman Executive Vice President
Chief Executive Officer and Chief Financial Officer
</TABLE>
41
<PAGE> 44
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of U. S. Bancorp:
We have audited the accompanying consolidated balance sheet of U. S.
Bancorp and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of U. S. Bancorp's management. Our
responsibility is to express an opinion on the financial statements based on our
audits. The consolidated financial statements give retroactive effect to the
merger of U. S. Bancorp and subsidiaries and West One Bancorp and subsidiaries,
which has been accounted for as a pooling-of-interests as described in Note 2 to
the consolidated financial statements. We did not audit the consolidated balance
sheet of West One Bancorp and subsidiaries as of December 31, 1994, or the
related consolidated statements of income, changes in shareholders' equity, and
cash flows of West One Bancorp and subsidiaries for the years ended December 31,
1994 and 1993, which statements reflect total assets of $8,792,699,000 as of
December 31, 1994 and net interest income and noninterest revenues of
$471,214,000 and $424,083,000 for the years ended December 31, 1994 and 1993,
respectively. Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for West One Bancorp and subsidiaries for 1994 and 1993, is based
solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of U. S. Bancorp and subsidiaries at
December 31, 1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Portland, Oregon
January 30, 1996 (February 11, 1996 as to the final paragraph of Note 2)
42
<PAGE> 45
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors of West One Bancorp
We have audited the consolidated balance sheet of West One Bancorp and
subsidiaries as of December 31, 1994, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the two years in the
period ended December 31, 1994 (not presented separately herein). These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above (not presented
separately herein) present fairly, in all material respects, the consolidated
financial position of West One Bancorp and subsidiaries as of December 31, 1994,
and the consolidated results of their operations and their cash flows for each
of the two years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements (not
presented separately herein), during 1993 West One Bancorp adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities."
/S/ COOPERS & LYBRAND L.L.P.
Boise, Idaho
January 19, 1995
43
<PAGE> 46
(This page intentionally left blank)
44
<PAGE> 47
U. S. BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks........................................... $ 2,416,209 $ 2,121,320
Interest-bearing deposits with banks.............................. 1,294 1,561
Federal funds sold and security resale agreements................. 506,408 541,220
Other short-term investments...................................... 8,817 9,287
Trading account securities........................................ 279,656 137,756
Loans held for sale............................................... 159,986 174,167
Securities available for sale, at fair value
(amortized cost: 1995 -- $3,259,095; 1994 -- $2,572,603)........ 3,276,723 2,509,202
Securities held to maturity, at amortized cost
(fair value: 1995 -- $885,695; 1994 -- $1,911,126).............. 865,126 1,985,990
Loans and lease financing, net of unearned income................. 22,785,275 21,645,158
Allowance for credit losses....................................... (434,508) (387,559)
----------- -----------
Net loans and lease financing..................................... 22,350,767 21,257,599
Premises, furniture and equipment................................. 633,836 673,207
Other real estate and equipment owned............................. 37,212 28,638
Customers' liability on acceptances............................... 306,648 240,083
Other assets...................................................... 951,601 929,078
----------- -----------
$31,794,283 $30,609,108
=========== ===========
LIABILITIES
Deposits
Noninterest-bearing deposits.................................... $ 6,009,728 $ 5,419,443
NOW accounts and interest checking.............................. 2,709,155 2,821,048
Savings......................................................... 1,583,656 2,133,286
Money market deposit accounts................................... 5,544,479 4,742,708
Consumer time................................................... 5,685,290 5,269,539
Time - $100,000 or more......................................... 1,732,321 1,473,165
----------- -----------
23,264,629 21,859,189
Federal funds purchased and security repurchase agreements........ 2,731,116 3,587,664
Commercial paper.................................................. 176,125 171,464
Other short-term borrowings....................................... 692,105 515,730
Long-term debt.................................................... 1,377,021 1,244,190
Acceptances outstanding........................................... 306,648 240,083
Other liabilities................................................. 629,586 497,734
----------- -----------
Total liabilities........................................... 29,177,230 28,116,054
----------- -----------
SHAREHOLDERS' EQUITY
Preferred stock, authorized 50,000,000 shares:
Series A, no par value, 6,000,000 shares outstanding............ 150,000 150,000
Common stock, $5 par value, authorized 250,000,000 shares,
outstanding: 1995 -- 150,592,468; 1994 -- 152,124,553........... 752,962 760,623
Capital surplus................................................... 347,836 445,303
Retained earnings................................................. 1,356,907 1,175,849
Net unrealized gain (loss) on securities available for sale, net
of tax.......................................................... 9,348 (38,721)
----------- -----------
Total shareholders' equity.................................. 2,617,053 2,493,054
----------- -----------
$31,794,283 $30,609,108
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
45
<PAGE> 48
U. S. BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS, EXCEPT EARNINGS PER
SHARE)
<S> <C> <C> <C>
INTEREST INCOME
Loans and lease financing, including fees.............. $2,103,750 $1,758,808 $1,591,060
Securities held to maturity............................ 108,019 125,489 227,370
Securities available for sale.......................... 141,895 137,676 68,594
Loans held for sale.................................... 13,157 27,582 55,211
Trading account securities............................. 10,469 9,024 8,714
Interest-bearing deposits and other short-term
investments.......................................... 15,219 15,819 11,332
---------- ---------- ----------
Total interest income............................ 2,392,509 2,074,398 1,962,281
INTEREST EXPENSE
Deposits............................................... 710,044 523,780 525,807
Short-term borrowings.................................. 199,712 135,572 84,069
Long-term debt......................................... 83,347 79,339 88,249
---------- ---------- ----------
Total interest expense........................... 993,103 738,691 698,125
NET INTEREST INCOME.................................... 1,399,406 1,335,707 1,264,156
Provision for credit losses............................ 124,093 120,146 106,234
---------- ---------- ----------
Net interest income after provision for credit
losses............................................... 1,275,313 1,215,561 1,157,922
---------- ---------- ----------
NONINTEREST REVENUES
Service charges on deposit accounts.................... 189,541 191,563 171,295
Bank card revenue, net................................. 73,393 73,332 69,274
Trust and investment management........................ 65,826 65,283 62,305
Exchange fees.......................................... 42,595 36,754 32,708
Insurance revenue...................................... 21,441 25,445 17,113
Other operating revenue................................ 99,943 74,809 99,371
Credit reporting revenue............................... - 13,204 33,984
Mortgage banking income, net........................... 16,927 23,064 34,667
Equity investment income (loss)........................ 3,177 (5,429) 33,973
Gain (loss) on sale of securities...................... 2,999 (9,212) 505
Gain on sale of mortgage loan servicing rights......... - 1,023 55,846
Gain on sale of operations and loans................... 8,898 62,883 9,311
---------- ---------- ----------
Total noninterest revenues....................... 524,740 552,719 620,352
---------- ---------- ----------
NONINTEREST EXPENSES
Employee compensation and benefits..................... 602,134 646,181 652,020
Net occupancy expense.................................. 85,430 87,507 85,284
Equipment rentals, depreciation and maintenance........ 127,354 139,916 120,342
Stationery, supplies and postage....................... 63,915 59,149 59,223
Regulatory agency fees................................. 35,525 54,121 54,374
Telecommunications..................................... 33,327 35,223 32,951
Amortization of intangibles............................ 19,497 25,459 27,189
Other operating expenses............................... 224,692 257,527 242,064
Merger and integration costs........................... 98,940 - -
Restructuring charge................................... - 100,000 -
---------- ---------- ----------
Total noninterest expenses....................... 1,290,814 1,405,083 1,273,447
---------- ---------- ----------
Income before income taxes............................. 509,239 363,197 504,827
Provision for income taxes............................. 180,268 108,531 163,691
---------- ---------- ----------
NET INCOME............................................. $ 328,971 $ 254,666 $ 341,136
========== ========== ==========
Net income available to common shareholders............ $ 316,784 $ 242,479 $ 328,949
Net income per common share............................ $ 2.09 $ 1.60 $ 2.23
Average number of common shares outstanding............ 151,554 151,392 147,518
</TABLE>
See Notes to Consolidated Financial Statements.
46
<PAGE> 49
U. S. BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN (LOSS)
ON
SHARES COMMON CAPITAL RETAINED SECURITIES, PREFERRED
OUTSTANDING STOCK SURPLUS EARNINGS NET OF TAX STOCK TOTAL
----------- -------- -------- ---------- ------------ --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 as
originally reported................ 99,067,777 $ 495,339 $379,982 $ 605,987 $ - $150,000 $1,631,308
Adjustments for pooling-of-interests
in 1995............................ 47,527,112 237,636 44,342 207,847 - - 489,825
----------- -------- -------- ---------- -------- -------- ----------
Balance at January 1, 1993,
restated........................... 146,594,889 732,975 424,324 813,834 - 150,000 2,121,133
Net income........................... - - - 341,136 - - 341,136
Exercise of stock options............ 362,370 1,811 2,913 (86) - - 4,638
Common stock issued in acquisition... 303,193 1,516 696 824 - - 3,036
Common dividends declared
(per share -- $.85)................ - - - (100,870) - - (100,870)
Preferred dividends declared......... - - - (12,187) - - (12,187)
Dividends reinvested and other....... 3,223,380 16,118 41,774 (225) - - 57,667
Change in net unrealized gain (loss)
on securities, net of tax.......... - - - - 27,208 - 27,208
----------- -------- -------- ---------- -------- -------- ----------
Balance at December 31, 1993......... 150,483,832 752,420 469,707 1,042,426 27,208 150,000 2,441,761
Net income........................... - - - 254,666 - - 254,666
Exercise of stock options............ 904,235 4,521 8,399 - - - 12,920
Repurchase of common stock........... (2,228,300) (11,142) (45,960) - - - (57,102)
Common stock issued in acquisition... 2,410,340 12,052 4,130 12,613 (1,048) - 27,747
Common stock issued to redeem
subordinated debt.................. 8,689 43 66 - - - 109
Common dividends declared
(per share -- $.94)................ - - - (120,489) - - (120,489)
Preferred dividends declared......... - - - (12,187) - - (12,187)
Dividends reinvested and other....... 545,757 2,729 8,961 (1,180) - - 10,510
Change in net unrealized gain (loss)
on securities, net of tax.......... - - - - (64,881) - (64,881)
----------- -------- -------- ---------- -------- -------- ----------
Balance at December 31, 1994......... 152,124,553 760,623 445,303 1,175,849 (38,721) 150,000 2,493,054
Net income........................... - - - 328,971 - - 328,971
Exercise of stock options............ 723,184 3,616 9,452 - - - 13,068
Repurchase of common stock........... (6,548,525) (32,743) (143,055) - - - (175,798)
Common stock issued to redeem
subordinated debt.................. 3,921,225 19,606 30,060 - - - 49,666
Common dividends declared
(per share -- $1.06)............... - - - (135,662) - - (135,662)
Preferred dividends declared......... - - - (12,187) - - (12,187)
Dividends reinvested and other....... 372,031 1,860 6,076 (64) - - 7,872
Change in net unrealized gain (loss)
on securities, net of tax.......... - - - - 48,069 - 48,069
----------- -------- -------- ---------- -------- -------- ----------
Balance at December 31, 1995......... 150,592,468 $752,962 $347,836 $1,356,907 $ 9,348 $150,000 $2,617,053
=========== ======== ======== ========== ======== ======== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
47
<PAGE> 50
U. S. BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities
Net income................................................................ $ 328,971 $ 254,666 $ 341,136
Adjustments to reconcile net income to cash used in operating activities:
Deferred income tax (benefit) expense................................... (49,774) (47,724) 37,021
Depreciation, amortization and accretion................................ 129,021 146,025 149,126
Provision for credit losses............................................. 124,093 120,146 106,234
Noncash portion of merger and integration costs......................... 87,617 - -
Noncash portion of restructuring charge................................. - 68,774 -
Net gain on sales of operations......................................... - (51,702) (4,838)
Net (gain) loss on sale of equity investments........................... (2,440) 5,873 (35,392)
Net (gain) loss on sale of securities available for sale................ (2,949) 9,212 (429)
Net gain on sales of securities held to maturity........................ (50) - (76)
Net gain on sale of trading securities.................................. (16,149) (4,294) (17,002)
Net gain on sales of loans and property................................. (40,437) (25,782) (26,181)
Net gain on sales of mortgage loan servicing rights..................... - (1,023) (55,846)
Change in loans held for sale........................................... 229,789 552,697 (143,315)
Change in trading account securities.................................... (124,329) 77,521 (33,016)
Change in deferred loan fees, net of amortization....................... 5,367 7,075 (5,551)
Change in accrued interest receivable................................... (15,635) (22,932) 6,906
Change in accrued interest payable...................................... 27,086 7,466 (9,354)
Change in other assets and liabilities, net............................. 86,500 (66,534) 27,828
-------- ---------- ----------
Net cash provided by operating activities................................... 766,681 1,029,464 337,251
-------- ---------- ----------
Cash flows from investing activities
Proceeds from maturities of interest-bearing deposits of nonbank
subsidiaries............................................................ 12,376 21,703 17,842
Purchase of interest-bearing deposits by nonbank subsidiaries............. (12,977) (12,153) (20,181)
Net decrease in investments in interest-earning deposits by banking
subsidiaries............................................................ 1,534 5,834 187,042
Proceeds from maturities of securities held to maturity................... 367,159 777,048 2,176,135
Proceeds from sales of securities held to maturity........................ 3,894 - 1,781
Purchase of securities held to maturity................................... (53,185) (426,123) (2,519,725)
Proceeds from sale of securities available for sale....................... 993,835 610,116 81,977
Proceeds from maturities of securities available for sale................. 610,835 434,957 121,123
Purchase of securities available for sale................................. (1,555,242) (913,260) (156,813)
Proceeds from sales of equity investments................................. 9,998 4,199 105,826
Purchase of equity investments............................................ (39,780) (18,278) (37,671)
Principal collected on loans made by nonbank subsidiaries................. 1,191,465 849,831 2,165,735
Loans made to customers by nonbank subsidiaries........................... (1,398,953) (846,407) (1,945,891)
Net change in loans by banking subsidiaries............................... 1,681,582 (2,103,147) (1,715,562)
Proceeds from sales of loans.............................................. 409,609 122,516 155,025
Purchase of loans......................................................... -- (76,536) (225,939)
Proceeds from sales of premises and equipment............................. 36,176 15,056 10,266
Purchase of premises and equipment........................................ (81,850) (120,523) (129,201)
Proceeds from sales of mortgage servicing rights.......................... 3,212 24,917 52,984
Purchase of mortgage servicing rights..................................... (6,633) (10,600) (9,779)
Proceeds from sales of foreclosed assets.................................. 63,438 47,231 61,487
Acquisitions/dispositions, net of cash and cash equivalents............... 15,731 336,509 444,454
-------- ---------- ----------
Net cash used in investing activities....................................... (1,110,940) (1,277,110) (1,179,085)
-------- ---------- ----------
Cash flows from financing activities
Net change in deposits.................................................... 1,401,167 32,844 (104,060)
Net change in short-term borrowings....................................... (824,672) 968,722 723,727
Proceeds from issuance of long-term debt.................................. 772,009 631,868 291,828
Repayment of long-term debt............................................... (439,518) (555,120) (568,705)
Proceeds from issuance of common stock.................................... 16,449 20,484 61,080
Common stock repurchased.................................................. (175,798) (57,102) -
Dividends paid............................................................ (145,301) (128,151) (112,965)
-------- ---------- ----------
Net cash provided by financing activities................................... 604,336 913,545 290,905
-------- ---------- ----------
Net change in cash and cash equivalents..................................... 260,077 665,899 (550,929)
Cash and cash equivalents at beginning of year.............................. 2,662,540 1,996,641 2,547,570
-------- ---------- ----------
Cash and cash equivalents at end of year.................................... $ 2,922,617 $ 2,662,540 $ 1,996,641
======== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
48
<PAGE> 51
U. S. BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Supplemental disclosures:
Cash paid during the period for:
Interest.................................................................. $ 966,277 $ 732,561 $ 708,825
Income taxes.............................................................. 190,477 151,209 121,452
Non-cash investing activities:
Transfer from loans to other real estate owned............................ $ 78,173 $ 38,676 $ 67,495
Transfer of loans to loans held for sale.................................. 300,654 - 26,120
Transfer of loans held for sale to loans.................................. 30,162 32,799 41,457
Transfer to consumer loans from loans held for sale....................... - 96,447 -
Transfer from loans to premises, furniture and equipment.................. - - 11,750
Transfer from securities held to maturity to available for sale........... 800,068 - 2,580,368
Transfer from securities available for sale to held to maturity........... - 56,263 -
Fair value adjustment to securities available for sale.................... 81,029 (36,401) 44,919
Income tax effect related to fair value adjustment........................ 29,827 41,558 17,712
Redemption of convertible subordinated debentures......................... 49,883 - -
</TABLE>
See Notes to Consolidated Financial Statements.
49
<PAGE> 52
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
U. S. Bancorp is a regional, multi-bank holding company which provides
banking and banking-related services, principally to domestic markets, through
its subsidiaries. The accounting and reporting policies of U. S. Bancorp and its
subsidiaries conform with generally accepted accounting principles and
prevailing practices within the banking industry. The following is a description
of the more significant policies.
Basis of Financial Statement Presentation
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and with general practice within the
banking industry. In preparing such financial statements, management is required
to make estimates and judgments that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the balance sheet and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates. Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for credit losses and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the allowance for
credit losses and the valuation of real estate owned, management obtains
independent appraisals for significant properties.
Principles of Consolidation
The consolidated financial statements of U. S. Bancorp include the accounts
of U. S. Bancorp and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
When an acquisition that is material to the consolidated financial
statements occurs through a pooling-of-interests, prior period financial
statements are restated to include the accounts of companies acquired. Results
of operations of companies acquired and accounted for as purchases are included
from their dates of acquisition. In accordance with the purchase method of
accounting, the assets and liabilities of purchased banking and financial
organizations were stated at estimated fair values at the date of acquisition.
The excess of cost over fair value of net assets acquired has been accounted for
as goodwill and is being amortized on the straight-line method ranging from 15
to 25 years.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
Loans Held for Sale
Loans held for sale include mortgage and consumer loans and each is
reported at the lower of cost or aggregate market value. The cost of
over-the-counter options used to hedge interest rate and price fluctuations
until mortgage loans are sold is amortized straight-line over the option period
and recorded as a component of the gain or loss on mortgage loan sales.
Commitment fees incurred on contracts to ensure future delivery of mortgage
loans into mortgage-backed securities are amortized straight-line over the
commitment period and recorded as a component of the gain or loss on mortgage
loan sales.
Securities
On December 31, 1993, U. S. Bancorp adopted Statement of Financial
Accounting Standards (FAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." FAS No. 115 requires the classification of securities at
acquisition into one of three categories: held to maturity, available for sale,
or trading.
In accordance with FAS No. 115, securities are classified as held to
maturity where U. S. Bancorp has the ability and positive intent to hold them to
maturity. Securities bought and held principally for the purpose
50
<PAGE> 53
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
of sale in the near term are classified as trading securities. Securities not
classified as trading securities nor as held to maturity securities are
classified as securities available for sale. Securities in this classification
are available for future liquidity requirements.
Securities held to maturity are carried at cost, adjusted for amortization
of premiums and accretion of discounts to maturity. Unrealized losses on
securities held to maturity due to fluctuations in fair value are recognized
when it is determined that an other than temporary decline in value has
occurred. Realized gains and losses on sale of securities available for sale are
computed on the specific identification method. Trading account securities are
carried at fair value. Realized gains and losses on sale of trading account
securities, computed on the average cost method, and fair value adjustments are
included in noninterest revenues.
Unrealized holding gains and losses on securities available for sale are
excluded from earnings and are reported net of tax as a separate component of
shareholders' equity until realized.
Interest Rate and Currency Contracts
U.S. Bancorp uses various interest rate contracts, such as interest rate
swaps, futures, forward rate agreements, caps and floors as part of
asset/liability management or to hedge trading accounts, and to provide for the
needs of its customers. Fees paid or received for entering into interest rate
contracts are amortized into income on a straight line basis over the contract
period.
Gains and losses resulting from changes in market value on interest rate
contracts used for asset/liability management purposes that qualify as hedges,
having been specifically designated as a hedge and with a high degree of
correlation between the changes in the market value of the derivative instrument
and the item being hedged, to the extent that such conditions continue to exist,
are deferred and recognized as interest income or interest expense over the
lives of the related assets or liabilities. Income or expense on interest rate
contracts used to manage interest rate exposure is recognized as an adjustment
of the yield over the life of the underlying assets or liabilities. In the event
that an instrument failed to qualify as a hedge, the instrument would be marked
to market with resultant gains and losses recognized in the statement of income.
For contracts used to hedge trading activities or for customer accommodations,
gains and losses resulting from market fluctuations are included in trading
account income in the period recognized. For contracts used to hedge available
for sale securities, changes in the value of these contracts are reported in
shareholders' equity on a net-of-tax basis.
Foreign currency contracts are valued at current prevailing rates of
exchange, and gains or losses resulting from such valuations are included in
noninterest revenues.
Allowance for Credit Losses
The allowance for credit losses is established to absorb known and inherent
losses primarily resulting from loans and leases outstanding, standby letters of
credit and other guarantees. Amounts are added to the allowance for credit
losses and charged against earnings to bring the allowance to a level which, in
management's judgment, is considered adequate to absorb losses inherent in the
portfolio. Management performs a quarterly analysis to determine the appropriate
level of the allowance, taking into consideration factors such as general
economic conditions, historical loss experience, credit concentrations and
trends in portfolio volume, maturity, delinquencies and nonaccruals. Actual
credit losses, net of recoveries, are deducted from the allowance. While
management uses the best information available on which to base estimates,
future adjustments to the allowance may be necessary if economic conditions,
particularly in U. S. Bancorp's markets, differ substantially from the
assumptions used by management.
Effective January 1, 1995, U. S. Bancorp adopted FAS No. 114, "Accounting
by Creditors for Impairment of a Loan", as amended by FAS No. 118, "Accounting
by Creditors for Impairment of a Loan -- Recognition and Disclosures." These
statements address the disclosure requirements and allocations of the
51
<PAGE> 54
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
allowance for credit losses for certain impaired loans. A loan within the scope
of these statements is considered impaired when, based on current information
and events, it is probable that a creditor will be unable to collect all amounts
due according to the contractual terms of the loan agreement, including
scheduled interest payments. These statements do not apply to leases or large
groups of smaller-balance homogeneous loans which are collectively evaluated.
When a loan has been identified as being impaired, the amount of the
impairment is measured by using discounted cash flows, except when it is
determined that the sole source of repayment for the loan is the operation or
liquidation of the underlying collateral. In such case, the current fair value
of the collateral, reduced by costs to sell, is used. When the measurement of
the impaired loan is less than the recorded investment in the loan (including
accrued interest, net deferred loan fees or costs, and unamortized premium or
discount), an impairment is recognized by creating or adjusting an allocation of
the allowance for credit losses. FAS No. 114, as amended, does not change the
timing of charge-offs of loans to reflect the amount ultimately expected to be
collected.
Interest accrued but not received on impaired loans is reversed against
interest income. Subsequent cash received by U. S. Bancorp related to impaired
loans is generally applied to reduce the principal balance.
Premises, Furniture and Equipment
Premises, furniture and equipment are stated at cost less accumulated
depreciation and amortization. Construction costs and the cost of funds to
finance major projects are capitalized. Maintenance and repairs are charged to
expense as incurred and the cost of improvements is capitalized. Provisions for
depreciation and amortization are computed using the straight-line method.
Estimated useful lives range up to 50 years for buildings, three to ten years
for furniture and equipment, and up to the lease term for leasehold
improvements.
Other Real Estate and Equipment Owned
Properties acquired by foreclosure or deed in lieu of foreclosure are
carried at the lower of their recorded amounts or fair value less estimated
costs of disposal in accordance with Statement of Position 92-3, "Accounting for
Foreclosed Assets." Any write-downs at, or prior to, the date of acquisition are
charged to the allowance for credit losses. Subsequent write-downs, gains or
losses recognized on the sale of these properties and net operating results are
included in noninterest expenses.
Income Taxes
Income taxes are accounted for using the asset and liability method. Under
this method, a deferred tax asset or liability is determined based on the
enacted tax rates which will be in effect when the differences between the
financial statement carrying amounts and tax bases of existing assets and
liabilities are expected to be reported in U. S. Bancorp's income tax returns.
The effect on deferred taxes of a change in tax rates is recognized in income in
the period that includes the enactment date.
Trust Division Assets
Property held by U. S. Bancorp subsidiary banks in fiduciary or agency
capacity for their customers is not included in the accompanying consolidated
balance sheet, since such items are not assets of the respective banks.
52
<PAGE> 55
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Revenue Recognition
Interest income is accrued as earned. The accrual of interest income on
business loans ceases when potential collection difficulties are foreseen and
collateral is inadequate to cover principal and interest. When a loan is placed
on nonaccrual status, interest accrued but not received is reversed against
interest income. If management determines that ultimate collectibility of
principal is in doubt, cash receipts on nonaccrual loans are applied to reduce
the principal balance. A loan may be returned to accrual status when all
delinquent principal and interest become current in accordance with the terms of
the loan agreement or when the loan is both well secured and in the process of
collection.
Bank card loans are charged off upon becoming 180 days past due. Other
consumer loans are, in general, charged off upon becoming 120 days past due and
interest earned but not collected thereon is reversed at the time of charge-off.
Consequently, such loans are not placed on nonaccrual status.
Unearned income on direct financing leases is amortized to produce a level
yield on the remaining net receivable balance. Income from leveraged leases is
recognized over the term of the leases based on the unrecovered equity
investment.
Income is recorded primarily on a cash basis for most service charges,
commissions and fees. Income related to equity investments results from
dividends received, realized gains and losses upon disposition of investments,
or market value adjustments of certain investments held by U.S. Bancorp's Small
Business Administration licensed subsidiary.
Loan Fee Income
Loan origination and commitment fees and certain direct loan origination
costs are deferred, and the net amount amortized as an adjustment of the yield
over the contractual life of the loans and included in interest income. Loan
fees from loans held for sale are deferred and recognized as a component of the
gain or loss on sale of the loans. Loans and leases are carried at cost less
unearned income and unamortized net loan fees. Commitment fees based on a
percentage of a customer's unused line of credit and fees related to standby
letters of credit are recognized in noninterest revenue over the commitment
period.
Mortgage Servicing
Loan servicing fees are based on a percentage of the outstanding loan
principal balances being serviced and are included in income as related loan
payments from mortgagors are collected.
The difference between the actual service fee rates and normal service fee
rates on those loans which are sold with servicing rights retained is
capitalized as excess servicing fee receivable, and is amortized based on a
method which relates the amortization to the estimated life of these loans. In
the event of unanticipated prepayments, the excess servicing fee receivable is
written down to the present value (based on the original discount rate) of the
estimated remaining future excess servicing revenue through a reduction of
servicing fee income.
Costs associated with the acquisition of mortgage loan servicing rights
through the purchase of servicing contracts are deferred and amortized on a
method which relates the amortization of these costs to the estimated net
servicing income. In the event of unanticipated prepayments, the future
amortization rate is adjusted prospectively, such that the discounted future
cash flows approximate the expected future net servicing income.
Monthly payments required of U. S. Bancorp under mortgage loan servicing
prepayment hedges are recorded as a reduction of servicing income. Payments
received by U. S. Bancorp as the result of changes in prepayment experience are
recorded as an increase to servicing income. There were no prepayment hedges in
place at December 31, 1995 or 1994, respectively.
53
<PAGE> 56
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Computations of Earnings Per Share
Earnings per common share are based on net income after preferred dividend
requirements and the weighted average number of common shares outstanding. The
impact of common stock equivalents, such as stock options, and other potentially
dilutive securities is not material, therefore, they are not included in the
computation.
Statement of Cash Flows
For purposes of the statement of cash flows, U. S. Bancorp considers cash
and due from banks and federal funds sold and security resale agreements to be
cash and cash equivalents. Deposits placed with other financial institutions,
time deposits and lending activities of the banks are reported net in the
statement.
Recently Issued Accounting Pronouncements
During 1995, the Financial Accounting Standards Board issued several
Statements of Financial Accounting Standards, (FAS's) which are described below.
Adoption of these statements in 1996 is not expected to have a significant
impact to U. S. Bancorp's results of operations or financial position.
FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," was issued in March 1995. This Statement
addresses the accounting for the impairment of long-lived assets, such as
premises, furniture and equipment, certain identifiable intangibles and goodwill
related to those assets. Long-lived assets and certain identifiable intangibles
are to be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. An
impairment loss is recognized when the sum of the future cash flows
(undiscounted and without interest charges expected from the use of the asset
and its eventual disposition) is less than the carrying amount of the asset. The
Statement also requires that long-lived assets and identifiable intangibles,
except for assets of a discontinued operation held for disposal, be accounted
for at the lower of cost or fair value less cost to sell.
FAS No. 122, "Accounting for Mortgage Servicing Rights", an amendment to
FAS No. 65, "Accounting for Certain Mortgage Banking Activities," was issued in
May 1995. This statement requires the recognition of a separate asset for
mortgage servicing rights, regardless of how they are acquired. Previously, only
purchased servicing rights were capitalizable as an asset, whereas the cost of
internally originated mortgage servicing rights was expensed. This Statement
also requires that capitalized excess servicing receivables be assessed for
impairment based on fair value, rather than an estimate of undiscounted future
cash flows.
FAS No. 123, "Accounting for Stock-Based Compensation", was issued in
October 1995. This Statement prescribes accounting and reporting standards for
all stock-based compensation plans, including employee stock options, restricted
stock and stock appreciation rights. The Statement defines a "fair value based
method" of accounting for employee stock options and encourages all entities to
adopt that method of accounting for all of their employee stock compensation
plans. However, it also allows an entity to continue to measure compensation for
those plans using the "intrinsic value based method" under Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (Opinion No.
25).
Under the fair value based method, compensation cost is measured at the
grant date of the option based on the value of the award and is recognized over
the service period, which is usually the vesting period. Under the intrinsic
value based method, compensation cost is the excess, if any, of the quoted
market price of the stock at grant date or other measurement date over the
amount an employee must pay to acquire the stock. Most U. S. Bancorp stock
options have no intrinsic value at grant date, and under Opinion No. 25 no
compensation cost is recognized for them. Compensation cost is recognized for
other types of stock-based compensation plans under Opinion No. 25, including
plans with variable, usually performance-based, features.
54
<PAGE> 57
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Beginning in 1996, FAS No. 123 requires that an employer's financial
statements include certain disclosures about stock-based compensation
arrangements regardless of the method used to account for them. An employer that
continues to apply the accounting provisions of Opinion No. 25 will disclose pro
forma amounts that reflect the difference between compensation cost, if any,
included in net income and the related cost measured by the fair value based
method, including tax effects, that would have been recognized in the income
statement if the fair value based method had been used. U.S. Bancorp anticipates
it will continue to apply Opinion No. 25 in accounting for stock-based
compensation plans, with appropriate disclosures of pro forma amounts.
2. ACQUISITIONS
On December 26, 1995, U. S. Bancorp completed the acquisition, announced in
May, 1995, of West One Bancorp (West One), a regional financial services company
headquartered in Boise, Idaho. In a transaction accounted for as a
pooling-of-interests, U. S. Bancorp issued 54.7 million shares of common stock.
On the merger date West One had $9.2 billion in assets, $7.0 billion in
deposits, and 227 branches in Oregon, Washington, Idaho and Utah. Certain
amounts in West One's financial statements have been restated to conform to U.
S. Bancorp's presentation. The following table reconciles previously reported
amounts to amounts restated to reflect the merger.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, 1995 -------------------------
(UNAUDITED) 1994 1993
------------------ ---------- ----------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net interest income and noninterest
revenues:
U. S. Bancorp as previously reported.... $1,059,124 $1,418,279 $1,459,930
West One................................ 388,534 470,147 424,578
---------- ---------- ----------
Combined.................................. $1,447,658 $1,888,426 $1,884,508
========== ========== ==========
Net income:
U. S. Bancorp as previously reported.... $ 217,708 $ 151,495 $ 257,949
West One................................ 89,888 103,171 83,187
---------- ---------- ----------
Combined.................................. $ 307,596 $ 254,666 $ 341,136
========== ========== ==========
Earnings per share:
U. S. Bancorp as previously reported.... $ 2.12 $ 1.40 $ 2.47
Effect of West One merger............... (.16) .20 (.24)
---------- ---------- ----------
Combined.................................. $ 1.96 $ 1.60 $ 2.23
========== ========== ==========
</TABLE>
55
<PAGE> 58
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS -- (CONTINUED)
In connection with the merger, pre-tax merger and integration costs of
$98.9 million were recognized during 1995. The merger and integration activity
is summarized in the following table:
<TABLE>
<CAPTION>
SEVERANCE, FACILITIES
RETENTION AND AND
OTHER EMPLOYEE- ACCOUNT PROFESSIONAL
RELATED COSTS CONVERSIONS FEES OTHER TOTAL
--------------- ----------- ------------ ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Merger and integration cost
provision......................... $29.4 $39.6 $ 13.9 $16.0 $98.9
Utilization for the period:
Cash.............................. - .2 10.6 .5 11.3
Noncash........................... - - - - -
----- ----- ----- ----- -----
Total..................... - .2 10.6 .5 11.3
----- ----- ----- ----- -----
Balance at December 31, 1995........ $29.4 $39.4 $ 3.3 $15.5 $87.6
===== ===== ===== ===== =====
</TABLE>
The merger and integration costs will be funded out of operating cash flows
with payments for severance and employee-related expenses occurring
approximately ratably over the next year. U. S. Bancorp will recognize
additional integration-related expenses during the first half of 1996. However,
the majority of these costs were incurred in 1995.
As part of the regulatory approval process for the merger, U. S. Bancorp
will divest 31 branches with deposits of approximately $720 million and loans of
approximately $465 million. U. S. Bancorp has signed a definitive agreement to
sell these branches, mainly in Oregon, and anticipates the transaction to close
in the second quarter of 1996, and to result in a pre-tax gain of approximately
$30 million.
In February 1996, U. S. Bancorp announced the signing of a definitive
agreement for U. S. Bancorp to acquire California Bancshares, Inc. (CBI), the
holding company for a multi-bank, 36-branch commercial banking operation serving
the east San Francisco Bay Area and the central valley of northern California.
Under terms of the agreement, which is subject to approval by regulators and CBI
shareholders, CBI will be merged into U. S. Bancorp, and each share of CBI
common stock will be converted into .95 shares of U. S. Bancorp common stock.
The total value of the transaction is approximately $327 million, based on the
U. S. Bancorp stock closing price of $34.25 on February 9, 1996. Subject to
continuing internal review, it is anticipated that this transaction will be
accounted for as a pooling-of-interests and completed in the second half of
1996.
3. CASH, LOAN AND DIVIDEND RESTRICTIONS
The subsidiary banks are required to maintain reserves against customer
deposits by keeping balances with the Federal Reserve Bank in a
noninterest-bearing account. The average amount of reserve balances for the year
ended December 31, 1995 was approximately $237 million.
Certain restrictions exist regarding the extent to which bank subsidiaries
may transfer funds to the parent company in the form of dividends, loans or
advances. Federal law prevents the parent company and its nonbank subsidiaries
from borrowing from bank subsidiaries unless the loans are secured by various
types of collateral. Secured loans that may be made by bank subsidiaries to the
parent company or any individual affiliate are generally limited to 10 percent
of the bank's equity and 20 percent of the bank's equity for loans to all
affiliates including the parent company in the aggregate.
Payment of dividends to the parent company by its subsidiary banks is
subject to review by banking regulators and is subject to various statutory
limitations and in certain circumstances requires approval by banking regulatory
agencies. These permissible dividends are further limited by the minimum capital
constraints imposed on banks by banking regulatory agencies. Within the limits
of these regulatory guidelines,
56
<PAGE> 59
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. CASH, LOAN AND DIVIDEND RESTRICTIONS -- (CONTINUED)
all significant banking subsidiaries of U. S. Bancorp have the ability to pay
dividends without prior regulatory approval.
The subsidiary banks can distribute as dividends to the parent company in
1996 (in addition to their 1996 net income) approximately $313 million. At
December 31, 1995, the total amount that could be loaned to the parent company
by its banking subsidiaries was approximately $312 million. As a result of the
above regulatory restrictions, net assets of the subsidiary banks not available
for dividends or loans amounted to approximately $1.84 billion. Restricted net
assets of nonbank subsidiaries was not significant.
4. LOANS AND ALLOWANCE FOR CREDIT LOSSES
Loans and lease financing are comprised of the following categories:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Loans
Commercial.................................................. $11,746.1 $10,863.3
Foreign..................................................... 56.3 49.8
Real estate construction.................................... 833.0 791.4
Real estate mortgage........................................ 3,477.1 3,350.2
Consumer.................................................... 5,485.4 5,610.0
---------- ----------
Total loans......................................... 21,597.9 20,664.7
---------- ----------
Lease financing
Lease receivables........................................... 1,125.6 934.3
Estimated residual value.................................... 306.3 250.7
Unearned income............................................. (244.5) (204.5)
---------- ----------
Lease financing, net of unearned income..................... 1,187.4 980.5
---------- ----------
Total loans and leases.............................. $22,785.3 $21,645.2
========== ==========
</TABLE>
U. S. Bancorp's loan classifications for financial reporting differ from
those for regulatory reporting. Loans are classified based on type of collateral
securing the loans for regulatory purposes. Loan classifications for financial
reporting purposes are based on the purpose and primary source of repayment of
the loans.
The minimum future lease payments related to direct finance receivables for
each of the years 1996 through 2000 are $345 million, $295 million, $237
million, $164 million and $102 million, respectively.
The following table summarizes the changes in the allowance for credit
losses.
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year...................... $387,559 $345,152 $327,398
Acquisitions (dispositions)..................... (3,137) 2,542 672
Provision for credit losses..................... 124,093 120,146 106,234
Net charge-offs................................. (74,007) (80,281) (89,152)
-------- -------- --------
Balance, end of year............................ $434,508 $387,559 $345,152
======== ======== ========
</TABLE>
57
<PAGE> 60
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. LOANS AND ALLOWANCE FOR CREDIT LOSSES -- (CONTINUED)
At December 31, 1995, U. S. Bancorp's recorded investment in loans for
which an impairment has been recognized totaled $104.0 million. Included in this
amount is $7.2 million of impaired loans for which the related FAS No. 114
allowance is $3.1 million. The balance of the allowance for credit losses in
excess of these specific reserves is available to absorb losses from all loans,
although allocations have been made for certain loans and loan categories as
part of management's quarterly analysis of the allowance. The average recorded
investment in impaired loans was $142.8 million for the year 1995.
5. RELATED PARTIES
Certain of U. S. Bancorp's subsidiary banks have granted loans to the
officers and directors of U. S. Bancorp and to their associates. These related
party loans are made in the ordinary course of business and, management
believes, do not involve more than a normal risk of collectibility. The
aggregate dollar amount of these loans was $148.4 million and $145.8 million at
December 31, 1995 and 1994, respectively. During 1995, $82.0 million of new
loans were made and repayments totaled $79.4 million.
A construction company, of which a current U. S. Bancorp Board of Directors
(Board) member is the chairman of the board, was awarded a contract in November
1992 to implement structural changes to upgrade the seismic capacity of a
section of U. S. Bancorp's headquarters complex in Portland, Oregon. Payments
under the contract were completed in 1994 and totaled approximately $6.25
million.
In connection with the merger agreement relating to the acquisition of
Peoples Ban Corporation ("Peoples") in 1987, U. S. Bancorp entered into a
shareholder agreement with certain holders (a current Board member and
affiliates) of the common stock of Peoples pursuant to which such holders agreed
to vote in favor of the merger of Peoples with a U. S. Bancorp subsidiary.
Pursuant to this agreement, U. S. Bancorp has agreed to afford such holders,
which are the holders of approximately 8.5 million shares of common stock,
certain registration rights with respect to such shares of common stock. U. S.
Bancorp is obligated, under certain circumstances and subject to specified terms
and conditions, to use its best efforts to register for sale under the federal
and state securities laws the securities of such holders.
6. SECURITIES
In November of 1995, the Financial Accounting Standards Board (FASB) issued
additional implementation guidance regarding the FASB's previously issued FAS
No. 115, "Accounting for Certain Investments in Debt and Equity Securities". The
additional guidance provided an opportunity to reassess the appropriateness of
the classification of securities, and reclassify securities in accordance with
the provisions of FAS No. 115. Any reclassification under these guidelines was
required to be made by December 31, 1995, and accordingly, U. S. Bancorp
reclassified approximately $800 million of held to maturity securities to the
available for sale classification prior to that date. The related unrealized
gains were $6.8 million and unrealized losses were $3.1 million.
58
<PAGE> 61
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. SECURITIES -- (CONTINUED)
The amortized cost and approximate fair value of securities available for
sale were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury obligations.................. $ 759,956 $ 1,976 $ 825 $ 761,107
U.S. government agency securities.......... 1,155,281 8,239 4,293 1,159,227
Mortgage-backed securities................. 816,380 10,362 2,133 824,609
Collateralized mortgage obligations........ 145,155 705 680 145,180
State and municipal bonds.................. 89,707 2,292 208 91,791
Equity and other securities................ 292,616 4,512 2,319 294,809
---------- ------- ------- ----------
$3,259,095 $ 28,086 $ 10,458 $3,276,723
========== ======= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury obligations.................. $1,026,801 $ 72 $ 33,810 $ 993,063
U.S. government agency securities.......... 414,411 4,498 2,247 416,662
Mortgage-backed securities................. 574,527 333 36,593 538,267
Collateralized mortgage obligations........ 228,574 3 13,055 215,522
Equity and other securities................ 328,290 25,084 7,686 345,688
---------- ------- ------- ----------
$2,572,603 $ 29,990 $ 93,391 $2,509,202
========== ======= ======= ==========
</TABLE>
The amortized cost and fair value of securities available for sale by
remaining contractual maturity are shown below. Expected maturities of
mortgage-backed securities and collateralized mortgage obligations will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties. Equity
securities were included in the table below as due after ten years.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------
AMORTIZED FAIR
COST VALUE
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less..................................... $ 453,812 $ 454,415
Due after one year through five years....................... 481,226 483,369
Due after five years through ten years...................... 259,505 262,517
Due after ten years......................................... 1,103,017 1,106,633
Serial maturities........................................... 961,535 969,789
---------- ----------
$3,259,095 $3,276,723
========== ==========
</TABLE>
In 1995, gains of $6.3 million and losses of $3.3 million were realized on
sales of securities available for sale. Gains of $1.3 million and losses of
$10.5 million were realized in 1994 and gains of $.7 million and losses of $.2
million were realized in 1993. The net unrealized gain or loss on securities
available for sale, net of income taxes, was included as a component of
shareholders' equity.
59
<PAGE> 62
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. SECURITIES -- (CONTINUED)
The amortized cost and approximate fair value of securities held to
maturity were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
State and municipal bonds.................. $ 813,006 $ 23,226 $ 2,382 $ 833,850
Other securities........................... 52,120 7 282 51,845
-------- ------- ------ --------
$ 865,126 $ 23,233 $ 2,664 $ 885,695
======== ======= ====== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury obligations.................. $ 9,966 $ - $ 221 $ 9,745
U.S. government agency securities.......... 116,171 - 7,958 108,213
Mortgage-backed securities................. 290,506 1,108 12,395 279,219
Collateralized mortgage obligations........ 519,405 76 25,810 493,671
State and municipal bonds.................. 930,869 7,980 34,275 904,574
Other securities........................... 119,073 - 3,369 115,704
-------- ------- ------ --------
$1,985,990 $ 9,164 $ 84,028 $1,911,126
======== ======= ====== ========
</TABLE>
The amortized cost and fair value of securities held to maturity by
remaining contractual maturity are shown below. Expected maturities of
mortgage-backed securities and collateralized mortgage obligations will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------
AMORTIZED FAIR
COST VALUE
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less........................................ $ 60,493 $ 61,132
Due after one year through five years.......................... 400,469 411,121
Due after five years through ten years......................... 385,345 394,075
Due after ten years............................................ 18,819 19,367
-------- --------
$ 865,126 $885,695
======== ========
</TABLE>
In 1995, held-to-maturity securities of four issuers were sold because of
downgrades in credit quality which caused the securities to fall below U.S.
Bancorp's investment policy guidelines. The combined amortized cost of the
securities sold was $3.8 million and a net gain of $50 thousand was realized on
the sales.
At December 31, 1995 and 1994, the banks pledged securities and loans
aggregating $3.2 billion and $3.3 billion, respectively, to secure certain
public and trust deposits and for other purposes as required or permitted by
law. Interest earned on tax-exempt securities was $48.6 million, $51.4 million
and $45.7 million for the years 1995, 1994 and 1993, respectively.
60
<PAGE> 63
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. PREMISES, FURNITURE AND EQUIPMENT
A summary of premises, furniture and equipment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 90,920 $ 92,622
Buildings................................................... 435,763 453,664
Leasehold improvements...................................... 129,727 124,481
Furniture and equipment..................................... 505,978 490,146
Property under capital leases (principally equipment)....... 18,143 18,849
---------- ----------
Total............................................. 1,180,531 1,179,762
Less accumulated depreciation and amortization.............. (546,695) (506,555)
---------- ----------
Premises, furniture and equipment -- net.................. $ 633,836 $ 673,207
========== ==========
</TABLE>
Capital lease amortization expense is included in net occupancy and
equipment expense. Accumulated amortization of capital leases was $14.0 million
and $11.6 million at December 31, 1995 and 1994, respectively.
8. LEASE OBLIGATIONS
Future minimum lease payments as of December 31, 1995 are shown below:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------ --------
(IN THOUSANDS)
<S> <C> <C>
1996............................................................. $1,029 $ 36,126
1997............................................................. 916 31,700
1998............................................................. 839 22,877
1999............................................................. 819 18,129
2000............................................................. 789 14,648
Later years...................................................... 2,431 109,463
------- ----------
- -
Total minimum payments........................................... 6,823 $232,943
===========
Amount representing interest..................................... 2,149
-------
-
Present value of net minimum lease payments...................... $4,674
========
</TABLE>
A majority of the leases apply to the banks' premises and provide for
renewal options for periods of up to 20 years. Total rental expense under
operating leases was $51.3 million, $56.2 million and $53.3 million for 1995,
1994 and 1993, respectively.
61
<PAGE> 64
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES
The provision for income taxes for the last three years consisted of the
following:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal.......................................... $206,707 $137,072 $106,921
State............................................ 23,335 19,183 19,749
-------- -------- --------
230,042 156,255 126,670
-------- -------- --------
Deferred
Federal.......................................... (44,645) (43,837) 34,525
State............................................ (5,129) (3,887) 2,496
-------- -------- --------
(49,774) (47,724) 37,021
-------- -------- --------
Total
Federal.......................................... 162,062 93,235 141,446
State............................................ 18,206 15,296 22,245
-------- -------- --------
$180,268 $108,531 $163,691
======== ======== ========
</TABLE>
A reconciliation between the statutory federal income tax rate and the
effective rate is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate................................. 35.0% 35.0% 35.0%
Adjusted for:
State income tax..................................... 2.3 2.7 3.0
Tax-exempt interest.................................. (5.8) (8.4) (5.9)
Nondeductible expenses............................... 2.8 1.5 0.8
Credits.............................................. (1.1) (1.9) (1.3)
Other -- net......................................... 2.2 1.0 0.8
---- ---- ----
Effective income tax rate.............................. 35.4% 29.9% 32.4%
==== ==== ====
</TABLE>
Accrued income taxes consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Current.................................................. $45,560 $20,982
Deferred................................................. 14,403 27,091
------- -------
$59,963 $48,073
======= =======
</TABLE>
62
<PAGE> 65
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Allowance for credit losses.................................. $153,843 $132,631
Accrued expenses............................................. 41,229 21,578
Deferred income.............................................. 9,629 14,670
Postretirement/employment benefits........................... 37,852 40,392
Unrealized gains/losses...................................... 14,796 7,593
Interest not recorded........................................ 9,708 1,723
Deferred liabilities......................................... 5,159 4,149
Retirement plans............................................. 3,555 -
Net operating loss........................................... 748 -
Unrealized depreciation on securities available for sale..... - 23,846
Deferred gain on sale of assets.............................. 9,637 -
Other........................................................ 2,296 13,648
-------- --------
288,452 260,230
-------- --------
Deferred tax liabilities:
Lease financing.............................................. 82,954 89,558
Leveraged leases............................................. 167,183 144,934
Securities................................................... 815 -
Accumulated depreciation and amortization.................... 26,247 32,833
Retirement plans............................................. - 3,489
Purchase accounting adjustments.............................. 2,693 2,685
Unrealized appreciation on securities available for sale..... 6,161 -
Equity investments........................................... 15,138 7,462
Other........................................................ 1,664 6,360
-------- --------
302,855 287,321
-------- --------
Net deferred tax liability................................... $ 14,403 $ 27,091
======== ========
</TABLE>
In 1995, U. S. Bancorp recorded taxes of approximately $1.2 million related
to gains on sale of securities available for sale. The tax benefit recorded
related to losses on the sale of securities in 1994 was $3.5 million, and taxes
related to gains on sale of securities in 1993 were $200 thousand.
10. CREDIT ARRANGEMENTS
At December 31, 1995, committed line of credit arrangements totaling $500
million were available to U. S. Bancorp through a syndication of unaffiliated
banks. Such lines generally provide for interest at the lending bank's prime
rate or other money market rates. These banking arrangements principally served
as commercial paper bank-up lines and provided general liquidity for the parent
company. There were no borrowings outstanding or compensating balance
requirements under these credit arrangements at December 31, 1995. During 1995,
U. S. Bancorp paid commitment fees ranging from .10 percent to .1875 percent of
the available lines.
63
<PAGE> 66
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
U. S. Bancorp (Parent Company Only):
Medium-term notes due 1996-2000........................... $ 245,800 $ 331,600
8.125% notes due 2002..................................... 149,326 149,220
7.00% notes due 2003...................................... 149,731 149,694
7.75% convertible subordinated debentures due 2006........ - 49,890
Other convertible subordinated capital notes due 1997..... - 20,987
6.75% notes due 2005...................................... 296,510 -
---------- ----------
841,367 701,391
---------- ----------
Banks:
Bank notes due 1995....................................... - 221,000
FHLB notes due 1996-2025.................................. 535,315 305,417
7.75% notes due 2002...................................... - 15,705
Mortgages and other notes payable......................... 339 677
---------- ----------
535,654 542,799
---------- ----------
$1,377,021 $1,244,190
========== ==========
</TABLE>
U. S. Bancorp (Parent Company Only)
All long-term debt of the parent company is unsecured. The medium-term
notes have fixed or variable rates ranging from 5.53% to 8.05% at December 31,
1995.
The 8.125% notes due in 2002, the 7% notes due in 2003, and the 6.75% notes
due in 2005 are subordinated to all senior indebtedness of U. S. Bancorp. The
notes are not redeemable by U. S. Bancorp, in whole or in part, prior to
maturity and do not provide for a sinking fund.
At December 31, 1995, U. S. Bancorp had $200 million borrowing capacity
under a $500 million subordinated shelf registration filed in 1993. In addition,
$589 million was available under an $800 million debt shelf registration filed
in 1991, of which $500 million has been designated as medium-term notes.
In 1995, West One, before the merger with U. S. Bancorp, called for
redemption and retired the 7.75% convertible subordinated debentures as
described in Note 15, "Shareholders' Equity." The other convertible subordinated
capital notes due 1997 were called and redeemed in mid-1995.
Banks
The bank notes issued by U. S. Bank of Oregon matured in October 1995. U.
S. Bank of Oregon and U. S. Bank of Washington together have $650 million
remaining uncommitted capacity at December 31, 1995, under a $1 billion bank
note continuous offering.
Various U. S. Bancorp subsidiary banks borrow from the Federal Home Loan
Banks (FHLB) of Seattle and San Francisco. These banking subsidiaries pledge
certain real estate loans and investment securities under blanket pledge
agreements as collateral for these secured notes. Interest rates ranged from
4.13% to 7.95% at December 31, 1995.
64
<PAGE> 67
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. LONG-TERM DEBT -- (CONTINUED)
The 7.75% notes due in 2002, which were subordinated to deposits and
certain other liabilities of U. S. Bank of Oregon, were redeemed on December 28,
1995. Mortgages and other notes payable are primarily mortgages on bank
premises. Interest rates range from 7.5% to 12% and remaining maturities vary.
Payments required to service U. S. Bancorp's long-term debt during the next
five years are as follows: 1996 - $396 million; 1997 - $290 million; 1998 - $24
million; 1999 - $5 million; and 2000 - $53 million.
12. EMPLOYEE BENEFIT PLANS
Retirement Plans
U. S. Bancorp provides noncontributory trusteed defined benefit pension
plans (Pension Plans) which cover substantially all employees. West One provided
substantially similar plans. Benefits are based on years of service and highest
average level of compensation for any five consecutive years out of the last ten
years of service. U. S. Bancorp's funding policy is to contribute annually an
amount between the minimum required under ERISA and the maximum amount that is
deductible for income tax purposes. Such contributions are intended to provide
not only for benefits attributed to service to date, but also for those expected
to be earned in the future.
U. S. Bancorp also maintains separate unfunded supplemental pension plans
(Supplemental Plans) that provide certain officers with defined pension benefits
in excess of limits imposed by federal tax law on benefit payments from
qualified plans and for certain compensation not covered in the Pension Plan.
The related retirement benefits are paid from U. S. Bancorp's assets. The
assumptions used in computing the present value of the accumulated benefit
obligation, the projected benefit obligation and net pension expense are
substantially consistent with those assumptions used for the Pension Plan.
The following table sets forth the aggregate pension plans' status and
amounts recognized in U. S. Bancorp's consolidated financial statements at
December 31, 1995 and 1994.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1995 1994
------------------------- -------------------------
PENSION SUPPLEMENTAL PENSION SUPPLEMENTAL
PLANS PLANS PLANS PLANS
-------- ------------ -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation................. $342,250 $ 20,537 $270,526 $ 15,012
======== ======== ======== ========
Accumulated benefit obligation............ $365,290 $ 20,704 $285,349 $ 15,187
======== ======== ======== ========
Projected benefit obligation................ $444,066 $ 27,054 $360,135 $ 17,458
Plan assets at fair value................... 466,144 - 375,528 -
-------- -------- -------- --------
Projected benefit obligation (in excess of)
or less than plan assets.................. 22,078 (27,054) 15,393 (17,458)
Unrecognized net (gain) loss from past
experience different from that assumed and
effects of changes in assumptions......... 6,586 7,293 19,728 (783)
Unrecognized prior service cost............. 13,851 3,349 4,652 3,548
Additional minimum liability................ - (5,687) - (2,592)
Unrecognized net transition (asset)
obligation at January 1, 1986............. (10,135) 1,395 (14,434) 1,614
-------- -------- -------- --------
Prepaid pension cost (pension liability).... $ 32,380 $(20,704) $ 25,339 $(15,671)
======== ======== ======== ========
</TABLE>
65
<PAGE> 68
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
Pension plan assets are invested approximately 70 percent in common stock
and equity mutual funds and 30 percent in fixed income mutual funds.
Pension cost for the Pension Plan and Supplemental Plans included the
following components:
<TABLE>
<CAPTION>
PENSION PLANS SUPPLEMENTAL PLANS
---------------------------------- ----------------------------
1995 1994 1993 1995 1994 1993
-------- -------- -------- ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Service cost -- benefits earned during
the period............................. $ 15,479 $ 18,692 $ 15,933 $ 440 $ 410 $ 198
Interest cost on projected benefit
obligation............................. 31,584 27,305 24,730 1,893 1,432 696
Net amortization and deferrals........... 60,817 (35,411) 8,798 845 762 503
(Return) loss on plan assets............. (99,921) 182 (41,100) - - -
-------- -------- -------- ------ ------ ------
Net periodic pension cost................ $ 7,959 $ 10,768 $ 8,361 $3,178 $2,604 $1,397
======== ======== ======== ====== ====== ======
</TABLE>
In determining the projected benefit obligation at each year-end the
following assumptions were used. These year-end assumptions also determine the
subsequent year net periodic pension cost.
<TABLE>
<CAPTION>
U. S. BANCORP WEST ONE
----------------------------------------- -------------------------------
1995 1994 1993 1995 1994 1993
----------- ---------- ---------- ----------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Weighted average discount rate....... 7.25% 8.50% 7.25% 7.25% 8.75% 7.50%
Expected long-term rate of return.... 9.00 9.00 9.00 9.00 10.00 10.50
Rate of increase in future salary
levels............................. 3.75 - 8.25 5.0 - 9.50 5.0 - 9.50 3.75 - 8.25 4.00 3.00
</TABLE>
Employee Investment Plan
U. S. Bancorp sponsors an Employee Investment Plan which allows qualified
employees, at their option, to make contributions of up to certain percentages
of pre-tax base salary through salary deductions under Section 401(k) of the
Internal Revenue Code. A portion of these contributions is matched by U. S.
Bancorp. All of U. S. Bancorp's matching contributions are invested in U. S.
Bancorp common stock. Employee contributions are invested, at the employees'
direction, among a variety of investment alternatives. West One had a similar
plan which was merged with U. S. Bancorp's existing plan on January 1, 1996.
Total expenses associated with the Employee Investment Plan were $13.4 million,
$9.6 million and $11.7 million in 1995, 1994 and 1993, respectively.
Other Postretirement and Postemployment Benefits
U. S. Bancorp has a benefit plan which provides postretirement health
benefits to all employees who have attained the age of 55 and have at least 10
years of service. Retiree health care benefits are offered under self-insured
plans. West One provided a substantially similar plan. The plans are
contributory, with retirees' contributions adjusted annually to reflect certain
cost-sharing provisions and benefit limitations. Certain retirees prior to July
1, 1993, are covered under a plan that is noncontributory for retirees and
contributory for dependents. In 1992, U. S. Bancorp adopted FAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" and
elected to immediately recognize the accumulated postretirement benefit
obligation measured as of January 1, 1992. U. S. Bancorp reserves the right to
terminate the plan or make plan changes at any time.
U. S. Bancorp also provides postemployment benefits other than retirement
benefits to former or inactive employees, their beneficiaries and covered
dependents. Those benefits include, but are not limited to, salary continuation,
supplemental unemployment benefits, severance benefits, disability-related
benefits (including
66
<PAGE> 69
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
workers' compensation), job training and counseling, and continuation of
benefits such as health care benefits and life insurance coverage. West One
provided similar benefits for its employees.
The following table sets forth the aggregate status of the postretirement
plans, reconciled with amounts recognized in U. S. Bancorp's balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees..................................................... $ 93,383 $105,158
Fully eligible active plan participants...................... 941 130
Other active participants.................................... 8,361 7,357
-------- --------
102,685 112,645
Unrecognized prior service cost................................ 5,881 6,347
Unrecognized net loss from past experience different from that
assumed and the effects of changes in assumptions............ (9,712) (20,345)
-------- --------
Accrued postretirement benefit liability....................... $ 98,854 $ 98,647
======== ========
</TABLE>
The net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost........................................... $ 748 $ 1,540 $ 1,652
Interest cost on accumulated postretirement benefit
obligation........................................... 7,716 8,416 7,891
Net amortization of deferrals.......................... (466) 905 554
------ ------- -------
Net periodic postretirement benefit cost............... $7,998 $10,861 $10,097
====== ======= =======
</TABLE>
The assumed discount rate used in determining the accumulated
postretirement benefit obligation was 7.25 percent at December 31, 1995. The
assumed discount rate for the U. S. Bancorp plan was 8.5 percent and 7.25
percent at December 31, 1994 and 1993, respectively. The West One accumulated
postretirement benefit obligation was calculated using assumed discount rates of
8.75 percent and 7.50 percent at December 31, 1994 and 1993, respectively. The
1995 health care trend rate was projected to be 10.5 percent for pre-65
participants and 8.5 percent for post-65 participants. These rates were assumed
to decrease gradually until they reach 4.75 percent in the year 2001 and remain
at that level thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of January 1, 1995 by $4.5 million and the
aggregate of the service and interest components of net periodic postretirement
cost for 1995 by $352,000.
Stock Incentive Plans
U. S. Bancorp maintains various stock incentive plans which provide for its
ability to grant stock options, stock appreciation rights, restricted share
awards, performance shares and other stock-based awards to directors, officers
and key employees. Under the terms of the employee and officer option
agreements, the option price is the fair market value at the time the option is
granted and the option period can not exceed ten years from the grant date.
Options become exercisable pursuant to various alternative vesting structures.
Non-employee directors may elect to acquire "deferred compensation options" in
lieu of fees otherwise due for
67
<PAGE> 70
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
board services and may exercise those options after six months. Deferred
compensation options granted to non-employee directors are issued at 40 percent
of market price on grant date. Upon exercise, all option proceeds are credited
to the capital accounts. The range of option prices is a function of the market
price of U. S. Bancorp stock on the date the options were granted, the impact of
stock dividends and stock splits, and the effect of business combinations.
Stock option activity is summarized in the following table:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
OPTIONS PER SHARE
--------- ----------------
<S> <C> <C>
Outstanding at January 1, 1993.......................... 3,977,437 $ 3.42 to $22.63
Grants................................................ 1,148,474 9.40 to 26.13
Options exercised..................................... (442,671) 3.42 to 16.33
Forfeited or cancelled................................ (11,960) 7.78 to 16.67
---------
Outstanding at December 31, 1993........................ 4,671,280 3.42 to 26.13
Grants................................................ 1,249,231 9.65 to 27.25
Options exercised..................................... (999,013) 3.42 to 25.88
Forfeited or cancelled................................ (81,143) 7.78 to 26.00
---------
Outstanding at December 31, 1994........................ 4,840,355 3.42 to 27.25
Grants................................................ 1,018,465 8.85 to 32.25
Options exercised..................................... (816,239) 3.42 to 26.00
Forfeited or cancelled................................ (111,695) 14.64 to 26.00
---------
Outstanding at December 31, 1995........................ 4,930,886 $ 5.50 to $32.25
=========
</TABLE>
Performance shares are earned only if specified performance goals are
attained during a designated performance cycle. Earned performance shares are
paid at the end of the performance cycle in shares of common stock or a
combination of cash and shares. Grants of performance shares totaled 100,112 as
of December 31, 1995 and none have been paid.
Exercisable options totaled 3,747,787, 2,756,982 and 2,970,716 at December
31, 1995, 1994 and 1993, respectively. At December 31, 1995, shares of common
stock reserved for issuance under all stock incentive plans totaled 11,754,422.
13. RESTRUCTURING CHARGE
In the first quarter of 1994, a $100 million restructuring charge was
recorded related to a comprehensive program designed to allow U. S. Bancorp to
become a more efficient, competitive and customer-focused financial institution.
The program included staff reductions accomplished through an early retirement
opportunity for certain employees, other severance programs and attrition;
divestiture of certain business activities; and the consolidation and
integration of certain operations and facilities that no longer fit U. S.
Bancorp's corporate objectives or the needs of its regional customers. The
program called for consolidation of branch operations centers for all states
from seven to two, closure of certain branches and other activities.
The $100 million charge represented the incremental costs that resulted
from the restructuring plan. Included in the restructuring charge were $52.4
million of costs associated with enhanced retirement and other benefit programs,
$22.6 million of severance benefits, $9.5 million of expenses related to the
cost to exit certain
68
<PAGE> 71
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. RESTRUCTURING CHARGE -- (CONTINUED)
business activities, $7.3 million related to consolidation and integration of
facilities, and $8.2 million of other cost reduction expenses related to the
program. The restructuring activity is summarized in the table below.
<TABLE>
<CAPTION>
FACILITIES
SEVERANCE CONSOLIDATION
OUTPLACEMENT AND BUSINESS
RETIREMENT AND OTHER DIVESTITURE
PLANS BENEFITS COSTS OTHER TOTAL
---------- ------------ ------------- ----- ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Restructuring Provision, March
1994.............................. $ 48.8 $ 26.2 $16.8 $8.2 $100.0
Utilization for the Period
Cash.............................. - 14.5 5.8 4.1 24.4
Noncash........................... 48.8(1) - 5.7 2.2 56.7
----- ----- ----- ---- ------
Total..................... 48.8 14.5 11.5 6.3 81.1
----- ----- ----- ---- ------
Balance, December 31, 1994.......... - 11.7 5.3 1.9 18.9
Utilization for the Period
Cash.............................. - 10.7 2.2 .1 13.0
Noncash........................... - - 2.8 1.8 4.6
----- ----- ----- ---- ------
Total..................... - 10.7 5.0 1.9 17.6
----- ----- ----- ---- ------
Balance, December 31, 1995.......... $ - $ 1.0 $ .3 $ - $ 1.3
===== ===== ===== ==== ======
</TABLE>
- ---------------
(1) Noncash amount of $48.8 million represents the amount transferred to U. S.
Bancorp's benefit plan liabilities during 1994. Payment of the cost of the
retirement programs will occur over a 10 to 15 year period as contributions
by U. S. Bancorp are made to the benefit plans. Actual cash payments made to
benefit plans are not included in the table above. As a result of the sale
of the mortgage subsidiary's loan production offices and the termination of
employees through the restructuring program, U. S. Bancorp recognized
pension curtailment gains totaling $6.5 million in 1994.
14. MORTGAGE BANKING ACTIVITIES
Changes in mortgage loan servicing rights purchased for the last three
years were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- ------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year................................. $20.5 $15.7 $ 46.2
Purchases.................................................. 6.5 10.3 9.8
Sales...................................................... - (2.8) (13.5)
Amortization............................................... (3.0) (3.8) (9.8)
Hedge reserve.............................................. - 2.0 (2.0)
Valuation adjustments due to changes in prepayment
assumptions.............................................. (3.2) (.9) (15.0)
----- ----- -----
Balance, end of year....................................... $20.8 $20.5 $ 15.7
===== ===== =====
</TABLE>
69
<PAGE> 72
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. MORTGAGE BANKING ACTIVITIES -- (CONTINUED)
Changes in excess servicing fee receivable for the last three years were as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year................................... $ .3 $ 4.4 $20.9
Capitalized.................................................. - .9 4.2
Sales........................................................ - (2.8) (5.6)
Amortization................................................. (.3) (2.0) (5.4)
Valuation adjustments due to changes in prepayment
assumptions................................................ - (.2) (9.7)
--- ---- ----
Balance, end of year......................................... $ - $ .3 $ 4.4
=== ==== ====
</TABLE>
The capitalization of excess servicing fee receivable and the amortization
and valuation adjustments related to mortgage banking assets are included in
mortgage banking income. Mortgage banking income is shown net of certain other
expenses in the consolidated statement of income.
In August 1994, a significant portion of the assets of U. S. Bancorp's
subsidiary, U. S. Bancorp Mortgage Company, was sold. The assets sold included
$3.6 billion of its $4.3 billion residential mortgage loan servicing portfolio
and 50 loan origination offices in 10 states. U. S. Bancorp continues to provide
residential mortgage loan servicing through two other subsidiaries and
originates mortgage loans through the branches of the bank subsidiaries and a
loan by phone program.
15. SHAREHOLDERS' EQUITY
The 8 1/8 percent Series A Preferred Stock is not redeemable prior to July
23, 1997. On or after such date, the Series A Preferred Stock will be
redeemable, in whole or part, at the option of U. S. Bancorp at a liquidating
preference of $25 per share plus accrued and unpaid dividends. Under current
regulations, U. S. Bancorp may not exercise its option to redeem the Series A
Preferred Stock without the prior approval of the Federal Reserve Board. The
preferred dividend requirement used in the calculation of earnings per common
share was $12.2 million for the years 1995, 1994 and 1993.
In 1995, West One, before the merger with U. S. Bancorp, called for
redemption and retired its 7.75% convertible subordinated debentures. In
connection with the redemption, West One purchased in the open market 2.7
million West One common shares (equivalent to 3.9 million U. S. Bancorp common
shares) for issuance to the debt holders. In 1994, U. S. Bancorp's Board of
Directors approved plans to repurchase up to 6.5 million shares of U. S. Bancorp
common stock over a five-year period.
Financial institutions are subject to risk-based capital guidelines
requiring minimum capital levels based on the perceived risk of assets and
off-balance sheet instruments. The federal bank regulatory agencies have jointly
issued rules which implement a system of prompt corrective action for financial
institutions required by FDICIA. The rules define the relevant capital levels
for the five categories, ranging from "well-capitalized" to "critically
undercapitalized."
Risk-based capital guidelines issued by the Federal Reserve Board establish
a risk-adjusted ratio relating capital to different categories of assets and
off-balance sheet exposures for bank holding companies. U. S. Bancorp's Tier 1
capital is comprised primarily of common equity and perpetual preferred stock,
less goodwill and certain other intangibles, and excludes the equity impact of
adjusting available for sale securities to market value. Total capital also
includes subordinated debt and a portion of the allowance for credit losses, as
defined according to regulatory guidelines.
70
<PAGE> 73
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SHAREHOLDERS' EQUITY -- (CONTINUED)
The risk-based capital guidelines have been supplemented by a leverage
ratio, defined as Tier 1 capital to adjusted quarterly average total assets.
Banking organizations other than those which are most highly rated are expected
to maintain ratios at least 100 to 200 basis points above the minimum 3 percent
level, depending on their financial condition.
Each subsidiary bank is subject to capital requirements similar to the
requirements for bank holding companies. At December 31, 1995 and 1994, all of
U. S. Bancorp's banking subsidiaries met the risk-based capital ratio and
leverage ratio requirements for "well capitalized" banks. The banking
subsidiaries' ratios are expected to be maintained at the required levels by the
retention of earnings and, if necessary, the issuance of additional
capital-qualifying securities.
The risk-based capital and leverage ratios for U. S. Bancorp are presented
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Total assets as reported................................ $31,794,283 $30,609,108
Shareholders' equity as reported........................ 2,617,053 2,493,054
Tier 1 capital.......................................... 2,418,782 2,312,598
Total capital........................................... 3,377,927 3,017,058
Weighted risk assets.................................... 28,656,662 26,521,830
Adjusted quarterly average assets....................... 30,651,822 29,568,331
Risk-based capital ratios
Tier 1 capital to weighted risk assets
Actual........................................ 8.44% 8.72%
Regulatory minimum............................ 4.00 4.00
Well capitalized.............................. 6.00 6.00
Total capital to weighted risk assets
Actual........................................ 11.79% 11.38%
Regulatory minimum............................ 8.00 8.00
Well capitalized.............................. 10.00 10.00
Leverage Ratio - Tier 1 capital to adjusted average
assets
Actual........................................ 7.89% 7.82%
Regulatory minimum............................ 4.00 4.00
Well capitalized.............................. 5.00 5.00
</TABLE>
16. CONTINGENCIES, COMMITMENTS, CONCENTRATIONS OF CREDIT AND OFF-BALANCE SHEET
RISK
Contingencies
U. S. Bancorp and certain subsidiaries are defendants in various legal
proceedings. Management, after reviewing these actions and proceedings with
counsel, believes that the outcome of such proceedings will not have a
materially adverse effect upon the consolidated financial position or results of
operations of U. S. Bancorp or its subsidiaries.
Commitments
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
71
<PAGE> 74
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. CONTINGENCIES, COMMITMENTS, CONCENTRATIONS OF CREDIT AND OFF-BALANCE SHEET
RISK -- (CONTINUED)
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. U. S. Bancorp evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by U. S. Bancorp upon extension of credit, is
based on management's credit evaluation of the counterparty. Collateral held
varies but may include deposits held in financial institutions, marketable
securities, accounts receivable, inventory, property, plant and equipment, and
income-producing commercial properties.
Standby letters of credit and financial guarantees written are conditional
commitments issued by U. S. Bancorp to guarantee the performance of a customer
to a third party. These guarantees are primarily issued to support public and
private borrowing arrangements, including state and municipal obligations,
industrial development revenue bonds, corporate debt, and similar transactions.
The credit risk involved in issuing letters of credit and writing financial
guarantees is essentially the same as that involved in extending loan facilities
to customers. Generally, standby letters of credit and financial guarantees
written are not secured, but, when required, collateral may include cash and
securities. Approximately 85 percent of standby letters of credit at December
31, 1995 expire in less than five years and 44 percent in less than one year.
The following table summarizes U. S. Bancorp's credit related financial
instruments, which include both commitments to extend credit and letters of
credit, each of which is considered in U. S. Bancorp's liquidity risk management
practices. For these financial instruments, contract amounts represent credit
risk.
<TABLE>
<CAPTION>
CONTRACT OR NOTIONAL
AMOUNT
---------------------
DECEMBER 31,
---------------------
1995 1994
------- -------
(IN MILLIONS)
<S> <C> <C>
Commitments to extend credit................................... $15,905 $16,869
Standby letters of credit and financial guarantees (net of
participations of $69 million and $61 million,
respectively)................................................ 1,074 853
</TABLE>
Concentrations of Credit
Most of U. S. Bancorp's lending activity is with customers located within
the Northwest. An economic downturn in the Northwest would likely have a
negative impact on U. S. Bancorp's results of operations depending on the
severity of the downturn. U. S. Bancorp maintains a diversified portfolio and
does not have significant on- or off-balance sheet concentrations of credit risk
in any one industry.
Off-Balance Sheet Risk
In the normal course of business, U. S. Bancorp uses financial instruments
with off-balance sheet risk to meet the financing needs of its customers and to
reduce its own exposure to fluctuations in interest rates. Such contracts are
nonspeculative in nature. These financial instruments include commitments to
extend credit, standby letters of credit and financial guarantees, options
related to customer accommodations, interest rate swaps, and futures and foreign
exchange contracts. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
consolidated financial statements. The contract or notional amounts of interest
rate swaps, futures, foreign exchange contracts and options related to customer
accommodations do not represent the credit or interest rate risk associated with
these contracts, but rather give an indication of the volume of the
transactions. Unless noted otherwise, U. S. Bancorp does not require collateral
or other security to support financial instruments with off-balance sheet credit
risk.
72
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U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. CONTINGENCIES, COMMITMENTS, CONCENTRATIONS OF CREDIT AND OFF-BALANCE SHEET
RISK -- (CONTINUED)
Credit risk is defined as the possibility of sustaining a loss due to the
failure of a counterparty to perform in accordance with the terms of the
contract. U. S. Bancorp's exposure to credit loss, in the event of
nonperformance by the other party to the financial instrument, for the
commitments to extend credit and standby letters of credit and financial
guarantees written is represented by the contractual amount of those
instruments. U. S. Bancorp uses the same credit policies in making commitments
and conditional obligations as it does for on-balance sheet instruments.
Interest rate derivative financial instruments are used to reduce the
interest rate risk of a specific asset or liability position or to adjust a
specific interest rate exposure that is identified by asset/liability management
monitoring processes. Income or expense on most derivative financial instruments
used to manage interest rate exposure is recorded on an accrual basis as an
adjustment to the yield of the related interest rate exposures over the period
covered by the contracts. Any financial instruments that do not qualify as
hedges are marked-to-market with resulting gains and losses recognized in the
statement of income.
Derivative Financial Instruments Held or Issued for Customer Accommodation or
Trading Purposes
The amounts disclosed below represent the end-of-period contract or
notional amounts and fair value of derivatives held or issued for customer
accommodation or trading purposes, the average aggregate fair values during the
year of those instruments and the associated credit exposures. Those amounts
reflect the netting of offsetting transactions only to the extent that they
could be offset under master netting agreements with various counterparties.
Fair values are based upon the estimated amounts that U. S. Bancorp would
receive (pay) to terminate the contracts as of reporting dates. Dealer quotes
and/or present value techniques, where dealer quotes are not available, have
been used for computing fair values. U. S. Bancorp's credit exposure resulting
from interest rate and foreign exchange contracts held for trading purposes is
limited to the current fair value of contracts with unrealized gains.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
CONTRACT OR
NOTIONAL AVERAGE CREDIT
AMOUNTS FAIR VALUE FAIR VALUE EXPOSURE
--------------- --------------- --------------- -----------
1995 1994 1995 1994 1995 1994 1995 1994
------ ------ ------ ------ ------ ------ ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Contracts:
Purchased options................. $ 52.0 $ 65.6 $ .2 $ 1.9 $ .6 $ .7 $ .2 $1.9
Written options................... (110.4) (76.1) (.2) (2.2) (.6) (.8) - -
Swaps............................. 237.2 146.3 - - - - 4.3 5.0
Assets......................... - - 4.3 5.0 3.7 3.3 - -
Liabilities.................... - - (1.5) (4.3) (2.1) (2.3) - -
Futures........................... 693.0 215.7 - - - - - .5
Assets......................... - - - .5 - .3 - -
Liabilities.................... - - (1.3) (.2) (.4) (.2) - -
Foreign exchange contracts:......... 144.0 132.6 - - - - 1.8 .8
Assets......................... - - 68.3 61.4 51.7 58.8 - -
Liabilities.................... - - (75.2) (70.7) (49.8) (67.9) - -
</TABLE>
U. S. Bancorp acts as a principal in writing interest rate caps and floors
for customers (written options). These interest rate caps and floors enable
customers to transfer, modify, or reduce their interest rate risk and obligate
one of the parties to make cash payments if an interest rate index exceeds a
specified upper "capped" level or if the index falls below a specified lower
"floor" level. Written options do not expose U. S. Bancorp to
73
<PAGE> 76
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. CONTINGENCIES, COMMITMENTS, CONCENTRATIONS OF CREDIT AND OFF-BALANCE SHEET
RISK -- (CONTINUED)
credit risk since the counterparty has already performed according to the terms
of the contract by paying a premium up front.
Purchased options represent offsetting positions intended to hedge certain
written options for customers. Credit risk exists for purchased options and is
measured as the replacement cost in the event of nonperformance by
counterparties for those contracts in a gain position, plus an amount for
residual credit risk. Normal credit reviews on each counterparty are performed,
and exposure to the interest rate risk inherent in these items is managed by
entering into offsetting positions or other hedging techniques.
Cash requirements include the premium paid to purchase such options
(premiums are received for options written) and if the option is exercised, the
strike price in such contract times the notional amount would be paid to or
received from the writer of the option, as appropriate. Interest rate caps and
floors have maturities ranging from 1996 to 2000. Net gains realized related to
interest rate caps and floors were not significant in 1995, 1994 and 1993.
Interest rate swaps, with notional amounts totaling $142 million, were
entered into as customer accommodations at December 31, 1995. Of this total, $95
million was matched by interest rate swaps with major financial institutions and
$47 million were hedged by interest rate futures. Net realized gains related to
customer swaps were approximately $1 million in 1995 and were not significant in
1994 and 1993. The current credit exposure on interest rate swaps is the
replacement cost in the event of nonperformance by counterparties for those
contracts in a gain position. Cash requirements include settling any net amounts
due to or from the counterparties.
Financial futures contracts are contracts for delayed delivery of
securities or money market instruments in which the seller agrees to make
delivery at a specified future date of a specified instrument, at a specified
price or yield. Initial margin requirements are met in cash or other
instruments, and changes in the contract values are settled daily. Futures
contracts have minimal credit risk because futures exchanges are the
counterparties.
Futures contracts are sold to hedge market price risks of interest rate
caps and swaps written for customers. Open contracts at December 31, 1995, had
maturities ranging from 1996 to 2005. Market value changes on futures contracts
that are designated as trading hedges are recognized in income in the period of
change. Realized losses on futures used for hedging trading swaps and options
were approximately $1 million in 1995 and were not significant in 1994 and 1993.
Foreign exchange contracts, consisting of forward and spot commitments to
purchase and sell foreign currencies, are agreements for delayed delivery of a
foreign currency in which the buyer agrees to purchase and the seller agrees to
deliver, at a specified future date, a specified amount at a specified exchange
rate. U. S. Bancorp is party to foreign exchange spot and forward contracts to
meet the needs of its customers. Customer transactions are generally covered by
offsetting positions to reduce risk arising from fluctuations in exchange rates.
Foreign exchange contracts generally relate to major foreign currencies and are
highly liquid. The foreign exchange contracts have original terms to maturity of
twelve months or less. Credit exposure for foreign exchange contracts is equal
to the unrealized gains in such contracts. Realized gains on foreign exchange
contracts totaled $5.1 million, $4.2 million, and $3.9 million for 1995, 1994
and 1993, respectively.
74
<PAGE> 77
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. CONTINGENCIES, COMMITMENTS, CONCENTRATIONS OF CREDIT AND OFF-BALANCE SHEET
RISK -- (CONTINUED)
The table below summarizes, by currency, the contractual amounts of U. S.
Bancorp's contracts to either pay or receive U.S. dollars in exchange for
foreign currencies:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------
PURCHASE SALES
CONTRACTS CONTRACTS
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Currency:
Canadian Dollars.............................................. $24.0 $18.9
Japanese Yen.................................................. 17.4 17.8
German Deutschemarks.......................................... 16.8 16.8
British Pounds Sterling....................................... 7.8 7.4
Spanish Pesetas............................................... 4.9 5.0
Others........................................................ 4.5 2.7
----- -----
Total........................................................... $75.4 $68.6
===== =====
</TABLE>
Derivative Financial Instruments Held or Issued for Purposes Other Than
Trading
U. S. Bancorp also holds or issues derivative instruments for
asset/liability management purposes. Its principal objectives are to maximize
net interest income while maintaining acceptable levels of interest rate and
liquidity risk and to facilitate its funding needs.
The amounts disclosed below represent the end of period contract or
notional amounts of derivatives held or issued for purposes other than trading
and the associated credit exposures for each class of instrument.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
CONTRACT OR NOTIONAL CREDIT
AMOUNTS EXPOSURE
--------------------- -------------
1995 1994 1995 1994
-------- -------- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C>
Hedges of interest rate risk on assets and
liabilities:
Financial futures.............................. $ - $ 722.9 $ - $ -
Interest rate swaps............................ 1,467.5 1,220.5 8.1 .3
Purchased options.............................. - 100.0 - -
Hedges of mortgage banking loan sales
transactions:
Forward sales.................................. $ 51.9 $ 7.8 $ - $ -
Purchased options.............................. 3.0 2.0 - -
</TABLE>
In 1994, futures contracts were purchased to hedge market price risks of
variable rate loans and liabilities that were not covered by swap positions.
Futures contracts were also sold to hedge market price risk of mortgage-backed
securities in the available for sale securities portfolio and certain securities
held for trading purposes. Unrealized losses at December 31, 1994 arising from
the use of futures totaled $4.6 million. Gains and losses on futures contracts
designated as non-trading hedges are deferred and amortized to income over the
life of the instrument hedged.
Interest rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts. Interest rate swaps are principally used to hedge
interest rate risk related to London Interbank Offering Rate (LIBOR)-based
floating rate loans and variable rate liabilities such as certificates of
deposit and term funds purchased. One interest rate swap with a notional amount
of $500 million, which matures in 1999, requires payment of prime less 2.535%
and receipt of the three-month LIBOR with caps, which increases 25 basis points
per quarter. Inherent in the value of the swap are gross unrealized gains
totaling $8.0 million and $.3 million and gross unrealized losses totaling $6.6
million and $37.9 million at December 31, 1995 and 1994, respectively.
75
<PAGE> 78
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. CONTINGENCIES, COMMITMENTS, CONCENTRATIONS OF CREDIT AND OFF-BALANCE SHEET
RISK -- (CONTINUED)
If an interest rate swap or futures contract that is used to manage
interest rate risk is terminated early and the hedged asset or liability
remains, any resulting gain or loss is deferred and amortized as an adjustment
to the yield of the underlying interest rate exposure position over the
remaining period originally covered by the terminated swap or futures contract.
Deferred losses on the early termination of interest rate swaps used to manage
interest rate risk totaled $391 thousand as of December 31, 1995. Deferred
losses on the termination of futures contracts used to manage interest rate risk
totaled $2.2 million at December 31, 1995. These deferred amounts are scheduled
to be amortized into income as follows:
<TABLE>
<CAPTION>
YEAR SWAPS FUTURES
---------------------------------------------------------- ----- -------
(IN THOUSANDS)
<S> <C> <C>
1996...................................................... $149 $ 463
1997...................................................... 138 231
1998...................................................... 104 231
1999...................................................... - 232
2000 and thereafter....................................... - 1,062
---- ------
Total................................................... $391 $ 2,219
==== ======
</TABLE>
Gains and losses on derivative contracts such as futures, forward delivery
commitments and foreign exchange commitments that qualify as hedges of
anticipated transactions are deferred and are amortized into income over the
term of the completed transaction which it hedged.
In conjunction with U. S. Bancorp's mortgage loan operations,
mortgage-backed securities and mortgage loans are sold for delivery in future
months, and over-the-counter options on mortgage-backed securities are purchased
to hedge closed mortgage loans and to hedge interest rate guarantee commitments
for unclosed mortgage loans. Net positions are valued at the lower of cost or
market. Gains or losses are recognized upon settlement of the forward sale
contracts based on the difference between the net sales proceeds and the net
carrying value of the loans sold. The option premium paid, which represents loss
exposure, is amortized over the life of the option. These forward commitments
and options are short-term in duration. Gross unrealized losses in the value of
these forward commitments and options were $614 thousand at December 31, 1995.
Gross unrealized gains were $791 thousand at December 31, 1994.
76
<PAGE> 79
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. CONTINGENCIES, COMMITMENTS, CONCENTRATIONS OF CREDIT AND OFF-BALANCE SHEET
RISK -- (CONTINUED)
Other disclosures about derivatives
The table below summarizes by notional amounts the annual maturities for
each major category of swaps entered into for both trading and nontrading
purposes as of December 31, 1995, based on the then current rates in effect. The
variable rate instruments are primarily LIBOR based.
<TABLE>
<CAPTION>
INSTRUMENTS EXPECTED TO MATURE IN
------------------------------------------------------------------------
2001 AND
1996 1997 1998 1999 2000 AFTER TOTAL
------ ----- ------ ------ ----- -------- ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Pay fixed rate......................... $ 11.5 $26.8 $ - $ 6.0 $14.0 $ 45.8 $104.1
Weighted average pay rate............ 8.48% 4.75% - 4.96% 5.09% 6.27%
Weighted average receive rate........ 7.26 5.40 - 5.38 5.38 5.41
Receive fixed rate..................... $486.8 $59.1 $123.5 $ 45.9 $22.2 $ 63.1 $800.6
Weighted average pay rate............ 5.51% 5.49% 5.55% 6.26% 5.37% 5.48%
Weighted average receive rate........ 6.96 6.16 6.51 6.31 6.13 6.04
Pay and receive variable rates......... $300.0 $ - $ - $500.0 $ - $ - $800.0
Weighted average pay rate............ 5.19% - - 5.97% - -
Weighted average receive rate........ 5.73 - - 5.25 - -
</TABLE>
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments". The estimated fair value amounts have been determined
using available market information and appropriate valuation methodologies.
However, considerable judgment is necessarily required to interpret market data
to develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts U. S. Bancorp could realize
in a current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value. Potential tax ramifications related to the realization of unrealized
gains and losses that would be incurred in an actual sale and/or settlement have
not been taken into consideration.
Cash and Short-Term Investments. For short-term instruments, including
cash and due from banks, interest-bearing deposits with banks and federal funds
sold and security resale agreements, the carrying amount is a reasonable
estimate of fair value.
Securities and Equity Investments. For securities held to maturity,
available for sale, or for trading purposes, fair value equals quoted market
price or dealer quotes. If quoted market price is not available, fair value is
estimated using quoted market prices for similar securities with like
maturities, interest rate and type.
The fair value of $45 million and $44 million at December 31, 1995 and
1994, respectively, of various investments in limited partnership equity
investments was not available through market sources, and was not practicable to
estimate. In such cases, fair value indicated was equal to carrying value.
Loans. Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type, such as commercial,
including foreign, real estate, including residential mortgage and
77
<PAGE> 80
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
construction, consumer and bank card. Each loan category is further segregated
by fixed and variable rate, performing and nonperforming categories. For
variable rate loans, carrying value approximates fair value. Fair value of fixed
rate loans is calculated by discounting contractual cash flows.
For performing fixed rate loans, the discount rate is estimated using the
rates currently offered for loans of similar characteristics which reflect the
credit and interest rate risk inherent in the loan. Performing loans include
certain loans that are internally classified largely due to weakening financial
strength of the borrowers or concern about specific industries. These loans have
been specifically provided for in the allowance for credit losses. The fair
value of these loans is shown net of this allocated allowance. Consumer and bank
card loans have no allocated allowance since they are charged-off upon becoming
120 and 180 days past due, respectively. The fair value of performing fixed rate
loans, except for performing residential mortgage loans and consumer loans, is
calculated by discounting contractual cash flows. For performing residential
mortgage and consumer loans, fair value is estimated by discounting contractual
cash flows adjusted for prepayment estimates. Acceleration of the payment of
principal is based on the monthly cash flow yield as compared to the discount
rate. The prepayment estimates are based upon internal historical data for
consumer loans, and market prepayment history for mortgage-backed securities
with similar characteristics for real estate mortgage loans.
Loans held for sale, primarily residential mortgage loans and student
loans, are carried on the books at the lower of cost or market. The fair value
of mortgage loans is estimated for the various loan portfolios based upon quoted
market prices for securities backed by similar loans. Commitments to sell
residential mortgages, which represent agreements to sell loans to permanent
investors at a specific contractual price or yield, are valued using market
prices for securities backed by similar loans and are reflected in the fair
value of the mortgage loans held for sale, to the extent that these commitments
relate to mortgage loans already originated. The fair value of student loans is
estimated to be equal to the carrying value, as these loans are sold within a
short time of their origin.
Fair value for significant nonperforming loans is primarily based on recent
internal estimates or external appraisals. Fair value for smaller nonperforming
loans is not readily available through market sources as there are no quoted
market prices. It is not practicable to estimate the fair value of these
nonperforming loans because of the significant cost. These nonperforming loans
were carried on the balance sheet at $29 million and $40 million at December 31,
1995 and 1994, respectively.
The fair value estimate for bank card loans does not include the value that
relates to estimated cash flows from possible future loans generated from
existing cardholders over the remaining life of the portfolio.
Deposit Liabilities. The fair value of deposits with no stated maturity,
such as noninterest-bearing deposits, savings and interest checking accounts,
and money market accounts, is equal to the amount payable on demand as of
December 31, 1995 and 1994. The fair value of certificates of deposit is based
on the discounted value of contractual cash flows. The discount rate is
estimated using the rates currently offered for deposits of similar remaining
maturities. The fair value does not include the benefit that results from the
low cost funding provided by the deposit liabilities compared to the cost of
borrowing funds in the market.
Short- and Long-Term Debt. For federal funds purchased and security
repurchase agreements, commercial paper and other short-term borrowings, the
carrying amount is a reasonable estimate of fair value because of the relatively
short period of time between the origination of the instrument and its expected
realization.
The fair value of medium-term notes and underwritten senior and
subordinated debt is calculated based on the discounted value of the contractual
cash flows. The discount rate used is the result of the implied
78
<PAGE> 81
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
treasury forward rates plus a risk premium. The risk premium was the difference
between the rates currently offered for newly issued notes and the treasury
yield curve at December 31, 1995 and 1994.
Acceptances and Other Assets and Liabilities. The carrying amount of
financial instruments in these classifications is a reasonable estimate of fair
value due to their short-term nature. These classifications are not presented in
the table.
Preferred Stock. The fair value of U. S. Bancorp's preferred stock is its
quoted market price.
79
<PAGE> 82
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
The estimated fair values of U.S. Bancorp's financial instruments at
December 31, 1995 and 1994 are presented below. Bracketed amounts in the
carrying value columns represent either reduction of asset accounts,
liabilities, or commitments representing potential cash outflows. Bracketed
amounts in the fair value columns represent estimated cash outflows required to
currently settle the obligations at current market rates.
<TABLE>
<CAPTION>
1995 1994
--------------------------- ---------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial Assets:
Cash and short-term investments........................... $ 2,932,728 $ 2,932,728 $ 2,673,388 $ 2,673,388
Securities and equity investments......................... 4,569,917 4,647,576 4,694,076 4,626,229
Loans held for sale....................................... 159,986 159,986 174,167 174,167
Loans
Commercial.............................................. 11,802,387 11,903,797 10,913,132 10,540,806
Real estate............................................. 4,310,152 4,441,925 4,141,636 4,126,676
Consumer................................................ 4,672,051 4,741,788 4,549,379 4,408,913
Bank card............................................... 813,346 813,346 1,060,577 1,060,577
Allowance for credit losses............................. (434,508) - (387,559) -
----------- ----------- ----------- -----------
Loans, net.............................................. 21,163,428 21,900,856 20,277,165 20,136,972
Financial Liabilities:
Deposits
Noninterest-bearing deposits............................ (6,009,728) (6,009,728) (5,419,443) (5,419,502)
Savings, NOW and interest checking...................... (4,292,811) (4,292,811) (4,954,334) (4,954,334)
Money market deposit accounts........................... (5,544,479) (5,544,479) (4,742,708) (4,742,708)
Time deposits........................................... (7,417,611) (7,494,082) (6,742,704) (6,541,202)
Federal funds purchased and security repurchase
agreements.............................................. (2,731,116) (2,731,116) (3,587,664) (3,587,664)
Commercial paper.......................................... (176,125) (176,125) (171,464) (171,464)
Other short-term borrowings............................... (692,105) (692,105) (515,730) (515,730)
Long-term debt............................................ (1,377,021) (1,422,361) (1,244,190) (1,254,990)
Preferred stock........................................... (150,000) (153,000) (150,000) (141,000)
Off-Balance Sheet Financial Instruments:
Commitments to extend credit, standby letters of credit
and commercial letters of credit........................ - (15,903) - (14,709)
Interest rate swaps
On-balance sheet asset.................................. 2,412 12,327 1,865 5,299
On-balance sheet liability.............................. (825) (8,070) (1,376) (42,272)
Financial futures contracts
On-balance sheet asset.................................. 152 - 542 -
On-balance sheet liability.............................. (49) - (4,837) -
Foreign exchange contracts
On-balance sheet asset.................................. 1,735 68,305 739 61,397
On-balance sheet liability.............................. (1,715) (75,206) (932) (70,673)
Purchased and written options
On-balance sheet asset.................................. - 168 - 1,874
On-balance sheet liability.............................. 645 (168) 952 (2,152)
</TABLE>
Off-Balance Sheet Financial Instruments. The amounts shown under carrying
value represent accruals, deferred gains or losses, and margin requirements
arising from the related unrecognized financial instruments. Fair values for U.
S. Bancorp's off-balance sheet instruments are based on quoted market prices
(futures); current settlement value (foreign exchange contracts and forwards);
deferred fees (loan commitments); or, if
80
<PAGE> 83
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
there are no relevant comparables, on pricing models or formulas using current
assumptions (interest rate swaps and options).
Limitations. The fair value estimates are made at a discrete point in time
based on relevant market information and information about the financial
instruments. Because no market exists for a significant portion of these
financial instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates. Accordingly,
the estimates presented herein are not necessarily indicative of what U. S.
Bancorp could realize in a current market exchange. In addition, the fair value
estimates are based on existing on- and off-balance sheet financial instruments
without attempting to estimate the value of anticipated future business and the
value of assets and liabilities that are not considered financial instruments.
U. S. Bancorp has significant assets and liabilities that are not considered
financial instruments, and they have not been incorporated into the fair value
estimates. For example, U. S. Bancorp has not estimated fair value for the
mortgage banking, bank card, trust or brokerage operations. Other significant
assets and liabilities that are not considered financial instruments include
deferred tax liabilities, premises and equipment, goodwill and other
intangibles.
81
<PAGE> 84
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. U. S. BANCORP (PARENT COMPANY ONLY) SUMMARY FINANCIAL INFORMATION
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash........................................................ $ 4,006 $ 897
Federal funds sold and security resale agreements........... - 65,225
Other short-term investments................................ - 13,909
Securities available for sale, at fair value (cost:
1995 -- $105,907; 1994 -- $68,615)........................ 105,879 66,105
Loans
Banking subsidiaries...................................... 481,000 258,109
Nonbank subsidiaries...................................... 37,659 138,285
Other..................................................... 14,827 17,928
---------- ----------
Total loans............................................ 533,486 414,322
Investment in subsidiaries
Banking................................................... 2,709,039 2,616,818
Nonbank................................................... 47,686 44,786
Other equity investments.................................... 110,989 124,284
Other assets................................................ 417,642 294,043
---------- ----------
$3,928,727 $3,640,389
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper............................................ $ 176,125 $ 171,454
Other short-term borrowings................................. 40,000 40,000
Other liabilities........................................... 254,182 234,490
Long-term debt.............................................. 841,367 701,391
---------- ----------
Total liabilities........................................... 1,311,674 1,147,335
Shareholders' equity........................................ 2,617,053 2,493,054
---------- ----------
$3,928,727 $3,640,389
========== ==========
</TABLE>
82
<PAGE> 85
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. U. S. BANCORP (PARENT COMPANY ONLY) SUMMARY FINANCIAL
INFORMATION -- (CONTINUED)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Dividends from subsidiaries
Banking -- cash....................................... $ 275,448 $ 245,545 $ 199,727
Banking -- noncash.................................... 38,535 250 745
Nonbanking -- cash.................................... 2,827 3,051 5,562
Nonbanking -- noncash................................. - 254 23,257
Interest from subsidiaries
Banking............................................... 23,706 23,187 21,767
Nonbank............................................... 7,657 9,156 9,700
Other interest.......................................... 9,776 7,432 7,636
Equity investment income (loss)......................... (6,673) (5,432) 26,940
Trading account gains (losses).......................... - (1,379) (473)
Other noninterest revenues.............................. 2,024 2,431 1,691
--------- --------- ---------
Total revenues..................................... 353,300 284,495 296,552
--------- --------- ---------
EXPENSES
Employee compensation and benefits...................... 98,517 91,016 91,194
Interest expense........................................ 69,338 71,921 81,936
Merger and integration costs............................ 45,627 - -
Restructuring charge.................................... - 36,589 -
Other operating expenses................................ 124,767 127,616 102,698
Less intercompany charges for services.................. (144,532) (151,056) (135,144)
--------- --------- ---------
Net expenses............................................ 193,717 176,086 140,684
--------- --------- ---------
Income before income taxes and equity in undistributed
income of subsidiaries................................ 159,583 108,409 155,868
Income tax benefit...................................... (38,311) (46,781) (26,387)
--------- --------- ---------
Income before equity in undistributed income of
subsidiaries.......................................... 197,894 155,190 182,255
Equity in undistributed income (loss) of subsidiaries
Banking............................................... 119,352 112,334 184,142
Nonbank(1)............................................ 11,725 (12,858) (25,261)
--------- --------- ---------
NET INCOME.............................................. $ 328,971 $ 254,666 $ 341,136
========= ========= =========
</TABLE>
- ---------------
(1) The equity in undistributed loss of subsidiaries includes dividends paid in
excess of current year earnings for certain subsidiaries.
83
<PAGE> 86
U. S. BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. U. S. BANCORP (PARENT COMPANY ONLY) SUMMARY FINANCIAL
INFORMATION -- (CONTINUED)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating Activities
Net income................................................................... $ 328,971 $ 254,666 $ 341,136
Adjustments to reconcile net income to cash used in operating activities:
Undistributed earnings of subsidiaries..................................... (131,077) (99,476) (158,881)
Noncash dividends included in undistributed earnings of subsidiaries....... (38,535) (504) (24,002)
Depreciation and amortization.............................................. 34,028 39,795 31,067
Noncash portion of merger/restructuring charges............................ 35,580 21,952 -
Net (gain) loss on sale of equity investments.............................. 8,345 5,875 (28,359)
Net (gain) loss on sale of securities available for sale................... (935) (172) 11
Loss on sale of trading securities......................................... - 1,379 473
Net (gain) loss on sale of premises and equipment.......................... 2,668 (218) (96)
Change in trading account securities....................................... - 22,263 2,108
Change in other assets..................................................... (27,993) 20,474 (12,682)
Change in other liabilities................................................ 9,257 (24,824) 106,648
--------- --------- ---------
Net cash provided by operating activities...................................... 220,309 241,210 257,423
--------- --------- ---------
Investing Activities
Change in other short-term investments, maturities less than 90 days......... 13,909 (800) (5,347)
Proceeds from maturities of securities held to maturity...................... - - 30,450
Purchase of securities held to maturity...................................... - - (41,016)
Proceeds from sale of securities available for sale.......................... 135,872 73,164 6,128
Purchase of securities available for sale.................................... (156,044) (95,301) (3,416)
Proceeds from sales of equity investments.................................... 8,369 987 99,446
Purchase of equity investments............................................... (24,388) (8,262) (22,339)
Principal collected on loans to subsidiaries and others...................... 535,136 379,626 387,440
Loans made to subsidiaries and others........................................ (653,037) (170,542) (421,442)
Equity contributed to subsidiaries........................................... (20,699) (24,828) (45,449)
Proceeds from sales of premises and equipment................................ 5,606 3,386 3,483
Purchase of premises and equipment........................................... (15,040) (50,372) (51,199)
Acquisitions, net of cash and cash equivalents............................... - 64 -
--------- --------- ---------
Net cash provided by (used in) investing activities............................ (170,316) 107,122 (63,261)
--------- --------- ---------
Financing Activities
Net change in short-term borrowings.......................................... 2,902 5,446 8,210
Proceeds from issuance of long-term debt..................................... 396,436 - 210,925
Repayment of long-term debt.................................................. (206,797) (167,200) (343,289)
Dividends paid............................................................... (145,301) (128,151) (112,965)
Proceeds from issuance of common stock....................................... 16,449 20,484 61,080
Repurchase of common stock................................................... (175,798) (57,102) -
--------- --------- ---------
Net cash used in financing activities.......................................... (112,109) (326,523) (176,039)
--------- --------- ---------
Net change in cash and cash equivalents........................................ (62,116) 21,809 18,123
Cash and cash equivalents at beginning of year................................. 66,122 44,313 26,190
--------- --------- ---------
Cash and cash equivalents at end of year....................................... $ 4,006 $ 66,122 $ 44,313
========= ========= =========
Supplemental disclosures:
Cash paid during the period for:
Interest..................................................................... $ 66,073 $ 74,204 $ 83,880
Income taxes................................................................. 190,058 151,431 121,712
Non-cash investing activities:
Noncash equity contributed to subsidiaries................................... $ 4,389 $ 28,113 $ 23,249
Transfer from securities held to maturity and other equity investments to
securities available for sale.............................................. - - 125,912
Fair value adjustment to securities available for sale....................... 29 8,025 10,587
Income tax effect related to fair value adjustment........................... 13 3,340 4,305
</TABLE>
84
<PAGE> 87
U. S. BANCORP AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
----------------------------------------- -----------------------------------------
4 3 2 1 4 3 2 1
-------- -------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income....................... $ 606.0 $ 608.8 $ 595.9 $ 581.8 $ 558.8 $ 530.6 $ 506.5 $ 478.5
Interest expense...................... 254.8 252.0 249.7 236.6 212.4 188.3 176.0 162.0
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income................... 351.2 356.8 346.2 345.2 346.4 342.3 330.5 316.5
Provision for credit losses........... 51.4 24.0 25.1 23.6 29.4 37.6 29.4 23.7
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income after provision
for credit losses................... 299.8 332.8 321.1 321.6 317.0 304.7 301.1 292.8
Gain on sale of operations and
loans............................... .8 3.0 4.6 .5 1.1 52.2 8.5 1.1
Other noninterest revenues............ 124.4 133.5 135.0 122.9 120.7 112.5 128.1 128.5
-------- -------- -------- -------- -------- -------- -------- --------
Total noninterest revenues............ 125.2 136.5 139.6 123.4 121.8 164.7 136.6 129.6
Restructuring charge.................. - - - - - - - 100.0
Merger and integration costs.......... 90.4 4.8 3.7 - - - - -
Other noninterest expenses............ 296.0 286.4 304.1 305.4 304.8 343.8 325.8 330.7
-------- -------- -------- -------- -------- -------- -------- --------
Total noninterest expenses............ 386.4 291.2 307.8 305.4 304.8 343.8 325.8 430.7
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes..... 38.6 178.1 152.9 139.6 134.0 125.6 111.9 (8.3)
Provision (benefit) for income
taxes............................... 17.2 64.0 54.2 44.8 40.9 35.8 34.6 (2.8)
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)..................... $ 21.4 $ 114.1 $ 98.7 $ 94.8 $ 93.1 $ 89.8 $ 77.3 $ (5.5)
======== ======== ======== ======== ======== ======== ======== ========
Net income (loss) as previously
reported............................ $ 21.4 $ 81.2 $ 70.0 $ 66.5 $ 65.9 $ 62.7 $ 51.3 $ (28.4)
Effect of merger...................... - 32.9 28.7 28.3 27.2 27.1 26.0 22.9
-------- -------- -------- -------- -------- -------- -------- --------
Net income............................ $ 21.4 $ 114.1 $ 98.7 $ 94.8 $ 93.1 $ 89.8 $ 77.3 $ (5.5)
======== ======== ======== ======== ======== ======== ======== ========
Per common share
Earnings per share as previously
reported.......................... $ .13 $ .79 $ .68 $ .65 $ .63 $ .60 $ .49 $ (.32)
Effect of merger.................... - (.06) (.05) (.05) (.04) (.03) - .27
-------- -------- -------- -------- -------- -------- -------- --------
Earnings (loss) per share........... $ .13 $ .73 $ .63 $ .60 $ .59 $ .57 $ .49 $ (.05)
======== ======== ======== ======== ======== ======== ======== ========
Dividends declared(1)............... $ .28 $ .28 $ .25 $ .25 $ .25 $ .25 $ .22 $ .22
======== ======== ======== ======== ======== ======== ======== ========
U.S. Bancorp common stock
High................................ $ 36 $ 29 1/2 $ 27 3/4 $ 26 3/4 $ 25 7/8 $ 28 1/8 $ 28 5/8 $ 28 5/8
Low................................. 28 3/8 23 7/8 23 1/2 22 22 1/8 25 1/4 24 1/2 23 1/2
Close............................... 33 3/8 28 1/4 24 26 22 5/8 25 1/2 25 7/8 25 1/4
Average daily reported trading volume
for the quarter..................... 597,078 403,029 507,413 232,339 321,213 308,236 381,603 561,597
</TABLE>
- ---------------
(1) Dividends per share are based on historical U. S. Bancorp common cash
dividends paid.
85
<PAGE> 88
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The information required by Item 10, Directors and Executive Officers of
the Registrant, is incorporated herein by reference to U. S. Bancorp's
definitive Proxy Statement dated March 11, 1996 ("Proxy Statement"), pages 1-5,
under the headings "Voting Securities and Principal Shareholders" and "Proposal
1: Election of Directors" or appears under the heading "Executive Officers of
the Registrant" on pages 8-10 of this report. The information required by Item
11, Executive Compensation, is incorporated herein by reference to the Proxy
Statement, pages 7-14 and 18 under the headings "Executive Compensation" and
"Compensation Committee Interlocks and Insider Participation." The information
required by Item 12, Security Ownership of Certain Beneficial Owners and
Management, is incorporated herein by reference to the Proxy Statement, pages
1-3 under the heading "Voting Securities and Principal Shareholders." The
information required by Item 13, Certain Relationships and Related Transactions,
is incorporated herein by reference to the Proxy Statement, pages 18-19, under
the heading "Transactions with U. S. Bancorp."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. and 2.
The financial statements and supplementary data listed in the index set
forth in Item 8 of this report are filed as part of this report.
All schedules are omitted because of the absence of the conditions under
which they are required or because the required information is included in the
financial statements or related notes.
(a) 3.
Exhibits are listed in the Exhibit Index beginning on page 89 of this
report. Each management contract or compensatory plan or arrangement required to
be filed as an exhibit to this report is listed under Item 10, "Executive
Compensation Plans and Arrangements and Other Management Contracts," in the
Exhibit Index.
(b) Reports on Form 8-K:
Amendment No. 1 to current report on Form 8-K dated December 26, 1995 was
filed on February 6, 1996, reporting under Items 5 and 7 financial statements of
West One Bancorp and pro forma financial information relating to the merger of
West One Bancorp with and into U. S. Bancorp.
Current report on Form 8-K dated January 31, 1996 was filed on February 21,
1996, reporting under Item 5 consolidated operating results for the month of
January 1996, following consummation of the merger of West One Bancorp with and
into U.S. Bancorp.
86
<PAGE> 89
Pursuant to the requirements of Section 13 or 15(d)of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
U. S. BANCORP
(Registrant)
Date: March 11, 1996 By: /s/ GERRY B. CAMERON
------------------------------------
Gerry B. Cameron
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 11th day of March, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- --------------------------------------------
<S> <C>
PRINCIPAL EXECUTIVE OFFICER AND DIRECTOR:
/s/ GERRY B. CAMERON Chairman of the Board
- --------------------------------------------- and
Gerry B. Cameron Chief Executive Officer
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ STEVEN P. ERWIN Executive Vice President
- --------------------------------------------- and
Steven P. Erwin Chief Financial Officer
OTHER DIRECTORS:
HARRY BETTIS* Director
- ---------------------------------------------
Harry Bettis
CAROLYN SILVA CHAMBERS* Director
- ---------------------------------------------
Carolyn Silva Chambers
FRANKLIN G. DRAKE* Director
- ---------------------------------------------
Franklin G. Drake
ROBERT L. DRYDEN* Director
- ---------------------------------------------
Robert L. Dryden
JOHN B. FERY* Director
- ---------------------------------------------
John B. Fery
Director
- ---------------------------------------------
Joshua Green III
DANIEL R. NELSON* Director
- ---------------------------------------------
Daniel R. Nelson
ALLEN T. NOBLE* Director
- ---------------------------------------------
Allen T. Noble
</TABLE>
87
<PAGE> 90
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- --------------------------------------------
<S> <C>
PAUL A. REDMOND* Director
- ---------------------------------------------
Paul A. Redmond
N. STEWART ROGERS* Director
- ---------------------------------------------
N. Stewart Rogers
BENJAMIN R. WHITELEY* Director
- ---------------------------------------------
Benjamin R. Whiteley
*By /s/ D. V. BOARD
- ---------------------------------------------
D. V. Board
Attorney-in-Fact
</TABLE>
88
<PAGE> 91
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C>
3.1 Restated Articles of Incorporation, U. S. Bancorp, as amended, incorporated by
reference to Exhibit 4.2 to the registrant's Registration Statement on Form S-4 (No.
33-62067) (the "Form S-4").
3.2 Bylaws, U. S. Bancorp, as amended and restated February 15, 1996.
4 The registrant has incurred long-term indebtedness as to which the amount involved
is less than 10 percent of the total assets of the registrant and its subsidiaries
on a consolidated basis. The registrant agrees to furnish copies of the instruments
relating to such indebtedness to the Commission upon request.
10 Executive Compensation Plans and Arrangements and Other Management Contracts
10.1 U. S. Bancorp 1985 Stock Option and SAR Plan, as amended, incorporated by reference
to Exhibit 10.2 to the registrant's annual report on Form 10-K for 1993.
10.2 U. S. Bancorp Deferred Compensation Plan for Non-Employee Directors, as amended
effective November 16, 1995.
10.3 Second Amendment and Restatement of U. S. Bancorp Executive Annual Incentive Plan
effective December 20, 1995.
10.4 Second Amendment and Restatement of U. S. Bancorp Management Annual Incentive Plan
effective January 2, 1996.
10.5 U. S. Bancorp Amended and Restated Supplemental Benefits Plan.
10.6 Registration Rights Agreement between U. S. Bancorp and certain shareholders of
Peoples Ban Corporation, incorporated by reference to Exhibit 2(B) to the
registrant's report on Form 8-K dated June 16, 1987 (File No. 0-3505).
10.7 Peoples Ban Corporation Deferred Compensation Agreement with Joshua Green III,
incorporated by reference to Exhibit (10)(N) to the registrant's annual report on
Form 10-K for 1987 (File No. 0-3505).
10.8 Description of Retirement Benefits of Joshua Green III, incorporated by reference to
Exhibit 10.6 to the registrant's quarterly report on Form 10-Q for the quarter ended
June 30, 1993.
10.9 Copy of resolutions of the Board of Directors of U. S. Bancorp adopted February 17,
1994, relating to the Executive Management Committee of U. S. Bancorp, incorporated
by reference to Exhibit 10.12 to the registrant's annual report on Form 10-K for
1993.
10.10 Form of Director Indemnification Agreement entered into between U. S. Bancorp and
Messrs. Bettis, Cameron, Chambers, Drake, Dryden, Fery, Green, Nelson, Noble,
Redmond, Rogers, and Whiteley, incorporated by reference to Exhibit 19 to the
registrant's quarterly report on Form 10-Q for the quarter ended June 30, 1988.
10.11 Second Amendment and Restatement of U. S. Bancorp 1990 Non-Employee Director Stock
Option Plan, incorporated by reference to Exhibit 10.2 to the registrant's quarterly
report on Form 10-Q for the quarter ended June 30, 1993, and as amended by the First
Amendment thereto, incorporated by reference to Exhibit 10.2 to the registrant's
quarterly report on Form 10-Q for the quarter ended June 30, 1994.
10.12 U. S. Bancorp 1991 Executive Deferred Compensation Plan, First Restatement, as
amended effective November 16, 1995.
10.13 Change in Control Agreement with Gerry B. Cameron dated June 23, 1995.
10.14 Form of Change in Control Agreement with certain other executive officers of the
registrant, including Messrs. Duim, Hatfield and Saunders, incorporated by reference
to Exhibit 19B to the registrant's quarterly report on Form 10-Q for the quarter
ended September 30, 1991.
</TABLE>
89
<PAGE> 92
<TABLE>
<CAPTION>
EXHIBITS
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<S> <C>
10.15 U. S. Bancorp Deferred Compensation Trust Agreement effective January 1, 1990,
incorporated by reference to Exhibit (10)(U) to the registrant's annual report on
Form 10-K for 1991.
10.16 U. S. Bancorp 1993 Non-Employee Director Stock Option Plan, incorporated by
reference to Exhibit 10.1 to the registrant's quarterly report on Form 10-Q for the
quarter ended June 30, 1993.
10.17 Third Amendment and Restatement of U. S. Bancorp 1993 Stock Incentive Plan effective
February 15, 1996.
10.18 Description of health insurance premium reimbursement plan for U. S. Bancorp
directors, incorporated by reference to Exhibit 10.18 to the registrant's annual
report on Form 10-K for 1994.
10.19 U. S. Bancorp 1995 Non-Employee Director Stock Option Plan, incorporated by
reference to Exhibit 10.1 to the registrant's quarterly report on Form 10-Q for the
quarter ended September 30, 1995.
10.20 U. S. Bancorp Performance Cash Award Plan effective January 1, 1996.
10.21 Employment Agreement with Robert D. Sznewajs dated January 4, 1996.
10.22 Employment Agreement with Daniel R. Nelson dated May 5, 1995, incorporated by
reference to Exhibit 10.3 to the Form S-4.
10.23 Employment Agreement with Robert J. Lane dated May 5, 1995, incorporated by
reference to Exhibit 10.4 to the Form S-4.
10.24 Employment Agreement with Dwight V. Board dated May 5, 1995.
12.1 U. S. Bancorp and Subsidiaries Computation of Ratios of Consolidated Earnings to
Fixed Charges.
12.2 U. S. Bancorp and Subsidiaries Capital Ratios.
12.3 U. S. Bancorp and Subsidiaries Computation of Ratios on a Before Accounting Change
Basis.
21 Subsidiaries of the registrant.
23.1 Consent of Deloitte and Touche LLP with respect to financial statements of the
registrant.
23.2 Consent of Coopers & Lybrand L.L.P. with respect to financial statements of West One
Bancorp.
24 Power of attorney of certain officers and directors.
27 Financial Data Schedule.
</TABLE>
90
<PAGE> 1
Exhibit 3.2
BYLAWS
of
U. S. BANCORP
ARTICLE I
Meetings of Shareholders
Section 1.1. Meetings. The regular Annual Meeting of the Shareholders of this
Corporation for the election of directors and for the transaction of such other
business as properly may come before the meeting shall be held in Portland,
Oregon, or other place duly authorized by the Board of Directors, on the third
Tuesday of April at such time as the Board of Directors may determine.
If for any cause an election of directors is not made on the same day as the
Annual Meeting, the Board of Directors shall order the election to be held on
some subsequent day as soon thereafter as practicable according to the
provisions of law, and notice thereof shall be given in the manner herein
provided for the Annual Meeting.
Business to be conducted at an Annual Meeting (other than procedural matters)
shall be limited to (i) business specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (ii)
business otherwise properly brought before the meeting by or at the direction of
the Board of Directors or the Chairman of the Board, or (iii) business properly
brought before the meeting by a shareholder of record of any class of capital
stock entitled to vote upon such business, provided that such shareholder shall
first have given written notice, in the time and manner specified for
shareholder notice of nominations for directors set forth in Section 1.2 of
these Bylaws, briefly describing such business and stating his intention to
present such business at the Annual Meeting.
Special meetings of the shareholders may be called by the Board of Directors,
the Chairman of the Board, the Chief Executive Officer, any Vice Chairman or the
President. A special meeting shall be called upon receipt of a written demand
therefor stating the purpose for which the meeting is to be called by any
shareholder or shareholders owning in the aggregate not less than ten percent of
the stock entitled to vote at such meeting. It shall be the duty of the
Secretary to send out notices of such meetings to be held in Portland, Oregon,
or other convenient place authorized by the Board of Directors and at such time
as may be fixed by the Board of Directors. If the Board of Directors shall fail
to fix a time or place, the meeting shall be held at such time as shall be fixed
by the Chairman of the Board, the Chief Executive Officer, any Vice Chairman,
the President, or the Secretary. Business conducted at a special meeting (other
than procedural matters) shall be limited to the matters stated in the notice
thereof (or any supplement thereto).
1
[AS AMENDED 2/15/96 - ARTICLE III, SECTION 3.1 - EXECUTIVE COMMITTEE; ARTICLE
III, SECTION 3.2 - EXECUTIVE MANAGEMENT COMMITTEE; ARTICLE III, SECTION 3.3 -
AUDIT COMMITTEE; ARTICLE III, SECTION 3.4 - OTHER COMMITTEES; AND ARTICLE IV,
SECTION 4.2 - CHAIRMAN OF THE BOARD.]
<PAGE> 2
Notice of such annual and special meetings shall be mailed postage prepaid not
less than ten nor more than sixty days prior to the date thereof, addressed to
each shareholder of record at his or her address appearing on the books of the
Corporation.
The certificate of the Secretary of this Corporation shall be sufficient proof
of the giving of said notice.
The Board of Directors may adopt rules governing the order of business and
conduct of any shareholders' meeting. Subject to the effect of any such rules,
the Chairman of the Board (or other officer presiding at a shareholders'
meeting) shall have general authority to determine the order of business and, in
the Chairman's discretion, to regulate the conduct of such meeting.
Section 1.2. Nominations for Director. Nominations for election to the Board of
Directors may be made by the Board of Directors or by any shareholder of record
of any outstanding class of capital stock entitled to vote for the election of
directors. Nominations, other than those made by or on behalf of the existing
Board of Directors, shall be made in writing and shall be delivered or mailed to
the Chairman of the Board of the Corporation not less than twenty-five days nor
more than sixty days prior to any meeting of shareholders called for the
election of directors, provided, however, that if less than thirty days' notice
of the meeting is given to shareholders, such nominations shall be mailed or
delivered to the Chairman of the Board not later than the close of business on
the fifth day following the day on which the notice of the meeting was mailed.
Section 1.3. Disputed Ballots. In the event a dispute arises regarding the
validity or tabulation of a ballot, vote, or proxy, the chairman of the meeting
may appoint a committee of three directors or other persons who are not
employees of the Corporation to resolve the dispute. The decision of the
committee shall be final and binding upon all parties to the dispute.
Section 1.4. Proxies. At all meetings of shareholders, a shareholder may vote by
proxy executed in writing by the shareholder or by his or her duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
11 months from the date of its execution unless otherwise expressly provided in
the proxy.
Section 1.5. Quorum. Manner of Acting. Shares entitled to vote as a separate
voting group may take action on a matter only if a quorum of those shares exists
with respect to the matter. A majority of the votes entitled to be cast on the
matter by a voting group, represented in person or by proxy, shall constitute a
quorum of that voting group for action on that matter. If a quorum exists,
action on a matter, other than the election of directors, shall be approved by a
voting group if the votes cast within the voting
2
[AS AMENDED 2/15/96 - ARTICLE III, SECTION 3.1 - EXECUTIVE COMMITTEE; ARTICLE
III, SECTION 3.2 - EXECUTIVE MANAGEMENT COMMITTEE; ARTICLE III, SECTION 3.3 -
AUDIT COMMITTEE; ARTICLE III, SECTION 3.4 - OTHER COMMITTEES; AND ARTICLE IV,
SECTION 4.2 - CHAIRMAN OF THE BOARD.]
<PAGE> 3
group favoring the action exceed the votes cast opposing the action unless the
Oregon Business Corporation Act or the articles of incorporation require a
greater number of affirmative votes. Directors shall be elected by a plurality
of the votes cast by the shares entitled to vote in the election at a meeting
at which a quorum is present. Once a share is represented for any purpose at a
meeting, it shall be deemed present for quorum purposes for the remainder of
the meeting and for any adjournment of that meeting unless a new record date
is or must be set for that adjourned meeting.
ARTICLE II
Directors
Section 2.1. Board of Directors. The Board of Directors (herein sometimes
referred to as the "Board") shall have power to manage and direct the business
and affairs of the Corporation.
Section 2.2. Number. The Board shall consist of not less than five nor more than
twenty-five persons, the exact number within such minimum and maximum limits to
be fixed and determined from time to time by resolution of a majority of the
full Board; provided, however, that a majority of the full Board of Directors
may not increase the number of directors to a number which exceeds by more than
four the number of directors last elected by shareholders, but in no event shall
the number of directors exceed twenty-five.
Section 2.3. Organization Meeting. The Secretary, upon receiving the results of
the election, shall cause the same to be recorded upon the minute book of the
Corporation and shall notify the directors-elect of their election. Promptly
after the adjournment of the meeting of the shareholders at which they were
elected, the newly elected Board shall meet at a convenient place for the
purpose of organizing and to transact such business as properly may come before
the Board and no notice of such organization meeting shall be required. If at
that time there is not a quorum in attendance, the members present may adjourn
from time to time until a quorum is secured.
Section 2.4. Regular Meetings. The Board of Directors may establish a schedule
of regular meetings for the transaction of business, the day and hour of which
may be specified by resolution adopted in advance of such regular meetings. In
the event of a failure of the Board of Directors to designate such day and hour,
the Chairman of the Board may designate the day and hour upon which such meeting
shall be held, which shall be specified in the notice of such meeting.
Section 2.5. Special Meetings. The Board of Directors may also hold special
meetings upon call of any officer who is a member of the Board of Directors, or
any three or more directors. Notice of special meetings of the Board of
Directors shall be given by the Secretary or Assistant Secretary of the
Corporation, or in case of their absence, refusal
3
[AS AMENDED 2/15/96 - ARTICLE III, SECTION 3.1 - EXECUTIVE COMMITTEE; ARTICLE
III, SECTION 3.2 - EXECUTIVE MANAGEMENT COMMITTEE; ARTICLE III, SECTION 3.3 -
AUDIT COMMITTEE; ARTICLE III, SECTION 3.4 - OTHER COMMITTEES; AND ARTICLE IV,
SECTION 4.2 - CHAIRMAN OF THE BOARD.]
<PAGE> 4
or inability to act, by any other officer who is a member of the Board of
Directors, or by any three or more directors by giving 24 hours' notice to the
last known address of each director. Calls for such special meetings must state
in general terms the object of the meeting.
Section 2.6. Retirement. Officer directors may be requested to resign from the
Board upon the date of their retirement as an officer of the Corporation. Each
other member of the Board of Directors will not be eligible for re-election as a
director at the Annual Meeting of the Shareholders following the date on which
such director shall reach the age of 70 years.
Section 2.7. Quorum. A majority of the number of directors from time to time
fixed as constituting the Board of Directors pursuant to Section 2.2 shall
constitute a quorum at any meeting, except when otherwise provided by law; but a
lesser number may adjourn any meeting, from time to time, and the meeting may be
held, as adjourned, without further notice.
Section 2.8. Vacancies. When any vacancy occurs among the directors, the
remaining members of the Board, in accordance with the laws of Oregon and with
the provisions of Section 2.2 of these Bylaws, may appoint a director to fill
such vacancy at any meeting of the Board.
Section 2.9. Notice. Notice of meetings of the Board of Directors or any
committee appointed by the Board of Directors may be written or oral, and may be
communicated in person, by telephone, telegraph, teletype, or other form of wire
or wireless communication, or by mail or private courier.
ARTICLE III
Committees
Section 3.1. Executive Committee. The Board of Directors may appoint an
Executive Committee consisting of not more than four non-officer directors, the
Chairman of the Board and the President. Members of the Executive Committee
shall be appointed annually by the Board of Directors immediately after its
election and organization and shall serve until the next such annual meeting or
until their successors have been appointed. Members of the Executive Committee
may be reappointed by the Board of Directors to succeed themselves.
The Executive Committee shall have and may exercise all the authority of the
Board of Directors during intervals between meetings of the Board of Directors
except to the extent, if any, that such authority shall be limited by resolution
of the Board of Directors and except also that neither the Executive Committee
nor any other committee created and appointed pursuant to these Bylaws shall
have the authority to (a) declare dividends or distributions with respect to the
Corporation's capital stock, (b) approve
4
[AS AMENDED 2/15/96 - ARTICLE III, SECTION 3.1 - EXECUTIVE COMMITTEE; ARTICLE
III, SECTION 3.2 - EXECUTIVE MANAGEMENT COMMITTEE; ARTICLE III, SECTION 3.3 -
AUDIT COMMITTEE; ARTICLE III, SECTION 3.4 - OTHER COMMITTEES; AND ARTICLE IV,
SECTION 4.2 - CHAIRMAN OF THE BOARD.]
<PAGE> 5
or propose to shareholders actions or proposals required by law to be approved
by shareholders, (c) fill vacancies on the Board of Directors of any committee
thereof, (d) amend the articles of incorporation except as may be necessary to
document a determination of the relative rights, preferences and limitations of
a class or series of shares pursuant to authority granted by the Board of
Directors, (e) adopt, amend, or repeal bylaws, (f) approve a plan of merger not
requiring shareholder approval, (g) authorize or approve the reacquisition of
shares of the Corporation's capital stock except within limits prescribed by the
Board of Directors, or (h) authorize or approve the issuance or sale of or
contract for sale of shares or determine the designation and relative rights,
preferences and limitations of a class or a series of shares, except that the
Board of Directors may authorize a committee of the Board to do so (i) pursuant
to a stock option or other stock compensation plan or (ii) by approving the
maximum number of shares to be issued and delegating the authority to determine
all or any part of the terms of the issuance or sale or contract of sale and the
designation and relative rights, preferences, and limitations of the class or
series of shares.
In addition to any other duties which the Board of Directors may assign, the
Executive Committee shall consider potential candidates for new directors and
make recommendations of candidates to the Board of Directors.
Section 3.2. Executive Management Committee. The Board of Directors may appoint
an Executive Management Committee consisting of such number of members as the
Board may from time to time determine. The members may be officers or directors
of the Corporation, or both. A majority of the members shall constitute a quorum
at any meeting of the Executive Management Committee. The Executive Management
Committee shall continue to act until succeeded and shall have the general
executive management of the Corporation, subject to the Board of Directors. The
Executive Management Committee shall in addition have such other duties as may
be specifically delegated to it by these Bylaws or by specific action of the
Board of Directors. All acts done and powers and authority conferred by the
Executive Management Committee from time to time shall be deemed to be and may
be certified as being done or conferred under authority of the Board of
Directors; provided, however, that all acts of the Executive Management
Committee shall be reported to the Board of Directors and shall be subject to
confirmation. Unless specifically reversed as to prospective effect, actions of
the Executive Management Committee shall be considered as confirmed.
The Executive Management Committee shall have power to discount, purchase and
sell bills, notes and other evidences of debt, to buy and sell bills of
exchange, to buy and sell stocks and other securities (other than shares of the
Corporation), to buy, hold, sell and exchange coin, bullion and other
commodities, to invest in other property, real or personal, and to make
reinvestments and changes of investments, with full power to sell, exchange,
transfer, assign, grant options to buy, lease, encumber or otherwise alienate
any of such property, to issue letters of credit and otherwise to lend the
credit of the Corporation, to authorize loans and discounts and other extensions
of credit, to
5
[AS AMENDED 2/15/96 - ARTICLE III, SECTION 3.1 - EXECUTIVE COMMITTEE; ARTICLE
III, SECTION 3.2 - EXECUTIVE MANAGEMENT COMMITTEE; ARTICLE III, SECTION 3.3 -
AUDIT COMMITTEE; ARTICLE III, SECTION 3.4 - OTHER COMMITTEES; AND ARTICLE IV,
SECTION 4.2 - CHAIRMAN OF THE BOARD.]
<PAGE> 6
guarantee the obligations, undertakings and performance of others, to establish
and maintain with others accounts of all kinds, including but not limited to
banking, safekeeping, agency, custodial, trust and management accounts, to make
reports and applications to regulatory and supervisory authorities, and to
manage the Corporation, its affiliates and subsidiaries in the expansion or
restriction of their functions and activities and in the establishment of new
affiliates and subsidiaries, including obtaining any required consent of
regulatory and supervisory authorities, except such power as the Board (or a
committee of the Board) only, by law, is authorized to perform, and shall have
the power to delegate like authority, within such limits as it may fix, to
designated officers of the Corporation or to such other committee or committees
of the Corporation as may be appointed by the Executive Management Committee or
by the Board of Directors, and the power as well to delegate authority for all
administrative acts including, without limitation, the fixing of salaries for
officers below the level of President who are not members of the Executive
Management Committee, fixing rates of interest and like matters, providing that
nothing contained in this paragraph shall be construed to limit or restrict the
authority of the Chief Executive Officer, any Vice Chairman, or the President to
delegate powers regarding such matters as authorized by Sections 4.3, 4.4 and
4.5 of these Bylaws.
Section 3.3. Audit Committee. There shall be an Audit Committee composed of not
less than three members of the Board of Directors, no one of whom shall be an
active officer of the Corporation or any of its subsidiaries and each of whom
shall be independent of management of the Corporation. The Committee shall
include at least two members with banking or related financial management
expertise, and shall not include any large customers of the Corporation (as
determined pursuant to the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA"). The Committee shall be appointed by the Board of Directors
annually at its organization meeting or more often.
It shall be the duty of the Committee to recommend to the Board of Directors the
accounting firm to be selected as independent auditor of the Corporation and its
subsidiaries: to act on behalf of the Board in discussing with the appropriate
corporate officers any termination of the independent auditor and any
significant disagreements between the independent auditor and management,
meeting and reviewing with the independent auditor and the appropriate corporate
officers, matters relating to disclosure, corporate practices, regulatory and
financial reporting, accounting procedures and policies, and adequacy of
financial and accounting controls; to review the planned scope of the audits by
the independent auditor; and to review, as appropriate, before or after the
fact, compliance of the Corporation and its subsidiaries with laws and
regulations concerning loans to insiders, related party transactions and other
transactions involving potential conflicts of interest, and applicable federal
and state laws and regulations concerning dividend restrictions. The Committee
shall review (a) with the independent auditor, the results of the annual audit,
including the auditor's comment letter; (b) with the appropriate corporate
officers, the annual report to the Securities and Exchange Commission, the
annual report to shareholders, and the
6
[AS AMENDED 2/15/96 - ARTICLE III, SECTION 3.1 - EXECUTIVE COMMITTEE; ARTICLE
III, SECTION 3.2 - EXECUTIVE MANAGEMENT COMMITTEE; ARTICLE III, SECTION 3.3 -
AUDIT COMMITTEE; ARTICLE III, SECTION 3.4 - OTHER COMMITTEES; AND ARTICLE IV,
SECTION 4.2 - CHAIRMAN OF THE BOARD.]
<PAGE> 7
Proxy Statement; and (c) with management and the independent auditor, the basis
for the reports issued by the Corporation under 12 CFR Part 363 and any
successor or substitute regulations implementing the provisions of Section 112
of FDICIA, and shall promptly report thereon to the Board of Directors.
The Audit Committee, in collaboration with the internal Auditor, shall set the
scope, nature and frequency of examinations of the Corporation and its
subsidiaries (with the exception of each subsidiary bank which has established
and appointed a separate audit committee composed entirely of outside directors
of such subsidiary bank in compliance with the requirements of FDICIA (an
"independent audit committee")), and other responsibilities of the internal
Auditor. The Committee shall monitor the internal audit group including a review
of the planned audit activities, audit scope, and the degree of coordination
with the independent auditors of the annual audit plan for the Corporation and
its subsidiaries. The Committee shall periodically receive reports from the
internal Auditor on results of audits on nonbank subsidiaries and on each
subsidiary bank which has not established and appointed an independent audit
committee, and on the status of audit coverage of the Corporation. The Committee
shall promptly submit its report thereon and its recommendations to the Board of
Directors of this Corporation and of each applicable subsidiary.
The Committee shall perform such additional duties as may be requested or
directed by the Board of Directors from time to time. The Committee shall
additionally submit to the Board of Directors any recommendations relating to
the scope of its responsibilities it may have from time to time.
The Committee may at its discretion from time to time, without prior permission
of the Board of Directors or any corporate officers, consult or retain legal
counsel, whether internal counsel, this Corporation's regular outside counsel,
or such independent outside counsel as the Committee may select.
The Committee shall meet on call of the chairperson and shall keep minutes of
all of its meetings showing all matters considered by it and the action taken
thereon, and shall submit a report of such meetings at the next regular meeting
of the Board of Directors.
Section 3.4. Other Committees. The Board of Directors may appoint from time to
time, either from its own members or from persons outside its membership, other
committees for such purposes and with such powers as the Board may determine.
ARTICLE IV
Titles, Duties, Qualifications and Terms of Officers
Section 4.1. Officers. The officers of this Corporation shall be a Chief
Executive Officer, a President, one or more Vice Presidents (one or more of whom
may be designated an Executive Vice President or Senior Vice President), a
Secretary, and an Auditor, and
7
[AS AMENDED 2/15/96 - ARTICLE III, SECTION 3.1 - EXECUTIVE COMMITTEE; ARTICLE
III, SECTION 3.2 - EXECUTIVE MANAGEMENT COMMITTEE; ARTICLE III, SECTION 3.3 -
AUDIT COMMITTEE; ARTICLE III, SECTION 3.4 - OTHER COMMITTEES; AND ARTICLE IV,
SECTION 4.2 - CHAIRMAN OF THE BOARD.]
<PAGE> 8
may include one or more Vice Chairmen and such other officers and assistant
officers as from time to time may be identified by the Corporation as in
positions with legal authority to bind the Corporation in its transactions with
customers or other third parties by executing contracts or other legal
instruments on the Corporation's behalf and whose decisionmaking authority
relates to fundamental corporate operations in such a way as to affect
potentially the public's trust in the Corporation. The same person may fill more
than one office or position.
The Board of Directors shall designate a member of the Board of Directors to be
the Chairman of the Board and may appoint the Chairman of the Board an officer
of this Corporation. Other officers may also be members of the Board of
Directors.
The Chairman of the Board shall be designated by and if appointed an officer,
elected by, and the Chief Executive Officer shall be elected by, the Board of
Directors at its annual organization meeting and each shall hold office for the
year for which the Board of Directors was elected and until a successor is
designated or elected, unless the Chairman of the Board or Chief Executive
Officer resigns, becomes disqualified, or is removed, which removal may be at
the pleasure of the Board. Any vacancy occurring in the position of the Chairman
of the Board or in the office of the Chief Executive Officer shall be filled by
the remaining members of the Board.
Vice Chairmen, the President and Executive Vice Presidents, if there be any, the
Auditor and the Secretary shall be elected or appointed by the Board of
Directors to hold their offices respectively at the pleasure of the Board of
Directors. Vice Presidents (other than Executive Vice Presidents), Assistant
Vice Presidents and such other officers and assistant officers as may be deemed
necessary may be appointed by the Board of Directors or chosen in such other
manner as provided in these Bylaws or as the Board of Directors shall by
resolution provide, to hold their offices respectively at the pleasure of the
Board of Directors.
The Chief Executive Officer (or other officer-director as the Board of Directors
may designate by resolution) shall have authority to appoint or remove or fill
vacancies among all officers excepting the Chairman of the Board (if an
officer), the Chief Executive Officer, Vice Chairman, the President, Executive
Vice Presidents, Auditor, and Secretary; such appointments or removals shall be
subject to ratification or recision at the next meeting of the Board of
Directors. The provisions of this paragraph are supplementary to any other
provisions of these Bylaws.
Section 4.2. Chairman of the Board. The Chairman of the Board shall preside over
meetings of shareholders, the Board of Directors, and the Executive Committee,
and shall perform such duties as may be requested or directed by the Board of
Directors.
8
[AS AMENDED 2/15/96 - ARTICLE III, SECTION 3.1 - EXECUTIVE COMMITTEE; ARTICLE
III, SECTION 3.2 - EXECUTIVE MANAGEMENT COMMITTEE; ARTICLE III, SECTION 3.3 -
AUDIT COMMITTEE; ARTICLE III, SECTION 3.4 - OTHER COMMITTEES; AND ARTICLE IV,
SECTION 4.2 - CHAIRMAN OF THE BOARD.]
<PAGE> 9
Section 4.3. Chief Executive Officer. The Chief Executive Officer shall be a
member of the Board of Directors. The Chief Executive Officer shall be the
principal executive officer of the Corporation and, subject to the control of
the Board of Directors, shall supervise the carrying out of the policies adopted
or approved by the Board of Directors. The Chief Executive Officer shall
exercise general supervision over the business and affairs and personnel of the
Corporation, including without limitation the fixing of salaries for members of
the Executive Management Committee whose salaries are not fixed by the Board of
Directors, provided the salaries so fixed shall be reported to the Board of
Directors.
Section 4.4. Vice Chairman. Each Vice Chairman shall perform such duties as may
be requested or directed by the Board of Directors or by the Chief Executive
Officer from time to time.
Section 4.5. President. The President shall perform such duties as may be
requested or directed by the Board of Directors or by the Chief Executive
Officer from time to time.
Section 4.6. Vice Presidents. Each Vice President shall have such powers and
duties as may be assigned by the Board of Directors, by the Chief Executive
Officer, or by the President. The Board of Directors shall designate a Vice
President to be the Chief Financial Officer of the Corporation, who shall be the
principal financial and accounting officer of the Corporation with
responsibility for keeping regular books of account, disbursement of corporate
funds, and preparation of financial reports. The Board of Directors shall also
designate a Vice President to be the Treasurer, who shall have general
responsibility for funding the operation of the Corporation and its subsidiaries
and shall, as and to the extent authorized by the Board of Directors or the
Executive Management Committee, borrow funds and issue securities on behalf of
the Corporation.
Section 4.7. Secretary. The Secretary shall be the recording officer of the
Board of Directors and keep in written form the minutes of the meetings of the
Board of Directors and of the shareholders. The Secretary shall attend to the
giving of all notices required by these Bylaws to be given, shall be the
custodian of the corporate seal of the Corporation, and shall make such reports
and perform such other duties as are incident to the office of Secretary, or as
are assigned by the Board of Directors.
Section 4.8. Auditor. The internal Auditor shall make periodic examinations of
the affairs of the Corporation and its subsidiaries, with the exception that the
examination of each subsidiary bank which has established and appointed an
independent audit committee shall be the responsibility of the auditor appointed
by the Board of Directors of each such subsidiary bank, acting under the
procedures and policies delineated in the Bylaws of the bank. The Auditor shall
collaborate with the Audit Committee in determining the scope, nature and
frequency of such examinations. The Auditor shall also perform such other duties
as may be assigned by the Board of Directors or the Chief Executive Officer of
the Corporation. The results of such examinations and
9
[AS AMENDED 2/15/96 - ARTICLE III, SECTION 3.1 - EXECUTIVE COMMITTEE; ARTICLE
III, SECTION 3.2 - EXECUTIVE MANAGEMENT COMMITTEE; ARTICLE III, SECTION 3.3 -
AUDIT COMMITTEE; ARTICLE III, SECTION 3.4 - OTHER COMMITTEES; AND ARTICLE IV,
SECTION 4.2 - CHAIRMAN OF THE BOARD.]
<PAGE> 10
recommendations of the Auditor, if any, shall be submitted in writing by the
Auditor to the Chief Executive Officer and to the Audit Committee.
ARTICLE V
Stock and Stock Certificates
Section 5.1. Transfers. Shares of stock shall be transferable on the books of
the Corporation, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall, in proportion to his or her shares, succeed to all rights and liabilities
of the prior holder of such shares.
Section 5.2. Stock Certificates. Certificates of stock shall bear the signature
of the Chief Executive Officer, the Chairman of the Board, or of the President,
or of a Vice President and the Secretary or an Assistant Secretary of the
Corporation, and shall be signed manually or by facsimile process, and shall be
countersigned by an authorized officer of First Chicago Trust Company of New
York as transfer agent, and the seal, manual or facsimile, of the Corporation
shall be set forth thereon. No transfer shall be made of any certificate issued
except on the surrender of the certificate or certificates previously issued
therefor, or on proof of their loss and the furnishing of indemnity satisfactory
to an appropriate officer of the Corporation as designated in writing by the
Chief Executive Officer or the President of the Corporation.
The Board of Directors shall have power and authority to make all such rules and
regulations as it may deem expedient concerning the issue, transfer,
registration, and replacement of lost certificates for shares of the capital
stock of the Corporation.
Section 5.3. Dividends. All declarations of dividends shall fix the date for the
payment thereof, and period of closing of stock books, and a record date, prior
to the payment of dividends, for the purpose of determining the shareholders
entitled to the same.
The transfer books may be closed for the purpose of the annual election of
directors, before meetings of shareholders, before the payment of dividends, for
the purpose of obtaining written consents of shareholders, or for any other
purpose, for such period not exceeding twenty days as the Board of Directors may
by resolution direct. In lieu of closing the transfer books the Board may in its
discretion fix a day and hour not less than ten days nor more than seventy days
prior to the holding of any meeting of shareholders or the day appointed for the
payment of any dividend or for any other notice, as the time as of which
shareholders entitled to notice of and to vote at such meeting, or to receive
such dividend or for such other purpose shall be determined, and only
shareholders of record at such time shall be entitled to notice of or to vote at
such meeting or to receive such dividend or to be treated as shareholders for
such other purposes.
10
[AS AMENDED 2/15/96 - ARTICLE III, SECTION 3.1 - EXECUTIVE COMMITTEE; ARTICLE
III, SECTION 3.2 - EXECUTIVE MANAGEMENT COMMITTEE; ARTICLE III, SECTION 3.3 -
AUDIT COMMITTEE; ARTICLE III, SECTION 3.4 - OTHER COMMITTEES; AND ARTICLE IV,
SECTION 4.2 - CHAIRMAN OF THE BOARD.]
<PAGE> 11
ARTICLE VI
Corporate Seal
The official seal of this Corporation shall be circular in form with the words
"corporate seal" and "Oregon" and the name of the Corporation appearing thereon.
ARTICLE VII
Miscellaneous Provisions
Section 7.1. Fiscal Year. The fiscal year of the Corporation shall be the
calendar year.
Section 7.2. Records. The organization papers of this Corporation, the results
of elections of directors-elect, the proceedings of all regular and special
meetings of the directors and of the shareholders, the Bylaws and any amendments
hereto, shall be recorded in a minute book; and the minutes of each meeting
shall be signed by the chairman and the secretary of the meeting.
ARTICLE VIII
Bylaws
Section 8.1. Inspection. A copy of the Bylaws, with all amendments thereto,
shall at all times be kept in a convenient place at the principal office of the
Corporation and shall be open for inspection to all shareholders, during
business hours.
Section 8.2. Amendments. These Bylaws may be changed or amended by the vote of a
majority of the whole number of directors.
11
[AS AMENDED 2/15/96 - ARTICLE III, SECTION 3.1 - EXECUTIVE COMMITTEE; ARTICLE
III, SECTION 3.2 - EXECUTIVE MANAGEMENT COMMITTEE; ARTICLE III, SECTION 3.3 -
AUDIT COMMITTEE; ARTICLE III, SECTION 3.4 - OTHER COMMITTEES; AND ARTICLE IV,
SECTION 4.2 - CHAIRMAN OF THE BOARD.]
<PAGE> 1
Exhibit 10.2
U. S. BANCORP
DEFERRED COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS
The U. S. BANCORP DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE
DIRECTORS (the "Plan") is amended and restated by U. S. Bancorp ("Bancorp"), an
Oregon corporation, effective January 1, 1990.
W I T N E S S E T H:
WHEREAS, Bancorp established the Plan effective
January 1, 1978, and
WHEREAS, Bancorp amended the Plan February 23, 1979, July 27,
1979, January 31, 1986, and November 1, 1986, and
WHEREAS, Bancorp amended and restated the Plan
January 1, 1988, and
WHEREAS, Bancorp desires to further amend and restate
the Plan,
NOW, THEREFORE, the Plan is hereby amended and restated
effective January 1, 1990.
ARTICLE I
DEFINITIONS
For purposes of this Plan, the following definitions shall be
used:
1.1 Affiliate. An affiliate of Bancorp as defined in
the U. S. Bancorp Retirement Plan.
1.2 Board. The board of directors of Bancorp.
1.3 Company. Bancorp or any Affiliate that adopts
this Plan.
- 1 -
<PAGE> 2
1.4 Compensation. Compensation for services as a Director,
including fees payable for services as a member of a committee of the board of
directors of Company.
1.5 Deferred Account. The account established and maintained
for each Participant pursuant to Article V.
1.6 Director. A member of the board of directors of Company.
1.7 Participant. An eligible Director who has filed
an election to participate in this Plan as provided in Article IV.
ARTICLE II
PURPOSE OF PLAN
The purpose of this Plan is to assist Company in retaining and
attracting non-employee Directors by providing such Directors with the
opportunity to defer Compensation.
ARTICLE III
ELIGIBILITY
Any Director who is not an employee of Company is eligible to
participate in this Plan.
ARTICLE IV
PARTICIPATION
4.1 Commencement. An eligible Director becomes a Participant
by filing an election to participate in this Plan with Bancorp on a form
provided by Bancorp.
- 2 -
<PAGE> 3
4.2 Effective Date. An election to participate in this Plan
filed on or before December 31 is effective to defer receipt of all or a portion
of Compensation earned during the following calendar year and subsequent
calendar years. An eligible Director who was not an eligible Director of a
particular Company on the preceding December 31st may file an election to
participate in this Plan within 30 days after becoming an eligible Director of
that Company which is effective to defer Compensation for services as a Director
of that Company earned during the remainder of the calendar year and subsequent
calendar years.
4.3 Amendment. The amount of Compensation deferred may be
amended by filing a notice of amendment with Bancorp on a form provided by
Bancorp. A notice of amendment filed on or before December 31st is effective for
Compensation earned during the following calendar year and subsequent calendar
years.
4.4 Termination. An eligible Director may terminate
participation in this Plan by filing a notice of termination with Bancorp on a
form provided by Bancorp. A notice of termination filed on or before December
31st is effective for Compensation earned during the following calendar year and
subsequent calendar years. Compensation deferred pursuant to this Plan prior to
the beginning of the calendar year in which a notice of termination is effective
will continue to be subject to the provisions of this Plan.
- 3 -
<PAGE> 4
4.5 Resumption. An eligible Director who terminates
participation in this Plan may again elect to participate in this Plan.
ARTICLE V
DEFERRED ACCOUNT
5.1 Deferred Account. A Deferred Account shall be established
and maintained for each Participant solely for record keeping purposes. The
Compensation that a Participant elects to defer shall not be paid currently and
shall be credited to the Participant's Deferred Account at the time the
Compensation would otherwise be payable.
5.2 Interest. With respect to Deferred Amounts credited to a
Deferred Account prior to December 31, 1995, each Deferred Account shall accrue
an additional amount (computed like interest compounded quarterly) from the date
Deferred Amounts are credited to the Deferred Account until:
(a) With respect to Participants for whom payment of their
Deferred Accounts becomes due or commences on or before December 31,
1995, the date of final payment of the balance of the Deferred Account;
and
(b) With respect to all other Participants, December 31,
1995.
The rate of interest shall be determined from time to time by the Board.
Beginning January 1, 1988, the rate for each calendar year shall be the highest
rate payable on two and one-half (2-1/2) year Money Market Certificates of
United States National
First Amendment
- 4 - August 20, 1992
<PAGE> 5
Bank of Oregon as of January 1 of that year unless changed by the Board.
Beginning January 1, 1990, the rate for each calendar year will equal the
monthly average interest rate on five-year Treasury Notes from the month of
November prior to that calendar year, as published in Federal Reserve
Statistical Release G.13 (or a corresponding successor publication as determined
by the Board), plus 75 basis points.
5.3 Additional Amounts Credited as Growth Factor.
(a) General. For all periods beginning on or after
January 1, 1996, each Deferred Account (other than Deferred Accounts in payout
status on December 31, 1995) will accrue an additional amount as described in
this section ("Growth Factor") from the date Deferred Amounts are credited to
the Deferred Account until the date of final payment of the balance of the
Deferred Account.
(b) Growth Factor. For each Deferred Account, the Growth
Factor for any period will be the amount of investment income that would have
been realized had an amount equal to the total balance of the Deferred Account
as of the first day of the period been invested in the Hypothetical Investment
or Investments (as described in Section 5.3(c)) specified for that period by the
Participant.
(c) Hypothetical Investments. For purposes of measuring
Growth Factor, a Participant may designate one or a combination of Hypothetical
Investments authorized from time to time by, or at the direction of, the Manager
of the U. S. Bancorp Human Resources Group, or his or her delegate (the
"Manager").
First Amendment
- 4a - November 16, 1995
<PAGE> 6
The Hypothetical Investment or combination of Hypothetical Investments
designated by a Participant will be referred to as the Participant's "Investment
Selection." Pursuant to forms and procedures to be adopted by or at the
direction of the Manager, a Participant may modify the Investment Section from
time to time,effective as of the first day of any calendar quarter. The Manager
may designate a Hypothetical Investment that will be effective if a Participant
does not otherwise make an effective Investment Selection. A Participant's
Investment Selection will be effective for all amounts credited to the
Participant's Deferred Account, including previous Deferred Amounts and accrued
Growth Factor as well as future Deferred Amounts.
(d) No Beneficial Interest. Hypothetical Investments are
solely for the purpose of determining the amount of Growth Factor to be credited
to Deferred Accounts. Company has no obligation to make actual investments
corresponding to the Hypothetical Investments. In the event that, for
measurement purposes, the Company (directly or through the U. S. Bancorp
Deferred Compensation Trust) makes actual investments corresponding to the
Investment Selections of the Participants, no Participant will have any rights
or beneficial interest in such actual investments greater than the rights of an
unsecured creditor of Company.
First Amendment
- 4b - November 16, 1995
<PAGE> 7
ARTICLE VI
FUNDING
This Plan is unfunded. The rights of a Participant who has
deferred Compensation for services as a Director of a particular Company are
limited to receiving from that Company
First Amendment
- 4c - November 16, 1995
<PAGE> 8
payment of the amount of the Participant's Deferred Account. A Participant's
rights shall be no greater than the rights of any unsecured general creditor of
that Company. Any compensation deferred under this Plan shall continue for all
purposes to be part of the general funds of that Company. Notwithstanding the
foregoing, a Company may deposit monies under the U.S. Bancorp Deferred
Compensation Trust Agreement (the "Trust") for the purpose of paying benefits
hereunder from those monies and the income thereon, unless such Trust assets are
required to satisfy the obligations of the Company to its general creditors.
ARTICLE VII
NONASSIGNMENT
A Participant's right to receive deferred compensation shall
not be anticipated, alienated, pledged, or in any other manner assigned by a
Participant and shall not be subject to levy, attachment, garnishment, or other
process by or on behalf of any of the Participant's creditors.
ARTICLE VIII
PAYMENT OF DEFERRED COMPENSATION
8.1 Methods of Payment.
(a) Election. A Participant, at or prior to filing an
election to participate, may elect the method of payment of the Participant's
Deferred Account from the options set forth in Section 8.1(b). The election as
to method of payment must be filed with Bancorp on a form prescribed by Bancorp.
A
First Amendment
- 5 - November 16, 1995
<PAGE> 9
Participant who does not effectively elect a method of payment will have the
Participant's Deferred Account paid in a single lump-sum payment as described in
Section 8.1(b)(i).
(b) Payment Methods. A Participant may elect one of the
following methods of payment:
(i) A lump sum cash payment within 30 days after the end of
the calendar year
First Amendment
- 5a - November 16, 1995
<PAGE> 10
during which the Participant ceases to be a director of Bancorp or any
of its Affiliates (the "Final Year").
(ii) Payment in up to ten annual installments as described
below beginning within 30 business days following the Final Year:
(A) The first installment will be an amount equal to
the product of the total balance of the Deferred Account as of
the last day of the Final Year multiplied by a fraction with a
numerator equal to one and a denominator equal to the total
number of installments;
(B) The second (and subsequent) installments will be
an amount equal to the product of the total balance of the
Deferred Account as of the end of the calendar year preceding
the installment payment date multiplied by a fraction with a
numerator equal to one and a denominator equal to one less
(and then two less, etc.) than the total number of
installments; and
(C) The final installment will be the total remaining
balance of the Deferred Account.
First Amendment
- 6 - November 16, 1995
<PAGE> 11
During the payout period, the Deferred Account will continue to accrue
Growth Factor, and the Participant may continue to make or modify
Investment Selections, as provided in Section 5.3.
8.2 Effective Date. An election of method of payment filed on
or before December 31st is effective for Compensation deferred during the
following calendar year and subsequent calendar years, together with accumulated
interest thereon. An eligible Director who was not an eligible Director of a
particular Company on the preceding December 31st may file an election of method
of payment within 30 days after becoming an eligible Director of that Company
which is effective for Compensation for services as a Director of that Company
deferred during the remainder of the calendar year and subsequent calendar
years.
First Amendment
- 6a - November 16, 1995
<PAGE> 12
8.3 Amendment. An election of method of payment may be amended
by filing a notice of amendment with Bancorp on a form provided by Bancorp. A
notice of amendment filed on or before December 31st is effective for
Compensation deferred during the following calendar year and subsequent calendar
years.
8.4 Acceleration of Payment. In the event a Participant ceases
to be a director of Bancorp or any of its Affiliates and becomes a proprietor,
officer, director, partner, employee or otherwise becomes associated with any
business that is in competition with Bancorp or any of its Affiliates, the Board
shall pay the entire balance of the Participant's Deferred Account in a lump sum
immediately to the Participant.
8.5 Death Benefits. Upon the death of a Participant, the
unpaid balance of the Participant's Deferred Account, if any, shall be paid to
the Participant's surviving spouse or, if there is no surviving spouse, to the
Participant's estate within 30 days after a Participant's death.
ARTICLE IX
GOVERNING LAW
This Plan and any agreements thereunder shall be construed,
administered, and governed in all respects in accordance with the laws of the
State of Oregon.
- 7 -
<PAGE> 13
ARTICLE X
AMENDMENT AND TERMINATION
The Board shall have the sole right to amend or terminate this
Plan.
ARTICLE XI
ENTIRE AGREEMENT
This Plan and the election to participate constitute the
entire understanding and agreement of Companies and Participants with respect to
deferred Compensation.
IN WITNESS WHEREOF this Plan is executed this 31st day
of December, 1991.
U. S. BANCORP
By /s/
-----------------------------
- 8 -
<PAGE> 14
U. S. BANCORP
DEFERRED COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS
FIRST AMENDMENT
THIS FIRST AMENDMENT is adopted by U. S. Bancorp, an Oregon
corporation ("Bancorp"), effective November 16, 1995.
RECITALS
A. Bancorp adopted the amended and restated DEFERRED
COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS (the "Plan") effective January 1,
1990; and
B. Bancorp desires to amend the Plan effective November
16, 1995.
AMENDMENT
Pursuant to Article X of the Plan, Bancorp amends the Plan
effective November 16, 1995, as follows:
(1) Section 5.2 of Article V is revised at page 4 and 4a;
(2) New Section 5.3 is added to Article V at pages 4a, 4b,
and 4c; and
(3) Section 8.1 of Article VIII is amended at pages 5, 5a, 6,
and 6a.
This First Amendment is executed as of the date indicated
below:
U. S. BANCORP
By /s/
---------------------------
Judith L. Rice
Date: November 16, 1995
<PAGE> 1
Exhibit 10.3
U. S. BANCORP
EXECUTIVE ANNUAL INCENTIVE PLAN
SECOND AMENDMENT AND RESTATEMENT
THIS EXECUTIVE ANNUAL INCENTIVE PLAN (the "Plan") was adopted
by U. S. Bancorp, an Oregon corporation ("Bancorp"), effective January 1, 1993,
was amended and restated by a First Amendment and Restatement effective August
18, 1994, and is further amended and ratified in the form of this Second
Amendment and Restatement effective December 20, 1995. Capitalized terms that
are not otherwise defined herein have the meanings set forth in Article .
ARTICLE I
PURPOSE OF PLAN
The continued growth and success of Bancorp depend upon its
ability to attract and retain the services of senior executives of the highest
level of competence and to provide incentives for their effective service and
superior performance. The purpose of the Plan is to advance the interests of
Bancorp and its shareholders through an annual incentive compensation program
that will attract, retain, and motivate senior executives.
ARTICLE II
SPONSORING EMPLOYERS
Any corporation in which Bancorp owns (directly or indirectly)
stock possessing 50 percent or more of the combined voting power may, by
resolution of its board of directors, sponsor and maintain this Plan for its
executives. Bancorp and such corporations are referred to collectively as the
"Sponsoring Employers."
- 1 -
<PAGE> 2
ARTICLE III
ELIGIBILITY
The executives eligible to participate in the Plan are
Bancorp's chief executive, operating, financial, and credit officers, other
executives of the Sponsoring Employers who are members of the Executive
Committee and any other officers and executives (who may also be directors) of
the Sponsoring Employers with comparable responsibilities.
ARTICLE IV
PARTICIPATION
For each Plan Period, the Compensation Committee shall select
the executives who are to participate in the Plan. An executive who becomes
eligible after the beginning of a Plan Period may be designated by the
Compensation Committee to be a Participant for the remaining portion of the Plan
Period.
ARTICLE V
INCENTIVE AWARDS
5.1 ANNUAL INCENTIVE AWARDS. For each Participant for each
Plan Period, the Participant's Annual Incentive Award (the "Award") shall be
equal to the product of:
(a) The aggregate of the Weighted Component Percentages for
the Participant's Designated Components for the Plan Period;
(b) The Participant's Modifier Percentage, if any, for the
Plan Period; and
(c) The Participant's Target Award for the Plan Period.
However, in no event shall a Participant's Award for a Plan Period exceed 200
percent of the Participant's Target Award for the Plan Period. Furthermore, for
each Plan Period, the
- 2 -
<PAGE> 3
Compensation Committee shall specify one or more minimum performance
requirements for Bancorp and its subsidiaries as a whole. If any of such minimum
performance requirements are not met, no Award shall be made to any Participant
under the formula set forth in this Section 5.1.
5.2 TARGET AWARD. For each Participant for each Plan Period,
the Compensation Committee shall specify, prior to the beginning of the Plan
Period, a targeted incentive award (the "Target Award"). The Target Award may be
expressed, at the Compensation Committee's discretion, as a fixed dollar amount
or as a percentage of a Participant's regular annualized base salary, as in
effect on the last day of the Plan Period.
5.3 DESIGNATED COMPONENTS. Awards under the Plan shall be
based on all or some of the following:
Corporate Component - A component based on the extent that
Bancorp and its subsidiaries as a whole achieve specified corporate
performance levels.
Operating Group Component - A component based on the extent
that various Bancorp Operating Groups achieve specified performance
levels.
Strategic Business Unit Component - A component based on the
extent that various Strategic Business Units achieve specified
performance levels.
Strategic Support Unit Component - A component based on the
extent that various Strategic Support Units achieve specified
performance levels.
Shared-Goals Component - A component that may be identified by
the Compensation Committee with respect to high priority projects that
require cooperation and joint involvement of more than one Operating
Group or Strategic Business Unit.
- 3 -
<PAGE> 4
For each Participant for each Plan Period, the Compensation Committee shall
designate which of the Components will determine the Participant's Award for the
Plan Period and shall assign each Designated Component a Component Weighting
Percentage which may be any whole number from zero to 100 percent. The sum of
the Component Weighting Percentages for all the Designated Components for a
Participant for a Plan Period shall equal 100 percent.
5.4 PARTICIPANT SCHEDULE. For each Participant for each Plan
Period, the Compensation Committee shall cause to be prepared and furnished to
the Participant as close as possible to the beginning of the Plan Period a
schedule setting forth:
(a) The Participant's Target Award for the Plan Period;
(b) The Participant's Designated Components and the
respective Component Weighting Percentages for each Designated
Component;
(c) For each Designated Component, the success factors and
the respective Threshold, Target, and Outstanding Performance Levels
for each success factor and a description of the method selected for
combining the performance results for each success factor into a single
Component Performance Percentage for that Component;
(d) The Participant's modifier goals, if any, and the
respective Threshold, Target, and Outstanding Performance Levels for
each modifier goal and a description of the method selected for
combining the performance results for each goal into a single Modifier
Percentage for the Participant;
(e) An explanation (using examples) of how the Weighted
Component Percentages for the Participant's Designated Components and
the Modifier
- 4 -
<PAGE> 5
Percentage, if any, will be computed and how the Participant's Award
will be determined.
5.5 SUCCESS FACTORS. Prior to the beginning of each Plan
Period, the Compensation Committee shall determine a success factor or
combination of success factors (generally not more than four for each
Component). For each such success factor, the Compensation Committee shall
specify a Threshold Performance Level, a Target Performance Level, and an
Outstanding Performance Level. If the Compensation Committee selects two or more
success factors for a particular Component, the Compensation Committee shall
also specify a method of combining the results of the separate success factors
into a single Component Performance Percentage. For each Component other than
any Corporate Components, Bancorp's Chief Executive Officer, subject to the
approval of the Compensation Committee, shall determine Threshold, Target, and
Outstanding Performance Levels and the method or methods of combining the
results of separate success factors.
5.6 MODIFIER GOALS. Prior to the beginning of each Plan
Period, the Compensation Committee may determine for any Participant a modifier
goal or a combination of modifier goals to measure the performance of the
Participant. For each modifier goal, the Compensation Committee shall specify a
Threshold Performance Level, a Target Performance Level, and an Outstanding
Performance Level. If the Compensation Committee selects two or more modifier
goals for a Participant, the Compensation Committee shall also specify a method
of combining the results of the separate modifier goals into a single Modifier
Percentage. For each Participant other than the Chief Executive Officer,
Bancorp's Chief Executive Officer, subject to the approval of the Compensation
- 5 -
<PAGE> 6
Committee, shall determine that Participant's modifier goals, Threshold, Target,
and Outstanding Performance Levels, and the method or methods of combining
results of separate modifier goals.
5.7 PERFORMANCE PERCENTAGES. As soon as possible after the
completion of each Plan Period, Bancorp's Chief Executive Officer, subject to
the approval of the Compensation Committee, shall determine:
(a) For each Component, a Component Performance Percentage
representing the degree to which success factors for that Component were
achieved; and
(b) For each Participant (other than the Chief Executive
Officer, for whom such determination shall be made by the Compensation
Committee):
(i) The aggregate of the Weighted Component
Percentages for the Participant's Designated Components for
the Plan Period; and
(ii) A Modifier Percentage representing the degree to
which any modifier goals for that Participant were achieved.
5.7.1 COMPONENT PERFORMANCE PERCENTAGE. For each Component,
based on the level of achievement for each success factor, the Chief Executive
Officer, subject to the approval of the Compensation Committee, shall determine
a Component Performance Percentage ranging from:
- 0 percent, for performance below the specified Threshold
Performance Level;
- A minimum value (not less than 50 percent), for performance
equal to the specified Threshold Performance Level; through
- 6 -
<PAGE> 7
- Up to 100 percent, for performance equal to the specified
Target Performance Level; to
- A maximum value (not more than 200 percent), for performance
equal to or greater than the specified Outstanding Performance Level.
If two or more success factors are specified for a Component, the method
specified pursuant to Section 5.5 for that Component for that Plan Period shall
be used to combine results into a single Component Performance Percentage.
5.7.2 WEIGHTED COMPONENT PERCENTAGES. For each Designated
Component for each Participant (other than the Chief Executive Officer, for whom
the Compensation Committee shall make the determination), the Chief Executive
Officer, subject to the approval of the Compensation Committee, shall compute a
Weighted Component Percentage equal to the Component Performance Percentage
multiplied by the Component Weighting Percentage designated for that Component.
5.7.3 MODIFIER PERCENTAGES. For each Participant for whom one
or more modifier goals are designated (other than the Chief Executive Officer,
for whom the Compensation Committee shall make the determination), the Chief
Executive Officer, subject to the approval of the Compensation Committee, shall
determine the level of achievement with respect to each modifier goal specified
for that Participant. Based on the level of achievement for each modifier goal,
the Chief Executive Officer (or the Compensation Committee) shall determine a
Modifier Percentage for each Participant ranging from:
- A minimum value (not less than 75 percent), for performance
equal to or below the specified Threshold Performance Level; through
- 7 -
<PAGE> 8
- 100 percent, for performance equal to the specified Target
Performance Level; to
- A maximum value (not more than 125 percent), for
performance equal to or greater than the specified Outstanding
Performance Level.
If two or more modifier goals are specified for a Participant, the Compensation
Committee shall use the method specified pursuant to Section for that Plan
Period to combine results into a single Modifier Percentage.
5.7.4 DETERMINING PERFORMANCE LEVELS. In determining the level
of achievement of success factors for any Component and of modifier goals for
any Participant, the Compensation Committee may, in its sole discretion, take
into consideration developments, changes in circumstances, and nonrecurring and
extraordinary events that were not foreseen at the beginning of the Plan Period.
5.8 CALCULATION OF AWARD. The Compensation Committee or the
Chief Executive Officer, subject to the approval of the Compensation Committee,
shall determine the Award for each Participant for a Plan Period no later than
three months after the end of the Plan Period. If a Participant's job position
changes during the Plan Period, the Compensation Committee or the Chief
Executive Officer, subject to the approval of the Compensation Committee, may
increase or decrease the amount of a Participant's Award to reflect the change.
Although Awards generally shall be based on the procedures specified in this
Article , the Compensation Committee or the Chief Executive Officer, subject to
the approval of the Compensation Committee, may adjust any Participant's Award
to reflect additional or extraordinary performance factors that, in the judgment
of the Compensation Committee, should be considered in the overall performance
of the Participant and the
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<PAGE> 9
Participant's Operating Group and Strategic Business Unit or Strategic Support
Unit for the Plan Period. If any of the minimum performance requirements
described in Section are not met for a Plan Period, the Compensation Committee
may determine whether, and to what extent, Participants shall receive an Award
determined on a basis other than the formula set forth in Section 5.1.
5.9 RIGHT TO RECEIVE AWARD. A Participant must continue
employment with a Sponsoring Employer until the end of a Plan Period in order to
be entitled to receive the Participant's Award for that year in accordance with
the terms of the Plan. If a Participant's employment with the Sponsoring
Employers is terminated before the end of the Plan Period for a reason other
than death, disability, Position Termination, or retirement, the Participant
shall not be entitled to any Award for that Plan Period. If a Participant's
employment with the Sponsoring Employers is terminated before the end of the
Plan Period due to death, disability, Position Termination, or retirement, the
Compensation Committee shall determine whether, and to what extent, the
Participant or the Participant's beneficiary or estate shall be entitled to
receive a pro-rata portion of the Participant's Award for the Plan Period and on
what basis such proration shall be made.
5.10 PARTIAL PLAN PERIODS. If the Compensation Committee
designates a Participant after the beginning of a Plan Period, as provided in
Article , the Compensation Committee (or the Chief Executive Officer, subject to
the approval of the Compensation Committee) shall adjust any combination of the
success factors and any modifier goals for the Participant, the Threshold,
Target, and Outstanding Performance Levels for one or more of the success
factors and modifier goals, or the Participant's Target Award to take into
account the Participant's participation for less than the full Plan Period.
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ARTICLE VI
PAYMENT OF AWARDS
Unless a Participant who is eligible to participate in the U.
S. Bancorp 1991 Executive Deferred Compensation Plan, or any successor or other
similar deferred compensation plan maintained by one or more of the Sponsoring
Employers, makes an effective deferral election under such deferred compensation
plan covering Awards under this Plan, a Participant's Award shall be paid in a
lump sum within three months after the end of the Plan Period to which the
payment relates.
ARTICLE VII
ADMINISTRATION
The Plan shall be administered by the Compensation Committee.
The Compensation Committee shall have the exclusive authority and responsibility
for all matters in connection with the operation and administration of the Plan.
The Compensation Committee's powers and duties shall include, but shall not be
limited to, the following:
(a) Responsibility for the compilation and maintenance of all
records necessary in connection with the Plan;
(b) Authorizing the payment of all benefits and expenses of
the Plan as they become payable under the Plan; and
(c) Authority to engage such legal, accounting, and other
professional services that it may deem proper.
Decisions by the Compensation Committee shall be final and
binding upon all parties affected by the Plan, including the beneficiaries of
Participants.
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<PAGE> 11
The Compensation Committee may rely on information and
recommendations provided by the Executive Committee. In addition to the matters
expressly delegated to Bancorp's Chief Executive Officer by the Plan, the
Compensation Committee may delegate to the Executive Committee, members of the
Executive Committee, or supervisory management who are not Executive Committee
members the responsibility for decisions the Compensation Committee may make or
actions the Compensation Committee may take under the terms of the Plan. Any
matter so delegated, including the matters delegated to the Chief Executive
Officer in the Plan, shall be subject to the Compensation Committee's reserved
right to review the decisions or actions and modify them when necessary or
appropriate under the circumstances. The Compensation Committee shall not allow
any employee to obtain control over decisions or actions that affect that
employee's Plan benefits.
ARTICLE VIII
MISCELLANEOUS
8.1 NONASSIGNABILITY OF BENEFITS. A Participant's benefits
under the Plan cannot be sold, transferred, anticipated, assigned, pledged,
hypothecated, seized by legal process, subjected to claims of creditors in any
way, or otherwise disposed of.
8.2 GOVERNING LAW. This Plan and any amendments shall be
construed, administered, and governed in all respects in accordance with
applicable federal law and the laws of the state of Oregon.
8.3 NO RIGHT OF CONTINUED EMPLOYMENT. Nothing in the Plan
shall confer upon any person the right to continue in the employ of any
Sponsoring Employer or interfere in any way with the right of any Sponsoring
Employer to terminate the person's employment at any time.
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<PAGE> 12
8.4 WITHHOLDING TAXES. The Sponsoring Employer shall withhold
any taxes required by law to be withheld in connection with payment of an Award
under this Plan.
ARTICLE IX
CLAIMS PROCEDURE
9.1 INITIAL CLAIM. Any person claiming an Award under this
Plan ("Claimant") shall present a claim in writing to the Manager of the Human
Resources Group (the "Manager").
9.2 DECISION ON INITIAL CLAIM.
9.2.1 TIME PERIOD FOR DENIAL NOTICE. A decision shall be made
on the claim as soon as practicable and shall be communicated in writing by the
Manager to the Claimant within a reasonable period after the Manager receives
the claim. In no event shall the decision on an initial claim be given more than
90 days after the date the claim was filed, unless special circumstances require
an extension of time for processing. If there is an extension, the Claimant
shall be notified of the extension within 90 days of the date the claim was
filed. The extension notice shall indicate the special circumstances and the
date by which a decision is expected. The extension shall not exceed 90 days
from the end of the initial response period.
9.2.2 CONTENTS OF NOTICE. If the claim is wholly or partially
denied, the notice of denial shall indicate:
(a) The specific reasons for the denial;
(b) The specific references to pertinent Plan provisions on
which the denial is based;
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<PAGE> 13
(c) A description of additional material or information
necessary for the Claimant to perfect the claim and an explanation of
why such material or information is necessary; and
(d) An explanation of the Plan's claim review procedure.
9.2.3 DEEMED DENIED. If written notice of the decision wholly
or partially denying the claim has not been furnished within 90 days after the
claim is filed, or if there has been an extension and no notice of a decision is
furnished by the end of the extension period, and if the claim has not been
granted within such period, the claim shall be deemed denied as of the end of
the 90-day or 180-day period for purposes of proceeding to the review stage
described in 9.3 and 9.4, below.
9.3 REVIEW OF DENIED CLAIM. If a Claimant receives a notice of
denial or if the claim is deemed denied pursuant to above, the Claimant may
request a review of the claim. The request for review is made by personally
delivering or mailing a written request for review, prepared by either the
Claimant or an authorized representative, to the Executive Committee. The
Claimant's request for review must be made within a reasonable period of time,
taking into consideration the nature of the benefit that is the subject of the
claim and other attendant circumstances. In no event shall the period for
requesting review expire less than 60 days after receipt of the notice of denial
or the date on which the claim is deemed denied if no notice is received. If the
written request for review is not made in a timely manner, the Claimant shall be
deemed to have waived the right to review. The Claimant or a duly authorized
representative may, at or after the time of making the request, review all
pertinent documents and submit issues and comments in writing.
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<PAGE> 14
9.4 DECISION ON REVIEW. A review shall be promptly made by the
Executive Committee after receipt of a timely filed request for review. A
decision on review shall be made and furnished in writing to the Claimant. The
decision shall be made not later than 60 days after receipt of the request for
review. If special circumstances require an extension of time for processing
(such as the need to hold a hearing), a decision shall be made and furnished to
the Claimant not later than 120 days after receipt of the request for review.
Any decision of the Executive Committee to grant a claim previously denied by
the Manager shall be subject to the approval of the Compensation Committee. If
an extension is required, the Claimant shall be notified of the extension within
60 days after the request for review was filed. The written decision shall
include the reasons for the decision with reference to the provisions of the
Plan upon which the decision is based. The decision shall be final and binding
upon the Claimant and the Sponsoring Employers and all other persons involved.
If the decision on review is not furnished within the applicable time period,
the claim shall be deemed denied on review.
The scope of any subsequent review of the benefit claim,
judicial or otherwise, shall be limited to a determination as to whether the
Executive Committee acted arbitrarily or capriciously in the exercise of its
discretion. In no event shall any such further review be on a de novo basis.
ARTICLE X
AMENDMENTS AND TERMINATION
The Compensation Committee has the power to terminate this
Plan at any time or to amend this Plan at any time and in any manner that it may
deem advisable.
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ARTICLE XI
DEFINITIONS
For purposes of this Plan, the following terms have the meanings set
forth in this Article :
AWARD--An annual incentive award under the Plan.
BANCORP--U. S. Bancorp, an Oregon corporation.
BOARD--The Board of Directors of U. S. Bancorp.
COMPENSATION COMMITTEE--The Compensation Committee of the
Board.
COMPONENT--One of the elements of performance used to
determine Awards under the Plan as described in Section 5.3, including the
Corporate, Operating Group, Strategic Business Unit, Strategic Support Unit, and
one or more Shared-Goals Components.
COMPONENT PERFORMANCE PERCENTAGE--A percentage, computed as
provided in Section 5.7.1, representing the degree to which success factors for
a component have been achieved.
COMPONENT WEIGHTING PERCENTAGE--A percentage specified by the
Compensation Committee pursuant to Section 5.3 for each of a Participant's
Designated Components to represent the relative weight to be given to each
Component.
DESIGNATED COMPONENT--One of the Components designated by the
Compensation Committee pursuant to Section 5.3 to determine the Award for a
Participant for a Plan Period.
EXECUTIVE COMMITTEE--Bancorp's Executive Committee, or any
successor committee designated by the Board.
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<PAGE> 16
MODIFIER PERCENTAGE--A percentage determined by the
Compensation Committee pursuant to Section 5.7.3 representing the level of
achievement with respect to a Participant's modifier goals.
OPERATING GROUP--One of the principal operating groups for
Bancorp and its subsidiaries, including, but not limited to, banking, investor
services, real estate, emerging businesses, capital markets, and leasing and
financial.
PARTICIPANT--An eligible employee designated by the
Compensation Committee to participate in the Plan for all or a portion of a Plan
Period.
PLAN PERIOD--A calendar year or other measurement period
specified by the Board.
POSITION TERMINATION--The elimination of a Participant's
employment position with a Sponsoring Employer.
SPONSORING EMPLOYER--Bancorp and the subsidiaries of Bancorp
that adopt the Plan as provided in Article II.
STRATEGIC BUSINESS UNIT--The subsidiary corporation or
division of Bancorp or a subsidiary corporation designated by the Board as
relevant business unit for a Participant for a Plan Period.
STRATEGIC SUPPORT UNIT--The group or unit of Bancorp or a
subsidiary corporation performing a support function that is designated by the
Board as a relevant support unit for a Participant for a Plan Period.
TARGET AWARD--The targeted incentive award for a Participant
for a Plan Period specified by the Board as provided in Section 5.2.
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<PAGE> 17
WEIGHTED COMPONENT PERCENTAGE--A percentage, determined as
provided in Section 5.7.2, representing a Component Performance Percentage
multiplied by a Component Weighting Percentage.
IN WITNESS WHEREOF this Second Amendment and Restatement of
the Plan was executed this 20th day of December, 1995.
U. S. BANCORP
By: /s/
------------------
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<PAGE> 1
Exhibit 10.4
U. S. BANCORP
MANAGEMENT ANNUAL INCENTIVE PLAN
SECOND AMENDMENT AND RESTATEMENT
THIS MANAGEMENT ANNUAL INCENTIVE PLAN (the "Plan") was adopted
by U. S. Bancorp, an Oregon corporation ("Bancorp"), effective January 1, 1993,
was amended and restated by a First Amendment and Restatement effective August
9, 1994, and is further amended and restated in the form of this Second
Amendment and Restatement effective January 2, 1996. Capitalized terms that are
not otherwise defined herein have the meanings set forth in Article .
ARTICLE I
PURPOSE OF PLAN
The continued growth and success of Bancorp depend upon its
ability to attract and retain the services of key executives of the highest
level of competence and to provide incentives for their effective service and
superior performance. The purpose of the Plan is to advance the interests of
Bancorp and its shareholders through an annual incentive compensation program
that will attract, retain, and motivate key executives.
ARTICLE II
SPONSORING EMPLOYERS
Any corporation in which Bancorp owns (directly or indirectly)
stock possessing 50 percent or more of the combined voting power may, by
resolution of its board of directors, sponsor and maintain this Plan for its
executives. Bancorp and such corporations are referred to collectively as the
"Sponsoring Employers."
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<PAGE> 2
ARTICLE III
ELIGIBILITY
All key executives (including officers who may also be
directors) of any Sponsoring Employer are eligible to participate in this Plan.
ARTICLE IV
PARTICIPATION
For each Plan Period, the Executive Committee shall determine
which eligible employees (other than members of the Executive Committee) shall
participate in the Plan. An executive who becomes eligible after the beginning
of a Plan Period may be designated by the Executive Committee to be a
Participant for the remaining portion of the Plan Period.
ARTICLE V
INCENTIVE AWARDS
5.1 ANNUAL INCENTIVE AWARDS.
For each Participant for each Plan Period, the Participant's
Annual Incentive Award (the "Award") shall be equal to the product of:
(a) The aggregate of the Weighted Component Percentages for
the Participant's Designated Components for the Plan Period;
(b) The Participant's Modifier Percentage, if any, for the
Plan Period; and
(c) The Participant's Target Award for the Plan Period.
However, in no event shall a Participant's Award for a Plan Period exceed 200
percent of the Participant's Target Award for the Plan Period.
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<PAGE> 3
5.2 TARGET AWARD. For each Participant for each Plan Period,
the Executive Committee shall specify, prior to the beginning of the Plan
Period, a targeted incentive award (the "Target Award"). The Target Award may be
expressed, at the Executive Committee's discretion, as a fixed dollar amount or
as a percentage of a Participant's regular annualized base salary, as in effect
on the last day of the Plan Period.
5.3 DESIGNATED COMPONENTS. Awards under the Plan shall be
based on all or some of the following components:
Corporate Component - A component based on the extent that
Bancorp and its subsidiaries as a whole achieve specified corporate
performance levels.
Operating Group Component - A component based on the extent
that various Bancorp Operating Groups achieve specified performance
levels.
Strategic Business Unit Component - A component based on the
extent that various Strategic Business Units achieve specified
performance levels.
Strategic Support Unit Component - A component based on the
extent that various Strategic Support Units achieve specified
performance levels.
Shared-Goals Component - A component that may be identified by
the Executive Committee with respect to high priority projects that
require a large degree of cooperation and joint involvement of more
than one Operating Group or Strategic Business Unit.
For each Participant for each Plan Period, the Executive Committee shall
designate which of the Components will determine the Participant's Award for the
Plan Period and shall assign each Designated Component a Component Weighting
Percentage which may be any whole
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<PAGE> 4
number from zero to 100 percent. The sum of the Component Weighting Percentages
for all the Designated Components for a Participant for a Plan Period shall
equal 100 percent.
5.4 PARTICIPANT SCHEDULE. For each Participant for each Plan
Period, the Executive Committee shall cause to be prepared and furnished to the
Participant as close as possible to the beginning of the Plan Period a schedule
setting forth:
(a) The Participant's Target Award for the Plan Period;
(b) The Participant's Designated Components and the respective
Component Weighting Percentages for each Designated Component;
(c) For each Designated Component, success factors and the
respective Threshold, Target, and Outstanding Performance Levels for
each success factor and a description of the method selected by the
Executive Committee for combining the performance results for each
success factor into a single Component Performance Percentage for that
Component;
(d) The Participant's modifier goals, if any, and the
respective Threshold, Target, and Outstanding Performance Levels for
each modifier goal and a description of the method selected by the
Executive Committee for combining the performance results for each
modifier goal into a single Modifier Percentage for the Participant;
(e) An explanation (using examples) of how the Weighted
Component Percentages for the Participant's Designated Components and
the Modifier Percentage, if any, will be computed and how the
Participant's Award will be determined.
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<PAGE> 5
5.5 SUCCESS FACTORS. Prior to the beginning of each Plan
Period, the Executive Committee shall determine a success factor or a
combination of success factors (generally not more than four) for each
Component. For each such success factor, the Executive Committee shall specify a
Threshold Performance Level, a Target Performance Level, and an Outstanding
Performance Level. If the Executive Committee selects two or more success
factors for a particular Component, the Executive Committee shall also specify a
method of combining the results of the separate success factors into a single
Component Performance Percentage.
5.6 MODIFIER GOALS. Prior to the beginning of each Plan
Period, the Executive Committee may determine for any Participant a modifier
goal or a combination of modifier goals to measure the performance of the
Participant. For each modifier goal, the Executive Committee shall specify a
Threshold Performance Level, a Target Performance Level, and an Outstanding
Performance Level. If the Executive Committee selects two or more modifier goals
for a Participant, the Executive Committee shall also specify a method of
combining the results of the separate modifier goals into a single Modifier
Percentage.
5.7 PERFORMANCE PERCENTAGES. As soon as possible after the
completion of each Plan Period, the Executive Committee shall determine:
(a) For each Component, a Component Performance Percentage
representing the degree to which success factors for that Component were
achieved; and
(b) For each Participant:
(i) The aggregate of the Weighted Component
Percentages for the Participant's Designated Components for
the Plan Period; and
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<PAGE> 6
(ii) A Modifier Percentage representing the degree to
which any modifier goals for that Participant were achieved.
5.7.1 COMPONENT PERFORMANCE PERCENTAGE. For each Component,
based on the level of achievement for each success factor, the Executive
Committee shall determine a Component Performance Percentage ranging from:
- 0 percent, for performance below the specified Threshold
Performance Level;
- A minimum value (not less than 50 percent), for performance
equal to the specified Threshold Performance Level; through
- Up to 100 percent, for performance equal to the specified
Target Performance Level; to
- A maximum value (not more than 200 percent), for performance
equal to or greater than the specified Outstanding Performance Level.
If two or more success factors are specified for a Component, the Executive
Committee shall use the method specified pursuant to Section 5.5 for that
Component for that Plan Period to combine results into a single Component
Performance Percentage.
5.7.2 WEIGHTED COMPONENT PERCENTAGES. For each Designated
Component for each Participant, the Executive Committee shall compute a Weighted
Component Percentage equal to the Component Performance Percentage multiplied by
the Component Weighting Percentage designated for that Component.
5.7.3 MODIFIER PERCENTAGES. For each Participant for whom one
or more modifier goals are designated, the Executive Committee shall determine
the level of achievement with respect to each modifier goal specified for that
Participant. Based on the
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<PAGE> 7
level of achievement for each modifier goal, the Executive Committee shall
determine a Modifier Percentage for each Participant ranging from:
- A minimum value (not less than 75 percent), for performance
equal to or below the specified Threshold Performance Level; through
- 100 percent, for performance equal to the specified Target
Performance Level; to
- A maximum value (not more than 125 percent), for performance
equal to or greater than the specified Outstanding Performance Level.
If two or more modifier goals are specified for a Participant, the Executive
Committee shall use the method specified pursuant to Section 5.6 for that Plan
Period to combine results into a single Modifier Percentage.
5.7.4 DETERMINING PERFORMANCE LEVELS. In determining the level
of achievement of success factors for any Component and of modifier goals for
any Participant, the Executive Committee may, in its sole discretion, take into
consideration developments, changes in circumstances, and nonrecurring and
extraordinary events that were not foreseen at the beginning of the Plan Period.
5.8 CALCULATION OF AWARD. The Executive Committee shall
determine the Award for each Participant for a Plan Period no later than three
months after the end of the Plan Period. If a Participant's job position changes
during the Plan Period, the Executive Committee may increase or decrease the
amount of a Participant's Award to reflect the change. Although Awards generally
shall be based on the procedures specified in this Article , the Executive
Committee may adjust any Participant's Award to reflect additional or
extraordinary performance factors that, in the judgment of the Executive
Committee,
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<PAGE> 8
should be considered in the overall performance of the Participant and the
Participant's Operating Group and Strategic Business Unit or Strategic Support
Unit for the Plan Period.
5.9 RIGHT TO RECEIVE AWARD. A Participant must continue
employment with a Sponsoring Employer until the end of a Plan Period in order to
be entitled to receive an Award for that Plan Period in accordance with the
terms of the Plan. If a Participant's employment with the Sponsoring Employers
is terminated before the end of the Plan Period for a reason other than death,
disability, Position Termination, or retirement, the Participant shall not be
entitled to any Award for that Plan Period. If a Participant's employment with
the Sponsoring Employers is terminated before the end of the Plan Period due to
death, disability, Position Termination, or retirement, the Executive Committee
shall determine whether, and to what extent, the Participant or the
Participant's beneficiary or estate shall be entitled to receive a pro-rata
portion of the Participant's Award for the Plan Period and on what basis such
proration shall be made.
5.10 PARTIAL PLAN PERIODS. If the Executive Committee
designates a Participant after the beginning of a Plan Period, as provided in
Article , the Executive Committee shall adjust any combination of the success
factors and any modifier goals for the Participant, the Threshold, Target, and
Outstanding Performance Levels for one or more of the success factors and
modifier goals, or the Participant's Target Award to take into account the
Participant's participation for less than the full Plan Period.
ARTICLE VI
PAYMENT OF AWARDS
Unless a Participant who is eligible to participate in the
U.S. Bancorp 1991 Executive Deferred Compensation Plan, or any successor or
other similar deferred
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<PAGE> 9
compensation plan maintained by one or more of the Sponsoring Employers, makes
an effective deferral election under such deferred compensation plan covering
Awards under this Plan, a Participant's Award shall be paid in a lump sum within
three months after the end of the Plan Period to which the payment relates.
ARTICLE VII
ADMINISTRATION
The Plan shall be administered by the Executive Committee. The
Executive Committee shall have the exclusive authority and responsibility for
all matters in connection with the operation and administration of the Plan. The
Executive Committee's powers and duties shall include, but shall not be limited
to, the following:
(a) Responsibility for the compilation and maintenance of all
records necessary in connection with the Plan;
(b) Authorizing the payment of all benefits and expenses of
the Plan as they become payable under the Plan; and
(c) Authority to engage such legal, accounting, and other
professional services that it may deem proper.
Decisions by the Executive Committee shall be final and
binding upon all parties affected by the Plan, including the beneficiaries of
Participants.
The Executive Committee may rely on information and
recommendations provided by supervisory management. The Executive Committee may
delegate to one or more individual Executive Committee members or to supervisory
management who are not Executive Committee members the responsibility for
decisions the Executive Committee may make or actions the Executive Committee
may take under the terms of the Plan, subject to
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<PAGE> 10
the Executive Committee's reserved right to review the decisions or actions and
modify them when necessary or appropriate under the circumstances. The Executive
Committee shall not allow any employee to obtain control over decisions or
actions that affect that employee's Plan benefits.
ARTICLE VIII
MISCELLANEOUS
8.1 NONASSIGNABILITY OF BENEFITS. A Participant's benefits
under the Plan cannot be sold, transferred, anticipated, assigned, pledged,
hypothecated, seized by legal process, subjected to claims of creditors in any
way, or otherwise disposed of.
8.2 GOVERNING LAW. This Plan and any amendments shall be
construed, administered, and governed in all respects in accordance with
applicable federal law and the laws of the state of Oregon.
8.3 NO RIGHT OF CONTINUED EMPLOYMENT. Nothing in the Plan
shall confer upon any person the right to continue in the employ of any
Sponsoring Employer or interfere in any way with the right of any Sponsoring
Employer to terminate the person's employment at any time.
8.4 WITHHOLDING TAXES. The Sponsoring Employer shall withhold
any taxes required by law to be withheld in connection with payment of an Award
under this Plan.
ARTICLE IX
CLAIMS PROCEDURE
9.1 INITIAL CLAIM. Any person claiming an Award under this
Plan ("Claimant") shall present a claim in writing to the Manager of the Human
Resources Group (the "Manager").
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<PAGE> 11
9.2 DECISION ON INITIAL CLAIM.
9.2.1 TIME PERIOD FOR DENIAL NOTICE. A decision shall be made
on the claim as soon as practicable and shall be communicated in writing by the
Manager to the Claimant within a reasonable period after the Manager receives
the claim. In no event shall the decision on an initial claim be given more than
90 days after the date the claim was filed, unless special circumstances require
an extension of time for processing. If there is an extension, the Claimant
shall be notified of the extension within 90 days of the date the claim was
filed. The extension notice shall indicate the special circumstances and the
date by which a decision is expected. The extension shall not exceed 90 days
from the end of the initial response period.
9.2.2 CONTENTS OF NOTICE. If the claim is wholly or partially
denied, the notice of denial shall indicate:
(a) The specific reasons for the denial;
(b) The specific references to pertinent Plan provisions on
which the denial is based;
(c) A description of additional material or information
necessary for the Claimant to perfect the claim and an explanation of
why such material or information is necessary; and
(d) An explanation of the Plan's claim review procedure.
9.2.3 DEEMED DENIED. If written notice of the decision wholly
or partially denying the claim has not been furnished within 90 days after the
claim is filed, or if there has been an extension and no notice of a decision is
furnished by the end of the extension period, and if the claim has not been
granted within such period, the claim shall be deemed
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<PAGE> 12
denied as of the end of the 90-day or 180-day period for purposes of proceeding
to the review stage described in 9.3 and 9.4, below.
9.3 REVIEW OF DENIED CLAIM. If a Claimant receives a notice of
denial or, if the claim is deemed denied pursuant to 9.2 above, the Claimant may
request a review of the claim. The request for review is made by personally
delivering or mailing a written request for review, prepared by either the
Claimant or an authorized representative, to the Executive Committee. The
Claimant's request for review must be made within a reasonable period of time,
taking into consideration the nature of the benefit that is the subject of the
claim and other attendant circumstances. In no event shall the period for
requesting review expire less than 60 days after receipt of the notice of denial
or the date on which the claim is deemed denied if no notice is received. If the
written request for review is not made in a timely manner, the Claimant shall be
deemed to have waived the right to review. The Claimant or a duly authorized
representative may, at or after the time of making the request, review all
pertinent documents and submit issues and comments in writing.
9.4 DECISION ON REVIEW. A review shall be promptly made by the
Executive Committee after receipt of a timely filed request for review. A
decision on review shall be made and furnished in writing to the Claimant. The
decision shall be made not later than 60 days after receipt of the request for
review. If special circumstances require an extension of time for processing
(such as the need to hold a hearing), a decision shall be made and furnished to
the Claimant not later than 120 days after receipt of the request for review. If
an extension is required, the Claimant shall be notified of the extension within
60 days after the request for review was filed. The written decision shall
include the reasons for the decision with reference to the provisions of the
Plan upon which the decision is based. The
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<PAGE> 13
decision shall be final and binding upon the Claimant and the Sponsoring
Employers and all other persons involved. If the decision on review is not
furnished within the applicable time period, the claim shall be deemed denied on
review.
The scope of any subsequent review of the benefit claim,
judicial or otherwise, shall be limited to a determination as to whether the
Executive Committee acted arbitrarily or capriciously in the exercise of its
discretion. In no event shall any such further review be on a de novo basis
because the Executive Committee has discretionary authority to determine
eligibility for benefits and to construe the terms of this Plan.
ARTICLE X
AMENDMENTS AND TERMINATION
The Executive Committee has the power to terminate this Plan
at any time or to amend this Plan at any time and in any manner that it may deem
advisable.
ARTICLE XI
DEFINITIONS
For purposes of this Plan, the following terms shall have the
meanings set forth in this Article XI:
AWARD--An annual incentive award under the Plan.
BANCORP--U. S. Bancorp, an Oregon corporation.
BOARD--The Board of Directors of U. S. Bancorp.
COMPONENT--One of the elements of performance used to
determine Awards under the Plan as described in Section 5.3, including the
Corporate, Operating Group, Strategic Business Unit, Strategic Support Unit, and
one or more Shared-Goals Components.
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<PAGE> 14
COMPONENT PERFORMANCE PERCENTAGE--A percentage, computed as
provided in Section 5.7.1, representing the degree to which success factors for
a component have been achieved.
COMPONENT WEIGHTING PERCENTAGE--A percentage specified by the
Executive Committee pursuant to Section 5.3 for each of a Participant's
Designated Components to represent the relative weight to be given to each
Component.
DESIGNATED COMPONENT--One of the Components designated by the
Executive Committee pursuant to Section 5.3 to determine the Award for a
Participant for a Plan Period.
EXECUTIVE COMMITTEE--Bancorp's Executive Committee, or any
successor committee designated by the Board.
MODIFIER PERCENTAGE--A percentage determined by the Executive
Committee pursuant to Section 5.7.3 representing the level of achievement with
respect to a Participant's modifier goals.
OPERATING GROUP--One of the principal operating groups for
Bancorp and its subsidiaries, including, but not limited to, banking, investor
services, real estate, emerging businesses, capital markets, and leasing and
financial.
PARTICIPANT--An eligible employee designated by the Executive
Committee to participate in the Plan for all or a portion of a Plan Period.
PLAN PERIOD --A calendar year or other measurement period
specified by the Executive Committee.
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<PAGE> 15
POSITION TERMINATION--The elimination of a Participant's
employment position with a Sponsoring Employer.
SPONSORING EMPLOYER--Bancorp and the subsidiaries of Bancorp
that adopt the Plan as provided in Article II.
STRATEGIC BUSINESS UNIT--The subsidiary corporation or
division of Bancorp or a subsidiary corporation designated by the Executive
Committee as a relevant business unit for a Participant for a Plan Period.
STRATEGIC SUPPORT UNIT--The group or unit of Bancorp or a
subsidiary corporation performing a support function that is designated by the
Executive Committee as a relevant support unit for a Participant for a Plan
Period.
TARGET AWARD--The targeted incentive award for a Participant
for a Plan Period specified by the Executive Committee as provided in
Section 5.2.
WEIGHTED COMPONENT PERCENTAGE--A percentage, determined as
provided in Section 5.7.2, representing a Component Performance Percentage
multiplied by a Component Weighting Percentage.
IN WITNESS WHEREOF this Second Amendment and Restatement of
the Plan, as approved by the Executive Committee, is executed this 2nd day of
January, 1996.
U. S. BANCORP
By: /s/
-----------------------------
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<PAGE> 1
Exhibit 10.5
U. S. BANCORP
AMENDED AND RESTATED
SUPPLEMENTAL BENEFITS PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I PURPOSE OF PLAN................................................................... 1
ARTICLE II NATURE OF PLAN................................................................... 1
ARTICLE III SPONSORING EMPLOYERS............................................................ 2
ARTICLE IV ELIGIBILITY...................................................................... 2
ARTICLE V PARTICIPATION..................................................................... 2
ARTICLE VI BENEFITS......................................................................... 3
6.1 Retirement Plan-Related Benefit................................................ 3
6.1.1 Retirement Benefits................................................. 3
(a) Restoration Benefit.......................................... 3
(b) Early Retirement Subsidy Benefit............................. 6
(c) Additional Benefit Service Benefit........................... 6
(d) Change in Control Benefits................................... 7
(1) Benefit............................................. 7
(2) Change in Control Defined........................... 9
(3) Cause Defined....................................... 11
(4) Good Reason Defined................................. 12
(5) Limitations and Reductions.......................... 16
(e) Additional Eligibility Service Benefit................... 16
(f) Enhanced Retirement Benefit.............................. 17
(1) Definitions......................................... 17
(2) Benefit............................................. 18
(3) Benefit Service Credit.............................. 20
(4) Prior Employer Benefits............................. 20
(5) Early Retirement Reduction.......................... 21
(6) Vesting............................................. 21
(7) Effect of Change in Control......................... 22
(8) Credit for Additional Benefit
Service.......................................... 23
(g) Reduction of Change in Control Related
Benefits................................................. 23
(h) Special Retirement Opportunity Benefit....................... 26
(1) Definitions......................................... 26
(4) Termination Date.................................... 29
6.1.2 Coordination of Benefits............................................ 29
6.1.3 Time and Manner of Payment.......................................... 28
(a) Joint and Survivor Annuity................................... 29
(b) Supplemental Income Option................................... 30
6.1.4 Early Retirement Reduction.......................................... 30
6.1.5 Benefit Forfeitability.............................................. 31
6.1.6 Preretirement Death Benefit......................................... 32
6.1.7 Lump-Sum Payments of Small Benefits................................. 34
6.1.8 Arbitration......................................................... 34
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
6.2 Investment Plan-Related Benefit................................................ 35
6.2.1 Annual Credit....................................................... 35
(a) Deferred Compensation Credit................................. 35
(b) Section 415 Limitation Credit................................ 36
(c) Before-Tax Contribution Limitation
Credit................................................... 36
(d) Matching Credit.............................................. 37
6.2.2 Investment Plan Benefit Account..................................... 38
6.2.3 Time and Manner of Payment.......................................... 38
6.2.4 Death Benefit....................................................... 38
ARTICLE VII VESTING......................................................................... 38
ARTICLE VIII SOURCE OF BENEFITS............................................................. 39
ARTICLE IX ADMINISTRATION OF THE PLAN....................................................... 40
ARTICLE X MISCELLANEOUS..................................................................... 41
10.1 Nonassignability of Benefits.................................................. 41
10.2 Governing Law................................................................. 41
10.3 No Right of Continued Employment.............................................. 41
10.4 Withholding Taxes............................................................. 41
10.5 Severability.................................................................. 42
ARTICLE XI CLAIMS PROCEDURE................................................................. 42
11.1 Initial Claim................................................................. 42
11.2 Decision on Initial Claim..................................................... 42
11.2.1 Time Period for Denial Notice...................................... 42
11.2.2 Contents of Notice................................................. 43
11.2.3 Deemed Denied...................................................... 43
11.3 Review of Denied Claim........................................................ 43
11.4 Decision on Review............................................................ 44
ARTICLE XII AMENDMENTS AND TERMINATION...................................................... 45
</TABLE>
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<PAGE> 4
U. S. BANCORP
AMENDED AND RESTATED
SUPPLEMENTAL BENEFITS PLAN
THIS SUPPLEMENTAL BENEFITS PLAN (the "Plan") is amended and
restated by U. S. Bancorp, an Oregon corporation ("Bancorp"), effective February
17, 1994.
ARTICLE I
PURPOSE OF PLAN
The continued growth and success of Bancorp are dependent upon
its ability to attract and retain the services of key executives of the highest
competence and to provide incentives for their effective service and superior
performance. The purpose of this Plan is to advance the interests of Bancorp and
its shareholders through a supplemental compensation program that will attract,
motivate, and retain key executives.
ARTICLE II
NATURE OF PLAN
This Plan is intended to be and shall be administered and
maintained by Bancorp as an income tax nonqualified, unfunded plan primarily for
the purpose of providing deferred compensation for a select group of management
or highly compensated employees within the meaning of Sections 201(2), 301(a)(3)
and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as
amended. Notwithstanding any other provision of this Plan, no benefit shall be
payable under this Plan that would cause the Plan to not be a select group plan.
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<PAGE> 5
ARTICLE III
SPONSORING EMPLOYERS
Any corporation in which Bancorp owns (directly or indirectly)
stock possessing 50 percent or more of the combined voting power may, by
resolution of its board of directors, sponsor and maintain this Plan for its
executives. Such corporations shall be referred to as "Sponsoring Employers."
ARTICLE IV
ELIGIBILITY
Any key executive (including officers who may also be
directors) of Bancorp and the Sponsoring Employers who is a member of a select
group of management or highly compensated employees shall be eligible to
participate in this Plan.
ARTICLE V
PARTICIPATION
A "Participant" is an eligible employee who has been
designated to receive one or more benefits under this Plan for one or more
years. The Compensation Committee of Bancorp s Board of Directors (the
"Compensation Committee") shall have the exclusive power to make and revise
benefit designations, if any, with respect to Bancorp's Chairman of the Board,
its Chief Executive Officer, and the members of Bancorp s Executive Committee
(the "Executive Committee") and with respect to all benefit designations under
6.1.1(d) and 6.1.1(f). The Compensation Committee may, in its discretion,
delegate by resolution to the Executive Committee the power to make and
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<PAGE> 6
revise benefit designations, if any, for all other eligible employees, other
than benefit designations under 6.1.1(d) and 6.1.1(f). In the absence of such
delegation, the Compensation Committee shall retain the power and authority to
make and revise all benefit designations under the Plan. By sponsoring and
maintaining the Plan for its employees, the Board of Directors of each
Sponsoring Employer expressly delegates to the Compensation Committee and the
Executive Committee, respectively, the authority to make and revise benefit
designations under the Plan for all employees of the Sponsoring Employer.
ARTICLE VI
BENEFITS
6.1 Retirement Plan-Related Benefit .
6.1.1 Retirement Benefits . Except as otherwise provided, a
Participant shall receive a monthly U. S. Bancorp Retirement Plan-Related
Benefit for the Participant's life only equal to the sum of the "Restoration
Benefit," "Early Retirement Subsidy Benefit," "Additional Benefit Service
Benefit," "Change in Control Benefits," "Additional Eligibility Service
Benefit," and "Enhanced Retirement Benefit," as defined below, for which the
Participant is designated. For purposes of this 6.1.1, any reference to a
Participant's Retirement Plan benefit shall include any portion of such
Retirement Plan benefit payable to an alternate payee pursuant to a qualified
domestic relations order.
(a) Restoration Benefit . A Participant designated to receive
a "Restoration Benefit" (previously referred to as the
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<PAGE> 7
"Additional Benefit") under this Plan shall receive a monthly benefit equal to
the sum of:
(1) the amount by which such Participant's early, normal,
or delayed retirement benefit under the Retirement Plan, as set forth
in Exhibit A attached hereto and incorporated by reference herein, is
reduced by application of federal law limiting benefits under income
tax qualified plans as provided in the Retirement Plan; and
(2) the difference (to the extent such difference is not
included in 6.1.1(a)(1) above) between:
(i) the early, normal, or delayed retirement
benefit that would have been payable to the Participant under
the Retirement Plan:
A) had deferred compensation (other
than deferred compensation under the U. S. Bancorp
Long-Term Management Incentive Plan or the U. S.
Bancorp 1993 Stock Incentive Plan) counted as
Compensation under the Retirement Plan at the time at
which such compensation would have been paid had it
not been deferred; and
B) had any nondeferred awards payable
to the Participant after
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<PAGE> 8
retirement under the U. S. Bancorp Executive Annual
Incentive Plan or Management Annual Incentive Plan
(an "Annual Plan") counted as Compensation under the
Retirement Plan at the time such awards were earned
or accrued in lieu of the corresponding award for the
first year of the five-year period for which Average
Monthly Compensation is computed; and
(ii) the Participant's actual early, normal, or
delayed retirement benefit under the Retirement Plan.
In calculating the benefit described in 6.1.1(a)(2)(i), the period of time used
to determine a Participant's Average Monthly Compensation may be different than
the period of time used to determine the Participant's Average Monthly
Compensation in calculating the benefit actually payable under the Retirement
Plan. Also, an award under an Annual Plan for a year shall be treated as earned
pro-rata over the 12 months of the year (or such lesser portion of the year that
the award relates to).
Notwithstanding the foregoing, no Participant shall have a lesser
monthly Restoration Benefit than the amount required to ensure that the sum of
the Participant's early, normal, or delayed retirement benefit under the
Retirement Plan plus the
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<PAGE> 9
Participant's Restoration Benefit under this Plan is not less than the sum of
such benefits as of December 31, 1988.
(b) Early Retirement Subsidy Benefit . Upon early
retirement at or after a designated age, a Participant designated to receive an
"Early Retirement Subsidy Benefit" under this Plan, who was eligible for early
retirement under the Retirement Plan on ceasing to be an employee of Bancorp and
its affiliates, shall receive a monthly benefit equal to the amount by which
such Participant's normal retirement benefit under the Retirement Plan is
reduced by reason of such early retirement.
(c) Additional Benefit Service Benefit . Upon retirement
at or after a designated age with less than 25 years of Benefit Service, a
Participant designated to receive an "Additional Benefit Service Benefit" under
this Plan, who was eligible for retirement under the Retirement Plan on ceasing
to be an employee of Bancorp and its affiliates, shall receive a monthly benefit
equal to the difference between:
(1) the early, normal, or delayed retirement benefit that
would have been payable to the Participant under the Retirement Plan
based on the lesser of:
(i) 25 years of Benefit Service; or
(ii) a designated number of years of Benefit
Service; and
(2) the Participant's actual early, normal, or delayed
retirement benefit under the Retirement Plan.
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<PAGE> 10
(d) Change in Control Benefits . The purpose of the
benefits provided by this 6.1.1(d) is to encourage the designated Participants
to continue in the employment of Bancorp. The designated Participants are
innovative, highly experienced, and knowledgeable banking executives whose
creativity, expertise, and effort have been instrumental in the development of
the business and growth of Bancorp. For purposes of this 6.1.1(d), references to
Bancorp or a Sponsoring Employer shall include any successor to Bancorp or the
Sponsoring Employer.
(1) Benefit . Upon termination from employment with
Bancorp or a Sponsoring Employer within two years from the date of
occurrence of any event constituting a "Change in Control" (it being
recognized that more than one such event may occur in which case the
two-year period shall run from the date of occurrence of each such
event), other than termination by Bancorp or a Sponsoring Employer for
"Cause" or by the Participant without "Good Reason," as those terms are
defined below, a designated Participant who is vested by meeting the
"Applicable Service Requirement," as described below, at termination of
employment shall receive the benefit under (i) and/or (ii) below. A
Participant may be designated for either or both of the following
benefits:
(i) A monthly benefit (a "Change in Control
Early Retirement Subsidy Benefit") equal to the amount by
which such Participant's
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<PAGE> 11
normal retirement benefit under the Exhibit A Retirement Plan
is reduced by reason of early retirement due to the
termination.
(ii) A monthly benefit (a "Change in Control
Additional Benefit Service Benefit") equal to the difference
between:
A) the early, normal, or delayed
retirement (which is the same as the type of actual
retirement under 6.1.1(d)(1)(ii)B)) benefit that
would have been payable to the Participant under the
Exhibit A Retirement Plan based on the lesser of:
1) 25 years of Benefit
Service; or
2) a designated number of
years of Benefit Service; and
B) the Participant's actual early,
normal, or delayed retirement benefit under the
Exhibit A Retirement Plan.
For purposes of the Change in Control Early Retirement Subsidy Benefit
described in 6.1.1(d)(1)(i), the Applicable Service Requirement is at
least ten years of
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<PAGE> 12
Eligibility Service. For purposes of the Change in Control Additional
Benefit Service Benefit described in 6.1.1(d)(1)(ii), the Applicable
Service Requirement is at least five years of Eligibility Service.
Participants continue to earn Eligibility Service after a Change in
Control. The benefits in this 6.1.1(d) cannot be eliminated by
amendment or termination of this Plan after a Change in Control.
(2) Change in Control Defined . A "Change in Control" of
Bancorp shall mean:
(i) A Change in Control of a nature that would
be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A as in effect on the date hereof
pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act"); provided that, without limitation, such a change in
control shall be deemed to have occurred at such time as any
Person (as defined below) hereafter becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 30 percent or more of the combined
voting power of Bancorp Voting Securities; or
(ii) During any period of 12 consecutive calendar
months, individuals who at the beginning of such period
constitute the Bancorp
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<PAGE> 13
board of directors cease for any reason to constitute at least
a majority thereof unless the election, or the nomination for
election, by Bancorp shareholders of each new director was
approved by a vote of at least a majority of the directors
then still in office who were directors at the beginning of
the period; or
(iii) There shall be consummated (A) any
consolidation or merger of Bancorp in which Bancorp is not the
continuing or surviving corporation or pursuant to which
Voting Securities (other than fractional shares) would be
converted into cash, securities, or other property, other than
a merger of Bancorp in which the holders of Voting Securities
immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger, or (B) any sale, lease,
exchange, or other transfer (in one transaction or a series of
related transactions) of a majority (by value) of the assets
of Bancorp, provided that any such consolidation, merger,
sale, lease, exchange, or other transfer consummated at the
insistence of an appropriate banking regulatory
- 10 -
<PAGE> 14
agency shall not constitute a Change in Control; or
(iv) Approval by the shareholders of Bancorp of
any plan or proposal for the liquidation or dissolution of
Bancorp.
For purposes of this "Change in Control" definition, the term "Person"
means any individual, corporation, partnership, group, association, or
other "person," as such term is used in Section 14(d) of the Exchange
Act, other than Bancorp or any employee benefit plan or plans sponsored
by Bancorp, and the phrase "Voting Securities" shall mean Bancorp's
issued and outstanding securities ordinarily having the right to vote
at elections of Bancorp's board of directors.
(3) Cause Defined . For purposes of 6.1.1(d), "Cause" for
termination of employment means:
(i) A material act of fraud or dishonesty by the
Participant within the course of performing his or her duties
for Bancorp or a Sponsoring Employer;
(ii) Gross negligence or intentional misconduct
by the Participant in the performance of material duties for
Bancorp or a Sponsoring Employer;
(iii) Commission of an act (or failure to take an
action) intentionally against the
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<PAGE> 15
interest of Bancorp or a Sponsoring Employer that causes
Bancorp or a Sponsoring Employer material injury; or
(iv) An act of serious moral turpitude that
causes Bancorp or a Sponsoring Employer material injury.
Notwithstanding the foregoing, a Participant shall not be deemed to
have been terminated for Cause unless and until there have been
delivered to the Participant a copy of a resolution duly adopted by
Bancorp s Board of Directors (the "Board") at a meeting of the Board
called and held for that purpose (after reasonable notice to the
Participant and an opportunity for the Participant, together with the
Participant's counsel, to be heard before the Board) finding that in
the good faith opinion of the Board, the Participant was guilty of
conduct constituting Cause as defined in this Plan and specifying the
particulars thereof in detail.
Any dispute as to whether a designated Participant was
terminated for Cause shall be submitted to arbitration pursuant to
6.1.8.
(4) Good Reason Defined . Termination by a designated
Participant of employment for "Good Reason" shall mean termination
based on any of the following:
(i) A change in the Participant's duties or
position or positions with Bancorp which
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<PAGE> 16
represents a demotion from his or her duties or position or
positions as in effect immediately prior to the Change in
Control, or a change in the Participant's duties or
responsibilities which is inconsistent with such duties or
position or positions, or any removal of the Participant from
or any failure to reappoint or reelect the Participant to such
position or positions, except in connection with the
termination of the Participant's employment for Cause or
disability or as a result of the Participant's death or the
termination by the Participant other than for Good Reason;
(ii) A reduction by Bancorp in the Participant's
base salary as in effect immediately prior to the Change in
Control;
(iii) The failure by Bancorp to continue in effect
any "Benefit Plan" (as defined below) in which the Participant
is participating at the time of the Change in Control (or
Benefit Plans providing the Participant with at least
substantially similar benefits), other than as a result of the
normal expiration of any such Benefit Plan in accordance with
its terms or a modification of such Benefit Plan which
modification is applicable to all employees who
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<PAGE> 17
participate in such Benefit Plan, as in effect at the time of
the Change in Control, or the taking of any action, or the
failure to act, by Bancorp which would adversely affect the
Participant's continued participation in any of such Benefit
Plans on at least as favorable a basis to the Participant as
is the case on the date of the Change in Control or which
would materially reduce the Participant's benefits in the
future under any of such Benefit Plans or deprive the
Participant of any material benefit enjoyed by the Participant
at the time of the Change in Control;
(iv) The failure by Bancorp to provide and credit
the Participant with the number of paid vacation days to which
the Participant is then entitled in accordance with Bancorp's
normal vacation policy as in effect immediately prior to the
Change in Control;
(v) Bancorp's requiring the Participant to be
based anywhere more than 35 miles from where the Participant's
office is located immediately prior to the Change in Control
except for required travel on Bancorp's business to an extent
substantially consistent with the business travel obligations
which the
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<PAGE> 18
Participant undertook on behalf of Bancorp prior to the Change
in Control;
(vi) The failure by Bancorp to obtain from any
successor the assent to this 6.1.1(d);
(vii) Any purported termination by Bancorp of a
Participant's employment which is not effected pursuant to a
Notice of Termination as defined below; and for purposes of
this 6.1.1(d), no such purported termination shall be
effective; or
(viii) Any refusal by Bancorp to continue to allow
the Participant to attend to matters or engage in activities
not directly related to the business of Bancorp which, prior
to the Change in Control, the Participant was permitted by the
Board to attend to or engage in.
For purposes of this "Good Reason" definition, "Notice of Termination"
means any notice of any termination of the Participant's employment
shall be communicated by written Notice of Termination to the other
party. A "Notice of Termination" of a Participant's employment by
Bancorp shall mean a notice which shall indicate the specific
termination provision relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Participant's
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<PAGE> 19
employment under the provision so indicated. "Benefit Plan" shall mean
any compensation plan (including this Plan) providing for incentive or
deferred compensation, stock options or other stock or stock-related
grants or awards, or any employee benefit plan such as a thrift,
investment, savings, pension, profit sharing, medical, disability,
accident, life insurance, cafeteria, or relocation plan or any other
plan, policy, or program of Bancorp providing similar types of benefits
to employees of Bancorp.
Any dispute as to whether a designated Participant has Good
Reason for termination of employment shall be submitted to arbitration
pursuant to 6.1.8.
(5) Limitations and Reductions . The Change in Control
benefits otherwise payable under this 6.1.1(d) are subject to the
limitations and reductions described in 6.1.1(g).
(e) Additional Eligibility Service Benefit . A
Participant designated to receive an "Additional Eligibility Service Benefit"
shall be treated as having years of Eligibility Service equal to the designated
Participant's actual years of Eligibility Service plus a designated number of
additional years of Eligibility Service. The total of the actual and the
additional designated years of Eligibility Services will be referred to as the
"Designated Total." Upon ceasing to be an
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<PAGE> 20
employee of Bancorp and its affiliates, a Participant designated for an
Additional Eligibility Service Benefit:
(1) shall receive a monthly benefit equal to the
difference between:
(i) the early, normal, or delayed retirement
(which is the same as the type of actual retirement under
6.1.1(e)(1)(ii)) benefit that would have been payable to the
Participant under the Retirement Plan had the Participant
retired with the Designated Total number of years of
Eligibility Service; and
(ii) the Participant's actual early, normal, or
delayed retirement benefits, if any, under the Retirement
Plan; and
(2) shall be treated as having the Designated Total
number of years of Eligibility Service for purposes of any other
Retirement Plan-Related Benefit under this Plan for which the
Participant is designated.
(f) Enhanced Retirement Benefit .
(1) Definitions . As used in this 6.1.1(f), the following
terms shall have the definitions set forth below:
"ADJUSTED AVERAGE MONTHLY COMPENSATION means Average Monthly
Compensation (as defined in Exhibit A to this Plan) adjusted in the
manner described in 6.1.1(a).
"CAUSE" has the meaning defined in 6.1.1(d)(3).
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<PAGE> 21
"CHANGE IN CONTROL" has the meaning defined in 6.1.1(d)(2).
"CHANGE IN CONTROL DATE" means the date of occurrence of an
event constituting a Change in Control (it being recognized that more
than one such event may occur, in which case the date of occurrence of
each such event is a Change in Control Date).
"EARLY RETIREMENT REDUCTION" has the meaning described in
6.1.1(f)(5).
"GOOD REASON" has the meaning defined in 6.1.1(d)(4).
"PRIOR EMPLOYER BENEFITS" has the meaning described in
6.1.1(f)(4).
"TARGET BENEFIT" means a monthly benefit equal to 2.75 percent
of a Participant s Adjusted Average Monthly Compensation multiplied by
the Participant s years, and fractions thereof, of Benefit Service up
to 20 years.
"TERMINATION DATE" means the date a Participant ceases to be
an employee of Bancorp or a Sponsoring Employer.
(2) Benefit . A Participant designated to receive an
"Enhanced Retirement Benefit" under this Plan shall receive, upon
termination of employment with Bancorp or a Sponsoring Employer after
attaining age 55 (providing the Participant is vested in such benefit
as provided in 6.1.1(f)(6)), a monthly benefit equal to the Target
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<PAGE> 22
Benefit, adjusted (in the event the Participant terminates employment
before attaining age 62) by the amount, if any, of Early Retirement
Reduction, and then reduced by the sum of the following:
(i) A hypothetical Social Security benefit
payable as of the Participant s age on the Termination Date
or, if later, age 62, calculated based on the law in effect on
the Termination Date assuming (A) that the Participant s
covered compensation equaled or exceeded the Social Security
wage base for all prior years and (B) the Participant will
have no compensation in any year (or portion of a year)
following the Termination Date;
(ii) An amount equal to the single life annuity
equivalent of the Retirement Plan benefit which would have
become payable to the Participant as of the Termination Date
had the Participant elected retirement under the Retirement
Plan as of the Termination Date;
(iii) The amount of Prior Employer Benefits
payable to the Participant for such month or attributable to
such month as described in 6.1.1(f)(4); and
(iv) The amounts payable to the Participant as
other Retirement Plan-Related
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<PAGE> 23
Benefits under this Plan as described in 6.1.2(e).
(3) Benefit Service Credit . For purposes of this
6.1.1(f), the Compensation Committee may, at the time a Participant is
designated for an Enhanced Retirement Benefit, or at any time
thereafter, credit the Participant with years of Benefit Service for
service with a prior employer. The number of years, and fractions
thereof, of Benefit Service credited shall be specified by resolution
of the Compensation Committee.
(4) Prior Employer Benefits . Whenever the Compensation
Committee gives a Participant Benefit Service credit for service with a
former employer, the Compensation Committee shall by resolution specify
the amount of Prior Service Benefits, if any, to be offset against the
Participant s Enhanced Retirement Benefit. Prior Service Benefits shall
be a monthly offset amount determined by, or at the direction, of the
Compensation Committee to reflect the Participant s accrued and vested
benefits attributable to service with the prior employer from qualified
and nonqualified pension, profit sharing, and similar deferred
compensation arrangements (but excluding any such benefits attributable
to the Participant s own contributions, whether made on a before-tax or
after-tax basis). The Compensation Committee, or its delegates, shall
determine for each
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<PAGE> 24
Prior Employer Benefit a monthly offset amount based on a single life
annuity form equivalent to the Prior Employer Benefit (assuming the
same commencement date as the Participant s Enhanced Retirement
Benefit).
(5) Early Retirement Reduction . If a Participant who is
otherwise vested in an Enhanced Retirement Benefit (as provided in
6.1.1(f)(6)) terminates employment with Bancorp or a Sponsoring
Employer prior to attaining age 62, the Participant s Target Benefit
shall be reduced by an Early Retirement Reduction equal to the accrued
Target Benefit multiplied by the product of a Reduction Percentage (as
described below) and the difference (in years and a fraction of a year
based on whole calendar months) between the Participant s age at the
Termination Date and 62. The Reduction Percentage shall be 7 percent
except where a Participant s retirement or termination of employment is
approved by the Compensation Committee, in which case the Reduction
Percentage shall be 3 percent. However, the Compensation Committee may,
in extraordinary circumstances, designate a different Reduction
Percentage between 0 percent and 7 percent.
(6) Vesting . Except as provided in 6.1.1(f)(7), a
Participant s right to an Enhanced Retirement Benefit is vested and
nonforfeitable when the Participant both attains age 55 and has at
least 10 years of Eligibility Service while still an employee of
Bancorp or a
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<PAGE> 25
Sponsoring Employer. If a Participant designated for an Enhanced
Retirement Benefit ceases to be an employee of Bancorp or a Sponsoring
Employer either (A) before the Participant has 10 years of Eligibility
Service or (B) before the Participant attains age 55, the Participant
shall not receive any Enhanced Retirement Benefit.
(7) Effect of Change in Control . Upon termination from
Bancorp or a Sponsoring Employer within two years after a Change in
Control Date, other than termination for Cause or without Good Reason,
the Enhanced Retirement Benefit for a designated Participant shall be
subject to the following provisions:
(i) Notwithstanding 6.1.1(f)(6), upon a Change
in Control, a Participant designated for an Enhanced
Retirement Benefit who has at least five years of Eligibility
Service shall become immediately vested in the accrued
Enhanced Retirement Benefit, whether or not the Participant
had attained age 55 as of the later of the Change in Control
Date or the Termination Date.
(ii) If a Participant has not attained age 55 as
of the Termination Date, the Participant s Enhanced Retirement
Benefit shall commence on the first day of the calendar month
in which the Participant attains age 55.
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<PAGE> 26
(iii) For purposes of computing a Participant s
Target Benefit, a Participant will continue to accrue Benefit
Service after a Change in Control.
(iv) The Early Retirement Reduction Percentage
for each Participant vested in an Enhanced Retirement Benefit
(pursuant to 6.1.1(f)(6) or 6.1.1(f)(7)(i)) shall be 3
percent.
(v) A Participant s Enhanced Retirement Benefit,
as modified by this 6.1.1(f)(7) upon a Change in Control, is
subject to the limitations and reductions described in
6.1.1(g).
(vi) The provisions of this 6.1.1(f)(7) cannot be
eliminated by amendment or termination of this Plan after a
Change in Control.
(8) Credit for Additional Benefit Service . For purposes
of computing a designated Participant s Target Benefit, the Committee
may, in special circumstances, credit the Participant with an
additional number of years of Benefit Service as determined by the
Committee.
(g) Reduction of Change in Control Related Benefits . In
the event that any portion of the Total Payments (as defined below) received by
a Participant in connection with a Change in
First Amendment
- 23 - April 19, 1994
<PAGE> 27
Control of Bancorp would not be deductible, in whole or in part, for federal
income tax purposes as a result of Section 280G of the Internal Revenue Code,
unless the Compensation Committee expressly provides by resolution that a
Participant s benefits under the Plan in connection with a Change in Control
will not be reduced, the Change in Control benefits otherwise payable under
6.1.1(d) or the Enhanced Retirement Benefit otherwise payable under 6.1.1(f), as
modified by
Second Amendment
- 23a - June 15, 1994
<PAGE> 28
6.1.1(f)(7), shall be reduced until (i) no portion of the Total Payments is not
deductible pursuant to Section 280G of the Internal Revenue Code or (ii) either
(A) the Change in Control benefits are reduced to zero or (B) the Enhanced
Retirement Benefit is reduced to the amount (if any) which would be payable
under 6.1.1(f) without regard to 6.1.1(f)(7), whichever happens first.
"Total Payments" mean all payments or benefits payable to a
Participant in connection with a Change in Control of Bancorp, including Change
in Control related benefits under 6.1.1(d) or 6.1.1(f) and "Other Payments."
"Other Payments" include any payment or benefit payable to a Participant in
connection with a Change in Control of Bancorp pursuant to any plan,
arrangement, or agreement (other than 6.1.1(d) or 6.1.1(f)) with Bancorp, a
person whose actions result in such Change in Control, or any person affiliated
with Bancorp or such person. For purposes of this limitation:
(1) No portion of the Total Payments, the receipt or
enjoyment of which a Participant has effectively waived in writing
prior to the date of payment of the Change in Control benefits, shall
be taken into account;
(2) No portion of the Total Payments shall be taken into
account which, in the opinion of tax counsel selected by Bancorp and
reasonably acceptable to the Participant ("Tax Counsel"), does not
constitute a
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<PAGE> 29
"parachute payment" within the meaning of Section 280G of the Internal
Revenue Code;
(3) The Change in Control benefits shall be reduced only
to the extent necessary so that the Total Payments (other than those
referred to in 6.1.1(g)(1) and 6.1.1(g)(2) ) in their entirety
constitute, in the opinion of Tax Counsel, reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4) of
the Internal Revenue Code; and
(4) The value of any noncash benefit or any deferred
payment or benefit included in the Total Payments, and whether or not
all or a portion of any payment or benefit is a "parachute payment" for
purposes of 6.1.1(g)(2), shall be determined by Bancorp's independent
accountants in accordance with the principles of Section 280(G)(d)(3)
and (4) of the Internal Revenue Code.
To the extent possible, Bancorp and the Participant agree that
reductions in benefits under any benefit plan shall be made (only to the extent
necessary to avoid a nondeductible excess parachute payment) in the following
order of priority:
(i) Severance payments under a change in control
agreement other than 6.1.1(d) or 6.1.1(f);
(ii) Continuation of benefits under any plan, policy, or
program of Bancorp (whether or not on an insured basis) providing
medical, dental, health,
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<PAGE> 30
disability income, life insurance or other death benefits, or similar types of
benefits to employees of Bancorp (other than under any plan or arrangement
providing for vacation pay, bonuses or incentive compensation of any kind, or
current or deferred salary or similar compensation);
(iii) Any Change in Control related benefit payable under
6.1.1(d) or 6.1.1(f) of this Plan or a successor plan or a plan
providing similar benefits; and
(iv) The acceleration in the exercisability of any stock
option or other stock related award granted by Bancorp.
Notwithstanding any other provision of 6.1.1(d) or 6.1.1(f),
Bancorp shall have no obligation to make any payments to a Participant pursuant
to 6.1.1(d) or 6.1.1(f) if, or to the extent, such payments are prohibited by
any applicable law or regulation, including without limitation the FDIC's
regulations regarding Golden Parachute and Indemnification Payments promulgated
under the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer Recovery
Act of 1990.
(h) Special Retirement Opportunity Benefit .
(1) Definitions . As used in this 6.1.1(h), the following
terms shall have the definitions set forth below:
First Amendment
- 26 - April 19, 1994
<PAGE> 31
"DEEMED AGE" means an age equal to five years more than a
designated Participant s actual age as of August 31, 1994.
"DEEMED BENEFIT YEARS" means a number of years of Benefit
Service, as defined in the Retirement Plan, equal to 5.667 years more
than a designated Participant s actual years of Benefit Service as of
December 31, 1993.
"DEEMED ELIGIBILITY YEARS" means a number of years of
Eligibility Service, as defined in the Retirement Plan, equal to six
years more than a designated Participant s actual years of Eligibility
Service as of December 31, 1993.
"SRO AVERAGE MONTHLY COMPENSATION" means the greater of:
(i) The monthly average of the designated Participant s
Compensation (adjusted as described in 6.1.1(a)) during the highest
consecutive five of the ten Plan Years beginning in 1984; or
(ii) The monthly average of the designated Participant s
Compensation (adjusted as described in 6.1.1(a)) for the 60 months
ending August 31, 1994, based on:
A) The Participant s bonuses paid during the
eight calendar months ending August 31, 1994, plus eight times
the Participant s monthly base salary as in effect on January
1, 1994;
First Amendment
- 26a - April 19, 1994
<PAGE> 32
B) The Participant s base salary and bonuses
paid during calendar years 1990 through 1993; and
C) A portion equal to four-twelfths (4/12) of
the Participant s base salary (excluding bonuses) paid in
calendar year 1989.
"SRO CONNECTED BENEFIT" means the Benefit (either a
Restoration Benefit, an Enhanced Retirement Benefit, or both) under the
Plan in connection with which a Participant is designated for a Special
Retirement Opportunity Benefit.
(2) Designation in Connection with Other Benefit . A
Special Retirement Opportunity Benefit shall be in connection with either (or
both) of the following benefits for which the designated Participant is also
designated: a Restoration Benefit under 6.1.1(a) or an Enhanced Retirement
Benefit under 6.1.1(f).
(3) Benefit . If a Participant is designated for a
Special Retirement Opportunity Benefit under this 6.1.1(h), the Participant s
SRO Connected Benefit (or Benefits) shall be based on treating the Participant:
(i) As having attained the greater of the Participant s
actual age as of the Annuity Starting Date (as defined in the
Retirement Plan) or the Deemed Age;
(ii) As having the Deemed Eligibility Years and the Deemed
Benefit Years; and
First Amendment
- 26b - April 19, 1994
<PAGE> 33
(iii) As having Average Monthly Compensation equal to the
SRO Average Monthly Compensation.
(4) Termination Date . The Committee may, in its
discretion, condition the designation of a Participant for a Special Retirement
Opportunity Benefit upon the Participant s termination of employment not later
than a date specified by the Committee.
6.1.2 Coordination of Benefits . The following rules shall
apply where a Participant is designated for more than one benefit under 6.1.1:
(a) If a Participant receives an Early Retirement Subsidy
Benefit under 6.1.1(b) or a Change in Control Early Retirement Subsidy Benefit
under 6.1.1(d)(1), there shall be no
First Amendment
- 26c - April 19, 1994
<PAGE> 34
early retirement reduction with respect to the Participant's benefits, if any,
described in 6.1.1(a), 6.1.1(c), and 6.1.1(d)(2).
(b) If a Participant receives an Additional Benefit
Service Benefit under 6.1.1(c) or a Change in Control Additional Benefit Service
Benefit under 6.1.1(d)(2), the Participant's benefits, if any, described in
6.1.1(a), 6.1.1(b), and 6.1.1(d)(1) shall be based on the lesser of 25 years of
Benefit Service or the designated number of years of Benefit Service.
(c) If a Participant is designated for an Early
Retirement Subsidy Benefit under 6.1.1(b) and a Change in Control Early
Retirement Subsidy Benefit under 6.1.1(d)(1), the Participant's Change in
Control Early Retirement Subsidy Benefit under 6.1.1(d)(1) shall be reduced by
the amount payable as an Early Retirement Subsidy Benefit under 6.1.1(b).
(d) If a Participant is designated for an Additional
Benefit Service Benefit under 6.1.1(c) and a Change in Control Additional
Benefit Service Benefit under 6.1.1(d)(2), the Participant's Change in Control
Additional Benefit Service Benefit under 6.1.1(d)(2) shall be reduced by the
amount payable as an Additional Benefit Service Benefit under 6.1.1(c).
(e) If a Participant is designated for an Enhanced
Retirement Benefit under 6.1.1(f) and is also designated for any other
Retirement Plan-Related Benefit under 6.1.1, the Participant s Enhanced
Retirement Benefit under 6.1.1(f) shall be reduced by the aggregate amounts
payable as any other Retirement
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<PAGE> 35
Plan-Related Benefits under 6.1.1 (after taking into account any other
applicable coordination provisions of this 6.1.2).
6.1.3 Time and Manner of Payment . A vested Participant's
Retirement Plan-Related Benefit (other than an Enhanced Retirement Benefit
pursuant to 6.1.1(f)) shall be paid after his or her ceasing to be an employee
of Bancorp or a Sponsoring Employer, beginning with the earlier of the first day
of the month after the Participant is age 55 and not yet age 65 and has at least
ten years of Eligibility Service ("early retirement date") or after the
Participant is at least age 65 and is vested or has had the fifth anniversary of
the Participant's commencement of participation.
A Participant who is vested in an Enhanced Retirement Benefit
shall be paid such Enhanced Retirement Benefit after the Participant ceases to
be an employee of Bancorp or a Sponsoring Employer, beginning with the first day
of the first calendar month after the Participant terminates employment.
A Participant's Retirement Plan-Related Benefit under the Plan
is earned in the single life annuity form with no benefit payable to anyone on
the Participant's post-retirement death. A Participant may make a one-time
election to receive that benefit in one of the forms provided below. The
Participant's election must be made before the Participant's commencing
participation. If no election is made by that latest election date, then the
Participant's benefit shall be paid in
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<PAGE> 36
the single life annuity form. The following optional forms are available:
(a) Joint and Survivor Annuity . An actuarial equivalent
reduced monthly benefit for life to the Participant with 50 percent or 100
percent, as elected, of that amount payable to the survivor designated at
retirement, if then living, for life after the death of the Participant. The
straight life annuity is converted to a 50 percent survivor annuity by
multiplying the straight life annuity amount by:
.94 + .004 x (spouse's age - Participant's age at death)]; not
greater than 1.000.
The straight life annuity is converted to a 100 percent survivor
annuity by multiplying it by:
[.89 + .006 x (beneficiary's age - retired Participant's
age)]; not greater than 1.000.
If the designated survivor dies before the Participant retires, then the
Participant shall select another survivor within 30 days. Except for death of
the survivor the Participant shall have no power to name a new survivor. If
there is no living designated survivor on the Participant's retirement, the
benefit shall be paid in the straight life annuity form. If the designated
survivor dies after the Participant retires but before the Participant dies,
then payments will continue to the Participant in the same reduced amount and
another survivor cannot be selected. No payments will be made to anyone after
the death of both the Participant and the designated survivor.
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<PAGE> 37
(b) Supplemental Income Option . An actuarial equivalent
benefit whereby monthly straight life annuity or joint and survivor
annuity payments to the Participant before the Participant is first
eligible for Social Security benefits are greater than the remaining
Participant life annuity payments so as to provide approximately equal
payments throughout the Participant's life annuity payment period,
including payments from Social Security. The actuarial equivalent
factors are as follows:
Amount of straight life annuity equivalent to $1 of temporary
annuity to age 62 and 1/12 equals $.006 times months of
payments.
If this benefit form is elected in conjunction with a benefit form that provides
payments after the Participant's death, the post-death payments shall be based
on the payments that would have been made to the Participant after first
eligibility for Social Security whether the retired Participant dies before or
after such eligibility.
6.1.4 Early Retirement Reduction . Except as provided in
6.1.2, if a Participant's Retirement Plan-Related Benefit (other than an
Enhanced Retirement Benefit under 6.1.1(f)) starts before the first of the month
after age 65 ("normal retirement date") and the Participant was eligible for
early retirement on terminating Bancorp employment, and the Participant is not
eligible for an Early Retirement Subsidy Benefit under 6.1.1(b), the
Participant's Retirement Plan-Related Benefit calculated under 6.1 shall be
reduced by 1/3 of 1 percent of such normal
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<PAGE> 38
retirement benefit for each month by which the early retirement date precedes
the following reference age:
Years of Eligibility Service Reference Age
---------------------------- -------------
Less than 25 65
25 or more 62
No reduction shall be made if the Participant is at least age 62 and has at
least 25 years of Eligibility Service. If a Participant was not eligible for
early retirement on terminating Bancorp employment, the 6.1 benefit shall be
reduced by .5833 percent for each full month from age 60 to age 65 and 1/3 of 1
percent from age 55 to age 60 by which the early retirement date precedes the
normal retirement date.
6.1.5 Benefit Forfeitability . A Participant shall forfeit
the entire amount of the Participant's Retirement Plan-Related Benefit described
in 6.1.1(b) and 6.1.1(c) or, if payments of said benefits have already begun,
any remaining payments, if the Participant, either directly or indirectly, on
the Participant's own behalf or as a partner, officer, employee, consultant,
financier, stockholder (except by ownership of less than 1 percent of the
outstanding stock of a publicly held corporation), director, or trustee of any
person, firm, or corporation, or otherwise, engages in any business competing
with the business carried on by Bancorp or any of its affiliates at the time of
the Participant's termination of employment with Bancorp and its affiliates
during the period ending on the later of (i) the date that is ten years after
the Participant's
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<PAGE> 39
termination of employment with Bancorp and its affiliates, or (ii) the
Participant's normal retirement date under the Retirement Plan.
6.1.6 Preretirement Death Benefit . If a vested Participant
dies prior to retirement under this Plan and has a surviving spouse, such
surviving spouse or designated nonspouse beneficiary, shall receive a monthly
preretirement death benefit equal to one-half of the Participant's straight life
annuity calculated as provided below. No preretirement death benefit is payable
to a designated nonspouse beneficiary if the Participant is not married on the
date of death.
The preretirement death benefit shall begin to be paid within
30 days after the Manager of the Human Resources Group or his or her designee
(the "Manager") is notified of the Participant's death, if the Participant was
an employee of Bancorp or a Sponsoring Employer at death, and if not, then
within 30 days after the Participant would have first been eligible for early or
normal retirement under this Plan had the Participant survived to that date,
whether or not the corresponding benefit has begun under the Retirement Plan,
and shall be payable for the life of the spouse.
For Retirement Plan-Related Benefits other than an Enhanced
Retirement Benefit, if the Participant was not an employee of Bancorp or a
Sponsoring Employer and was not yet age 65 on the date of death, then the
Participant's age 65 single life annuity benefit shall be reduced by the
reduction factors in
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<PAGE> 40
6.1.3 for a Participant who is not eligible for early retirement on terminating
employment. If the Participant was an employee of Bancorp or a Sponsoring
Employer on the date of death then the Participant's age 65 single life annuity
benefit shall be reduced by the reduction factors in 6.1.3 for a Participant who
was eligible for early retirement on terminating Bancorp employment, but there
shall be no reduction below age 55 if the Participant died before age 55.
For Enhanced Retirement Benefits under 6.1.1(f), if the
Participant was an employee of Bancorp or a Sponsoring Employer on the date of
death and was vested in an Enhanced Retirement Benefit, the Participant s Target
Benefit shall be reduced by applying the reduction factors in 6.1.1(f)(5) as if
the Compensation Committee had approved the Participant s retirement or
termination of employment.
If the beneficiary is the spouse, then the above death benefit
shall be paid for the life of the spouse with no further payments made after the
spouse's death. If the beneficiary is a person other than the spouse and the
beneficiary is more than five years younger than the Participant, then the
survivor benefit shall be paid for the life of the nonspouse survivor but not to
exceed the life expectancy of a beneficiary who is exactly five years younger
than the Participant. If the nonspouse beneficiary is five or less years younger
than the Participant, then the survivor shall receive the death benefit for life
with no payments after the survivor's death.
- 33 -
<PAGE> 41
6.1.7 Lump-Sum Payments of Small Benefits . Notwithstanding
any other provision of this Plan, the Retirement Plan-Related Benefit or the
preretirement death benefit shall be paid in an actuarial equivalent lump sum
within 30 days after the Manager determines that the present value of such
benefit is less than an amount fixed and revised from time to time, in the
Manager's discretion. The actuarial equivalent shall be determined using the
1971 TPF&C forecast mortality for males, set back five years for the Participant
and one year for the survivor, if any, at the "applicable interest rate". The
"applicable interest rate" shall mean the interest rate or rates that would have
been used as of the first day of the calendar year that contains the
distribution date by the Pension Benefit Guaranty Corporation ("PBGC") for the
purpose of determining the present value of the Participant's benefits under the
Plan, assuming the Plan was insured by the PBGC even though it is not, and
terminated on the date distribution commences with insufficient assets to
provide benefits guaranteed by the PBGC on that date.
6.1.8 Arbitration . Any dispute with respect to whether a
Participant designated for a benefit described in 6.1.1(d) or 6.1.1(f) was
terminated for "Cause" or terminated employment with "Good Reason," as those
terms are defined in 6.1.1(d), shall, after compliance with the claims procedure
set forth in Article XI of this Plan, be submitted to arbitration for a binding
determination by a single arbitrator agreed upon by the
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<PAGE> 42
Participant and the Board, or if the Participant and the Board are unable to
agree upon an arbitrator within 20 days after either the Participant or the
Board demands arbitration, appointed by the presiding judge of the Circuit Court
of the State of Oregon for Multnomah County. After the appointment of an
arbitrator, the arbitration proceedings shall follow the rules of the American
Arbitration Association but shall not be conducted under its auspices. The
arbitrator shall have the power to grant limited discovery in his or her
discretion upon good cause shown by the party seeking discovery.
6.2 Investment Plan-Related Benefit .
6.2.1 Annual Credit . Each Participant shall receive, for
each calendar year for which the Participant has been designated for this
benefit, a credit to the Participant's "Investment Plan Benefit Account" of an
amount equal to the sum of the Participant's "Deferred Compensation Credit,"
"Section 415 Limitation Credit," "Before-Tax Contribution Limitation Credit,"
and "Matching Credit," to the extent such credits are not duplicative, as
described below.
(a) Deferred Compensation Credit . The amount of the
Deferred Compensation Credit is the amount of the employer matching contribution
that would have been allocated to the Participant's Bancorp Contribution Account
under the U. S. Bancorp Employee Investment Plan (the "Investment Plan") had
deferred compensation counted as nondeferred compensation under the Investment
Plan. In computing the amount that would have
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<PAGE> 43
been so allocated, the whole number percentage that has been actually elected by
the Participant to determine the elective before-tax contribution under the
Investment Plan shall be used. Furthermore, computation of the Participant's
Deferred Compensation Credit shall not take into account (i) the limitation on
annual additions required by Section 415 of the Internal Revenue Code, (ii) the
federal income tax limitations on the amount of compensation that can be taken
into account under the Investment Plan, and (iii) the federal income tax
limitations on the amount of elective before-tax contributions.
(b) Section 415 Limitation Credit . The amount of the
Section 415 Limitation Credit is the amount by which the employer matching
contribution that would have been allocated to the Participant's Bancorp
Contribution Account under the terms of the Investment Plan is reduced by
application of the limitation on annual additions required by Section 415 of the
Internal Revenue Code.
(c) Before-Tax Contribution Limitation Credit . The
amount of the Before-Tax Contribution Limitation Credit is the difference
between:
(1) the amount of the employer matching contribution that
would have been allocated to the Participant's Bancorp Contribution
Account under the Investment Plan based on the Participant's actual
compensation and the whole number percentage that has been actually
elected by the Participant to determine the
- 36 -
<PAGE> 44
elective before-tax contribution, before application of federal income
tax limitations on the amount of compensation that can be taken into
account under the Investment Plan and the amount of elective before-tax
contributions, and
(2) the amount of the employer matching contribution
actually allocated to the Participant's Bancorp Contribution Account
under the Investment Plan.
(d) Matching Credit. For any Participants not eligible
to participate in the Investment Plan, the amount of the Matching Credit is the
amount of the employer matching contribution that would have been allocated to
the Participant's Bancorp Contribution Account under the Investment Plan had the
Participant's deferred compensation under any applicable plan or plans counted
as elective before-tax contributions under the Investment Plan. For this
purpose, an applicable plan is a deferred compensation plan approved by the
Board that specifically provides that compensation deferred under the plan is to
be taken into account in determining the Matching Credit under this Plan. Also,
computation of the Participant's Matching Credit shall not take into account (i)
the limitation on annual addition required by Section 415 of the Internal
Revenue Code, (ii) the federal income tax limitations on the amount of
compensation that can be taken into account under the Investment Plan, and (iii)
the federal income tax limitations on the amount of elective before-tax
contributions.
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<PAGE> 45
6.2.2 Investment Plan Benefit Account. An Investment Plan
Benefit Account shall be maintained for each Participant designated for the
benefits described under 6.2.1. The balance in the Investment Plan Benefit
Account shall be adjusted upward or downward as of each Investment Plan
valuation date by the same percentage amount as the Participant's actual Bancorp
Contribution Account under the Investment Plan is adjusted.
6.2.3 Time and Manner of Payment. The Investment Plan
Benefit Account shall be paid to the Participant in a lump sum within 30 days
after termination of employment with Bancorp and its affiliates (or as soon
thereafter as practical), except that if prior to the adoption of this amended
and restated Plan the Participant had terminated such employment and elected to
receive payment of that Account on a date specific, then such Account shall be
paid on that date.
6.2.4 Death Benefit. In the event of a Participant's
death, the Investment Plan Benefit Account shall be paid to the beneficiary
named in accordance with procedures established by the Manager or, in the
absence of a named beneficiary, to the Participant's beneficiary under the terms
of the Investment Plan, in a lump sum within 30 days after the Participant's
death.
ARTICLE VII
VESTING
Except as provided in 6.1.1(d), 6.1.1(f), 6.1.4, and in this
Article VII, a Participant's right to any benefit under the Plan is vested and
nonforfeitable at the same time as and to the
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<PAGE> 46
same extent as the Participant is vested in related plan benefits. In connection
with the designation of a Participant for any benefit under the Plan, the
Compensation Committee or the Executive Committee may specify different vesting
provisions for a particular benefit.
ARTICLE VIII
SOURCE OF BENEFITS
This Plan and the benefits payable hereunder shall be unfunded
and shall be payable only from the general assets of Bancorp or a Sponsoring
Employer. Bancorp and Sponsoring Employers do not represent that a specific
portion of their assets will be used to provide the benefits hereunder.
Participants, surviving spouses, and beneficiaries shall have no interest in any
specific assets of Bancorp or any Sponsoring Employer. Nothing contained herein
shall be deemed to create a trust of any kind or create any fiduciary
relationship. To the extent that any person acquires a right to receive payments
from Bancorp or any Sponsoring Employer under this Plan, such rights shall be no
greater than the rights of their unsecured general creditors. Notwithstanding
the foregoing, Bancorp and the Sponsoring Employer may deposit moneys under the
U. S. Bancorp Deferred Compensation Trust Agreement (the "Trust") for the
purpose of paying benefits hereunder from those moneys and the income thereon,
unless such Trust assets are required to satisfy the obligations of Bancorp and
the Sponsoring Employers to their general creditors.
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<PAGE> 47
ARTICLE IX
ADMINISTRATION OF THE PLAN
Except for matters specifically reserved to the Compensation
Committee, the Plan shall be administered by the Executive Committee. Except as
otherwise provided and subject to review and supervision by the Compensation
Committee, the Executive Committee shall have the authority and responsibility
for all matters in connection with the operation and administration of the Plan.
The Executive Committee's powers and duties shall include, but shall not be
limited to, the following:
(a) Responsibility for the compilation and maintenance of
all records necessary in connection with the Plan, including records of
Participant designations;
(b) Authorizing the payment of all benefits and expenses
of the Plan as they become payable under the Plan; and
(c) Authority to engage such legal, accounting, and other
professional services as it may deem proper.
Decisions by the Executive Committee shall be final and binding upon all parties
affected by the Plan, including the surviving spouses and beneficiaries of
Participants.
The Executive Committee may rely on information and
recommendations provided by supervisory management. The Executive Committee may
delegate to a subcommittee composed of less than all Executive Committee members
or to supervisory management who are not Executive Committee members, the
- 40 -
<PAGE> 48
responsibility for decisions that it may make or actions that it may take under
the terms of the Plan, subject to the reserved right of the Executive Committee
and the Compensation Committee to review such decisions or actions and modify
them when necessary or appropriate under the circumstances. The Executive
Committee shall not allow any employee to engage directly or indirectly in any
decisions or actions that affect that employee's Plan benefit.
ARTICLE X
MISCELLANEOUS
10.1 Nonassignability of Benefits. Benefits under this
Plan cannot be sold, transferred, anticipated, assigned, pledged, hypothecated,
seized by legal process, subjected to claims of creditors in any way, or
otherwise disposed of.
10.2 Governing Law. This Plan and any amendments shall be
construed, administered, and governed in all respects in accordance with
applicable federal law and the laws of the State of Oregon.
10.3 No Right of Continued Employment. Nothing in this
Plan shall be construed to give a Participant the right to remain an employee of
Bancorp or any of its affiliates, and Bancorp and its affiliates reserve the
right to discharge a Participant with or without cause at any time.
10.4 Withholding Taxes. Bancorp or the Sponsoring
Employer shall withhold any taxes required by law to be withheld in connection
with payment of benefits under this Plan.
- 41 -
<PAGE> 49
10.5 Severability. The invalidity or unenforceability of
any provision of this Plan shall not affect the validity or enforceability of
any other provision of this Plan, and each provision of this Plan shall be
severable and enforceable to the extent permitted by law.
ARTICLE XI
CLAIMS PROCEDURE
11.1 Initial Claim. Any person claiming a benefit under
this Plan ("Claimant") shall present the claim in writing to the Manager. Any
dispute with respect to a claim for benefits under 6.1.1(d) as to whether the
designated Participant's termination was for "Cause" or with "Good Reason"
shall, after compliance with the claims procedure of this Article XI, be
submitted to binding arbitration pursuant to 6.1.8.
11.2 Decision on Initial Claim.
11.2.1 Time Period for Denial Notice. A decision shall be
made on the claim as soon as practicable and shall be communicated in writing by
the Manager to the Claimant within a reasonable period after receipt of the
claim by the Manager. In no event shall the decision on an initial claim be
given more than 90 days after the date the claim was filed, unless special
circumstances require an extension of time for processing. If there is an
extension, the Claimant shall be notified of such within 90 days of the date the
claim was filed. The extension notice shall indicate the special circumstances
and the date by
- 42 -
<PAGE> 50
which a decision is expected. The extension shall not exceed 90 days from the
end of the initial response period.
11.2.2 Contents of Notice. If the claim is wholly or
partially denied, the notice of denial shall indicate:
(a) The specific reasons for the denial;
(b) The specific references to pertinent Plan provisions
on which the denial is based;
(c) A description of additional material or information
necessary for the Claimant to perfect the claim and an explanation of
why such material or information is necessary; and
(d) An explanation of the Plan's claim review procedure.
11.2.3 Deemed Denied. If written notice of the decision
wholly or partially denying the claim has not been furnished within 90 days
after the claim is filed or there has been an extension and no notice of a
decision is furnished by the end of the extension period, and if the claim has
not been granted within such period, the claim shall be deemed denied as of the
end of the 90-day or 180-day period for purposes of proceeding to the review
stage described in 11.3 and 11.4.
11.3 Review of Denied Claim. If a Claimant receives a notice
of denial or his or her claim is deemed denied pursuant to 11.2 above, the
Claimant may request a review of the claim. The request for review is made by
personally delivering or mailing a written request for review, prepared by
either the Claimant or
- 43 -
<PAGE> 51
his or her authorized representative, to the Executive Committee. The Claimant's
request for review must be made within a reasonable period of time taking into
consideration the nature of the benefit that is the subject of the claim and
other attendant circumstances. In no event shall the period for requesting
review expire less than 60 days after receipt of the notice of denial or the
date on which the claim is deemed denied if no notice is received. If the
written request for review is not made on a timely basis, the Claimant shall be
deemed to waive his or her right to review. The Claimant or his or her duly
authorized representative may, at or after the time of making the request,
review all pertinent documents and submit issues and comments in writing.
11.4 Decision on Review. A review shall be promptly made
by the Executive Committee after receipt of a timely filed request for review. A
decision on review shall be made and furnished in writing to the Claimant. The
decision shall be made not later than 60 days after receipt of the request for
review. If special circumstances require an extension of time for processing
(such as the need to hold a hearing), a decision shall be made and furnished to
the Claimant not later than 120 days after such receipt. If an extension is
required, the Claimant shall be notified of such within 60 days after the
request for review was filed. The written decision shall include the reasons for
such decision with reference to the provisions of the Plan upon which the
decision is based. The decision shall be final
- 44 -
<PAGE> 52
and binding upon the Claimant and Bancorp and its affiliates and all other
persons involved. If the decision on review is not furnished within the
applicable time period, the claim shall be deemed denied on review.
The scope of any subsequent review of the benefit claim,
judicial or otherwise, shall be limited to a determination as to whether the
Executive Committee acted arbitrarily or capriciously in the exercise of its
discretion. In no event shall any such further review be on a de novo basis as
the Executive Committee has discretionary authority to determine eligibility for
benefits and to construe the terms of this Plan.
ARTICLE XII
AMENDMENTS AND TERMINATION
Except as expressly provided in 6.1.1(d)(1) and
6.1.1(f)(7)(vi), the Board has the power to terminate this Plan at any time or
to amend this Plan at any time and in any manner that it may deem advisable.
IN WITNESS WHEREOF this amended and restated Plan was executed
this 17th day of February, 1994.
U. S. BANCORP
By: /s/
------------------
- 45 -
<PAGE> 53
U. S. BANCORP
SUPPLEMENTAL BENEFITS PLAN
EXHIBIT A
RETIREMENT PLAN BENEFIT
(REFERENT SECTION 6.1.1(a))
A.1 Normal Retirement Benefit . Upon retirement at normal
retirement date, a Participant is entitled to receive a monthly benefit payable
for life, in an amount equal to the sum of the Participant's benefits under (A),
(B) and (C) below but no less than the minimum benefit under (D) below as
follows, except that the accrued normal retirement benefit of a Participant who
was covered under the Peoples Ban Corporation Employee Pension Plan ("Peoples
Pension Plan") before 1988, shall be determined as provided separately in this
section.
(A) 1.3 percent of the Participant's Average Monthly
Compensation, multiplied by the Participant's years and fractions
thereof of Benefit Service up to 25 years.
(B) .4 percent of the Participant's Average Monthly
Compensation in excess of Covered Compensation multiplied by the
Participant's years and fractions thereof of Benefit Service up to 25
years.
(C) .5 percent of the Participant's Average Monthly
Compensation multiplied by the Participant's years and fractions
thereof of Benefit Service in excess of 25 years of Benefit Service.
- 1 -
<PAGE> 54
(D) Minimum Benefit . Notwithstanding the foregoing, no
Participant who is a Highly Compensated Employee as defined in Code
Section 414(q)(1)(A) or (B) shall have a lesser accrued monthly normal
retirement benefit than such Participant had as of December 31, 1988,
and no other Participant shall have a lesser accrued monthly normal
retirement benefit than such Participant had as of January 30, 1990.
In no event shall the normal retirement benefit be less than the highest early
retirement benefit to which the Participant was entitled.
For the purpose of calculating the accrued benefit payable as
a life annuity at normal retirement age, the formula to be used for a
Participant who had an accrued benefit under the Peoples Pension Plan as of
December 31, 1987, or who had a reinstatable benefit under the Peoples Pension
Plan as of that date that was subsequently reinstated, shall be the formula set
forth above, except that the percentage in A.1(A) shall be 1 percent instead of
1.3 percent with respect to that portion of the Participant's first 25 years of
Benefit Service prior to January 1, 1988.
A.2 Maximum Annual Benefit . No benefit shall be payable with
respect to a Participant which is based on Compensation in excess of the amount
that can be used for computing benefits under an income tax qualified plan,
$200,000 as of January 1, 1989, and $150,000 as of January 1, 1994, as
- 2 -
<PAGE> 55
provided in the Retirement Plan, or which exceeds the limitations of Code
Section 415 as set forth therein.
A.3 Compensation . Compensation for determining Average
Monthly Compensation shall have the meaning given that term in Code Section
415(c)(3) and Treasury Regulation Section 1.415-2(d) thereunder, except that
Compensation shall include only nondeferred amounts paid in cash and determined
prior to any reduction for elective before-tax contributions under the U. S.
Bancorp Investment Plan or any Code Section 401(k) cash or deferred arrangement,
and prior to any reduction for salary reduction contributions under a Code
Section 125 cafeteria plan.
A.4 Average Monthly Compensation . Average Monthly
Compensation is the monthly average of an eligible employee's Compensation
during the highest five of the last ten calendar years or the monthly average
during the last 60 consecutive months of service, if greater.
A.5 Covered Compensation . Covered Compensation is
current monthly 35-year average maximum earnings which may be considered wages
subject to Social Security taxation which shall be determined for each
Participant according to the year the Participant attains Social Security
retirement age as of which unreduced benefits are payable. Covered Compensation
will be changed and this Exhibit A will be automatically changed whenever the
maximum earnings currently subject to Social Security tax are changed and such
change is approved by the Internal Revenue Service. The current Covered
Compensation is set forth in
- 3 -
<PAGE> 56
Appendix I, which is attached hereto and incorporated by reference herein, which
may be replaced without formal Plan amendment upon a change in that Covered
Compensation as described above.
A.6 Benefit Guidelines . As the benefit payable under 6.1
as of any date relates to the benefit accrued or but for the applicable
limitations or other restrictions would have been accrued under the U. S.
Bancorp Retirement Plan as of that date, the actuarial equivalent value of the
benefit payable under this Plan shall be neither more nor less than the
actuarial equivalent value of the benefit under this Plan determined in relation
to that Retirement Plan as if it was fully set forth in this Plan.
- 4 -
<PAGE> 57
U. S. BANCORP
SUPPLEMENTAL BENEFITS
EXHIBIT A
APPENDIX I
COVERED COMPENSATION
<TABLE>
<CAPTION>
1993 1994
Monthly Monthly
Year of Covered Covered
Birth Compensation Compensation
----- ------------ ------------
<S> <C> <C>
1926 $1,644 $1,644
1927 1,766 1,766
1928 1,893 1,893
1929 2,019 2,026
1930 2,144 2,159
1931 2,270 2,291
1932 2,396 2,424
1933 2,521 2,557
1934 2,647 2,690
1935 2,773 2,823
1936 2,894 2,951
1937 3,016 3,080
1938 3,253 3,331
1939 3,371 3,457
1940 3,490 3,583
1941 3,606 3,706
1942 3,717 3,824
1943 3,823 3,937
1944 3,926 4,048
1945 4,027 4,156
1946 4,125 4,261
1947 4,220 4,363
1948 4,303 4,453
1949 4,378 4,535
1950 4,445 4,609
1951 4,505 4,676
1952 4,557 4,735
1953 4,604 4,790
1954 4,647 4,840
1955 4,717 4,924
1956 4,747 4,961
1957 4,770 4,991
1958 4,785 5,013
1959 4,795 5,030
1960 4,800 5,042
1961 and later 4,800 5,050
</TABLE>
<PAGE> 58
U. S. BANCORP
FIRST AMENDMENT
TO THE
U. S. BANCORP AMENDED AND RESTATED
SUPPLEMENTAL BENEFITS PLAN
THIS FIRST AMENDMENT is adopted by U. S. Bancorp, an Oregon
corporation ("Bancorp"), effective April 19, 1994.
RECITALS
A. Bancorp adopted the U. S. Bancorp Supplemental
Benefits Plan (the "Plan") effective January 1, 1985;
B. Bancorp last amended and restated the Plan effective
February 17, 1994; and
C. Bancorp desires to further amend the Plan.
AMENDMENT
Pursuant to Article XII of the Plan, Bancorp further amends
the Plan effective April 19, 1994, as follows:
ARTICLE VI - BENEFITS
A new 6.1.1(f)(8) is added at page 23.
A new 6.1.1(h) is added at pages 26, 26a, 26b, and 26c.
This First Amendment is executed as of the date indicated
below:
U. S. BANCORP
By /s/
------------------------------
Judith L. Rice
Date: April 19, 1994
<PAGE> 59
U. S. BANCORP
SECOND AMENDMENT
TO THE
U. S. BANCORP AMENDED AND RESTATED
SUPPLEMENTAL BENEFITS PLAN
THIS SECOND AMENDMENT is adopted by U. S. Bancorp, an Oregon
corporation ("Bancorp"), effective June 15, 1994.
RECITALS
A. Bancorp adopted the U. S. Bancorp Supplemental
Benefits Plan (the "Plan") effective January 1, 1985;
B. Bancorp last amended and restated the Plan effective
April 19, 1994; and
C. Bancorp desires to further amend the Plan.
AMENDMENT
Pursuant to Article XII of the Plan, Bancorp further amends
the Plan effective June 15, 1994, as follows:
ARTICLE VI - BENEFITS
Existing 6.1.1(g) is amended at page 23(a).
This Second Amendment is executed as of the date indicated
below:
U. S. BANCORP
By: /s/
-------------------------
Judith L. Rice
Date: June 15, 1994
<PAGE> 1
U. S. BANCORP
1991 EXECUTIVE DEFERRED COMPENSATION PLAN
FIRST RESTATEMENT
This RESTATED 1991 EXECUTIVE DEFERRED COMPENSATION PLAN (the
"Plan") is adopted by U. S. Bancorp, an Oregon corporation ("Bancorp"),
effective February 21, 1991.
ARTICLE I
PURPOSE OF PLAN
The continued growth and success of Bancorp are dependent upon
its ability to attract and retain the services of key executives of the highest
competence and to provide incentives for their effective service and superior
performance. The purpose of the Plan is to advance the interests of Bancorp and
its shareholders through a deferred compensation program that will attract and
retain key executives.
ARTICLE II
NATURE OF PLAN
This Plan is intended to be and shall be administered by
Bancorp as an income tax nonqualified, unfunded plan primarily for the purpose
of providing deferred compensation for a "select group of management or highly
compensated employees" within the meaning of Sections 201(2), 301(a)(3), and
401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended.
- 1 -
<PAGE> 2
ARTICLE III
SPONSORING EMPLOYERS
The corporations whose employees are covered by the Plan (the
"Sponsoring Employers") are Bancorp and those subsidiaries of Bancorp that adopt
the U. S. Bancorp Supplemental Benefits Plan or adopt this Plan.
ARTICLE IV
ELIGIBILITY
Any key executive (including officers who may also be
directors) of Bancorp and the Sponsoring Employers who is (or will be) for one
or more calendar years a participant in the U. S. Bancorp Supplemental Benefits
Plan, and any other key employee of Bancorp or a Sponsoring Employer who is
designated by Bancorp's Executive Management Committee (the "Committee") as
eligible to participate in the Plan for one or more calendar years, shall be
eligible to participate in this Plan ("Eligible Employees").
ARTICLE V
PARTICIPATION
5.1 ELECTION. An Eligible Employee may participate in the
Plan by filing with Bancorp an election, on a form provided by Bancorp (an
"Election"), to participate in the Plan for one or more calendar years. An
Eligible Employee who makes an Election for a calendar year shall be a
"Participant" for such year. For purposes of this Plan, the period from April 1,
1991, through December 31, 1991 (the "1991 Plan Year"), shall be treated as a
calendar year. Each Election shall be in a form prescribed by
Third Amendment
- 2 - November 16, 1995
<PAGE> 3
the Manager of Bancorp's Human Resources Group or his or her delegate (the
"Manager"), and shall set forth the Participant's election to participate in the
Plan for one or more calendar years, the percentage or amount of Compensation
(as defined in Section 5.4) to be deferred for each such calendar year, and a
payment method pursuant to Section 8.1. A Participant may elect to defer all or
any specified portion of Compensation for a calendar year. The portion of a
Participant's Compensation deferred under the Plan shall be referred to as the
"Deferred Amount."
5.2 ELECTION FOR 1991 PLAN YEAR. A Participant must file
an Election to defer a specified portion of Compensation during the 1991 Plan
Year on or prior to March 31, 1991.
5.3 TIME FOR FILING ELECTION; AMENDMENT OR TERMINATION OF
ELECTION. An Election to defer Compensation for any calendar year after 1991
must be filed with the Manager on or before December 31 next preceding such
calendar year. An Election covering one or more calendar years may be amended or
terminated by filing an Amendment or Termination of Deferral Election in a form
prescribed by the Manager not later than December 31 next preceding the first
calendar year covered by such amended or terminated Election. An Election for
any calendar year may not be amended, modified, revoked, or terminated after the
beginning of such calendar year. A Participant who has made an Election covering
more than one calendar year and who ceases to be an Eligible Employee shall be
Second Amendment
- 3 - December 15, 1992
<PAGE> 4
deemed to have terminated his or her Election for all remaining calendar years
covered by his or her Election which begin after the Participant ceases to be an
Eligible Employee.
5.4 COMPENSATION. For purposes of this Article V,
"Compensation" means regular cash compensation, including any awards or bonuses
payable under any incentive compensation plan or program maintained by the
Sponsoring Employers, other than the plans described in paragraph (d) of this
Section 5.4. For purposes of this Section 5.4, "Compensation" does not include:
Second Amendment
- 3a - December 15, 1992
<PAGE> 5
(a) employee elected contributions towards the purchase
of any benefit in lieu of cash under the U. S. Bancorp U-Select Plan or
any other cafeteria plan of Bancorp as defined in Section 125 of the
Internal Revenue Code of 1986 (the "Code");
(b) any employee elected contributions under the U. S.
Bancorp Employee Investment Plan or any other plan under Code Section
401(k);
(c) any other similar employee elected contribution or
purchase of benefits under any plan specifically designated for such
purpose by the Committee; or
(d) incentive compensation under any plan or program of
the Sponsoring Employers which is designated by the Committee as
ineligible for deferral under the Plan.
ARTICLE VI
DEFERRED ACCOUNTS
6.1 DEFERRED ACCOUNTS. All Deferred Amounts shall be
withheld and credited to the Participant's "Deferred Account" at the time the
Compensation would otherwise be payable. Each Deferred Account shall be
maintained solely for recordkeeping purposes.
6.2 INTEREST. With respect to Deferred Amounts credited
to a Deferred Account prior to December 31, 1995, each Deferred Account shall
accrue an additional amount (computed like
Third Amendment
- 4 - November 16, 1995
<PAGE> 6
interest compounded quarterly) from the date Deferred Amounts are credited to
the Deferred Account pursuant to Section 5.1 until:
(a) With respect to Participants for whom payment of
their Deferred Accounts becomes due or commences on or before January
1, 1996, the date of final payment of the balance of the Deferred
Account; and
(b) With respect to all other Participants, December 31,
1995.
The rate of interest during a calendar year shall equal the monthly average
interest rate on five-year Treasury Notes for the month
First Amendment
- 4b - August 20, 1992
<PAGE> 7
of November prior to that calendar year, as published in the Federal Reserve
Statistical Release G.13 (or a corresponding successor publication as determined
by the Committee), plus 75 basis points.
6.3 ADDITIONAL AMOUNTS CREDITED AS GROWTH FACTOR.
(a) General. For all periods beginning on or after
January 1, 1996, each Deferred Account (other than Deferred Accounts in payout
status on December 31, 1995) will accrue an additional amount as described in
this section ("Growth Factor") from the date Deferred Amounts are credited to
the Deferred Account pursuant to Section 5.1 until the date of final payment of
the balance of the Deferred Account.
(b) Growth Factor. For each Deferred Account, the Growth
Factor for any period will be the amount of investment income that would have
been realized had an amount equal to the total balance of the Deferred Account
as of the first day of the period been invested in the Hypothetical Investment
or Investments (as described in Section 6.3(c)) specified for that period by the
Participant.
(c) Hypothetical Investments. For purposes of measuring
Growth Factor, a Participant may designate one or a combination of Hypothetical
Investments authorized from time to time by, or at the direction of, the
Manager. The Hypothetical Investment or combination of Hypothetical Investments
designated by a Participant will be referred to as the Participant's "Investment
Selection." Pursuant to forms and procedures to be
Third Amendment
- 5 - November 16, 1995
<PAGE> 8
adopted by or at the direction of the Manager, a Participant may modify the
Investment Section from time to time, effective as of the first day of any
calendar quarter. The Manager may designate a Hypothetical Investment that will
be effective if a Participant does not otherwise make an effective Investment
Selection. A Participant's Investment Selection will be effective for all
amounts credited to the Participant's Deferred Account, including previous
Deferred Amounts and accrued Growth Factor as well as future Deferred Amounts.
(d) No Beneficial Interest. Hypothetical Investments are
solely for the purpose of determining the amount of Growth Factor to be credited
to Deferred Accounts. The Sponsoring Employers have no obligation to make actual
investments corresponding to the Hypothetical Investments. In the event that,
for measurement purposes, the Sponsoring Employers (directly or through the U.
S. Bancorp Deferred Compensation Trust) make actual investments corresponding to
the Investment Selections of the Participants, no Participant will have any
rights or beneficial interest in such actual investments greater than the rights
of an unsecured creditor of Bancorp or the Sponsoring Employer.
ARTICLE VII
SOURCE OF BENEFITS
7.1 UNFUNDED PLAN. This Plan and the benefits payable
hereunder shall be unfunded and shall be payable only from the general assets of
Bancorp or Sponsoring Employers. Bancorp and
Third Amendment
- 5a - November 16, 1995
<PAGE> 9
the Sponsoring Employers do not represent that a specific portion of their
assets will be used to provide the benefits hereunder. Participants or
beneficiaries shall not have any interest in any assets of Bancorp or a
Sponsoring Employer. Nothing contained herein shall be deemed to create a trust
of any kind or create any fiduciary relationship. To the extent that any person
acquires a right to receive payments from Bancorp or any Sponsoring Employer
under this Plan, such rights shall be no greater than the right of any unsecured
general creditor of Bancorp or such Sponsoring Employer.
7.2 TRUST. Notwithstanding the foregoing, Bancorp and its
Sponsoring Employers may deposit monies under the U. S. Bancorp Deferred
Compensation Trust Agreement (the "Trust") for the purpose of paying benefits
hereunder from those monies and the income thereon, unless such Trust assets are
required to satisfy the obligations of Bancorp and its Sponsoring Employers to
their general creditors.
Third Amendment
- 5b - November 16, 1995
<PAGE> 10
ARTICLE VIII
PAYMENT OF DEFERRED COMPENSATION
8.1 PAYMENT OPTIONS.
(A) ELECTION. Each Participant shall set forth in each
Election an irrevocable election of one of the methods of payment of the accrued
balance of the Participant's Deferred Account described in Section 8.1(b). If no
method of payment is effectively elected, a Participant's Deferred Account shall
be paid in cash in a single lump sum within 30 days following the Retirement
Year.
(B) PAYMENT METHODS. A Participant may elect one of the
following payment methods:
(i) A lump-sum cash payment to be made within 30 days
following the calendar year in which the Participant retires under the
U. S. Bancorp Retirement Plan (the "Retirement Year"); or
(ii) Payment in ten annual installments as described below
beginning within 30 days following the Retirement Year:
(A) The first installment will be an amount
equal to one-tenth of the total balance of the Deferred
Account as of the last day of the Retirement Year;
(B) The second (and subsequent) installments
will be an amount equal to one-ninth (and then one-eighth,
etc.) of the
Third Amendment
- 6 - November 16, 1995
<PAGE> 11
total balance of the Deferred Account as of the end of the
calendar year preceding the installment payment date; and
(C) The tenth and final installment will be the
total remaining balance of the Deferred Account.
During the 10-year payout period, the Deferred Account will continue to
accrue Growth Factor, and the Participant may continue to make or
modify Investment Selections, as provided in Section 6.3.
8.2 DEATH BENEFIT. If a Participant dies before receiving
full payment of the Deferred Account, the balance shall be paid in a lump-sum
cash payment to the Participant's beneficiary or, if no beneficiary has been
effectively designated, to the Participant's estate within 30 days after a
Participant's death.
8.3 ACCELERATION OF PAYMENT. The Committee, in its sole
discretion, may accelerate payment of the balance of a Deferred Account if a
Participant requests payment and the Committee finds that an unforeseeable
emergency exists, but only
Third Amendment
- 6a - November 16, 1995
<PAGE> 12
to the extent needed to satisfy the emergency. An unforeseeable emergency is a
severe financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a dependent (as defined
in Section 152(a) of the Code) of the Participant, loss of the Participant's
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant. The circumstances that will constitute an unforeseeable emergency
will depend upon the facts of each case, but, in any case, payment may not be
made to the extent that such hardship is or may be relieved--
(a) Through reimbursement or compensation by insurance or
otherwise;
(b) By liquidation of the Participant's assets, to the
extent the liquidation of such assets would not itself cause severe
financial hardship; or
(c) By cessation of deferrals under the Plan. Examples of
what are not considered to be unforeseeable emergencies include the
need to send a Participant's child to college or the desire to purchase
a home.
8.4 TERMINATION. If a Participant ceases to be employed
by Bancorp and its subsidiaries for any reason other than death or retirement,
the Committee shall pay the balance of the Participant's Deferred Account in a
lump-sum cash payment within 30 days after the Participant's termination.
- 7 -
<PAGE> 13
ARTICLE IX
ADMINISTRATION
The Plan shall be administered by the Committee. The Committee
shall have the exclusive authority and responsibility for all matters in
connection with the operation and administration of the Plan. The Committee's
powers and duties shall include, but shall not be limited to, the following:
(a) Responsibility for the compilation and maintenance of
all records necessary in connection with the Plan;
(b) Authorizing the payment of all benefits and expenses
of the Plan as they become payable under the Plan; and
(c) Authority to engage such legal, accounting, and other
professional services as it may deem proper.
Decisions by the Committee shall be final and binding upon all
parties affected by the Plan, including Participants and the beneficiaries of
Participants.
The Committee may rely on information and recommendations
provided by supervisory management. The Committee may delegate to a subcommittee
composed of less than all Committee members or to supervisory management who are
not Committee members the responsibility for decisions that it may make or
actions that it may take under the terms of the Plan, subject to the Committee's
reserved right to review such
- 8 -
<PAGE> 14
decisions or actions and modify them when necessary or appropriate under the
circumstances. The Committee shall not allow any employee to obtain control over
decisions or actions that affect that employee's Plan benefits.
ARTICLE X
MISCELLANEOUS
10.1 NONASSIGNABILITY OF BENEFITS. A Participant's
benefits under the Plan, including the right to receive payment of the Deferred
Account, cannot be sold, transferred, anticipated, assigned, pledged,
hypothecated, seized by legal process, subjected to claims of creditors in any
way, or otherwise disposed of.
10.2 GOVERNING LAW. This Plan and any amendments shall be
construed, administered, and governed in all respects in accordance with
applicable federal law and the laws of the State of Oregon.
10.3 NO RIGHT OF CONTINUED EMPLOYMENT. Nothing in the Plan
shall confer upon any person the right to continue in the employ of Bancorp or
any Sponsoring Employer or interfere in any way with the right of Bancorp or any
Sponsoring Employer to terminate the person's employment at any time.
10.4 WITHHOLDING TAXES. Bancorp or the Sponsoring Employer
shall withhold any taxes required by law to be withheld in connection with
payment of deferred compensation under this Plan. In the event Bancorp or any
Sponsoring Employer shall be required to withhold taxes with respect to
- 9 -
<PAGE> 15
amounts deferred pursuant to the Plan, Bancorp or the Sponsoring Employer shall
have the right to require a Participant to reimburse them for any such taxes.
ARTICLE XI
CLAIMS PROCEDURE
11.1 INITIAL CLAIM. Any person claiming any benefit under
this Plan (the "Claimant") shall present a claim in writing (a "Claim") to the
Manager of the Human Resources Group (the "Manager").
11.2 DECISION ON INITIAL CLAIM.
(a) Time Period for Denial Notice. A decision shall be
made on the Claim as soon as practicable and shall be communicated in writing by
the Manager to the Claimant within a reasonable period after receipt of the
Claim by the Manager. In no event shall the decision on an initial Claim be
given more than 90 days after the date the Claim was filed, unless special
circumstances require an extension of time for processing. If there is an
extension, the Claimant shall be notified of such within 90 days of the date the
Claim was filed. The extension notice shall indicate the special circumstances
and the date by which a decision is expected. The extension shall not exceed 90
days from the end of the initial response period.
(b) Contents of Notice. If the Claim is wholly or
partially denied, the Claimant shall be given a written notice of denial which
shall indicate:
- 10 -
<PAGE> 16
(1) The specific reasons for the denial;
(2) The specific references to pertinent Plan provisions
on which the denial is based;
(3) A description of additional material or information
necessary for the Claimant to perfect the Claim and an explanation of
why such material or information is necessary; and
(4) An explanation of the Plan's Claim review procedure.
(c) Deemed Denied. If written notice of the decision
wholly or partially denying the Claim has not been furnished within 90 days
after the Claim is filed or there has been an extension and no notice of a
decision is furnished by the end of the extension period, and if the Claim has
not been granted within such period, the Claim shall be deemed denied as of the
end of the 90-day or 180-day period for purposes of proceeding to the review
stage described in 11.3 and 11.4.
11.3 REVIEW OF DENIED CLAIM. If a Claimant receives a
notice of denial or his or her Claim is deemed denied pursuant to 11.2 above,
the Claimant may request a review of the Claim. The request for review is made
by personally delivering or mailing a written request for review, prepared by
either the Claimant or his or her authorized representative, to the Committee.
The Claimant's request for review must be made within a reasonable period of
time taking into consideration the nature of the benefit which is the
- 11 -
<PAGE> 17
subject of the Claim and other attendant circumstances. In no event shall the
period for requesting review expire less than 60 days after receipt of the
notice of denial or the date on which the Claim is deemed denied if no notice is
received. If the written request for review is not made on a timely basis, the
Claimant shall be deemed to waive his or her right to review. The Claimant or
his or her duly authorized representative may, at or after the time of making
the request, review all pertinent documents and submit issues and comments in
writing.
11.4 DECISION ON REVIEW. A review shall be promptly made
by the Committee after receipt of a timely filed request for review. A decision
on review shall be made and furnished in writing to the Claimant. The decision
shall be made not later than 60 days after receipt of the request for review. If
special circumstances require an extension of time for processing (such as the
need to hold a hearing), a decision shall be made and furnished to the Claimant
not later than 120 days after such receipt. If an extension is required, the
Claimant shall be notified of such within 60 days after the request for review
was filed. The written decision shall include the reasons for such decision with
reference to the provisions of the Plan upon which the decision is based. The
decision shall be final and binding upon the Claimant and Bancorp and its
subsidiaries and all other persons involved. If the decision on review is not
furnished within the applicable time period, the Claim shall be deemed denied on
review.
- 12 -
<PAGE> 18
The scope of any subsequent review of the benefit Claim,
judicial or otherwise, shall be limited to a determination as to whether the
Committee acted arbitrarily or capriciously in the exercise of its discretion.
In no event shall any such further review be on a de novo basis as the Committee
has discretionary authority to determine eligibility for benefits and to
construe the terms of this Plan.
ARTICLE XII
AMENDMENTS AND TERMINATION
Bancorp's Board of Directors has the power to terminate this
Plan at any time or to amend this Plan at any time and in any manner that it may
deem advisable. In the event of termination of the Plan, compensation deferred
pursuant to the Plan prior to the effective date of the termination shall
continue to be subject to the provisions of the Plan as if the Plan had not been
terminated.
IN WITNESS WHEREOF this Restated Plan was executed as of
the 15th day of December, 1992.
U. S. BANCORP
By: /s/
---------------------------
Judith L. Rice,
Executive Vice President
- 13 -
<PAGE> 19
U. S. BANCORP
1991 EXECUTIVE DEFERRED COMPENSATION PLAN
FIRST RESTATEMENT
FIRST AMENDMENT
THIS FIRST AMENDMENT is adopted by U. S. Bancorp, an
Oregon corporation ("Bancorp"), effective October 15, 1992.
RECITALS
A. Bancorp adopted the First Restatement of the U. S.
Bancorp 1991 Deferred Compensation Plan (the "Plan") effective February 21,
1991; and
B. Bancorp desires to amend the Plan effective October
15, 1992.
AMENDMENT
Pursuant to Article XII of the Plan, Bancorp amends the Plan
effective October 15, 1992, as follows:
ARTICLE V - PARTICIPATION
Section 5.4 is revised at pages 3, 4, and 4a.
This First Amendment is executed as of the date indicated
below.
U. S. BANCORP
By: /s/
---------------------------
Judith L. Rice
Date: October 15, 1992
<PAGE> 20
U. S. BANCORP
1991 EXECUTIVE DEFERRED COMPENSATION PLAN
FIRST RESTATEMENT
SECOND AMENDMENT
THIS SECOND AMENDMENT is adopted by U. S. Bancorp, an Oregon
corporation ("Bancorp"), effective December 15, 1992.
RECITALS
A. Bancorp adopted the First Restatement of the U. S.
Bancorp 1991 Deferred Compensation Plan (the "Plan") effective February 21,
1991;
B. Bancorp previously amended the Plan effective October
15, 1992; and
C. Bancorp desires to further amend the Plan effective
December 15, 1992.
AMENDMENT
Pursuant to Article XII of the Plan, Bancorp amends the Plan
effective December 15, 1992, as follows:
(1) Article IV is revised at page 2.
(2) Sections 5.1 and 5.3 of Article V
are revised at pages 2, 3, and 3a.
This Second Amendment is executed as of the date indicated
below.
U. S. BANCORP
By /s/
------------------------
Judith L. Rice
<PAGE> 21
U. S. BANCORP
1991 EXECUTIVE DEFERRED COMPENSATION PLAN
FIRST RESTATEMENT
THIRD AMENDMENT
THIS THIRD AMENDMENT is adopted by U. S. Bancorp, an
Oregon corporation ("Bancorp"), effective November 16, 1995.
RECITALS
A. Bancorp adopted the First Restatement of the U. S.
Bancorp 1991 Deferred Compensation Plan (the "Plan") effective February 21,
1991;
B. Bancorp previously amended the Plan effective October
15, 1992, and December 15, 1992; and
C. Bancorp desires to further amend the Plan effective
November 16, 1995.
AMENDMENT
Pursuant to Article XII of the Plan, Bancorp amends the Plan
effective November 16, 1995, as follows:
(1) Articles III and IV are revised at page 2.
(2) Section 5.4(d) of Article V is revised at page 4.
(3) Section 6.2 of Article VI is revised at page 4a.
(4) New Section 6.3 is added to Article VI at pages 5,
5a, and 5b.
(5) Section 8.1 of Article VIII is amended at pages 6 and
6a.
This Third Amendment is executed as of the date indicated
below.
U. S. BANCORP
By: /s/
---------------------------
Judith L. Rice
Date: November 16, 1995
<PAGE> 1
Exhibit 10.13
[U. S. Bancorp Letterhead]
June 23, 1995
Mr. Gerry B. Cameron
Chairman of the Board and
Chief Executive Officer
U. S. Bancorp
111 S.W. Fifth Avenue, T-31
Portland, Oregon 97204
Subject: CHANGE IN CONTROL AGREEMENT
(Three-Year Benefit)
Dear Mr. Cameron:
This letter agreement amends and replaces the letter agreement
dated August 19, 1993, between you and U. S. Bancorp. Upon execution of this
letter agreement, the August 19, 1993, letter agreement will be entirely
superseded. This amendment was specifically authorized by the U. S. Bancorp
Board of Directors on June 15, 1994.
U. S. Bancorp (which, together with its wholly-owned
subsidiaries, is referred to as "Bancorp") considers the establishment and
maintenance of its key management group to be essential to the best interests of
Bancorp and its shareholders. Bancorp recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control may arise and
that the attendant uncertainty may result in the departure or distraction of key
management personnel to the detriment of Bancorp and its shareholders.
Accordingly, the Board of Directors of Bancorp (the "Board") has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of key members of Bancorp's management without
distraction from the possibility of a change in control of Bancorp. The Board
believes it important that, in the event of a proposal for transfer of control
of Bancorp, you be able to assess the proposal and advise the Board without
being influenced by the uncertainties of your own situation. The Board also
considers Bancorp's management one of Bancorp's most valuable assets and wishes
to take appropriate steps to preserve the management group through the
uncertainties which may attend any potential transaction involving a change in
control.
In order to induce you to remain in the employ of Bancorp,
this letter Agreement, which has been approved by the Board, sets forth the
severance compensation which Bancorp agrees will be provided to you in the event
your employment with Bancorp
<PAGE> 2
Mr. Gerry B. Cameron - 2 - June 23, 1995
is terminated subsequent to a "Change In Control" of Bancorp under the
circumstances described below.
1. Definitions. For purposes of this Agreement, the
following terms will have the meanings set forth in this Section 1.
"Agreement" - This letter agreement, including any extensions
of the term of this Agreement pursuant to Section 3.
"Bancorp" - U. S. Bancorp, an Oregon corporation, and its
wholly-owned subsidiaries.
"Bancorp Shares" - Shares of the $5 par value common stock of
Bancorp.
"Benefit Plan" - Any plan, policy, or program of Bancorp
(whether or not on an insured basis) providing medical, dental, health,
disability income, life insurance or other death benefits, or similar types of
benefits to employees of Bancorp. Benefit Plan does not include any plan or
arrangement providing for vacation pay, bonuses or incentive compensation of any
kind, or current or deferred salary or similar compensation.
"Board" - The Bancorp board of directors.
"Cause" - Cause for termination shall mean commission of an
act of fraud, embezzlement, or theft constituting a felony or commission of an
act (or failure to take an action) intentionally against the interest of Bancorp
which causes Bancorp material injury. Notwithstanding the foregoing, you shall
not be deemed to have been terminated for Cause unless and until there shall
have been delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds of the entire membership of the
Board at a meeting of the Board called and held for the purpose (after
reasonable notice to you and an opportunity for you, together with your counsel,
to be heard before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct constituting Cause as defined in this Agreement
and specifying the particulars thereof in detail. The foregoing provisions shall
not restrict the authority, discretion, or power of the Board, by any action
taken in compliance with Bancorp's articles of incorporation and bylaws, to
terminate your employment with or without Cause. Rather, the foregoing
provisions merely define, for purposes of your contractual rights and remedies
under this
<PAGE> 3
Mr. Gerry B. Cameron - 3 - June 23, 1995
Agreement, the circumstances in which termination of your employment will
constitute termination for Cause.
"Change in Control" - A change in control of Bancorp shall
mean:
(a) A change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A as in effect on the date hereof pursuant to the Exchange
Act; provided that, without limitation, such a change in control shall
be deemed to have occurred at such time as any Person hereafter becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of 30 percent or more of the combined
voting power of Bancorp Voting Securities; or
(b) During any period of 12 consecutive calendar months,
individuals who at the beginning of such period constitute the Board
cease for any reason to constitute at least a majority thereof unless
the election, or the nomination for election, by Bancorp shareholders
of each new director was approved by a vote of at least a majority of
the directors then still in office who were directors at the beginning
of the period; or
(c) There shall be consummated (i) any consolidation or
merger of Bancorp in which Bancorp is not the continuing or surviving
corporation or pursuant to which Voting Securities (other than
fractional shares) would be converted into cash, securities, or other
property, other than a merger of Bancorp in which the holders of Voting
Securities immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately
after the merger, or (ii) any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of a majority
(by value) of the assets of Bancorp, provided that any such
consolidation, merger, sale, lease, exchange, or other transfer
consummated at the insistence of an appropriate banking regulatory
agency shall not constitute a Change in Control; or
<PAGE> 4
Mr. Gerry B. Cameron - 4 - June 23, 1995
(d) Approval by the shareholders of Bancorp of any plan
or proposal for the liquidation or dissolution of Bancorp.
"Code" - The Internal Revenue Code of 1986, as amended.
"Date of Termination" - Shall mean (a) if this Agreement is
terminated for Disability, 30 days after Notice of Termination is given
(provided that you shall not have returned to the performance of your duties on
a full-time basis within such 30-day period), or (b) if your employment is
terminated for any other reason, the date on which a Notice of Termination is
given; provided that if within 30 days after any Notice of Termination is given
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties or by a final judgment, order, or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected). The term of this Agreement shall be extended
until the Date of Termination.
"Disability" - Termination of your employment with Bancorp for
"Disability" shall mean termination because of (a) your absence from your duties
with Bancorp on a full-time basis for 180 consecutive days as a result of your
incapacity due to physical or mental illness and (b) your failure to return to
performance of your duties with Bancorp on a full-time basis within 30 days
after a written Notice of Termination is given to you.
"Excess Parachute Payment" - A payment as defined in Section
280G(b) of the Code.
"Exchange Act" - The Securities Exchange Act of 1934, as
amended.
"Excise Tax" - A tax imposed by Section 4999(a) of the Code,
or any successor provision, with respect to Excess Parachute Payments.
"Good Reason" - Termination by you of your employment for
"Good Reason" shall mean termination based on any of the following:
<PAGE> 5
Mr. Gerry B. Cameron - 5 - June 23, 1995
(a) a change in your status or position or positions with
Bancorp which, in your reasonable judgment, represents a demotion from
your status or position or positions as in effect immediately prior to
the Change in Control, or a change in your duties or responsibilities
which, in your reasonable judgment, is inconsistent with such status or
position or positions, or any removal of you from or any failure to
reappoint or reelect you to such position or positions, except in
connection with the termination of your employment for Cause or
Disability or as a result of your death or the termination by you other
than for Good Reason;
(b) a reduction by Bancorp in your base salary as in
effect immediately prior to the Change in Control;
(c) the failure by Bancorp to continue in effect any Plan
in which you are participating at the time of the Change in Control (or
Plans providing you with at least substantially similar benefits),
other than as a result of the normal expiration of any such Plan in
accordance with its terms or a modification of such Plan which
modification is applicable to all employees who participate in such
Plan, as in effect at the time of the Change in Control, or the taking
of any action, or the failure to act, by Bancorp which would adversely
affect your continued participation in any of such Plans on at least as
favorable a basis to you as is the case on the date of the Change in
Control or which would materially reduce your benefits in the future
under any of such Plans or deprive you of any material benefit enjoyed
by you at the time of the Change in Control;
(d) the failure by Bancorp to provide and credit you with
the number of paid vacation days to which you are then entitled in
accordance with Bancorp's normal vacation policy as in effect
immediately prior to the Change in Control;
(e) Bancorp's requiring you to be based anywhere more
than 35 miles from where your office is located immediately prior to
the Change in Control except for required travel on Bancorp's business
to an extent substantially consistent with the business travel
<PAGE> 6
Mr. Gerry B. Cameron - 6 - June 23, 1995
obligations which you undertook on behalf of Bancorp prior to the
Change in Control;
(f) the failure by Bancorp to obtain from any successor
the assent to this Agreement contemplated by subsection 6(a) hereof;
(g) any purported termination by Bancorp of your
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of this Agreement; and for purposes of this
Agreement, no such purported termination shall be effective; or
(h) any refusal by Bancorp to continue to allow you to
attend to matters or engage in activities not directly related to the
business of Bancorp which, prior to the Change in Control, you were
permitted by the Board to attend to or engage in.
"Gross-Up Payment" - A payment described in Section 5 of this
Agreement with respect to an Excise Tax.
"Notice of Termination" - Any notice of any termination of
your employment shall be communicated by written Notice of Termination to the
other party hereto. For purposes of this Agreement, a "Notice of Termination" of
your employment by Bancorp shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
"Other Agreement" - A plan, arrangement, or agreement pursuant
to which an Other Payment is made.
"Other Payment" - Any payment or benefit payable to you in
connection with a Change in Control of Bancorp pursuant to any plan,
arrangement, or agreement (other than this Agreement) with Bancorp, a person
whose actions result in such Change in Control, or any person affiliated with
Bancorp or such person.
"Outside Tax Counsel" - Outside tax counsel selected by
Bancorp's independent accountants and reasonably acceptable to you.
<PAGE> 7
Mr. Gerry B. Cameron - 7 - June 23, 1995
"Person" - Any individual, corporation, partnership, group,
association, or other "person," as such term is used in Section 14(d) of the
Exchange Act, other than Bancorp or any employee benefit plan or plans sponsored
by Bancorp.
"Plan" - Any compensation plan such as a plan providing for
incentive or deferred compensation, stock options, or other stock or
stock-related grants or awards or any employee benefit plan such as a thrift,
investment, savings, pension, profit sharing, medical, disability, accident,
life insurance, cafeteria, or relocation plan or any other plan, policy, or
program of Bancorp providing similar types of benefits to employees of Bancorp.
"Severance Payments" - The payments described in subsection
4(d) of this Agreement.
"Total Payments" - All payments or benefits payable to you in
connection with a Change in Control of Bancorp, including Severance Payments
under this Agreement and Other Payments.
"Voting Securities" - Bancorp's issued and outstanding
securities ordinarily having the right to vote at elections of Bancorp's Board.
2. Agreement to Provide Services; Right to Terminate;
Confidentiality.
(a) Termination Prior to Certain Offers. Except in the
event of a Change in Control, and except as otherwise provided in subsection
2(b) of this Agreement or in any written employment agreement between you and
Bancorp, either Bancorp or you may terminate your employment at any time,
subject to Bancorp paying whatever severance benefits as are provided for
pursuant to applicable Bancorp Plans or compensation agreements other than this
Agreement. If, and only if, termination of your employment with Bancorp occurs
after a Change in Control, the provisions of this Agreement regarding the
payment of Severance Payments shall apply.
(b) Continuation of Services Subsequent to Certain
Offers. In the event a tender offer or exchange offer is made by a Person for
more than 30 percent of Bancorp's Voting Securities, you agree that you will not
leave the employ of Bancorp (other than as a result of Disability) and will
render services to Bancorp in the capacity in which you then serve until such
tender
<PAGE> 8
Mr. Gerry B. Cameron - 8 - June 23, 1995
offer or exchange offer has been abandoned or terminated or a Change in Control
has occurred. In the event that, during the period you are obligated to continue
in the employ of Bancorp pursuant to this subsection 2(b), Bancorp reduces your
compensation, your obligations under this subsection 2(b) shall terminate.
(c) Termination for Cause. Bancorp may terminate your
employment for Cause whether or not a Change in Control has occurred.
(d) Confidentiality. You acknowledge that (i) by reason
of the capacity in which you have been employed, you have financial information
regarding Bancorp which has not been publicly disclosed and which is
confidential to Bancorp, and (ii) disclosure of such financial information could
cause irreparable harm to Bancorp. You agree that you will not disclose, without
prior written consent of Bancorp, any financial or other confidential business
information regarding Bancorp which has not been publicly disclosed by Bancorp.
3. Term of Agreement. This Agreement shall commence on
the date hereof and shall continue in effect until December 31, 1995; provided,
however, that commencing on January 1, 1996, and each January 1 thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless at least 90 days prior to such January 1, Bancorp or you shall have given
notice that this Agreement shall not be extended; and provided, further, that if
a Change in Control shall occur while this Agreement is in effect, the term of
this Agreement shall automatically be extended for a period of 3 calendar years
beyond the calendar year in which such Change in Control occurs. Except as
provided in subsection 2(a) of this Agreement, this Agreement shall terminate if
you or Bancorp terminate your employment prior to a Change in Control.
4. Termination Following Change in Control. In the event
that your employment with Bancorp is terminated, whether by you or by Bancorp,
within 3 years from the date of occurrence of any event constituting a Change in
Control (it being recognized that more than one such event may occur in which
case the 3-year period shall run from the date of occurrence of each such
event), you shall be entitled to the following respective benefits:
(a) Disability. During any period that you are unable to
perform your duties hereunder as a result of
<PAGE> 9
Mr. Gerry B. Cameron - 9 - June 23, 1995
incapacity due to physical or mental illness, you shall continue to
receive your full base salary at the rate then in effect until your
employment with Bancorp is terminated by Bancorp for Disability.
Thereafter, your benefits shall be determined in accordance with
Bancorp's Disability Income Program. If Bancorp's Disability Income
Program is modified or terminated following a Change in Control,
Bancorp shall substitute another plan or program with benefits
applicable to you substantially similar to those provided by the
Disability Income Program prior to its modification or termination.
(b) Termination Upon Death. In the event of your death
while an employee of Bancorp, Bancorp shall pay to your representative
your full base salary through the date of your death at the rate in
effect on the date of the Change in Control, together with all
benefits, including death benefits, to which you are then entitled
under Plans in which you are a participant, and Bancorp shall have no
further obligations to you under this Agreement.
(c) Termination for Cause or Without Good Reason. If your
employment is terminated by Bancorp for Cause, or by you other than for
Good Reason, Bancorp shall pay you your full base salary through the
Date of Termination at the rate in effect on the date the Change in
Control occurs, together with all benefits to which you are then
entitled under Plans in which you are a participant, and Bancorp shall
have no further obligations to you under this Agreement.
(d) Termination Without Cause or With Good Reason. If
your employment with Bancorp is terminated (other than for Disability
or upon your death) by Bancorp without Cause or by you with Good
Reason, subject to the limitations set forth in Sections 7 and 12,
Bancorp shall pay you, upon demand, the following amounts ("Severance
Payments"):
(i) your full base salary through the Date of
Termination at the rate in effect on the date the Change in
Control occurs;
<PAGE> 10
Mr. Gerry B. Cameron - 10 - June 23, 1995
(ii) in lieu of any further salary payments to
you for periods subsequent to the Date of Termination, an
amount of severance pay equal to three times the sum of (A)
your annual base salary, at the rate in effect on the date the
Change in Control occurs, plus (B) the average annual
incentive compensation (if any) paid to you or accrued to your
benefit (prior to any deferrals) in respect of the two fiscal
years last ended prior to the fiscal year in which the Change
in Control occurs;
(iii) all legal fees and expenses incurred by you
as a result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement); and
(iv) reimbursement in full of all reasonable
amounts paid or incurred by you for outplacement services in
connection with obtaining other employment.
The amount of Severance Payments otherwise payable pursuant to this
Agreement shall be reduced by (A) amounts payable to you pursuant to
Bancorp's Severance Benefits Plan or any successor plan providing
severance benefits to Bancorp employees and (B) amounts payable to you
(after any adjustment or reduction to reflect payments described in
clause (A)) as salary continuation and incentive compensation pursuant
to any employment agreement between you and Bancorp which is in effect
as of the Date of Termination. The payments provided for in this
paragraph shall be made not later than the fifth day following the Date
of Termination; provided, however, that if the amounts of such payments
cannot be finally determined on or before such day, Bancorp shall pay
to you on such day an estimate, as determined in good faith by Bancorp,
of the minimum amount of such payments, and shall pay the remainder of
such payments (together with interest at the rate of 10 percent per
annum) as soon as the amount thereof can be determined but in no event
later than the 30th day after the Date of Termination. In the event
that the amount of the estimated
<PAGE> 11
Mr. Gerry B. Cameron - 11 - June 23, 1995
payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by Bancorp to you, payable on the
fifth day after demand by Bancorp (together with interest at the rate
of 10 percent per annum).
(e) Related Benefits. Unless you die or your employment
is terminated by Bancorp for Cause or Disability, or by you other than
for Good Reason, Bancorp shall maintain in full force and effect, for
the continued benefit of you for three years after the Date of
Termination, all Benefit Plans in which you were entitled to
participate immediately prior to the Date of Termination, provided that
your continued participation is possible under the general terms and
provisions of such Benefit Plans; provided, however, that if you become
eligible to participate in a benefit plan, program, or arrangement of
another employer which confers benefits upon you substantially similar
to those provided by one or more Benefit Plans, you shall cease to
receive benefits under this subparagraph in respect of such Benefit
Plan or Plans. In the event that your participation in any Benefit Plan
is barred by the provisions of such Benefit Plan, Bancorp shall arrange
to provide you with benefits substantially similar to those which you
are entitled to receive under such Benefit Plan.
(f) No Mitigation. You shall not be required to mitigate
the amount of any payment provided for in this Section 4 by seeking
other employment or otherwise, nor, except as expressly set forth in
subsection 4(e), shall the amount of any payment provided for in this
Section 4 be reduced by any compensation earned by you as the result of
employment by another employer after the Date of Termination, or
otherwise.
5. Gross-Up Payment.
(a) General. In the event any portion of the Total
Payments will be subject to the Excise Tax, Bancorp will pay you an
additional amount (the "Gross-Up Payment") equal to (1) the Excise Tax
imposed on you with respect to the portion of the Total Payments that
constitutes an Excess Parachute Payment, plus (2) all federal, state,
and local income taxes and Excise Tax imposed on you with respect to
the Gross-Up Payment.
<PAGE> 12
Mr. Gerry B. Cameron - 12 - June 23, 1995
(b) Determining Amount of Excise Tax. For purposes of
determining whether any portion of the Total Payments will be subject to the
Excise Tax and the amount of any Excise Tax:
(i) The entire amount of the Total Payments shall be
treated as an Excess Parachute Payment unless and to the extent, in the
written opinion of Outside Tax Counsel, the Total Payments, in whole or
in part, are not subject to the Excise Tax;
(ii) The value of any noncash benefits or any deferred
payment that are part of the Total Payments shall be determined by
Bancorp's independent accountants in accordance with the requirements
of Sections 280G(d)(3) and 280G(d)(4) of the Code and any regulations
promulgated under those sections.
(c) Determining Amount of Gross-Up Payment. For purposes
of determining the amount of the Gross-Up Payment:
(i) You will be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation applicable to
individuals (including any applicable surtaxes and taking into account
any applicable loss or reduction of deductions or exemptions) for the
Calendar year in which the Gross-Up Payment is to be made;
(ii) You shall be deemed to pay state and local income
taxes at the highest marginal rates of taxation applicable to
individuals (including any applicable surtaxes and taking into account
any applicable loss or reduction of deductions or exemptions) in the
state and locality of your residence at the date the Gross-Up Payment
will be made.
(d) Time of Payment. Bancorp will pay the Gross-Up
Payment to you not later than the 5th day following the Date of Termination;
provided, however, that if the amount of the Gross-Up Payment cannot be finally
determined on or before such day, Bancorp shall pay you on that day an estimate,
as determined in good faith by Bancorp, of the minimum amount of the Gross-Up
Payment, and shall pay the remainder of the Gross-Up Payment (together with
interest at 10 percent per annum) as soon as the amount of the Gross-Up Payment
can be determined, but in no event later than the 90th day after the Date of
Termination. In the
<PAGE> 13
Mr. Gerry B. Cameron - 13 - June 23, 1995
event that the estimated amount of Gross-Up Payment paid to you exceeds the
total amount of Gross-Up Payment subsequently determined to have been due, the
excess will constitute a loan by Bancorp to you, payable on the 5th day after
demand by Bancorp (together with interest at the rate of 10 percent per annum).
(e) Subsequent Adjustment - Repayment. In the event that
the amount of Excise Tax you are required to pay is subsequently determined to
be less than the amount taken into account under this Agreement, you agree that
promptly after the amount of such reduction in Excise Tax is finally determined,
you will repay to Bancorp, without interest, the amount of such reduction, plus
the net federal income tax benefit, if any, you actually will receive (in the
opinion of Outside Tax Counsel) as a result of making the repayment described in
this Section 5(d).
(f) Subsequent Adjustment - Additional Payment. In the
event that the amount of Excise Tax you are required to pay is subsequently
determined to exceed the amount taken into account under this Agreement, Bancorp
shall make an additional Gross-Up Payment in the manner set forth in this
Section 5 in respect of such additional Excise Tax, plus any interest, additions
to tax, or penalties payable by you with respect to the additional Excise Tax,
promptly after the time that the amount can be reasonably determined.
6. Notice. For the purposes of this Agreement, notices
and all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth on the first page of this Agreement, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
7. Successors; Binding Agreement.
(a) Bancorp's Successors. This Agreement shall inure to
the benefit of, and be binding upon, any corporate or other successor or
assignee of Bancorp which shall acquire, directly or indirectly, by merger,
consolidation or purchase, or otherwise, all or substantially all of the
business or assets of Bancorp. Bancorp shall require any such successor, by an
agreement in form and substance reasonably satisfactory to you, expressly to
assume
<PAGE> 14
Mr. Gerry B. Cameron - 14 - June 23, 1995
and agree to perform this Agreement in the same manner and to the same extent as
Bancorp would be required to perform if no such succession had taken place.
(b) Your Successors. This Agreement shall inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. If you should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
your devisee, legatee, or other designee or, if there is no such designee, to
your estate.
8. Miscellaneous. No provision of this Agreement may be
modified, waived, or discharged unless such modification, waiver, or discharge
is agreed to in a writing signed by you and the Chairman of the Board or
President of Bancorp. No waiver by either party hereto at any time of any breach
by the other party hereto of, or of compliance with, any condition or provision
of this Agreement to be performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same, or at any prior
or subsequent, time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of Oregon.
9. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
10. Payments During Controversy. Notwithstanding the
pendency of any dispute or controversy, Bancorp will continue to pay you your
full compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary and installments of incentive
compensation) and continue you as a participant in all Plans in which you were
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved in accordance with the procedure described in
Section 1 in connection with the definition of "Date of Termination." Amounts
paid under this section are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other
<PAGE> 15
Mr. Gerry B. Cameron - 15 - June 23, 1995
amounts due under this Agreement. You shall be entitled to seek specific
performance of your right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
11. Withholding. Bancorp shall withhold from any payment
of Severance Payments or any other benefits under this Agreement all federal,
state, and local taxes as shall be required pursuant to any law or governmental
regulation or ruling.
12. Regulatory Limitations. Notwithstanding any other
provision of this Agreement, Bancorp shall have no obligation to make any
payments to you pursuant to Section 4 of this Agreement if, or to the extent,
such payments are prohibited by any applicable law or regulation, including
without limitation the FDIC's regulations regarding Golden Parachute and
Indemnification Payments promulgated under the Comprehensive Thrift and Bank
Fraud Prosecution and Taxpayer Recovery Act of 1990.
If this letter correctly sets forth our agreement on the
subject matter hereof, kindly sign and return to Bancorp the enclosed copy of
this letter, which will then constitute our agreement on this subject.
Sincerely,
U. S. BANCORP
By /s/ Judith L. Rice
----------------------------
Judith L. Rice
Executive Vice President
Agreed to this 23rd day
of June , 1995.
/s/ Gerry B. Cameron
- --------------------------
Gerry B. Cameron
<PAGE> 1
EXHIBIT 10.17
U. S. BANCORP
1993 STOCK INCENTIVE PLAN
THIRD AMENDMENT AND RESTATEMENT
FEBRUARY 15, 1996
<PAGE> 2
U. S. BANCORP
1993 STOCK INCENTIVE PLAN
THIRD AMENDMENT AND RESTATEMENT
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE 1 -- ESTABLISHMENT AND PURPOSE................................................ 1
1.1 Establishment; Restatement................................................. 1
1.2 Purpose.................................................................... 1
1.3 Other Option Plans......................................................... 1
ARTICLE 2 -- DEFINITIONS.............................................................. 1
2.1 Defined Terms.............................................................. 1
2.2 Gender and Number.......................................................... 5
ARTICLE 3 -- ADMINISTRATION........................................................... 5
3.1 General.................................................................... 5
3.2 Composition of the Committee............................................... 5
3.3 Authority of the Committee................................................. 5
3.4 Delegation................................................................. 5
3.5 Liability of Committee Members............................................. 5
3.6 Costs of Plan.............................................................. 5
ARTICLE 4 -- DURATION OF THE PLAN AND SHARES SUBJECT TO THE PLAN...................... 6
4.1 Duration of the Plan....................................................... 6
4.2 Shares Subject to the Plan................................................. 6
ARTICLE 5 -- ELIGIBILITY.............................................................. 6
ARTICLE 6 -- AWARDS................................................................... 6
6.1 Types of Awards............................................................ 6
6.2 General.................................................................... 7
6.3 Nonuniform Determinations.................................................. 7
6.4 Award Agreements........................................................... 7
6.5 Provisions Governing All Awards............................................ 7
6.6 Dividend Equivalents....................................................... 9
ARTICLE 7 -- OPTIONS.................................................................. 9
7.1 Types of Options........................................................... 9
7.2 General; Limitation on Number of Options................................... 9
7.3 Option Price............................................................... 9
7.4 Option Term................................................................ 10
7.5 Time of Exercise........................................................... 10
7.6 Special Rules for Incentive Stock Options.................................. 10
7.7 Restricted Shares.......................................................... 10
7.8 Reload Options............................................................. 10
ARTICLE 8 -- STOCK APPRECIATION RIGHTS................................................ 10
8.1 General; Limitation on Number of SARs...................................... 10
8.2 Nature of Stock Appreciation Right......................................... 10
8.3 Exercise................................................................... 11
8.4 Form of Payment............................................................ 11
</TABLE>
i
<PAGE> 3
<TABLE>
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<S> <C>
ARTICLE 9 -- RESTRICTED AWARDS........................................................ 11
9.1 Types of Restricted Awards................................................. 11
9.2 General.................................................................... 11
9.3 Restriction Period......................................................... 11
9.4 Forfeiture................................................................. 12
9.5 Settlement of Restricted Awards............................................ 12
9.6 Rights as a Shareholder.................................................... 12
ARTICLE 10 -- PERFORMANCE AWARD....................................................... 12
10.1 Types of Performance Awards................................................ 12
10.2 Performance Cycles......................................................... 13
10.3 Performance Goals.......................................................... 13
10.4 Determination of Awards.................................................... 13
10.5 Settlement of Performance Awards........................................... 13
10.6 Rights as a Shareholder.................................................... 13
10.7 Performance Awards for Executive Officers.................................. 13
ARTICLE 11 -- OTHER STOCK BASED AND COMBINATION AWARDS................................ 14
11.1 Other Stock-Based Awards................................................... 14
11.2 Combination Awards......................................................... 14
ARTICLE 12 -- DEFERRAL ELECTIONS...................................................... 14
ARTICLE 13 -- ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC......................... 14
13.1 Plan Does Not Restrict Bancorp............................................. 14
13.2 Adjustments by the Committee............................................... 14
ARTICLE 14 -- AMENDMENT AND TERMINATION............................................... 15
ARTICLE 15 -- MISCELLANEOUS........................................................... 15
15.1 Tax Withholding............................................................ 15
15.2 Unfunded Plan.............................................................. 15
15.3 Payments to Trust.......................................................... 15
15.4 Annulment of Awards........................................................ 15
15.5 Engaging in Competition With Bancorp....................................... 15
15.6 Other Bancorp Benefit and Compensation Programs............................ 16
15.7 Securities Law Restrictions................................................ 16
15.8 Governing Law.............................................................. 16
15.9 Accounting Matters......................................................... 16
ARTICLE 16 -- SHAREHOLDER APPROVAL.................................................... 16
</TABLE>
ii
<PAGE> 4
U. S. BANCORP
1993 STOCK INCENTIVE PLAN
THIRD AMENDMENT AND RESTATEMENT
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 Establishment; Restatement. U. S. Bancorp, an Oregon corporation
("Bancorp"), established the U. S. Bancorp 1993 Stock Incentive Plan effective
as of October 21, 1993, as amended and restated effective February 17, 1994,
November 17, 1994, and further amended and restated in the present form
effective February 15, 1996 (the "Plan"), subject to shareholder approval as
provided in Article 16.
1.2 Purpose. The purpose of the Plan is to promote and advance the
interests of Bancorp and its shareholders by enabling Bancorp to attract,
retain, and reward key employees of Bancorp and its Subsidiaries. It is also
intended to strengthen the mutuality of interests between such employees and
Bancorp's shareholders. The Plan is designed to serve these purposes by offering
stock options and other cash and equity-based incentive awards, thereby
providing a proprietary interest in pursuing the long-term growth,
profitability, and financial success of Bancorp.
1.3 Other Option Plans. The Plan shall be separate from the following
existing plans (the "Prior Plans"):
U. S. Bancorp 1984 Incentive Stock Option Plan
U. S. Bancorp 1985 Stock Option and SAR Plan
The Plan shall neither affect the operation of the Prior Plans nor be affected
by the Prior Plans, except as follows:
(a) No further stock options will be granted under any of the Prior
Plans after the date the Plan was initially approved by Bancorp's
shareholders; and
(b) The number of Shares which may be made subject to Awards under the
Plan shall be adjusted, pursuant to Section 4.2, to reflect cancellation or
expiration of options previously granted under the Prior Plans.
ARTICLE 2
DEFINITIONS
2.1 Defined Terms. For purposes of the Plan, the following terms shall
have the meanings set forth below:
"ACQUIRING PERSON" means any person or related person or related persons
which constitute a "group" for purposes of Section 13(d) and Rule 13d-5 under
the Securities Exchange Act of 1934 (the "Exchange Act"), as such Section and
Rule are in effect as of the Grant Date; provided, however, that the term
Acquiring Person shall not include (a) Bancorp or any of its Subsidiaries, (b)
any employee benefit plan or related trust of Bancorp or any of its
Subsidiaries, (c) any entity holding voting capital stock of Bancorp for or
pursuant to the terms of any such employee benefit plan, or (d) any person or
group solely because such person or group has voting power with respect to
capital stock of Bancorp arising from a revocable proxy or consent given in
response to a public proxy or consent solicitation made pursuant to the Exchange
Act.
"AWARD" means an award or grant made to a Participant of Options, Stock
Appreciation Rights, Restricted Awards, Performance Awards, or Other Stock-Based
Awards pursuant to the Plan.
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<PAGE> 5
"AWARD AGREEMENT" means an agreement as described in Section 6.4 evidencing
an Award under the Plan.
"BOARD" means the Board of Directors of Bancorp.
"CHANGE IN CONTROL" of Bancorp means:
(a) The acquisition by any Acquiring Person of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of 20 percent or
more of the combined voting power of the then outstanding Voting
Securities; provided, however, that for purposes of this paragraph (a) the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from Bancorp, (ii) any acquisition by Bancorp, (iii)
any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by Bancorp or any corporation controlled by Bancorp, or (iv)
any acquisition by any corporation pursuant to a transaction that complies
with clauses (i), (ii), and (iii) of paragraph (c) of this definition of
Change in Control; or
(b) During any period of 12 consecutive calendar months, individuals
who at the beginning of such period constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual who becomes a director during
the period whose election, or nomination for election, by Bancorp's
shareholders was approved by a vote of at least a majority of the directors
then constituting the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger, or consolidation or sale
or other disposition of all or substantially all of the assets of Bancorp
(a "Business Combination") in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities
who were the beneficial owners of the Voting Securities outstanding
immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 50 percent of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as
a result of such transaction owns Bancorp or all or substantially all of
Bancorp's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination, of the Voting Securities, (ii) no Person
(excluding any employee benefit plan, or related trust, of Bancorp or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20 percent or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(d) Approval by the shareholders of Bancorp of any plan or proposal
for the liquidation or dissolution of Bancorp.
"CHANGE IN CONTROL DATE" means the first date following the Grant Date on
which a Change in Control has occurred.
"CODE" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, or any successor thereto, together with rules, regulations,
and interpretations promulgated thereunder. Where the context so requires, any
reference to a particular Code section shall be construed to refer to the
successor provision to such Code section.
-2-
<PAGE> 6
"COMMITTEE" means the Compensation Committee of the Board (or a successor
committee appointed by the Board to administer the Plan as provided in Article 3
of the Plan).
"COMMON STOCK" means the $5 par value Common Stock of Bancorp or any
security of Bancorp issued in substitution, exchange, or lieu thereof.
"CONTINUING RESTRICTION" means a Restriction described in Sections 6.5(g),
15.4, 15.5, and 15.7 of the Plan and any other Restrictions expressly designated
by the Committee in an Award Agreement as a Continuing Restriction.
"BANCORP" means U. S. Bancorp, an Oregon corporation, or any successor
corporation.
"DISABILITY" means the condition of being permanently "disabled" within the
meaning of Section 22(e)(3) of the Code, namely being unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12 months.
However, the Committee may, by resolution, change the foregoing definition of
"Disability" or may adopt a different definition for purposes of specific
Awards.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended and in
effect from time to time, or any successor statute. Where the context so
requires, any reference to a particular section of the Exchange Act, or to any
rule promulgated under the Exchange Act, shall be construed to refer to
successor provisions to such section or rule.
"FAIR MARKET VALUE" -- For all purposes of the Plan, the "Fair Market
Value" of Shares on a particular day shall be determined without regard to any
restrictions (other than a restriction which, by its terms, will never lapse)
and means:
(a) If the Shares are listed on a stock exchange, the low sale price
as reported for that day by the principal stock exchange on which the
Shares are listed; or
(b) If the Shares are not listed on a stock exchange:
(i) The low sale price as reported for that day in The Wall Street
Journal by the National Market System of the National Association of
Securities Dealers Automated Quotation System (NASDAQ); or
(ii) If the low sale price is not reported in The Wall Street
Journal for that day, the low sale price quoted by NASDAQ for that
day.
If no sale price is reported by the principal stock exchange or, if the
Shares are not listed on a stock exchange, in The Wall Street Journal or quoted
by NASDAQ for that day, the low sale price reported or quoted for the
immediately preceding day on which it was reported or quoted shall be used. In
the event Common Stock becomes listed on a stock exchange, the Committee may, by
resolution, revise the foregoing definition of Fair Market Value by reference to
trading prices as reported for such stock exchange.
"INCENTIVE STOCK OPTION" or "ISO" means any Option granted pursuant to the
Plan that is intended to be and is specifically designated in its Award
Agreement as an "incentive stock option" within the meaning of Section 422 of
the Code.
"NONQUALIFIED OPTION" or "NQO" means any Option granted pursuant to the
Plan that is not a Statutory Option.
"OPTION" includes a Statutory Option, an ISO, and an NQO.
"OTHER STOCK-BASED AWARD" means an Award as defined in Section 11.1.
"PARTICIPANT" means an employee of Bancorp or a Subsidiary who is granted
an Award under the Plan.
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<PAGE> 7
"PERFORMANCE AWARD" means a Performance Cash Award or a Performance Share
Award granted pursuant to the provisions of Article 10 of the Plan, the Vesting
of which is contingent on performance attainment.
"PERFORMANCE CASH AWARD" means an Award described in Section 10.1(a) of the
Plan.
"PERFORMANCE CYCLE" means a designated performance period pursuant to the
provisions of Section 10.2 of the Plan.
"PERFORMANCE GOAL" means a designated performance objective pursuant to the
provisions of Section 10.3 of the Plan.
"PERFORMANCE SHARE" means a Share granted under and subject to a
Performance Share Award. "Performance Share Award" means an Award described in
Section 10.1(b) of the Plan.
"PLAN" means this Third Amendment and Restatement of the U. S. Bancorp 1993
Stock Incentive Plan, as set forth herein and as it may be hereafter amended and
from time to time.
"PRIOR PLANS" mean the previous stock option plans of Bancorp described in
Section 1.3.
"REPORTING PERSON" means a Participant who is subject to the reporting
requirements of Section 16(a) of the Exchange Act.
"RESTRICTED AWARD" means a Restricted Share Award or a Restricted Unit
Award granted pursuant to Article 9 of the Plan.
"RESTRICTED SHARE" means a Share granted under and subject to a Restricted
Share Award. "Restricted Share Award" means an Award described in Section 9.1(a)
of the Plan.
"RESTRICTED UNIT AWARD" means an Award described in Section 9.1(b) of the
Plan.
"RESTRICTION" means a provision in the Plan or in an Award Agreement which
limits the exercisability or transferability, or which governs the forfeiture,
of an Award or the Shares, cash, or other property payable pursuant to an Award.
"RETIREMENT" means retirement under the U. S. Bancorp Retirement Plan.
However, the Committee may, by resolution, change the foregoing definition of
"Retirement" or may adopt a different definition for purposes of specific
Awards.
"SHARE" means a share of Common Stock.
"STATUTORY OPTION" means an Incentive Stock Option or any other form of
stock option that is intended to meet the requirements specified in the Code (as
the Code may be amended from time to time) for favorable income tax treatment
for the Participant, for Bancorp, or for both.
"STOCK APPRECIATION RIGHT" or "SAR" means an Award providing a benefit
based on the appreciation of Common Stock granted pursuant to the provisions of
Article 8 of the Plan.
"SUBSIDIARY" means a "subsidiary corporation" of Bancorp, within the
meaning of Section 425 of the Code, namely any corporation in which Bancorp
directly or indirectly controls 50 percent or more of the total combined voting
power of all classes of stock having voting power.
"VEST" or "VESTED" means:
(a) In the case of an Award that requires exercise, to be or to become
immediately and fully exercisable and free of all Restrictions (other than
Continuing Restrictions);
(b) In the case of an Award that is subject to forfeiture, to be or to
become nonforfeitable, freely transferable, and free of all Restrictions
(other than Continuing Restrictions);
(c) In the case of an Award that is required to be earned by attaining
specified Performance Goals, to be or to become earned and nonforfeitable,
freely transferable, and free of all Restrictions (other than Continuing
Restrictions); or
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<PAGE> 8
(d) In the case of any other Award as to which payment is not
dependent solely upon the exercise of a right, election, exercise, or
option, to be or to become immediately payable and free of all Restrictions
(except Continuing Restrictions).
"VOTING SECURITIES" means Bancorp's issued and outstanding securities
ordinarily having the right to vote at elections of directors.
2.2 Gender and Number. Except where otherwise indicated by the context,
any masculine or feminine terminology used in the Plan shall also include the
opposite gender; and the definition of any term in Section 2.1 in the singular
shall also include the plural, and vice versa.
ARTICLE 3
ADMINISTRATION
3.1 General. The Plan shall be administered by the Committee or a
successor committee as described in Section 3.2.
3.2 Composition of the Committee. The Committee shall consist of not less
than a sufficient number of members of the Board who are "disinterested persons"
within the meaning of Rule 16b-3 under the Exchange Act. The Board may from time
to time remove members from, or add members to, the Committee. Vacancies on the
Committee, however caused, shall be filled by the Board. The Board may, without
amendment of the Plan, transfer the duties of the Committee to another committee
meeting the requirements of Rule 16b-3.
3.3 Authority of the Committee. The Committee shall have full power and
authority to administer the Plan in its sole discretion, including the authority
to:
(a) Construe and interpret the Plan and any Award Agreement;
(b) Promulgate, amend, and rescind rules and procedures relating to
the implementation of the Plan;
(c) Select the employees who shall be granted Awards;
(d) Determine the number and types of Awards to be granted to each
such Participant;
(e) Determine the number of Shares, or Share equivalents, to be
subject to each Award;
(f) Determine the option price, purchase price, base price, or similar
feature for any Award; and
(g) Determine all the terms and conditions of all Award Agreements,
consistent with the requirements of the Plan.
Decisions of the Committee, or any delegate as permitted by the Plan, shall be
final, conclusive, and binding on all Participants.
3.4 Delegation. Notwithstanding the foregoing, the Committee may delegate
to one or more officers of Bancorp the authority to exercise on behalf of the
Committee any power, authority, or discretion of the Committee with respect to
Awards granted to Participants who are not Reporting Persons. Matters which the
Committee may delegate include, but are not limited to: (a) determining the
recipients, types, amounts, and terms of Awards to be granted to Participants
who are not Reporting Persons; (b) the acceleration of the time when such an
Award becomes Vested; and (c) elections and determinations with respect to
exercise or payment of such an Award.
3.5 Liability of Committee Members. No member of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan, any Award, or any Participant.
3.6 Costs of Plan. The costs and expenses of administering the Plan shall
be borne by Bancorp.
-5-
<PAGE> 9
ARTICLE 4
DURATION OF THE PLAN AND SHARES SUBJECT TO THE PLAN
4.1 Duration of the Plan. The Plan initially became effective October 21,
1993. The Plan shall remain in effect until Awards have been granted covering
all the available Shares or the Plan is otherwise terminated by the Board.
Termination of the Plan shall not affect outstanding Awards.
4.2 Shares Subject to the Plan.
(a) Shares. The shares which may be made subject to Awards under the Plan
shall be Shares of Common Stock, which may be either authorized and unissued
Shares or reacquired Shares. No fractional Shares shall be issued under the
Plan.
(b) General Limitation on Awards. Subject to adjustment pursuant to Article
13, the maximum number of Shares for which Awards may be granted under the Plan
shall not exceed 6,000,000 Shares, plus the number of Shares that remain
available for grants of options under the Prior Plans as of the date the Plan is
approved by Bancorp's shareholders as provided in Article 16. The aggregate
number of Shares which may be subject to Awards under the Plan and options under
the Prior Plans (including options previously granted and exercised or
outstanding under the Prior Plans as of the effective date of the Plan) shall
not exceed 8,250,000 Shares, as adjusted under the Plan and the Prior Plans to
reflect changes in capitalization.
(c) Annual Limitation. Subject to adjustment pursuant to Article 13, the
maximum number of Shares for which Restricted Awards may be granted during any
calendar year shall not exceed 400,000 Shares.
(d) Cancellation or Expiration of Awards. If an Award under the Plan (or
any option previously granted under the Prior Plans) is canceled or expires for
any reason prior to having been fully Vested or exercised by a Participant or is
settled in cash in lieu of Shares or is exchanged for other Awards, all Shares
covered by such Awards (or options under the Prior Plans) shall again become
available for additional Awards under the Plan.
(e) Share for Share Exercises. In the event any Option or other Award
requiring exercise is exercised (pursuant to the terms of the applicable Award
Agreement) in whole or in part by delivery or attestation to Bancorp of
previously acquired Shares, the Shares delivered or attested to Bancorp in lieu
of payment of the exercise price of the Option or other Award will be added to
the Shares available for additional Awards under the Plan.
ARTICLE 5
ELIGIBILITY
Officers and other key employees of Bancorp and its Subsidiaries (including
employees who may also be directors of Bancorp or a Subsidiary) who, in the
Committee's judgment, are or will be contributors to the long-term success of
Bancorp shall be eligible to receive Awards under the Plan.
ARTICLE 6
AWARDS
6.1 Types of Awards. The types of Awards that may be granted under the
Plan are:
(a) Options governed by Article 7 of the Plan;
(b) Stock Appreciation Rights governed by Article 8 of the Plan;
(c) Restricted Awards governed by Article 9 of the Plan, which may
include Restricted Share Awards and Restricted Unit Awards;
(d) Performance Awards governed by Article 10 of the Plan, which may
include Performance Cash Awards and Performance Share Awards; and
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(e) Other Stock-Based Awards or combination awards governed by Article 11
of the Plan.
In the discretion of the Committee, any Award may be granted alone, in addition
to, or in tandem with other Awards under the Plan.
6.2 General. Subject to the limitations of the Plan, the Committee may
cause Bancorp to grant Awards to such Participants, at such times, of such
types, in such amounts, for such periods, with such option prices, purchase
prices, or base prices, and subject to such terms, conditions, limitations, and
restrictions as the Committee, in its discretion, shall deem appropriate. Awards
may be granted as additional compensation to a Participant or in lieu of other
compensation to such Participant. A Participant may receive more than one Award
and more than one type of Award under the Plan.
6.3 Nonuniform Determinations. The Committee's determinations under the
Plan or under one or more Award Agreements, including without limitation, (a)
the selection of Participants to receive Awards, (b) the type, form, amount, and
timing of Awards, (c) the terms of specific Award Agreements, and (d) elections
and determinations made by the Committee with respect to exercise or payments of
Awards, need not be uniform and may be made by the Committee selectively among
Participants and Awards, whether or not Participants are similarly situated.
6.4 Award Agreements. Each Award shall be evidenced by a written Award
Agreement between Bancorp and the Participant. Award Agreements may, subject to
the provisions of the Plan, contain any provision approved by the Committee.
6.5 Provisions Governing All Awards. All Awards shall be subject to the
following provisions:
(a) Alternative Awards. If any Awards are designated in their Award
Agreements as alternative to each other, the exercise of all or part of one
Award automatically shall cause an immediate equal (or pro rata)
corresponding termination of the other alternative Award or Awards.
(b) Rights as Shareholders. No Participant shall have any rights of a
shareholder with respect to Shares subject to an Award until such Shares
are issued in the name of the Participant.
(c) Employment Rights. Neither the adoption of the Plan nor the
granting of any Award shall confer on any person the right to continued
employment with Bancorp or any Subsidiary, nor shall it interfere in any
way with the right of Bancorp or a Subsidiary to terminate such person's
employment at any time for any reason, with or without cause.
(d) Transferability. Except as otherwise provided in this Section
6.5(d), each Award (other than Shares after they Vest) will not be
transferable other than by will or the laws of descent and distribution and
will be exercisable (for Awards which require exercise) during the lifetime
of the Participant only by the Participant or, in the event the Participant
becomes legally incompetent, by the Participant's guardian or legal
representative. Notwithstanding the foregoing, the Committee, in its
discretion, may provide in any Award Agreement that the Award is
transferable, without payment of consideration, to immediate family members
of the Participant or to trusts or partnership for such family members
("Permitted Family Transferees"). The Committee may, in its discretion,
also amend outstanding Award Agreements for Awards granted prior to 1996 to
allow transfer of such Awards, without payment of consideration, to
Permitted Family Transferees. Furthermore, in the event Rule 16b-3 under
the Exchange Act is amended to eliminate restrictions on transferability as
a condition of exemption under Rule 16b-3, the Committee, in its
discretion, may provide in any Award Agreement that the Award may be freely
transferred, may be freely transferred to any class of transferees
identified in the Award Agreement, or may be transferred subject to any
terms and conditions specified in the Award Agreement. Notwithstanding the
foregoing, Awards may be surrendered to Bancorp pursuant to Section 6.5(h)
in connection with the payment of the purchase or option price of another
Award.
(e) Termination Of Employment. The terms and conditions under which an
Award may be exercised, if at all, after a Participant's termination of
employment shall be determined by the Committee and specified in the
applicable Award Agreement.
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(f) Payment of Purchase Price and Withholding. The Committee, in its
discretion, may include in any Award Agreement a provision permitting the
Participant to pay the purchase or option price, if any, for the Shares or
other property issuable pursuant to the Award, or the Participant's
federal, state, or local tax or tax withholding obligation with respect to
such issuance in whole or in part by any one or more of the following:
(i) By delivering previously owned Shares;
(ii) By reducing the number of Shares or other property otherwise
Vested and issuable pursuant to the Award;
(iii) By delivering to Bancorp a promissory note payable on such
terms and over such period as the Committee shall determine;
(iv) By delivery (in a form satisfactory to the Committee) of an
irrevocable direction to a securities broker acceptable to the
Committee:
(A) To sell Shares subject to the Award and to deliver all or a
part of the sales proceeds to Bancorp in payment of all or a part of
the option price and taxes or withholding taxes attributable to the
issuance; or
(B) To pledge Shares subject to the Award to the broker as
security for a loan and to deliver all or a part of the loan proceeds
to Bancorp in payment of all or a part of the option price and taxes
or withholding taxes attributable to the issuance; or
(v) In any combination of the foregoing or in any other form
approved by the Committee.
For purposes of exercising an Option by delivery of previously owned
Shares, the Participant may deliver, in lieu of an actual delivery of
Shares, an attestation by the Participant in a form satisfactory to Bancorp
that the Participant owns freely transferable previously acquired Shares
having a Fair Market Value equal to the Option exercise price. Any Shares
withheld or surrendered with respect to a Reporting Person shall be subject
to such additional conditions and limitations as the Committee may impose
to comply with the requirements of the Exchange Act.
(g) Reporting Persons. With respect to all Awards granted to Reporting
Persons:
(i) Options (or other Awards requiring exercise) shall not be
exercisable (or the Shares issuable upon exercise of the Options shall
not be transferable) until at least six months after the date the Award
was granted, except in the case of the death or Disability of the
Participant; and
(ii) Shares issued pursuant to any Award (other than Options or
other Awards requiring exercise) may not be sold by the Participant for
at least six months after acquisition, except in the case of the death
or Disability of the Participant;
provided, however, that (unless an Award Agreement expressly provides
otherwise) the limitation of this Section 6.5(g) shall apply only if or to
the extent required by Rule 16b-3 under the Exchange Act. Award Agreements
for Awards to Reporting Persons shall also comply with any future
restrictions imposed by such Rule 16b-3.
(h) Service Periods. At the time of granting Awards, the Committee may
specify, by resolution or in the Award Agreement, the period or periods of
service performed or to be performed by the Participant in connection with
the grant of the Award.
(i) Change in Control Provisions. Each Award Agreement with respect to
an Award granted after November 17, 1994, shall include a provision that as
of a Change in Control Date:
(A) An Option or other Award requiring exercise shall become
fully and immediately exercisable;
(B) An Award subject to Restrictions shall become fully Vested
if the Participant's employment is terminated (by Bancorp without
Cause, or by the Participant for Good Reason,
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as those terms are defined in the Award Agreement) within a specified
period following the Change in Control Date; or
(C) A Performance Award or other Award subject to Performance
Goals (other than an Option Award where the exercisability of the
Option is wholly or partially based on attaining Performance Goals,
which shall be governed by paragraph A above) shall be deemed to have
been earned to the extent of the greater of:
(1) A number of Shares or a portion of the target cash award
determined by the Committee based on the extent to which the
Performance Goals specified in the Award Agreement have been
achieved during the portion of the Performance Cycle ending on
the last day of the last fiscal quarter of Bancorp ending on or
before the Change in Control Date; or
(2) A pro rata number of Shares or a portion of the target
cash award equal to the product of the Target Shares or target
cash award identified in the Award Agreement multiplied by a
fraction with a numerator equal to the whole number of calendar
months beginning on or after the Grant Date and ending on or
before the Change in Control Date and a denominator equal to the
number of calendar months in the entire Performance Cycle
specified in the Award Agreement.
However, each Award Agreement (other than an Award Agreement for a Performance
Cash Award) that includes a Change in Control provision shall be subject to the
following limitation:
If the Committee in good faith adopts a resolution that (i) the use of
the pooling method of accounting with respect to the Change in Control
transaction would be materially beneficial to Bancorp, and (ii) the
acceleration of the exercisability, Vesting, or earning of the Award in
connection with the Change in Control would have a materially adverse
effect on Bancorp's ability to use the pooling method of accounting with
respect to the Change in Control, then the Award shall not be accelerated
on account of the Change in Control.
6.6 Dividend Equivalents. The Committee, in its discretion, may provide
that any Award will earn dividends or dividend equivalents. An Award Agreement
may provide that such dividends or dividend equivalents will be paid currently
or will be credited to the Participant's account. Any crediting of dividends or
dividend equivalents will be subject to such restrictions and conditions as the
Committee may establish in an Award Agreement, including reinvestment in
additional Shares or share equivalents.
ARTICLE 7
OPTIONS
7.1 Types of Options. Options granted under the Plan may be in the form of
Statutory Options (including Incentive Stock Options) or Nonqualified Options.
The grant of each Option and the Award Agreement governing each Option shall
identify the Option as an ISO, other Statutory Option, or an NQO. In the event
the Code is amended to provide for tax-favored forms of Statutory Options other
than or in addition to Incentive Stock Options, the Committee may grant Options
under the Plan meeting the requirements of such forms of Statutory Options.
7.2 General; Limitation on Number of Options. Options shall be subject to
the terms and conditions set forth in Article 6 and this Article 7 and Award
Agreements governing Options shall contain such additional terms and conditions,
not inconsistent with the express provisions of the Plan, as the Committee shall
deem desirable. The number of Shares subject to Options granted under the Plan
to any Participant during any five-calendar-year period shall not exceed
750,000.
7.3 Option Price. Each Award Agreement for Options shall state the option
exercise price per Share of Common Stock purchasable under the Option, which
shall not be less than 100 percent of the Fair Market Value of a Share on the
date an Option is granted.
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7.4 Option Term. The Award Agreement for each Option shall specify the
term, which shall not exceed 10 years from the date of grant, during which the
Option may be exercised, as determined by the Committee.
7.5 Time of Exercise. The Award Agreement for each Option shall specify,
as determined by the Committee:
(a) The time or times when the Option shall become exercisable and
whether the Option shall become exercisable in full or in graduated amounts
based on: (i) continuation of employment over a period specified in the
Award Agreement, (ii) satisfaction of performance goals or criteria
specified in the Award Agreement, or (iii) a combination of continuation of
employment and satisfaction of performance goals or criteria;
(b) Such other terms, conditions, and restrictions as to when the
Option may be exercised as shall be determined by the Committee; and
(c) The extent, if any, that the Option shall remain exercisable after
the Participant ceases to be an employee of Bancorp or a Subsidiary.
An Award Agreement for an Option may, in the discretion of the Committee,
provide whether, and to what extent, the time when an Option becomes exercisable
shall be accelerated or otherwise modified in the event of the death,
Disability, or Retirement of the Participant. The Committee may, at any time in
its discretion, accelerate the time when all or any portion of an outstanding
Option becomes exercisable.
7.6 Special Rules for Incentive Stock Options. In the case of an Option
designated as an Incentive Stock Option, the terms of the Option and the Award
Agreement shall conform with the statutory and regulatory requirements specified
pursuant to Section 422 of the Code, as in effect on the date such ISO is
granted. ISOs may be granted only to employees of Bancorp or a Subsidiary. ISOs
may not be granted under the Plan after ten years following the date specified
in Section 4.1, unless the ten-year limitation of Section 422(b)(2) of the Code
is removed or extended.
7.7 Restricted Shares. In the discretion of the Committee, the Award
Agreement for an Option may provide that the Shares issuable upon exercise of an
Option shall be Restricted Shares, subject to Restrictions specified in the
Award Agreement.
7.8 Reload Options. The Committee, in its discretion, may provide in an
Award Agreement for an Option that in the event all or a portion of the Option
is exercised by the Participant using previously acquired Shares or previously
acquired Shares are surrendered in payment of the Participant's federal, state,
or local tax or tax withholding obligation with respect to such exercise, the
Participant shall automatically be granted a replacement Option (with an option
price equal to the Fair Market Value of a Share on the date of such exercise)
for a number of Shares equal to (or equal to a portion of) the number of Shares
surrendered upon exercise of the Option or for payment of taxes. Such Reload
Option features may be subject to such terms and conditions as the Committee
shall determine, including without limitation, a condition that the Participant
retain the Shares issued upon exercise of the Option for a specified period of
time.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 General; Limitation on Number of SARs. Stock Appreciation Rights or
SARs shall be subject to the terms and conditions set forth in Article 6 and
this Article 8 and Award Agreements governing Stock Appreciation Rights shall
contain such additional terms and conditions, not inconsistent with the express
terms of the Plan, as the Committee shall deem desirable. The number of Shares
subject to SARs granted under the Plan to any Participant during any
five-calendar-year period shall not exceed 750,000.
8.2 Nature of Stock Appreciation Right. A Stock Appreciation Right is an
Award entitling a Participant to receive an amount equal to the excess (or, if
the Committee shall determine at the time of grant, a portion of the excess) of
the Fair Market Value of a Share of Common Stock on the date of exercise
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of the SAR over the base price, as described below, on the date of grant of the
SAR, multiplied by the number of Shares with respect to which the SAR shall have
been exercised. The base price shall be designated by the Committee in the Award
Agreement for the SAR and shall be the Fair Market Value of a Share on the grant
date of the SAR or such other higher price as the Committee shall determine.
8.3 Exercise. A Stock Appreciation Right may be exercised by a Participant
in accordance with procedures established by the Committee. The Committee may
also provide that a SAR shall be automatically exercised on one or more
specified dates or upon the satisfaction of performance goals or criteria or one
or more other conditions specified by the Committee in the SAR Award Agreement.
In the case of SARs granted to Reporting Persons, exercise of the SAR shall be
limited by the Committee to the extent required to comply with the applicable
requirements of Rule 16b-3 under the Exchange Act.
8.4 Form of Payment. Payment upon exercise of a Stock Appreciation Right
may be made in cash, in installments, in Shares, or in any other manner or
combination of such methods, or in any other form as the Committee, in its
discretion, shall determine.
ARTICLE 9
RESTRICTED AWARDS
9.1 Types of Restricted Awards. Restricted Awards granted under the Plan
may be in the form of either Restricted Share Awards or Restricted Unit Awards.
(a) Restricted Share Awards. A Restricted Share Award is an Award of
Shares transferred to a Participant subject to such terms and conditions as
the Committee deems appropriate, including, without limitation,
restrictions on the sale, assignment, transfer, or other disposition of
such Restricted Shares and may include a requirement that the Participant
forfeit such Restricted Shares back to Bancorp upon termination of
Participant's employment for specified reasons within a specified period of
time or upon other conditions, as set forth in the Award Agreement for such
Restricted Shares. Each Participant receiving a Restricted Share Award may
be issued a stock certificate in respect of such Restricted Shares,
registered in the name of such Participant and bearing a legend referring
to the Restrictions set forth in the Award Agreement, and shall execute a
stock power in blank with respect to the Restricted Shares evidenced by
such certificate. The certificate evidencing such Restricted Shares and the
stock power shall be held in custody by Bancorp until the Restrictions
thereon shall have lapsed.
(b) Restricted Unit Awards. A Restricted Unit Award is an Award of
Restricted Units (with each Restricted Unit having a value equivalent to
one Share) granted to a Participant subject to such terms and conditions as
the Committee deems appropriate, and may include a requirement that the
Participant forfeit such Restricted Units upon termination of Participant's
employment for specified reasons within a specified period of time or upon
other conditions, as set forth in the Award Agreement for such Restricted
Units.
9.2 General. Restricted Awards shall be subject to the terms and
conditions of Article 6 and this Article 9 and Award Agreements governing
Restricted Awards shall contain such additional terms and conditions, not
inconsistent with the express provisions of the Plan, as the Committee shall
deem desirable.
9.3 Restriction Period. Award Agreements for Restricted Awards shall
provide that Restricted Awards, and the Shares subject to Restricted Awards, may
not be transferred, and may provide that, in order for a Participant to Vest in
such Restricted Awards, the Participant must remain in the employment of Bancorp
or its Subsidiaries, subject to relief for reasons specified in the Award
Agreement, for a period commencing on the grant date of the Award and ending on
such later date or dates as the Committee may designate at the time of the Award
(the "Restriction Period"). During the Restriction Period, a Participant may not
sell, assign, transfer, pledge, encumber, or otherwise dispose of a Restricted
Award or the Shares received under or governed by the Restricted Award. The
Committee, in its sole discretion, may provide for a single lapse of
restrictions at the expiration of the Restriction Period or for the lapse of
restrictions in installments during the Restriction Period. Upon expiration of
the applicable Restriction Period (or lapse of
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Restrictions during the Restriction Period where the Restrictions lapse in
installments) the Participant shall be entitled to settlement of the Restricted
Award or portion thereof, as the case may be. Although Restricted Awards will
usually Vest based on continued employment and Performance Awards under Article
10 will usually Vest based on attainment of Performance Goals, the Committee, in
its discretion, may condition Vesting of Restricted Awards on attainment of
Performance Goals as well as continued employment. In such case, the Restriction
Period for such a Restricted Award shall include the period prior to
satisfaction of the Performance Goals. The Committee, in its discretion, may
accelerate the Vesting of any Restricted Award.
9.4 Forfeiture. If a Participant ceases to be an employee of Bancorp or a
Subsidiary during the Restriction Period for any reason other than reasons which
may be specified in an Award Agreement (such as death, Disability, or
Retirement) or otherwise fails to satisfy the conditions specified in an Award
Agreement, the Award Agreement may require that all non-Vested Restricted Awards
previously granted to the Participant be forfeited and returned to Bancorp.
9.5 Settlement of Restricted Awards.
(a) Restricted Shares. Upon Vesting of a Restricted Share Award, the legend
on such Shares will be removed and the Participant's stock power will be
returned and the Shares will no longer be Restricted Shares.
(b) Restricted Units. Upon Vesting of a Restricted Unit Award, a
Participant shall be entitled to receive a certificate for a number of
unrestricted Shares equal to the number of Vested Restricted Units, cash equal
to the then Fair Market Value of a number of Shares equal to the Vested
Restricted Units, or a combination of cash and Shares, as determined by the
Committee.
9.6 Rights as a Shareholder. A Participant shall have, with respect to
unforfeited Restricted Shares received under a Restricted Share Award, all the
rights of a shareholder of Bancorp, including the right to vote the Shares, and
the right to receive any cash dividends. Stock dividends issued with respect to
Restricted Shares shall be treated as additional Shares covered by the
Restricted Share Award and shall be subject to the same Restrictions. A
Participant will have no rights as a shareholder with respect to Restricted Unit
Awards until Shares have been issued in settlement of such Awards.
ARTICLE 10
PERFORMANCE AWARDS
10.1 Types of Performance Awards. Performance Awards under the Plan may be
in the form of either Performance Cash Awards or Performance Share Awards.
Performance Awards shall be subject to the terms and conditions set forth in
Article 6 and this Article 10. Performance Awards for executive officers are
subject to Section 10.7.
(a) Performance Cash Awards. A Performance Cash Award is an Award
providing for a cash award subject to such terms and conditions as the
Committee deems appropriate including, without limitation, the requirement
that the Participant will earn such cash award or a portion thereof only in
the event specified Performance Goals are met within a specified
Performance Cycle, as set forth in the Award Agreement for the Performance
Cash Award.
(b) Performance Share Awards. A Performance Share Award is an Award of
Performance Shares granted to a Participant subject to such terms and
conditions as the Committee deems appropriate, including, without
limitation, the requirement that the Participant will earn such Performance
Shares or a portion thereof only in the event specified Performance Goals
are met within a specified Performance Cycle, as set forth in the Award
Agreement for the Performance Share Award. A Participant receiving a
Performance Share Award may (but need not) be issued a stock certificate in
respect of such Shares, registered in the name of Participant, and bearing
a legend referring to the terms and conditions set forth in the Award
Agreement and shall execute a stock power in blank with respect to the
Shares evidenced by such certificate. Any certificate evidencing such
Performance Shares and the stock power shall be held in custody by Bancorp
until the Performance Goals are satisfied. Performance Share Awards for
executive officers are subject to Section 10.7(b)(ii).
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10.2 Performance Cycles. For each Performance Award, the Committee shall
designate a performance period (the "Performance Cycle") with a duration to be
determined by the Committee in its discretion within which specified Performance
Goals are to be attained. There may be several Performance Cycles in existence
at any one time and the duration of Performance Cycles may differ from each
other.
10.3 Performance Goals. The Committee shall establish Performance Goals
for each Performance Cycle on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time select. Performance Goals
selected by the Committee may include performance criteria for Bancorp, a
Subsidiary, or an operating group, division, or unit of Bancorp and its
Subsidiaries. During any Performance Cycle, the Committee may adjust the
Performance Goals for such Performance Cycle as it deems equitable in
recognition of unusual or nonrecurring events affecting Bancorp, changes in
applicable tax laws or accounting principles, or such other factors as the
Committee may determine; provided, however, that the Committee may not adjust
Performance Goals for any Participant who is a covered employee for purposes of
Section 162(m) of the Code for the year in which such Performance Award is
settled, in such a manner as would increase the amount of compensation otherwise
payable to such covered employee.
10.4 Determination of Awards. As soon as practicable after the end of a
Performance Cycle, the Committee shall determine the extent to which Performance
Awards have been earned on the basis of performance in relation to the
established Performance Goals.
10.5 Settlement of Performance Awards.
(a) Performance Cash Awards. Settlement of earned Performance Cash Awards
shall be made to the Participant as soon as practicable after the expiration of
the Performance Cycle and the Committee's determination under Section 10.4 of
the extent to which the Award has been earned by the payment of cash equal to
the earned portion of the Award, by the issuance of unrestricted Shares having a
Fair Market Value equal to the earned portion of the Award, or by a combination
of cash and Shares, as determined by the Committee.
(b) Performance Share Awards. Settlement of earned Performance Shares shall
be made to the Participant as soon as practicable after the expiration of the
Performance Cycle and the Committee's determination under Section 10.4 of the
extent to which the Award has been earned by the issuance and delivery of
unrestricted Shares equal to the number of earned Performance Shares, by the
payment of cash equal to the then Fair Market Value of the earned Performance
Shares, or by a combination of cash and Performance Shares, as determined by the
Committee.
10.6 Rights as a Shareholder. Unless a stock certificate is issued with
respect to a Performance Share Award as provided in Section 10.1(b), a
Participant will not have any rights as a shareholder with respect to unearned
Performance Shares. With respect to unearned Performance Shares for which a
certificate has been issued in the Participant's name under a Performance Share
Award, a Participant shall have all the rights of a shareholder of Bancorp,
including the right to vote the Shares, and the right to receive any cash
dividends. Stock dividends issued with respect to Performance Shares shall be
treated as additional Performance Shares covered by the Performance Share Award
and shall be subject to the same terms and conditions. A Participant will have
no right as a shareholder with respect to Performance Cash Awards.
10.7 Performance Awards for Executive Officers. All Performance Awards to
executive officers of Bancorp and its Subsidiaries shall be subject to the
following additional specific requirements:
(a) Performance Goals. The Performance Goals shall be any one or a
combination of:
- net income
- cash flow
- any profit-related return ratios or
calculations.
Such Performance Goals may be measured on an absolute basis or relative to
a group of peer banks selected by the Committee, relative to internal
goals, or relative to levels attained in prior years. The Committee will
establish specific Performance Goals for each Performance Award not later
than 90 days after the beginning of the Performance Cycle for the Award.
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(b) Award Limitations.
(i) Performance Cash Awards. The maximum amount of compensation
payable with respect to Performance Cash Awards granted to any
individual executive officer (under the Plan and under the U. S. Bancorp
Performance Cash Award Plan) will not exceed $2 million for each
calendar year in a Performance Cycle.
(ii) Performance Share Awards. The maximum number of Shares
issuable with respect to Performance Share Awards granted to any
individual executive officer will not exceed 100,000 Shares (subject to
adjustment pursuant to Article 13) for any calendar year in a
Performance Cycle.
ARTICLE 11
OTHER STOCK BASED AND COMBINATION AWARDS
11.1 Other Stock-Based Awards. The Committee may grant other Awards under
the Plan pursuant to which Shares are or may in the future be acquired, or
Awards denominated in or measured by Share equivalent units, including Awards
valued using measures other than the market value of Shares. Other Stock-Based
Awards are not restricted to any specified form or structure and may include,
without limitation, Share purchase warrants, other rights to acquire Shares, and
securities convertible into or redeemable for Shares. The number of Shares
subject to Other Stock-Based Awards granted to any Participant during any five-
calendar-year period shall not exceed 750,000. Such Other Stock-Based Awards may
be granted either alone, in addition to, or in tandem with, any other type of
Award granted under the Plan.
11.2 Combination Awards. The Committee may also grant Awards under the
Plan in tandem or combination with other Awards or in exchange of Awards, or in
tandem or combination with, or as alternatives to, grants or rights under any
other employee plan of Bancorp, including the plan of any acquired entity. No
action authorized by this section shall reduce the amount of any existing
benefits or change the terms and conditions thereof without the Participant's
consent.
ARTICLE 12
DEFERRAL ELECTIONS
If a Participant in the Plan who is eligible to participate in the U. S.
Bancorp 1991 Executive Deferred Compensation Plan, or any successor or other
similar deferred compensation plan maintained by Bancorp or a Subsidiary, makes
an effective deferral election under such deferred compensation plan which
covers Awards under this Plan, the payment of cash, including without limitation
payment of dividend equivalents (or, if permitted by such deferred compensation
plan, the delivery of Shares) that would otherwise be due to such Participant by
virtue of the exercise, earn out, or Vesting of an Award under this Plan may be
deferred under the terms of the deferred compensation plan.
ARTICLE 13
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
13.1 Plan Does Not Restrict Bancorp. The existence of the Plan and the
Awards granted under the Plan shall not affect or restrict in any way the right
or power of the Board or the shareholders of Bancorp to make or authorize any
adjustment, recapitalization, reorganization, or other change in Bancorp's
capital structure or its business, any merger or consolidation of Bancorp, any
issue of bonds, debentures, preferred or prior preference stocks ahead of or
affecting Bancorp's capital stock or the rights thereof, the dissolution or
liquidation of Bancorp or any sale or transfer of all or any part of its assets
or business, or any other corporate act or proceeding.
13.2 Adjustments by the Committee. In the event of any change in
capitalization affecting the Common Stock of Bancorp, such as a stock dividend,
stock split, recapitalization, merger, consolidation, split-
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<PAGE> 18
up, spin-off, combination or exchange of shares or other form of reorganization,
or any other change affecting the Common Stock, such proportionate adjustments,
if any, as the Committee, in its sole discretion, may deem appropriate to
reflect such change, shall be made with respect to the aggregate number of
Shares for which Awards in respect thereof may be granted under the Plan, the
maximum number of Shares which may be sold or awarded to any Participant, the
number of Shares covered by each outstanding Award, and the base price or
purchase price per Share in respect of outstanding Awards. The Committee may
also make such adjustments in the number of Shares covered by, and price or
other value of any outstanding Awards in the event of a spin-off or other
distribution (other than normal cash dividends), of Bancorp assets to
shareholders.
ARTICLE 14
AMENDMENT AND TERMINATION
Without further approval of Bancorp's shareholders, the Board may at any
time terminate the Plan, or may amend it from time to time in such respects as
the Board may deem advisable, subject to any applicable shareholder approval
requirement imposed by applicable securities laws, federal income tax laws, or
NASDAQ or securities exchange rules.
ARTICLE 15
MISCELLANEOUS
15.1 Tax Withholding. Bancorp shall have the right to deduct from any
settlement of any Award under the Plan, including the delivery or vesting of
Shares, any federal, state, or local taxes of any kind required by law to be
withheld with respect to such payments or to take such other action as may be
necessary in the opinion of Bancorp to satisfy all obligations for the payment
of such taxes. The recipient of any payment or distribution under the Plan shall
make arrangements satisfactory to Bancorp for the satisfaction of any such
withholding tax obligations. Bancorp shall not be required to make any such
payment or distribution under the Plan until such obligations are satisfied.
15.2 Unfunded Plan. The Plan shall be unfunded and Bancorp shall not be
required to segregate any assets that may at any time be represented by Awards
under the Plan. Any liability of Bancorp to any person with respect to any Award
under the Plan shall be based solely upon any contractual obligations that may
be effected pursuant to the Plan. No such obligation of Bancorp shall be deemed
to be secured by any pledge of, or other encumbrance on, any property of
Bancorp.
15.3 Payments to Trust. The Committee is authorized to cause to be
established a trust agreement or several trust agreements whereunder the
Committee may make payments of amounts due or to become due to Participants in
the Plan.
15.4 Annulment of Awards. Any Award Agreement may provide that the grant
of an Award payable in cash is revocable until cash is paid in settlement
thereof or that grant of an Award payable in Shares is revocable until the
Participant becomes entitled to the certificate (without Restriction or legend)
in settlement thereof. In the event the employment of a Participant is
terminated for cause or without good reason (as defined in an Award Agreement),
any Award that is revocable shall be annulled as of the date of such
termination, and the Award Agreement may require the Participant to return to
Bancorp any Shares issued under the Award or the proceeds from any sale of such
Shares within a specified period prior to such termination.
15.5 Engaging in Competition With Bancorp. Any Award Agreement may provide
that, if a Participant terminates employment with Bancorp or a Subsidiary for
any reason whatsoever, and within a period of time (as specified in the Award
Agreement) after the date of such termination accepts employment with any
competitor of (or otherwise engages in competition with) Bancorp, the Committee,
in its sole discretion, may require such Participant to return to Bancorp the
economic value of any Award that is realized or obtained (measured at the date
of exercise, Vesting, or payment) by such Participant at any time during a
specified period prior to the date of such Participant's termination of
employment with Bancorp.
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<PAGE> 19
15.6 Other Bancorp Benefit and Compensation Programs. Payments and other
benefits received by a Participant under an Award made pursuant to the Plan
shall not be deemed a part of a Participant's regular, recurring compensation
for purposes of the termination indemnity or severance pay law of any state or
country and shall not be included in, nor have any effect on, the determination
of benefits under any other employee benefit plan or similar arrangement
provided by Bancorp or a Subsidiary unless expressly so provided by the Award
Agreement or by such other plan or arrangements. Awards under the Plan may be
made in combination with or in tandem with, or as alternatives to, grants,
awards, or payments under any other Bancorp or Subsidiary plans, arrangements,
or programs. The Plan notwithstanding, Bancorp or any Subsidiary may adopt such
other compensation programs and additional compensation arrangements as it deems
necessary to attract, retain, and reward employees for their service with
Bancorp and its Subsidiaries.
15.7 Securities Law Restrictions. No Shares shall be issued under the Plan
unless counsel for Bancorp shall be satisfied that such issuance will be in
compliance with applicable federal and state securities laws. Certificates for
Shares delivered under the Plan may be subject to such stop-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed, and any
applicable federal or state securities law. The Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions.
15.8 Governing Law. Except with respect to references to the Code or
federal securities laws, the Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the state of Oregon.
15.9 Accounting Matters. In the event that the Compensation Committee
determines that any provision of the Plan added or amended by the Third
Amendment and Restatement of the Plan is likely to have a materially adverse
impact on the ability of Bancorp to use the pooling method of accounting, such
added provision or amendment of a provision shall not be given any effect.
ARTICLE 16
SHAREHOLDER APPROVAL
The Third Amendment and Restatement of the Plan effective February 15,
1996, is expressly subject to the approval of the Plan, as amended and restated,
by the holders of a majority of the Shares present, or represented, and entitled
to vote on such approval at the 1996 annual meeting of Bancorp's shareholders.
All Award Agreements granted prior to the 1996 annual meeting of shareholders
that incorporate provisions authorized or allowed solely by reason of this Third
Amendment and Restatement of the Plan shall be subject to such shareholder
approval.
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<PAGE> 1
Exhibit 10.20
U. S. BANCORP
PERFORMANCE CASH AWARD PLAN
THIS PERFORMANCE CASH AWARD PLAN (the "Plan") was adopted by
U. S. Bancorp, an Oregon corporation ("Bancorp"), on February 15, 1996,
effective as of January 1, 1996. Capitalized terms that are not otherwise
defined herein have the meanings set forth in Article 10.
ARTICLE 1
PURPOSE OF PLAN
The continued growth and success of Bancorp depend upon its
ability to attract and retain the services of senior executives of the highest
level of competence and to provide incentives for their effective service and
superior performance. The purpose of the Plan is to advance the interests of
Bancorp and its shareholders through a long-term incentive compensation program
that will attract, retain, and motivate senior executives.
ARTICLE 2
SPONSORING EMPLOYERS
The Plan is sponsored and will be maintained on behalf of
Bancorp and any corporation in which Bancorp owns (directly or indirectly) stock
possessing 50 percent or more of the combined voting power that has, by
resolution of its board of directors, sponsored and maintained the U. S. Bancorp
Supplemental Benefits Plan. Bancorp and such corporations are referred to
collectively as the "Sponsoring Employers."
- 1 -
<PAGE> 2
ARTICLE 3
ELIGIBILITY
The executives eligible to participate in the Plan are members
of the Executive Committee and any other officers and executives (who may also
be directors) of the Sponsoring Employers with comparable responsibilities who
are selected by the Compensation Committee.
ARTICLE 4
PARTICIPATION
For each Performance Cycle, the Compensation Committee shall
select the executives who are to participate in the Plan. An executive who
becomes eligible after the beginning of a Performance Cycle may be designated by
the Compensation Committee to be a Participant for the remaining portion of the
Performance Cycle.
ARTICLE 5
PERFORMANCE CASH AWARDS
5.1 Nature of Performance Cash Awards. A Performance Cash
Award is an award providing for a cash award subject to such terms and
conditions as the Compensation Committee deems appropriate, including without
limitation the requirement the Participant will earn such cash award or a
portion of the cash award only in the event specified Performance Goals are met
within a specified Performance Cycle.
5.2 Target Percentage and Target Award. For each
Performance Cycle, the Compensation Committee will specify a Target Percentage
for each Participant to be used to determine the Participant's Target Award. The
Target Award for each Participant will be
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<PAGE> 3
the product of the Participant's Target Percentage and (as specified by the
Compensation Committee in the Performance Cash Award Agreement) either:
- The Participant's annualized base salary as in effect
as of the last day of the Performance Cycle; or
- The Participant's average annual base salary during
the Performance Cycle.
5.3 Performance Cycle. For each Performance Cash Award,
the Compensation Committee will designate a performance period (the "Performance
Cycle") with a duration to be determined by the Compensation Committee in its
discretion within which specified Performance Goals are to be attained. There
may be several Performance Cycles in existence at any one time, and the duration
of Performance Cycles may differ from each other.
5.4 Performance Goals. The Compensation Committee will
establish performance criteria ("Performance Goals") for each Performance Cycle.
The Performance Goals may be any one or a combination of:
- Net income
- Cash flow
- Any profit-related return ratios or calculations.
Such Performance Goals may be measured on an absolute basis or relative to a
group of peer banks designated by the Compensation Committee, relative to
internal goals, or relative to levels obtained in prior years. The Compensation
Committee will establish specific Performance Goals for each Performance Cash
Award not later than 90 days after the beginning of the Performance Cycle for
the award. During any Performance Cycle, the
- 3 -
<PAGE> 4
Compensation Committee may adjust the Performance Goals for such Performance
Cycle as it deems equitable in recognition of unusual or nonrecurring events
affecting Bancorp, changes in applicable tax laws or accounting principles, or
such other factors as the Compensation Committee may determine; provided,
however, that the Compensation Committee may not adjust Performance Goals for
any Participant who is a covered employee for purposes of Section 162(m) of the
Internal Revenue Code of 1986, as amended, for the year in which an Award is
settled, in such a manner as would increase the amount of compensation otherwise
payable to such covered employee.
5.5 Award Limitations. The maximum amount of compensation
payable with respect to Performance Cash Awards granted to any individual
Participant under the Plan and under the U. S. Bancorp 1993 Stock Incentive Plan
may not exceed $2 million in the aggregate for each calendar year in a
Performance Cycle.
5.6 Determination of Awards. As soon as practicable after
the end of a Performance Cycle, the Compensation Committee will determine the
extent to which Performance Cash Awards have been earned on the basis of
performance in relation to the established Performance Goals.
5.7 Settlement of Performance Cash Awards. Settlement of
earned Performance Cash Awards will be made to each Participant as soon as
practicable after the expiration of the Performance Cycle and the Compensation
Committee's determination under Section of the extent to which the Award has
been earned by the payment of cash equal to the earned portion of the Award.
- 4 -
<PAGE> 5
5.8 Performance Cash Award Agreement. For each
Participant for each Performance Cycle, a grant of a Performance Cash Award
under the Plan will be evidenced by a Performance Cash Award Agreement. Each
Performance Cash Award Agreement shall set forth:
- The Performance Cycle;
- The Participant's Target Percentage and the method to
be used to determine the Participant's Target Award;
- The Performance Goals and the method of determining
the extent to which the Performance Goals are achieved;
- The method of computing the amount, if any, of the
Performance Cash Award to be earned if the Participant terminates
employment before the end of the Performance Cycle; and
- Such other terms and conditions not inconsistent with
the Plan as the Compensation Committee may determine.
5.9 Right to Receive Award. A Participant must continue
employment with a Sponsoring Employer until the end of a Performance Cycle in
order to be entitled to receive the Participant's Performance Cash Award for
that Performance Cycle in accordance with the terms of the Plan. If a
Participant's employment with the Sponsoring Employers is terminated before the
end of the Performance Cycle for a reason other than death, Disability, Position
Termination, Retirement, or Change in Control, the Participant shall not be
entitled to any Award for that Performance Cycle. If a Participant's employment
with the Sponsoring Employers is terminated before the end of the Performance
Cycle due to death, Disability, Position Termination, Retirement, or Change in
Control, the Participant or the
- 5 -
<PAGE> 6
Participant's beneficiary or estate will be entitled to receive a pro-rata
portion of the Participant's Award for the Performance Cycle only if, and to
the extent, specified in the Performance Cash Award Agreement.
ARTICLE 6
PAYMENT OF AWARDS
Unless a Participant who is eligible to participate in the U.
S. Bancorp 1991 Executive Deferred Compensation Plan, or any successor or other
similar deferred compensation plan maintained by one or more of the Sponsoring
Employers, makes a deferral election under such deferred compensation plan
covering Awards under this Plan, a Participant's Performance Cash Award
shall be paid in a lump sum within three months after the end of the Performance
Cycle to which the Award relates.
ARTICLE 7
ADMINISTRATION
The Plan shall be administered by the Compensation Committee.
The Compensation Committee shall have the exclusive authority and responsibility
for all matters in connection with the operation and administration of the Plan.
Decisions by the Compensation Committee shall be final and binding upon all
parties affected by the Plan, including the beneficiaries of Participants.
ARTICLE 8
MISCELLANEOUS
8.1 Nonassignability of Benefits. A Participant's
benefits under the Plan cannot be sold, transferred, anticipated, assigned,
pledged, hypothecated, seized by legal process, subjected to claims of creditors
in any way, or otherwise disposed of.
- 6 -
<PAGE> 7
8.2 Governing Law. This Plan and any amendments shall be
construed, administered, and governed in all respects in accordance with
applicable federal law and the laws of the state of Oregon.
8.3 No Right of Continued Employment. Nothing in the Plan
shall confer upon any person the right to continue in the employ of any
Sponsoring Employer or interfere in any way with the right of any Sponsoring
Employer to terminate the person's employment at any time.
8.4 Withholding Taxes. The Sponsoring Employer shall
withhold any taxes required by law to be withheld in connection with payment of
an Award under this Plan.
ARTICLE 9
AMENDMENTS AND TERMINATION
The Compensation Committee has the power to terminate this
Plan at any time or to amend this Plan at any time and in any manner that it may
deem advisable.
ARTICLE 10
DEFINITIONS
For purposes of this Plan, the following terms have the
meanings set forth in this Article :
AWARD - A Performance Cash Award.
BANCORP - U. S. Bancorp, an Oregon corporation.
BOARD - The Board of Directors of U. S. Bancorp.
CHANGE IN CONTROL - A change in control of Bancorp as that
term is defined in the U. S. Bancorp 1993 Stock Incentive Plan as in effect from
time to time.
COMPENSATION COMMITTEE - The Compensation Committee of the
Board.
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<PAGE> 8
DISABILITY - The condition of being permanently "disabled"
within the meaning of Section 22(e)(3) of the Code, namely being unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months. However, the Committee may, by resolution, change the
foregoing definition of "Disability" or may adopt a different definition for
purposes of specific Awards.
EXECUTIVE COMMITTEE - Bancorp's Executive Management
Committee, or any successor committee designated by the Board.
PARTICIPANT - An eligible employee designated by the
Compensation Committee to participate in the Plan for all or a portion of a
Performance Cycle.
PERFORMANCE CYCLE - A designated performance period during
which an Award may be earned.
POSITION TERMINATION - The elimination of a Participant's
employment position with a Sponsoring Employer.
RETIREMENT - Retirement under the U. S. Bancorp Retirement
Plan. However, the Committee may, by resolution, change the foregoing definition
of "Retirement" or may adopt a different definition for purposes of specific
Awards.
SPONSORING EMPLOYER - Bancorp and the subsidiaries of Bancorp
that sponsor and maintain the Plan as provided in Article 2.
- 8 -
<PAGE> 9
TARGET AWARD - The targeted award for a Participant for a
Performance Cycle specified by the Compensation Committee as provided in Section
5.2.
IN WITNESS WHEREOF this Plan was executed this 15th day of
February, 1996.
U. S. BANCORP
By: /s/
Title: Executive Vice President
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<PAGE> 1
Exhibit 10.21
January 4, 1996
Mr. Robert D. Sznewajs
Vice Chairman
U. S. Bancorp
3100 U. S. Bancorp Tower
111 S.W. Fifth Avenue
Portland, Oregon 97204
Subject: Employment Agreement
Dear Mr. Sznewajs:
U. S. Bancorp (which, together with its wholly owned
subsidiaries, is referred to in this letter agreement as "Bancorp") recognizes
you as an innovative, highly-experienced, and knowledgeable banking executive
whose creativity, expertise, and effort have been, and will continue to be,
crucial to the ongoing development and growth of Bancorp.
In order to induce you to remain in the employ of Bancorp,
this Agreement, which has been approved by the Board, includes:
- A SERP Agreement that sets forth your benefits under the
U.S. Bancorp Supplemental Benefits Plan;
- A CIC Agreement that sets forth the severance compensation
that Bancorp agrees will be provided you in the event your employment
with Bancorp is terminated subsequent to a "Change in Control" of
Bancorp under the circumstances described in Section 2 of this
Agreement; and
- An Employment Agreement that sets forth the termination
compensation that Bancorp agrees will be provided you in the event
your employment with Bancorp is terminated under the circumstances
described in Section 3 of this Agreement.
DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings set forth below:
"Agreement" - This letter agreement, including the SERP
Agreement, the CIC Agreement, and the Employment Agreement.
<PAGE> 2
Mr. Robert D. Sznewajs - 2 - January 4, 1996
"Bancorp" - U. S. Bancorp, an Oregon corporation, and its
wholly-owned subsidiaries.
"Bancorp Shares" - Shares of the $5 par value common stock of
Bancorp.
"Benefit Plan" - Any plan, policy, or program of Bancorp
(whether or not on an insured basis) providing medical, dental, health,
disability income, life insurance or other death benefits, or similar types of
benefits to employees of Bancorp. Benefit Plan does not include any plan or
arrangement providing for vacation or severance pay, retirement benefits,
bonuses or incentive compensation of any kind, or current or deferred salary or
similar compensation.
"Board" - The Bancorp board of directors.
"Cause" - Cause for termination shall mean commission of an
act of fraud, embezzlement, or theft constituting a felony or commission of an
act (or failure to take an action) intentionally against the interest of
Bancorp which causes Bancorp material injury. Notwithstanding the foregoing,
you shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to you a copy of a resolution duly adopted by
the affirmative vote of not less than two-thirds of the entire membership of
the Board at a meeting of the Board called and held for the purpose (after
reasonable notice to you and an opportunity for you, together with your
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board you were guilty of conduct constituting Cause as defined in this
Agreement and specifying the particulars thereof in detail. The foregoing
provisions do not restrict the authority, discretion, or power of the Board, by
any action taken in compliance with Bancorp s articles of incorporation and
bylaws, to terminate your employment with or without Cause. Rather, the
foregoing provisions merely define, for purposes of your contractual rights and
remedies under this Agreement, the circumstances in which termination of your
employment will constitute termination for Cause.
"Change in Control" - A change in control of Bancorp shall
mean:
(i) The acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20 percent or more of the
<PAGE> 3
Mr. Robert D. Sznewajs - 3 - January 4, 1996
combined voting power of the then outstanding Voting Securities;
provided, however, that for purposes of this paragraph (i), the
following acquisitions shall not constitute a Change of Control; (A)
any acquisition directly from Bancorp, (B) any acquisition by Bancorp,
(C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Bancorp or any corporation controlled by
Bancorp, or (D) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A), (B), and (C) of paragraph
(iii) below; or
(ii) individuals who, as of the date of this Agreement,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date of this
Agreement whose election, or nomination for election by Bancorp's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(iii) consummation of a reorganization, merger, or
consolidation or sale or other disposition of all or substantially all
of the assets of Bancorp (a "Business Combination") in each case,
unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners of
the Voting Securities outstanding immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50
percent of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a
result of such transaction owns Bancorp or all or substantially all of
Bancorp's assets
<PAGE> 4
Mr. Robert D. Sznewajs - 4 - January 4, 1996
either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such
Business Combination, of the Voting Securities, (B) no Person
(excluding any employee benefit plan (or related trust) of Bancorp or
such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20 percent or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) approval by the shareholders of Bancorp of a complete
liquidation or dissolution of the Company.
"CIC Agreement" - The provisions of Section 2 of this
Agreement.
"CIC Term" - The term of the CIC Agreement as specified in
Section 2.2 of this Agreement.
"Code" - The Internal Revenue Code of 1986, as amended.
"Disability" or "Disabled" - Inability to perform services
with Bancorp on a full-time basis by reason of "Total Disability" within the
meaning of the U. S. Bancorp Disability Income Program (or any successor plan
or program maintained by Bancorp). In the event Bancorp no longer maintains a
similar plan or program, "Disability" or "Disabled" will mean inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment. You will be considered Disabled
for purposes of this Agreement:
(a) Upon the Board's acceptance of a Notice of Disability
from you accompanied by evidence, satisfactory to the Board, that you
are Disabled; or
<PAGE> 5
Mr. Robert D. Sznewajs - 5 - January 4, 1996
(b) 30 days after written notice to you of the Board's
determination (after notice to you and an opportunity to be heard
before the Board) that you are Disabled.
In either situation, for purposes of computing the continuation period
described in Section 3.2.2, you will be treated as having become Disabled as of
the first day of continuous absence from your duties with Bancorp on account of
such Disability.
"Employment Agreement" - The provisions of Section 3 of this
Agreement.
"Employment Term" - The term of the Employment Agreement,
namely the period from the date of this Agreement through the later of (i) the
Expiration Date, or (ii) (if you become Disabled prior to that date) 180 days
after you become Disabled; provided, however, that if you become Chief
Executive Officer of Bancorp, the Employment Term will expire as of the date
you assume that position.
"Exchange Act" - The Securities Exchange Act of 1934, as
amended.
"Excise Tax" - A tax imposed by Section 4999(a) of the Code,
or any successor provision, with respect to "excess parachute payments" as
described in Section 280G(b) of the Code.
"Expiration Date" - December 31, 2002.
"Good Reason" -
A. Before Change in Control. For all purposes of this
Agreement, unless a Change in Control has occurred, termination by you of your
employment with Bancorp during the Employment Term for "Good Reason" means
termination based on any of the following:
(i) A change in your status or position or positions with
Bancorp that represents a material demotion from your status or
position or positions as of the date of this Agreement or a material
change in your duties or responsibilities that is inconsistent with
such status or position or positions;
<PAGE> 6
Mr. Robert D. Sznewajs - 6 - January 4, 1996
(ii) A reduction by Bancorp in your base salary (as in effect
on the date of this Agreement or as increased at any time during the
Term of this Agreement) other than a reduction applied on a
nondiscriminatory manner to all Key Executives;
(iii) The failure of Bancorp to continue your participation
(on terms comparable to those for other Key Executives) in any Plans
and vacation programs or arrangements in which other Key Executives
are participants; and
(iv) Bancorp's requiring you to be based more than 35 miles
from Bancorp's principal executive office, except for required travel
on Bancorp's business to an extent substantially consistent with your
business travel obligations as of the date of this Agreement.
B. After Change in Control - After a Change in Control has
occurred, termination by you of your employment with Bancorp during the CIC
Term for "Good Reason" means termination based on any of the following:
(i) a change in your status or position or positions with
Bancorp which, in your reasonable judgment, represents a demotion from
your status or position or positions as in effect immediately prior to
the Change in Control, or a change in your duties or responsibilities
which, in your reasonable judgment, is inconsistent with such status
or position or positions, or any removal of you from or any failure to
reappoint or reelect you to such position or positions, except in
connection with the termination of your employment for Cause or
Disability or as a result of your death or the termination by you
other than for Good Reason;
(ii) a reduction by Bancorp in your base salary as in effect
immediately prior to the Change in Control;
<PAGE> 7
Mr. Robert D. Sznewajs - 7 - January 4, 1996
(iii) the failure by Bancorp to continue in effect any Plan
in which you are participating at the time of the Change in Control
(or Plans providing you with at least substantially similar benefits),
other than as a result of the normal expiration of any such Plan in
accordance with its terms or a modification of such Plan which
modification is applicable to all employees who participate in such
Plan, as in effect at the time of the Change in Control, or the taking
of any action, or the failure to act, by Bancorp which would adversely
affect your continued participation in any of such Plans on at least
as favorable a basis to you as is the case on the date of the Change
in Control or which would materially reduce your benefits in the
future under any of such Plans or deprive you of any material benefit
enjoyed by you at the time of the Change in Control;
(iv) the failure by Bancorp to provide and credit you with
the number of paid vacation days to which you are then entitled in
accordance with Bancorp s normal vacation policy as in effect
immediately prior to the Change in Control;
(v) Bancorp's requiring you to be based anywhere more than 35
miles from where your office is located immediately prior to the
Change in Control except for required travel on Bancorp s business to
an extent substantially consistent with the business travel
obligations which you undertook on behalf of Bancorp prior to the
Change in Control;
(vi) the failure by Bancorp to obtain from any successor the
assent to this Agreement contemplated by Section 4.1.1 of this
Agreement;
(vii) any purported termination by Bancorp of your employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of this Agreement; and for purposes of this
Employment Agreement, no such purported termination shall be
effective; or
(viii) any refusal by Bancorp to continue to allow you to
attend to matters or engage in activities not directly related to the
business of Bancorp which,
<PAGE> 8
Mr. Robert D. Sznewajs - 8 - January 4, 1996
prior to the Change in Control, you were permitted by the Board to
attend to or engage in.
"Gross-Up Payment" - A payment described in Section 2.4 of
this Agreement with respect to an Excise Tax.
"Key Executives" - Executives of Bancorp who have positions of
Executive Vice President or higher, or executives of Bancorp whose positions
and responsibilities are substantially equivalent to those of executive vice
presidents of Bancorp as of the date of this Agreement.
"Other Agreement" - A plan, arrangement, or agreement pursuant
to which an Other Payment is made.
"Other Payment" - Any payment or benefit payable to you in
connection with a Change in Control of Bancorp pursuant to any plan,
arrangement, or agreement (other than this Agreement) with Bancorp, any person
whose actions result in a change in control of Bancorp, or any person
affiliated with Bancorp or such person.
"Outside Tax Counsel" - Outside tax counsel selected by
Bancorp's independent accountants and reasonably acceptable to you.
"Parachute Payment" - A payment or benefit payable to you in
connection with a change in control of Bancorp that is treated as a parachute
payment within the meaning of Code Section 280G(b)(2).
"Person" - Any individual, corporation, partnership, group,
association, or other "person," as such term is used in Section 13(d)(3) or
Section 14(d) of the Exchange Act, other than Bancorp or any employee benefit
plan or plans sponsored by Bancorp.
"Plan" - Any compensation plan such as a plan providing for
incentive or deferred compensation, stock options, or other stock or
stock-related grants or awards or any employee benefit plan such as a thrift,
investment, savings, pension, profit sharing, medical, disability, accident,
life insurance, cafeteria, or relocation plan or any other plan, policy, or
program of Bancorp providing similar types of benefits to employees of Bancorp.
<PAGE> 9
Mr. Robert D. Sznewajs - 9 - January 4, 1996
"SERP" - Bancorp's Supplemental Benefits Plan, as amended from
time to time, or any successor plan providing substantially similar benefits.
"SERP Agreement" - The provisions of Section 1 of this
Agreement.
"Severance Payments" - The payments described in Section 2.3.4
of this Agreement.
"Termination Benefits" - The payments and benefits described
in Section 3.2.5 of this Agreement.
"Total Payments" - All payments or benefits payable to you in
connection with a Change in Control of Bancorp, including Severance Payments
and Other Payments.
"Voting Securities" - Bancorp's issued and outstanding
securities ordinarily having the right to vote at elections of Bancorp s Board.
SECTION 1
SERP BENEFITS
1.1 SERP Participation. You are designated as a participant
in the SERP with the following benefits:
- A Restoration Benefit under 6.1.1(a) of the SERP;
- An Enhanced Retirement Benefit under 6.1.1(f) of the SERP;
and
- An Investment Plan-Related Benefit under 6.2 of the SERP.
Except as expressly provided in this Agreement, the foregoing is an exclusive
list of your benefits under the SERP and supersedes all prior designations.
1.2 Benefit Service Credit. For purposes of your Enhanced
Retirement Plan Benefit, pursuant to 6.1.1(f)(3) of the SERP you are credited
with eleven years of Benefit Service for your service with a prior employer
(subject to the offset described in Section 1.3 of this Agreement). The eleven
years
<PAGE> 10
Mr. Robert D. Sznewajs - 10 - January 4, 1996
of Benefit Service are in addition to your actual years of Benefit Service.
1.3 Prior Employer Benefits. Pursuant to 6.1.1(f)(4) of the
SERP, your Enhanced Retirement Benefit is subject to offset for Prior Employer
Benefits equal to a single life annuity in the amount of $2,368.01 per month,
subject to an early retirement reduction factor of $10.319 times the number of
calendar months prior to age 65.
1.4 Eligibility Service Credit. For purposes of determining
vesting for the Enhanced Retirement Benefit under the provisions of 6.1.1(f)(6)
and 6.1.1(f)(7)(i) of the SERP, you will be credited with eleven years of
Eligibility Service in addition to your actual years of Eligibility Service
provided you do not violate the noncompetition provisions of Section 1.5 of
this Agreement. In the event that you compete in violation of Section 1.5,
your vesting will be determined on the basis of your actual number of years of
Eligibility Service without credit for the eleven additional years.
1.5 Noncompetition. For purposes of Section 1.4 of this
Agreement, in the event that your employment is terminated by Bancorp for Cause
or by you without Good Reason prior to a Change in Control, you will not be
entitled to the additional eleven years of Eligibility Service if, within three
years of the date you terminate employment with Bancorp, you either directly or
indirectly, on your own behalf or as a partner, member, shareholder (except by
ownership of less than 1 percent of the outstanding stock of a publicly held
corporation), officer, employee, consultant, financier, director, or trustee of
any person, firm, corporation, or other entity, engage in a financial services
business competing, as of the date of your termination of employment, with the
business then carried on by Bancorp or any of its subsidiaries and affiliates.
You agree to promptly notify Bancorp of any employment you undertake within
such three-year period. In the event that SERP benefits are paid to you based
on the eleven years of Eligibility Service credited pursuant to Section 1.4
and, within the three-year period you violate the provisions of this Section
1.5, you agree to repay to Bancorp (without interest) the difference, if any,
between the benefits paid and the benefits that would have been payable without
credit for the eleven years of Eligibility Service.
<PAGE> 11
Mr. Robert D. Sznewajs - 11 - January 4, 1996
1.6 Effect of Change in Control. Upon a Change in Control of
Bancorp, your right to an Enhanced Retirement Benefit under the SERP will be
modified as provided in Section 2.3.4 of the CIC Agreement.
1.7 Effect of SERP Plan Document. The provisions of this
SERP Agreement modify and describe your benefits under the SERP but shall not
be deemed to create a separate benefit in addition to the SERP benefits.
Except as expressly provided in this Agreement, your benefits under the SERP
are subject to the provisions of the SERP plan document.
SECTION 2
CHANGE IN CONTROL AGREEMENT
2.1 Agreement to Provide Services; Right to Terminate;
Confidentiality.
2.1.1 Termination Prior to Certain Offers. Except in the
event of a Change in Control, and except as otherwise provided in Section 2.1.2
of this Agreement, either Bancorp or you may terminate your employment at any
time, subject to Bancorp paying whatever severance benefits as are provided for
pursuant to applicable Bancorp Plans or compensation agreements other than this
Agreement. If, and only if, termination of your employment with Bancorp occurs
after a Change in Control, the provisions of this CIC Agreement shall apply.
2.1.2 Continuation of Services Subsequent to Certain Offers.
In the event a tender offer or exchange offer is made by a Person for more than
20 percent of Bancorp s Voting Securities, you agree that you will not leave
the employ of Bancorp (other than as a result of Disability) and will render
services to Bancorp in the capacity in which you then serve until such tender
offer or exchange offer has been abandoned or terminated or a Change in Control
has occurred. In the event that, during the period you are obligated to
continue in the employ of Bancorp pursuant to this Section 2.1.2, Bancorp
reduces your compensation, your obligations under this Section 2.1.2 shall
terminate.
2.1.3 Termination for Cause. Bancorp may terminate your
employment for Cause whether or not a Change in Control has occurred.
<PAGE> 12
Mr. Robert D. Sznewajs - 12 - January 4, 1996
2.1.4 Confidentiality. You acknowledge that (i) by reason of
the capacity in which you have been employed, you have financial information
regarding Bancorp which has not been publicly disclosed and which is
confidential to Bancorp, and (ii) disclosure of such financial information
could cause irreparable harm to Bancorp. You agree that you will not disclose,
without prior written consent of Bancorp, any financial or other confidential
business information regarding Bancorp which has not been publicly disclosed by
Bancorp.
2.2 Term of Change in Control Provisions. This CIC Agreement
commences on the date hereof and shall continue in effect until December 31,
2002; provided, however, that commencing on January 1, 2003, and each January 1
thereafter, the CIC Term shall automatically be extended for one additional
year unless at least 90 days prior to such January 1, Bancorp or you shall have
given notice that this CIC Agreement shall not be extended; and provided,
further, that if a Change in Control shall occur while this CIC Agreement is in
effect, the CIC Term shall automatically be extended for a period of three
calendar years beyond the calendar year in which such Change in Control occurs.
Except as provided in Section 2.1.1 of this Agreement, this CIC Agreement shall
terminate if you or Bancorp terminate your employment prior to a Change in
Control.
2.3 Termination Following Change in Control. In the event
that your employment with Bancorp is terminated, whether by you or by Bancorp,
within three years from the date of occurrence of any event constituting a
Change in Control that occurs during the CIC Term (it being recognized that
more than one such event may occur in which case the three-year period shall
run from the date of occurrence of each such event), you shall be entitled to
the following respective benefits:
2.3.1 Disability. During any period that you are unable to
perform your duties hereunder as a result of incapacity due to
physical or mental illness, you shall continue to receive your full
base salary at the rate then in effect until your employment with
Bancorp is terminated by Bancorp for Disability. Thereafter, your
benefits shall be determined in accordance with Bancorp's Disability
Income Program. If Bancorp's Disability Income Program is modified or
terminated following a Change
<PAGE> 13
Mr. Robert D. Sznewajs - 13 - January 4, 1996
in Control, Bancorp shall substitute another plan or program with
benefits applicable to you substantially similar to those provided by
the Disability Income Program prior to its modification or
termination.
2.3.2 Termination Upon Death. In the event of your death
while an employee of Bancorp, Bancorp shall pay to your representative
your full base salary through the date of your death at the rate in
effect on the date of the Change in Control, together with all
benefits, including death benefits, to which you are then entitled
under Plans in which you are a participant, and Bancorp shall have no
further obligations to you under this Agreement.
2.3.3 Termination for Cause or Without Good Reason. If your
employment is terminated by Bancorp for Cause, or by you other than
for Good Reason, Bancorp shall pay you your full base salary through
the Date of Termination at the rate in effect on the date the Change
in Control occurs, together with all benefits to which you are then
entitled under Plans in which you are a participant, and Bancorp shall
have no further obligations to you under this Agreement.
2.3.4 Termination Without Cause or With Good Reason. If your
employment with Bancorp is terminated (other than for Disability or
upon your death) by Bancorp without Cause or by you with Good Reason,
subject to the limitations set forth in Section 4.5 of this Agreement,
Bancorp shall pay you, upon demand, the following amounts ("Severance
Payments"):
(a) your full base salary through the Date of
Termination at the rate in effect on the date the Change in
Control occurs;
(b) in lieu of any further salary payments to you
for periods subsequent to the Date of Termination, an amount
of severance pay equal to three times the sum
<PAGE> 14
Mr. Robert D. Sznewajs - 14 - January 4, 1996
of (i) your annual base salary, at the rate in effect on the
date the Change in Control occurs, plus (ii) the average
annual incentive compensation (if any) paid to you or accrued
to your benefit (prior to any deferrals) in respect of the two
fiscal years last ended prior to the fiscal year in which the
Change in Control occurs;
(c) all legal fees and expenses incurred by you as a
result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement); and
(d) reimbursement in full of all reasonable amounts
(up to a maximum of $50,000) paid or incurred by you for
outplacement services in connection with obtaining other
employment.
(e) In addition, your Enhanced Retirement Benefit
under the SERP as described in the SERP Agreement will be
modified as follows:
(i) Notwithstanding 6.1.1(f)(6) and 6.1.1(f)(7)
of the SERP and Section 1.5 of the SERP Agreement,
your right to an Enhanced Retirement Benefit will be
fully vested and nonforfeitable as of the Date of
Termination;
(ii) If you have not attained age 55 as of
the Date of Termination, your Enhanced Retirement
Benefit will commence on the first day of the
calendar month in which you attain age 55;
<PAGE> 15
Mr. Robert D. Sznewajs - 15 - January 4, 1996
(iii) For purposes of computing your Target
Benefit under the SERP, you will continue to accrue
Benefit Service after the Change in Control;
(iv) Your Early Retirement Reduction Percentage
for purposes of 6.1.1(f)(5) of the SERP will be 3
percent; and
(v) Your Enhanced Retirement Benefit will not be
reduced pursuant to the Reduction in Change in
Control Related Benefits provisions under 6.1.1(g) of
the SERP.
The amount of Severance Payments otherwise payable
pursuant to this CIC Agreement shall be reduced by (A) amounts
payable to you pursuant to Bancorp s Severance Benefits Plan
or any successor plan providing severance benefits to Bancorp
employees and (B) amounts payable to you (after any adjustment
or reduction to reflect payments described in clause (A)) as
salary continuation and incentive compensation pursuant to any
other employment agreement between you and Bancorp which is in
effect as of the Date of Termination. The payments provided
for in this paragraph shall be made not later than the fifth
day following the Date of Termination; provided, however, that
if the amounts of such payments cannot be finally determined
on or before such day, Bancorp shall pay to you on such day an
estimate, as determined in good faith by Bancorp, of the
minimum amount of such payments, and shall pay the remainder
of such payments (together with interest at the rate of 10
percent per annum) as soon as the amount thereof can be
determined but in no event later than the 30th day
<PAGE> 16
Mr. Robert D. Sznewajs - 16 - January 4, 1996
after the Date of Termination. In the event that the amount
of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a
loan by Bancorp to you, payable on the fifth day after demand
by Bancorp (together with interest at the rate of 10 percent
per annum).
2.3.5 Related Benefits. Unless you die or your employment is
terminated by Bancorp for Cause or Disability, or by you other than
for Good Reason, Bancorp shall maintain in full force and effect, for
the continued benefit of you for three years after the Date of
Termination, all Benefit Plans in which you were entitled to
participate immediately prior to the Date of Termination, provided
that your continued participation is possible under the general terms
and provisions of such Benefit Plans; provided, however, that if you
become eligible to participate in a benefit plan, program, or
arrangement of another employer which confers benefits upon you
substantially similar to those provided by one or more Benefit Plans,
you shall cease to receive benefits under this subparagraph in respect
of such Benefit Plan or Plans. In the event that your participation
in any Benefit Plan is barred by the provisions of such Benefit Plan,
Bancorp shall arrange to provide you with benefits substantially
similar to those which you are entitled to receive under such Benefit
Plan. Nothing contained in this Section 2.3.5 shall be construed to
extend your employment for such three-year period or to cause you to
be treated as an employee of Bancorp during such three-year period.
2.3.6 No Mitigation. You shall not be required to mitigate
the amount of any payment provided for in this Section 2.3 by seeking
other employment or otherwise, nor, except as expressly set forth in
Section 2.3.5, shall the amount of any payment provided for in this
Section 2.3 be reduced by any compensation earned by you as the result
of employment by another employer after the Date of Termination, or
otherwise.
<PAGE> 17
Mr. Robert D. Sznewajs - 17 - January 4, 1996
2.4 Gross-Up Payment.
2.4.1 General. In the event any portion of the Total
Payments will be subject to the Excise Tax, Bancorp will pay you an additional
amount (the "Gross-Up Payment") equal to (a) the Excise Tax imposed on you with
respect to the portion of the Total Payments that constitutes an Excess
Parachute Payment, plus (b) all federal, state, and local income taxes and
Excise Tax imposed on you with respect to the Gross-Up Payment.
2.4.2 Effect on Stock Incentive Plan Awards. Under the terms
of Award Agreements under Bancorp's Stock Incentive Plan, the vesting or
exercisability of certain Awards are accelerated upon the occurrence of a
Change in Control, but only to the extent such acceleration does not result in
an excess parachute payment. The provisions of this CIC Agreement are not
intended to modify the provisions of the Award Agreements and no Gross-Up
Payment will be paid with respect to any Awards under the Stock Incentive Plan.
2.4.3 Determining Amount of Excise Tax. For purposes of
determining whether any portion of the Total Payments will be subject to the
Excise Tax and the amount of any Excise Tax:
(a) The entire amount of the Total Payments shall be treated
as an Excess Parachute Payment unless and to the extent, in the
written opinion of Outside Tax Counsel, the Total Payments, in whole
or in part, are not subject to the Excise Tax;
(b) The value of any noncash benefits or any deferred payment
that are part of the Total Payments shall be determined by Bancorp's
independent accountants in accordance with the requirements of
Sections 280G(d)(3) and 280G(d)(4) of the Code and any regulations
promulgated under those sections.
2.4.4 Determining Amount of Gross-Up Payment. For purposes
of determining the amount of the Gross-Up Payment:
(a) You will be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation applicable to
individuals (including any applicable surtaxes and taking into account
any
<PAGE> 18
Mr. Robert D. Sznewajs - 18 - January 4, 1996
applicable loss or reduction of deductions or exemptions) for the
Calendar year in which the Gross-Up Payment is to be made;
(b) You shall be deemed to pay state and local income taxes
at the highest marginal rates of taxation applicable to individuals
(including any applicable surtaxes and taking into account any
applicable loss or reduction of deductions or exemptions) in the state
and locality of your residence at the date the Gross-Up Payment will
be made.
2.4.5 Time of Payment. Bancorp will pay the Gross-Up Payment
to you not later than the 45th day following the Date of Termination (but in no
event later than 10 days before any applicable payment of tax is due);
provided, however, that if the amount of the Gross-Up Payment cannot be finally
determined on or before such day, Bancorp shall pay you on that day an
estimate, as determined in good faith by Bancorp, of the minimum amount of the
Gross-Up Payment, and shall pay the remainder of the Gross-Up Payment (together
with interest at 10 percent per annum) as soon as the amount of the Gross-Up
Payment can be determined, but in no event later than the 90th day after the
Date of Termination. In the event that the estimated amount of Gross-Up
Payment paid to you exceeds the total amount of Gross-Up Payment subsequently
determined to have been due, the excess will constitute a loan by Bancorp to
you, payable on the 5th day after demand by Bancorp (together with interest at
the rate of 10 percent per annum).
2.4.6 Subsequent Adjustment - Repayment. In the event that
the amount of Excise Tax you are required to pay is subsequently determined to
be less than the amount taken into account under this Agreement, you agree that
promptly after the amount of such reduction in Excise Tax is finally
determined, you will repay to Bancorp, without interest, the amount of such
reduction, plus the net federal income tax benefit, if any, you actually will
receive (in the opinion of Outside Tax Counsel) as a result of making the
repayment described in this Section 2.4.6.
2.4.7 Subsequent Adjustment - Additional Payment. In the
event that the amount of Excise Tax you are required to pay is subsequently
determined to exceed the amount taken into account under this Agreement,
Bancorp shall make an additional
<PAGE> 19
Mr. Robert D. Sznewajs - 19 - January 4, 1996
Gross-Up Payment in the manner set forth in this Section 2.4.7 in respect of
such additional Excise Tax, plus any interest, additions to tax, or penalties
payable by you with respect to the additional Excise Tax, promptly after the
time that the amount can be reasonably determined.
2.5 Miscellaneous. No provision of this CIC Agreement may be
modified, waived, or discharged unless such modification, waiver, or discharge
is agreed to in a writing signed by you and the Chairman of the Board or Chief
Executive Officer of Bancorp (or, if you are Chairman of the Board and Chief
Executive Officer, an officer of Bancorp specifically authorized for such
purpose by the Compensation Committee of Bancorp's Board of Directors). No
waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same, or at any prior or subsequent,
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws
of the State of Oregon.
2.6 Validity. The invalidity or unenforceability of any
provision of this CIC Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect.
2.7 Payments During Controversy. Notwithstanding the
pendency of any dispute or controversy, Bancorp will continue to pay you your
full compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, base salary and installments of incentive
compensation) and continue you as a participant in all Plans in which you were
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved in accordance with the procedure described in this
Agreement in connection with the definition of "Date of Termination." Amounts
paid under this Section 2.7 are in addition to all other amounts due under this
CIC Agreement and shall not be offset against or reduce any other amounts due
under this CIC Agreement. You shall be entitled to seek specific performance
of your right to be paid until the Date of Termination during
<PAGE> 20
Mr. Robert D. Sznewajs - 20 - January 4, 1996
the pendency of any dispute or controversy arising under or in connection with
this CIC Agreement.
SECTION 3
EMPLOYMENT AGREEMENT
3.1 Employment. Bancorp agrees to employ you, and you accept
employment with Bancorp, during the Employment Term on the terms and conditions
set forth in this Employment Agreement.
3.2 Termination of Agreement.
3.2.1 Death. If you die prior to the expiration of the
Employment Term, Bancorp shall pay to your representative your Base Salary
through the date of death. All, benefits including death benefits, to which
you are then entitled under Plans in which you are a participant will be
payable as provided in those Plans. This Employment Agreement will terminate
as of the date of death and Bancorp shall have no further obligations to you
under this Employment Agreement.
3.2.2 Disability. In the event you become Disabled during
the Employment Term, the Employment Agreement will remain in effect and you
will be entitled to continue to receive your base salary and all benefits under
Plans in which you are a participant until the earlier of (i) the expiration of
the Employment Term, or (ii) 180 days after the date you become Disabled. This
Employment Agreement will then terminate as of the end of such continuation
period. To the extent allowable under applicable law and other Plans, you will
be treated as an employee of Bancorp during the continuation period for
purposes of this Employment Agreement and the Plans in which you are a
participant.
3.2.3 Termination for Cause. Pending the determination by
the Board whether or not Cause exists for termination of your employment
pursuant to the definition of Cause in this Agreement, the Board may suspend
you or relieve you of your duties as an officer, but shall not terminate your
employment. Upon such determination that Cause exists, Bancorp may terminate
your employment. This Employment Agreement shall terminate as of the date of
termination of your employment for Cause, and Bancorp shall have no further
obligations to you under this Agreement. If Bancorp terminates your employment
for Cause, Bancorp shall pay you
<PAGE> 21
Mr. Robert D. Sznewajs - 21 - January 4, 1996
your base salary through the effective date of such termination for Cause. All
accrued benefits to which you are then entitled under Plans in which you are a
participant shall be payable as provided in those Plans.
3.2.4 Voluntary Termination Without Good Reason. If you
voluntarily terminate employment with Bancorp during the Employment Term
without Good Reason (other than by reason of Disability), Bancorp will pay you
your base salary through the effective date of such termination of employment,
together with all accrued benefits to which you are then entitled under Plans
in which you are a participant, payable at the times provided in those Plans,
and Bancorp shall have no further obligations to you under this Employment
Agreement.
3.2.5 Involuntary Termination Without Cause or Voluntary
Termination With Good Reason. If Bancorp terminates your employment prior to
the expiration of the Employment Term without Cause for any reason other than
death or Disability, or if you voluntarily terminate employment with Bancorp
prior to the expiration of the Employment Term for Good Reason, you will be
entitled to receive the following Termination Benefits:
(a) Your full base salary will be continued through the date
of termination at the rate in effect on the date of termination.
(b) You will be paid an amount equal to three times the sum
of (i) your annual base salary, at the rate in effect on the date of
termination, plus (ii) the average annual incentive compensation (if
any) paid to you or accrued for your benefit (prior to any deferrals)
in respect of the two fiscal years of Bancorp last ended prior to the
fiscal year in which the termination occurs.
(c) Bancorp will continue for a period of three years
following the date of termination of all Benefit Plans (which do not
include the Retirement Plan or the Employee Investment Plan) in which
you were entitled to participate immediately prior to the date of
termination, provided that your continued participation is possible
under the general terms and provisions of such Benefit Plans;
provided, however, that if you become eligible to
<PAGE> 22
Mr. Robert D. Sznewajs - 22 - January 4, 1996
participate in a benefit plan, program, or arrangement of another
employer which confers benefits upon you substantially similar to
those provided by one or more Benefit Plans, you shall cease to
receive benefits under this subparagraph in respect of such Benefit
Plan or Plans. In the event that your participation in any Benefit
Plan is barred by the provisions of such Benefit Plan, Bancorp shall
arrange to provide you with benefits substantially similar to those
which you are entitled to receive under such Benefit Plan.
(d) You will be entitled to an Enhanced Retirement Benefit
under Section 6.1.1(f) of the SERP as described in Section 1 of this
Agreement, payable at the times specified in and subject to the terms
and conditions of the SERP, with the following additional provisions:
(i) Notwithstanding Section 6.1.1(f)(6) and Section
6.1.1(f)(7) of the SERP, your right to an Enhanced Retirement
Benefit will be fully vested and nonforfeitable as of the date
of termination; and
(ii) The Reduction Percentage for purposes of Section
6.1.1(f)(5) of the SERP will be 3 percent.
(e) You will not be required to mitigate the amount of any
payments provided in this Section 3.2.5 by seeking other employment or
otherwise, nor, except as expressly provided in subparagraph (c), will
the amount of any payment provided for in this Section 3.2.5 be
reduced by any compensation held by you as the result of employment
with another employer after the date of termination, or otherwise.
The Termination Benefits payable pursuant to this Section
3.2.5 are in lieu of any other severance benefits payable under the U. S.
Bancorp Severance Benefits Plan.
<PAGE> 23
Mr. Robert D. Sznewajs - 23 - January 4, 1996
3.2.6 Treatment of Termination Benefits; Effect of Change in
Control. The Termination Benefits payable under Section 3.2.5 of this
Employment Agreement are not conditioned upon a Change in Control of Bancorp
but are payable upon any termination described in this Employment Agreement,
whether or not a Change in Control has occurred. Thus, it is our mutual
intention that the benefits payable under this Employment Agreement are not to
be treated as Total Payments. In the event a termination of employment that
would otherwise be governed by Section 3.2.5 occurs within the period described
in Section 2.3 following a Change in Control, you will be entitled to the
benefits described in Section 2.3 in lieu of any benefits described in this
Section 3.
SECTION 4
GENERAL
4.1 Successors; Binding Agreement.
4.1.1 Successors of Bancorp. This Agreement shall inure to
the benefit of, and be binding upon, any corporate or other successor or
assignee of Bancorp which shall acquire, directly or indirectly, by merger,
consolidation or purchase, or otherwise, all or substantially all of the
business or assets of Bancorp. Bancorp shall require any such successor, by an
agreement in form and substance reasonably satisfactory to you, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent as Bancorp would be required to perform if no such succession had taken
place.
4.1.2 Your Successors. This Agreement shall inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. If you should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to your devisee, legatee, or other designee or, if there is no such designee,
to your estate.
<PAGE> 24
Mr. Robert D. Sznewajs - 24 - January 4, 1996
4.2 Miscellaneous. No provision of this Agreement may be
modified, waived, or discharged unless such modification, waiver, or discharge
is agreed to in a writing signed by you and the Chairman of the Board or Chief
Executive Officer of Bancorp (or, if you are Chairman of the Board and Chief
Executive Officer, an officer of Bancorp specifically authorized for such
purpose by the Compensation Committee of Bancorp's Board of Directors). No
waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same, or at any prior or subsequent,
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws
of the State of Oregon.
4.3 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
4.4 Withholding. Bancorp will withhold from any payment of
Termination Benefits, Gross-Up Payments, or any other benefits under this
Agreement all federal, state, and local taxes as will be required pursuant to
any law or governmental regulation or ruling.
4.5 Regulatory Limitations. Notwithstanding any other
provision of this Agreement, Bancorp shall have no obligation to make any
payments to you pursuant to this Agreement if, or to the extent, such payments
are prohibited by any applicable law or regulation, including without
limitation the FDIC s regulations regarding Golden Parachute and
Indemnification Payments promulgated under the Comprehensive Thrift and Bank
Fraud Prosecution and Taxpayer Recovery Act of 1990.
4.6 Cancellation of Change in Control Agreement. Effective
upon execution of this Agreement, the Change in Control Agreement between you
and Bancorp dated May 1, 1994, is canceled and will have no further effect.
<PAGE> 25
Mr. Robert D. Sznewajs - 25 - January 4, 1996
If this letter correctly sets forth our agreement on the
subject matter hereof, kindly sign and return to Bancorp the enclosed copy of
this letter, which will then constitute our agreement on this subject.
Sincerely,
U. S. BANCORP
By: /s/ Gerry B. Cameron
----------------------------
Its: Chairman and CEO
----------------------------
Approved as to form.
/s/
- ------------------------------------
N. Stewart Rogers, Chairman
U. S. Bancorp Compensation Committee
Agreed to this 4th day of January, 1996.
/s/
- ------------------------------------
Robert D. Sznewajs
<PAGE> 1
Exhibit 10.24
EMPLOYMENT AGREEMENT
AGREEMENT by and between U.S. Bancorp, an Oregon corporation ("USB"), West
One Bancorp, an Idaho corporation (the "Company") and Dwight V. Board (the
"Executive"), dated as of the 5th day of May, 1995.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive pending the merger
of the Company and USB (the "Merger") pursuant to the Agreement and Plan of
Merger dated as of May 5, 1995 and to provide the surviving corporation after
the Merger with continuity of management. Therefore, in order to accomplish
these objectives, the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean the effective date of
the Merger.
2. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the third anniversary thereof
(the "Employment Period").
3. Terms of Employment. (a) Position and Duties. (i) (A) During the
Employment Period, the Executive shall serve as General Counsel of USB with such
authority, duties and responsibilities as are commensurate with such position
and as may be consistent with such position as may be assigned to him by the
Chief Executive Officer of USB and (B) the Executive's services shall be
performed at USB's headquarters in Portland, Oregon.
(ii) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote substantially all of his attention and time during normal business hours
to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and
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<PAGE> 2
(C) manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
(ii) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies.
(iii) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies.
(iv) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for
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<PAGE> 3
all reasonable expenses incurred by the Executive in accordance with the
Company's policies.
(v) Fringe Benefits. During the Employment Period, the Executive shall
be entitled to fringe benefits, including, without limitation, payment of club
dues, and, if applicable, use of an automobile and payment of related expenses,
to the extent applicable generally to other peer executives of the Company and
its affiliated companies.
(vi) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments as provided generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
(vii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the plans, policies, programs and
practices of the Company and its affiliated companies as in effect generally at
any time with respect to other peer executives of the Company and its affiliated
companies.
4. Termination of Employment. (a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 11(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean:
(i) the continued failure of the Executive to perform substantially the
Executive's duties with the Company or
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<PAGE> 4
one of its affiliates (other than any such failure resulting from incapacity due
to physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief Executive
Officer of the Company which specifically identifies the manner in which the
Board or Chief Executive Officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company, or
(iii) conviction of a felony or guilty or nolo contendere plea by the
Executive with respect thereto, or
(iv) a material breach of the covenants contained in Section 9.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean in the absence of a written consent of the Executive:
(i) the assignment to the Executive of any duties inconsistent in any
material respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a) of this Agreement, or any other action by the
Company which results in a material diminution in
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<PAGE> 5
such position, authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(ii) any material failure by the Company to comply with any of the
provisions of Section 3(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any office
or location more than 35 miles from that provided in Section 3(a)(i)(B) hereof
or the Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the Effective
Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 10(c)
of this Agreement.
For purposes of this Section 3(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this Agreement
to the contrary notwithstanding, a termination by the Executive for any reason
during the 30-day period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 11(b) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than thirty days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company,
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<PAGE> 6
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein within 30 days of such notice, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
5. Obligations of the Company upon Termination. (a) Good Reason; Other
Than for Cause, Death or Disability. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the Date
of Termination to the extent not theretofore paid, (2) the product of
(x) the highest annual bonus paid to the Executive for any of the three
years prior to the Effective Date (the "Recent Annual Bonus") and (y) a
fraction, the numerator of which is the number of days in the fiscal
year in which the Date of Termination occurs through the Date of
Termination, and the denominator of which is 365 and (3) any
compensation previously deferred (other than pursuant to a qualified
plan) by the Executive (together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described in clauses (1), (2),
and (3) shall be hereinafter referred to as the "Accrued Obligations");
and
B. the amount equal to the product of (1) three and (2) the sum of
(x) the Executive's Annual Base Salary and (y) the Recent Annual Bonus;
and
C. an amount equal to the excess of (a) the actuarial equivalent of
the benefit under the Company's qualified defined benefit retirement
plan (the
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<PAGE> 7
"Retirement Plan") (utilizing actuarial assumptions no less favorable to
the Executive than those in effect under the Company's Retirement Plan
immediately prior to the Effective Date), and any excess or supplemental
retirement plan in which the Executive participates (together, the
"SERP") which the Executive would receive if the Executive's employment
continued for three years after the Date of Termination assuming for
this purpose that all accrued benefits are fully vested, and, assuming
that the Executive's compensation in each of the three years is that
required by Section 3(b)(i) and assuming an annual bonus equal to the
Recent Annual Bonus, over (b) the actuarial equivalent of the
Executive's actual benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of Termination;
(ii) for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would have
been provided to them in accordance with the plans, programs, practices and
policies described in Section 3(b)(iii) of this Agreement if the Executive's
employment had not been terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies and their families, provided, however,
that if the Executive becomes reemployed with another employer and is eligible
to receive medical or other welfare benefits under another employer provided
plan, the medical and other welfare benefits described herein shall be secondary
to those provided under such other plan during such applicable period of
eligibility. For purposes of determining eligibility (but not the time of
commencement of benefits) of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be considered to
have remained employed until three years after the Date of Termination and to
have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall be
selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and
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<PAGE> 8
benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 5(b) shall include
death benefits as in effect on the date of the Executive's death with respect to
other peer executives of the Company and its affiliated companies and their
beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 5(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause or the Executive terminates his employment without
Good Reason during the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to pay to the
Executive (x) his Annual Base Salary through the Date of Termination, (y) the
amount of any compensation previously deferred by the Executive, and (z) Other
Benefits, in each case to the extent theretofore unpaid.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or
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<PAGE> 9
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, except as
provided in Section 5(a)(ii), such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company agrees to pay as incurred,
to the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 8) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 8(a), if it shall be determined that the Executive is
entitled to a Gross-Up Payment, but that the
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<PAGE> 10
Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that
could be paid to the Executive such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive
and the Payments, in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Coopers &
Lybrand LLP or such other certified public accounting firm reasonably acceptable
to the Company as may be designated by the Executive (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized accounting firm reasonably
acceptable to the Company to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by
the Company to the Executive within five days of (i) the later of the due date
for the payment of any Excise Tax, and (ii) the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 8(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the
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<PAGE> 11
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively
to contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 8(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the
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<PAGE> 12
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 8(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 8(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Confidential Information. (a) The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
(b) In the event of a breach or threatened breach of this Section 9, the
Executive agrees that the Company shall be entitled to injunctive relief in a
court of appropriate jurisdiction to remedy any such breach or threatened
breach, the Executive acknowledges that damages would be inadequate and
insufficient.
(c) Any termination of the Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 9.
- 12 -
<PAGE> 13
10. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Oregon, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
738 Eastridge
Boise, Idaho 83712
If to the Company:
101 South Capitol Boulevard
P.O. Box 8427
Boise, Idaho 83733
Attention: General Counsel
- 13 -
<PAGE> 14
If to USB:
111 S.W. Fifth Avenue
Portland, Oregon 97204
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 4(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will",
and prior to the Effective Date, the Executive's employment may be terminated by
either the Executive or the Company at any time, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date this Agreement shall supersede any other employment, severance or change of
control agreement between the parties with respect to the subject matter hereof.
(g) Notwithstanding any provision of this Agreement, the Company shall
have no obligation to make any payments to Executive if or to the extent such
payments are prohibited by any applicable law or regulation, including, without
limitation, the FDIC's regulation regarding golden parachute and indemnification
payments promulgated under the Comprehensive Thrift and Bank Fraud Prosecution
and Taxpayer Recovery Act of 1990.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its
- 14 -
<PAGE> 15
Board of Directors, the Company has caused these presents to be executed in its
name on its behalf, all as of the day and year first above written.
/s/ Dwight V. Board
---------------------------------
DWIGHT V. BOARD
U.S. BANCORP
By /s/ Gerry B. Cameron
------------------------------
WEST ONE BANCORP
By /s/ Daniel R. Nelson
------------------------------
- 15 -
<PAGE> 1
EXHIBIT 12.1
U.S. BANCORP AND SUBSIDIARIES
COMPUTATION OF RATIOS OF CONSOLIDATED EARNINGS TO FIXED CHARGES
(in Thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Income $ 328,971 $ 254,666 $ 341,136 $ 211,556 $ 232,125
Accounting Changes -- -- -- 59,890 --
Income Taxes 180,268 108,531 163,691 120,503 100,795
---------- ---------- ---------- ---------- ----------
Earnings before income taxes and
accounting changes 509,239 363,197 504,827 391,949 332,920
---------- ---------- ---------- ---------- ----------
Add: Fixed Charges
Interest on borrowed funds including
capitalized interest 283,059 215,004 172,414 217,261 294,278
Interest income from federal funds sold (A) (3,959) (3,090) (5,259) (11,562) (25,088)
Interest component of leases (B) 17,623 18,510 17,310 15,257 13,646
---------- ---------- ---------- ---------- ----------
Total fixed charges 296,723 230,424 184,465 220,956 282,836
Less: capitalized interest -- (93) (96) (470) (1,532)
---------- ---------- ----------- ---------- ----------
Fixed charges 296,723 230,331 184,369 220,486 281,304
---------- ---------- ---------- ---------- ----------
Earnings before income taxes, accounting changes
and fixed charges $ 805,962 $ 593,528 $ 689,196 $ 612,435 $ 614,224
---------- ---------- ---------- ---------- ----------
Ratio of earnings to total fixed charges 2.72x 2.58x 3.74x 2.77x 2.17x
---------- ---------- ---------- ---------- ----------
CONSIDERING INTEREST ON DEPOSITS AS FIXED CHARGES (A)
Fixed charges shown above $ 296,723 $ 230,424 $ 184,465 $ 220,956 $ 282,836
Interest on deposits 710,044 523,780 525,807 608,439 825,669
---------- ---------- ---------- ---------- ----------
Total fixed charges 1,006,767 754,204 710,272 829,395 1,108,505
Less: capitalized interest -- (93) (96) (470) (1,532)
---------- ---------- ---------- ---------- ----------
Fixed charges 1,006,767 754,111 710,176 828,925 1,106,973
Add: earnings before income taxes and
accounting changes 509,239 363,197 504,827 391,949 332,920
---------- ---------- ---------- ---------- ----------
Earnings before income taxes, accounting changes
and fixed charges $1,516,006 $1,117,308 $1,215,003 $1,220,874 $1,439,893
---------- ---------- ---------- ---------- ----------
Ratio of earnings to total fixed charges 1.51x 1.48x 1.71x 1.47x 1.30x
---------- ---------- ---------- ---------- ----------
</TABLE>
A - Approximates interest expense related to federal funds purchased
transactions for purposes other than funding of banking
subsidiaries' operations.
B - Interest component of leases includes imputed interest on
capitalized leases and approximately one-third of rental
expense, which approximates the interest component of operating
leases.
<PAGE> 1
U. S. BANCORP AND SUBSIDIARIES Exhibit 12.2
CAPITAL RATIOS
(In Thousands)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total assets, as reported $31,794,283 $ 30,609,108 $ 29,086,757 $ 27,874,784 $ 24,292,336
Shareholders equity as reported 2,617,053 2,493,054 2,441,761 2,121,133 1,773,428
Tier 1 capital 2,418,782 2,312,598 2,184,839 1,951,425 1,612,076
Total capital 3,377,927 3,017,058 2,868,209 2,602,106 2,118,586
Weighted risk assets 28,656,662 26,521,830 24,417,553 22,611,197 20,682,653
Adjusted quarterly average assets 30,651,822 29,568,331 28,587,951 27,494,254 23,803,843
Risk-based capital ratios
Tier 1 capital to weighted
risk assets 8.44% 8.72% 8.95% 8.63% 7.79%
Total capital to weighted
risk assets 11.79% 11.38% 11.75% 11.51% 10.24%
Leverage Ratio - Tier 1 capital to
adjusted average assets 7.89% 7.82% 7.64% 7.10% 6.77%
</TABLE>
<PAGE> 1
Exhibit 12.3
U.S. BANCORP AND SUBSIDIARIES
COMPUTATION OF RATIOS ON A BEFORE ACCOUNTING CHANGE BASIS
<TABLE>
<CAPTION>
Year Ended
December 31,
1992
--------------
(In Thousands)
<S> <C>
Income before cumulative effect of accounting changes $ 271,446
Less preferred dividend requirement (5,349)
-----------
Income before cumulative effect of accounting changes
applicable to common stock $ 266,097
===========
Average common equity before accounting changes $ 1,893,022
Adjustment for cumulative effect of accounting changes (59,890)
-----------
Average common equity, adjusted for accounting changes $ 1,833,132
===========
Average assets $25,335,202
===========
Returns on a Before Accounting Change Basis
Return on average common equity 14.06%
Return on average assets 1.07%
</TABLE>
<PAGE> 1
Exhibit 21
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
INCORPORATION
SUBSIDIARY NAME OR ORGANIZATION
- --------------- ---------------
<S> <C>
Bancorp Merchant Services Alliance, Inc. Oregon
(Wholly-owned subsidiary of United States National
Bank of Oregon)
Compass Group, Inc. Washington
(Wholly-owned subsidiary of U. S. Bancorp)
First State Bank of Oregon Oregon
(Wholly-owned subsidiary of U. S. Bancorp)
Idaho First Bank Idaho
(Wholly-owned subsidiary of U. S. Bancorp)
Mt. Hood Life Insurance, Inc. Oregon
(Wholly-owned subsidiary of U. S. Bancorp)
Qualivest Capital Management, Inc. Oregon
(Wholly-owned subsidiary of United States National
Bank of Oregon)
Tracy Mortgage Company Oregon
(Wholly-owned subsidiary of U. S. Bancorp)
U. S. Bancorp Financial, Inc. Oregon
(Wholly-owned subsidiary of U. S. Bancorp)
dba U. S. Bancorp Financial (Los Angeles County, CA)
U. S. Bancorp Insurance Oregon
(Wholly-owned subsidiary of First State Bank of Oregon)
dba U. S. Bancorp Insurance, Inc. (Alaska, Arizona, New Jersey, Utah)
dba Portland Insurance Agency (California, Wyoming)
dba First State Insurance, Inc. (Montana)
U. S. Bancorp Insurance Agency, Inc. Oregon
(Wholly-owned subsidiary of U. S. Bancorp)
dba Mt. Hood Credit Life Insurance Agency, Inc.
(Oregon, Arizona, Montana, Utah, Washington)
dba Mt. Hood Insurance (Washington)
</TABLE>
1
<PAGE> 2
<TABLE>
<S> <C>
U. S. Bancorp Leasing & Financial Oregon
(Wholly-owned subsidiary of United States National
Bank of Oregon)
U. S. Bancorp Mortgage Company Oregon
(Wholly-owned subsidiary of United States National
Bank of Oregon)
U. S. Bancorp Securities Oregon
(Wholly-owned subsidiary of United States National
Bank of Oregon)
dba U. S. Bancorp Securities, Inc. (Washington)
U. S. Bank (Canada Canada
(Wholly-owned subsidiary of United States National
Bank of Oregon)
U. S. Bank Insurance Agency, Inc. Oregon
(Wholly-owned subsidiary of United States National
Bank of Oregon)
U. S. Bank of California California
(Wholly-owned subsidiary of U. S. Bancorp)
dba U. S. Bank & Bank of the North Coast (California)
dba U. S. Bank and U. S. Bank Insurance (Oregon)
U. S. Bank of Idaho, National Association U. S. A.
(Wholly-owned subsidiary of U. S. Bancorp)
U. S. Bank of Nevada Nevada
(Wholly-owned subsidiary of U. S. Bancorp)
U. S. Bank of Washington, National Association U. S. A.
(Wholly-owned subsidiary of U. S. Bancorp)
U. S. Savings Bank of Washington Washington
(Wholly-owned subsidiary of U. S. Bancorp)
dba U. S. Bancorp Home Loans and U. S. Home Loans (Washington, Oregon)
dba U. S. Bancorp Home Loans (California, Idaho, Nevada)
U. S. Trade Services, Inc. Oregon
(Wholly-owned subsidiary of U. S. Bancorp)
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
U. S. World Trade Corporation Oregon
(Wholly-owned subsidiary of U. S. Bancorp)
United States National Bank of Oregon U. S. A.
(Wholly-owned subsidiary of U. S. Bancorp)
dba U. S. Bank and U. S. Bank, National Association (Oregon)
Ward Cook, Inc. Oregon
(Wholly-owned subsidiary of West One Bank. Oregon, S.B.)
West One Bank, Idaho Idaho
(Wholly-owned subsidiary of U. S. Bancorp)
West One Bank, Oregon Oregon
(Wholly-owned subsidiary of U. S. Bancorp)
West One Bank, Oregon S.B. Oregon
(Wholly-owned subsidiary of U. S. Bancorp)
West One Bank, Utah Utah
(Wholly-owned subsidiary of U. S. Bancorp)
West One Bank, Washington Washington
(Wholly-owned subsidiary of U. S. Bancorp)
West One Financial Services, Inc. Idaho
(Wholly-owned subsidiary of U. S. Bancorp)
West One Insurance Services, Inc. Idaho
(Wholly-owned subsidiary of West One Bank, Idaho)
West One Life Insurance Company Arizona
(Wholly-owned subsidiary of U. S. Bancorp)
West One Trust Company (Utah) Utah
(Wholly-owned subsidiary of U. S. Bancorp)
West One Trust Company, Washington Washington
(Wholly-owned subsidiary of U. S. Bancorp)
Williams & Morris L.P., Inc. Oregon
(Wholly-owned subsidiary of U. S. Bancorp)
</TABLE>
3
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-18706, 33-28785, 33-39765, 33-39860, 33-39861, 33-71904, 33-83158, 33-64435,
and 33-64429 of U.S. Bancorp on Form S-8 and Nos. 33-43407, 33-48249, 33-64318,
and 33-86474 on Form S-3 of our report dated January 30, 1996 (February 11,
1996 as to the final paragraph of Note 2), appearing in this Annual Report on
Form 10-K of U.S. Bancorp for the year ended December 31, 1995.
DELOITTE & TOUCHE LLP
March 7, 1996
<PAGE> 1
Exhibit 23.2
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statements of
U.S. Bancorp on Form S-3 (File Nos. 33-43407, 33-48249, 33-64318 and 33-86474)
and on Form S-8 (File Nos. 33-18706, 33-28785, 33-39765, 33-39860, 33-39861,
33-71904, 33-83158, 33-64435 and 33-64429) of our report dated January 19,
1995, on our audits of the consolidated financial statements of West One
Bancorp and subsidiaries as of December 31, 1994, and for each of the two years
in the period ended December 31, 1994, which report includes an explanatory
paragraph relating to West One Bancorp's change in accounting for investment
securities in 1993 and which report is included in this Annual Report on Form
10-K of U.S. Bancorp.
COOPERS & LYBRAND L.L.P.
Boise, Idaho
March 7, 1996
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
Each person whose signature appears below designates and appoints GERRY B.
CAMERON, STEVEN P. ERWIN, DWIGHT V. BOARD, SHERYL W. DAWSON, and DEBORAH B.
GOLDBERG, and each of them, true and lawful attorneys-in-fact and agents to sign
the annual report on Form 10-K of U. S. Bancorp, an Oregon corporation, for the
year ended December 31, 1995, and to file said report, with all exhibits
thereto, with the Securities and Exchange Commission under the Securities
Exchange Act of 1934. Each person whose signature appears below also grants full
power and authority to these attorneys-in-fact and agents to perform every act
and execute any instruments that they deem necessary or desirable in connection
with said report, as fully as he could do in person, hereby ratifying and
confirming all that the attorneys-in-fact and agents or their substitutes may
lawfully do or cause to be done.
IN WITNESS WHEREOF, this power of attorney has been executed by each of the
undersigned as of the 15th day of February, 1996.
Signature Title
- --------- -----
Chairman, Chief Executive Officer
and Director (Principal Executive
/s/ Gerry B. Cameron Officer)
- --------------------------------
Executive Vice President and Chief
Financial Officer (Principal Financial
/s/ Steven P. Erwin and Principal Accounting Officer)
- --------------------------------
/s/ Harry L. Bettis Director
- --------------------------------
/s/ Carolyn Silva Chambers Director
- --------------------------------
/s/ Franklin G. Drake Director
- --------------------------------
/s/ Robert L. Dryden Director
- --------------------------------
/s/ John B. Fery Director
- --------------------------------
- -------------------------------- Director
Joshua Green III
/s/ Daniel R. Nelson Director
- --------------------------------
/s/ Allen T. Noble Director
- --------------------------------
/s/ Paul A. Redmond Director
- --------------------------------
/s/ N. Stewart Rogers Director
- --------------------------------
/s/ Benjamin R. Whiteley Director
- --------------------------------
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,416,209
<INT-BEARING-DEPOSITS> 1,294
<FED-FUNDS-SOLD> 506,408
<TRADING-ASSETS> 279,656
<INVESTMENTS-HELD-FOR-SALE> 3,276,723
<INVESTMENTS-CARRYING> 865,126
<INVESTMENTS-MARKET> 885,695
<LOANS> 22,785,275
<ALLOWANCE> 434,508
<TOTAL-ASSETS> 31,794,283
<DEPOSITS> 23,264,629
<SHORT-TERM> 3,599,346
<LIABILITIES-OTHER> 629,586
<LONG-TERM> 1,377,021
0
150,000
<COMMON> 752,962
<OTHER-SE> 1,714,091
<TOTAL-LIABILITIES-AND-EQUITY> 31,794,283
<INTEREST-LOAN> 2,103,750
<INTEREST-INVEST> 249,914
<INTEREST-OTHER> 28,376
<INTEREST-TOTAL> 2,392,509
<INTEREST-DEPOSIT> 710,044
<INTEREST-EXPENSE> 993,103
<INTEREST-INCOME-NET> 1,399,406
<LOAN-LOSSES> 124,093
<SECURITIES-GAINS> 2,999
<EXPENSE-OTHER> 1,290,814
<INCOME-PRETAX> 509,239
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 328,971
<EPS-PRIMARY> 2.09
<EPS-DILUTED> 2.09
<YIELD-ACTUAL> 5.38
<LOANS-NON> 118,436
<LOANS-PAST> 29,968
<LOANS-TROUBLED> 10,996
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 387,559
<CHARGE-OFFS> 116,893
<RECOVERIES> 42,886
<ALLOWANCE-CLOSE> 434,508
<ALLOWANCE-DOMESTIC> 249,408
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 185,100
</TABLE>
