US Bank 2007 Annual Report Download - page 94

Minority interests principally represent preferred stock of
consolidated subsidiaries. During 2006, the Company’s
primary banking subsidiary formed USB Realty Corp., a real
estate investment trust, for the purpose of issuing
5,000 shares of Fixed-to-Floating Rate Exchangeable Non-
cumulative Perpetual Series A Preferred Stock with a
liquidation preference of $100,000 per share (“Series A
Preferred Securities”) to third party investors, and investing
the proceeds in certain assets, consisting predominately of
mortgage-backed securities from the Company. Dividends on
the Series A Preferred Securities, if declared, will accrue and
be payable quarterly, in arrears, at a rate per annum of
6.091 percent from December 22, 2006 to, but excluding,
January 15, 2012. After January 15, 2012, the rate will be
equal to three-month LIBOR for the related dividend period
plus 1.147 percent. If USB Realty Corp. has not declared a
dividend on the Series A Preferred Securities before the
dividend payment date for any dividend period, such
dividend shall not be cumulative and shall cease to accrue
and be payable, and USB Realty Corp. will have no
obligation to pay dividends accrued for such dividend
period, whether or not dividends on the Series A Preferred
Securities are declared for any future dividend period.
The Series A Preferred Securities will be redeemable, in
whole or in part, at the option of USB Realty Corp. on the
dividend payment date occurring in January 2012 and each
fifth anniversary thereafter, or in whole but not in part, at
the option of USB Realty Corp. on any dividend date before
or after January 2012 that is not a five-year date. Any
redemption will be subject to the approval of the Office of
the Comptroller of the Currency.
For a summary of the regulatory capital requirements
and the actual ratios as of December 31, 2007 and 2006, for
the Company and its bank subsidiaries, see Table 21
included in Management’s Discussion and Analysis, which is
incorporated by reference into these Notes to Consolidated
Financial Statements.
Note 15 EARNINGS PER SHARE
The components of earnings per share were:
(Dollars and Shares in Millions, Except Per Share Data) 2007 2006 2005
Net income................................................................ $4,324 $4,751 $4,489
Preferred dividends .......................................................... (60) (48) –
Net income applicable to common equity . ...................................... $4,264 $4,703 $4,489
Average common shares outstanding .............................................. 1,735 1,778 1,831
Net effect of the exercise and assumed purchase of stock awards and conversion of outstanding
convertible notes ......................................................... 23 26 26
Average diluted common shares outstanding ......................................... 1,758 1,804 1,857
Earnings per common share . . .................................................. $ 2.46 $ 2.64 $ 2.45
Diluted earnings per common share ............................................... $ 2.43 $ 2.61 $ 2.42
For the years ended December 31, 2007, 2006 and 2005,
options to purchase 13 million, 1 million and 16 million
shares, respectively, were outstanding but not included in the
computation of diluted earnings per share because they were
antidilutive. Convertible senior debentures that could
potentially be converted into shares of the Company’s
common stock pursuant to a specified formula, were not
included in the computation of diluted earnings per share to
the extent the conversions were antidilutive.
Note 16 EMPLOYEE BENEFITS
Employee Investment Plan The Company has a defined
contribution retirement savings plan which allows qualified
employees to make contributions up to 75 percent of their
annual compensation, subject to Internal Revenue Service
limits, through salary deductions under Section 401(k) of the
Internal Revenue Code. Employee contributions are invested,
at the employees’ direction, among a variety of investment
alternatives. Employee contributions are 100 percent
matched by the Company, up to four percent of an
employee’s eligible annual compensation. The Company’s
matching contribution vests immediately. Although the
matching contribution is initially invested in the Company’s
common stock, an employee can reinvest the matching
contributions among various investment alternatives. Total
expense was $62 million, $58 million and $53 million in
2007, 2006 and 2005, respectively.
Pension Plans Pension benefits are provided to substantially
all employees based on years of service, multiplied by a
percentage of their final average pay. Employees become
vested upon completing five years of vesting service. In
92 U.S. BANCORP