US Bank 2014 Annual Report Download - page 120

NOTE 16 EARNINGS PER SHARE
The components of earnings per share were:
Year Ended December 31
(Dollars and Shares in Millions, Except Per Share Data) 2014 2013 2012
Net income attributable to U.S. Bancorp ................................................................. $5,851 $5,836 $5,647
Preferred dividends ...................................................................................... (243) (250) (238)
Impact of preferred stock redemption(a) ................................................................. – (8) –
Earnings allocated to participating stock awards ......................................................... (25) (26) (26)
Net income applicable to U.S. Bancorp common shareholders ........................................ $5,583 $5,552 $5,383
Average common shares outstanding .................................................................... 1,803 1,839 1,887
Net effect of the exercise and assumed purchase of stock awards ....................................... 10 10 9
Average diluted common shares outstanding............................................................. 1,813 1,849 1,896
Earnings per common share ............................................................................. $ 3.10 $ 3.02 $ 2.85
Diluted earnings per common share ..................................................................... $ 3.08 $ 3.00 $ 2.84
(a) Represents stock issuance costs originally recorded in capital surplus upon the issuance of the Company’s Series D Non-Cumulative Perpetual Preferred Stock that were reclassified to retained
earnings on the redemption date.
Options outstanding at December 31, 2013 and 2012, to
purchase 5 million and 22 million common shares,
respectively, were not included in the computation of diluted
earnings per share for the years ended December 31, 2013
and 2012, respectively, because they were antidilutive.
Convertible senior debentures outstanding at December 31,
2012, that could potentially be converted into shares of the
Company’s common stock pursuant to specified formulas,
were not included in the computation of dilutive earnings per
share for the year ended December 31, 2012, because they
were antidilutive.
NOTE 17 EMPLOYEE BENEFITS
Employee Retirement Savings Plan The Company has a
defined contribution retirement savings plan that covers
substantially all its employees. Qualified employees are
allowed to contribute 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 their
direction among a variety of investment alternatives. Employee
contributions are 100 percent matched by the Company, up to
four percent of each employee’s eligible annual compensation.
The Company’s matching contribution vests immediately and
is invested in the same manner as each employee’s future
contribution elections. Total expense for the Company’s
matching contributions was $122 million, $118 million and
$111 million in 2014, 2013 and 2012, respectively.
Pension Plans The Company has tax qualified
noncontributory defined benefit pension plans that provide
benefits to substantially all its employees. Participants
receive annual cash balance pay credits based on eligible pay
multiplied by a percentage determined by their age and years
of service. Participants also receive an annual interest credit.
Employees become vested upon completing three years of
vesting service. For participants in the plan before 2010 that
elected to stay under their existing formula, pension benefits
are provided to eligible employees based on years of service,
multiplied by a percentage of their final average pay.
Additionally, as a result of plan mergers, a portion of pension
benefits may also be provided using a cash balance benefit
formula where only interest credits continue to be credited to
participants’ accounts.
In general, the Company’s qualified pension plans’
funding objectives include maintaining a funded status
sufficient to meet participant benefit obligations over time
while reducing long-term funding requirements and pension
costs. The Company has an established process for
evaluating all of the plans, their performance and significant
plan assumptions, including the assumed discount rate and
the long-term rate of return (“LTROR”). Annually, the
Company’s Compensation and Human Resources Committee
(the “Committee”), assisted by outside consultants, evaluates
plan objectives, funding policies and plan investment policies
considering its long-term investment time horizon and asset
allocation strategies. The process also evaluates significant
plan assumptions. Although plan assumptions are
established annually, the Company may update its analysis
on an interim basis in order to be responsive to significant
events that occur during the year, such as plan mergers and
amendments.
The Company’s funding policy is to contribute amounts
to its plans sufficient to meet the minimum funding
requirements of the Employee Retirement Income Security
Act of 1974, as amended by the Pension Protection Act, plus
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