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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.           )

 

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Notice of Annual Meeting of Shareholders of U.S. Bancorp

By order of the Board of Directors

Laura F. Bednarski

Corporate Secretary

March 6, 2018

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​ Proposal 1 — Election of directors

Proposal 1 — Election of directors

Our Board of Directors currently has 16 members, and directors are elected annually to one-year terms. Two of our current directors — Richard K. Davis, currently our Executive Chairman, and Douglas M. Baker, Jr. — are not standing for re-election at the 2018 annual meeting of shareholders. All of our other current directors have been nominated for election by the Board to hold office until the 2019 annual meeting and the election of their successors.

All of the nominees currently serve on our Board, and each of them has previously been elected by the shareholders, except for Richard P. McKenney. Mr. McKenney was elected to the Board in October 2017. The Board has determined that, except for Andrew Cecere, each nominee for election as a director at the annual meeting is independent from U.S. Bancorp as discussed later in this proxy statement under "Corporate Governance — Director Independence."

Director nominee selection process

The selection process for first-time director candidates includes the following steps:

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​identification of candidates by the Governance Committee based upon information provided by a director search firm, suggestions from current directors and executive officers, or recommendations received from shareholders;



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​interviews of candidates by the Lead Director and other directors;



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​reports presented to the Board by the Governance Committee on the candidates and selection process;



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​recommendations made by the Governance Committee; and



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​election by the Board or formal nomination by the Board for inclusion in the slate of directors at the annual meeting.

Director candidates recommended by shareholders are given the same consideration as candidates suggested by a search firm, directors or executive officers. A shareholder seeking to recommend a prospective candidate for the Governance Committee's consideration should submit the candidate's name and sufficient written information about the candidate to permit a determination by the Governance Committee of whether the candidate meets the director selection criteria set forth in our Corporate Governance Guidelines. Recommendations should be sent to the Chair of the Governance Committee in care of the Corporate Secretary of U.S. Bancorp at the address listed on page 79 of this proxy statement.

Director nomination considerations

Our Governance Committee continuously assesses the evolving opportunities and challenges facing our company in order to align the Board's composition with the company's leadership needs and strategic direction. When nominating new and incumbent directors, our Governance Committee considers the following factors:

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​Personal qualities:  The Governance Committee will only consider individuals as candidates for director who possess the highest personal and professional ethics and integrity, and who are committed to representing the long-term interests of all of our shareholders. Directors must be able to work in a collegial manner with persons of different education, business and cultural backgrounds.



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​Business skills and qualifications:  The Governance Committee considers the balance of business experience represented on the Board at any one time and also reviews Board self-evaluations and information with respect to the business and professional expertise represented by current members in order to identify any specific skills and backgrounds desirable in future Board members. As part of this process, the Governance Committee identifies the particular areas of professional experience and skill sets represented on the Board and compares them to the set of skills that the Committee believes is important to have represented among the directors at any given time. Any gaps become focus areas for director search efforts.



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​Chief executive experience:  Ten of our nominees are current or former CEOs of large publicly held or private corporations. Directors with a CEO background bring to our Board experience overseeing management, finance, marketing and execution of corporate strategy.



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​Risk management:  Eight of our nominees have specific risk management expertise, gained either through leadership at a critical infrastructure company or financial services institution. Directors with this expertise help our Board identify and assess the many and varied risks facing our company as a large financial institution.

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​Financial reporting and accounting:  Six of our nominees have specialized financial reporting qualifications, such as past experience as a CPA or the CFO of a large corporation. Directors with these qualifications are particularly well suited to overseeing the quality and integrity of our company's financial statements.



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​Financial services industry expertise:  Five of our nominees have leadership experience within the financial services industry. Directors with this experience contribute to our Board a deep knowledge of the business challenges and opportunities facing our company.



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​Regulated industry expertise:  Four of our nominees have leadership experience in a regulated industry other than financial services. Directors with this expertise bring to our Board a valuable perspective on how an extensive regulatory framework intersects with strategic and operational planning.



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​Corporate governance:  Three of our nominees bring to our Board significant leadership experience on the boards of other publicly held corporations and/or experience working in the field of corporate governance. Directors with this experience help our Board fulfill its oversight function effectively.



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​Community and customer experience:  Three of our nominees have significant leadership experience in a consumer-focused business other than financial services or in community service organizations. Directors with this experience help our Board appreciate how the work our company does connects to retail customers and individuals living in the communities we serve.



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​Diversity:  Our Governance Committee regularly reviews the composition of the Board in light of the backgrounds, industries, skills, professional experience, geographic communities, gender, race, ethnicity and other personal qualities and attributes represented by our current members. The Governance Committee incorporates this broad view of diversity into its director nomination process and is committed to ensuring that the Board's composition as a whole appropriately reflects the current and anticipated needs of the Board and the company, and actively seeks women and people of color as candidates in every search effort.



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​Tenure:  Our Governance Committee believes that it is important to maintain a balance of tenure on the Board, in order to benefit from the business, industry and governance experience of longer-serving directors; the fresh perspectives contributed by new directors; and the value of continuity as Board composition changes. Our Governance Committee approaches its task of recommending candidates for election or re-election with the goal of having a mix of directors with long, medium and short tenures on the Board. It therefore aims to have a measured rate of Board refreshment. Over the last three years, five independent directors have departed from the Board (not including the upcoming departure of Mr. Baker, who is not seeking re-election at the annual meeting), and four independent directors have joined the Board.



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​Capacity:  Serving on the board of a large financial institution requires a significant commitment of time and energy, and directors must be willing and able to devote sufficient attention to carrying out their duties and responsibilities effectively. The Governance Committee will consider the professional and other demands placed on candidates, including service on the boards of public companies or other large, complex organizations. In no event may a director serve on more than three other boards of public companies in addition to our Board, and a director who serves as the CEO of a public company may not serve on more than two other boards of public companies in addition to our Board, unless the Board determines that the director's service to our company would not be impaired.



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​Retirement and other considerations for incumbent directors:  The Governance Committee's decision to renominate an incumbent director is also informed by the director's past attendance, participation in the work of the Board and overall contribution to the Board, as assessed in the annual board evaluation process. In addition, the Governance Committee will evaluate any director's continued service on the Board for appropriateness in each of the following circumstances: the director has a change in employment or other major responsibilities, an employee director ceases to be a company employee, and the director reaches the age of 72.

Each of the director nominees named below has agreed to serve as a director if elected. Proxies may not be voted for more than 14 nominees. If, for any reason, any nominee becomes unable to serve before the election, the persons named as proxies will vote your shares for a substitute nominee selected by the Board of Directors. Alternatively, the

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Board of Directors, at its option, may reduce the number of directors that are nominated for election. In addition, as described below under "Corporate Governance — Majority Vote Standard for Election of Directors," each of the nominees has tendered his or her contingent resignation as a director in accordance with our Corporate Governance Guidelines, to be effective if he or she fails to receive a majority of the votes cast in an uncontested election and the Board accepts the tendered resignation.

Included below is certain information that the director nominees have provided as well as additional information that the Board considered in nominating them. Board service dates listed include service as directors of U.S. Bancorp's predecessor companies.

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​ Corporate governance

Corporate governance

Our Board of Directors and management are dedicated to exemplary corporate governance. Good corporate governance is vital to our continued success. Our Board of Directors has adopted Corporate Governance Guidelines to provide a corporate governance framework for our directors and management to effectively pursue our objectives for the benefit of our shareholders. The Board reviews and updates these guidelines and the charters of the Board committees at least annually in response to evolving best practices and the results of annual Board and committee evaluations.

Our Corporate Governance Guidelines, as well as our Code of Ethics and Business Conduct, can be found at www.usbank.com by clicking on "About Us" and then "Investor Relations" and then "Corporate Governance" and then, as applicable, "Corporate Governance Guidelines" or "Code of Ethics."

Our Board of Directors has determined that each of the following directors, comprising all of our non-employee directors, has no material relationship with U.S. Bancorp and is independent: Douglas M. Baker, Jr., Warner L. Baxter, Marc N. Casper, Arthur D. Collins, Jr., Kimberly J. Harris, Roland A. Hernandez, Doreen Woo Ho, Olivia F. Kirtley, Karen S. Lynch, David B. O'Maley, Richard P. McKenney, O'dell M. Owens, M.D., M.P.H., Craig D. Schnuck and Scott W. Wine. Andrew Cecere is not independent because he is currently an executive officer of U.S. Bancorp, and Richard K. Davis is not independent because he is a current employee and a former executive officer of U.S. Bancorp.

Our Board has adopted a set of standards in our Corporate Governance Guidelines to assist it in assessing the independence of each of our non-employee directors. A director of U.S. Bancorp who meets the independence qualifications of the New York Stock Exchange (the "NYSE") listing standards may be deemed "independent" by the Board of Directors after consideration of the relationships between U.S. Bancorp or any of our affiliates and the director or any of his or her immediate family members or other related parties. Our Board deems the following relationships to be categorically immaterial such that they will not, by themselves, affect an independence determination:

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​a relationship between our company and an organization of which the director or a member of his or her immediate family is an executive officer if that role does not constitute that person's principal occupation;



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​an ordinary banking relationship for services readily available from other large financial institutions;



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​employment by our company of a member of the director's immediate family if that person's annual compensation does not exceed $120,000; and



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​a relationship between our company and an organization with which the director or a member of his or her immediate family is affiliated if (a) the relationship arises in the ordinary course of both parties' operations and (b) the aggregate annual amount involved does not exceed $120,000.

The only relationship between U.S. Bancorp and our directors or the directors' related interests that was considered by the Board when assessing the independence of our non-employee directors is the relationship between U.S. Bancorp and Schnuck Markets, Inc., a corporation with which our director Craig D. Schnuck is affiliated. The Board determined that this relationship, which is described later in this proxy statement under the heading "Certain Relationships and Related Transactions — Related Person Transactions," did not impair Mr. Schnuck's independence because the amounts involved are immaterial to Schnuck Markets' gross revenues and the relationship had no unique characteristics that could influence Mr. Schnuck's impartial judgment as a director of U.S. Bancorp.

The Board of Directors conducts its business through meetings of the Board and the following standing committees: Audit, Capital Planning, Compensation and Human Resources, Governance, Public Responsibility, Risk Management, and Executive. The standing committees report on their deliberations and actions at each full Board meeting. Each of the standing committees has the authority to engage outside experts, advisers and counsel to the extent it considers appropriate to assist the committee in its work. Each of the standing committees has adopted and operates under a written charter. These charters can be found on our website at www.usbank.com by clicking on "About Us" and then "Investor Relations" and then "Corporate Governance" and then "Board Committees."

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The independent directors meet in executive session (without the CEO or any other member of management present) at the end of each regularly scheduled Board meeting and may also meet in executive session at any other time. The Lead Director presides over these executive sessions. See "Board Leadership Structure." During each committee meeting, the committees have the opportunity to hold executive sessions without members of management present.

The Board of Directors held eight meetings during 2017. Each director attended at least 75% of the total meetings of the Board and Board committees on which he or she served during the year. The average attendance rate of all directors in 2017 was 99%.

Our Governance Committee conducts an annual assessment of the Board's performance to determine whether the Board, its committees and its members are functioning effectively and to identify areas for growth and improvement. The annual process is as follows:

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We believe that it is of utmost importance that our directors receive additional information and training about issues that are critical to exercising prudent oversight of the management of our company. We have implemented a robust director education program that begins with in-depth training covering our industry, financial reporting, and each of our lines of business, and that continues with special education sessions throughout the year that highlight current business, industry, regulatory and governance topics presented by internal and external experts.

We value the views of our investors and welcome feedback from them. Our standard engagement practice is to have conversations about corporate governance and executive compensation matters with our largest investors each fall. We expanded our efforts in 2017 by conducting two shareholder outreach campaigns: we reached out to our top 50 shareholders in the spring to invite a conversation before our annual meeting, and we reached out to our top 50 shareholders again in the fall. The investors we invited to speak with us hold more than 50% of our outstanding shares, and those that accepted our invitation to speak in the spring and/or the fall hold approximately 30% of our outstanding shares.

All of the meetings were held telephonically. The meetings were attended by members of management from the following functions: executive compensation, investor relations, and the Corporate Secretary's office. During the spring outreach campaign, one shareholder requested inclusion of the Lead Director on the call, and Mr. O'Maley participated. We proactively offered participation by an independent director to our top ten shareholders for our fall outreach campaign, and one such shareholder accepted that offer and spoke with Mr. O'Maley alongside management; no other requests for participation by a director were made in the fall.

The primary topic of conversation for both the spring and fall conversations was our executive compensation program. In the spring, we asked shareholders about concerns they might have when considering their Say on Pay vote and provided information in response to their questions. Feedback was shared with our Compensation and Human Resources Committee. Our shareholder conversations in the fall focused on the changes we were planning to make to the program for 2018. The Compensation and Human Resources Committee was updated on messages from our shareholders in the fall, including their responses to the planned changes. Please see the Compensation Discussion and Analysis starting on page 32 for more information about the compensation messages we received from our shareholders and the program changes we have made in response.

The conversations we had with shareholders in 2017 also covered the topics of board composition, board leadership, corporate financial performance, and corporate social responsibility. Management shared the feedback received on these topics with the Governance Committee as it was received.

All of the Audit Committee members meet the independence and experience requirements of the NYSE and the Securities and Exchange Commission (the "SEC"). As part of those requirements, our Board of Directors has determined that each member of the Audit Committee is independent and financially literate. The Audit Committee charter generally prohibits Audit Committee members from serving on more than two other public company audit committees. Currently, no Audit Committee member exceeds this limitation.

All of the Governance Committee members and Compensation and Human Resources Committee members also meet the independence requirements of the NYSE, including, with respect to the Compensation and Human Resources Committee members, the NYSE's independence requirements specific to members of compensation committees.

At all times, one or more members of our Audit Committee possess the education or experience required to qualify as an "audit committee financial expert" as defined by the SEC, and one or more members of our Risk Management Committee have experience identifying, assessing and managing the risk exposures of large, complex financial firms, in accordance with rules promulgated by the Federal Reserve Board.

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​ Corporate governance

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The charter of each of our standing committees fully describes that committee's responsibilities. The following summary highlights the committees' key areas of oversight.

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As part of its responsibility to oversee the management, business and strategy of our company, the Board of Directors has approved a risk management framework that establishes governance and risk management requirements for all risk-taking activities. This framework includes company-level and business unit risk appetite statements that set boundaries for the types and amount of risk that may be undertaken in pursuing business objectives and initiatives.

The Board of Directors oversees management's performance relative to the risk management framework, risk appetite statements, and other policy requirements. While management is responsible for defining the various risks facing our company, formulating risk management policies and procedures, and managing risk exposures on a day-to-day basis, our Board's responsibility is to oversee our company's risk management processes by informing itself concerning our material risks and evaluating whether management has reasonable risk management and control processes in place to address those material risks.

The Board's risk oversight responsibility is primarily carried out through its standing committees, as follows:

In addition, the Board has created a special committee dedicated to overseeing the company's work to enhance its Bank Secrecy Act/anti-money laundering compliance program.

The Risk Management, Audit and Capital Planning Committees meet annually in joint session to give each committee the opportunity to review the risk areas primarily overseen by the other. Finally, at each meeting of the full Board of Directors, each committee gives a detailed review of the matters it discussed and conclusions it reached during its recent meetings.

Each Board committee carries out its responsibilities using reports from management containing information relevant to the risk areas under that committee's oversight. The committees must therefore be confident that an appropriate risk

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monitoring structure is in place at the management level in order to be provided accurate and useful informational reports. The management-level risk oversight structure is robust. Our company relies on comprehensive risk management processes to identify, aggregate and measure, manage, and monitor risks. This system enables the Board of Directors to establish a mutual understanding with management of the effectiveness of our company's risk management practices and capabilities, to review our company's risk exposure and to elevate certain key risks for discussion at the Board level. A framework exists to account for the introduction of emerging risks or any increase in risks routinely taken, which would either be largely controlled by the risk limits in place or identified through the frequent risk reporting that occurs throughout our company.

The Executive Risk Committee, which is chaired by the company's Chief Risk Officer and which includes the CEO and other members of the executive management team, oversees execution against the risk management framework and risk appetite statement. The Executive Risk Committee meets monthly, and more frequently when circumstances merit, to provide executive management oversight of our risk management framework, assess appropriate levels of risk exposure and actions that may be required for identified risks to be adequately mitigated, promote effective management of all risk categories, and foster the establishment and maintenance of an effective risk culture. The Executive Risk Committee members manage large, sophisticated groups within our company that are dedicated to controlling and monitoring risk to the levels deemed appropriate by the Board of Directors and executive management. These individuals, together with our company's controller, treasurer and others, also provide the Board's committees with the information the committees need and request in order to carry out their oversight responsibilities.

The Executive Risk Committee focuses on current and emerging risks, including strategic and reputational risks, directing timely and comprehensive actions. The following senior operating committees have also been established, each responsible for overseeing a specified category of risk:

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​the Asset and Liability Management Committee ensures that the policies, guidelines and practices established to manage our financial risks, including interest rate risk, market risk, liquidity risk, operations risk and capital adequacy, are followed;



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​the Capital Management Operating Committee provides oversight of the company's programs related to stress testing, capital planning and capital adequacy, and resolution and recovery, as well as oversight of the company's compliance with capital regulation;



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​the Compliance Risk Management Committee provides direction regarding the management of compliance risk to the company's business lines and risk management programs and shares institutional knowledge regarding compliance risk management and mitigation across the company;



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​the Disclosure Committee assists the CEO and the CFO in fulfilling their responsibilities for oversight of the accuracy and timeliness of the disclosures made by the company;



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​the Enterprise Financial Crimes Compliance Operating Committee is responsible for the management and implementation of the company's program on enterprise financial crimes across business lines to ensure a consistent control infrastructure and culture of compliance throughout the company;



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​the Enterprise IT Governance Committee ensures that delivery of the company's information technology services, including information security and business continuity, are aligned with the company's priorities and risk appetite;



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​the Executive Credit Management Group Committee ensures that products that have credit risk are supported by sound credit practices; reviews asset quality, trends, portfolio performance statistics and loss forecasts; and reviews and adjusts credit policies accordingly;



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​the Incentive Review Committee reviews and evaluates all of our company's incentive compensation programs and policies for risk sensitivity and mitigation;



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​the International Risk Oversight Committee is responsible for overseeing the company's foreign operations and cross-border activity;



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​the Mergers & Acquisitions Committee is responsible for the consideration and approval of all mergers, acquisitions and divestitures of the company;



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​the Operational Risk Committee provides direction and oversight of the company's operational risk management framework and corporate control programs, including significant operational risk events;



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​the Reputation Risk Operating Committee is dedicated to the oversight of risk associated with activities and issues that may negatively impact the reputation of the company;

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​the Sales Practices Oversight Committee oversees and provides direction regarding a coordinated and unified approach to risks associated with sales practices and services at the company;



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​the Strategic Investment Committee is responsible for the company's strategic investments, including capital expenditures, corporate real estate, and the company's organic growth initiatives; and



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​the Trust Management Committee oversees the fiduciary activities of the Wealth Management and Investment Services business line.

The company's Board and management-level committees are supported by a "three lines of defense" model for establishing effective checks and balances. The first line of defense, primarily the revenue-generating business lines, manages risks in conformity with established limits and policy requirements. In turn, business leaders and their risk officers establish programs to ensure conformity with these limits and policy requirements. The second line of defense, primarily the Chief Risk Officer's organization, but also including the policy and oversight activities of corporate support functions, translates risk appetite and strategy into actionable risk limits and policies. The second line of defense monitors the first line of defense's compliance with limits and policies, and provides reporting and escalation of emerging risks and other concerns to senior management and the Risk Management Committee of the Board of Directors. The third line of defense, internal audit, is responsible for providing the Audit Committee and senior management with independent assessment and assurance regarding the effectiveness of the company's governance, risk management and control processes.

Board leadership policies and practices

Our Board believes that a strong, independent Board of Directors is critical to effective oversight of management. The Board regularly and carefully considers the critical issue of the best independent leadership structure for the Board, and maintains a flexible policy regarding the issue of whether the position of Chairman should be held by an independent director. At least annually, the Board reviews the Board's and company's needs and the leadership attributes of its directors and executives to determine whether our company is best served at that particular time by having the CEO or another director hold the position of Chairman.

In order to ensure strong independent Board leadership, the independent directors elect a Lead Director with the substantial leadership responsibilities detailed below when the position of Chairman is not held by an independent director. The Lead Director is elected annually upon the recommendation of the Governance Committee, with the expectation that he or she will generally serve three, and may serve up to five, consecutive terms.

In addition to strong independent leadership of the full Board, each of the Audit Committee, Governance Committee, and Compensation and Human Resources Committee is composed solely of independent directors. This means that independent directors oversee critical, risk-sensitive matters such as the quality and integrity of our financial statements; the compensation of our executive officers, including the CEO; the nomination of directors; and the evaluation of the Board, its committees, and its members. Each of the Capital Planning Committee, Risk Management Committee and Public Responsibility Committee is chaired by an independent director. Each of the standing committees, as well as the full Board, meet in executive session on a regular basis.

Leadership decisions in 2018

Richard K. Davis has served as the Chairman of our Board since December 2007. For most of that time he was also our CEO, and since stepping down from the CEO position in April 2017, he has continued his Board leadership role as Executive Chairman. On the date of this year's annual meeting, Mr. Davis will retire from the Board and Andrew Cecere, our current President and Chief Executive Officer and a member of the Board, will become Chairman of the Board. David B. O'Maley will continue serving as the Board's independent Lead Director, a position he has held since January 2017.

The independent directors, led by the Governance Committee, thoughtfully explored the question of what leadership structure would be most appropriate for the Board and the company upon Mr. Davis's retirement. They considered the challenges and opportunities facing the company at this time, the viewpoints of various stakeholders, and prevalent leadership practices and trends within the financial services industry and among large corporations more generally. The independent directors concluded that Mr. Cecere's leadership of the Board will provide valuable continuity of governance and that he is best suited to contribute to long-term shareholder value through this role.

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More information about the Chairman and Lead Director roles and the leaders who currently are, or shortly will be, in those positions follows.

Chairman

Mr. Cecere, our President and Chief Executive Officer, has the knowledge, expertise and experience to understand and clearly articulate to the Board the opportunities and risks facing U.S. Bancorp and to lead discussions on important matters affecting our business.

Lead Director

Mr. O'Maley brings a wealth of experience in the financial services industry and on our Board to his role as Lead Director. As the former Chairman and CEO of a large financial services company, Mr. O'Maley contributes substantial financial industry and risk management expertise to the Board. He has served as Chair of the Compensation and Human Resources Committee, and is currently a member of the Compensation and Human Resources and Governance Committees, as well as the Executive Committee.

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Our bylaws provide that in uncontested elections a nominee for director will be elected to the Board if the number of votes cast "FOR" the nominee's election exceeds the number of votes cast "AGAINST" that nominee's election. The voting standard for directors in a contested election is a plurality of the votes cast at the meeting.

Our Corporate Governance Guidelines provide that director nominees must submit a contingent resignation in writing to the Governance Committee, which becomes effective if the director fails to receive a sufficient number of votes for re-election at the annual meeting of shareholders and the Board accepts the resignation. The Board will nominate for election or re-election as director only candidates who have tendered such a contingent resignation.

Our Corporate Governance Guidelines further provide that if an incumbent director fails to receive the required vote for re-election, our Governance Committee will act within 90 days after certification of the shareholder vote to determine whether to accept the director's resignation, and will submit a recommendation for prompt consideration by the Board. The Board expects the director whose resignation is under consideration to abstain from participating in any decision regarding his or her resignation. The Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a director's resignation.

If each member of the Governance Committee fails to receive the required vote in favor of his or her election in the same election, then those independent directors who did receive the required vote will appoint a committee amongst themselves to consider the resignations and recommend to the Board whether to accept them. However, if the only directors who received the required vote in the same election constitute three or fewer directors, all directors may participate in the decision regarding whether to accept the resignations.

Each director nominee named in this proxy statement has tendered an irrevocable, contingent resignation as a director in accordance with our Corporate Governance Guidelines, which resignation will become effective if he or she fails to receive the required vote for election at the annual meeting and the Board accepts his or her resignation.

A primary responsibility of the Board is planning for succession with respect to our company's CEO, as well as overseeing succession planning for other senior management positions. The Board's process targets the building of enhanced management depth, considers continuity and stability within our company, and responds to our company's evolving needs and changing circumstances. To achieve these goals, the executive talent development and succession planning process is integrated into the Board's annual activities.

The Board works with the Governance Committee to evaluate a number of potential internal and external candidates as successors to the CEO, and considers emergency, temporary scenarios as well as long-term succession. The Compensation and Human Resources Committee is responsible for reviewing succession planning for executive officer positions other than the CEO. The CEO makes available to the Board his or her recommendations and evaluations of potential successors, along with a review of any development plans recommended for those individuals.

Key corporate social responsibility initiatives include the following:

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​Corporate giving: We add strength and vitality to our communities through our Community Possible platform focused on closing the gaps between people and possibility. In 2017, we provided over $58.4 million in U.S. Bank Foundation grants and corporate contributions to nonprofit organizations across the country.



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​Community engagement: In 2017, we created a national Community Advisory Committee. The committee creates a forum and ideas exchange between bank and community leaders that will help us further our commitment to understanding the needs of the communities we serve.



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​Diversity and inclusion: Embracing diversity and fostering inclusion are business imperatives. Diverse perspectives define our company, culture and customer service. We are committed to treating all employees,

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customers, vendors and community members with respect. Over 60% of our workforce is women, and we employed more than 1,700 military veterans in 2017. In the past year, we also kicked off an extensive multicultural marketing campaign, increased our spending with diverse suppliers, built strong community partnerships and signed the CEO Pledge with other Fortune 500 companies to promote diversity and inclusion across industries. Additionally, U.S. Bank Business Resource Groups, which work to bring together employees who have similar backgrounds, experiences, or interests and their allies, play a critical role in engaging employees and driving business growth. Our current Business Resource Groups include: Women, Veterans, African American, Asian, Hispanic, LGBT, Disabilities, Native American, Alumni, and our Development Network.

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​Economic development: Last year, we revitalized communities with a total of $4.6 billion in community development loans and U.S. Bancorp Community Development Corporation investments. This funding went toward projects like revitalizing the Pullman neighborhood of Chicago, where U.S. Bank invested in affordable housing, donated land for a recreation facility, and invested in a loan fund to help small business owners in the area. Our investment in Pullman and neighborhoods like it across the country helps create economic revitalization, new jobs and safer housing.



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​Employee engagement: Our employees are at the core of everything we do. We are proud to give back and to encourage our employees to do good in their communities through paid time off to volunteer, matching gifts and our Dollars for Doing program. In 2017, our employees donated 188,000 hours of volunteer time, which we have valued at $4.5 million. Our employees also gave generously through our Employee Giving Campaign in Partnership with the United Way in 2017, donating more than $9 million to nonprofit organizations across the country.



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​Environmental sustainability: We care deeply about promoting sustainable business practices while supporting economic growth — it is one of the reasons that we have invested more than $18 billion in environmentally beneficial business opportunities over the past 10 years. We are committed to reducing our corporate greenhouse gas emissions by 40% by 2029 and 60% by 2044. Additionally, we are proud to have received a grade of A- from the CDP (formerly known as the Carbon Disclosure Project) in both 2016 and 2017.



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​Financial literacy: Investing in education is an investment in our future. We empower our employees and our customers to grow their financial knowledge through programs like Financial Genius and Student Union. In 2017, more than 200,000 individuals were served through financial education seminars and online workshops in local communities.

To learn more about our corporate social responsibility efforts, visit our website at www.usbank.com, then click on "About Us" and then "Corporate Social Responsibility."

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​ Certain relationships and related transactions

Certain relationships and related transactions

The Board has adopted a written Related Person Transactions Policy for the review, evaluation and approval or ratification of transactions between our company and its related persons. "Related persons" under this policy include our directors, director nominees, executive officers, holders of more than 5% of our common stock, and their respective immediate family members. Their "immediate family members" include children, stepchildren, parents, stepparents, spouses, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and any person (other than a tenant or employee) sharing the person's household.

Except as described below, the policy requires the Governance Committee of the Board to review and evaluate and either approve or disapprove all transactions or series of transactions in which:

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​the amount involved will, or may be expected to, exceed $120,000 in any fiscal year;



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​our company is or will be a participant; and



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​a related person has a direct or indirect interest.

The Board has determined that the Governance Committee does not need to review or approve certain transactions even if the amount involved will exceed $120,000, including the following transactions:

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​lending and other financial services transactions or relationships that are in the ordinary course of business and non-preferential, and comply with applicable laws;



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​transactions in which the related person's interest derives solely from his or her services as a director of, and/or his or her ownership of less than ten percent of the equity interest (other than a general partner interest) in, another corporation or organization that is a party to the transaction;



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​transactions in which the related person's interest derives solely from his or her ownership of a class of equity securities of our company and all holders of that class of equity securities received the same benefit on a pro rata basis;



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​transactions where the rates or charges involved are determined by competitive bids, or that involve the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority; and



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​employment and compensation arrangements for any executive officer and compensation arrangements for any director, provided that such arrangements have been approved by the Compensation and Human Resources Committee.

When considering whether to approve or ratify a transaction, the Governance Committee will consider facts and circumstances that it deems relevant to its determination, including:

▶

​the nature and extent of the related person's interest in the transaction;



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​whether the transaction is on substantially the same terms as those prevailing at the time for comparable transactions with persons not affiliated with our company;



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​the materiality of the transaction to each party;



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​whether our company's Code of Ethics could be implicated, including whether the transaction would create a conflict of interest or appearance of a conflict of interest;



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​whether the transaction is in the best interest of our company; and



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​in the case of a non-employee director, whether the transaction would impair his or her independence.

No director is allowed to participate in the deliberations or vote on the approval or ratification of a transaction if that director is a related person with respect to the transaction under review. On an annual basis, the Governance Committee assesses all ongoing relationships with related persons to confirm that the transactions are still appropriate.

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Lending transactions

During 2017, U.S. Bancorp and our banking and investment subsidiaries engaged in transactions in the ordinary course of business with some of our directors, executive officers and the persons that we know beneficially owned more than 5% of our common stock on December 31, 2017, and the entities with which they are associated. All loans and loan commitments and any transactions involving other financial products and services in connection with these transactions were made in the ordinary course of business, on substantially the same terms, including current interest rates and collateral, as those prevailing at the time for comparable transactions with others not related to our banking and investment subsidiaries and did not involve more than the normal risk of collectibility or present other unfavorable features.

Transactions with entities affiliated with directors or executive officers

During 2017, U.S. Bank operated 32 branches and 67 ATMs in grocery stores owned by Schnuck Markets, Inc., of which Craig D. Schnuck, one of our directors, beneficially owns approximately 13% of the outstanding capital stock. Mr. Schnuck's sister, Nancy A. Diemer, and his four brothers, Scott C. Schnuck, Todd R. Schnuck, Mark J. Schnuck and Terry E. Schnuck, each beneficially own approximately 13% of the outstanding capital stock of Schnuck Markets as well. In addition, each of Mr. Schnuck's brothers is a director of, and holds the following officer positions with, Schnuck Markets: Scott C. Schnuck, Chairman of the Executive Committee; Todd R. Schnuck, Chairman and Chief Executive Officer; Mark J. Schnuck, Vice President; and Terry E. Schnuck, Assistant Secretary. Rent and fee payments by U.S. Bank to Schnuck Markets were approximately $2.8 million in 2017. The consolidated gross revenues of Schnuck Markets in 2017 were approximately $2.7 billion. These transactions were conducted at arm's length in the ordinary course of business of each party to the transaction. As discussed above under the heading "Corporate Governance — Director Independence," the Board of Directors has determined that this relationship is immaterial to Mr. Schnuck, and that Mr. Schnuck is an independent director.

Prior to joining the company as Vice Chairman, Consumer Banking Sales and Support, on July 10, 2017, Timothy A. Welsh served as a Senior Partner at McKinsey and Company, a management consulting firm. From January 1, 2017 to July 10, 2017, U.S. Bank paid McKinsey and Company approximately $800,000 for financial services consulting. Certain of the consulting services were provided by Mr. Welsh directly. The fees U.S. Bank paid to McKinsey were negotiated on an arm's length basis.

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​ Compensation discussion and analysis

Compensation discussion and analysis

This section explains how we compensated the individuals who served as our CEO or CFO for all or a part of 2017 and each of our three other most highly compensated executive officers for 2017 (our named executive officers, or "NEOs"):

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​Andrew Cecere, who has served as President and Chief Executive Officer since April 18, 2017; Mr. Cecere previously served as President and Chief Operating Officer;



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​Richard K. Davis, who served as Chairman and Chief Executive Officer until April 18, 2017; Mr. Davis has remained an employee of our company in his role as Executive Chairman;



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​Terrance R. Dolan, who serves as Vice Chairman and Chief Financial Officer;



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​P.W. (Bill) Parker, who serves as Vice Chairman and Chief Risk Officer;



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​Jeffry H. von Gillern, who serves as Vice Chairman, Technology and Operations Services; and



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​Gunjan Kedia, who serves as Vice Chairman, Wealth Management and Investment Services.

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​ Compensation discussion and analysis

Compensation program objective

The Committee has designed the executive compensation program to create long-term shareholder value by attracting and retaining talented leaders and rewarding them for top performance. The Committee achieves this objective through a compensation package that:

▶

​links a significant portion of total compensation to corporate and business line performance, which we believe will create long-term shareholder value;



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​provides total compensation that is market competitive, permitting us to hire and retain high-caliber individuals at all levels of management;



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​emphasizes stock-based compensation, encouraging our executive officers to think and act as long-term shareholders;



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​subjects equity awards to multi-year vesting and retention requirements that enhance executive ownership and encourage a long-term view of corporate achievement; and



▶

​encourages an appropriate sensitivity to risk on the part of senior management, which protects long-term shareholder interests.

Pay for performance

U.S. Bancorp operates in a highly complex business environment, where it competes with many well-established financial institutions. Our long-term business objective is to maximize shareholder value by consistently delivering superior returns on common equity that exceed the cost of equity. If we are successful in achieving this objective, the Committee believes the results will benefit our shareholders.

Accordingly, our executive compensation program is designed to reward our executives for achieving annual and long-term financial results that further our long-term business objective. The annual cash incentive plan rewards performance relative to corporate and business line financial plans established at the beginning of the fiscal year, and the PRSUs are earned based on achievement of ROE targets that directly measure the return generated by the company on its shareholders' investment. At the same time, the Committee carefully weighs the risks inherent in these programs against the goals of the programs and the company's risk appetite. Additional discussion of the risk oversight undertaken by the Committee can be found below under "Decision Making and Policies — Risk Considerations in Setting Compensation Plans and Programs."

Compensation elements

Our executive officers' total direct compensation consists of three elements: base salary, annual cash incentive compensation, and long-term incentive compensation. In 2017, 75% of the value of each executive officer's long-term incentive award was delivered in PRSUs and 25% was delivered in stock options. Each of these elements of total direct compensation is described in detail below. When evaluating an executive officer's compensation compared to market levels and those of other members of our company's executive officer group, the Committee considers both the value of each element and of the total direct compensation package.

Executive officers are also eligible to receive health benefits under the same plans available to our other employees, matching contributions to their U.S. Bank 401(k) Savings Plan accounts on the same basis as our other employees, and retirement benefits that are earned over their career with the company. Perquisites for executive officers are limited, consisting primarily of financial planning expenses, home security, parking and executive physicals. Executive officers do not receive gross-up payments for tax liabilities resulting from perquisites.

Equity awards can be accelerated on a double-trigger basis, as described in "Potential Payments Upon Termination or Change-in-Control," but the executive officers are not entitled to receive any cash benefits upon any employment termination scenario that does not involve death or disability.

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The Committee considers the salary of executive officers relative to comparable executives in our compensation peer group and will make market-based adjustments as it deems appropriate. Salaries can also be adjusted to reflect experience and tenure in a position, internal pay equity within the executive officer group, increased scope of responsibilities, individual performance, and retention considerations.

January 2017 salary actions: When Mr. Dolan was promoted to CFO in the middle of 2016, the Committee increased his base salary from $525,000 to $575,000, as reported in our 2017 proxy statement. In January 2017, the Committee further increased his base salary to $650,000 to address a significant misalignment that remained between his base salary and the salaries of chief financial officers at companies in our compensation peer group. No other NEO received a salary adjustment at that time.

April 2017 salary actions: Effective April 18, 2017, Mr. Cecere's annual base salary increased from $800,000 to $1,000,000 to reflect the increased responsibilities tied to his promotion to CEO, and Mr. Davis's annual base salary decreased from $1,400,000 to $1,000,000 in accordance with his decreased responsibilities.

How we determine our NEOs' annual cash incentive awards

All management-level employees, including the NEOs and our other executive officers, have the opportunity to earn annual cash incentive awards that reflect their responsibility levels and reward achievement of corporate and business line goals, as well as reflect individual performance and risk sensitivity. The awards made to our NEOs are granted under our 2006 Executive Incentive Plan (the "EIP").

The formula for calculating each NEO's Annual Cash Incentive Payout consists of the following elements:

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​Each NEO's Target Award Amount, which is set by the Committee as a percentage of his or her base salary (Target Award Percentage × Base Salary)



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​The Bonus Funding Percentage applicable to each NEO, which is calculated based on a combination of corporate and business line performance metrics



▶

​The Committee's assessment of each NEO's Individual Performance and Risk Sensitivity, which can increase or decrease the value of the Bonus Funding Percentage applied to each NEO's Target Award Amount

Setting the Target Award Amounts

The Target Award Amount for each executive officer is based on the officer's level of responsibility within the organization as well as market-based and internal pay equity considerations.

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January 2017 target award actions: The Committee increased the Target Award Percentages for all of the NEOs except for Mr. Davis in January 2017. Mr. Cecere's Target Award Percentage was increased to reflect the growing responsibility he had been assuming in his role as President and Chief Operating Officer. The other NEOs' Target Award Percentages (other than Mr. Davis's) increased to better align those executives' cash compensation levels with the cash compensation levels of corresponding executives at companies in our compensation peer group.

April 2017 target award actions: When Mr. Cecere became President and Chief Executive Officer in April 2017, his Target Award Percentage was increased to 225% of his new base salary of $1,000,000. The Target Award Amount adjustment was effective starting in May 2017. The Committee increased his Target Award Percentage to reflect his increased responsibilities as CEO and to more closely align his cash compensation opportunity with the cash compensation paid to CEOs at companies in our compensation peer group. The Committee also determined that Mr. Davis would not be eligible to receive an Annual Cash Incentive Award for the portion of the year that he served as Executive Chairman because he was no longer an executive officer at that time.

Calculating the Bonus Funding Percentage

Each year, the Committee targets an aggregate amount of annual cash incentive awards to be granted to all management-level employees in each business line. The actual size of the pool that funds payouts can range from 0% to 200% of the target amount (the Bonus Funding Percentage) based on the company's and the business line's performance against earnings per share ("EPS") and pretax income targets included in the annual financial plan. The Board establishes these financial targets at the beginning of the fiscal year with the intent that they be challenging yet reasonably achievable goals.

The Bonus Funding Percentage for each of our revenue-producing business lines is based on the company's EPS performance compared to the target amount in the annual financial plan (weighted 35%) and that business line's pretax income performance compared to the target amount in the annual financial plan (weighted 65%); for each of the business lines in a support function, the 65% of the Bonus Funding Percentage assigned to pretax income performance is calculated based on the weighted average results of all of the revenue-producing business lines in their group. The calculation is described in detail below.

For purposes of computing the Bonus Funding Percentage, our standard practice is to adjust EPS results so that the effect of any variation in our loan loss reserve build or release is reduced by 50%. We routinely adjust EPS in this manner, whether the loan loss reserve variation is favorable or unfavorable. The Committee will also consider whether EPS should be further adjusted from reported amounts to normalize any notable items; such adjustments are made infrequently.

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The Committee believes that EPS and business line pretax income are appropriate performance metrics for the executive officers' annual cash incentive awards for the following reasons:

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​EPS is an important indicator of profitability that aligns the interests of the executive officers with those of shareholders;



▶

​EPS captures elements of corporate performance that are beyond those of the individual operating business lines, such as corporate funding policies and the management and use of capital;



▶

​the business line pretax income targets are the fundamental drivers of the company's revenues and income before taxes;



▶

​the EPS and pretax income targets are aligned with annual financial plan targets, which the Board and management have assessed for achievability; accordingly, the targets provide incentives to take appropriate amounts of risk to achieve those goals; and



▶

​the Committee values the clear alignment of incentives for executive officers and other management-level employees resulting from shared performance metrics.

The Bonus Funding Percentage for each business line is calculated as follows:

▶

​The percentages by which actual corporate EPS differs from the EPS target and actual business line pretax income differs from target pretax income are each multiplied by a leverage factor of four to magnify the positive or negative variation of actual results. For example, if the actual corporate EPS were 5% greater than the EPS target, the formula would multiply 5% by four to arrive at 20%. The 20% would then be added to 100% to get the EPS Bonus Funding Result of 120%. If the actual business line pretax income were 3% below target, the formula would multiply 3% by four to arrive at 12%. The 12% would then be subtracted from 100%, resulting in a Pretax Income Bonus Funding Result of 88%. Neither the EPS Bonus Funding Result nor the Pretax Income Bonus Funding Result may be less than 0% or greater than 200%.



▶

​The EPS Bonus Funding Result is multiplied by 35% to yield the Corporate Component, and the Pretax Income Bonus Funding Result is multiplied by 65% to yield the Business Line Component.



▶

​The Corporate Component is then added to the Business Line Component to arrive at the Bonus Funding Percentage for that business line. For example, a 120% EPS Bonus Funding Result weighted 35% and an 88% Pretax Income Bonus Funding Result weighted 65% results in a Bonus Funding Percentage of 99.2%.

The Bonus Funding Percentage used for most annual cash incentive plan participants in corporate-wide support functions that do not produce revenue — the Overall Bonus Funding Percentage — is calculated slightly differently, with 35% based on the EPS Bonus Funding Result and 65% based on the weighted average Pretax Income Bonus Funding Results of all of the company's business lines.

2017 Corporate Component results: The target level of EPS in 2017 was $3.42. The company reported EPS of $3.51 for 2017, including notable items from the fourth quarter related to the estimated impacts of tax reform, a special

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employee bonus, a charitable contribution to the U.S. Bank Foundation, and a regulatory and legal accrual. Combined, these notable items had a net positive impact of $0.09 on EPS for the year.

The Committee determined the EPS value to be used to calculate the Corporate Component of the Annual Cash Incentive Payouts for members of the executive team as follows:

▶

​The Committee started with the company's core EPS results for 2017 of $3.42 (that is, excluding the impact of the notable items from reported EPS described above).



▶

​In accordance with its standard practice, the Committee adjusted the EPS results downward by $0.02 to offset by 50% the positive effect that our lower-than-planned increase of loan loss reserves had on earnings.



▶

​The Committee further decreased the calculated EPS by applying the negative impact of the $608 million liability the company accrued in the fourth quarter for payments expected to be made in the settlement of certain regulatory and legal matters.



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​The resulting EPS value used to calculate the Corporate Component for all awards to executive officers was $3.05. Note that the EPS value used to calculate the Corporate Component for the awards of other employees who participate in the annual cash incentive plan was based on core EPS, adjusted only for the change of loan loss reserves as explained above (that is, $3.42). The payouts to non-executives were not affected by the negative adjustment for amounts accrued related to the settlement of certain regulatory and legal matters, as the Committee determined that it was appropriate to primarily hold executives accountable for this expense.



▶

​After applying the leverage factor to the difference between target and the actual EPS results used for executive awards, the EPS Bonus Funding Result for executive officers' awards was 56.6%.

2017 Business Line Component results: Pretax income results ranged from 87.2% to 134.0% of target performance across our company's 26 revenue-producing business lines, which generated Pretax Income Bonus Funding Results of 48.9% to 200.0% following application of the leverage factor and the 200% earn-out cap. The weighted average Pretax Income Bonus Funding Results of all of the company's business lines, which was used to calculate the Overall Bonus Funding Percentage, was 99.4%.

2017 bonus funding results: The Bonus Funding Percentage used to calculate the payouts for executive officers with leadership responsibilities for the entire company or for a corporate-wide support function was the Overall Bonus Funding Percentage as adjusted for the decreased EPS value applied to executive awards, or the Overall Executive Bonus Funding Percentage. Accordingly, the awards granted to Messrs. Davis, Cecere, Dolan and Parker were calculated by using the Overall Executive Bonus Funding Percentage, which was 84.4%: [(56.6% × 35%) + (99.4% × 65%)].

The Bonus Funding Percentage for each executive officer who leads a revenue-producing group, including Ms. Kedia, equaled a weighted average of the Bonus Funding Percentages of all of the business lines for which he or she has responsibility, using the decreased EPS value applied to executive awards.

The Bonus Funding Percentage for the Technology and Operations Services business line, led by Mr. von Gillern, is calculated differently from all other business lines in that 35% is based on the EPS Bonus Funding Result (decreased for Mr. von Gillern's award as with all other executive awards), 50% is based on the weighted average Pretax Income Bonus Funding Results of all of the company's revenue-producing business lines, and 15% is based on that business line's expense management performance compared to plan. The Committee considers expense management to be particularly important to Technology and Operations Services because this business line has responsibility for a significant portion of the company's overall expenditures.

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The resulting Bonus Funding Percentages were as follows for the NEOs:

Factoring in individual performance and risk sensitivity

The Committee considers the performance of the business lines managed by each executive officer and that executive officer's individual performance during the year. Individual performance criteria for all executive officers include performance relative to risk management, leadership, employee engagement, community involvement, involvement in special projects and new initiatives, and talent management, as well as factors including credit quality and audit, regulatory and compliance results. The Bonus Funding Percentage to be applied to an executive's Target Award Amount can be adjusted downward as well as upward based on these performance reviews.

The Committee also uses a formal "risk scorecard" analysis, which can result in downward or upward adjustments to the Bonus Funding Percentage to reflect the executives' demonstrated sensitivity to risk. The Committee believes that it is important to retain the ability to recognize outstanding individual performance and risk mitigation in determining Annual Cash Incentive Payouts, as well as to acknowledge circumstances where individual performance improvements are suggested or where inappropriate risk-taking behaviors have occurred.

Finally, the Committee reviews the level of our corporate performance relative to our financial peer group in the principal profitability measures used by the Board in assessing corporate performance, as well as in relative levels of total shareholder return, as a check on the appropriateness of the award levels in the context of these operational performance measures.

2017 individual performance and risk sensitivity actions: The Committee determined that each NEO's applicable Bonus Funding Percentage appropriately reflected that executive's performance and contribution to the company in 2017. Accordingly, no individual performance-based modifications were made to the NEOs' Bonus Funding Percentages. Following an analysis of the NEOs' risk scorecard results, the Committee increased the Bonus Funding Percentage applicable to Mr. Parker's Target Award Amount by 5% in recognition of the substantial improvements made to the company's risk management function under his leadership.

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2017 Annual Cash Incentive Payout results: The resulting payouts made to the NEOs in February 2018 for 2017 performance under the annual cash incentive plan were as follows:

As described above, the calculation of Mr. Cecere's Annual Cash Incentive Payout of $1,659,867 was based on a blended Target Award Amount of $1,966,667 corresponding to the portions of 2017 he served as Chief Operating Officer and as CEO: [(175% × $800,000) × 84.4% for January through April] + [(225% × $1,000,000) × 84.4% for May through December].

The calculation of Mr. Davis's Annual Cash Incentive Payout of $886,200 was based on a prorated Target Award Amount applicable to the portion of 2017 he served as CEO, with no payout for the time he served as Executive Chairman: (225% × $1,400,000) × 84.4% for January through April.

Establishing the structure of the equity awards

The Committee grants the executive officers equity awards to align their interests with those of long-term shareholders. As in each of the last several years, 75% of the value of each NEO's long-term incentive award in 2017 was granted in the form of PRSUs, and 25% was granted in the form of stock options. These awards were granted under the U.S. Bancorp 2015 Stock Incentive Plan.

The PRSUs granted in 2017 were earned according to a formula tied to our one-year ROE performance, as described in detail below. Both the earned PRSUs and stock options granted in 2017 vest ratably over four years from the grant date, and the PRSU awards will be settled in shares of our common stock. Cash dividends on unvested PRSUs are accrued during the performance period, but accrued dividends are only paid after the end of the performance period on shares actually earned by the executives.

Based on feedback we received though our shareholder engagement process, the Committee structured the long-term incentive awards granted in February 2018 differently: 60% of the value for each NEO was granted as PRSUs that will be earned over a three-year period (instead of a one-year period) and will cliff vest at the end of the performance period, and 40% were granted as restricted stock units that will vest ratably over three years. The Committee replaced stock options with restricted stock units to reduce the program's risk profile while providing increased ownership and retention value.

Setting the value of the equity awards

Each year in January, the Committee determines the dollar value of the long-term incentive awards to be granted to the executive officers, and the grants are made in mid-February. In setting each year's award amounts, the Committee considers the relative market position of the awards and the total compensation for each executive, the proportion of each executive's total direct compensation to be delivered as a long-term incentive award, internal pay equity, executive performance and changes in responsibility, retention considerations, and corporate performance.

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2017 equity value actions: The Committee increased the value of equity awards granted in 2017 over the prior year's values as follows (values reflect the fair market value of the award on the date of grant):

The Committee substantially increased the value of Mr. Dolan's equity awards to address a significant misalignment with his total compensation level compared to that of chief financial officers at companies in our compensation peer group, and to provide appropriate retention. The increases to the other NEOs' award levels correspond to adjustments that continue to align their long-term incentive opportunities with market levels.

Selecting the performance metrics and performance period for the PRSU awards

The number of PRSUs earned is determined according to a formula that uses a comparison of our actual ROE to target results, as well as our ROE performance relative to our peer financial institutions. ROE is used as the performance metric because:

▶

​it directly reflects the return generated by the company on our shareholders' investment;



▶

​it encompasses profitability, efficiency, balance sheet management and financial leverage, and is among the most widely used indicators of financial performance in our industry;



▶

​achieving a high ROE requires prudent management of the tradeoffs between risk and return, requiring an appropriate balance between achieving the highest return on invested capital and managing risk within the company's established risk tolerance levels; and



▶

​using ROE as a performance metric aligns the interests of the executives with those of long-term shareholders, because sustaining a high ROE is a primary driver of strong earnings growth and long-term valuation.

The Committee uses a performance matrix reflecting both the absolute and relative ROE scales to determine the final PRSU award amounts earned during the performance period. Target levels of both absolute and relative ROE are established, with maximum and minimum levels also identified. Earn-out amounts are determined using interpolation. The Committee believes that the PRSU earn-out structure provides an important balance between rewarding the achievement of absolute performance goals and strong relative performance. Executives are not rewarded for poor performance simply because members of our financial peer group have even worse performance, nor are they rewarded for exceeding expectations if performance relative to peers is substandard. In addition, by using a sliding scale for each ROE performance metric, the matrix takes into account the amount of variance from the ROE target and peer group ROE results, rewarding performance while mitigating the incentive for excessive risk taking that may result from an "all-or-nothing" award.

The PRSUs granted in 2017 used a one-year performance period because the Committee believed that a short performance period would provide executives a clear line of sight linking pay and performance, and the longer vesting period would require subsequent service to receive the benefit of the awards. Based on the feedback received from our shareholders, however, the Committee changed the performance period to three years for the PRSUs granted in February 2018 to further align pay with long-term performance.

Setting the levels of absolute and relative ROE for the PRSU performance matrix

The one-year absolute ROE target selected for the 2017 PRSU awards aligns with the company's annual financial plan, which was approved by the company's Board of Directors. The ROE goal the company sets for itself in its annual

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financial plan is aggressive; over the last several years, the company's ROE goal has been higher than the actual performance of all of the members of its financial peer group for the corresponding year. The Committee believes it is beneficial for the company's stakeholders that the executive team be challenged to achieve a reasonably attainable but stretch level of performance. This goal-setting approach might appropriately require a target level reduction in years when external pressures on the performance metric are expected to push it downward, an approach the Committee views more favorably than setting a lower level of performance as the target with the expectation that it cannot be lowered in future years.

As part of the executive compensation program changes we made beginning in 2018, the absolute ROE target will now be consistent with our long-range financial goal as provided to investors. The Committee made this change to provide additional consistency and transparency about our goal setting. The target and maximum ROE levels selected by the Committee for the three-year performance period contained in the PRSU awards granted in February 2018 were based on the ROE range included in the company's profitability goals announced at its most recent Investor Day conference, held in September 2016. While the Investor Day presentation provided an ROE range of 13.5% to 16.5%, the Committee adjusted the goals contained in the PRSUs upward to reflect the impact tax reform is expected to have on the company's ROE results over the awards' three-year performance period.

The Committee also established a sliding scale of ROE achieved relative to the ROE of our financial peer group, which consists of the following institutions: Bank of America, BB&T, Fifth Third, J.P. Morgan, KeyCorp, PNC, Regions, SunTrust, and Wells Fargo. This group is used by the company for financial comparison purposes because these companies, along with U.S. Bancorp, are the ten largest financial services companies based in the United States that provide broadly comparable retail and commercial banking services. Performance above the median of peers will result in increases in the award payout, while performance below the median of peers will result in decreases in the award payout.

2017 performance setting actions: The Committee established the following performance matrix at the time the 2017 PRSU awards were granted, providing for the actual award amounts to range from 0% to 125% of the target number of units in each award.

The target level of absolute ROE for 2017 (13.5%) was set slightly higher than the actual level of ROE performance in 2016 (13.4%). When the company established the ROE target to be included in its annual financial plan for 2017, which was approved by the Board and then adopted by the Committee when setting the target level of absolute ROE for the PRSU awards, it continued to be aggressive relative to its peer financial institutions but also mindful of external pressures on that performance metric. The industry pressures on ROE over the past several years have included revenue headwinds due to persistent low interest rates and regulatory limitations on fee revenues, increased regulatory costs, and higher liquidity and capital requirements.

2017 ROE performance results: In accordance with the terms of the PRSU award agreements, the Committee determined our absolute ROE performance based on the result included in our 2017 audited financial statements. Our reported ROE result in 2017 was 13.8%, compared to the target absolute level of 13.5%. In relation to its financial peer group, U.S. Bancorp's 2017 ROE ranked above the 75th percentile. The final calculation resulted in the number of PRSUs earned being equal to 113.4% of the target number of units granted.

The number of units earned by each NEO for 2017 performance, as well as the number of stock options granted to each NEO in 2017, are reported in the Outstanding Equity Awards at 2017 Fiscal Year-End table later in this proxy statement.

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Who is involved in making compensation decisions

Executive compensation policy, practices and amounts are determined by the Committee, which is composed entirely of independent outside directors. The Committee has responsibility for setting each component of compensation for our CEO with the assistance and guidance of its independent compensation consultant. The Committee had retained Frederic W. Cook & Co., Inc., as its independent compensation consultant through the first part of 2017, and then engaged Meridian Compensation Partners, LLC, for the second half of the year.

Our CEO and senior members of our human resources group, also with the assistance of the compensation consultant, develop initial recommendations for all components of compensation for the executive officers other than the CEO and present their recommendations to the Committee for review and approval. The Committee also annually reviews the total amount and types of compensation paid to non-employee members of the Board of Directors and recommends any changes to the independent directors for approval.

The Committee retains an independent compensation consultant to:

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​provide advice regarding compensation program design, competitive practices, market trends and peer group composition;



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​make recommendations to the Committee in setting the pay of our CEO;



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​provide the same advisory services to the Committee, our CEO, and senior members of our human resources group regarding the compensation of the other executive officers; and



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​advise the Committee on director compensation.

Neither Frederic W. Cook & Co., Inc., nor Meridian Compensation Partners, LLC, provide any other services to our company. Following a review of the relationship between the company and each of these consultants in 2017, the Committee concluded that their work for the Committee does not raise any conflicts of interest.

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How compensation is determined

The executive compensation outcomes described in the preceding pages are the culmination of a year's worth of analysis and decision making by the Committee, as follows:

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Compensation peer group

For several years, the Committee used the same peer group of financial services companies to perform market checks on the level of compensation of our executive officers that management and the Board use for financial performance comparisons. The Committee altered this compensation peer group in 2017 by removing Regions Financial Corporation and KeyCorp and adding Citigroup and Capital One Financial.

The Board does not use Citigroup and Capital One Financial for financial comparison purposes because both companies have a business mix that is very different from our company's, but the Committee decided to adopt the different peer group for compensation purposes because it believes that these two institutions are more meaningful competitors in the marketplace for executive talent than are the two smallest institutions in our financial peer group. The Committee continues to use the financial peer group (which had been the compensation peer group from 2009 through 2016) to measure the company's absolute ROE performance in the PRSU earn-out matrix.

As shown below, U.S. Bancorp occupies a median position in its compensation peer group with respect to significant financial metrics.

The Committee also reviews and uses compensation data from a large group of diversified financial services companies as an additional point of comparison. As a result of this ongoing analysis and resulting compensation adjustments, our executive compensation positioning is generally within market range, recognizing that several positions are unique to our company and do not have clear market comparisons.

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Risk considerations in setting compensation plans and programs

Overview: Prudent risk taking is an integral part of any business strategy, and our compensation program is not intended to encourage management decisions that completely eliminate risk. Rather, the combination of various elements in our program is designed to encourage appropriate sensitivity to risk and mitigate the potential to reward risk taking that may produce short-term results that appear in isolation to be favorable, but that may undermine the successful execution of our long-term business strategy and negatively affect shareholder value. Our compensation practices are also designed to reward performance while maintaining our core commitment to customer service and ethical principles. Together with the company's processes for strategic planning, its internal control over financial reporting and other financial and compliance policies and practices, the design of our compensation program helps to discourage management actions that demonstrate insensitivity to risk.

Role of the Incentive Review Committee: As a large financial services company, we have been subject to a continuing horizontal industry review of incentive compensation policies and practices undertaken by the Federal Reserve Board since 2009. We routinely undertake a thorough risk analysis of every incentive compensation plan of the company, the individuals covered by each plan and the risks inherent in each plan's design and implementation. We also conduct validation and back-testing activities to ensure that compensation plans are correctly risk rated, the plans are designed to adequately mitigate risk inherent therein, and the plans are administered effectively. The Incentive Review Committee was created to oversee that review and to provide more comprehensive oversight of the relationship between the various kinds of risk we manage and our company's incentive compensation plans and programs. The Incentive Review Committee meets throughout the year and is responsible for the ultimate review and approval of all company incentive plans.

This Incentive Review Committee reviews incentive plan elements such as risk controls, plan participants, performance measures, performance and payout curves or formulas, how target level performance is determined (including whether any thresholds and caps exist), how frequently payouts occur, and the mix of fixed and variable compensation that the plan delivers. The plans and programs are also reviewed from the standpoint of reasonableness (for example, how target pay levels compare to similar plans for similar employee groups at other companies, and how payout amounts relate to the results that generate the payments), how well the plans and programs are aligned with U.S. Bancorp's goals and objectives and with the company's risk appetite, and from an overall standpoint, whether these plans and programs represent an appropriate mix of short-term and long-term compensation.

As part of this review by our Incentive Review Committee, our management team, including senior risk officers and individuals from the compensation department, have identified the risks inherent in these programs and have modified plans and controls where appropriate to mitigate certain potential risks. For example, most business line incentive compensation plans with a credit component track early defaults, or defaults that occur within the first 12 months, and must include a provision that allows the company to offset future payments by the amount of the previously paid incentives related to the early default.

In addition, a "risk scorecard" analysis measuring adequacy of risk management is undertaken for senior management-level employees who have the individual ability to pose material risk to the company, including the executive officers; all employees who have credit responsibility and who participate in annual corporate cash incentive plans; and all employees who, as part of a group, can engage in risk-taking behavior that could be material to the company and who participate in annual corporate cash incentive plans. This analysis serves as the basis for annual cash incentive plan adjustments for these employees. Annually, the Incentive Review Committee also addresses risk events that pose a material adverse impact to the company or business line to determine whether an event should trigger cancellation of equity awards. The Incentive Review Committee has reviewed its process with the Committee and discussed the areas where compensation-related risks were being addressed by plan modifications, or were mitigated by internal controls or otherwise.

Role of the Compensation and Human Resources Committee: The Compensation and Human Resources Committee also conducts an annual review of the compensation packages and components for the executive officers. The Committee assesses the incentives for risk taking contained in the compensation program and balances them with the other goals of the compensation program. The Committee meets at that time with members of senior management for a discussion of the material risks our company faces, in order to assess those risks and the overall risk tolerance of the company approved by the Board of Directors in relation to the levels of risk inherent in the compensation plans and programs and the performance targets set each year.

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​ Compensation discussion and analysis

In evaluating the incentives for risk taking in compensation plans and policies for executive officers, the Committee considered the following risk-mitigating aspects of those plans and policies:

Based on a consideration of the foregoing reviews and factors, the Committee has determined that risks arising from the company's compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the company.

Stock ownership and retention requirements

The Committee believes that significant ownership of our common stock by our executive officers directly aligns their interests with those of our other shareholders and also helps balance the incentives for risk taking inherent in equity-based awards. We have had a requirement for many years that our executives hold significant amounts of company stock, and as part of the executive compensation program changes we made beginning in 2018, we have recently added a requirement that our executives retain a substantial portion of the net value of their vested stock awards and exercised stock options, even after minimum ownership levels have been attained and until retirement. The current ownership and retention requirements are as follows:

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Vested PRSUs, exercised stock options, and all restricted stock units are included in determining whether an executive officer satisfies the minimum ownership levels. Until the applicable ownership level is met, the executive officers must hold 75% of the net value of any vested stock award or exercised option.

As of December 31, 2017, all of our executive officers were in compliance with the stock ownership requirements. Most executive officers complied by holding stock valued in excess of their applicable salary multiple, and those who have not yet reached those levels (the most recently appointed executive officers) complied by holding at least 75% of the after-tax value of any vested stock award or exercised option.

Recoupment ("clawback") of annual cash incentive payouts

The Committee has a clawback policy and will evaluate the facts and circumstances surrounding a restatement of earnings, if any, and, in its sole discretion, may adjust and recoup cash incentive amounts paid to our CEO, any executive officers or any other employees as it deems appropriate, if attributable to incorrectly reported earnings.

Tax considerations

Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year for certain executive officers. The annual cash incentive awards and equity awards granted to the NEOs in 2017 were designed in a manner intended to qualify them as "performance-based" compensation under Section 162(m), which would exempt them from the deduction limit.

Annual cash incentive awards granted to the NEOs in 2017 were granted under the EIP. The EIP sets the maximum award level that can be given to any NEO under the plan for any year at 0.2% of the company's net income for the year to satisfy Section 162(m)'s performance-based exemption. The Committee then used negative discretion to reduce the payout amount of each executive's cash incentive award to an amount that was determined based on the formula described above: Target Award Amount × (Bonus Funding Percentage +/- Individual Performance and Risk Sensitivity). The maximum award amount under the EIP was established principally to position these awards to comply with the performance-based exemption under Section 162(m), and is not indicative of the expected payout amounts.

Equity awards granted to the NEOs in 2017 were granted under the U.S. Bancorp 2015 Stock Incentive Plan. Based on the design of that plan and the steps that the Committee took to establish performance goals for the PRSUs and then later certify the results, the PRSUs and stock options were also intended to qualify as performance-based compensation under Section 162(m).

The exemption from Section 162(m)'s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017. Accordingly, compensation in excess of $1 million paid to executive officers covered by Section 162(m)'s deduction limit will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. The application and interpretation of Section 162(m) and the regulations issued thereunder as they currently stand, including the scope of the transition relief under the legislation repealing Section 162(m)'s exemption from the deduction limit, are uncertain. Therefore, despite the Committee's efforts to structure the NEOs' annual cash incentive awards and equity awards in 2017 in a manner intended to be exempt from Section 162(m)'s deduction limits, no assurance can be given that compensation intended to satisfy the requirement for exemption from those limits will in fact be deductible.

The Committee reviews all executive compensation programs and payments to determine the tax impact on the company as well as on the executive officers. Tax impact is one of many factors considered by the Committee as it designs a compensation program whose objectives include rewarding high performance, shareholder alignment, market competitiveness, accounting impact, and perceived value to executives. Because many different factors influence a well-rounded, comprehensive executive compensation program, the Committee retains the discretion and flexibility to award compensation that is not deductible under Section 162(m) and to modify compensation that was initially intended to be exempt under Section 162(m) if it determines that such modifications are consistent with the overall objectives of the executive compensation program.

Compensation committee report

The Compensation and Human Resources Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation and Human Resources Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in our 2017 Annual Report on Form 10-K.

Compensation and Human Resources Committee of the Board of Directors of U.S. Bancorp

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​ Executive compensation

Executive compensation

The following table shows the cash and non-cash compensation awarded to or earned by our NEOs for 2017.