OVERVIEW

Earnings Summary U.S. Bancorp and its subsidiaries (the “Company”) reported net income attributable to U.S. Bancorp of $1.5 billion for the second quarter of 2013, or $.76 per diluted common share, compared with $1.4 billion, or $.71 per diluted common share for the second quarter of 2012. Return on average assets and return on average common equity were 1.70 percent and 16.1 percent, respectively, for the second quarter of 2013, compared with 1.67 percent and 16.5 percent, respectively, for the second quarter of 2012. The provision for credit losses was $30 million lower than net charge-offs for the second quarter of 2013, compared with $50 million lower than net charge-offs for the second quarter of 2012.

Total net revenue, on a taxable-equivalent basis, for the second quarter of 2013 was $120 million (2.4 percent) lower than the second quarter of 2012, reflecting a 1.5 percent decrease in net interest income and a 3.4 percent decrease in noninterest income. The decrease in net interest income from a year ago was the result of lower rates on loans and investment securities, partially offset by higher average earning assets, continued growth in lower cost core deposit funding and the positive impact from maturities of higher rate long-term debt during 2012. Noninterest income decreased from a year ago, primarily due to lower mortgage banking revenue and other revenue, partially offset by an increase in trust and investment management fees and a favorable change in net securities gains (losses).

Noninterest expense in the second quarter of 2013 was $44 million (1.7 percent) lower than the second quarter of 2012, primarily the result of the impact of a second quarter 2012 accrual for the Company’s portion of an indemnification obligation associated with Visa Inc. litigation matters (“Visa accrual”) and lower professional services expense in the second quarter of 2013, partially offset by higher compensation and employee benefits expense.

The provision for credit losses for the second quarter of 2013 of $362 million was $108 million (23.0 percent) lower than the second quarter of 2012. Net charge-offs in the second quarter of 2013 were $392 million, compared with $520 million in the second quarter of 2012. Refer to “Corporate Risk Profile” for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit

quality of the loan portfolio and establishing the allowance for credit losses.

Net income attributable to U.S. Bancorp for the first six months of 2013 was $2.9 billion, or $1.49 per diluted common share, compared with $2.8 billion, or $1.38 per diluted common share for the first six months of 2012. Return on average assets and return on average common equity were 1.68 percent and 16.1 percent, respectively, for the first six months of 2013, compared with 1.64 percent and 16.3 percent, respectively, for the first six months of 2012. The provision for credit losses was $60 million lower than net charge-offs for the first six months of 2013, compared with $140 million lower than net charge-offs for the first six months of 2012.

Total net revenue, on a taxable-equivalent basis, for the first six months of 2013 was $175 million (1.8 percent) lower than the first six months of 2012, reflecting a .4 percent decrease in net interest income and a 3.3 percent decrease in noninterest income. The decrease in net interest income from the prior year was the result of lower rates on loans and investment securities, partially offset by higher average earning assets, continued growth in lower cost core deposit funding and the positive impact from maturities of higher rate long-term debt. Noninterest income decreased from the prior year, primarily due to lower mortgage banking revenue and other revenue, partially offset by increases in trust and investment management fees and payments-related revenue, and a favorable change in net securities gains (losses).

Noninterest expense in the first six months of 2013 was $134 million (2.6 percent) lower than the first six months of 2012, reflecting the impact of the second quarter 2012 Visa accrual, lower insurance-related costs, and decreases in professional services and other expenses, partially offset by higher compensation and employee benefits expense.

The provision for credit losses of $765 million for the first six months of 2013 was $186 million (19.6 percent) lower than the first six months of 2012. Net charge-offs in the first six months of 2013 were $825 million, compared with $1.1 billion in the first six months of 2012. Refer to “Corporate Risk Profile” for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.

STATEMENT OF INCOME ANALYSIS

Net Interest Income Net interest income, on a taxable-equivalent basis, was $2.7 billion in the second quarter and $5.4 billion in the first six months of 2013, or decreases of $41 million (1.5 percent) and $22 million (.4 percent), respectively, compared with the same periods of 2012. The decreases were the result of a lower net interest margin percentage, partially offset by growth in average earning assets. Average earning assets increased $8.2 billion (2.7 percent) in the second quarter and $11.1 billion (3.7 percent) in the first six months of 2013, compared with the same periods of 2012, driven by increases in loans and investment securities, partially offset by decreases in other earning assets, primarily due to the deconsolidation of certain consolidated variable interest entities (“VIEs”) in the second quarter of 2013, as the Company transferred control over the most significant activities of the entities to a third party manager. Refer to Note 4 of the Notes to Consolidated Financial Statements for further information on the deconsolidation of certain VIEs. Further offsetting the increases in average earning assets in the second quarter of 2013 was a decrease in loans held for sale, principally due to lower residential mortgage loan originations in the second quarter of 2013, compared with the second quarter of 2012. The net interest margin in the second quarter and first six months of 2013 was 3.43 percent and 3.46 percent, respectively, compared with 3.58 percent and 3.59 percent in the second quarter and first six months of 2012, respectively. The decreases in the net interest margin primarily reflected lower rates on investment securities and loans, partially offset by lower rates on deposits and maturities of higher rate long-term debt during 2012. Refer to the “Consolidated Daily Average Balance Sheet and Related Yields and Rates” tables for further information on net interest income.

Average total loans for the second quarter and first six months of 2013 were $11.1 billion (5.2 percent) and $11.7 billion (5.5 percent) higher, respectively, than the same periods of 2012, driven by growth in residential mortgages, commercial loans and commercial real estate loans. These increases were driven by higher demand for loans from new and existing customers. The increases were partially offset by declines in credit card loans,

other retail loans and loans covered by loss sharing agreements with the Federal Deposit Insurance Corporation (“FDIC”). Average loans acquired in FDIC-assisted transactions that are covered by loss sharing agreements with the FDIC (“covered” loans) decreased $3.4 billion (24.4 percent) in the second quarter and $3.4 billion (24.2 percent) in the first six months of 2013, compared with the same periods of 2012, respectively.

Average investment securities in the second quarter and first six months of 2013 were $1.3 billion (1.7 percent) and $1.6 billion (2.2 percent) higher, respectively, than the same periods of 2012, primarily due to purchases of U.S. government agency-backed securities, net of prepayments and maturities.

Average total deposits for the second quarter and first six months of 2013 were $16.1 billion (7.0 percent) and $16.4 billion (7.1 percent) higher, respectively, than the same periods of 2012. Average noninterest-bearing deposits for the second quarter and first six months of 2013 were $2.3 billion (3.6 percent) and $2.6 billion (4.0 percent) higher, respectively, than the same periods of 2012, driven by growth in Consumer and Small Business Banking balances. Average total savings deposits for the second quarter and first six months of 2013 were $15.8 billion (13.1 percent) and $13.2 billion (10.9 percent) higher, respectively, than the same periods of 2012, the result of growth in Consumer and Small Business Banking balances primarily from continued strong participation in a consumer savings product offering. Additionally, the increases were due to higher corporate trust and broker-dealer balances. Average time certificates of deposit less than $100,000 for the second quarter and first six months of 2013 were $1.6 billion (10.9 percent) and $1.5 billion (10.0 percent) lower, respectively, than the same periods of 2012, due to maturities. Average time deposits greater than $100,000 were $.4 billion (1.2 percent) lower in the second quarter and $2.1 billion (7.0 percent) higher in the first six months of 2013, compared with the same periods of 2012, respectively. Time deposits greater than $100,000 are managed as an alternative to other funding sources such as wholesale borrowing, based largely on relative pricing.

Provision for Credit Losses The provision for credit losses for the second quarter and first six months of 2013 decreased $108 million (23.0 percent) and $186 million (19.6 percent), respectively, from the same periods of 2012. Net charge-offs decreased $128 million (24.6 percent) and $266 million (24.4 percent) in the second quarter and first six months of 2013, respectively, compared with the same periods of 2012, principally due to improvement in the commercial, commercial real estate and residential mortgage portfolios. The provision for credit losses was lower than net charge-offs by $30 million in the second quarter and $60 million in the first six months of 2013, compared with $50 million in the second quarter and $140 million in the first six months of 2012. Refer to “Corporate Risk Profile” for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.

Noninterest Income Noninterest income was $2.3 billion in the second quarter and $4.4 billion in the first six months of 2013, or decreases of $79 million (3.4 percent) and $153 million (3.3 percent), respectively, compared with the same periods of 2012. The decreases from a year ago were principally due to lower mortgage banking revenue and other revenue, partially offset by higher trust and investment management fees and favorable changes in net securities gains (losses). The decreases in mortgage banking revenue were due to

lower origination and sales revenue, partially offset by a favorable change in the Company’s mortgage representation and warranties reserve during the second quarter of 2013. The reductions in other income were driven by lower equity investment and retail lease revenue. In addition, corporate payment products revenue decreased due to lower government and transportation-related transactions, and ATM processing services revenue decreased due to lower volumes. Commercial products revenue was also lower, primarily driven by lower standby letters of credit fees, and capital markets revenue. Offsetting these negative variances were increases in trust and investment management fees due to improved market conditions and business expansion. Net securities gains (losses) reflected favorable variances as compared with the same periods of the prior year, as the Company recognized impairment on certain money center bank securities in the second quarter of 2012 following rating agency downgrades. Credit and debit card revenue also increased over the prior year, driven by higher volumes, including the impact of business expansion, partially offset by the impact of a credit recorded in the second quarter of 2012 related to the final expiration of debit card customer rewards. In addition, merchant processing services revenue increased due to higher volumes and product fees and investment products fees increased due to higher sales and fee volumes.

Noninterest Expense Noninterest expense was $2.6 billion in the second quarter and $5.0 billion in the first six months of 2013, or decreases of $44 million (1.7 percent) and $134 million (2.6 percent), respectively, compared with the same periods of 2012. The decreases in noninterest expense from a year ago were primarily due to reductions in other expense and professional services expense, partially offset by higher compensation and employee benefits expense. Other expense decreased due to the second quarter 2012 Visa accrual and lower FDIC insurance expense and costs related to other real estate owned, partially offset by higher costs related to investments in affordable housing and other tax-advantaged projects. In addition, other expense for the first six months of 2013 was lower than the same period of the prior year due to lower insurance-related costs. Professional services expense was lower due to reductions in mortgage servicing review-related costs. Other intangibles expense decreased due to the reduction or completion of the amortization of certain intangibles. Compensation expense increased in the second quarter and first six months of 2013, compared with the same periods of the prior year, primarily attributable to the growth in staffing for business initiatives and business expansion, in addition to merit increases. Employee benefits expense increased, principally due to higher pension costs and staffing levels. In addition, net occupancy and equipment expense was higher due to business initiatives and expansion, and technology and communications expense increased due to business expansion and technology projects. Marketing and business development expense increased in the second quarter of 2013 compared with the same period of 2012, due to payments-related initiatives.

Income Tax Expense The provision for income taxes was $529 million (an effective rate of 26.8 percent) for the second quarter and $1.1 billion (an effective rate of 27.7 percent) for the first six months of 2013, compared with $564 million (an effective rate of 29.0 percent) and $1.1 billion (an effective rate of 28.9 percent) for the same periods of 2012. The decrease in the effective rates for the second quarter and first six months of 2013, compared with the same periods of 2012, reflected the impact of favorable developments on federal and state tax examinations. For further information on income taxes, refer to Note 10 of the Notes to Consolidated Financial Statements.

BALANCE SHEET ANALYSIS

Loans The Company’s loan portfolio was $228.0 billion at June 30, 2013, compared with $223.3 billion at December 31, 2012, an increase of $4.6 billion (2.1 percent). The increase was driven primarily by increases in residential mortgages, commercial loans and commercial real estate loans, partially offset by lower credit card, other retail and covered loans.

Residential mortgages held in the loan portfolio increased $3.7 billion (8.5 percent) at June 30, 2013, compared with December 31, 2012, reflecting origination and refinancing activity due to the low interest rate environment. Residential mortgages originated and placed in the Company’s loan portfolio are primarily well-secured jumbo mortgages and branch-originated first lien home equity loans to borrowers with high credit quality. The Company generally retains portfolio loans through maturity; however, the Company’s intent may change over time based upon various factors such as ongoing asset/liability management activities, assessment of product profitability, credit risk, liquidity needs, and capital

implications. If the Company’s intent or ability to hold an existing portfolio loan changes, it is transferred to loans held for sale.

Commercial loans and commercial real estate loans increased $2.0 billion (3.0 percent) and $1.3 billion (3.6 percent), respectively, at June 30, 2013, compared with December 31, 2012, reflecting higher demand from new and existing customers.

Credit card loans decreased $466 million (2.7 percent) at June 30, 2013, compared with December 31, 2012, the result of customers paying down their balances. Other retail loans, which include retail leasing, home equity and second mortgages and other retail loans, decreased $607 million (1.3 percent) at June 30, 2013, compared with December 31, 2012. The decrease was primarily driven by lower home equity and second mortgages and student loan balances.

Loans Held for Sale Loans held for sale, consisting primarily of residential mortgages to be sold in the secondary market, were $4.8 billion at June 30, 2013, compared with $8.0 billion at December 31, 2012. The decrease in loans held for sale was principally due to lower residential mortgage loan originations during the first six months of 2013, as compared with the second half of 2012.

Most of the residential mortgage loans the Company originates or purchases follow guidelines that allow the loans to be sold into existing, highly liquid secondary markets; in particular in government agency transactions and to government-sponsored enterprises.

Investment Securities Investment securities totaled $75.0 billion at June 30, 2013, compared with $74.5 billion at December 31, 2012. The $447 million (.6 percent) increase primarily reflected $1.3 billion of net investment purchases, partially offset by a $798 million unfavorable change in net unrealized gains (losses) on available-for-sale investment securities. Held-to-maturity securities were $34.7 billion at June 30, 2013, compared with $34.4 billion at December 31, 2012, primarily reflecting net purchases of U.S government agency-backed securities.

The Company’s available-for-sale securities are carried at fair value with changes in fair value reflected in other comprehensive income (loss) unless a security is deemed to be other-than-temporarily impaired. At June 30, 2013, the Company’s net unrealized gains on available-for-sale securities were $301 million, compared with $1.1 billion at December 31, 2012. The unfavorable change in net unrealized gains was primarily due to decreases in the fair value of agency mortgage-backed and state and political securities due to increases in interest rates. Gross unrealized losses on available-for-sale securities totaled $486 million at June 30, 2013, compared with $147 million at December 31, 2012.

The Company conducts a regular assessment of its investment portfolio to determine whether any securities are other-than-temporarily impaired. When assessing unrealized losses for other-than-temporary impairment, the Company considers the nature of the investment, the financial condition of the issuer, the extent and duration of unrealized loss, expected cash flows of underlying assets and market conditions. At June 30, 2013, the Company had no plans to sell securities with unrealized losses, and believes it is more likely than not that it would not be required to sell such securities before recovery of their amortized cost.

There is limited market activity for non-agency mortgage-backed securities held by the Company. As a result, the Company estimates the fair value of these securities using estimates of expected cash flows, discount rates and management’s assessment of various other market factors, which are judgmental in nature. The Company recorded $3 million and $10 million of impairment charges in earnings during the second quarter and first six months of 2013, respectively, on non-agency mortgage-backed securities. These impairment charges were due to changes in expected cash flows primarily resulting from changes in voluntary prepayment and default assumptions in the underlying mortgage pools. Further adverse changes in market conditions may result in additional impairment charges in future periods. Refer to Notes 2 and 13 in the Notes to Consolidated Financial

Statements for further information on investment securities.

Deposits Total deposits were $251.6 billion at June 30, 2013, compared with $249.2 billion December 31, 2012, the result of increases in time deposits greater than $100,000, money market deposits and savings deposits, partially offset by decreases in noninterest bearing deposits, interest checking balances and time certificates less than $100,000. Time deposits greater than $100,000 increased $4.2 billion (14.5 percent) at June 30, 2013, compared with December 31, 2012. Time deposits greater than $100,000 are managed as an alternative to other funding sources such as wholesale borrowing, based largely on relative pricing. Money market balances increased $3.6 billion (7.0 percent) primarily due to higher Wholesale Banking and Commercial Real Estate and institutional trust and custody balances. Savings account balances increased $1.1 billion (3.6 percent), primarily due to continued strong participation in a savings product offered by Consumer and Small Business Banking. Noninterest-bearing deposits decreased $3.5 billion (4.8 percent), primarily due to a decrease in Wealth Management and Securities Services, and Wholesale Banking and Commercial Real Estate balances. Interest checking balances decreased $2.1 billion (4.1 percent) primarily due to lower broker-dealer balances, partially offset by

higher corporate trust balances. Time certificates less than $100,000 decreased $891 million (6.5 percent) at June 30, 2013, compared with December 31, 2012, primarily due to maturities.

Borrowings The Company utilizes both short-term and long-term borrowings as part of its asset/liability management and funding strategies. Short-term borrowings, which include federal funds purchased, commercial paper, repurchase agreements, borrowings secured by high-grade assets and other short-term borrowings, were $26.2 billion at June 30, 2013, compared with $26.3 billion at December 31, 2012. The $123 million (.5 percent) decrease in short-term borrowings was primarily due to lower repurchase agreement balances, partially offset by an increase in commercial paper and other short-term borrowings. Long-term debt was $19.7 billion at June 30, 2013, compared with $25.5 billion at December 31, 2012. The $5.8 billion (22.7 percent) decrease was primarily due to a $4.5 billion decrease in long-term debt related to the deconsolidation of certain consolidated VIEs and $1.4 billion of medium-term note maturities. Refer to the “Liquidity Risk Management” section for discussion of liquidity management of the Company.

CORPORATE RISK PROFILE

Overview Managing risks is an essential part of successfully operating a financial services company. The Company’s most prominent risk exposures are credit, residual value, operational, interest rate, market, liquidity and reputation risk. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan, investment or derivative contract when it is due. Residual value risk is the potential reduction in the end-of-term value of leased assets. Operational risk includes risks related to fraud, processing errors, technology, breaches of internal controls and in data security, and business continuation and disaster recovery. Operational risk also includes legal and compliance risks, including risks arising from the failure to adhere to laws, rules, regulations and internal policies and procedures. Interest rate risk is the potential reduction of net interest income as a result of changes in interest rates, which can affect the repricing of assets and liabilities differently. Market risk arises from fluctuations in interest rates, foreign exchange rates, and security prices that may result in changes in the values of financial instruments, such as trading and available-for-sale securities, certain mortgage loans held for sale, mortgage servicing rights (“MSRs”) and derivatives that are accounted for on a fair value basis. Liquidity risk is the possible inability to fund obligations to depositors, investors or borrowers. Further, corporate strategic decisions, as well as the risks described above, could give rise to reputation risk. Reputation risk is the risk that negative publicity or press, whether true or not, could result in costly litigation or cause a decline in the Company’s stock value, customer base, funding sources or revenue. In addition to the risks identified above, other risk factors exist that may impact the Company. Refer to “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December  31, 2012, for a detailed discussion of these factors.

Credit Risk Management The Company’s strategy for credit risk management includes well-defined, centralized credit policies, uniform underwriting criteria, and ongoing risk monitoring and review processes for all commercial and consumer credit exposures. In evaluating its credit risk, the Company considers changes, if any, in underwriting activities, the loan portfolio composition (including product mix and geographic, industry or customer-specific concentrations), trends in loan performance, the level of allowance coverage relative to similar banking institutions and macroeconomic factors, such as changes in unemployment rates, gross domestic product and

consumer bankruptcy filings. The Risk Management Committee of the Company’s Board of Directors oversees the Company’s credit risk management process.

In addition, credit quality ratings, as defined by the Company, are an important part of the Company’s overall credit risk management and evaluation of its allowance for credit losses. Loans with a pass rating represent those not classified on the Company’s rating scale for problem credits, as minimal risk has been identified. Loans with a special mention or classified rating, including all of the Company’s loans that are 90 days or more past due and still accruing, nonaccrual loans, those considered troubled debt restructurings (“TDRs”), and loans in a junior lien position that are current but are behind a modified or delinquent loan in a first lien position, encompass all loans held by the Company that it considers to have a potential or well-defined weakness that may put full collection of contractual cash flows at risk. The Company’s internal credit quality ratings for consumer loans are primarily based on delinquency and nonperforming status, except for a limited population of larger loans within those portfolios that are individually evaluated. For this limited population, the determination of the internal credit quality rating may also consider collateral value and customer cash flows. The Company obtains recent collateral value estimates for the majority of its residential mortgage and home equity and second mortgage portfolios, which allows the Company to compute estimated loan-to-value (“LTV”) ratios reflecting current market conditions. These individual refreshed LTV ratios are considered in the determination of the appropriate allowance for credit losses. However, the underwriting criteria the Company employs consider the relevant income and credit characteristics of the borrower, such that the collateral is not the primary source of repayment. Refer to Note 3 in the Notes to Consolidated Financial Statements for further discussion of the Company’s loan portfolios including internal credit quality ratings. In addition, refer to “Management’s Discussion and Analysis — Credit Risk Management” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, for a more detailed discussion on credit risk management processes.

The Company manages its credit risk, in part, through diversification of its loan portfolio and limit setting by product type criteria and concentrations. As part of its normal business activities, the Company offers a broad array of lending products. The Company categorizes its loan portfolio into three segments, which is the level at which it develops and documents a

systematic methodology to determine the allowance for credit losses. The Company’s three loan portfolio segments are commercial lending, consumer lending and covered loans. The commercial lending segment includes loans and leases made to small business, middle market, large corporate, commercial real estate, financial institution, non-profit and public sector customers. Key risk characteristics relevant to commercial lending segment loans include the industry and geography of the borrower’s business, purpose of the loan, repayment source, borrower’s debt capacity and financial flexibility, loan covenants, and nature of pledged collateral, if any. These risk characteristics, among others, are considered in determining estimates about the likelihood of default by the borrowers and the severity of loss in the event of default. The Company considers these risk characteristics in assigning internal risk ratings to, or forecasting losses on, these loans which are the significant factors in determining the allowance for credit losses for loans in the commercial lending segment.

The consumer lending segment represents loans and leases made to consumer customers including residential mortgages, credit card loans, and other retail loans such as revolving consumer lines, auto loans and leases, student loans, and home equity loans and lines. Home equity or second mortgage loans are junior lien closed-end accounts fully disbursed at origination. These loans typically are fixed rate loans, secured by residential real estate, with a 10 or 15 year fixed payment amortization schedule. Home equity lines are revolving accounts giving the borrower the ability to draw and repay balances repeatedly, up to a maximum commitment, and are secured by residential real estate. These include accounts in either a first or junior lien position. Typical terms on home equity lines are variable rates benchmarked to the prime rate, with a 15-year draw period during which a minimum payment is equivalent to the monthly interest, followed by a 10-year amortization period. At June 30, 2013, substantially all of the Company’s home equity lines were in the draw period. Key risk characteristics relevant to consumer lending segment loans primarily relate to the borrowers’ capacity and willingness to repay and include unemployment rates and other economic factors, customer payment history and in some cases, updated LTV information on real estate based loans. These risk characteristics, among others, are reflected in forecasts of delinquency levels, bankruptcies and losses which are the primary factors in determining the allowance for credit losses for the consumer lending segment.

The covered loan segment represents loans acquired in FDIC-assisted transactions that are covered by loss sharing agreements with the FDIC that greatly reduce the risk of future credit losses to the Company. Key risk characteristics for covered segment loans are consistent with the segment they would otherwise be included in had the loss share coverage not been in place, but consider the indemnification provided by the FDIC.

The Company further disaggregates its loan portfolio segments into various classes based on their underlying risk characteristics. The two classes within the commercial lending segment are commercial loans and commercial real estate loans. The three classes within the consumer lending segment are residential mortgages, credit card loans and other retail loans. The covered loan segment consists of only one class.

The Company’s consumer lending segment utilizes several distinct business processes and channels to originate consumer credit, including traditional branch lending, indirect lending, portfolio acquisitions, correspondent banks and loan brokers. Each distinct underwriting and origination activity manages unique credit risk characteristics and prices its loan production commensurate with the differing risk profiles.

Residential mortgages represent an important financial product for consumer customers of the Company and are originated through the Company’s branches, loan production offices and a wholesale network of originators. The Company may retain residential mortgage loans it originates on its balance sheet or sell the loans into the secondary market while retaining the servicing rights and customer relationships. Utilizing the secondary markets enables the Company to effectively reduce its credit and other asset/liability risks. For residential mortgages that are retained in the Company’s portfolio and for home equity and second mortgages, credit risk is also diversified by geography and managed by adherence to LTV and borrower credit criteria during the underwriting process.

The Company estimates updated LTV information quarterly, based on a method that combines automated valuation model updates and relevant home price indices. LTV is the ratio of the loan’s outstanding principal balance to the current estimate of property value. For home equity and second mortgages, combined loan-to-value (“CLTV”) is the combination of the first mortgage original principal balance and the second lien outstanding principal balance, relative to the current estimate of property value. Certain loans do not have a LTV or CLTV, primarily due to lack of availability of relevant automated valuation model and/or home price indices values, or lack of necessary valuation data on acquired loans.

The following tables provide summary information for the LTVs of residential mortgages and home equity and second mortgages by borrower type at June 30, 2013: