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 third quarter of 2013, or $.76 per diluted common share, compared with $1.5 billion, or $.74 per diluted common share for the third quarter of 2012. Return on average assets and return on average common equity were 1.65 percent and 15.8 percent, respectively, for the third quarter of 2013, compared with 1.70 percent and 16.5 percent, respectively, for the third quarter of 2012. The provision for credit losses was $30 million lower than net charge-offs for the third quarter of 2013, compared with $50 million lower than net charge-offs for the third quarter of 2012.

Total net revenue, on a taxable-equivalent basis, for the third quarter of 2013 was $288 million (5.6 percent) lower than the third quarter of 2012, reflecting a 2.5 percent decrease in net interest income and a 9.1 percent decrease in noninterest income. The decrease in net interest income from a year ago was the result of an increase in average earning assets, offset by a decrease in the net interest margin. Noninterest income decreased from a year ago, primarily due to lower mortgage banking revenue.

Noninterest expense in the third quarter of 2013 was $44 million (1.7 percent) lower than the third quarter of 2012, primarily due to a reduction in mortgage servicing review-related professional services expense and lower compensation expense, partially offset by higher employee benefits expense.

The provision for credit losses for the third quarter of 2013 of $298 million was $190 million (38.9 percent) lower than the third quarter of 2012. Net charge-offs in the third quarter of 2013 were $328 million, compared with $538 million in the third 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 nine months of 2013 was $4.4 billion, or $2.25 per

diluted common share, compared with $4.2 billion, or $2.12 per diluted common share for the first nine months of 2012. Return on average assets and return on average common equity were 1.67 percent and 16.0 percent, respectively, for the first nine months of 2013, compared with 1.66 percent and 16.4 percent, respectively, for the first nine months of 2012. The provision for credit losses was $90 million lower than net charge-offs for the first nine months of 2013, compared with $190 million lower than net charge-offs for the first nine months of 2012.

Total net revenue, on a taxable-equivalent basis, for the first nine months of 2013 was $463 million (3.1 percent) lower than the first nine months of 2012, reflecting a 1.1 percent decrease in net interest income and a 5.3 percent decrease in noninterest income. The decrease in net interest income from the prior year was the result of an increase in average earning assets, offset by a decrease in the net interest margin. 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, payments-related revenue and investment products fees, and a favorable change in net securities gains (losses).

Noninterest expense for the first nine months of 2013 was $178 million (2.3 percent) lower than the first nine months of 2012, reflecting lower professional services expense, the impact of a 2012 accrual for the Company’s portion of an indemnification obligation associated with Visa Inc. litigation matters (“Visa accrual”) and decreases in insurance-related costs and other expenses, partially offset by higher employee benefits expense.

The provision for credit losses of $1.1 billion for the first nine months of 2013 was $376 million (26.1 percent) lower than the first nine months of 2012. Net charge-offs in the first nine months of 2013 were $1.2 billion, compared with $1.6 billion in the first nine 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 third quarter and $8.1 billion in the first nine months of 2013, representing decreases of $69 million (2.5 percent) and $91 million (1.1 percent), respectively, compared with the same periods of 2012. The decreases were the result of lower net interest margin, partially offset by higher average earning assets. The net interest margin in the third quarter and first nine months of 2013 was 3.43 percent and 3.45 percent, respectively, compared with 3.59 percent in both the third quarter and first nine months of 2012. The decreases in the net interest margin primarily reflected lower rates on investment securities and loans, partially offset by lower rates on deposits and a reduction in higher cost long-term debt. Average earning assets increased $6.1 billion (2.0 percent) in the third quarter and $9.4 billion (3.1 percent) in the first nine months of 2013, compared with the same periods of 2012, driven by increases in loans and investment securities, partially offset by decreases in loans held for sale and in other earning assets, primarily due to the deconsolidation of certain consolidated variable interest entities (“VIEs”) in the second quarter of 2013. 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 third quarter and first nine months of 2013 were $12.4 billion (5.7 percent) and $12.0 billion (5.6 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 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 $2.9 billion (22.7 percent) in the third quarter and $3.2 billion (23.8 percent) in the first nine months of 2013, compared with the same periods of 2012, respectively.

Average investment securities in the third quarter and first nine months of 2013 were $2.5 billion (3.5 percent) and $1.9 billion (2.7 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 third quarter and first nine months of 2013 were $13.1 billion (5.5 percent) and $15.3 billion (6.6 percent) higher, respectively, than the same periods of 2012. Average noninterest-bearing deposits for the third quarter of 2013 were relatively stable with an increase of $137 million (.2 percent) over the third quarter of 2012. Average noninterest-bearing deposits for the first nine months of 2013 were $1.8 billion (2.7 percent) higher than the same period of 2012, driven by growth in Consumer and Small Business Banking balances. Average total savings deposits for the third quarter and first nine months of 2013 were $15.8 billion (13.1 percent) and $14.1 billion (11.7 percent) higher, respectively, than the same periods of 2012, the result of growth in Consumer and Small Business Banking, Wholesale and Commercial Real Estate, and corporate trust balances. Average time certificates of deposit less than $100,000 for the third quarter and first nine months of 2013 were $1.9 billion (13.0 percent) and $1.6 billion (11.0 percent) lower, respectively, than the same periods of 2012, due to maturities. Average time deposits greater than $100,000 were $1.0 billion (2.8 percent) lower in the third quarter and $1.1 billion (3.3 percent) higher in the first nine 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 third quarter and first nine months of 2013 decreased $190 million (38.9 percent) and $376 million (26.1 percent), respectively, from the same periods of 2012. Net charge-offs decreased $210 million (39.0 percent) and $476 million (29.2 percent) in the third quarter and first nine months of 2013, respectively, compared with the same periods of 2012, principally due to improvement in the commercial, commercial real estate, residential mortgages and home equity and second mortgages portfolios. The provision for credit losses was lower than net charge-offs by $30 million in the third quarter and $90 million in the first nine months of 2013, compared with $50 million in the third quarter and $190 million in the first nine 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 $2.2 billion in the third quarter and $6.6 billion in the first nine months of 2013, reflecting decreases of $219 million (9.1 percent) and $372 million (5.3 percent), respectively, compared with the same periods of 2012. The decreases from a year ago were principally due to lower mortgage banking revenue due to lower origination and sales revenue, partially offset by higher servicing income and favorable changes in the valuation of mortgage servicing rights (“MSRs”), net of hedging

activities. Growth in several fee categories partially offset the decline in mortgage banking revenue. Credit and debit card revenue increased over the prior year due to higher transaction volumes, including the impact of business expansion. Merchant processing services revenue was higher as a result of higher volumes and an increase in fee-based product revenue. Trust and investment management fees increased, reflecting improved market conditions and business expansion, while investment products fees increased due to higher sales volumes and fees. In addition, net securities gains (losses) for the first nine months of 2013 reflected a favorable variance, as compared with the same period of the prior year, as the Company recognized impairment on certain money center bank securities during the second quarter of 2012 following rating agency downgrades. Offsetting these positive variances were declines in corporate payment products revenue due to lower government-related transactions, and ATM processing services revenue due to lower volumes. Commercial products revenue was also lower, primarily driven by lower standby letters of credit fees and capital markets revenue. Other income also declined in the third quarter and first nine months of 2013, compared with the same periods of the prior year. The decline in the third quarter of 2013 was principally the result of a gain on the sale of a credit card portfolio in the third quarter 2012. The decline in the first nine months of 2013 was driven by the third quarter 2012 gain on the sale of a credit card portfolio, and lower retail lease and equity investment revenue.

Noninterest Expense Noninterest expense was $2.6 billion in the third quarter and $7.6 billion in the first nine months of 2013, reflecting decreases of $44 million (1.7 percent) and $178 million (2.3 percent), respectively, compared with the same periods of 2012. The decreases in noninterest expense from a year ago were primarily due to reductions in professional services and other expense. Professional services expense was lower due to reductions in mortgage servicing review-related costs. Other expense decreased due to reductions in litigation-related expenses and lower costs related to other real estate owned and FDIC insurance expense, partially offset by higher costs related to investments in affordable housing and other tax-advantaged projects. Other expense for the first nine months of 2013 was also lower than the same period of the prior year due to lower insurance-related costs and the 2012 Visa accrual. In addition, marketing and business development expense decreased due to the timing of marketing programs, while other intangibles expense decreased due to the reduction or completion of the amortization of certain intangibles. Compensation expense decreased in the third quarter of 2013, compared with the same period of the prior year, primarily as a result of lower incentive expense. Compensation expense increased in first nine months of 2013, compared with the same period of the prior year, primarily attributable to the growth in staffing for business initiatives and business expansion, and merit increases, partially offset by lower incentive expense. Employee benefits expense increased in the third quarter and first nine months of 2013, compared with the same periods of the prior year, principally due to higher pension and medical costs and staffing levels. In addition, net occupancy and equipment expense was higher due to business initiatives and higher rent expense and maintenance costs, while technology and communications expense increased due to business expansion and technology projects.

Income Tax Expense The provision for income taxes was $542 million (an effective rate of 27.5 percent) for the third quarter and $1.6 billion (an effective rate of 27.7 percent) for the first nine months of 2013, compared with $593 million (an effective rate of 29.3 percent) and $1.7 billion (an effective rate of 29.0 percent) for the same periods of 2012. 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 $231.4 billion at September 30, 2013, compared with $223.3 billion at December 31, 2012, an increase of $8.1 billion (3.6 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 $6.2 billion (14.0 percent) at September 30, 2013, compared with December 31, 2012, reflecting origination and refinancing activity due to the low interest rate environment during the period. 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 $2.7 billion (4.1 percent) and $1.7 billion (4.7 percent), respectively, at September 30, 2013, compared with December 31, 2012, reflecting higher demand from new and existing customers.

Credit card loans were essentially unchanged at September 30, 2013, compared with December 31, 2012. Other retail loans, which include retail leasing, home equity and second mortgages and other retail loans, decreased $598 million (1.3 percent) at September 30, 2013, compared with December 31, 2012. The decrease was primarily driven by lower home equity and second mortgages and student loan balances, partially offset by higher auto, retail leasing and installment loans.

Loans Held for Sale Loans held for sale, consisting primarily of residential mortgages to be sold in the secondary market, were $3.9 billion at September 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 third quarter of 2013, as compared with the fourth quarter 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 $76.2 billion at September 30, 2013, compared with $74.5 billion at December 31, 2012. The $1.7 billion (2.3 percent) increase primarily reflected $2.8 billion of net investment purchases, partially offset by a $1.0 billion unfavorable change in net unrealized gains (losses) on available-for-sale investment securities. Held-to-maturity securities were $36.9 billion at September 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 September 30, 2013, the Company’s net unrealized gains on available-for-sale securities were $67 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 as a result of increases in interest rates. Gross unrealized losses on available-for-sale securities totaled $624 million at September 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, any government or agency guarantees and market conditions. At September 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 $13 million of impairment charges in earnings during the third quarter and first nine 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 $261.7 billion at September 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 time certificates less than $100,000, noninterest bearing deposits and interest checking balances. Time deposits greater than $100,000 increased $7.5 billion (25.8 percent) at September 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 $8.1 billion (15.9 percent) primarily due to higher Wholesale Banking and Commercial Real Estate and Wealth Management and Securities Services balances. Savings account balances increased $1.3 billion (4.1 percent), primarily due to continued strong participation in a savings product offered by Consumer and Small Business Banking. Time certificates less than $100,000 decreased $1.6 billion (11.4 percent) at September 30, 2013, compared with December 31, 2012, primarily due to maturities. Noninterest-bearing deposits decreased $1.8 billion (2.5 percent), primarily due to a decrease in Wealth Management and Securities Services balances, partially offset by higher Wholesale Banking and Commercial Real Estate and Consumer and

Small Business Banking balances. Interest checking balances decreased $927 million (1.8 percent) primarily due to lower broker-dealer balances, partially offset by higher Wholesale Banking and Commercial Real Estate and corporate trust balances.

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 $26.1 billion at September 30, 2013, compared with $26.3 billion at December 31, 2012. The $.2 billion (.7 percent) decrease in short-term borrowings was primarily due to lower repurchase agreement and federal funds purchased balances, partially offset by an increase in commercial paper and other short-term borrowings. Long-term debt was $18.8 billion at September 30, 2013, compared with $25.5 billion at December 31, 2012. The $6.7 billion (26.5 percent) decrease was primarily due to a $4.5 billion decrease in long-term debt related to the deconsolidation of certain consolidated VIEs and $2.4 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, 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 considered 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 September 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 the Company prices its loan production commensurate with the differing risk profiles.

Residential mortgages 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 September 30, 2013:

At September 30, 2013, approximately $1.4 billion of residential mortgages were to customers that may be defined as sub-prime borrowers based on credit scores from independent agencies at loan origination, compared with $1.6 billion at December 31, 2012. In addition to residential mortgages, at September 30, 2013, $.3 billion of home equity and second mortgage loans were to customers that may be defined as sub-prime borrowers, compared with $.4 billion at December 31, 2012. The total amount of consumer lending segment residential mortgage, home equity and second mortgage loans to customers that may be defined as sub-prime borrowers represented only .5 percent of total assets at September 30, 2013, compared with .6 percent at December 31, 2012. The Company considers sub-prime loans to be those made to borrowers with a risk of default significantly higher than those approved for prime lending programs, as reflected in credit scores obtained from independent agencies at loan origination, in addition to other credit underwriting criteria. Sub-prime portfolios include only loans originated according to the Company’s underwriting programs specifically designed to serve customers with weakened credit histories. The sub-prime designation indicators have been and will continue to be subject to re-evaluation over time as borrower characteristics, payment performance and economic conditions change. The sub-prime loans originated during periods from June 2009 and after are with borrowers who met the Company’s program guidelines and have a credit score that generally is at or below a threshold of 620 to 650 at loan origination depending on the program. Sub-prime loans originated during periods prior to June 2009 were based upon program level guidelines without regard to credit score.

Covered loans included $1.0 billion in loans with negative-amortization payment options at September 30, 2013, compared with $1.3 billion at December 31, 2012. Other than covered loans, the Company does not have any residential mortgages with payment schedules that would cause balances to increase over time.

Home equity and second mortgages were $15.5 billion at September 30, 2013, compared with $16.7 billion at December 31, 2012, and included $4.8 billion of home equity lines in a first lien position and $10.7 billion of home equity and second mortgage loans and lines in a junior lien position. Loans and lines in a junior lien position at September 30, 2013, included approximately $3.8 billion of loans and lines for which the Company also serviced the related first lien loan, and approximately $6.9 billion where the Company did not service the related first lien loan. The Company was able

to determine the status of the related first liens using information the Company has as the servicer of the first lien or information reported on customer credit bureau files. The Company also evaluates other indicators of credit risk for these junior lien loans and lines including delinquency, estimated average CLTV ratios and updated weighted-average credit scores in making its assessment of credit risk, related loss estimates and determining the allowance for credit losses.

The following table provides a summary of delinquency statistics and other credit quality indicators for the Company’s junior lien positions at September 30, 2013:

See the Analysis and Determination of the Allowance for Credit Losses section for additional information on how the Company determines the allowance for credit losses for loans in a junior lien position.

Loan Delinquencies Trends in delinquency ratios are an indicator, among other considerations, of credit risk within the Company’s loan portfolios. The Company measures delinquencies, both including and excluding nonperforming loans, to enable comparability with other companies. Accruing loans 90 days or more past due totaled $1.1 billion ($591 million excluding covered loans) at September 30, 2013, compared with $1.3 billion ($660 million excluding covered loans) at December 31, 2012. The $69 million (10.5 percent) decrease, excluding covered loans, reflected improvement in residential mortgages, credit card and other retail loan portfolios during the first nine months of 2013. These balances exclude loans purchased from Government National Mortgage Association (“GNMA”) mortgage pools whose repayments are

primarily insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. Accruing loans 90 days or more past due are not included in nonperforming assets and continue to accrue interest because they are adequately secured by collateral, are in the process of collection and are reasonably expected to result in repayment or restoration to current status, or are managed in homogeneous portfolios with specified charge-off timeframes adhering to regulatory guidelines. The ratio of accruing loans 90 days or more past due to total loans was .48 percent (.27 percent excluding covered loans) at September 30, 2013, compared with ..59 percent (.31 percent excluding covered loans) at December 31, 2012.