-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RsvwygOMyBqoZGiXsQ3i63LUeQXm6uWQweN8o5goveIvbPzKvak2HJkAxWkSm4bj 33x1PQ31nAI4SX43AA+dGA== 0001047469-97-001070.txt : 19971020 0001047469-97-001070.hdr.sgml : 19971020 ACCESSION NUMBER: 0001047469-97-001070 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971016 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971017 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: US BANCORP \DE\ CENTRAL INDEX KEY: 0000036104 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 410255900 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-22363 FILM NUMBER: 97697400 BUSINESS ADDRESS: STREET 1: FIRST BANK PL STREET 2: 601 SECOND AVE S CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4302 BUSINESS PHONE: 6129731111 MAIL ADDRESS: STREET 1: 601 2ND AVENUE SOUTH-FIRST BANK PLACE STREET 2: 601 2ND AVENUE SOUTH-FIRST BANK PLACE CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4302 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BANK SYSTEM INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BANK STOCK CORP DATE OF NAME CHANGE: 19720317 8-K 1 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): OCTOBER 16, 1997 U.S. BANCORP (Exact name of registrant as specified in its charter) DELAWARE 1-6880 41-0255900 (State or other jurisdiction (Commission (I.R.S Employer of Incorporation) File Number) Identification No.) 601 SECOND AVENUE SOUTH, MINNEAPOLIS, MINNESOTA 55402 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 612-973-1111 NOT APPLICABLE (Former name or former address, if changed since last report) Item 5. OTHER EVENTS On October 16, 1997, U.S. Bancorp (the "Company") released its third quarter 1997 earnings summary to the public. The Company's press release, dated October 16, 1997, announcing such earnings summary is included as Exhibit 99 hereto and is incorporated herein by reference. Item 7. FINANCIAL STATEMENTS AND EXHIBITS (c.) Exhibits (filed herewith) Exhibit 99 Press release of U.S. Bancorp dated October 16, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. U.S. BANCORP By /s/ DAVID J. PARRIN -------------------- David J. Parrin Senior Vice President & Controller DATE: OCTOBER 17, 1997 EX-99 2 EXHIBIT 99 NEWS RELEASE - -------------------------------------------------------------------------------- [LETTERHEAD] CONTACT: Wendy L. Raway John R. Danielson Judith T. Murphy Media Relations Investor Relations Investor Relations (612) 973-2429 (612) 973-2261 (612) 973-2264 U.S. BANCORP REPORTS RECORD OPERATING EARNINGS FOR 3Q 1997
3Q 3Q PERCENT YTD YTD PERCENT EARNINGS SUMMARY 1997 1996 CHANGE 1997 1996 CHANGE - --------------------------------------------------------------------------------------------------------------------------- ($ in millions, except per-share data) Before nonrecurring items*: Operating earnings $324.8 $290.6 11.8 $919.7 $850.3 8.2 Operating earnings to common 321.7 286.0 12.5 910.5 836.3 8.9 Earnings per common share (fully diluted) 1.29 1.11 16.2 3.64 3.26 11.7 Net income (loss) (47.6) 255.7 nm 549.6 926.6 (40.7) Earnings (loss) per common share (fully diluted) (0.20) 0.98 nm 2.16 3.55 (39.2) Dividends paid per common share 0.4650 0.4125 12.7 1.3950 1.2375 12.7 Book value per common share (period-end) 22.82 22.97 (0.7) Return on average common equity** (%) 22.3 19.7 21.5 19.7 Return on average assets** (%) 1.88 1.70 1.80 1.69 Net interest margin (%) 5.03 5.05 5.05 5.03 Efficiency ratio** (%) 47.7 51.6 49.3 52.4
* Net nonrecurring items totaled $(525.8) million, or $(372.4) million, after-tax, in 3Q97 and $(56.2) million, or $(34.9) million, after-tax, in 3Q96. Net nonrecurring items totaled $(522.2) million, or $(370.1) million, after-tax, year-to-date 1997 and $144.6 million, or $76.3 million, after-tax, year-to-date 1996. ** before nonrecurring items MINNEAPOLIS, October 16, 1997 -- U.S. Bancorp (NYSE: USB) today reported record operating earnings of $324.8 million, or $1.29 per fully diluted share, for the third quarter of 1997, compared with $290.6 million, or $1.11 per fully diluted share, in the third quarter of 1996. Return on average assets and return on average common equity, excluding nonrecurring items, were 1.88 percent and 22.3 percent, respectively, in the third quarter of 1997, compared with returns, excluding nonrecurring items, of 1.70 percent and 19.7 percent in the third quarter of 1996. U.S. Bancorp, formerly known as First Bank System, Inc., (the "Company") is the organization created by the merger of First Bank System, Inc. ("FBS") and U.S. Bancorp ("USBC") of Portland, Page 2 Oregon. The merger was completed on August 1, 1997 as a pooling-of-interests, and prior periods have been restated. As a result of the merger, the Company recorded a net loss for the third quarter of 1997, including nonrecurring items, of $(47.6) million, or $(0.20) per fully diluted share, compared to net income of $255.7 million, or $0.98 per fully diluted share, in the third quarter of 1996. During the third quarter, senior management and employees continued to focus on the goal of successfully completing the integration of the former FBS and former USBC into the new U.S. Bancorp. The integration and conversion plans were completed prior to close on August 1st, and the planned tasks are on schedule. The credit card system conversion is planned for October, 1997. The trust and core systems conversions are scheduled for the first and second quarters of 1998. The planned cost take-outs of $340 million, or 28% of the former USBC's expense base, are expected to be substantially achieved on a run-rate basis by the third quarter of 1998. Earnings in the third quarter of 1997 included nonrecurring charges of $535.2 million, consisting of $440.2 million ($318.5 million after-tax) of merger-related expenses and a $95.0 million ($59.8 million after-tax) merger-related provision for credit losses. The $440.2 million of merger-related expenses included $232.3 million of severance and retention costs, $65.8 million of occupancy/equipment writedowns, $43.4 million of capitalized software and other asset writeoffs, $35.0 million of investment banking and other transaction costs, $27.1 million of conversion expense, and $36.6 million of other merger-related expenses. Approximately $190.0 million ($120.0 million after-tax) of additional merger-related expenses are expected to be incurred over the next four quarters. Merger-related credit activity included the $95.0 million merger-related provision for credit losses and $62.3 million of charge-offs, taken as a result of efforts to align the classification and charge-off practices of the former USBC with those of the Company. The quarter also included nonrecurring income of $9.4 million ($5.9 million after-tax) from the gain on sale of USBC's affinity credit card portfolio. Page 3 U.S. Bancorp's President and Chief Executive Officer, John F. Grundhofer, said, "We are very pleased with the results of our first quarter as the new U.S. Bancorp. Our integration and conversion efforts are progressing on schedule, while our day-to-day business continues to grow. Our operating return on assets of 1.88 percent, return on equity of 22.3 percent and efficiency ratio of 47.7 percent are among the best in the industry." The strong operating earnings for the third quarter reflected growth in both net interest income and noninterest income and a decrease in noninterest expense from the third quarter of 1996. Excluding nonrecurring items, noninterest income for the quarter increased $44.3 million, or 12.4 percent, from the third quarter of 1996, while noninterest expense declined by $18.1 million, or 3.1 percent. The combination of growing revenues and declining expense led to an efficiency ratio (ratio of expenses to revenues), before nonrecurring items, of 47.7 percent in the third quarter of 1997, compared with 51.6 percent in the third quarter of 1996. Excluding merger-related charge-offs, net charge-offs were .76 percent of average loans in the third quarter of 1997, compared with .73 percent in the second quarter of 1997 and .54 percent in same period of last year. Consumer loans (excluding first mortgage loans) 30 days or more past due were 2.18 percent of loans outstanding for the third quarter of 1997, slightly below the 2.26 percent for the second quarter of 1997, and slightly above the 2.06 percent in the same period of last year. The ratio of allowance for credit losses to nonperforming loans continued to indicate strong reserve coverage of 343 percent at September 30, 1997, higher than the coverage ratio of 310 percent at June 30, 1997, and slightly below the coverage ratio of 357 percent at September 30, 1996. On September 15, 1997, U.S. Bancorp announced that it would acquire Zappco, Inc., a bank holding company headquartered in St. Cloud, Minnesota, with three banks, six banking locations and total assets of $360 million. The acquisition is subject to regulatory approval and is expected to close around year end 1997. Page 4
INCOME STATEMENT HIGHLIGHTS - ------------------------------------------------------------------------------------------------------------------ (Taxable-equivalent basis, $ in millions, except per-share data) 3Q 3Q PERCENT YTD YTD PERCENT 1997 1996 CHANGE 1997 1996 CHANGE -------------------------------------------------------------------- Net interest income $779.8 $770.0 1.3 $2,321.3 $2,256.6 2.9 Provision for credit losses* 90.0 73.1 23.1 275.3 195.7 40.7 Noninterest income* 400.3 356.0 12.4 1,181.7 1,071.4 10.3 Noninterest expense* 562.9 581.0 (3.1) 1,727.9 1,744.9 (1.0) ------------------- -------------------- Income before taxes and nonrecurring items 527.2 471.9 11.7 1,499.8 1,387.4 8.1 Taxable-equivalent adjustment 14.5 16.1 (9.9) 44.2 48.2 (8.3) Income taxes* 187.9 165.2 13.7 535.9 488.9 9.6 ------------------- -------------------- Income before nonrecurring items 324.8 290.6 11.8 919.7 850.3 8.2 Net nonrecurring items (after-tax) (372.4) (34.9) nm (370.1) 76.3 nm ------------------- -------------------- Net income (loss) ($47.6) $255.7 nm $549.6 $926.6 (40.7) ------------------- -------------------- ------------------- -------------------- Net income (loss) to common ($50.7) $251.1 nm $540.4 $912.6 (40.8) ------------------- -------------------- ------------------- -------------------- Per fully diluted common share:** Earnings, before nonrecurring items $1.29 $1.11 16.2 $3.64 $3.26 11.7 ------------------- -------------------- ------------------- -------------------- Earnings on a cash basis, before nonrecurring items*** $1.41 $1.22 15.6 $3.97 $3.54 12.1 ------------------- -------------------- ------------------- -------------------- Net income (loss) ($0.20) $0.98 nm $2.16 $3.55 (39.2) ------------------- -------------------- ------------------- -------------------- Earnings (loss) on a cash basis*** ($0.09) $1.08 nm $2.49 $3.95 (37.0) ------------------- -------------------- ------------------- --------------------
* before effect of nonrecurring items ** nonrecurring items reduced earnings by $1.49 in 3Q97, $0.13 in 3Q96 and $1.48 year-to-date 1997 and added $0.29 year-to-date 1996 nonrecurring items reduced cash basis earnings by $1.50 in 3Q97, $0.14 in 3Q96 and 1.48 year-to-date 1997 and added $0.41 year-to-date 1996 *** calculated by adding amortization of goodwill and other intangible assets to net income NET INTEREST INCOME Third quarter net interest income on a taxable-equivalent basis was $779.8 million, which was higher by $9.8 million, or 1.3 percent, than the third quarter of 1996. The increase was primarily the result of an increase in earning assets of $902 million in the third quarter of 1997, driven by loan production, partially offset by reductions in investment securities and residential mortgages. Average loans were up $2.5 billion, or 4.8 percent, from the third quarter of 1996. Excluding residential mortgage loans and the effect of the $420 million first quarter corporate card securitization, average loans for the third quarter were higher by $3.2 billion, or 7.0 percent, than third quarter of 1996. This increase reflected growth in both core commercial and consumer loans. Page 5 Average securities for the third quarter were lower by $942 million than the third quarter of 1996, reflecting both maturities and sales of securities. The net interest margin in the third quarter of 1997 of 5.03 percent was slightly below the 1996 margin of 5.05 percent. AVERAGE LOANS -------------------------------------------------------------------------- ($ in millions) 3Q 3Q PERCENT 1997 1996 CHANGE ---------------------------------- Commercial* $22,574 $21,015 7.4 Commercial real estate 10,300 9,482 8.6 ------- ------- Total commercial 32,874 30,497 7.8 Home equity and second mortgage 5,204 4,679 11.2 Credit card 3,764 3,547 6.1 Other 6,847 7,161 (4.4) ------- ------- Total consumer, excl. residential 15,815 15,387 2.8 Residential mortgage 5,001 5,356 (6.6) ------- ------- Total loans $53,690 $51,240 4.8 ------- ------- ------- ------- Total loans, excluding residential mortgages $48,689 $45,884 6.1 ------- ------- ------- ------- * $420 million of corporate charge card receivables were securitized and removed from the loan portfolio during the 1Q 1997. Excluding the securitization, commercial loans would have increased by $2.0 billion, or 9.4%, and, excluding residential mortgage loans, total loans would have increased by $3.2 billion, or 7.0 percent. Page 6
NONINTEREST INCOME - ---------------------------------------------------------------------------------------------------------------------- ($ in millions) 3Q 3Q PERCENT YTD YTD PERCENT 1997 1996 CHANGE 1997 1996 CHANGE --------------------------------------------------------------------- Credit card fee revenue* $106.2 $90.1 17.9 $295.7 $260.2 13.6 Service charges on deposit accounts 102.2 96.4 6.0 295.0 279.8 5.4 Trust fees 87.4 74.2 17.8 259.2 225.0 15.2 Investment products fees and commissions 16.5 13.1 26.0 49.0 44.9 9.1 Other 88.0 82.2 7.1 282.8 261.5 8.1 ------------------- -------------------- Subtotal 400.3 356.0 12.4 1,181.7 1,071.4 10.3 Termination fee, net of transaction costs -- -- -- 190.0 State income tax refund -- -- -- 65.0 Gain on sale of mortgage banking operations -- -- -- 45.8 Gain on sale of operations and loans 9.4 -- 9.4 25.6 Net securities gains -- 0.9 3.6 20.3 Other -- 4.2 -- 4.2 ------------------- -------------------- Nonrecurring gains 9.4 5.1 13.0 350.9 ------------------- -------------------- Total noninterest income $409.7 $361.1 $1,194.7 $1,422.3 ------------------- -------------------- ------------------- --------------------
* Excluding the effect of the 1Q 1997 corporate card securitization, credit card fee income would have increased by $21.2 million, or 23.5 percent, over 3Q 1996 and $47.2 million, or 18.1 percent over year-to-date 1996. NONINTEREST INCOME Third quarter noninterest income, before nonrecurring items, was $400.3 million, an increase of $44.3 million, or 12.4 percent, from the same quarter of 1996. Excluding the reduction in fees related to the first quarter corporate card securitization, noninterest income, before nonrecurring items, increased by $49.4 million, or 13.9 percent. The increase in noninterest income resulted from growth in all categories of fee revenue. Credit card fee revenue increased by $16.1 million, or 17.9 percent, as a result of higher volumes for Purchasing and Corporate Cards and the Northwest Airlines WorldPerks credit card, partially offset by the effect of the first quarter corporate card securitization. Excluding the effect of the corporate card securitization, credit card fee revenue would have increased by $21.2 million, or 23.5 percent. Trust fees were up over the third quarter of 1996 by $13.2 million, or 17.8 percent, due to growth in the corporate, institutional and personal Page 7 trust businesses. The nonrecurring gain on sale resulted from the sale of the former USBC's $45 million affinity credit card portfolio.
NONINTEREST EXPENSE - ---------------------------------------------------------------------------------------------------------------------- ($ in millions) 3Q 3Q PERCENT YTD YTD PERCENT 1997 1996 CHANGE 1997 1996 CHANGE --------------------------------------------------------------------- Salaries* $242.2 $238.1 1.7 $729.7 $715.3 2.0 Employee benefits* 49.2 52.2 (5.7) 167.5 167.2 0.2 Net occupancy 45.3 44.6 1.6 136.3 133.9 1.8 Furniture and equipment 40.4 42.1 (4.0) 127.4 131.4 (3.0) Goodwill and intangibles* 29.1 27.1 7.4 82.3 73.2 12.4 Professional services* 18.9 13.5 40.0 47.5 40.6 17.0 Other personnel costs 14.3 23.8 (39.9) 47.1 61.1 (22.9) Telephone 15.5 15.9 (2.5) 44.8 44.7 0.2 Advertising and marketing 13.3 15.7 (15.3) 42.2 46.3 (8.9) FDIC insurance 2.4 2.5 (4.0) 6.9 11.4 (39.5) Other* 92.3 105.5 (12.5) 296.2 319.8 (7.4) --------------------- --------------------- Subtotal 562.9 581.0 (3.1) 1,727.9 1,744.9 (1.0) Merger-related 440.2 -- 440.2 49.5 SAIF special assessment -- 61.3 -- 61.3 Branch distribution resizing -- -- -- 38.6 Goodwill and intangibles -- -- -- 29.5 Salaries and employee benefits -- -- -- 10.1 Other -- -- -- 17.3 --------------------- --------------------- Nonrecurring charges 440.2 61.3 440.2 206.3 --------------------- --------------------- Total noninterest expense $1,003.1 $642.3 $2,168.1 $1,951.2 --------------------- --------------------- --------------------- ---------------------
* before effect of nonrecurring items in 1996 NONINTEREST EXPENSE Third quarter noninterest expense, before nonrecurring items, totaled $562.9 million, a decrease of $18.1 million, or 3.1 percent, from the third quarter of 1996. Expense reductions in a number of categories reflect the initial benefits of the merger, realized through lower expenditures for furniture and equipment expense, telephone and other expense, such as travel and entertainment and printing, stationary and supplies. The reduction in other personnel reflects lower contract labor expense associated with 1996 technology projects that are now complete. Offsetting a portion of the favorable variance in contract labor was an increase in professional services expense, which was Page 8 $5.4 million higher than the third quarter of 1996, primarily due to several 1997 technology initiatives which involve third party consulting arrangements. The $440.2 million of nonrecurring expenses in the third quarter of 1997 were merger-related, including $232.3 million of severance and retention costs, $65.8 million of occupancy/equipment write-downs, $43.4 million of capitalized software and other asset write-offs, $35.0 million of investment banking and other transaction costs, $27.1 million of conversion expense, and all other merger-related expenses of $36.6 million. Additional merger-related charges of approximately $190.0 million are expected to be incurred over the next four quarters. The 1996 third quarter nonrecurring item was a $61.3 million SAIF special assessment.
ALLOWANCE FOR CREDIT LOSSES ---------------------------------------------------------------------------------------------------- ($ in millions) 3Q 2Q 1Q 4Q 3Q 1997 1997 1997 1996 1996 ------------------------------------------------- Balance, beginning of period $999.4 $993.4 $992.5 $987.4 $984.2 Net charge-offs (recoveries) Commercial 83.8 25.2 9.2 8.1 6.1 Consumer 80.7 72.8 74.7 63.1 63.8 ------------------------------------------------- Total 164.5 98.0 83.9 71.2 69.9 Provision for credit losses 90.0 101.1 84.2 75.5 73.1 Merger-related provision for credit losses 95.0 -- -- -- -- Acquisitions and other additions -- 2.9 0.6 0.8 -- ------------------------------------------------- Balance, end of period $1,019.9 $999.4 $993.4 $992.5 $987.4 ------------------------------------------------- ------------------------------------------------- Net charge-offs to average loans (%) 1.22 0.73 0.65 0.54 0.54 Allowance for credit losses to period-end loans (%) 1.88 1.85 1.88 1.90 1.91
CREDIT QUALITY Total net charge-offs of $164.5 million in the third quarter of 1997 included $62.3 million of merger-related charge-offs. These charge-offs were taken to align the classification and charge-off practices of the former USBC with those of the Company. Consumer loan net charge-offs, Page 9 excluding merger related charge-offs of $7.0 million, were $73.7 million, an increase of $.9 million, or 1.2 percent, from the second quarter of 1997. Excluding merger-related charge-offs, total consumer charge-offs as a percent of average loans were 1.40 percent for the third quarter of 1997, equal to the second quarter of 1997. Consumer loans (excluding first mortgage loans) 30 days or more past due were 2.18 percent of the portfolio at September 30, 1997, compared with 2.26 percent in the second quarter and 2.06 percent a year earlier. Commercial loan net charge-offs, excluding merger-related charge-offs of $55.3 million, were $28.5 million for the third quarter, compared with net charge-offs of $25.2 million in the second quarter of 1997 and $6.1 million in the third quarter of 1996. The majority of the $28.5 million of commercial net charge-offs can be attributed to one large credit.
CONSUMER CREDIT ----------------------------------------------------------------------------------------------------- (Percent) SEP 30 JUN 30 MAR 31 DEC 31 SEP 30 1997 1997 1997 1996 1996 ------------------------------------------------- Net Charge-off Ratios:* Credit cards 4.23 4.03 4.35 3.97 4.15 Other consumer 1.28 1.20 1.20 0.82 0.87 Subtotal, excl. first mortgage 1.98 1.84 1.92 1.56 1.63 First mortgage 0.13 0.05 0.09 0.17 0.07 Total consumer 1.54 1.40 1.46 1.21 1.22 Delinquency Ratios (including NPLs): Total consumer, excl. first mortgage Past due 30+ days 2.18 2.26 2.30 2.26 2.06 Past due 90+ days 0.43 0.42 0.48 0.47 0.44 Total consumer Past due 30+ days 2.56 2.47 2.68 2.57 2.47 Past due 90+ days 0.65 0.67 0.69 0.71 0.67
* annualized and calculated on average loan balances The allowance for credit losses was $1,019.9 million at September 30, 1997, up from $987.4 million at September 30, 1996. The ratio of allowance for credit losses to nonperforming loans was Page 10 343 percent at September 30, 1997, compared with 310 percent at June 30, 1997, and 357 percent at September 30, 1996.
ASSET QUALITY ($ in millions) SEP 30 JUN 30 MAR 31 DEC 31 SEP 30 1997 1997 1997 1996 1996 ------------------------------------------------- Nonperforming loans Commercial $176.2 $199.4 $194.8 $143.7 $144.2 Commercial real estate 62.4 59.4 63.3 63.2 67.8 Consumer 58.5 63.2 64.5 62.4 64.6 ------------------------------------------------- Total 297.1 322.0 322.6 269.3 276.6 Other real estate 29.0 22.7 30.3 43.2 58.2 Other nonperforming assets 12.1 8.1 9.8 7.5 9.9 ------------------------------------------------- Total nonperforming assets* $338.2 $352.8 $362.7 $320.0 $344.7 ------------------------------------------------- ------------------------------------------------- Accruing loans 90 days past due $79.5 $86.0 $85.0 $90.6 $85.1 ------------------------------------------------- ------------------------------------------------- Allowance to nonperforming loans (%) 343 310 308 369 357 Allowance to nonperforming assets (%) 302 283 274 310 286 Nonperforming assets to loans plus ORE (%)0.62 0.62 0.65 0.69 0.61 0.66
* does not include accruing loans 90 days past due Nonperforming assets at September 30, 1997, totaled $338.2 million, down by $6.5 million, or 1.9 percent, from September 30, 1996. The ratio of nonperforming assets to loans and other real estate was .62 percent at September 30, 1997, down from .65 percent at June 30, 1996, and .66 percent at September 30, 1996. Page 11
CAPITAL POSITION ---------------------------------------------------------------------------------------------------- (Percent) SEP 30 JUN 30 MAR 31 DEC 31 SEP 30 1997 1997 1997 1996 1996 ------------------------------------------------- Common equity to assets 8.0 8.0 8.1 8.0 8.2 Total shareholders' equity to assets 8.2 8.2 8.3 8.3 8.5 Tangible common equity to assets* 6.7 6.7 6.8 6.7 6.8 Tier 1 capital ratio 7.0 7.6 7.7 7.6 7.1 Total risk-based capital ratio 11.1 11.9 12.0 11.9 11.3 Leverage ratio 7.3 7.5 7.6 7.5 6.9
* calculated by deducting goodwill from common equity and assets CAPITAL At September 30, 1997, the common-equity-to-assets ratio was 8.0 percent, compared with a ratio of 8.2 percent at September 30, 1996, and the regional bank peer group average of 7.9 percent at June 30, 1997. Minneapolis-based U.S. Bancorp ("USB"), is the result of a merger between First Bank System, Inc. of Minneapolis and U.S. Bancorp, formerly headquartered in Portland, Oregon. With $70 billion in assets, USB is the 14th largest bank holding company in the nation operating more than 1,000 banking offices in 17 states: Minnesota, Oregon, Washington, Colorado, California, Idaho, Nebraska, North Dakota, Nevada, South Dakota, Montana, Iowa, Illinois, Utah, Wisconsin, Kansas, and Wyoming. The company provides comprehensive banking, trust, investment and payment systems products and services to consumers, businesses and institutions. It operates a network of 4,500 ATMs throughout the U.S. and 24 hour, seven days a week telephone customer service centers. The company is the largest provider of Visa corporate and purchasing cards in the world and one of the largest providers of corporate trust services in the U.S. ### U. S. Bancorp CONSOLIDATED STATEMENT OF INCOME
Three Months Ended Nine Months Ended ------------------------------------------------------------ (In Millions, Except Per-Share Data) September 30 September 30 September 30 September 30 (Unaudited) 1997 1996 1997 1996 - --------------------------------------------------------------------------------------------------------------------------------- INTEREST INCOME Loans $1,211.1 $1,149.3 $3,561.9 $3,370.3 Securities: Taxable 89.0 104.5 281.0 319.4 Exempt from federal income taxes 16.8 18.0 51.5 53.5 Other interest income 15.2 22.6 50.7 68.0 ------------------------------------------------------------- Total interest income 1,332.1 1,294.4 3,945.1 3,811.2 INTEREST EXPENSE Deposits 362.3 363.6 1,077.7 1,078.7 Federal funds purchased and repurchase agreements 41.9 51.2 140.6 150.2 Other short-term funds borrowed 28.2 48.2 98.2 149.2 Long-term debt 122.1 77.5 314.6 224.7 Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely the junior subordinated debentures of the parent company 12.3 -- 36.9 -- ------------------------------------------------------------ Total interest expense 566.8 540.5 1,668.0 1,602.8 ------------------------------------------------------------ Net interest income 765.3 753.9 2,277.1 2,208.4 Provision for credit losses 185.0 73.1 370.3 195.7 ------------------------------------------------------------ Net interest income after provision for credit losses 580.3 680.8 1,906.8 2,012.7 NONINTEREST INCOME Credit card fee revenue 106.2 90.1 295.7 260.2 Service charges on deposit accounts 102.2 96.4 295.0 279.8 Trust fees 87.4 74.2 259.2 225.0 Investment products fees and commissions 16.5 13.1 49.0 44.9 Gain on sale of operations and loans 9.4 -- 9.4 25.6 Securities gains -- .9 3.6 20.3 Termination fee -- -- -- 190.0 State income tax refund -- -- -- 65.0 Gain on sale of mortgage banking operations -- -- -- 45.8 Other 88.0 86.4 282.8 265.7 ------------------------------------------------------------ Total noninterest income 409.7 361.1 1,194.7 1,422.3 NONINTEREST EXPENSE Salaries 242.2 238.1 729.7 724.5 Employee benefits 49.2 52.2 167.5 168.1 Net occupancy 45.3 44.6 136.3 133.9 Furniture and equipment 40.4 42.1 127.4 131.4 Goodwill and other intangible assets 29.1 27.1 82.3 102.7 Professional services 18.9 13.5 47.5 40.6 Other personnel costs 14.3 23.8 47.1 61.1 Telephone 15.5 15.9 44.8 44.7 Advertising and marketing 13.3 15.7 42.2 46.3 FDIC insurance 2.4 2.5 6.9 11.4 Merger, integration, and resizing 440.2 -- 440.2 88.1 SAIF special assessment -- 61.3 -- 61.3 Other 92.3 105.5 296.2 337.1 ------------------------------------------------------------ Total noninterest expense 1,003.1 642.3 2,168.1 1,951.2 ------------------------------------------------------------ Income before income taxes (13.1) 399.6 933.4 1,483.8 Applicable income taxes 34.5 143.9 383.8 557.2 ------------------------------------------------------------ Net income ($47.6) $255.7 $549.6 $926.6 ------------------------------------------------------------ ------------------------------------------------------------ Net income applicable to common equity ($50.7) $251.1 $540.4 $912.6 ------------------------------------------------------------ ------------------------------------------------------------ EARNINGS PER COMMON SHARE Primary average common and common equivalent shares 248,459,568 254,981,925 248,819,246 254,385,569 Primary net income ($.20) $.98 $2.17 $3.59 ------------------------------------------------------------ ------------------------------------------------------------ Fully diluted average common and common equivalent shares 249,008,302 258,388,435 250,024,705 258,303,532 Fully diluted net income ($.20) $.98 $2.16 $3.55 ------------------------------------------------------------ ------------------------------------------------------------
Page 12 U.S. Bancorp CONSOLIDATED BALANCE SHEET
September 30 December 31 September 30 (In Millions) 1997 1996 1996 - ---------------------------------------------------------------------------------------------------- ASSETS (Unaudited) (Unaudited) Cash and due from banks $4,342 $4,813 $5,102 Federal funds sold 56 95 414 Securities purchased under agreements to resell 473 803 720 Trading account securities 156 231 207 Available-for-sale securities 6,832 6,473 6,743 Held-to-maturity securities* -- 797 825 Loans 54,143 52,355 51,792 Less allowance for credit losses 1,020 993 987 ------------------------------------------ Net loans 53,123 51,362 50,805 Bank premises and equipment 885 1,018 1,020 Interest receivable 401 377 387 Customers' liability on acceptances 591 497 592 Other assets 3,315 3,283 3,241 ------------------------------------------ Total assets $70,174 $69,749 $70,056 ------------------------------------------ ------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $14,433 $14,344 $14,387 Interest-bearing 33,941 35,012 35,184 ------------------------------------------ Total deposits 48,374 49,356 49,571 Federal funds purchased 1,199 1,672 1,875 Securities sold under agreements to repurchase 1,294 1,729 1,372 Other short-term funds borrowed 2,004 3,191 3,932 Long-term debt 8,710 5,369 5,069 Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely the junior subordinated debentures of the parent company 600 600 -- Acceptances outstanding 591 497 592 Other liabilities 1,661 1,572 1,677 ------------------------------------------ Total liabilities 64,433 63,986 64,088 Shareholders' equity: Preferred stock 150 150 237 Common stock 306 316 320 Capital surplus 1,767 1,929 2,077 Retained earnings 3,472 3,809 3,742 Unrealized gain (loss) on securities, net of tax 46 5 (27) Treasury stock -- (446) (381) ------------------------------------------ Total shareholders' equity 5,741 5,763 5,968 ------------------------------------------ Total liabilities and shareholders' equity $70,174 $69,749 $70,056 ------------------------------------------ ------------------------------------------
*The fair value of held-to-maturity securities was as follows: December 31, 1996 - $811 and September 30, 1996 - $836 Page 13 -----END PRIVACY-ENHANCED MESSAGE-----