-----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, Om0kiYPVACIsW1M1bqBmGVJK845Jo3LyyQhxwHOmnGic218LDSTrDXnE12Bpv8Gz YEtgLpJoJsFRFPyL81toog== 0001047469-98-027508.txt : 19980717 0001047469-98-027508.hdr.sgml : 19980717 ACCESSION NUMBER: 0001047469-98-027508 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980715 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980716 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: 98667145 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 FORM 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): JULY 15, 1998 ------------- 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 July 15, 1998, U.S. Bancorp (the "Company") released its second quarter 1998 earnings summary to the public. The Company's press release, dated July 15, 1998, 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) 99 Press release issued by U.S. Bancorp on July 15, 1998. 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/ Susan E. Lester ------------------- Susan E. Lester Executive Vice President & Chief Financial Officer DATE: July 15, 1998 ------------- EX-99 2 EXHIBIT 99 [LOGO] NEWS RELEASE 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 2ND QUARTER 1998
- ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- 2Q 2Q PERCENT YTD YTD PERCENT EARNINGS SUMMARY 1998 1997 CHANGE 1998 1997 CHANGE - ---------------------------------------------------------------------------------------------------------------------------------- ($ in millions, except per-share data) Before nonrecurring items*: Operating earnings $358.2 $302.7 18.3 $708.2 $594.9 19.0 Operating earnings to common 358.2 299.6 19.6 708.2 588.8 20.3 Earnings per common share (diluted) 0.48 0.40 20.0 0.94 0.79 19.0 Net income 320.6 303.9 5.5 649.1 597.2 8.7 Earnings per common share (diluted) 0.43 0.41 4.9 0.86 0.80 7.5 Dividends paid per common share 0.1750 0.1550 12.9 0.3500 0.3100 12.9 Book value per common share (period-end) 8.28 7.79 6.3 Return on average common equity** (%) 23.2 21.4 23.4 21.1 Return on average assets** (%) 2.01 1.76 2.02 1.75 Net interest margin (%) 4.91 5.05 4.95 5.07 Efficiency ratio** (%) 49.7 49.7 48.0 50.2 Banking efficiency ratio***(%) 46.0 49.7 46.1 50.2 * Net nonrecurring items totaled $(37.6) million, after-tax, in 2Q98 and $1.2 million, after tax, in 2Q97. Net nonrecurring items totaled $(59.1) million, after tax, year-to-date 1998, and $2.3 million, after tax, year-to-date 1997. ** before nonrecurring items *** before nonrecurring items; without Piper Jaffray broker/dealer - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
MINNEAPOLIS, July 15, 1998 -- U.S. Bancorp (NYSE: USB) today reported record operating earnings of $358.2 million, or $.48 per diluted share, for the second quarter of 1998, compared with $302.7 million, or $.40 per diluted share, in the second quarter of 1997. Return on average common equity and return on average assets, excluding nonrecurring items, were 23.2 percent and 2.01 percent, respectively, in the second quarter of 1998, compared with returns, excluding nonrecurring items, of 21.4 percent and 1.76 percent in the second quarter of 1997. U.S. Bancorp Reports Second Quarter 1998 Results July 15, 1998 Page 2 Including nonrecurring items, the Company recorded net income for the second quarter of 1998 of $320.6 million, or $.43 per diluted share, compared to net income of $303.9 million, or $.41 per diluted share, in the second quarter of 1997. On May 1, 1998, the Company completed the acquisition of Piper Jaffray Companies Inc., a full service investment banking and institutional and retail brokerage company, in a cash purchase transaction for $738 million. U.S. Bancorp's President and Chief Executive Officer, John F. Grundhofer, said, "We are very pleased with our second quarter results. The quarter was highlighted by the acquisition of Piper Jaffray and our continuing progress in integrating the former U.S. Bancorp of Portland, including successful core system conversions in five of our six western-most states. Once again, we experienced strong revenue growth year-over-year, while continuing to reduce our base operating expenses. Our performance ratios are among the best in the banking industry and are the direct result of our focus on satisfying our customers needs and creating value for our shareholders." During the second quarter, further progress was made towards the full integration of the former First Bank System, Inc. ("FBS") and the former U.S. Bancorp ("USBC") of Portland, Oregon into the new U.S. Bancorp. Core system conversions for the states of California, Utah and Nevada were completed in May, and the conversions for the states of Washington and Idaho were completed in June. The core system conversion for the state of Oregon is scheduled to be completed in July. Earnings in the second quarter of 1998 included after-tax nonrecurring merger-related charges of $37.6 million. Approximately $53 million, after tax, of additional merger-related expenses associated with the acquisition of U.S Bancorp of Portland, Oregon are expected to be incurred over the next two quarters. This represents an increase of approximately $25 million, or 5.6 percent, over the $450 million, after-tax, of merger-related charges originally announced in March of 1997. Increased systems conversion costs are the principal reason for the variance. The strong operating earnings for the second quarter reflected growth in core noninterest income and a decrease in core noninterest expense from the second quarter of 1997. Comparisons to prior U.S. Bancorp Reports Second Quarter 1998 Results July 15, 1998 Page 3 periods are affected by the May 1, 1998, acquisition of Piper Jaffray Companies Inc. Without the Piper Jaffray acquisition, noninterest income, before nonrecurring items, increased by $56.3 million, or 13.9 percent, reflecting strong growth in credit card fee revenue and trust and investment management fees. Without the Piper Jaffray acquisition, noninterest expense, before nonrecurring items, declined by $24.9 million, or 4.2 percent. Without the impact of the Piper Jaffray broker/dealer, the efficiency ratio (ratio of expenses to revenues) for the second quarter of 1998 was 46.0 percent, compared to 49.7 percent in the second quarter of 1997. Net charge-offs were .77 percent of average loans in the second quarter of 1998, equal to the first quarter of 1998 and slightly higher than the .73 percent in same period of last year. Consumer loans (excluding first mortgage loans) 30 days or more past due were 2.02 percent of loans outstanding in the second quarter of 1998, slightly above the 1.97 percent in the first quarter of 1998 and below the 2.26 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 359 percent at June 30, 1998. On April 22, 1998, shareholders authorized an increase in the capital stock necessary to implement a previously announced three-for-one stock split. The stock split was in the form of a 200 percent stock dividend payable May 18, 1998, to shareholders of record on May 4, 1998. The impact of the stock split has been reflected in the second quarter financial statements and all prior periods. On June 9, 1998, U.S. Bancorp announced a share repurchase program. The Company's Board of Directors authorized the repurchase of up to $2.5 billion of the Company's common stock over the period ending March 31, 2000. The shares will be repurchased in the open market or through negotiated transactions. During the second quarter, the Company repurchased 6.6 million shares for a total dollar value of $275.2 million. U.S. Bancorp Reports Second Quarter 1998 Results July 15, 1998 Page 4
- ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT HIGHLIGHTS - ---------------------------------------------------------------------------------------------------------------------------------- (Taxable-equivalent basis, $ in millions, except per-share data) 2Q 2Q PERCENT YTD YTD PERCENT 1998 1997 CHANGE 1998 1997 CHANGE ----------------------------------------------------------------------- Net interest income $777.9 $779.6 (0.2) $1,545.9 $1,541.5 0.3 Provision for credit losses 93.0 101.1 (8.0) 183.0 185.3 (1.2) Noninterest income* 561.1 405.6 38.3 1,007.0 781.4 28.9 Noninterest expense* 665.1 589.5 12.8 1,224.2 1,165.0 5.1 ---------------------- ------------------------ Income before taxes and nonrecurring items 580.9 494.6 17.4 1,145.7 972.6 17.8 Taxable-equivalent adjustment 12.9 14.8 (12.8) 26.0 29.7 (12.5) Income taxes* 209.8 177.1 18.5 411.5 348.0 18.2 ---------------------- ------------------------ Income before nonrecurring items 358.2 302.7 18.3 708.2 594.9 19.0 Net nonrecurring items (after-tax) (37.6) 1.2 nm (59.1) 2.3 nm ---------------------- ------------------------ Net income $320.6 $303.9 5.5 $649.1 $597.2 8.7 ---------------------- ------------------------ Net income to common $320.6 $300.8 6.6 $649.1 $591.1 9.8 ---------------------- ------------------------ Per diluted common share:** Earnings, before nonrecurring items $0.48 $0.40 20.0 $0.94 $0.79 19.0 ---------------------- ------------------------ Earnings on a cash basis, before nonrecurring items*** $0.52 $0.44 18.2 $1.03 $0.86 19.8 ---------------------- ------------------------ Net income $0.43 $0.41 4.9 $0.86 $0.80 7.5 ---------------------- ------------------------ Earnings on a cash basis*** $0.47 $0.44 6.8 $0.96 $0.87 10.3 ---------------------- ------------------------ * before effect of nonrecurring items ** nonrecurring items reduced earnings by $0.05 in 2Q98 and $0.08 year-to-date 1998 and added $0.01 in 2Q97 and year-to-date 1997. nonrecurring items reduced cash basis earnings by $0.05 in 2Q98 and $0.07 year-to-date 1998 and added $0.01 in year-to-date 1997. *** calculated by adding amortization of goodwill and other intangible assets to net income - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME Second quarter net interest income on a taxable-equivalent basis was $777.9 million, compared to $779.6 million recorded in the second quarter of 1997. Earning assets increased by $1.6 billion, or 2.6 percent, driven by core commercial and consumer loan growth, partially offset by reductions in investment securities and residential mortgages. Average loans were up $1.9 billion, or 3.5 percent, from the second quarter of 1997. Excluding residential mortgage loans, average loans for the second U.S. Bancorp Reports Second Quarter 1998 Results July 15, 1998 Page 5 quarter were higher by $2.9 billion, or 6.0 percent, than second quarter of 1997, reflecting growth in the commercial, home equity and second mortgages and credit card loans. Other consumer loans were lower on average than the second quarter of 1997, primarily due to reductions in installment loans in the northwest region. Average securities for the second quarter were lower by $846 million than the second quarter of 1997, reflecting both maturities and sales of securities. The net interest margin in the second quarter of 1998 of 4.91 percent was below the 1997 margin of 5.05 percent and the first quarter margin of 4.98 percent, primarily due to growth in Payment Systems' noninterest-bearing assets, including corporate and purchasing card loan balances, the additional funding required for the Piper Jaffray acquisition and continued margin compression in the commercial loan portfolio.
------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ AVERAGE LOANS ------------------------------------------------------------------------------------------------------------------------ ($ in millions) 2Q 2Q PERCENT 1998 1997 CHANGE ----------------------------------------------------- Commercial $24,264 $22,431 8.2 Commercial real estate 10,712 10,293 4.1 -------------------------------- Total commercial 34,976 32,724 6.9 Home equity and second mortgage 5,694 5,072 12.3 Credit card 3,941 3,546 11.1 Other 6,636 7,012 (5.4) -------------------------------- Total consumer, excl. residential 16,271 15,630 4.1 Residential mortgage 4,153 5,161 (19.5) -------------------------------- Total loans $55,400 $53,515 3.5 -------------------------------- -------------------------------- Total loans, excluding residential mortgages $51,247 $48,354 6.0 -------------------------------- -------------------------------- ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------
U.S. Bancorp Reports Second Quarter 1998 Results July 15, 1998 Page 6
- ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- NONINTEREST INCOME - ----------------------------------------------------------------------------------------------------------------------------------- ($ in millions) 2Q 2Q PERCENT YTD YTD PERCENT 1998 1997 CHANGE 1998 1997 CHANGE ------------------------------------------------------------------------ Credit card fee revenue* $147.6 $98.8 49.4 $274.4 $189.5 44.8 Trust and investment management fees 108.0 87.2 23.9 202.9 171.8 18.1 Service charges on deposit accounts 99.4 97.4 2.1 197.3 192.8 2.3 Investment products fees and commissions 57.5 16.7 244.3 75.7 32.5 132.9 Trading account profits and commissions 28.0 6.8 311.8 35.1 17.3 102.9 Investment banking revenue 29.0 -- nm 29.0 -- nm Other 91.6 98.7 (7.2) 192.6 177.5 8.5 ---------------------- ------------------------ Subtotal** 561.1 405.6 38.3 1,007.0 781.4 28.9 Net securities gains -- 1.9 12.6 3.6 ---------------------- ------------------------ Nonrecurring gains -- 1.9 12.6 3.6 ---------------------- ------------------------ Total noninterest income $561.1 $407.5 $1,019.6 $785.0 ---------------------- ------------------------ ---------------------- ------------------------ * Excluding the effects of the 4Q97 NWA contract renewal and the merchant processing alliance buyout, 2Q credit card fee revenue would have increased by $35.1 million, or 35.5%. **Excluding Piper Jaffray, fee income, before nonrecurring items, would have increased by $56.3 million, or 13.9%. - ----------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME Second quarter noninterest income, before nonrecurring items, was $561.1 million, an increase of $155.5 million, or 38.3 percent, from the same quarter of 1997. The increase for the quarter without the Piper Jaffray acquisition was $56.3 million, or 13.9 percent. The increase resulted principally from growth in credit card and trust and investment management fee revenue. Credit card fee revenue increased by $48.8 million, or 49.4 percent, as a result of higher volumes for purchasing and corporate cards and the Northwest Airlines WorldPerks credit card. Second quarter credit card fees were also enhanced by the renewal of the Northwest Airlines WorldPerks program (4Q97) and the buyout of the third party interest in a merchant processing alliance (1Q98). Without these items, credit card fees increased by $35.1 million, or 35.5 percent. Trust and investment management fees were up over the second quarter of 1997 by $20.8 million, or 23.9 percent, due to growth in the corporate, institutional and personal trust businesses and the addition of Piper Jaffray. Without Piper Jaffray, trust and investment management fees grew by $12.9 million, or 14.8 percent. Investment products fees and U.S. Bancorp Reports Second Quarter 1998 Results July 15, 1998 Page 7 commissions, trading account profits and commissions and investment banking revenue were higher by $40.8 million, $21.2 million and $29.0 million, respectively, reflecting the acquisition of Piper Jaffray. Other noninterest income was lower than the second quarter of 1997 by $7.1 million, or 7.2 percent. The reduction was primarily related to distributions from investment partnerships recorded by the former U.S. Bancorp of Portland in the second quarter of 1997.
- ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- NONINTEREST EXPENSE - ----------------------------------------------------------------------------------------------------------------------------------- ($ in millions) 2Q 2Q PERCENT YTD YTD PERCENT 1998 1997 CHANGE 1998 1997 CHANGE ------------------------------------------------------------------- Salaries and employee benefits $362.1 $304.1 19.1 $655.8 $605.8 8.3 Net occupancy 47.9 45.2 6.0 91.4 91.0 0.4 Furniture and equipment 39.6 44.2 (10.4) 75.0 87.0 (13.8) Goodwill and intangibles 36.0 25.8 39.5 69.4 53.2 30.5 Advertising and marketing 17.8 16.6 7.2 33.5 28.9 15.9 Telephone 17.0 15.7 8.3 32.5 29.3 10.9 Other personnel costs 16.8 16.4 2.4 29.9 32.8 (8.8) Professional services 15.3 15.1 1.3 26.6 28.6 (7.0) Other 112.6 106.4 5.8 210.1 208.4 0.8 -------------------- -------------------- Subtotal* 665.1 589.5 12.8 1,224.2 1,165.0 5.1 Merger-related 59.5 -- 106.0 -- -------------------- -------------------- Nonrecurring charges 59.5 -- 106.0 -- -------------------- -------------------- Total noninterest expense $724.6 $589.5 $1,330.2 $1,165.0 -------------------- -------------------- -------------------- -------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- * Excluding Piper Jaffray, noninterest expense, before nonrecurring items, decreased by $24.9 million, or 4.2%.
NONINTEREST EXPENSE Second quarter noninterest expense, before nonrecurring items, totaled $665.1 million, an increase of $75.6 million, or 12.8 percent, from the second quarter of 1997. Without the effect of Piper Jaffray, noninterest expense, before nonrecurring items, decreased by $24.9 million, or 4.2 percent. Excluding Piper Jaffray, expense categories showing the largest decreases over the second quarter of 1997 included salaries and employee benefits, furniture and fixtures and other expenses which were U.S. Bancorp Reports Second Quarter 1998 Results July 15, 1998 Page 8 favorable by $13.7 million, $8.3 million and $7.0 million, respectively. Goodwill and other intangibles expense was higher than the second quarter of 1997 by $10.2 million, or 39.5 percent, as a result of the Piper Jaffray acquisition, plus several small bank and portfolio purchases during 1997 and the buyout of a merchant processing alliance. The $59.5 million of nonrecurring, merger-related expenses incurred in the second quarter of 1998 included $57.8 million of conversion expense for the former U.S. Bancorp of Portland and $1.7 million related to the acquisition of Piper Jaffray. Additional USBC merger-related charges of approximately $53 million, after tax, are expected to be incurred in 1998. Total merger-related charges for USBC will be approximately $475 million, after tax, compared to the Company's original estimate of $450 million, after tax, or 5.6 percent higher, primarily due to an increase in estimated systems conversion related expense.
- ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ALLOWANCE FOR CREDIT LOSSES - ----------------------------------------------------------------------------------------------------------------------------------- ($ in millions) 2Q 1Q 4Q 3Q 2Q 1998 1998 1997 1997 1997 -------------------------------------------------------------------------- Balance, beginning of period $995.5 $1,008.7 $1,019.9 $999.4 $993.4 Net charge-offs* Commercial 16.7 14.1 14.7 83.8 25.2 Consumer 90.0 89.1 88.6 80.7 72.8 -------------------------------------------------------------------------- Total 106.7 103.2 103.3 164.5 98.0 Provision for credit losses 93.0 90.0 90.0 90.0 101.1 Merger-related provision for credit losses -- -- -- 95.0 -- Acquisitions and other additions -- -- 2.1 -- 2.9 -------------------------------------------------------------------------- Balance, end of period $981.8 $995.5 $1,008.7 $1,019.9 $999.4 -------------------------------------------------------------------------- -------------------------------------------------------------------------- Net charge-offs to average loans (%) 0.77 0.77 0.75 1.22 0.73 Allowance for credit losses to period-end loans (%) 1.76 1.81 1.84 1.88 1.85 * 3Q 1997 includes merger-related commercial charge-offs of $55.3 million and consumer charge-offs of $7.0 million - ----------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
U.S. Bancorp Reports Second Quarter 1998 Results July 15, 1998 Page 9 CREDIT QUALITY Total net charge-offs in the second quarter of 1998 were $106.7 million, $3.5 million higher than the first quarter of 1998 and $8.7 million higher than the second quarter of 1997. Consumer loan net charge-offs of $90.0 million were $.9 million higher than the first quarter of 1998 and higher than the same period of 1997 by $17.2 million. Credit card loan net charge-offs were 4.84 percent of average loans for the second quarter of 1998, higher than the first quarter of 1998 ratio of 4.20 percent and the second quarter of 1997 ratio of 4.03 percent, primarily due to seasonally higher bankruptcies and fraud-related charge-offs. Other consumer loan net charge-offs were 1.33 percent, lower than the first quarter of 1998 ratio of 1.53 percent, but higher than the second quarter of 1997 ratio of 1.21 percent. A portion of the improvement over the first quarter of 1998 reflects a decrease in charge-offs in the northwest region's portfolio of installment loans. Consumer loans (excluding first mortgage loans) 30 days or more past due were 2.02 percent of the portfolio at June 30, 1998, compared with 1.97 percent in the first quarter of 1998 and 2.26 percent in the second quarter of 1997. Commercial loan net charge-offs were $16.7 million for the second quarter, compared with net charge-offs of $14.1 million in the first quarter of 1998 and $25.2 million in the second quarter of 1997. U.S. Bancorp Reports Second Quarter 1998 Results July 15, 1998 Page 10
- --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- CONSUMER CREDIT - --------------------------------------------------------------------------------------------------------------- (Percent) JUN 30 MAR 31 DEC 31 SEP 30 JUN 30 1998 1998 1997 1997 1997 ---------------------------------------------------------------------- Net Charge-off Ratios:* Credit cards 4.84 4.20 3.87 4.23 4.03 Other consumer 1.33 1.53 1.59 1.28 1.21 Subtotal, excl. first mortgage 2.18 2.19 2.16 1.98 1.85 First mortgage 0.15 0.22 0.16 0.13 0.05 Total consumer 1.77 1.76 1.70 1.54 1.40 Delinquency Ratios (including NPLs): Total consumer, excl. first mortgage Past due 30+ days 2.02 1.97 2.36 2.17 2.26 Past due 90+ days 0.50 0.51 0.49 0.43 0.42 Total consumer Past due 30+ days 2.31 2.38 2.76 2.57 2.47 Past due 90+ days 0.70 0.77 0.70 0.66 0.67 * annualized and calculated on average loan balances - --------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------
The allowance for credit losses was $981.8 million at June 30, 1998, down from $999.4 million at June 30, 1997. The ratio of allowance for credit losses to nonperforming loans was 359 percent at June 30, 1998, compared to 340 percent at March 31, 1998, and 310 percent at June 30, 1997. U.S. Bancorp Reports Second Quarter 1998 Results July 15, 1998 Page 11
- -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- ASSET QUALITY - -------------------------------------------------------------------------------------------------------------------------------- ($ in millions) JUN 30 MAR 31 DEC 31 SEP 30 JUN 30 1998 1998 1997 1997 1997 ------------------------------------------------------------------------ Nonperforming loans Commercial $140.2 $161.5 $179.1 $176.2 $199.4 Commercial real estate 68.9 61.3 60.3 62.4 59.4 Consumer 64.4 70.1 57.7 58.5 63.2 ------------------------------------------------------------------------ Total 273.5 292.9 297.1 297.1 322.0 Other real estate 17.3 21.6 30.1 29.0 22.7 Other nonperforming assets 9.6 10.9 12.3 12.1 8.1 ------------------------------------------------------------------------ Total nonperforming assets* $300.4 $325.4 $339.5 $338.2 $352.8 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Accruing loans 90 days past due $86.6 $91.7 $93.8 $79.5 $86.0 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Allowance to nonperforming loans (%) 359 340 340 343 310 Allowance to nonperforming assets (%) 327 306 297 302 283 Nonperforming assets to loans plus ORE (%) 0.54 0.59 0.62 0.62 0.65 * does not include accruing loans 90 days past due - -------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------
Nonperforming assets at June 30, 1998, totaled $300.4 million, lower by $25.0 million, or 7.7 percent, than March 31, 1998, and lower by $52.4 million, or 14.9 percent, than June 30, 1997. The ratio of nonperforming assets to loans and other real estate was .54 percent at June 30, 1998, lower than the ratio at March 31, 1998, of .59 percent and at June 30, 1997, of .65 percent. U.S. Bancorp Reports Second Quarter 1998 Results July 15, 1998 Page 12
- -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- CAPITAL POSITION - ---------------------------------------------------------------------------------------------------------------------------------- (Percent) JUN 30 MAR 31 DEC 31 SEP 30 JUN 30 1998 1998 1997 1997 1997 ------------------------------------------------------------------------ Common equity to assets 8.3 8.6 8.3 8.0 8.0 Total shareholders' equity to assets 8.3 8.6 8.3 8.2 8.2 Tangible common equity to assets* 6.5 7.4 7.0 6.7 6.7 Tier 1 capital ratio 7.2 7.8 7.4 7.2 7.6 Total risk-based capital ratio 11.5 11.9 11.6 11.4 11.9 Leverage ratio 7.4 7.7 7.3 7.3 7.5 * calculated by deducting goodwill from common equity and assets - -------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------
CAPITAL At June 30, 1998, the common-equity-to-assets ratio was 8.3 percent, compared with a ratio of 8.0 percent at June 30, 1997, and the regional bank peer group average of 8.1 percent at March 31, 1998.
- ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- COMMON SHARES - ---------------------------------------------------------------------------------------------------------------------------------- (Millions) 2Q 1Q 4Q 3Q 2Q 1998 1998 1997 1997 1997 ---------------------------------------------------------------------- Beginning shares outstanding 742.5 739.9 735.1 732.6 735.6 Shares issued for stock option and stock purchase plans and other corporate purposes 3.8 2.6 4.9 4.0 4.0 Shares repurchased (6.6) -- (0.1) (1.5) (7.0) Ending shares outstanding 739.7 742.5 739.9 735.1 732.6 - -------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------
On June 9, 1998, the Company announced a $2.5 billion share repurchase program. Between June 9, 1998 and June 30, 1998, the Company repurchased 6.6 million shares for a total dollar value of $275.2 million in both open market and privately negotiated transactions. U.S. Bancorp Reports Second Quarter 1998 Results July 15, 1998 Page 13 Minneapolis-based U.S. Bancorp ("USB"), with $74 billion in assets, is the 14th largest bank holding company in the nation and operates approximately 1,000 banking offices in 17 Midwestern and Western states. The company provides comprehensive banking, trust, investment and payment systems products and services to consumers, businesses and institutions. It operates a network of 4,800 ATMs and provides 24 hour, seven days a week telephone customer service. The company offers full-service brokerage services at 91 offices in the West and Midwest through Piper Jaffray Inc., the 11th largest brokerage in the nation. The company is the largest provider of Visa corporate and purchasing cards in the world, and is one of the largest providers of corporate trust services in the nation. FORWARD-LOOKING STATEMENTS This press release includes forward-looking statements that involve inherent risks and uncertainties. U.S. Bancorp cautions readers that a number of important factors could cause actual results to differ materially from those in the forward-looking statements. These factors include economic conditions and competition in the geographic and business areas in which the Company operates, inflation, fluctuations in interest rates, legislation and governmental regulation and the progress of integrating the former U.S. Bancorp. ### U. S. Bancorp CONSOLIDATED STATEMENT OF INCOME
Three Months Ended Six Months Ended ------------------------------------------------------------ (Dollars in Millions, Except Per Share Data) June 30 June 30 June 30 June 30 (Unaudited) 1998 1997 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------- INTEREST INCOME Loans $1,225.6 $1,197.6 $2,429.8 $2,350.8 Securities: Taxable 78.2 95.4 164.0 192.0 Exempt from federal income taxes 15.6 17.4 31.7 34.7 Other interest income 30.2 18.4 49.2 35.5 ------------------------------------------------------------ Total interest income 1,349.6 1,328.8 2,674.7 2,613.0 INTEREST EXPENSE Deposits 352.2 363.6 707.3 715.4 Federal funds purchased and repurchase agreements 41.8 50.8 75.4 98.7 Other short-term funds borrowed 14.3 33.1 27.1 70.0 Long-term debt 157.8 104.2 314.2 192.5 Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely the junior subordinated debentures of the parent company 18.5 12.3 30.8 24.6 ------------------------------------------------------------ Total interest expense 584.6 564.0 1,154.8 1,101.2 ------------------------------------------------------------ Net interest income 765.0 764.8 1,519.9 1,511.8 Provision for credit losses 93.0 101.1 183.0 185.3 ------------------------------------------------------------ Net interest income after provision for credit losses 672.0 663.7 1,336.9 1,326.5 NONINTEREST INCOME Credit card fee revenue 147.6 98.8 274.4 189.5 Trust and investment management fees 108.0 87.2 202.9 171.8 Service charges on deposit accounts 99.4 97.4 197.3 192.8 Investment products fees and commissions 57.5 16.7 75.7 32.5 Trading account profits and commissions 28.0 6.8 35.1 17.3 Investment banking revenue 29.0 -- 29.0 -- Securities gains -- 1.9 12.6 3.6 Other 91.6 98.7 192.6 177.5 ------------------------------------------------------------ Total noninterest income 561.1 407.5 1,019.6 785.0 NONINTEREST EXPENSE Salaries 303.3 246.9 542.9 487.5 Employee benefits 58.8 57.2 112.9 118.3 Net occupancy 47.9 45.2 91.4 91.0 Furniture and equipment 39.6 44.2 75.0 87.0 Goodwill and other intangible assets 36.0 25.8 69.4 53.2 Advertising and marketing 17.8 16.6 33.5 28.9 Telephone 17.0 15.7 32.5 29.3 Other personnel costs 16.8 16.4 29.9 32.8 Professional services 15.3 15.1 26.6 28.6 Merger-related 59.5 -- 106.0 -- Other 112.6 106.4 210.1 208.4 ------------------------------------------------------------ Total noninterest expense 724.6 589.5 1,330.2 1,165.0 ------------------------------------------------------------ Income before income taxes 508.5 481.7 1,026.3 946.5 Applicable income taxes 187.9 177.8 377.2 349.3 ------------------------------------------------------------ Net income $320.6 $303.9 $649.1 $597.2 ------------------------------------------------------------ ------------------------------------------------------------ Net income applicable to common equity $320.6 $300.8 $649.1 $591.1 ------------------------------------------------------------ ------------------------------------------------------------ EARNINGS PER COMMON SHARE Average shares outstanding 739,630,613 733,120,503 739,171,968 734,170,890 Earnings per share $.43 $.41 $.88 $.81 ------------------------------------------------------------ ------------------------------------------------------------ Diluted average shares outstanding 752,410,125 741,450,456 752,049,262 742,466,421 Diluted earnings per share $.43 $.41 $.86 $.80 ------------------------------------------------------------ ------------------------------------------------------------
Page 14 U.S. Bancorp CONSOLIDATED BALANCE SHEET
June 30 December 31 June 30 (Dollars in Millions) 1998 1997 1997 - ----------------------------------------------------------------------------------------------------------------------------- ASSETS (Unaudited) (Unaudited) Cash and due from banks $4,537 $4,739 $4,299 Federal funds sold 743 62 1,538 Securities purchased under agreements to resell 594 630 486 Trading account securities 411 195 176 Available-for-sale securities 5,923 6,885 6,112 Held-to-maturity securities (fair value: June 30, 1997 - $773) -- -- 760 Loans 55,778 54,708 54,158 Less allowance for credit losses 982 1,009 999 ------------------------------------------- Net loans 54,796 53,699 53,159 Premises and equipment 901 860 963 Interest receivable 414 405 409 Customers' liability on acceptances 292 535 780 Goodwill and other intangible assets 1,967 1,482 1,417 Other assets 3,172 1,803 1,576 ------------------------------------------- Total assets $73,750 $71,295 $71,675 ------------------------------------------- ------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $15,745 $14,544 $15,978 Interest-bearing 33,562 34,483 34,834 ------------------------------------------- Total deposits 49,307 49,027 50,812 Federal funds purchased 546 800 860 Securities sold under agreements to repurchase 1,460 1,518 1,372 Other short-term funds borrowed 1,484 974 2,354 Long-term debt 11,381 10,247 7,583 Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely the junior subordinated debentures of the parent company 950 600 600 Acceptances outstanding 292 535 780 Other liabilities 2,203 1,704 1,461 ------------------------------------------- Total liabilities 67,623 65,405 65,822 Shareholders' equity: Preferred stock -- -- 150 Common stock 931 925 946 Capital surplus 1,358 1,261 1,142 Retained earnings 4,034 3,645 4,154 Accumulated other comprehensive income 58 59 5 Treasury stock (254) -- (544) ------------------------------------------- Total shareholders' equity 6,127 5,890 5,853 ------------------------------------------- Total liabilities and shareholders' equity $73,750 $71,295 $71,675 ------------------------------------------- -------------------------------------------
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