-----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, Bt4cNHS7ri11kouCbyqMdSnbceqyVqsVNy6gJe91pucJlPs3r7FzkY2jPorYHoXi 1EBnW/j+l36+BWtTy9NskA== 0001047469-99-001596.txt : 19990121 0001047469-99-001596.hdr.sgml : 19990121 ACCESSION NUMBER: 0001047469-99-001596 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990120 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990120 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: 99508738 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 8K 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): JANUARY 20, 1999 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 January 20, 1999, U.S. Bancorp (the "Company") released its fourth quarter and full year 1998 earnings summary to the public. The Company's press release, dated January 20, 1999, 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 January 20, 1999. 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/ Terrance R. Dolan ---------------------------------- Terrance R. Dolan Senior Vice President & Controller DATE: January 20, 1999 EX-99. 2 EXH 99 - PRESS 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 4TH QUARTER AND FULL YEAR 1998
- ------------------------------------------------------------------------------------------------------------------------------- 4Q 4Q PERCENT FULL YEAR FULL YEAR PERCENT EARNINGS SUMMARY 1998 1997 CHANGE 1998 1997 CHANGE - ------------------------------------------------------------------------------------------------------------------------------- ($ in millions, except per-share data) Before nonrecurring items*: Operating earnings $377.3 $335.5 12.5 $1,455.8 $1,255.2 16.0 Operating earnings to common 377.3 334.1 12.9 1,455.8 1,244.6 17.0 Earnings per common share (diluted) 0.52 0.45 15.6 1.96 1.68 16.7 Cash earnings per common share (diluted)** 0.57 0.49 16.3 2.15 1.83 17.5 Net income 349.2 288.9 20.9 1,327.4 838.5 58.3 Earnings per common share (diluted) 0.48 0.39 23.1 1.78 1.11 60.4 Cash earnings per common share (diluted)** 0.53 0.43 23.3 1.98 1.27 55.9 Dividends paid per common share 0.175 0.155 12.9 0.70 0.62 12.9 Book value per common share (period-end) 8.23 7.96 3.4 Return on average common equity***(%) 25.5 23.3 24.1 22.0 Return on average assets*** (%) 2.03 1.91 2.03 1.83 Net interest margin (%) 4.78 4.99 4.87 5.04 Efficiency ratio*** (%) 49.8 47.5 49.1 48.9 Banking efficiency ratio****(%) 43.2 46.5 44.2 47.9 * Net nonrecurring items totaled $(28.1) million, after-tax, in 4Q98 and $(46.6) million, after tax, in 4Q97. Net nonrecurring items totaled $(128.4) million, after tax, full year 1998, and $(416.7) million, after tax, full year 1997. ** calculated by adding amortization of goodwill and other intangible assets to net income *** before nonrecurring items **** before nonrecurring items; without investment banking and brokerage activity - -------------------------------------------------------------------------------------------------------------------------------
MINNEAPOLIS, January 20, 1999 -- U.S. Bancorp (NYSE: USB) today reported record operating earnings of $377.3 million, or $.52 per diluted share, for the fourth quarter of 1998, compared with $335.5 million, or $.45 per diluted share, in the fourth quarter of 1997. Operating earnings on a cash basis increased from $.49 per diluted share in the fourth quarter of 1997 to $.57 per diluted share, or 16.3 percent, in the fourth quarter of 1998. Return on average common equity and return on average U.S. Bancorp Reports Fourth Quarter 1998 Results January 20, 1999 Page 2 assets, excluding nonrecurring items, were 25.5 percent and 2.03 percent, respectively, in the fourth quarter of 1998, compared with returns, excluding nonrecurring items, of 23.3 percent and 1.91 percent in the fourth quarter of 1997. Including nonrecurring, merger-related charges of $28.1 million, after-tax, the Company recorded net income for the fourth quarter of 1998 of $349.2 million, or $.48 per diluted share, compared to $288.9 million, or $.39 per diluted share, in the fourth quarter of 1997. Operating earnings for the full year 1998 were $1,455.8 million, or $1.96 per diluted share, compared to $1,255.2 million, or $1.68 per diluted share, for the full year 1997. The positive year-over-year results were driven by growth in noninterest income and a decrease in noninterest expense from core banking activity, resulting primarily from the cost savings achieved from the acquisition of the former U.S. Bancorp ("USBC") of Portland, Oregon. Comparisons to prior periods are affected by the May 1, 1998, acquisition of Piper Jaffray Companies Inc. ("Piper Jaffray"). Excluding Piper Jaffray, noninterest income, before nonrecurring items, increased by $237.6 million, or 14.8 percent, and noninterest expense, before nonrecurring items, decreased by $87.8 million, or 3.8 percent. Including nonrecurring items of $128.4 million, the Company recorded net income for the full year 1998 of $1,327.4 million, or $1.78 per diluted share, compared to net income of $838.5 million, or $1.11 per diluted share, in 1997. U.S. Bancorp's Chairman, President and Chief Executive Officer, John F. Grundhofer, said, "1998 was a year marked by tremendous change for our employees and customers. The successful integration of the banking operations of First Bank System, Inc. and the former U.S. Bancorp of Portland, Oregon was our primary focus and achievement for the year. In addition, we expanded our array of solutions for our business clients and private banking customers with the May 1998 acquisition of Piper Jaffray, a full-service investment banking and securities company. Our continued focus on providing solutions for customers and creating value for our shareholders has served us well, even through the volatile economic times we experienced during the past year. Our strong fourth quarter and full year profitability ratios and earnings per share growth are among the best in the industry, and we are well-positioned to make the most of our new opportunities during 1999 and beyond." U.S. Bancorp Reports Fourth Quarter 1998 Results January 20, 1999 Page 3 Earnings in the fourth quarter of 1998 included after-tax nonrecurring, merger-related charges of $28.1 million, including charges associated with USBC, Piper Jaffray and Zappco, Inc. Since August of 1997, after-tax merger-related items associated with the acquisition of USBC have totaled $546.3 million. No additional charges for USBC are expected to be incurred. Approximately $12 million, after-tax, in merger-related charges are expected to be incurred with respect to Piper Jaffray in 1999. Operating earnings for the fourth quarter reflected growth in core banking noninterest income and a decrease in core banking noninterest expense from the fourth quarter of 1997. Without the Piper Jaffray acquisition, noninterest income, before nonrecurring items, increased by $51.3 million, or 12.2 percent, reflecting growth in credit card fee revenue, trust and investment management fees, and other fees. On the same basis, noninterest expense, before nonrecurring items, declined by $24.8 million, or 4.3 percent. The banking efficiency ratio (the ratio of expenses to revenues without the impact of investment banking and brokerage activity), before nonrecurring items, for the fourth quarter of 1998 was 43.2 percent, compared to 46.5 percent in the fourth quarter of 1997. Net charge-offs in the fourth quarter of 1998 were $118.2 million, higher than the third quarter of 1998 net charge-offs of $106.1 million and the fourth quarter of 1997 net charge-offs of $103.3 million. The increases were primarily a result of growth in consumer loan balances, excluding residential mortgages, and higher fraud losses. Net charge-offs were .81 percent of average loans in the fourth quarter of 1998, compared to .75 percent in both the third quarter of 1998 and fourth quarter of last year. Nonperforming assets increased from $292.0 million at September 30, 1998, to $304.3 million at December 31, 1998. Consumer loans (excluding first mortgage loans) 30 days or more past due were 2.16 percent of loans outstanding at December 31, 1998, above the 2.04 percent at September 30, 1998, but below the 2.30 percent at December 31, 1997. The ratio of allowance for credit losses to nonperforming loans continued to indicate strong reserve coverage of 359 percent at December 31, 1998. In December, the Company purchased a $900 million portfolio of high-loan-to-value ("high-LTV") second mortgage loans, together with the related servicing rights. Both the yields and credit costs associated with these loans are expected to be higher than the typical home equity loans originated by the Company. The Company has experience in originating and servicing high-LTV U.S. Bancorp Reports Fourth Quarter 1998 Results January 20, 1999 Page 4 loans and, given the purchase price paid for the portfolio, expects to earn unusually high returns on the transaction.
- ------------------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT HIGHLIGHTS - ------------------------------------------------------------------------------------------------------------------------------- (Taxable-equivalent basis, $ in millions, except per-share data) 4Q 4Q PERCENT FULL YEAR FULL YEAR PERCENT 1998 1997 CHANGE 1998 1997 CHANGE --------------------------------------------------------------------- Net interest income $787.1 $784.7 0.3 $3,111.9 $3,106.0 0.2 Provision for credit losses* 101.0 90.0 12.2 379.0 365.3 3.8 Noninterest income* 620.1 420.5 47.5 2,244.0 1,602.2 40.1 Noninterest expense* 701.2 572.8 22.4 2,627.8 2,300.7 14.2 ----------------------- ------------------------ Income before taxes and nonrecurring items 605.0 542.4 11.5 2,349.1 2,042.2 15.0 Taxable-equivalent adjustment 12.8 13.7 (6.6) 51.3 57.9 (11.4) Income taxes* 214.9 193.2 11.2 842.0 729.1 15.5 ----------------------- ------------------------ Income before nonrecurring items 377.3 335.5 12.5 1,455.8 1,255.2 16.0 Net nonrecurring items (after-tax) (28.1) (46.6) nm (128.4) (416.7) nm ----------------------- ------------------------ Net income $349.2 $288.9 20.9 $1,327.4 $838.5 58.3 ----------------------- ------------------------ ----------------------- ------------------------ Net income to common $349.2 $287.5 21.5 $1,327.4 $827.9 60.3 ----------------------- ------------------------ ----------------------- ------------------------ Per diluted common share: Earnings, before nonrecurring items $0.52 $0.45 15.6 $1.96 $1.68 16.7 ----------------------- ------------------------ Earnings on a cash basis, before nonrecurring items** $0.57 $0.49 16.3 $2.15 $1.83 17.5 ----------------------- ------------------------ Net income $0.48 $0.39 23.1 $1.78 $1.11 60.4 ----------------------- ------------------------ ----------------------- ------------------------ Earnings on a cash basis** $0.53 $0.43 23.3 $1.98 $1.27 55.9 ----------------------- ------------------------ ----------------------- ------------------------ * before effect of nonrecurring items ** calculated by adding amortization of goodwill and other intangible assets to net income - -------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME Fourth quarter net interest income on a taxable-equivalent basis was $787.1 million, compared to $784.7 million recorded in the fourth quarter of 1997. Average earning assets for the period increased by $3.0 billion, or 4.8 percent, driven by core commercial and consumer loan growth, partially offset by reductions in securities and residential mortgages. Net interest income rose only U.S. Bancorp Reports Fourth Quarter 1998 Results January 20, 1999 Page 5 modestly, due to a decline in net interest margin. The decline in the margin resulted from growth in Payment Systems' noninterest-bearing assets, including corporate and purchasing card loan balances, the funding required for the Piper Jaffray acquisition and the share repurchase program, and margin compression in the commercial loan portfolio. Excluding residential mortgage loans, average loans for the fourth quarter were higher by $4.4 billion, or 8.7 percent, than fourth quarter of 1997, reflecting strong growth in commercial loans and home equity and second mortgages. Average securities available-for-sale for the fourth quarter of 1998 were lower than the fourth quarter of 1997 by $1.3 billion, reflecting both maturities and sales of securities.
- -------------------------------------------------------------------------------------------------------------------------- AVERAGE LOANS - ------------------------------------------------------------------------------------------------------------------------ ($ in millions) 4Q 4Q PERCENT FULL YEAR FULL YEAR PERCENT 1998 1997 CHANGE 1998 1997 CHANGE ------------------------------------------------------------------------- Commercial $25,844 $23,276 11.0 $24,608 $22,466 9.5 Commercial real estate 11,057 10,407 6.2 10,781 10,292 4.8 ------------------------- ------------------------- Total commercial 36,901 33,683 9.6 35,389 32,758 8.0 Home equity and second mortgage 6,439 5,760 11.8 6,130 5,555 10.4 Credit card 4,084 3,964 3.0 4,021 3,702 8.6 Other 7,022 6,660 5.4 6,803 6,894 (1.3) ------------------------- ------------------------- Total consumer, excl. residential 17,545 16,384 7.1 16,954 16,151 5.0 Residential mortgage 3,202 4,319 (25.9) 3,636 4,604 (21.0) ------------------------- ------------------------- Total loans $57,648 $54,386 6.0 $55,979 $53,513 4.6 ------------------------- ------------------------- ------------------------- ------------------------- Total loans, excluding residential mortgages $54,446 $50,067 8.7 $52,343 $48,909 7.0 ------------------------- ------------------------- ------------------------- ------------------------- - --------------------------------------------------------------------------------------------------------------------------
Net interest income on a taxable-equivalent basis for the full year 1998 was $3,111.9 million, slightly higher than the $3,106.0 million recorded in the full year 1997. During 1998, average earning assets grew by $2.2 billion, or 3.6 percent, primarily due to core commercial and consumer loan growth, partially offset by reductions in securities and residential mortgages. The net interest U.S. Bancorp Reports Fourth Quarter 1998 Results January 20, 1999 Page 6 margin declined from 5.04 percent in 1997 to 4.87 percent in 1998, primarily as a result of growth in Payment Systems' noninterest-bearing assets, the funding required for the Piper Jaffray acquisition and the share repurchase program, and margin compression in the commercial loan portfolio. Excluding residential mortgage loans, average loans for 1998 were higher by $3.4 billion, or 7.0 percent. Average securities for 1998 were lower than 1997 by $1.0 billion, or 14.6 percent, reflecting both maturities and sales of securities. Average noninterest-bearing deposits were higher in both the fourth quarter and the full year 1998, compared to the fourth quarter and the full year 1997, by 6.2 percent and 6.4 percent, respectively. U.S. Bancorp Reports Fourth Quarter 1998 Results January 20, 1999 Page 7
- ------------------------------------------------------------------------------------------------------------------------------ NONINTEREST INCOME - ------------------------------------------------------------------------------------------------------------------------------ ($ in millions) 4Q 4Q PERCENT FULL YEAR FULL YEAR PERCENT 1998 1997 CHANGE 1998 1997 CHANGE -------------------------------------------------------------------- Credit card fee revenue $144.3 $123.1 17.2 $574.8 $418.8 37.2 Trust and investment management fees 105.3 88.8 18.6 413.0 348.0 18.7 Service charges on deposit accounts 107.0 101.2 5.7 406.0 396.2 2.5 Investment products fees and commissions 78.0 16.7 367.1 229.7 65.7 249.6 Trading account profits and commissions 40.2 7.1 466.2 118.1 30.9 282.2 Investment banking revenue 33.1 -- nm 100.4 -- nm Other 112.2 83.6 34.2 402.0 342.6 17.3 ----------------------- ----------------------- Subtotal* 620.1 420.5 47.5 2,244.0 1,602.2 40.1 Net securities gains -- -- 12.6 3.6 Gain on credit card portfolio sale -- -- -- 9.4 ----------------------- ----------------------- Nonrecurring gains -- -- 12.6 13.0 ----------------------- ----------------------- Total noninterest income $620.1 $420.5 $2,256.6 $1,615.2 ----------------------- ----------------------- * Excluding Piper Jaffray, 4Q98 fee income, before nonrecurring items, would have increased by $51.3 million, or 12.2%. - ------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME Fourth quarter noninterest income, before nonrecurring items, was $620.1 million, an increase of $199.6 million, or 47.5 percent, from the same quarter of 1997. The increase for the quarter without the Piper Jaffray acquisition was $51.3 million, or 12.2 percent. Credit card fee revenue increased by $21.2 million, or 17.2 percent. Credit card fee revenue in the fourth quarter of 1998 was affected by the loss of a portion of the U.S. Government purchasing card business. The new contracts were effective December 1, 1998. As a result, the Company expects a more moderate growth rate in credit card fee revenue in 1999, and on a pro forma basis, a reduction in earnings per share of $.05 annually. Trust and investment management fees were up over the fourth quarter of 1997 by $16.5 million, or 18.6 percent, due to growth in the corporate, institutional and personal trust businesses and the addition of Piper Jaffray. Investment products fees and commissions, trading account profits and commissions and investment banking revenue were higher, principally due to the acquisition of Piper U.S. Bancorp Reports Fourth Quarter 1998 Results January 20, 1999 Page 8 Jaffray. Other noninterest income was higher than the fourth quarter of 1997 by $28.6 million, or 34.2 percent. Without Piper Jaffray, other noninterest income increased by $16.4 million, or 19.6 percent. Noninterest income, before nonrecurring items, for the full year 1998 was $2,244.0 million, an increase of $641.8 million, or 40.1 percent, over the full year 1997. Excluding Piper Jaffray, noninterest income, before nonrecurring items, increased by $237.6 million, or 14.8 percent, primarily as a result of strong growth in credit card fee revenue and trust and investment management fees.
- ------------------------------------------------------------------------------------------------------------------------------- NONINTEREST EXPENSE - ------------------------------------------------------------------------------------------------------------------------------- ($ in millions) 4Q 4Q PERCENT FULL YEAR FULL YEAR PERCENT 1998 1997 CHANGE 1998 1997 CHANGE --------------------------------------------------------------------- Salaries and employee benefits $382.1 $289.5 32.0 $1,433.2 $1,186.7 20.8 Net occupancy 46.8 45.7 2.4 187.4 182.0 3.0 Furniture and equipment 39.0 38.0 2.6 153.4 165.4 (7.3) Goodwill and other intangible assets 37.2 31.0 20.0 143.7 113.3 26.8 Professional services 26.4 22.8 15.8 71.3 70.3 1.4 Telephone 18.0 14.9 20.8 69.7 59.7 16.8 Advertising and marketing 19.4 14.4 34.7 67.2 56.6 18.7 Other personnel costs 12.7 19.5 (34.9) 53.0 66.6 (20.4) Other 119.6 97.0 23.3 448.9 400.1 12.2 ----------------------- ------------------------ Subtotal* 701.2 572.8 22.4 2,627.8 2,300.7 14.2 Nonrecurring charges 44.1 71.4 216.5 511.6 ----------------------- ------------------------ Total noninterest expense $745.3 $644.2 $2,844.3 $2,812.3 ----------------------- ------------------------ * Excluding Piper Jaffray, 4Q98 noninterest expense, before nonrecurring items, would have decreased by $24.8 million, or 4.3%. - -------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE Fourth quarter noninterest expense, before nonrecurring items, totaled $701.2 million, an increase of $128.4 million, or 22.4 percent, from the fourth quarter of 1997. Without the effect of Piper Jaffray, noninterest expense, before nonrecurring items, decreased by $24.8 million, or 4.3 percent. The favorable variance in expense primarily reflects the expense savings from the integration of U.S. Bancorp Reports Fourth Quarter 1998 Results January 20, 1999 Page 9 USBC, with year-over-year reductions in salaries and employee benefits, other personnel expense, net occupancy, and furniture and equipment. The $44.1 million of nonrecurring, merger-related expenses incurred in the fourth quarter of 1998 included $39.0 million of conversion expense for USBC and $4.4 million related to the acquisition of Piper Jaffray. Noninterest expense, before nonrecurring items, totaled $2,627.8 million for the full year 1998, an increase of $327.1 million, or 14.2 percent, over the full year 1997. Excluding Piper Jaffray, noninterest expense, before nonrecurring items, decreased by $87.8 million, or 3.8 percent, primarily due to savings related to the acquisition of USBC, with the largest favorable variances occurring in salaries and benefits, furniture and equipment, other personnel, and net occupancy.
- --------------------------------------------------------------------------------------------------------------- ALLOWANCE FOR CREDIT LOSSES - --------------------------------------------------------------------------------------------------------------- ($ in millions) 4Q 3Q 2Q 1Q 4Q 1998 1998 1998 1998 1997 ----------------------------------------------------------- Balance, beginning of period $980.1 $981.8 $995.5 $1,008.7 $1,019.9 Net charge-offs Commercial 17.7 16.7 16.7 14.1 14.7 Consumer 100.5 89.4 90.0 89.1 88.6 ----------------------------------------------------------- Total 118.2 106.1 106.7 103.2 103.3 Provision for credit losses 101.0 95.0 93.0 90.0 90.0 Acquisitions and other additions 38.0 9.4 -- -- 2.1 ----------------------------------------------------------- Balance, end of period $1,000.9 $980.1 $981.8 $995.5 $1,008.7 ----------------------------------------------------------- Net charge-offs to average loans (%) 0.81 0.75 0.77 0.77 0.75 Allowance for credit losses to period-end loans (%) 1.69 1.72 1.76 1.81 1.84 - ---------------------------------------------------------------------------------------------------------------
CREDIT QUALITY Total net charge-offs in the fourth quarter of 1998 were $118.2 million, higher than the third quarter of 1998 net charge-offs of $106.1 million and the fourth quarter of 1997 net charge-offs of U.S. Bancorp Reports Fourth Quarter 1998 Results January 20, 1999 Page 10 $103.3 million. Consumer loan net charge-offs of $100.5 million were $11.1 million higher than the third quarter of 1998 and higher than the same period of 1997 by $11.9 million, reflecting growth in the portfolio, excluding residential mortgages, and an increase in fraud losses. Credit card loan net charge-offs were 4.16 percent of average loans for the fourth quarter of 1998, lower than the third quarter of 1998 ratio of 4.26 percent, but higher than the fourth quarter of 1997 ratio of 3.87 percent. Other consumer loan net charge-offs were 1.67 percent of average loans for the fourth quarter of 1998, higher than the third quarter of 1998 ratio of 1.35 percent and the fourth quarter of 1997 ratio of 1.53 percent. Commercial loan net charge-offs were $17.7 million for the fourth quarter, slightly higher than the $16.7 million in the third quarter of 1998 and $14.7 million in the fourth quarter of 1997.
- ---------------------------------------------------------------------------------------------------------------------- CONSUMER CREDIT - ---------------------------------------------------------------------------------------------------------------------- (Percent) DEC 31 SEP 30 JUN 30 MAR 31 DEC 31 1998 1998 1998 1998 1997 ---------------------------------------------------------- Net Charge-off Ratios:* Credit cards 4.16 4.26 4.84 4.20 3.87 Other consumer 1.67 1.35 1.29 1.47 1.53 Subtotal, excl. first mortgage 2.25 2.04 2.13 2.13 2.10 First mortgage 0.12 0.14 0.17 0.25 0.17 Total consumer 1.92 1.72 1.77 1.76 1.70 Delinquency Ratios (including NPLs): Total consumer, excl. first mortgage Past due 30+ days 2.16 2.04 1.97 1.92 2.30 Past due 90+ days 0.56 0.53 0.48 0.50 0.48 Total consumer Past due 30+ days 2.39 2.30 2.31 2.38 2.76 Past due 90+ days 0.75 0.72 0.70 0.77 0.70 * annualized and calculated on average loan balances - ----------------------------------------------------------------------------------------------------------------------
U.S. Bancorp Reports Fourth Quarter 1998 Results January 20, 1999 Page 11 Consumer loans (excluding first mortgage loans) 30 days or more past due were 2.16 percent of the portfolio at December 31, 1998, compared with 2.04 percent at September 30, 1998, and 2.30 percent at December 31, 1997.
- -------------------------------------------------------------------------------------------------------------- ASSET QUALITY - -------------------------------------------------------------------------------------------------------------- ($ in millions) DEC 31 SEP 30 JUN 30 MAR 31 DEC 31 1998 1998 1998 1998 1997 ---------------------------------------------------------- Nonperforming loans Commercial $165.7 $149.4 $140.2 $161.5 $179.1 Commercial real estate 52.7 57.7 68.9 61.3 60.3 Consumer 60.5 62.0 64.4 70.1 57.7 ---------------------------------------------------------- Total 278.9 269.1 273.5 292.9 297.1 Other real estate 14.3 15.5 17.3 21.6 30.1 Other nonperforming assets 11.1 7.4 9.6 10.9 12.3 ---------------------------------------------------------- Total nonperforming assets* $304.3 $292.0 $300.4 $325.4 $339.5 ---------------------------------------------------------- Accruing loans 90 days past due $106.8 $93.9 $86.6 $91.7 $93.8 ---------------------------------------------------------- Allowance to nonperforming loans (%) 359 364 359 340 340 Allowance to nonperforming assets (%) 329 336 327 306 297 Nonperforming assets to loans plus ORE (%) 0.51 0.51 0.54 0.59 0.62 * does not include accruing loans 90 days past due - --------------------------------------------------------------------------------------------------------------
The allowance for credit losses was $1,000.9 million at December 31, 1998, up from $980.1 million at September 30, 1998. The ratio of allowance for credit losses to nonperforming loans was 359 percent at December 31, 1998, compared to 364 percent at September 30, 1998, and 340 percent at December 31, 1997. Nonperforming assets at December 31, 1998, totaled $304.3 million, higher by $12.3 million, or 4.2 percent, than September 30, 1998, but lower by $35.2 million, or 10.4 percent, than December 31, 1997. The ratio of nonperforming assets to loans and other real estate was .51 percent at U.S. Bancorp Reports Fourth Quarter 1998 Results January 20, 1999 Page 12 December 31, 1998, equal to the ratio at September 30, 1998, and lower than the ratio at December 31, 1997, of .62 percent.
- -------------------------------------------------------------------------------------------------------------- CAPITAL POSITION - -------------------------------------------------------------------------------------------------------------- (Percent) DEC 31 SEP 30 JUN 30 MAR 31 DEC 31 1998 1998 1998 1998 1997 ---------------------------------------------------------- Common equity to assets 7.8 8.0 8.3 8.6 8.3 Tangible common equity to assets* 6.0 6.2 6.5 7.4 7.0 Tier 1 capital ratio 6.5 6.8 7.2 7.8 7.4 Total risk-based capital ratio 10.9 11.4 11.5 11.9 11.6 Leverage ratio 6.8 7.0 7.4 7.7 7.3 * calculated by deducting goodwill from common equity and assets - --------------------------------------------------------------------------------------------------------------
CAPITAL At December 31, 1998, the common-equity-to-assets ratio was 7.8 percent, lower than the ratio at September 30, 1998, of 8.0 percent and the ratio at December 31, 1997, of 8.3 percent. The decline in the capital ratio is primarily a result of the Company's share repurchase program.
- --------------------------------------------------------------------------------------------------------------------------- COMMON SHARES - --------------------------------------------------------------------------------------------------------------------------- (Millions) 4Q 3Q 2Q 1Q 4Q 1998 1998 1998 1998 1997 ---------------------------------------------------------------------- Beginning shares outstanding 730.7 739.7 742.5 739.9 735.1 Shares issued for stock option and stock purchase plans and other corporate purposes 1.7 2.4 3.8 2.6 4.9 Shares repurchased (6.6) (11.4) (6.6) -- (0.1) ---------------------------------------------------------------------- Ending shares outstanding 725.8 730.7 739.7 742.5 739.9 ---------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------
U.S. Bancorp Reports Fourth Quarter 1998 Results January 20, 1999 Page 13 On June 9, 1998, the Company announced a share repurchase program of up to $2.5 billion of common stock over the period ending March 31, 2000. During the fourth quarter, the Company repurchased 6.6 million shares for a total dollar value of $240 million in both open market and privately negotiated transactions. The Company has repurchased 24.6 million shares under this program for a total dollar value of $963 million. Minneapolis-based U.S. Bancorp ("USB"), with $76 billion in assets, is the 13th 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 approximately 100 offices in the West and Midwest through U.S. Bancorp Piper Jaffray Companies 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, Year 2000 issues, and the progress of integrating the former U.S. Bancorp. U. S. Bancorp CONSOLIDATED STATEMENT OF INCOME
Three Months Ended Year Ended ------------------------------------------------------------------ December 31 December 31 December 31 December 31 (Dollars in Millions, Except Per Share Data) 1998 1997 1998 1997 ------------------------------------------------------------------ INTEREST INCOME (Unaudited) Loans $1,245.2 $1,222.6 $4,921.8 $4,784.5 Securities: Taxable 68.2 90.5 303.6 371.5 Exempt from federal income taxes 15.5 16.6 62.8 68.1 Other interest income 34.0 18.8 119.2 69.5 ------------------------------------------------------------------ Total interest income 1,362.9 1,348.5 5,407.4 5,293.6 INTEREST EXPENSE Deposits 332.4 359.1 1,391.0 1,436.8 Federal funds purchased and repurchase agreements 36.3 42.4 153.6 183.0 Other short-term funds borrowed 13.9 19.4 59.1 117.6 Long-term debt 186.7 144.4 672.7 459.0 Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely the junior subordinated debentures of the parent company 19.3 12.2 70.4 49.1 ------------------------------------------------------------------ Total interest expense 588.6 577.5 2,346.8 2,245.5 ------------------------------------------------------------------ Net interest income 774.3 771.0 3,060.6 3,048.1 Provision for credit losses 101.0 90.0 379.0 460.3 ------------------------------------------------------------------ Net interest income after provision for credit losses 673.3 681.0 2,681.6 2,587.8 NONINTEREST INCOME Credit card fee revenue 144.3 123.1 574.8 418.8 Trust and investment management fees 105.3 88.8 413.0 348.0 Service charges on deposit accounts 107.0 101.2 406.0 396.2 Investment products fees and commissions 78.0 16.7 229.7 65.7 Trading account profits and commissions 40.2 7.1 118.1 30.9 Investment banking revenue 33.1 -- 100.4 -- Securities gains -- -- 12.6 3.6 Gain on sale of credit card portfolio -- -- -- 9.4 Other 112.2 83.6 402.0 342.6 ------------------------------------------------------------------ Total noninterest income 620.1 420.5 2,256.6 1,615.2 NONINTEREST EXPENSE Salaries 328.4 239.6 1,210.9 969.3 Employee benefits 53.7 49.9 222.3 217.4 Net occupancy 46.8 45.7 187.4 182.0 Furniture and equipment 39.0 38.0 153.4 165.4 Goodwill and other intangible assets 37.2 31.0 143.7 113.3 Professional services 26.4 22.8 71.3 70.3 Telephone 18.0 14.9 69.7 59.7 Advertising and marketing 19.4 14.4 67.2 56.6 Other personnel costs 12.7 19.5 53.0 66.6 Merger-related 44.1 71.4 216.5 511.6 Other 119.6 97.0 448.9 400.1 ------------------------------------------------------------------ Total noninterest expense 745.3 644.2 2,844.3 2,812.3 ------------------------------------------------------------------ Income before income taxes 548.1 457.3 2,093.9 1,390.7 Applicable income taxes 198.9 168.4 766.5 552.2 ------------------------------------------------------------------ Net income $349.2 $288.9 $1,327.4 $838.5 ------------------------------------------------------------------ ------------------------------------------------------------------ Net income applicable to common equity $349.2 $287.5 $1,327.4 $827.9 ------------------------------------------------------------------ ------------------------------------------------------------------ EARNINGS PER COMMON SHARE Average shares outstanding 722,842,350 734,764,128 733,897,845 733,550,892 Earnings per share $.48 $.39 $1.81 $1.13 ------------------------------------------------------------------ ------------------------------------------------------------------ Diluted average shares outstanding 730,093,607 745,854,264 744,178,143 742,913,736 Diluted earnings per share $.48 $.39 $1.78 $1.11 ------------------------------------------------------------------ ------------------------------------------------------------------
U.S. Bancorp CONSOLIDATED BALANCE SHEET
December 31 December 31 (Dollars in Millions) 1998 1997 - ------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 4,772 $ 4,739 Federal funds sold 83 62 Securities purchased under agreements to resell 461 630 Trading account securities 537 195 Available-for-sale securities 5,577 6,885 Loans 59,122 54,708 Less allowance for credit losses 1,001 1,009 --------------------------- Net loans 58,121 53,699 Premises and equipment 879 860 Interest receivable 456 405 Customers' liability on acceptances 166 535 Goodwill and other intangible assets 1,975 1,482 Other assets 3,411 1,803 --------------------------- Total assets $ 76,438 $ 71,295 --------------------------- --------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $ 16,377 $ 14,544 Interest-bearing 33,657 34,483 --------------------------- Total deposits 50,034 49,027 Federal funds purchased 1,255 800 Securities sold under agreements to repurchase 1,427 1,518 Other short-term funds borrowed 683 974 Long-term debt 13,781 10,247 Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely the junior subordinated debentures of the parent company 950 600 Acceptances outstanding 166 535 Other liabilities 2,172 1,704 --------------------------- Total liabilities 70,468 65,405 Shareholders' equity: Common stock 931 925 Capital surplus 1,247 1,261 Retained earnings 4,456 3,645 Accumulated other comprehensive income 72 59 Treasury stock (736) -- --------------------------- Total shareholders' equity 5,970 5,890 --------------------------- Total liabilities and shareholders' equity $ 76,438 $ 71,295 --------------------------- ---------------------------
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