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): April 19, 2017
U.S. BANCORP
(Exact name of registrant as specified in its charter)
1-6880
(Commission File Number)
DELAWARE | 41-0255900 | |
(State or other jurisdiction | (I.R.S. Employer Identification | |
of incorporation) | Number) |
800 Nicollet Mall
Minneapolis, Minnesota 55402
(Address of principal executive offices and zip code)
(651) 466-3000
(Registrants telephone number, including area code)
(not applicable)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ | Written communications pursuant to Rule 425 Under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On April 19, 2017, U.S. Bancorp (the Company) issued a press release reporting quarter ended March 31, 2017 results, and posted on its website its 1Q17 Earnings Conference Call Presentation, which contains certain additional historical and forward-looking information relating to the Company. The press release is included as Exhibit 99.1 hereto and is incorporated herein by reference. The information included in the press release is considered to be filed under the Securities Exchange Act of 1934. The 1Q17 Earnings Conference Call Presentation is included as Exhibit 99.2 hereto and is incorporated herein by reference. The information included in the 1Q17 Earnings Conference Call Presentation is considered to be furnished under the Securities Exchange Act of 1934. The press release and 1Q17 Earnings Conference Call Presentation contain forward-looking statements regarding the Company and each includes a cautionary statement identifying important factors that could cause actual results to differ materially from those anticipated.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
99.1 | Press Release issued by U.S. Bancorp on April 19, 2017, deemed filed under the Securities Exchange Act of 1934. |
99.2 | 1Q17 Earnings Conference Call Presentation, deemed furnished under the Securities Exchange Act of 1934. |
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/ Craig E. Gifford |
Craig E. Gifford |
Executive Vice President and Controller |
DATE: April 19, 2017
Exhibit 99.1
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News Release | |||
Contacts: | ||||
Dana Ripley | Jennifer Thompson | |||
Media | Investors/Analysts | |||
(612) 303-3167 | (612) 303-0778 |
U.S. BANCORP REPORTS FIRST QUARTER 2017 EARNINGS
Earnings Per Diluted Common Share of $0.82
Return on average assets of 1.35 percent and average common equity of 13.3 percent
Returned 78 percent of earnings to shareholders
MINNEAPOLIS, April 19, 2017 U.S. Bancorp (NYSE: USB) today reported net income of $1,473 million for the first quarter of 2017, or $0.82 per diluted common share, compared with $1,386 million, or $0.76 per diluted common share, in the first quarter of 2016.
Highlights for the first quarter of 2017 included:
| Industry-leading return on average assets of 1.35 percent and return on average common equity of 13.3 percent |
| Net interest income (taxable-equivalent basis) grew 3.7 percent year-over-year and declined slightly on a linked quarter basis due to fewer days in the quarter |
| Net interest margin of 3.03 percent for the first quarter of 2017 decreased 3 basis points from the first quarter of 2016, due to loan mix and reinvestment yields, and grew 5 basis points over the fourth quarter of 2016, due to the favorable impact of higher interest rates |
| Average total loans grew 4.1 percent over the first quarter of 2016 and 0.2 percent linked quarter |
| Noninterest income increased 8.4 percent on a year-over-year basis |
| Payment services revenue increased 4.9 percent led by credit and debit card revenue growth of 9.8 percent |
| Trust and investment management fees increased 8.6 percent |
| Mortgage banking revenue increased 10.7 percent |
| Nonperforming assets decreased 13.0 percent on a year-over-year basis and 6.7 percent on a linked quarter basis |
| Strong capital position. At March 31, 2017, the estimated common equity tier 1 capital to risk-weighted assets ratio was 9.2 percent using the Basel III fully implemented standardized approach and was 11.5 percent using the Basel III fully implemented advanced approaches method. |
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 2
EARNINGS SUMMARY | Table 1 | |||||||||||||||||||
($ in millions, except per-share data) | Percent | Percent | ||||||||||||||||||
Change | Change | |||||||||||||||||||
1Q | 4Q | 1Q | 1Q17 vs | 1Q17 vs | ||||||||||||||||
2017 | 2016 | 2016 | 4Q16 | 1Q16 | ||||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 1,473 | $ | 1,478 | $ | 1,386 | (.3 | ) | 6.3 | |||||||||||
Diluted earnings per common share |
$ | .82 | $ | .82 | $ | .76 | | 7.9 | ||||||||||||
Return on average assets (%) |
1.35 | 1.32 | 1.32 | |||||||||||||||||
Return on average common equity (%) |
13.3 | 13.1 | 13.0 | |||||||||||||||||
Net interest margin (%) |
3.03 | 2.98 | 3.06 | |||||||||||||||||
Efficiency ratio (%) (a) |
55.6 | 55.3 | 54.6 | |||||||||||||||||
Tangible efficiency ratio (%) (a) |
54.8 | 54.5 | 53.7 | |||||||||||||||||
Dividends declared per common share |
$ | .280 | $ | .280 | $ | .255 | | 9.8 | ||||||||||||
Book value per common share (period end) |
$ | 25.05 | $ | 24.63 | $ | 23.82 | 1.7 | 5.2 |
(a) | See Non-GAAP Financial Measures reconciliation on page 21 |
Net income attributable to U.S. Bancorp was $1,473 million for the first quarter of 2017, 6.3 percent higher than the $1,386 million for the first quarter of 2016, and 0.3 percent lower than the $1,478 million for the fourth quarter of 2016. Diluted earnings per common share of $0.82 in the first quarter of 2017 were $0.06 higher than the first quarter of 2016 and were unchanged from the fourth quarter of 2016. The increase in net income year-over-year was principally due to total net revenue growth, including an increase in net interest income of 3.7 percent on a taxable-equivalent basis (3.9 percent as reported on a GAAP basis), mainly a result of loan growth, and an increase in noninterest income of 8.4 percent, driven by higher payment services revenue, trust and investment management fees and mortgage banking revenue. This increase was partially offset by higher noninterest expense due to increased compensation expense related to hiring to support business growth and compliance programs as well as merit increases and higher variable compensation expense. The decrease in net income on a linked quarter basis was principally due to a decrease in total net revenue of 2.0 percent, reflecting lower net interest income of 0.3 percent, due to two fewer days, and a decrease in noninterest income of 4.2 percent driven by seasonally lower payment services revenue and a decline in mortgage banking revenue. These decreases were mostly offset by a decline in noninterest expense of 2.0 percent mainly from seasonally lower costs from investments in tax-advantaged projects and professional services expense, along with lower income tax expense.
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 3
U.S. Bancorp President and Chief Executive Officer Andy Cecere said, U.S. Bancorp once again delivered industry-leading returns and profitability in the first quarter of 2017 as we leveraged our diverse business platform and our investments in innovation to deliver the entire bank to our customers in the ways they want to interact with us. We strive to continually improve upon our best-in-class performance, and we are well positioned to do so against the backdrop of an evolving economic and regulatory environment.
In the first quarter, we maintained our industry-leading performancea U.S. Bancorp hallmark. Our return on average common equity was 13.3 percent and, compared to a year ago, diluted earnings per share grew by 7.9 percent, supported by strong revenue growth and stable credit quality. We also returned 78 percent of earnings to shareholders.
In everything we do at U.S. Bancorp, we work to become the most trusted choice for our customers, shareholders and communities. In the first quarter, we were fortunate to be recognized for our commitment to ethics and integrity by the Ethisphere Institute, which named U.S. Bank to its Worlds Most Ethical Companies list for the third year in a row. We are proud of this recognition and how it affirms our culture of trust. It is a culture that was fortified by our Executive Chairman Richard Davis and a culture that I will preserve and cultivate in my new role.
I am excited for the future and working with our employees who have a unique capability to help U.S. Bancorp deliver consistent growth while exploring innovations that create dynamic opportunities with our customers, and accomplishing it all with a commitment to being our customers most trusted partner. We are well positioned to create long-term value for our shareholders, customers, communities and employees.
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 4
INCOME STATEMENT HIGHLIGHTS | Table 2 | |||||||||||||||||||
($ in millions, except per-share data) | Percent | Percent | ||||||||||||||||||
Change | Change | |||||||||||||||||||
1Q | 4Q | 1Q | 1Q17 vs | 1Q17 vs | ||||||||||||||||
2017 | 2016 | 2016 | 4Q16 | 1Q16 | ||||||||||||||||
Net interest income |
$ | 2,945 | $ | 2,955 | $ | 2,835 | (.3 | ) | 3.9 | |||||||||||
Taxable-equivalent adjustment |
50 | 49 | 53 | 2.0 | (5.7 | ) | ||||||||||||||
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Net interest income (taxable-equivalent basis) |
2,995 | 3,004 | 2,888 | (.3 | ) | 3.7 | ||||||||||||||
Noninterest income |
2,329 | 2,431 | 2,149 | (4.2 | ) | 8.4 | ||||||||||||||
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Total net revenue |
5,324 | 5,435 | 5,037 | (2.0 | ) | 5.7 | ||||||||||||||
Noninterest expense |
2,944 | 3,004 | 2,749 | (2.0 | ) | 7.1 | ||||||||||||||
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Income before provision and income taxes |
2,380 | 2,431 | 2,288 | (2.1 | ) | 4.0 | ||||||||||||||
Provision for credit losses |
345 | 342 | 330 | .9 | 4.5 | |||||||||||||||
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Income before taxes |
2,035 | 2,089 | 1,958 | (2.6 | ) | 3.9 | ||||||||||||||
Income taxes and taxable-equivalent adjustment |
549 | 598 | 557 | (8.2 | ) | (1.4 | ) | |||||||||||||
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Net income |
1,486 | 1,491 | 1,401 | (.3 | ) | 6.1 | ||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(13 | ) | (13 | ) | (15 | ) | | 13.3 | ||||||||||||
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Net income attributable to U.S. Bancorp |
$ | 1,473 | $ | 1,478 | $ | 1,386 | (.3 | ) | 6.3 | |||||||||||
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Net income applicable to U.S. Bancorp common shareholders |
$ | 1,387 | $ | 1,391 | $ | 1,329 | (.3 | ) | 4.4 | |||||||||||
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Diluted earnings per common share |
$ | .82 | $ | .82 | $ | .76 | | 7.9 | ||||||||||||
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 5
NET INTEREST INCOME | Table 3 | |||||||||||||||||||
(Taxable-equivalent basis; $ in millions) | ||||||||||||||||||||
Change | Change | |||||||||||||||||||
1Q | 4Q | 1Q | 1Q17 vs | 1Q17 vs | ||||||||||||||||
2017 | 2016 | 2016 | 4Q16 | 1Q16 | ||||||||||||||||
Components of net interest income |
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Income on earning assets |
$ | 3,451 | $ | 3,424 | $ | 3,275 | $ | 27 | $ | 176 | ||||||||||
Expense on interest-bearing liabilities |
456 | 420 | 387 | 36 | 69 | |||||||||||||||
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Net interest income |
$ | 2,995 | $ | 3,004 | $ | 2,888 | $ | (9 | ) | $ | 107 | |||||||||
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Average yields and rates paid |
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Earning assets yield |
3.49 | % | 3.40 | % | 3.48 | % | .09 | % | .01 | % | ||||||||||
Rate paid on interest-bearing liabilities |
.62 | .57 | .56 | .05 | .06 | |||||||||||||||
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Gross interest margin |
2.87 | % | 2.83 | % | 2.92 | % | .04 | % | (.05 | )% | ||||||||||
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Net interest margin |
3.03 | % | 2.98 | % | 3.06 | % | .05 | % | (.03 | )% | ||||||||||
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Average balances |
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Investment securities (a) |
$ | 110,764 | $ | 110,386 | $ | 106,031 | $ | 378 | $ | 4,733 | ||||||||||
Loans |
273,158 | 272,671 | 262,281 | 487 | 10,877 | |||||||||||||||
Earning assets |
399,281 | 401,971 | 378,208 | (2,690 | ) | 21,073 | ||||||||||||||
Interest-bearing liabilities |
296,170 | 295,288 | 279,516 | 882 | 16,654 |
(a) | Excludes unrealized gain (loss) |
Net Interest Income
Net interest income on a taxable-equivalent basis in the first quarter of 2017 was $2,995 million, an increase of $107 million (3.7 percent) over the first quarter of 2016. The increase was principally driven by loan growth, partially offset by a lower net interest margin. Average earning assets were $21.1 billion (5.6 percent) higher than the first quarter of 2016, driven by increases of $10.9 billion (4.1 percent) in average total loans, $4.7 billion (4.5 percent) in average investment securities and higher average cash balances. Net interest income on a taxable-equivalent basis decreased $9 million (0.3 percent) linked quarter driven by the impact of two fewer days in the first quarter. In addition, higher net interest margin was partially offset by lower average earning assets, mainly average loans held for sale and average cash balances.
The net interest margin in the first quarter of 2017 was 3.03 percent, compared with 3.06 percent in the first quarter of 2016, and 2.98 percent in the fourth quarter of 2016. The decrease in the net interest margin of 3 basis points on a year-over-year basis reflected the net impact of loan mix, lower yield on securities purchased, higher rates paid on deposits, and a shift in interest-bearing liabilities mix. On a linked quarter basis, the increase of 5 basis points was principally due to the benefit of asset repricing during a period of rising rates.
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 6
Investment Securities
Average investment securities in the first quarter of 2017 were $4.7 billion (4.5 percent) higher year-over-year and $378 million (0.3 percent) higher than the prior quarter. These increases were primarily due to purchases of U.S. Treasury securities, partially offset by a reduction in U.S. government agency-backed securities, net of prepayments and maturities, in support of liquidity management.
AVERAGE LOANS | Table 4 | |||||||||||||||||||
($ in millions) | Percent | Percent | ||||||||||||||||||
Change | Change | |||||||||||||||||||
1Q | 4Q | 1Q | 1Q17 vs | 1Q17 vs | ||||||||||||||||
2017 | 2016 | 2016 | 4Q16 | 1Q16 | ||||||||||||||||
Commercial |
$ | 88,284 | $ | 88,448 | $ | 84,582 | (.2 | ) | 4.4 | |||||||||||
Lease financing |
5,455 | 5,359 | 5,238 | 1.8 | 4.1 | |||||||||||||||
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Total commercial |
93,739 | 93,807 | 89,820 | (.1 | ) | 4.4 | ||||||||||||||
Commercial mortgages |
31,461 | 31,767 | 31,836 | (1.0 | ) | (1.2 | ) | |||||||||||||
Construction and development |
11,697 | 11,624 | 10,565 | .6 | 10.7 | |||||||||||||||
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Total commercial real estate |
43,158 | 43,391 | 42,401 | (.5 | ) | 1.8 | ||||||||||||||
Residential mortgages |
57,900 | 56,718 | 54,208 | 2.1 | 6.8 | |||||||||||||||
Credit card |
20,845 | 20,942 | 20,244 | (.5 | ) | 3.0 | ||||||||||||||
Retail leasing |
6,469 | 6,191 | 5,179 | 4.5 | 24.9 | |||||||||||||||
Home equity and second mortgages |
16,259 | 16,444 | 16,368 | (1.1 | ) | (.7 | ) | |||||||||||||
Other |
31,056 | 31,245 | 29,550 | (.6 | ) | 5.1 | ||||||||||||||
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Total other retail |
53,784 | 53,880 | 51,097 | (.2 | ) | 5.3 | ||||||||||||||
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Total loans, excluding covered loans |
269,426 | 268,738 | 257,770 | .3 | 4.5 | |||||||||||||||
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Covered loans |
3,732 | 3,933 | 4,511 | (5.1 | ) | (17.3 | ) | |||||||||||||
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Total loans |
$ | 273,158 | $ | 272,671 | $ | 262,281 | .2 | 4.1 | ||||||||||||
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 7
Loans
Average total loans were $10.9 billion (4.1 percent) higher in the first quarter of 2017 than the first quarter of 2016. The increase was due to growth in total commercial loans (4.4 percent), residential mortgages (6.8 percent), total other retail loans (5.3 percent), total commercial real estate (1.8 percent) and credit card loans (3.0 percent). These increases were partially offset by run-off in the covered loans portfolio (17.3 percent). Average total loans were $487 million (0.2 percent) higher in the first quarter of 2017 than the fourth quarter of 2016. This increase was primarily driven by linked quarter growth in residential mortgages (2.1 percent) and retail leasing (4.5 percent), partially offset by a decline in total commercial real estate (0.5 percent), home equity and second mortgages (1.1 percent) and covered loans (5.1 percent).
AVERAGE DEPOSITS | Table 5 | |||||||||||||||||||
($ in millions) | Percent | Percent | ||||||||||||||||||
Change | Change | |||||||||||||||||||
1Q | 4Q | 1Q | 1Q17 vs | 1Q17 vs | ||||||||||||||||
2017 | 2016 | 2016 | 4Q16 | 1Q16 | ||||||||||||||||
Noninterest-bearing deposits |
$ | 80,738 | $ | 84,892 | $ | 78,569 | (4.9 | ) | 2.8 | |||||||||||
Interest-bearing savings deposits |
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Interest checking |
65,681 | 64,647 | 57,910 | 1.6 | 13.4 | |||||||||||||||
Money market savings |
108,759 | 106,637 | 86,462 | 2.0 | 25.8 | |||||||||||||||
Savings accounts |
42,609 | 41,310 | 39,250 | 3.1 | 8.6 | |||||||||||||||
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Total savings deposits |
217,049 | 212,594 | 183,622 | 2.1 | 18.2 | |||||||||||||||
Time deposits |
30,646 | 31,697 | 33,687 | (3.3 | ) | (9.0 | ) | |||||||||||||
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Total interest-bearing deposits |
247,695 | 244,291 | 217,309 | 1.4 | 14.0 | |||||||||||||||
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Total deposits |
$ | 328,433 | $ | 329,183 | $ | 295,878 | (.2 | ) | 11.0 | |||||||||||
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Deposits
Average total deposits for the first quarter of 2017 were $32.6 billion (11.0 percent) higher than the first quarter of 2016. Average noninterest-bearing deposits increased $2.2 billion (2.8 percent) year-over-year mainly in Consumer and Small Business Banking and Wealth Management and Securities Services. Average total savings deposits were $33.4 billion (18.2 percent) higher year-over-year, the result of growth across all business lines. Average time deposits were $3.0 billion (9.0 percent) lower than the prior year quarter. Changes in time deposits are largely related to those deposits managed as an alternative to other funding sources such as wholesale borrowing, based largely on relative pricing and liquidity characteristics.
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 8
Average total deposits decreased $750 million (0.2 percent) from the fourth quarter of 2016. On a linked quarter basis, average noninterest-bearing deposits seasonally decreased $4.2 billion (4.9 percent) across all business lines, while average total savings deposits grew $4.5 billion (2.1 percent) reflecting increases in Consumer and Small Business Banking and Wealth Management and Securities Services, partially offset by decreases in Wholesale Banking and Commercial Real Estate. Average time deposits, which are managed based on funding needs, relative pricing, and liquidity characteristics, decreased $1.1 billion (3.3 percent) on a linked quarter basis.
NONINTEREST INCOME | Table 6 | |||||||||||||||||||
($ in millions) | Percent | Percent | ||||||||||||||||||
Change | Change | |||||||||||||||||||
1Q | 4Q | 1Q | 1Q17 vs | 1Q17 vs | ||||||||||||||||
2017 | 2016 | 2016 | 4Q16 | 1Q16 | ||||||||||||||||
Credit and debit card revenue |
$ | 292 | $ | 316 | $ | 266 | (7.6 | ) | 9.8 | |||||||||||
Corporate payment products revenue |
179 | 171 | 170 | 4.7 | 5.3 | |||||||||||||||
Merchant processing services |
378 | 404 | 373 | (6.4 | ) | 1.3 | ||||||||||||||
ATM processing services |
85 | 87 | 80 | (2.3 | ) | 6.3 | ||||||||||||||
Trust and investment management fees |
368 | 368 | 339 | | 8.6 | |||||||||||||||
Deposit service charges |
177 | 186 | 168 | (4.8 | ) | 5.4 | ||||||||||||||
Treasury management fees |
153 | 147 | 142 | 4.1 | 7.7 | |||||||||||||||
Commercial products revenue |
207 | 217 | 197 | (4.6 | ) | 5.1 | ||||||||||||||
Mortgage banking revenue |
207 | 240 | 187 | (13.8 | ) | 10.7 | ||||||||||||||
Investment products fees |
40 | 38 | 40 | 5.3 | | |||||||||||||||
Securities gains (losses), net |
29 | 6 | 3 | nm | nm | |||||||||||||||
Other |
214 | 251 | 184 | (14.7 | ) | 16.3 | ||||||||||||||
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Total noninterest income |
$ | 2,329 | $ | 2,431 | $ | 2,149 | (4.2 | ) | 8.4 | |||||||||||
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Noninterest Income
First quarter noninterest income of $2,329 million was $180 million (8.4 percent) higher than the first quarter of 2016, driven by increases in payment services revenue, trust and investment management fees, mortgage banking and other revenue. Payment services revenue was higher principally due to an increase in credit and debit card revenue of $26 million (9.8 percent), reflecting higher sales volumes. Merchant processing services revenue increased $5 million (1.3 percent). Adjusted for the approximate $5 million impact of foreign currency rate changes, year-over-year merchant processing services revenue increased approximately 2.7 percent. Trust and investment management fees increased $29 million (8.6 percent)
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 9
primarily due to improved market conditions and account growth, along with lower money market fee waivers. Mortgage banking revenue increased $20 million (10.7 percent) mainly due to the valuation of mortgage servicing rights, net of hedging activities. Other income increased $30 million (16.3 percent) compared with the prior year quarter, primarily due to higher equity investment income in the first quarter of 2017.
Noninterest income was $102 million (4.2 percent) lower in the first quarter of 2017 than the fourth quarter of 2016 driven by an expected decline in mortgage banking revenue and other income, along with seasonally lower fee-based revenue including credit and debit card revenue, merchant processing services revenue and deposit service charges, partially offset by securities gains. Mortgage banking revenue decreased $33 million (13.8 percent), reflecting seasonality and lower origination and sales volume. Other income decreased $37 million (14.7 percent) primarily driven by lower syndication revenue related to refinancings from tax credits. Credit and debit card revenue decreased $24 million (7.6 percent) mainly due to seasonally lower sales volume. Merchant processing services revenue decreased $26 million (6.4 percent) primarily as a result of seasonality and the timing of marketing incentives from card associations. Deposit service charges decreased $9 million (4.8 percent) due to seasonally lower transaction volumes, while commercial products revenue decreased $10 million (4.6 percent) due to lower syndication fees.
NONINTEREST EXPENSE | Table 7 | |||||||||||||||||||
($ in millions) | Percent Change |
Percent Change |
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1Q 2017 |
4Q 2016 |
1Q 2016 |
1Q17 vs 4Q16 |
1Q17 vs 1Q16 |
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Compensation |
$ | 1,391 | $ | 1,357 | $ | 1,249 | 2.5 | 11.4 | ||||||||||||
Employee benefits |
314 | 261 | 300 | 20.3 | 4.7 | |||||||||||||||
Net occupancy and equipment |
247 | 247 | 248 | | (.4 | ) | ||||||||||||||
Professional services |
96 | 156 | 98 | (38.5 | ) | (2.0 | ) | |||||||||||||
Marketing and business development |
90 | 107 | 77 | (15.9 | ) | 16.9 | ||||||||||||||
Technology and communications |
235 | 238 | 233 | (1.3 | ) | .9 | ||||||||||||||
Postage, printing and supplies |
81 | 75 | 79 | 8.0 | 2.5 | |||||||||||||||
Other intangibles |
44 | 45 | 45 | (2.2 | ) | (2.2 | ) | |||||||||||||
Other |
446 | 518 | 420 | (13.9 | ) | 6.2 | ||||||||||||||
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|||||||||||||||
Total noninterest expense |
$ | 2,944 | $ | 3,004 | $ | 2,749 | (2.0 | ) | 7.1 | |||||||||||
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 10
Noninterest Expense
First quarter noninterest expense of $2,944 million was $195 million (7.1 percent) higher than the first quarter of 2016, primarily due to higher compensation, employee benefits, marketing and business development expense and other expense. Compensation expense increased $142 million (11.4 percent) principally due to the impact of hiring to support business growth and compliance programs, merit increases, and higher variable compensation. Employee benefits expense increased $14 million (4.7 percent) primarily driven by higher payroll taxes. Marketing and business development expense increased $13 million (16.9 percent) to support new business development. Other expense was $26 million (6.2 percent) higher primarily reflecting the impact of the FDIC insurance surcharge, which began in the third quarter of 2016.
Noninterest expense decreased $60 million (2.0 percent) on a linked quarter basis driven by seasonally lower costs related to investments in tax-advantaged projects, lower professional services and marketing and business development expense, partially offset by higher employee benefits and compensation expense. Other noninterest expense decreased $72 million (13.9 percent) primarily due to seasonally lower costs related to investments in tax-advantaged projects. Professional services expense was $60 million (38.5 percent) lower primarily due to the timing of business initiatives and a decrease in costs related to compliance and legal matters. Marketing and business development expense decreased $17 million (15.9 percent) due to the timing of certain marketing campaigns and seasonally lower travel costs. Partially offsetting these declines was a seasonal increase in employee benefits expense of $53 million (20.3 percent) primarily driven by seasonally higher payroll tax and healthcare expenses, in addition to an increase in compensation expense of $34 million (2.5 percent) reflecting the impact of variable compensation including the timing of stock-based compensation grants and merit increases.
Provision for Income Taxes
The provision for income taxes for the first quarter of 2017 resulted in a tax rate on a taxable-equivalent basis of 27.0 percent (effective tax rate of 25.1 percent), compared with 28.4 percent (effective tax rate of 26.5 percent) in the first quarter of 2016, and 28.6 percent (effective tax rate of 26.9 percent) in the fourth quarter of 2016. The lower tax rate for the first quarter of 2017 reflects the tax benefit associated with stock-based compensation under new accounting guidance effective the first quarter of 2017. The impact of this guidance is expected to principally be reflected in the first quarter of each year.
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 11
ALLOWANCE FOR CREDIT LOSSES | Table 8 | |||||||||||||||||||||||||||||||||||||||
($ in millions) | 1Q 2017 |
% (b) | 4Q 2016 |
% (b) | 3Q 2016 |
% (b) | 2Q 2016 |
% (b) | 1Q 2016 |
% (b) | ||||||||||||||||||||||||||||||
Balance, beginning of period |
$ | 4,357 | $ | 4,338 | $ | 4,329 | $ | 4,320 | $ | 4,306 | ||||||||||||||||||||||||||||||
Net charge-offs |
||||||||||||||||||||||||||||||||||||||||
Commercial |
71 | .33 | 71 | .32 | 84 | .38 | 74 | .34 | 78 | .37 | ||||||||||||||||||||||||||||||
Lease financing |
4 | .30 | 5 | .37 | 3 | .23 | 5 | .38 | 5 | .38 | ||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||
Total commercial |
75 | .32 | 76 | .32 | 87 | .37 | 79 | .34 | 83 | .37 | ||||||||||||||||||||||||||||||
Commercial mortgages |
(1 | ) | (.01 | ) | (3 | ) | (.04 | ) | 5 | .06 | (4 | ) | (.05 | ) | (2 | ) | (.03 | ) | ||||||||||||||||||||||
Construction and development |
(1 | ) | (.03 | ) | (6 | ) | (.21 | ) | (4 | ) | (.14 | ) | 4 | .15 | (3 | ) | (.11 | ) | ||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||
Total commercial real estate |
(2 | ) | (.02 | ) | (9 | ) | (.08 | ) | 1 | .01 | | | (5 | ) | (.05 | ) | ||||||||||||||||||||||||
Residential mortgages |
12 | .08 | 12 | .08 | 12 | .08 | 17 | .12 | 19 | .14 | ||||||||||||||||||||||||||||||
Credit card |
190 | 3.70 | 181 | 3.44 | 161 | 3.11 | 170 | 3.39 | 164 | 3.26 | ||||||||||||||||||||||||||||||
Retail leasing |
3 | .19 | 1 | .06 | 1 | .07 | 2 | .15 | 1 | .08 | ||||||||||||||||||||||||||||||
Home equity and second mortgages |
(1 | ) | (.02 | ) | (1 | ) | (.02 | ) | 1 | .02 | (1 | ) | (.02 | ) | 2 | .05 | ||||||||||||||||||||||||
Other |
58 | .76 | 62 | .79 | 52 | .68 | 50 | .68 | 51 | .69 | ||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||
Total other retail |
60 | .45 | 62 | .46 | 54 | .41 | 51 | .40 | 54 | .43 | ||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||
Total net charge-offs, excluding covered loans |
335 | .50 | 322 | .48 | 315 | .47 | 317 | .49 | 315 | .49 | ||||||||||||||||||||||||||||||
Covered loans |
| | | | | | | | | | ||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||
Total net charge-offs |
335 | .50 | 322 | .47 | 315 | .46 | 317 | .48 | 315 | .48 | ||||||||||||||||||||||||||||||
Provision for credit losses |
345 | 342 | 325 | 327 | 330 | |||||||||||||||||||||||||||||||||||
Other changes (a) |
(1 | ) | (1 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||
Balance, end of period |
$ | 4,366 | $ | 4,357 | $ | 4,338 | $ | 4,329 | $ | 4,320 | ||||||||||||||||||||||||||||||
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Components |
||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses |
$ | 3,816 | $ | 3,813 | $ | 3,797 | $ | 3,806 | $ | 3,853 | ||||||||||||||||||||||||||||||
Liability for unfunded credit commitments |
550 | 544 | 541 | 523 | 467 | |||||||||||||||||||||||||||||||||||
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Total allowance for credit losses |
$ | 4,366 | $ | 4,357 | $ | 4,338 | $ | 4,329 | $ | 4,320 | ||||||||||||||||||||||||||||||
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Gross charge-offs |
$ | 417 | $ | 405 | $ | 398 | $ | 407 | $ | 405 | ||||||||||||||||||||||||||||||
Gross recoveries |
$ | 82 | $ | 83 | $ | 83 | $ | 90 | $ | 90 | ||||||||||||||||||||||||||||||
Allowance for credit losses as a percentage of Period-end loans, excluding covered loans |
1.61 | 1.60 | 1.61 | 1.62 | 1.65 | |||||||||||||||||||||||||||||||||||
Nonperforming loans, excluding covered loans |
338 | 317 | 309 | 311 | 302 | |||||||||||||||||||||||||||||||||||
Nonperforming assets, excluding covered assets |
296 | 275 | 264 | 263 | 255 | |||||||||||||||||||||||||||||||||||
Period-end loans |
1.60 | 1.59 | 1.60 | 1.61 | 1.63 | |||||||||||||||||||||||||||||||||||
Nonperforming loans |
338 | 318 | 310 | 312 | 303 | |||||||||||||||||||||||||||||||||||
Nonperforming assets |
292 | 272 | 261 | 259 | 251 |
(a) | Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the indemnification asset, and the impact of any loan sales. |
(b) | Annualized and calculated on average loan balances |
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 12
Credit Quality
The Companys provision for credit losses for the first quarter of 2017 was $345 million, which was $3 million (0.9 percent) higher than the prior quarter and $15 million (4.5 percent) higher than the first quarter of 2016. Credit quality was relatively stable compared with the fourth quarter of 2016.
The provision for credit losses was $10 million higher than net charge-offs in the first quarter of 2017, $20 million higher than net charge-offs in the fourth quarter of 2016, and $15 million higher than net charge-offs in the first quarter of 2016. The reserve build for the first quarter of 2017 was $10 million lower than the prior quarter due to lower portfolio growth and stable credit quality. Total net charge-offs in the first quarter of 2017 were $335 million, compared with $322 million in the fourth quarter of 2016, and $315 million in the first quarter of 2016. Net charge-offs increased $13 million (4.0 percent) compared with the fourth quarter of 2016 mainly due to seasonally higher credit card loan net charge-offs and lower total commercial real estate recoveries. Net charge-offs increased $20 million (6.3 percent) compared with the first quarter of 2016 primarily due to higher credit card loan and total other retail net charge-offs, partially offset by lower net charge-offs related to total commercial and residential mortgages. The net charge-off ratio was 0.50 percent in the first quarter of 2017, compared with 0.47 percent in the fourth quarter of 2016 and 0.48 percent in the first quarter of 2016.
The allowance for credit losses was $4,366 million at March 31, 2017, compared with $4,357 million at December 31, 2016, and $4,320 million at March 31, 2016. The ratio of the allowance for credit losses to period-end loans was 1.60 percent at March 31, 2017, compared with 1.59 percent at December 31, 2016, and 1.63 percent at March 31, 2016. The ratio of the allowance for credit losses to nonperforming loans was 338 percent at March 31, 2017, compared with 318 percent at December 31, 2016, and 303 percent at March 31, 2016.
Nonperforming assets were $1,495 million at March 31, 2017, compared with $1,603 million at December 31, 2016, and $1,719 million at March 31, 2016. The ratio of nonperforming assets to loans and other real estate was 0.55 percent at March 31, 2017, compared with 0.59 percent at December 31, 2016, and 0.65 percent at March 31, 2016. The $108 million (6.7 percent) decrease in nonperforming assets on a linked quarter basis was driven by improvements in commercial loans, commercial real estate, residential mortgages and other real estate. The $224 million (13.0 percent) decrease in nonperforming assets on a year-over-year basis was driven by commercial loans, residential mortgages and other real estate. Accruing loans 90 days or more past due were $718 million ($524 million excluding covered loans) at March 31, 2017,
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 13
compared with $764 million ($552 million excluding covered loans) at December 31, 2016, and $804 million ($528 million excluding covered loans) at March 31, 2016.
DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES | Table 9 | |||||||||||||||||||
(Percent) | ||||||||||||||||||||
Mar 31 2017 |
Dec 31 2016 |
Sep 30 2016 |
Jun 30 2016 |
Mar 31 2016 |
||||||||||||||||
Delinquent loan ratios - 90 days or more past due excluding nonperforming loans |
||||||||||||||||||||
Commercial |
.06 | .06 | .05 | .05 | .05 | |||||||||||||||
Commercial real estate |
.01 | .02 | .02 | .03 | .04 | |||||||||||||||
Residential mortgages |
.24 | .27 | .28 | .27 | .31 | |||||||||||||||
Credit card |
1.23 | 1.16 | 1.11 | .98 | 1.10 | |||||||||||||||
Other retail |
.14 | .15 | .14 | .13 | .15 | |||||||||||||||
Total loans, excluding covered loans |
.19 | .20 | .19 | .18 | .20 | |||||||||||||||
Covered loans |
5.34 | 5.53 | 5.72 | 5.81 | 6.23 | |||||||||||||||
Total loans |
.26 | .28 | .28 | .27 | .30 | |||||||||||||||
Delinquent loan ratios - 90 days or more past due including nonperforming loans |
||||||||||||||||||||
Commercial |
.52 | .57 | .61 | .58 | .57 | |||||||||||||||
Commercial real estate |
.27 | .31 | .26 | .27 | .28 | |||||||||||||||
Residential mortgages |
1.23 | 1.31 | 1.37 | 1.39 | 1.54 | |||||||||||||||
Credit card |
1.24 | 1.18 | 1.13 | 1.00 | 1.14 | |||||||||||||||
Other retail |
.43 | .45 | .42 | .43 | .45 | |||||||||||||||
Total loans, excluding covered loans |
.67 | .71 | .72 | .70 | .75 | |||||||||||||||
Covered loans |
5.53 | 5.68 | 5.89 | 5.98 | 6.39 | |||||||||||||||
Total loans |
.73 | .78 | .79 | .79 | .84 |
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 14
ASSET QUALITY | Table 10 | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||
Mar 31 2017 |
Dec 31 2016 |
Sep 30 2016 |
Jun 30 2016 |
Mar 31 2016 |
||||||||||||||||
Nonperforming loans |
||||||||||||||||||||
Commercial |
$ | 397 | $ | 443 | $ | 477 | $ | 450 | $ | 457 | ||||||||||
Lease financing |
42 | 40 | 40 | 39 | 16 | |||||||||||||||
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|
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Total commercial |
439 | 483 | 517 | 489 | 473 | |||||||||||||||
Commercial mortgages |
74 | 87 | 98 | 91 | 94 | |||||||||||||||
Construction and development |
36 | 37 | 7 | 12 | 10 | |||||||||||||||
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|||||||||||
Total commercial real estate |
110 | 124 | 105 | 103 | 104 | |||||||||||||||
Residential mortgages |
575 | 595 | 614 | 628 | 677 | |||||||||||||||
Credit card |
2 | 3 | 4 | 5 | 7 | |||||||||||||||
Other retail |
157 | 157 | 153 | 157 | 157 | |||||||||||||||
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|
|
|
|
|
|
|
|||||||||||
Total nonperforming loans, excluding covered loans |
1,283 | 1,362 | 1,393 | 1,382 | 1,418 | |||||||||||||||
Covered loans |
7 | 6 | 7 | 7 | 7 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total nonperforming loans |
1,290 | 1,368 | 1,400 | 1,389 | 1,425 | |||||||||||||||
Other real estate (a) |
155 | 186 | 213 | 229 | 242 | |||||||||||||||
Covered other real estate (a) |
22 | 26 | 28 | 34 | 33 | |||||||||||||||
Other nonperforming assets |
28 | 23 | 23 | 20 | 19 | |||||||||||||||
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|
|
|
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|
|||||||||||
Total nonperforming assets (b) |
$ | 1,495 | $ | 1,603 | $ | 1,664 | $ | 1,672 | $ | 1,719 | ||||||||||
|
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|
|
|
|
|
|
|
|||||||||||
Total nonperforming assets, excluding covered assets |
$ | 1,466 | $ | 1,571 | $ | 1,629 | $ | 1,631 | $ | 1,679 | ||||||||||
|
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|
|
|
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|
|
|
|||||||||||
Accruing loans 90 days or more past due, excluding covered loans |
$ | 524 | $ | 552 | $ | 518 | $ | 478 | $ | 528 | ||||||||||
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|
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|
|
|
|||||||||||
Accruing loans 90 days or more past due |
$ | 718 | $ | 764 | $ | 748 | $ | 724 | $ | 804 | ||||||||||
|
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|
|
|
|
|
|
|
|||||||||||
Performing restructured loans, excluding GNMA and covered loans |
$ | 2,478 | $ | 2,557 | $ | 2,672 | $ | 2,676 | $ | 2,735 | ||||||||||
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|
|
|
|
|
|
|
|||||||||||
Performing restructured GNMA and covered loans |
$ | 1,746 | $ | 1,604 | $ | 1,375 | $ | 1,602 | $ | 1,851 | ||||||||||
|
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|
|
|
|
|
|
|
|||||||||||
Nonperforming assets to loans plus ORE, excluding covered assets (%) |
.54 | .58 | .61 | .62 | .64 | |||||||||||||||
Nonperforming assets to loans plus ORE (%) |
.55 | .59 | .61 | .62 | .65 |
(a) | Includes equity investments in entities whose principal assets are other real estate owned. |
(b) | Does not include accruing loans 90 days or more past due. |
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 15
COMMON SHARES | Table 11 | |||||||||||||||||||
(Millions) | 1Q 2017 |
4Q 2016 |
3Q 2016 |
2Q 2016 |
1Q 2016 |
|||||||||||||||
Beginning shares outstanding |
1,697 | 1,705 | 1,719 | 1,732 | 1,745 | |||||||||||||||
Shares issued for stock incentive plans, acquisitions and other corporate purposes |
6 | 6 | 2 | 2 | 3 | |||||||||||||||
Shares repurchased |
(11 | ) | (14 | ) | (16 | ) | (15 | ) | (16 | ) | ||||||||||
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|
|
|
|||||||||||
Ending shares outstanding |
1,692 | 1,697 | 1,705 | 1,719 | 1,732 | |||||||||||||||
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|
|
CAPITAL POSITION | Table 12 | |||||||||||||||||||
($ in millions) | Mar 31 2017 |
Dec 31 2016 |
Sep 30 2016 |
Jun 30 2016 |
Mar 31 2016 |
|||||||||||||||
Total U.S. Bancorp shareholders equity |
$ | 47,798 | $ | 47,298 | $ | 47,759 | $ | 47,390 | $ | 46,755 | ||||||||||
Standardized Approach |
||||||||||||||||||||
Basel III transitional standardized approach |
||||||||||||||||||||
Common equity tier 1 capital |
$ | 33,847 | $ | 33,720 | $ | 33,827 | $ | 33,444 | $ | 32,827 | ||||||||||
Tier 1 capital |
39,374 | 39,421 | 39,531 | 39,148 | 38,532 | |||||||||||||||
Total risk-based capital |
47,279 | 47,355 | 47,452 | 47,049 | 45,412 | |||||||||||||||
Common equity tier 1 capital ratio |
9.5 | % | 9.4 | % | 9.5 | % | 9.5 | % | 9.5 | % | ||||||||||
Tier 1 capital ratio |
11.0 | 11.0 | 11.1 | 11.1 | 11.1 | |||||||||||||||
Total risk-based capital ratio |
13.3 | 13.2 | 13.3 | 13.4 | 13.1 | |||||||||||||||
Leverage ratio |
9.1 | 9.0 | 9.2 | 9.3 | 9.3 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach (a) |
9.2 | 9.1 | 9.3 | 9.3 | 9.2 | |||||||||||||||
Advanced Approaches |
||||||||||||||||||||
Common equity tier 1 capital to risk-weighted assets for the Basel III transitional advanced approaches |
11.8 | 12.2 | 12.4 | 12.3 | 12.3 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches (a) |
11.5 | 11.7 | 12.1 | 12.0 | 11.9 | |||||||||||||||
Tangible common equity to tangible assets (a) |
7.6 | 7.5 | 7.5 | 7.6 | 7.7 | |||||||||||||||
Tangible common equity to risk-weighted assets (a) |
9.4 | 9.2 | 9.3 | 9.3 | 9.3 |
Beginning January 1, 2014, the regulatory capital requirements effective for the Company follow Basel III, subject to certain transition provisions from Basel I over the following four years to full implementation by January 1, 2018. Basel III includes two comprehensive methodologies for calculating risk-weighted assets: a general standardized approach and more risk-sensitive advanced approaches, with the Companys capital adequacy being evaluated against the methodology that is most restrictive.
(a) | See Non-GAAP Financial Measures reconciliation on page 21 |
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 16
Capital Management
Total U.S. Bancorp shareholders equity was $47.8 billion at March 31, 2017, compared with $47.3 billion at December 31, 2016, and $46.8 billion at March 31, 2016. During the first quarter, the Company returned 78 percent of earnings to shareholders through dividends and share buybacks.
All regulatory ratios continue to be in excess of well-capitalized requirements. The estimated common equity tier 1 capital to risk-weighted assets ratio using the Basel III fully implemented standardized approach was 9.2 percent at March 31, 2017, compared with 9.1 percent at December 31, 2016, and 9.2 percent at March 31, 2016. The estimated common equity tier 1 capital to risk-weighted assets ratio using the Basel III fully implemented advanced approaches method was 11.5 percent at March 31, 2017, compared with 11.7 percent at December 31, 2016, and 11.9 percent at March 31, 2016.
On Wednesday, April 19, 2017, at 8:00 a.m. CT, Andy Cecere, president and chief executive officer, and Terry Dolan, vice chairman and chief financial officer, will host a conference call to review the financial results. The conference call will be available online or by telephone. To access the webcast and presentation, go to www.usbank.com and click on About U.S. Bank. The Webcasts & Presentations link can be found under the Investor/Shareholder information heading, which is at the left side near the bottom of the page. To access the conference call from locations within the United States and Canada, please dial 866-316-1409. Participants calling from outside the United States and Canada, please dial 706-634-9086. The conference ID number for all participants is 73528771. For those unable to participate during the live call, a recording will be available at approximately 11:00 a.m. CT on Wednesday, April 19 and be accessible through Wednesday, April 26 at 11:00 p.m. CT. To access the recording within the United States and Canada, dial 855-859-2056. If calling from outside the United States and Canada, please dial 404-537-3406 to access the recording. The conference ID is 73528771.
Minneapolis-based U.S. Bancorp (NYSE: USB), with $450 billion in assets as of March 31, 2017, is the parent company of U.S. Bank National Association, the fifth largest commercial bank in the United States. The Company operates 3,091 banking offices in 25 states and 4,838 ATMs and provides a comprehensive line of banking, investment, mortgage, trust and payment services products to consumers, businesses and institutions. Visit U.S. Bancorp on the web at www.usbank.com.
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 17
Forward-Looking Statements
The following information appears in accordance with the Private Securities Litigation Reform Act of 1995:
This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. A reversal or slowing of the current economic recovery or another severe contraction could adversely affect U.S. Bancorps revenues and the values of its assets and liabilities. Global financial markets could experience a recurrence of significant turbulence, which could reduce the availability of funding to certain financial institutions and lead to a tightening of credit, a reduction of business activity, and increased market volatility. Stress in the commercial real estate markets, as well as a downturn in the residential real estate markets could cause credit losses and deterioration in asset values. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorps results could also be adversely affected by deterioration in general business and economic conditions; changes in interest rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of securities held in its investment securities portfolio; legal and regulatory developments; litigation; increased competition from both banks and non-banks; changes in customer behavior and preferences; breaches in data security; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and managements ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputational risk.
For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorps Annual Report on Form 10-K for the year ended December 31, 2016, on file with the Securities and Exchange Commission, including the sections entitled Risk Factors and Corporate Risk Profile contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. However, factors other than these also could adversely affect U.S. Bancorps results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 18
Non-GAAP Financial Measures
In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:
| Tangible common equity to tangible assets, |
| Tangible common equity to risk-weighted assets, |
| Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach, and |
| Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches. |
These capital measures are viewed by management as useful additional methods of reflecting the level of capital available to withstand unexpected market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Companys capital position relative to other financial services companies. These measures differ from currently effective capital ratios defined by banking regulations principally in that the numerator of the currently effective ratios, which are subject to certain transitional provisions, temporarily excludes a portion of unrealized gains and losses related to available-for-sale securities and retirement plan obligations, and includes a portion of capital related to intangible assets, other than mortgage servicing rights. These capital measures are not defined in generally accepted accounting principles (GAAP), or are not currently effective or defined in federal banking regulations. As a result, these capital measures disclosed by the Company may be considered non-GAAP financial measures.
The Company also discloses net interest income and related ratios and analysis on a taxable-equivalent basis, which may also be considered non-GAAP financial measures. The Company believes this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable and tax-exempt sources. In addition, certain performance measures, including the efficiency ratio and net interest margin utilize net interest income on a taxable-equivalent basis.
There may be limits in the usefulness of these measures to investors. As a result, the Company encourages readers to consider the consolidated financial statements and other financial information contained in this press release in their entirety, and not to rely on any single financial measure. A table follows that shows the Companys calculation of these non-GAAP financial measures.
###
(MORE)
U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 19
U.S. Bancorp
Consolidated Statement of Income
(Dollars and Shares in Millions, Except Per Share Data) | Three Months Ended March 31, |
|||||||
(Unaudited) |
2017 | 2016 | ||||||
Interest Income |
||||||||
Loans |
$ | 2,797 | $ | 2,644 | ||||
Loans held for sale |
35 | 31 | ||||||
Investment securities |
530 | 517 | ||||||
Other interest income |
38 | 29 | ||||||
|
|
|
|
|||||
Total interest income |
3,400 | 3,221 | ||||||
Interest Expense |
||||||||
Deposits |
199 | 139 | ||||||
Short-term borrowings |
66 | 65 | ||||||
Long-term debt |
190 | 182 | ||||||
|
|
|
|
|||||
Total interest expense |
455 | 386 | ||||||
|
|
|
|
|||||
Net interest income |
2,945 | 2,835 | ||||||
Provision for credit losses |
345 | 330 | ||||||
|
|
|
|
|||||
Net interest income after provision for credit losses |
2,600 | 2,505 | ||||||
Noninterest Income |
||||||||
Credit and debit card revenue |
292 | 266 | ||||||
Corporate payment products revenue |
179 | 170 | ||||||
Merchant processing services |
378 | 373 | ||||||
ATM processing services |
85 | 80 | ||||||
Trust and investment management fees |
368 | 339 | ||||||
Deposit service charges |
177 | 168 | ||||||
Treasury management fees |
153 | 142 | ||||||
Commercial products revenue |
207 | 197 | ||||||
Mortgage banking revenue |
207 | 187 | ||||||
Investment products fees |
40 | 40 | ||||||
Securities gains (losses), net |
29 | 3 | ||||||
Other |
214 | 184 | ||||||
|
|
|
|
|||||
Total noninterest income |
2,329 | 2,149 | ||||||
Noninterest Expense |
||||||||
Compensation |
1,391 | 1,249 | ||||||
Employee benefits |
314 | 300 | ||||||
Net occupancy and equipment |
247 | 248 | ||||||
Professional services |
96 | 98 | ||||||
Marketing and business development |
90 | 77 | ||||||
Technology and communications |
235 | 233 | ||||||
Postage, printing and supplies |
81 | 79 | ||||||
Other intangibles |
44 | 45 | ||||||
Other |
446 | 420 | ||||||
|
|
|
|
|||||
Total noninterest expense |
2,944 | 2,749 | ||||||
|
|
|
|
|||||
Income before income taxes |
1,985 | 1,905 | ||||||
Applicable income taxes |
499 | 504 | ||||||
|
|
|
|
|||||
Net income |
1,486 | 1,401 | ||||||
Net (income) loss attributable to noncontrolling interests |
(13 | ) | (15 | ) | ||||
|
|
|
|
|||||
Net income attributable to U.S. Bancorp |
$ | 1,473 | $ | 1,386 | ||||
|
|
|
|
|||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 1,387 | $ | 1,329 | ||||
|
|
|
|
|||||
Earnings per common share |
$ | .82 | $ | .77 | ||||
Diluted earnings per common share |
$ | .82 | $ | .76 | ||||
Dividends declared per common share |
$ | .280 | $ | .255 | ||||
Average common shares outstanding |
1,694 | 1,737 | ||||||
Average diluted common shares outstanding |
1,701 | 1,743 | ||||||
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 20
U.S. Bancorp
Consolidated Ending Balance Sheet
(Dollars in Millions) |
March 31, 2017 |
December 31, 2016 |
March 31, 2016 |
|||||||||
(Unaudited) | (Unaudited) | |||||||||||
Assets |
||||||||||||
Cash and due from banks |
$ | 20,319 | $ | 15,705 | $ | 10,981 | ||||||
Investment securities |
||||||||||||
Held-to-maturity |
43,393 | 42,991 | 42,113 | |||||||||
Available-for-sale |
67,031 | 66,284 | 64,912 | |||||||||
Loans held for sale |
2,738 | 4,826 | 4,005 | |||||||||
Loans |
||||||||||||
Commercial |
94,491 | 93,386 | 91,277 | |||||||||
Commercial real estate |
42,832 | 43,098 | 42,743 | |||||||||
Residential mortgages |
58,266 | 57,274 | 54,955 | |||||||||
Credit card |
20,387 | 21,749 | 19,957 | |||||||||
Other retail |
53,966 | 53,864 | 51,161 | |||||||||
|
|
|
|
|
|
|||||||
Total loans, excluding covered loans |
269,942 | 269,371 | 260,093 | |||||||||
Covered loans |
3,635 | 3,836 | 4,429 | |||||||||
|
|
|
|
|
|
|||||||
Total loans |
273,577 | 273,207 | 264,522 | |||||||||
Less allowance for loan losses |
(3,816 | ) | (3,813 | ) | (3,853 | ) | ||||||
|
|
|
|
|
|
|||||||
Net loans |
269,761 | 269,394 | 260,669 | |||||||||
Premises and equipment |
2,432 | 2,443 | 2,486 | |||||||||
Goodwill |
9,348 | 9,344 | 9,368 | |||||||||
Other intangible assets |
3,313 | 3,303 | 3,042 | |||||||||
Other assets |
31,187 | 31,674 | 31,062 | |||||||||
|
|
|
|
|
|
|||||||
Total assets |
$ | 449,522 | $ | 445,964 | $ | 428,638 | ||||||
|
|
|
|
|
|
|||||||
Liabilities and Shareholders Equity |
||||||||||||
Deposits |
||||||||||||
Noninterest-bearing |
$ | 85,222 | $ | 86,097 | $ | 80,407 | ||||||
Interest-bearing |
251,651 | 248,493 | 225,941 | |||||||||
|
|
|
|
|
|
|||||||
Total deposits |
336,873 | 334,590 | 306,348 | |||||||||
Short-term borrowings |
12,183 | 13,963 | 23,777 | |||||||||
Long-term debt |
35,948 | 33,323 | 34,872 | |||||||||
Other liabilities |
16,085 | 16,155 | 16,248 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
401,089 | 398,031 | 381,245 | |||||||||
Shareholders equity |
||||||||||||
Preferred stock |
5,419 | 5,501 | 5,501 | |||||||||
Common stock |
21 | 21 | 21 | |||||||||
Capital surplus |
8,388 | 8,440 | 8,368 | |||||||||
Retained earnings |
51,069 | 50,151 | 47,267 | |||||||||
Less treasury stock |
(15,660 | ) | (15,280 | ) | (13,658 | ) | ||||||
Accumulated other comprehensive income (loss) |
(1,439 | ) | (1,535 | ) | (744 | ) | ||||||
|
|
|
|
|
|
|||||||
Total U.S. Bancorp shareholders equity |
47,798 | 47,298 | 46,755 | |||||||||
Noncontrolling interests |
635 | 635 | 638 | |||||||||
|
|
|
|
|
|
|||||||
Total equity |
48,433 | 47,933 | 47,393 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities and equity |
$ | 449,522 | $ | 445,964 | $ | 428,638 | ||||||
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U.S. Bancorp Reports First Quarter 2017 Results
April 19, 2017
Page 21
U.S. Bancorp
Non-GAAP Financial Measures
(Dollars in Millions, Unaudited) |
March 31, 2017 |
December 31, 2016 |
September 30, 2016 |
June 30, 2016 |
March 31, 2016 |
|||||||||||||||
Total equity |
$ | 48,433 | $ | 47,933 | $ | 48,399 | $ | 48,029 | $ | 47,393 | ||||||||||
Preferred stock |
(5,419 | ) | (5,501 | ) | (5,501 | ) | (5,501 | ) | (5,501 | ) | ||||||||||
Noncontrolling interests |
(635 | ) | (635 | ) | (640 | ) | (639 | ) | (638 | ) | ||||||||||
Goodwill (net of deferred tax liability) (1) |
(8,186 | ) | (8,203 | ) | (8,239 | ) | (8,246 | ) | (8,270 | ) | ||||||||||
Intangible assets, other than mortgage servicing rights |
(671 | ) | (712 | ) | (756 | ) | (796 | ) | (820 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Tangible common equity (a) |
33,522 | 32,882 | 33,263 | 32,847 | 32,164 | |||||||||||||||
Tangible common equity (as calculated above) |
33,522 | 32,882 | 33,263 | 32,847 | 32,164 | |||||||||||||||
Adjustments (2) |
(136 | ) | (55 | ) | 97 | 133 | 99 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common equity tier 1 capital estimated for the Basel III fully implemented standardized and advanced approaches (b) |
33,386 | 32,827 | 33,360 | 32,980 | 32,263 | |||||||||||||||
Total assets |
449,522 | 445,964 | 454,134 | 438,463 | 428,638 | |||||||||||||||
Goodwill (net of deferred tax liability) (1) |
(8,186 | ) | (8,203 | ) | (8,239 | ) | (8,246 | ) | (8,270 | ) | ||||||||||
Intangible assets, other than mortgage servicing rights |
(671 | ) | (712 | ) | (756 | ) | (796 | ) | (820 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Tangible assets (c) |
440,665 | 437,049 | 445,139 | 429,421 | 419,548 | |||||||||||||||
Risk-weighted assets, determined in accordance with prescribed transitional standardized approach regulatory requirements (d) |
|
356,373 |
* |
358,237 | 356,733 | 351,462 | 346,227 | |||||||||||||
Adjustments (3) |
4,731 | * | 4,027 | 3,165 | 3,079 | 3,485 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Risk-weighted assets estimated for the Basel III fully implemented standardized approach (e) |
|
361,104 |
* |
362,264 | 359,898 | 354,541 | 349,712 | |||||||||||||
Risk-weighted assets, determined in accordance with prescribed transitional advanced approaches regulatory requirements |
|
285,963 |
* |
277,141 | 272,832 | 271,495 | 267,309 | |||||||||||||
Adjustments (4) |
5,046 | * | 4,295 | 3,372 | 3,283 | 3,707 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Risk-weighted assets estimated for the Basel III fully implemented advanced approaches (f) |
|
291,009 |
* |
281,436 | 276,204 | 274,778 | 271,016 | |||||||||||||
Ratios * |
||||||||||||||||||||
Tangible common equity to tangible assets (a)/(c) |
7.6 | % | 7.5 | % | 7.5 | % | 7.6 | % | 7.7 | % | ||||||||||
Tangible common equity to risk-weighted |
9.4 | 9.2 | 9.3 | 9.3 | 9.3 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the |
||||||||||||||||||||
Basel III fully implemented standardized approach (b)/(e) |
9.2 | 9.1 | 9.3 | 9.3 | 9.2 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the |
||||||||||||||||||||
Basel III fully implemented advanced approaches (b)/(f) |
11.5 | 11.7 | 12.1 | 12.0 | 11.9 | |||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, 2017 |
December 31, 2016 |
September 30, 2016 |
June 30, 2016 |
March 31, 2016 |
||||||||||||||||
Net interest income |
$ | 2,945 | $ | 2,955 | $ | 2,893 | $ | 2,845 | $ | 2,835 | ||||||||||
Taxable-equivalent adjustment (5) |
50 | 49 | 50 | 51 | 53 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net interest income, on a taxable-equivalent basis |
2,995 | 3,004 | 2,943 | 2,896 | 2,888 | |||||||||||||||
Net interest income, on a taxable-equivalent basis (as calculated above) |
2,995 | 3,004 | 2,943 | 2,896 | 2,888 | |||||||||||||||
Noninterest income |
2,329 | 2,431 | 2,445 | 2,552 | 2,149 | |||||||||||||||
Less: Securities gains (losses), net |
29 | 6 | 10 | 3 | 3 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total net revenue, excluding net securities gains (losses) (g) |
5,295 | 5,429 | 5,378 | 5,445 | 5,034 | |||||||||||||||
Noninterest expense (h) |
2,944 | 3,004 | 2,931 | 2,992 | 2,749 | |||||||||||||||
Less: Intangible amortization |
44 | 45 | 45 | 44 | 45 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Noninterest expense, excluding intangible amortization (i) |
2,900 | 2,959 | 2,886 | 2,948 | 2,704 | |||||||||||||||
Efficiency ratio (h)/(g) |
55.6 | % | 55.3 | % | 54.5 | % | 54.9 | % | 54.6 | % | ||||||||||
Tangible efficiency ratio (i)/(g) |
54.8 | 54.5 | 53.7 | 54.1 | 53.7 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
* | Preliminary data. Subject to change prior to filings with applicable regulatory agencies. |
(1) | Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements. |
(2) | Includes net losses on cash flow hedges included in accumulated other comprehensive income (loss) and other adjustments. |
(3) | Includes higher risk-weighting for unfunded loan commitments, investment securities, residential mortgages, mortgage servicing rights and other adjustments. |
(4) | Primarily reflects higher risk-weighting for mortgage servicing rights. |
(5) | Utilizes a tax rate of 35 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes. |
(MORE)
Supplemental Business Line Schedules
1Q 2017
U.S. Bancorp First Quarter 2017 Business Line Results
April 19, 2017
Page 2
LINE OF BUSINESS FINANCIAL PERFORMANCE (a) | ||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
Net Income Attributable to U.S. Bancorp |
Percent Change | 1Q 2017 | ||||||||||||||||||||||
Business Line |
1Q 2017 |
4Q 2016 |
1Q 2016 |
1Q17 vs 4Q16 |
1Q17 vs 1Q16 |
Earnings Composition |
||||||||||||||||||
Wholesale Banking and |
||||||||||||||||||||||||
Commercial Real Estate |
$ | 259 | $ | 274 | $ | 118 | (5.5 | ) | nm | 18 | % | |||||||||||||
Consumer and Small Business |
||||||||||||||||||||||||
Banking |
295 | 298 | 354 | (1.0 | ) | (16.7 | ) | 20 | ||||||||||||||||
Wealth Management and |
||||||||||||||||||||||||
Securities Services |
109 | 106 | 78 | 2.8 | 39.7 | 7 | ||||||||||||||||||
Payment Services |
274 | 313 | 287 | (12.5 | ) | (4.5 | ) | 19 | ||||||||||||||||
Treasury and Corporate Support |
536 | 487 | 549 | 10.1 | (2.4 | ) | 36 | |||||||||||||||||
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|
|
|
|
|
|
|||||||||||||||||
Consolidated Company |
$ | 1,473 | $ | 1,478 | $ | 1,386 | (.3 | ) | 6.3 | 100 | % | |||||||||||||
|
|
|
|
|
|
|
|
(a) | preliminary data |
Lines of Business
The Companys major lines of business are Wholesale Banking and Commercial Real Estate, Consumer and Small Business Banking, Wealth Management and Securities Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate resources and assess performance. Noninterest expenses incurred by centrally managed operations or business lines that directly support another business lines operations are charged to the applicable business line based on its utilization of those services, primarily measured by the volume of customer activities, number of employees or other relevant factors. These allocated expenses are reported as net shared services expense within noninterest expense. Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Companys diverse customer base. During 2017, certain organization and methodology changes were made and, accordingly, prior period results were restated and presented on a comparable basis.
U.S. Bancorp First Quarter 2017 Business Line Results
April 19, 2017
Page 3
WHOLESALE BANKING AND COMMERCIAL REAL ESTATE (a) | ||||||||||||||||||||
($ in millions) | ||||||||||||||||||||
Percent Change | ||||||||||||||||||||
1Q 2017 |
4Q 2016 |
1Q 2016 |
1Q17 vs 4Q16 |
1Q17 vs 1Q16 |
||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$ | 587 | $ | 603 | $ | 529 | (2.7 | ) | 11.0 | |||||||||||
Noninterest income |
244 | 220 | 206 | 10.9 | 18.4 | |||||||||||||||
Securities gains (losses), net |
(3 | ) | 2 | | nm | nm | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total net revenue |
828 | 825 | 735 | .4 | 12.7 | |||||||||||||||
Noninterest expense |
384 | 371 | 348 | 3.5 | 10.3 | |||||||||||||||
Other intangibles |
1 | 1 | 1 | | | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total noninterest expense |
385 | 372 | 349 | 3.5 | 10.3 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Income before provision and taxes |
443 | 453 | 386 | (2.2 | ) | 14.8 | ||||||||||||||
Provision for credit losses |
36 | 23 | 201 | 56.5 | (82.1 | ) | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Income before income taxes |
407 | 430 | 185 | (5.3 | ) | nm | ||||||||||||||
Income taxes and taxable-equivalent adjustment |
148 | 156 | 67 | (5.1 | ) | nm | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income |
259 | 274 | 118 | (5.5 | ) | nm | ||||||||||||||
Net (income) loss attributable to noncontrolling interests |
| | | | | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 259 | $ | 274 | $ | 118 | (5.5 | ) | nm | |||||||||||
|
|
|
|
|
|
|||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||
Loans |
$ | 93,727 | $ | 93,645 | $ | 90,148 | .1 | 4.0 | ||||||||||||
Other earning assets |
2,882 | 2,833 | 2,237 | 1.7 | 28.8 | |||||||||||||||
Goodwill |
1,647 | 1,647 | 1,647 | | | |||||||||||||||
Other intangible assets |
15 | 16 | 18 | (6.3 | ) | (16.7 | ) | |||||||||||||
Assets |
102,308 | 102,464 | 98,444 | (.2 | ) | 3.9 | ||||||||||||||
Noninterest-bearing deposits |
36,882 | 37,919 | 36,702 | (2.7 | ) | .5 | ||||||||||||||
Interest-bearing deposits |
70,491 | 72,159 | 54,804 | (2.3 | ) | 28.6 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total deposits |
107,373 | 110,078 | 91,506 | (2.5 | ) | 17.3 | ||||||||||||||
Total U.S. Bancorp shareholders equity |
9,680 | 9,201 | 8,817 | 5.2 | 9.8 |
(a) | preliminary data |
Wholesale Banking and Commercial Real Estate offers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets services, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution, non-profit and public sector clients. Wholesale Banking and Commercial Real Estate contributed $259 million of the Companys net income in the first quarter of 2017, compared with $118 million in the first quarter of 2016. Wholesale Banking and Commercial Real Estates net income increased $141 million over the same
U.S. Bancorp First Quarter 2017 Business Line Results
April 19, 2017
Page 4
quarter of 2016 primarily due to a decrease in the provision for credit losses as well as an increase in net interest income and noninterest income, partially offset by an increase in noninterest expense. Total net revenue increased $93 million (12.7 percent) due to a $58 million (11.0 percent) increase in net interest income and a $35 million (17.0 percent) increase in total noninterest income. Net interest income increased year-over-year primarily due to higher average loan and deposit balances along with the impact of higher rates on the margin benefit from deposits, partially offset by lower spread on loans reflecting a competitive marketplace. Noninterest income increased year-over-year primarily due to higher capital markets volume and higher foreign currency customer activity. Total noninterest expense was $36 million (10.3 percent) higher compared with a year ago primarily due to an increase in variable costs allocated to manage the business, including the impact of the FDIC surcharge, and higher variable compensation. Provision for credit losses decreased $165 million (82.1 percent) primarily due to the impacts of reserve build for energy sector downgrades in the prior year, along with lower net charge-offs.
U.S. Bancorp First Quarter 2017 Business Line Results
April 19, 2017
Page 5
CONSUMER AND SMALL BUSINESS BANKING (a) | ||||||||||||||||||||
($ in millions) | ||||||||||||||||||||
Percent Change | ||||||||||||||||||||
1Q 2017 |
4Q 2016 |
1Q 2016 |
1Q17 vs 4Q16 |
1Q17 vs 1Q16 |
||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$ | 1,222 | $ | 1,229 | $ | 1,157 | (.6 | ) | 5.6 | |||||||||||
Noninterest income |
585 | 627 | 551 | (6.7 | ) | 6.2 | ||||||||||||||
Securities gains (losses), net |
| | | | | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total net revenue |
1,807 | 1,856 | 1,708 | (2.6 | ) | 5.8 | ||||||||||||||
Noninterest expense |
1,272 | 1,308 | 1,210 | (2.8 | ) | 5.1 | ||||||||||||||
Other intangibles |
7 | 8 | 8 | (12.5 | ) | (12.5 | ) | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total noninterest expense |
1,279 | 1,316 | 1,218 | (2.8 | ) | 5.0 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Income before provision and taxes |
528 | 540 | 490 | (2.2 | ) | 7.8 | ||||||||||||||
Provision for credit losses |
65 | 71 | (67 | ) | (8.5 | ) | nm | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
Income before income taxes |
463 | 469 | 557 | (1.3 | ) | (16.9 | ) | |||||||||||||
Income taxes and taxable-equivalent adjustment |
168 | 171 | 203 | (1.8 | ) | (17.2 | ) | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income |
295 | 298 | 354 | (1.0 | ) | (16.7 | ) | |||||||||||||
Net (income) loss attributable to noncontrolling interests |
| | | | | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 295 | $ | 298 | $ | 354 | (1.0 | ) | (16.7 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||
Loans |
$ | 139,124 | $ | 138,702 | $ | 133,669 | .3 | 4.1 | ||||||||||||
Other earning assets |
4,022 | 5,476 | 3,723 | (26.6 | ) | 8.0 | ||||||||||||||
Goodwill |
3,681 | 3,681 | 3,681 | | | |||||||||||||||
Other intangible assets |
2,768 | 2,508 | 2,513 | 10.4 | 10.1 | |||||||||||||||
Assets |
153,666 | 154,896 | 148,019 | (.8 | ) | 3.8 | ||||||||||||||
Noninterest-bearing deposits |
26,974 | 28,806 | 25,965 | (6.4 | ) | 3.9 | ||||||||||||||
Interest-bearing deposits |
119,475 | 117,407 | 112,917 | 1.8 | 5.8 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total deposits |
146,449 | 146,213 | 138,882 | .2 | 5.4 | |||||||||||||||
Total U.S. Bancorp shareholders equity |
11,523 | 11,354 | 11,019 | 1.5 | 4.6 |
(a) | preliminary data |
Consumer and Small Business Banking delivers products and services through banking offices, telephone servicing and sales, on-line services, direct mail, ATM processing and mobile devices. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking. Consumer and Small Business Banking contributed $295 million of the Companys net income in the first quarter of 2017, compared with $354 million in the first quarter of 2016. Consumer and Small Business Bankings net income decreased $59 million (16.7 percent) from the same quarter of 2016 due to an increase
U.S. Bancorp First Quarter 2017 Business Line Results
April 19, 2017
Page 6
in the provision for credit losses and an increase in noninterest expense, partially offset by an increase in total net revenue. Total net revenue increased $99 million (5.8 percent) due to higher net interest income and noninterest income. Net interest income increased $65 million (5.6 percent) primarily due to higher average loan and deposit balances along with the impact of higher rates on the margin benefit from deposits, partially offset by lower spread on loans. Noninterest income was $34 million (6.2 percent) higher than a year ago, reflecting higher mortgage banking revenue driven by the value of mortgage servicing rights, net of hedging activities. Total noninterest expense in the first quarter of 2017 increased $61 million (5.0 percent) over the same quarter of the prior year primarily due to higher compensation and employee benefits expense, reflecting the impact of increased staffing and merit increases, and higher net shared services expense, reflecting the impact of implementation costs of capital investments to support business growth. The provision for credit losses increased $132 million primarily due to the release of reserves in the first quarter of 2016 as a result of improvements in the mortgage portfolio.
U.S. Bancorp First Quarter 2017 Business Line Results
April 19, 2017
Page 7
WEALTH MANAGEMENT AND SECURITIES SERVICES (a) | ||||||||||||||||||||
($ in millions) | ||||||||||||||||||||
Percent Change | ||||||||||||||||||||
1Q 2017 |
4Q 2016 |
1Q 2016 |
1Q17 vs 4Q16 |
1Q17 vs 1Q16 |
||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$ | 179 | $ | 163 | $ | 117 | 9.8 | 53.0 | ||||||||||||
Noninterest income |
398 | 406 | 379 | (2.0 | ) | 5.0 | ||||||||||||||
Securities gains (losses), net |
| | | | | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total net revenue |
577 | 569 | 496 | 1.4 | 16.3 | |||||||||||||||
Noninterest expense |
399 | 399 | 370 | | 7.8 | |||||||||||||||
Other intangibles |
5 | 6 | 6 | (16.7 | ) | (16.7 | ) | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total noninterest expense |
404 | 405 | 376 | (.2 | ) | 7.4 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Income before provision and taxes |
173 | 164 | 120 | 5.5 | 44.2 | |||||||||||||||
Provision for credit losses |
1 | (2 | ) | (2 | ) | nm | nm | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
Income before income taxes |
172 | 166 | 122 | 3.6 | 41.0 | |||||||||||||||
Income taxes and taxable-equivalent adjustment |
63 | 60 | 44 | 5.0 | 43.2 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income |
109 | 106 | 78 | 2.8 | 39.7 | |||||||||||||||
Net (income) loss attributable to noncontrolling interests |
| | | | | |||||||||||||||
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|
|
|
|
|||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 109 | $ | 106 | $ | 78 | 2.8 | 39.7 | ||||||||||||
|
|
|
|
|
|
|||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||
Loans |
$ | 7,957 | $ | 7,645 | $ | 7,044 | 4.1 | 13.0 | ||||||||||||
Other earning assets |
153 | 145 | 137 | 5.5 | 11.7 | |||||||||||||||
Goodwill |
1,566 | 1,567 | 1,567 | (.1 | ) | (.1 | ) | |||||||||||||
Other intangible assets |
87 | 93 | 109 | (6.5 | ) | (20.2 | ) | |||||||||||||
Assets |
11,437 | 10,654 | 10,285 | 7.3 | 11.2 | |||||||||||||||
Noninterest-bearing deposits |
13,862 | 15,124 | 12,889 | (8.3 | ) | 7.5 | ||||||||||||||
Interest-bearing deposits |
56,937 | 53,911 | 45,585 | 5.6 | 24.9 | |||||||||||||||
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|
|
|
|||||||||||||||
Total deposits |
70,799 | 69,035 | 58,474 | 2.6 | 21.1 | |||||||||||||||
Total U.S. Bancorp shareholders equity |
2,402 | 2,392 | 2,374 | .4 | 1.2 |
(a) | preliminary data |
Wealth Management and Securities Services provides private banking, financial advisory services, investment management, retail brokerage services, insurance, trust, custody and fund servicing through five businesses: Wealth Management, Corporate Trust Services, U.S. Bancorp Asset Management, Institutional Trust & Custody and Fund Services. Wealth Management and Securities Services contributed $109 million of the Companys net income in the first quarter of 2017, compared with $78 million in the first quarter of 2016. The business lines contribution was $31 million (39.7 percent) higher than the same quarter of 2016,
U.S. Bancorp First Quarter 2017 Business Line Results
April 19, 2017
Page 8
reflecting an increase in total net revenue, partially offset by an increase in total noninterest expense. Total net revenue increased $81 million (16.3 percent) year-over-year driven by an increase in net interest income of $62 million (53.0 percent), principally due to higher average loan and deposit balances along with the impact of higher rates on the margin benefit from deposits. Noninterest income increased $19 million (5.0 percent) principally due to improved market conditions and account growth, along with the impact of lower money market fee waivers. Total noninterest expense increased $28 million (7.4 percent) primarily as a result of higher compensation and employee benefits expense, reflecting the impact of higher staffing and merit increases, higher net shared services expense, and higher other expense including the impact of the FDIC surcharge. The provision for credit losses was relatively flat compared with the prior year quarter.
U.S. Bancorp First Quarter 2017 Business Line Results
April 19, 2017
Page 9
PAYMENT SERVICES (a)
($ in millions)
Percent Change | ||||||||||||||||||||
1Q 2017 |
4Q 2016 |
1Q 2016 |
1Q17 vs 4Q16 |
1Q17 vs 1Q16 |
||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$ | 549 | $ | 562 | $ | 527 | (2.3 | ) | 4.2 | |||||||||||
Noninterest income |
857 | 911 | 816 | (5.9 | ) | 5.0 | ||||||||||||||
Securities gains (losses), net |
| | | | | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total net revenue |
1,406 | 1,473 | 1,343 | (4.5 | ) | 4.7 | ||||||||||||||
Noninterest expense |
692 | 686 | 656 | .9 | 5.5 | |||||||||||||||
Other intangibles |
31 | 30 | 30 | 3.3 | 3.3 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total noninterest expense |
723 | 716 | 686 | 1.0 | 5.4 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Income before provision and taxes |
683 | 757 | 657 | (9.8 | ) | 4.0 | ||||||||||||||
Provision for credit losses |
241 | 254 | 192 | (5.1 | ) | 25.5 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Income before income taxes |
442 | 503 | 465 | (12.1 | ) | (4.9 | ) | |||||||||||||
Income taxes and taxable-equivalent adjustment |
161 | 183 | 169 | (12.0 | ) | (4.7 | ) | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income |
281 | 320 | 296 | (12.2 | ) | (5.1 | ) | |||||||||||||
Net (income) loss attributable to noncontrolling interests |
(7 | ) | (7 | ) | (9 | ) | | 22.2 | ||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 274 | $ | 313 | $ | 287 | (12.5 | ) | (4.5 | ) | ||||||||||
|
|
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|
|
|
|||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||
Loans |
$ | 28,936 | $ | 29,265 | $ | 27,817 | (1.1 | ) | 4.0 | |||||||||||
Other earning assets |
257 | 258 | 600 | (.4 | ) | (57.2 | ) | |||||||||||||
Goodwill |
2,453 | 2,456 | 2,464 | (.1 | ) | (.4 | ) | |||||||||||||
Other intangible assets |
437 | 465 | 508 | (6.0 | ) | (14.0 | ) | |||||||||||||
Assets |
34,588 | 34,891 | 33,999 | (.9 | ) | 1.7 | ||||||||||||||
Noninterest-bearing deposits |
1,024 | 964 | 961 | 6.2 | 6.6 | |||||||||||||||
Interest-bearing deposits |
99 | 99 | 95 | | 4.2 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total deposits |
1,123 | 1,063 | 1,056 | 5.6 | 6.3 | |||||||||||||||
Total U.S. Bancorp shareholders equity |
6,407 | 6,470 | 6,326 | (1.0 | ) | 1.3 |
(a) | preliminary data |
Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services, consumer lines of credit and merchant processing. Payment Services contributed $274 million of the Companys net income in the first quarter of 2017, compared with $287 million in the first quarter of 2016. The $13 million (4.5 percent) decrease in the business lines contribution from the prior year was primarily due to an increase in the provision for credit
U.S. Bancorp First Quarter 2017 Business Line Results
April 19, 2017
Page 10
losses and an increase in noninterest expense, partially offset by an increase in total net revenue, which grew $63 million (4.7 percent) year-over-year. Net interest income increased $22 million (4.2 percent) primarily due to higher average loan balances and rates in addition to higher fees. Total noninterest income was $41 million (5.0 percent) higher year-over-year due to an increase in credit and debit card revenue, corporate payment products revenue and merchant processing services revenue driven by higher volumes. Total noninterest expense increased $37 million (5.4 percent) over the first quarter of 2016 principally due to higher compensation and employee benefits expense, reflecting higher staffing to support business investment and compliance programs and merit increases, and higher net shared services expense. The provision for credit losses increased $49 million (25.5 percent) due to higher net charge-offs and an unfavorable change in the reserve allocation.
U.S. Bancorp First Quarter 2017 Business Line Results
April 19, 2017
Page 11
TREASURY AND CORPORATE SUPPORT (a)
($ in millions)
Percent Change | ||||||||||||||||||||
1Q 2017 |
4Q 2016 |
1Q 2016 |
1Q17 vs 4Q16 |
1Q17 vs 1Q16 |
||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$ | 458 | $ | 447 | $ | 558 | 2.5 | (17.9 | ) | |||||||||||
Noninterest income |
216 | 261 | 194 | (17.2 | ) | 11.3 | ||||||||||||||
Securities gains (losses), net |
32 | 4 | 3 | nm | nm | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total net revenue |
706 | 712 | 755 | (.8 | ) | (6.5 | ) | |||||||||||||
Noninterest expense |
153 | 195 | 120 | (21.5 | ) | 27.5 | ||||||||||||||
Other intangibles |
| | | | | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total noninterest expense |
153 | 195 | 120 | (21.5 | ) | 27.5 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Income before provision and taxes |
553 | 517 | 635 | 7.0 | (12.9 | ) | ||||||||||||||
Provision for credit losses |
2 | (4 | ) | 6 | nm | (66.7 | ) | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
Income before income taxes |
551 | 521 | 629 | 5.8 | (12.4 | ) | ||||||||||||||
Income taxes and taxable-equivalent adjustment |
9 | 28 | 74 | (67.9 | ) | (87.8 | ) | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income |
542 | 493 | 555 | 9.9 | (2.3 | ) | ||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(6 | ) | (6 | ) | (6 | ) | | | ||||||||||||
|
|
|
|
|
|
|||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 536 | $ | 487 | $ | 549 | 10.1 | (2.4 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||
Loans |
$ | 3,414 | $ | 3,414 | $ | 3,603 | | (5.2 | ) | |||||||||||
Other earning assets |
118,809 | 120,588 | 109,230 | (1.5 | ) | 8.8 | ||||||||||||||
Goodwill |
| | | | | |||||||||||||||
Other intangible assets |
| | | | | |||||||||||||||
Assets |
139,312 | 141,998 | 130,810 | (1.9 | ) | 6.5 | ||||||||||||||
Noninterest-bearing deposits |
1,996 | 2,079 | 2,052 | (4.0 | ) | (2.7 | ) | |||||||||||||
Interest-bearing deposits |
693 | 715 | 3,908 | (3.1 | ) | (82.3 | ) | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total deposits |
2,689 | 2,794 | 5,960 | (3.8 | ) | (54.9 | ) | |||||||||||||
Total U.S. Bancorp shareholders equity |
17,911 | 18,218 | 18,202 | (1.7 | ) | (1.6 | ) |
(a) | preliminary data |
Treasury and Corporate Support includes the Companys investment portfolios, funding, capital management, interest rate risk management, income taxes not allocated to the business lines, including most investments in tax-advantaged projects, and the residual aggregate of those expenses associated with corporate activities that are managed on a consolidated basis. Treasury and Corporate Support recorded net income of $536 million in the first quarter of 2017, compared with $549 million in the first quarter of 2016. The decrease in net income of $13 million (2.4 percent) from the prior year quarter was primarily due to a
U.S. Bancorp First Quarter 2017 Business Line Results
April 19, 2017
Page 12
decrease in total net revenue and an increase in total noninterest expense. Net interest income decreased $100 million (17.9 percent) from the first quarter of 2016 principally due to the impact of higher rates credited to the business lines on deposits, partially offset by growth in the investment portfolio. Total noninterest income increased $51 million (25.9 percent) from the first quarter of last year principally due to income from equity investments. Total noninterest expense increased $33 million (27.5 percent) principally due to higher compensation expense, reflecting the impact of increased staffing and merit increases including variable compensation. These increases were partially offset by lower net shared services expense. The provision for credit losses was $4 million (66.7 percent) lower year-over-year due to lower net charge-offs and a favorable change in the reserve allocation.
U.S. Bancorp 1Q17 Earnings Conference Call April 19, 2017 Exhibit 99.2
Forward-looking Statements and Additional Information The following information appears in accordance with the Private Securities Litigation Reform Act of 1995: Today’s presentation contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. A reversal or slowing of the current economic recovery or another severe contraction could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities. Global financial markets could experience a recurrence of significant turbulence, which could reduce the availability of funding to certain financial institutions and lead to a tightening of credit, a reduction of business activity, and increased market volatility. Stress in the commercial real estate markets, as well as a downturn in the residential real estate markets could cause credit losses and deterioration in asset values. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by deterioration in general business and economic conditions; changes in interest rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of securities held in its investment securities portfolio; legal and regulatory developments; litigation; increased competition from both banks and non-banks; changes in customer behavior and preferences; breaches in data security; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputational risk. For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2016, on file with the Securities and Exchange Commission, including the sections entitled “Risk Factors” and “Corporate Risk Profile” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. However, factors other than these also could adversely affect U.S. Bancorp’s results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events. This presentation includes non-GAAP financial measures to describe U.S. Bancorp’s performance. The calculations of these measures are provided in the Appendix. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
1Q17 Highlights * Taxable-equivalent basis, see slide 27 for calculation ** Estimated for the Basel III fully implemented standardized approach; RWA = risk-weighted assets, see slide 26 for calculation 1Q17 Highlights Income Statement change vs. Credit Quality change vs. $ in millions, except EPS 1Q17 4Q16 1Q16 $ in millions 1Q17 4Q16 1Q16 Net interest income* $2,995 -0.3 % 3.7 % Nonperforming assets $1,495 -6.7 % -13 % Noninterest income 2329 -4.2 8.4 NPA ratio 5.4999999999999997E-3 (4bps) (10bps) Reported net income 1473 -0.3 6.3 Net charge-off ratio 5.0000000000000001E-3 3bps 2bps Diluted EPS $0.82 0 % 7.9 % Balance Sheet change vs. Capital change vs. $ in billions 1Q17 4Q16 1Q16 1Q17 4Q16 1Q16 Average earning assets $399.3 -0.7 % 5.6 % CET1 capital to RWA** 9.2% 10bps 0bps Average total loans 273.2 0.2 4.0999999999999996 Book value per share $25.05 1.7 % 5.2 % Average total deposits 328.4 -0.2 11 Payout ratio 0.78 1Q17 Highlights Income Statement change vs. Credit Quality change vs. $ in millions, except EPS 1Q17 4Q16 1Q16 $ in millions 1Q17 4Q16 1Q16 Net interest income* $2,995 -0.3 % 3.7 % Nonperforming assets $1,495 -6.7 % -13 % Noninterest income 2329 -4.2 8.4 NPA ratio 5.4999999999999997E-3 (4bps) (10bps) Reported net income 1473 -0.3 6.3 Net charge-off ratio 5.0000000000000001E-3 3bps 2bps Diluted EPS $0.82 0 % 7.9 % Balance Sheet change vs. Capital change vs. $ in billions 1Q17 4Q16 1Q16 1Q17 4Q16 1Q16 Average earning assets $399.3 -0.7 % 5.6 % CET1 capital to RWA** 9.2% 10bps 0bps Average total loans 273.2 0.2 4.0999999999999996 Book value per share $25.05 1.7 % 5.2 % Average total deposits 328.4 -0.2 11 Payout ratio 0.78
Performance Ratios Return on Average Common Equity Efficiency Ratio* & Net Interest Margin** * Non-GAAP, see slide 27 for calculation ** Taxable equivalent basis Return on Average Assets
Average Loans +0.2% linked quarter +4.1% year-over-year Large corporate growth was pressured by high levels of pay downs and active capital markets in 1Q17 Commercial middle market loan growth was strong across many markets vs. 1Q16 Commercial real estate reflected a cautious approach to certain segments $ in billions Average (Three months ended 3/31/17) Balances 4Q16 1Q16 Retail $53.8 (0.2) % 5.3 % Credit Card 20.9 (0.5) 3.0 Residential Mortgage 57.9 2.1 6.8 Commercial Real Estate 43.2 (0.5) 1.8 Commercial 93.7 (0.1) 4.4 Covered 3.7 (5.1) (17.3) Total loans $273.2 0.2 % 4.1 % Change vs.
Average Deposits -0.2% linked quarter +11.0% year-over-year Interest-bearing Deposits $ in billions Rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent Linked quarter growth reflected typical seasonal trends and lower funding requirements Growth vs. 1Q16 driven primarily by total savings deposits partially offset by a decline in time deposits Average Change (Three months ended 3/31/17) Balances 4Q16 1Q16 Rates vs. 4Q16 Interest checking $65.7 1.6 % 13.4 % 0.08 % 0.00 % Money market savings 108.8 2.0 25.8 0.48 0.10 Savings accounts 42.6 3.1 7.6 0.08 0.00 Time deposits 30.6 (3.3) (9.0) 0.65 0.06 Total interest-bearing $247.7 1.4 % 14.0 % 0.33 % 0.05 % deposits Change vs.
Credit Quality NCO Ratio +3bps QoQ +2bps YoY NPAs -6.7% QoQ -13.0% YoY $ in millions
Credit Quality Auto 1Q16 4Q16 1Q17 Average Loans $16.6$17.6 $17.5 30-89 Delinquencies0.39% 0.74% 0.64% 90+ Delinquencies0.02% 0.06% 0.05% Nonperforming Loans0.07%0.09% 0.09% $ in billions * As of December 31, 2016 CRE – Owner Occupied USB Total Commitments* $573 $0.6, 3% Retail Industry $19.7, 3.4% Direct C&I Exposure to Retailers REITs CRE – Investor Retail Industry Overall retail industry risk remains manageable due to client selection, risk controls and portfolio diversification Two-thirds of Direct C&I exposure to the retail industry is investment grade or equivalent, while the non-investment grade is primarily secured by inventory and/or receivables
Earnings Summary $ and shares in millions, except per-share data 1Q17 4Q16 1Q16 vs. 4Q16 vs. 1Q16 Net Interest Income $2,945 $2,955 $2,835 (0.3) 3.9 Taxable-equivalent Adjustment 50 49 53 2.0 (5.7) Net Interest Income (taxable-equivalent basis) 2,995 3,004 2,888 (0.3) 3.7 Noninterest Income 2,329 2,431 2,149 (4.2) 8.4 Net Revenue 5,324 5,435 5,037 (2.0) 5.7 Noninterest Expense 2,944 3,004 2,749 (2.0) 7.1 Operating Income 2,380 2,431 2,288 (2.1) 4.0 Net Charge-offs 335 322 315 4.0 6.3 Excess Provision 10 20 15 (50.0) (33.3) Income Before Taxes 2,035 2,089 1,958 (2.6) 3.9 Applicable Income Taxes 549 598 557 (8.2) (1.4) Noncontrolling Interests (13) (13) (15) - 13.3 Net Income 1,473 1,478 1,386 (0.3) 6.3 Preferred Dividends/Other 86 87 57 (0.6) 50.2 Net Income to Common $1,387 $1,391 $1,329 (0.3) 4.4 Diluted EPS $0.82 $0.82 $0.76 - 7.9 Average Diluted Shares 1,701 1,705 1,743 (0.2) (2.4) Reported % Change
Revenue $5,324 $5,435 $5,037 Linked Quarter Decline reflected typical seasonal patterns in certain fee businesses Year-over-Year Growth primarily driven by solid loan growth and broad-based growth in fee income $ in millions Taxable-equivalent basis -2.0% linked quarter +5.7% year-over-year 1Q17 Revenue
Net Interest Income Linked Quarter Net interest income was stable despite two fewer days The 5bp increase in net interest margin reflected the impact of higher interest rates Year-over-Year Net interest income growth driven by strong earning asset growth $ in millions Taxable-equivalent basis -0.3% linked quarter +3.7% year-over-year
Noninterest Income $ in millions Payments = credit and debit card, corporate payment products and merchant processing Service charges = deposit service charges, treasury management and ATM processing $2,149 $2,431 $2,329 Linked Quarter Typical seasonal factors impacted growth in deposit service charges, payments and mortgage Decrease in mortgage revenue (14%) reflected both seasonal patterns and lower refinancing activity Year-over-Year Payments revenue driven by higher credit and debit card sales volumes Trust and investment management revenue up 8.6% on better market conditions, account growth and lower fee waivers Treasury management revenue grew 7.7% reflecting account penetration -4.2% linked quarter +8.4% year-over-year
Noninterest Expense $2,749 $3,004 $2,944 Linked Quarter Decrease in noninterest expense (2%) reflected typical seasonal patterns Year-over-Year Total noninterest expense up 7.1% on higher compensation and benefit costs, marketing and other expenses Higher compensation expense reflected hiring to support business growth and compliance programs Higher ‘other expense’ primarily reflected the FDIC surcharge implemented in 3Q16 $ in millions -2.0% linked quarter +7.1% year-over-year
Capital Position RWA = risk-weighted assets; * See Non-GAAP Financial Measures reconciliation on slide 26 $ in billions 1Q17 4Q16 3Q16 2Q16 1Q16 Total U.S. Bancorp shareholders' equity $47.8 $47.3 $47.8 $47.4 $46.8 Standardized Approach Basel III transitional standardized approach Common equity tier 1 capital ratio 9.5% 9.4% 9.5% 9.5% 9.5% Tier 1 capital ratio 0.11 0.11 0.111 0.111 0.111 Total risk-based capital ratio 0.13300000000000001 0.13200000000000001 0.13300000000000001 0.13400000000000001 0.13100000000000001 Leverage ratio 9.0999999999999998 0.09 9.2% 9.3% 9.3% Common equity tier 1 capital to RWA estimated for the Basel III fully implemented standardized approach* 9.2% 9.0999999999999998 9.3% 9.3% 9.2% Advanced Approaches Common equity tier 1 capital ratio 0.11799999999999999 0.122 0.124 0.123 0.123 Common equity tier 1 capital to RWA estimated for the Basel III fully implemented advanced approaches* 0.115 0.11700000000000001 0.121 0.12 0.11899999999999999 Tangible common equity to tangible assets* 7.6% 7.5% 7.5% 7.6% 7.7% Tangible common equity as a % of RWA* 9.4% 9.2% 9.3% 9.3% 9.3%
Appendix
Average Loans Key Points vs. 1Q16 Average total loans increased by $10.9 billion, or 4.1% Average total commercial loans increased by $3.9 billion, or 4.4% Average residential mortgage loans increased by $3.7 billion, or 6.8% vs. 4Q16 Average total loans increased by $487 million, or 0.2% Average residential mortgage loans increased by $1.2 billion, or 2.1% Average total commercial real estate loans decreased by $233 million, or 0.5% Year-over-Year Growth 5.8% 8.1% 7.6% 6.2% 4.1% Covered Commercial CRE Res Mtg Retail Credit Card $269.6 $262.3 $266.6 * Excluding the credit card portfolio acquisition ** Excluding student loans which were transferred to held for sale at the end of 1Q15 and returned to held for investment during 3Q15 3.6% $273.2 Average Loans ($bn)
Average Deposits Key Points vs. 1Q16 Average total deposits increased by $32.6 billion, or 11.0% Average low-cost deposits (NIB, interest checking, money market and savings) increased by $35.6 billion, or 13.6% vs. 4Q16 Average total deposits decreased by $750 million, or 0.2% Average low-cost deposits increased by $301 million, or 0.1% Year-over-Year Growth 6.3% 7.6% 10.0% 11.8% 11.0% Time Money Market Checking and Savings Noninterest-bearing $318.5 $295.9 $307.4 $329.2 Average Deposits ($bn) $328.4
Credit Quality – Commercial Loans Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points Loans increased modestly 4.4% year over year; growth slowed in 1Q17 as a result of seasonality, energy paydowns and strong bond market activity Net charge-offs improved year-over-year as energy portfolio continued to stabilize Improvement in nonperforming loans driven by upgrades of energy relationships due to improved industry dynamics $mm1Q164Q161Q17 Average Loans$89,820$93,807$93,739 30-89 Delinquencies0.21%0.28%0.23% 90+ Delinquencies0.05%0.06%0.06% Nonperforming Loans0.52%0.52%0.46%
A&D Construction $672 Credit Quality – Commercial Real Estate Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points Average loans increased 1.8% year-over-year as growth waned in recent quarters as interest rates increased and certain sectors, such as multi-family, have seen increased market supply Nonperforming loans have remained stable, year-over-year, at historically low levels Recoveries continue to exceed gross charge-offs, which resulted in net losses continuing near zero $mm1Q164Q161Q17 Average Loans$42,401$43,391$43,158 30-89 Delinquencies0.19%0.10%0.15% 90+ Delinquencies0.04%0.02%0.01% Nonperforming Loans0.24%0.29%0.26% Performing TDRs*$212$169$153 Investor $20,593 Owner Occupied $10,868 Multi-family $4,272 Retail $885 Residential Construction $2,350 Office $1,046 Other $2,472 * TDR = troubled debt restructuring
Credit Quality – Residential Mortgage Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points Originations continued to be high credit quality (weighted average FICO of 756, weighted average LTV of 68%) 90% of the balances have been originated since the beginning of 2009; the origination quality metrics and performance to date have significantly outperformed prior vintages with similar seasoning $mm1Q164Q161Q17 Average Loans$54,208$56,718$57,900 30-89 Delinquencies0.24%0.26%0.21% 90+ Delinquencies0.31%0.27%0.24% Nonperforming Loans1.23%1.04%0.99% *Excludes GNMA loans, whose repayments are insured by the FHA or guaranteed by the Department of VA ($1,717 million in 1Q17)
Credit Quality – Credit Card Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points Year-over-year average loan growth of 3.0% was driven by high credit quality originations Commitment weighted average FICO on new originations was 761, up 3 points from 1Q16 Year-over-year increases in delinquency and loss rates primarily reflect vintage maturation $mm1Q164Q161Q17 Average Loans$20,244$20,942$20,845 30-89 Delinquencies1.09%1.31%1.24% 90+ Delinquencies1.10%1.16%1.23% Nonperforming Loans0.04%0.01%0.01%
Credit Quality – Home Equity Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points High-quality originations (weighted average FICO on commitments of 768, weighted average CLTV of 70%) originated primarily through the retail branch network to existing bank customers on their primary residences Net charge-offs declined year-over-year $mm1Q164Q161Q17 Average Loans$16,368$16,444$16,259 30-89 Delinquencies0.39%0.37%0.33% 90+ Delinquencies0.26%0.25%0.24% Nonperforming Loans0.80%0.78%0.79% Subprime: 1% Wtd Avg LTV*: 88% NCO: -2.74% Prime: 97% Wtd Avg LTV*: 72% NCO: -0.03% Other: 2% Wtd Avg LTV*: 70% NCO: 1.39% *LTV at origination
Credit Quality – Retail Leasing Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points Continued high-quality originations (weighted average FICO of 782) support the portfolio’s stable credit profile Delinquencies, nonperforming leases and net charge-offs remained at very low levels $mm1Q164Q161Q17 Average Loans$5,179$6,191$6,469 30-89 Delinquencies0.17%0.28%0.24% 90+ Delinquencies0.02%0.02%0.01% Nonperforming Loans0.04%0.03%0.04% * Manheim Used Vehicle Value Index source: www.manheimconsulting.com, January 1995 = 100, quarter value = average monthly ending values
Credit Quality – Other Retail Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points Overall growth continued to be driven by the auto loans and installment categories, which were up 5.5% and 14.9% year-over-year, respectively Net charge-offs and 30-89 delinquencies showed seasonal decreases $mm1Q164Q161Q17 Average Loans$29,550$31,245$31,056 30-89 Delinquencies0.42%0.66%0.56% 90+ Delinquencies0.10%0.13%0.12% Nonperforming Loans0.08%0.09%0.09%
Credit Quality – Auto Loans Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points Continued growth in auto loans driven by high-quality originations in the indirect channel (weighted average FICO 776) Net charge-offs remained relatively stable on a linked quarter basis $mm1Q164Q161Q17 Average Loans$16,623$17,624$17,538 30-89 Delinquencies0.39%0.74%0.64% 90+ Delinquencies0.02%0.06%0.05% Nonperforming Loans0.07%0.09%0.09% Direct: 6% Wtd Avg FICO: 748 NCO: 0.24% Indirect: 94% Wtd Avg FICO: 769 NCO: 0.48% Auto loans are included in Other Retail category
Non-GAAP Financial Measures * Preliminary data. Subject to change prior to filings with applicable regulatory agencies. (1) Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements. (2) Includes net losses on cash flow hedges included in accumulated other comprehensive income (loss) and other adjustments. (3) Includes higher risk-weighting for unfunded loan commitments, investment securities, residential mortgages, mortgage servicing rights and other adjustments. (4) Primarily reflects higher risk-weighting for mortgage servicing rights. March 31, December 31, September 30, June 30, March 31, (Dollars in Millions, Unaudited) 2017 2016 2016 2016 2016 Total equity $48,433 $47,933 $48,399 $48,029 $47,393 Preferred stock (5,419) (5,501) (5,501) (5,501) (5,501) Noncontrolling interests (635) (635) (640) (639) (638) Goodwill (net of deferred tax liability) (1) (8,186) (8,203) (8,239) (8,246) (8,270) Intangible assets, other than mortgage servicing rights (671) (712) (756) (796) (820) Tangible common equity (a) 33,522 32,882 33,263 32,847 32,164 Tangible common equity (as calculated above) 33,522 32,882 33,263 32,847 32,164 Adjustments (2) (136) (55) 97 133 99 Common equity tier 1 capital estimated for the Basel III fully implemented standardized and advanced approaches (b) 33,386 32,827 33,360 32,980 32,263 Total assets 449,522 445,964 454,134 438,463 428,638 Goodwill (net of deferred tax liability) (1) (8,186) (8,203) (8,239) (8,246) (8,270) Intangible assets, other than mortgage servicing rights (671) (712) (756) (796) (820) Tangible assets (c) 440,665 437,049 445,139 429,421 419,548 Risk-weighted assets, determined in accordance with prescribed transitional standardized approach regulatory requirements (d) 356,373 * 358,237 356,733 351,462 346,227 Adjustments (3) 4,731 * 4,027 3,165 3,079 3,485 Risk-weighted assets estimated for the Basel III fully implemented standardized approach (e) 361,104 * 362,264 359,898 354,541 349,712 Risk-weighted assets, determined in accordance with prescribed transitional advanced approaches regulatory requirements 285,963 * 277,141 272,832 271,495 267,309 Adjustments (4) 5,046 * 4,295 3,372 3,283 3,707 Risk-weighted assets estimated for the Basel III fully implemented advanced approaches (f) 291,009 * 281,436 276,204 274,778 271,016 Ratios * Tangible common equity to tangible assets (a)/(c) 7.6 % 7.5 % 7.5 % 7.6 % 7.7 Tangible common equity to risk-weighted assets (a)/(d) 9.4 9.2 9.3 9.3 9.3 Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach (b)/(e) 9.2 9.1 9.3 9.3 9.2 Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches (b)/(f) 11.5 11.7 12.1 12.0 11.9
Non-GAAP Financial Measures (1) Utilizes a tax rate of 35 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes. (Dollars in Millions, Unaudited) March 31, December 31, September 30, June 30, March 31, 2017 2016 2016 2016 2016 Net interest income $2,945 $2,955 $2,893 $2,845 $2,835 Taxable-equivalent adjustment (1) 50 49 50 51 53 Net interest income, on a taxable-equivalent basis 2,995 3,004 2,943 2,896 2,888 Net interest income, on a taxable-equivalent basis (as calculated above) 2,995 3,004 2,943 2,896 2,888 Noninterest income 2,329 2,431 2,445 2,552 2,149 Less: Securities gains (losses), net 29 6 10 3 3 Total net revenue, excluding net securities gains (losses) (a) 5,295 5,429 5,378 5,445 5,034 Noninterest expense (b) 2,944 3,004 2,931 2,992 2,749 Less: Intangible amortization 44 45 45 44 45 Noninterest expense, excluding intangible amortization (c) 2,900 2,959 2,886 2,948 2,704 Efficiency ratio (b)/(a) 55.6 % 55.3 % 54.5 % 54.9 % 54.6 % Tangible efficiency ratio (c)/(a) 54.8 54.5 53.7 54.1 53.7 Three Months Ended
U.S. Bancorp 1Q17 Earnings Conference Call April 19, 2017
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