UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 17, 2018
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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule l2b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section l3(a) of the Exchange Act. ☐
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On October 17, 2018, U.S. Bancorp (the Company) issued a press release reporting quarter-ended September 30, 2018 results, and posted on its website its 3Q18 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 3Q18 Earnings Conference Call Presentation is included as Exhibit 99.2 hereto and is incorporated herein by reference. The information included in the press release and 3Q18 Earnings Conference Call Presentation is considered to be furnished under the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference in any filings under the Securities Act of 1933. The press release and 3Q18 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 |
99.2 |
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: October 17, 2018
Exhibit 99.1
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U.S. Bancorp Reports Third Quarter 2018 Results Record net revenue of $5,699 million, record net income of $1,815 million and record diluted earnings per share of $1.06 Industry leading return on average assets of 1.58% and return on average common equity of 15.5%
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3Q18 Key Financial Data
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3Q18 Highlights | |||||||||||||||||
PROFITABILITY METRICS |
3Q18 | 2Q18 | 3Q17 |
Net income of $1,815 million and diluted earnings per common share of $1.06
Industry leading return on average assets of 1.58% and return on average common equity of 15.5%
Return on tangible common equity of 19.9%
Returned 78% of 3Q earnings to shareholders through dividends and share buybacks
Year-over-year positive operating leverage with net revenue increase of 2.4% and noninterest expense increase of 1.5%
Net interest income grew 2.4% year-over-year (1.7% on a taxable-equivalent basis) and 1.7% linked quarter on both a reported and tax-equivalent basis
Total noninterest income grew 3.3% year-over year
o Payment services revenue grew 7.1%
o Trust and investment management fees increased 8.2%
Nonperforming assets decreased 19.7% on a year-over- year basis and 8.0% on a linked quarter basis | ||||||||||||||
Return on average assets (%) |
1.58 | 1.54 | 1.38 | |||||||||||||||
Return on average common equity (%) |
15.5 | 15.3 | 13.6 | |||||||||||||||
Return on tangible common equity (%) (a) |
19.9 | 19.8 | 17.3 | |||||||||||||||
Net interest margin (%) |
3.15 | 3.13 | 3.14 | |||||||||||||||
Efficiency ratio (%) (a)
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53.5
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54.8
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53.9
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INCOME STATEMENT (b) | 3Q18 | 2Q18 | 3Q17 | |||||||||||||||
Net interest income (taxable-equivalent basis) |
$3,281 | $3,226 | $3,227 | |||||||||||||||
Noninterest income |
$2,418 | $2,414 | $2,340 | |||||||||||||||
Net income attributable to U.S. Bancorp |
$1,815 | $1,750 | $1,563 | |||||||||||||||
Diluted earnings per common share |
$1.06 | $1.02 | $.88 | |||||||||||||||
Dividends declared per common share
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$.37
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$.30
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$.30
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BALANCE SHEET (b) | 3Q18 | 2Q18 | 3Q17 | |||||||||||||||
Average total loans |
$281,065 | $278,624 | $277,626 | |||||||||||||||
Average total deposits |
$330,121 | $334,822 | $335,151 | |||||||||||||||
Net charge-off ratio |
.46% | .48% | .47% | |||||||||||||||
Book value per common share (period end) |
$27.35 | $27.02 | $25.98 | |||||||||||||||
Basel III standardized CET1 (c) |
9.0% | 9.1% | 9.4% | |||||||||||||||
(a) See Non-GAAP Financial Measures reconciliation on pages 16-17
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(b) Dollars in millions, except per share data
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(c) CET1 = Common equity tier 1 capital ratio, 3Q17 as if fully implemented |
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CEO Commentary
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Strong underlying momentum in each of our business lines drove record revenue, net income and EPS this quarter. We remain vigilant in our expense discipline while continuing to prudently invest in our core businesses as well as in our digital and payments capabilities. In the third quarter, we expanded our commercial banking presence, launched a new digital platform to serve our small business customers and acquired new capabilities in our payments business. At the same time, our focus on optimization allowed us to deliver positive operating leverage and a best-in-class efficiency ratio, while growing our industry leading return on tangible common equity ratio to 19.9%. I am thankful for our U.S. Bank team members who work every day to put the customer in the center with the goal of delivering outstanding results for each of our stakeholders.
Andy Cecere, Chairman, President and CEO, U.S. Bancorp
In the Spotlight
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Investor contact: Jennifer Thompson, 612.303.0778 | Media contact: Stacey Wempen, 612.303.7620
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U.S. Bancorp Third Quarter 2018 Results | |
INCOME STATEMENT HIGHLIGHTS | ||||||||||||||||||||||||||||||||
($ in millions, except per-share data) | Percent Change | |||||||||||||||||||||||||||||||
3Q | 2Q | 3Q | 3Q18 vs | 3Q18 vs | YTD | YTD | Percent | |||||||||||||||||||||||||
2018 | 2018 | 2017 | 2Q18 | 3Q17 | 2018 | 2017 | Change | |||||||||||||||||||||||||
Net interest income |
$3,251 | $3,197 | $3,176 | 1.7 | 2.4 | $9,616 | $9,205 | 4.5 | ||||||||||||||||||||||||
Taxable-equivalent adjustment |
30 | 29 | 51 | 3.4 | (41.2) | 88 | 152 | (42.1) | ||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
3,281 | 3,226 | 3,227 | 1.7 | 1.7 | 9,704 | 9,357 | 3.7 | ||||||||||||||||||||||||
Noninterest income |
2,418 | 2,414 | 2,340 | .2 | 3.3 | 7,104 | 6,947 | 2.3 | ||||||||||||||||||||||||
Total net revenue |
5,699 | 5,640 | 5,567 | 1.0 | 2.4 | 16,808 | 16,304 | 3.1 | ||||||||||||||||||||||||
Noninterest expense |
3,044 | 3,085 | 2,998 | (1.3) | 1.5 | 9,184 | 8,891 | 3.3 | ||||||||||||||||||||||||
Income before provision and income taxes |
2,655 | 2,555 | 2,569 | 3.9 | 3.3 | 7,624 | 7,413 | 2.8 | ||||||||||||||||||||||||
Provision for credit losses |
343 | 327 | 360 | 4.9 | (4.7) | 1,011 | 1,055 | (4.2) | ||||||||||||||||||||||||
Income before taxes |
2,312 | 2,228 | 2,209 | 3.8 | 4.7 | 6,613 | 6,358 | 4.0 | ||||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
490 | 470 | 640 | 4.3 | (23.4) | 1,351 | 1,791 | (24.6) | ||||||||||||||||||||||||
Net income |
1,822 | 1,758 | 1,569 | 3.6 | 16.1 | 5,262 | 4,567 | 15.2 | ||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(7) | (8) | (6) | 12.5 | (16.7) | (22) | (31) | 29.0 | ||||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$1,815 | $1,750 | $1,563 | 3.7 | 16.1 | $5,240 | $4,536 | 15.5 | ||||||||||||||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$1,732 | $1,678 | $1,485 | 3.2 | 16.6 | $5,007 | $4,302 | 16.4 | ||||||||||||||||||||||||
Diluted earnings per common share |
$1.06 | $1.02 | $.88 | 3.9 | 20.5 | $3.04 | $2.55 | 19.2 | ||||||||||||||||||||||||
Net income attributable to U.S. Bancorp was $1,815 million for the third quarter of 2018, which was 16.1 percent higher than the $1,563 million for the third quarter of 2017, and 3.7 percent higher than the $1,750 million for the second quarter of 2018. Diluted earnings per common share were $1.06 in the third quarter of 2018, compared with $0.88 in the third quarter of 2017 and $1.02 in the second quarter of 2018.
The increase in net income year-over-year was largely due to total net revenue growth of 2.4 percent partially offset by noninterest expense growth of 1.5 percent. Net interest income increased 2.4 percent (1.7 percent on a taxable-equivalent basis), mainly a result of the impact of rising interest rates, earning assets growth, and higher yields on reinvestment of securities, partially offset by higher rates on deposits and funding mix. Noninterest income increased 3.3 percent compared with a year ago, driven by strong growth in payment services revenue, trust and investment management fees, and other noninterest revenue, partially offset by decreases in mortgage banking revenue and commercial products revenue. Noninterest expense increased 1.5 percent primarily due to increased compensation expense related to supporting business growth and compliance programs, merit increases, and variable compensation related to revenue growth, higher employee benefits expense, and higher technology and communications expense in support of business growth. Partially offsetting these increases was lower other noninterest expense driven by lower costs related to tax-advantaged projects, lower FDIC insurance expense, a reduction in mortgage servicing costs, and lower pension related costs.
Net income increased on a linked quarter basis primarily due to total net revenue growth of 1.0 percent and a decrease in noninterest expense of 1.3 percent. The increase in total net revenue reflected an increase in net interest income of 1.7 percent due to the impact of rising interest rates, earning assets growth, and an additional day in the third quarter, partially offset by higher rates on deposits and funding mix. Noninterest income increased 0.2 percent driven by seasonally higher payment services revenue and deposit services charges, along with higher trust and investment management fees and other noninterest income. These increases were partially offset by decreases in commercial products revenue and mortgage banking revenue. The decrease in noninterest expense of 1.3 percent was primarily driven by lower other noninterest expense due to lower costs related to tax-advantaged projects driven by syndicating tax credits following tax reform and the change in accruals related to legal and insurance matters, as well as a reduction in compensation expense due to lower incentives and seasonally lower contract labor costs.
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U.S. Bancorp Third Quarter 2018 Results | |
NET INTEREST INCOME | ||||||||||||||||||||||||||||||||
(Taxable-equivalent basis; $ in millions) | Change | |||||||||||||||||||||||||||||||
3Q | 2Q | 3Q | 3Q18 vs | 3Q18 vs | YTD | YTD | ||||||||||||||||||||||||||
2018 | 2018 | 2017 | 2Q18 | 3Q17 | 2018 | 2017 | Change | |||||||||||||||||||||||||
Components of net interest income |
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Income on earning assets |
$4,155 | $3,980 | $3,758 | $175 | $397 | $11,957 | $10,774 | $1,183 | ||||||||||||||||||||||||
Expense on interest-bearing liabilities |
874 | 754 | 531 | 120 | 343 | 2,253 | 1,417 | 836 | ||||||||||||||||||||||||
Net interest income |
$3,281 | $3,226 | $3,227 | $55 | $54 | $9,704 | $9,357 | $347 | ||||||||||||||||||||||||
Average yields and rates paid |
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Earning assets yield |
3.98% | 3.86% | 3.66% | .12% | .32% | 3.86% | 3.56% | .30% | ||||||||||||||||||||||||
Rate paid on interest-bearing liabilities |
1.10 | .97 | .69 | .13 | .41 | .96 | .63 | .33 | ||||||||||||||||||||||||
Gross interest margin |
2.88% | 2.89% | 2.97% | (.01)% | (.09)% | 2.90% | 2.93% | (.03)% | ||||||||||||||||||||||||
Net interest margin |
3.15% | 3.13% | 3.14% | .02% | .01% | 3.14% | 3.09% | .05% | ||||||||||||||||||||||||
Average balances |
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Investment securities (a) |
$113,547 | $114,578 | $111,832 | $(1,031) | $1,715 | $113,873 | $111,325 | $2,548 | ||||||||||||||||||||||||
Loans |
281,065 | 278,624 | 277,626 | 2,441 | 3,439 | 279,699 | 275,454 | 4,245 | ||||||||||||||||||||||||
Earning assets |
415,177 | 412,676 | 408,825 | 2,501 | 6,352 | 413,246 | 404,031 | 9,215 | ||||||||||||||||||||||||
Interest-bearing liabilities |
314,816 | 312,217 | 304,236 | 2,599 | 10,580 | 312,894 | 299,922 | 12,972 | ||||||||||||||||||||||||
(a) Excludes unrealized gain (loss) | ||||||||||||||||||||||||||||||||
Net interest income on a taxable-equivalent basis in the third quarter of 2018 was $3,281 million, an increase of $54 million (1.7 percent) over the third quarter of 2017. The increase was principally driven by the impact of rising interest rates, earning assets growth, and higher yields on securities, partially offset by lower spread due to loan mix, higher rates on deposits and funding mix shift as well as the impact of tax reform which reduced the taxable-equivalent adjustment benefit related to tax exempt assets and higher interest recoveries in the prior year quarter. Average earning assets were $6.4 billion (1.6 percent) higher than the third quarter of 2017, reflecting increases of $3.4 billion (1.2 percent) in average total loans, $1.7 billion (1.5 percent) in average investment securities, and $2.0 billion (13.1 percent) in average other earning assets.
Net interest income on a taxable-equivalent basis increased $55 million (1.7 percent) on a linked quarter basis primarily driven by the impact of higher interest rates on assets, earning asset growth, and an additional day in the third quarter, partially offset by deposits and funding mix shift. Average earning assets were $2.5 billion (0.6 percent) higher on a linked quarter basis, reflecting increases of $2.4 billion (0.9 percent) in average total loans and $1.5 billion (9.6 percent) in average other earning assets. Average investment securities decreased $1.0 billion (0.9 percent).
The net interest margin in the third quarter of 2018 was 3.15 percent, compared with 3.14 percent in the third quarter of 2017 and 3.13 percent in the second quarter of 2018. The increase in the net interest margin year-over-year was primarily due to higher interest rates, partially offset by deposit and funding mix, lower loan spreads due to mix, and the impact of tax reform. The increase in net interest margin on a linked quarter basis was primarily due to the impact of higher rates on assets, partially offset by deposit and funding mix, as well as higher cash balances.
Average investment securities in the third quarter of 2018 increased $1.7 billion (1.5 percent) from the third quarter of 2017, due to purchases of U.S. Treasury, mortgage-backed and state and political securities, net of prepayments and maturities. Average investment securities decreased $1.0 billion (0.9 percent) from the second quarter of 2018 as a portion of the proceeds received on maturities of securities in the current quarter were not reinvested.
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U.S. Bancorp Third Quarter 2018 Results | |
AVERAGE LOANS | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q | 2Q | 3Q | 3Q18 vs | 3Q18 vs | YTD | YTD | Percent | |||||||||||||||||||||||||
2018 | 2018 | 2017 | 2Q18 | 3Q17 | 2018 | 2017 | Change | |||||||||||||||||||||||||
Commercial |
$93,541 | $92,835 | $91,077 | .8 | 2.7 | $92,776 | $89,817 | 3.3 | ||||||||||||||||||||||||
Lease financing |
5,507 | 5,518 | 5,556 | (.2) | (.9) | 5,519 | 5,530 | (.2) | ||||||||||||||||||||||||
Total commercial |
99,048 | 98,353 | 96,633 | .7 | 2.5 | 98,295 | 95,347 | 3.1 | ||||||||||||||||||||||||
Commercial mortgages |
28,362 | 28,710 | 30,114 | (1.2) | (5.8) | 28,746 | 30,729 | (6.5) | ||||||||||||||||||||||||
Construction and development |
11,180 | 11,147 | 11,507 | .3 | (2.8) | 11,172 | 11,708 | (4.6) | ||||||||||||||||||||||||
Total commercial real estate |
39,542 | 39,857 | 41,621 | (.8) | (5.0) | 39,918 | 42,437 | (5.9) | ||||||||||||||||||||||||
Residential mortgages |
62,042 | 60,834 | 59,030 | 2.0 | 5.1 | 61,023 | 58,496 | 4.3 | ||||||||||||||||||||||||
Credit card |
21,774 | 21,220 | 20,926 | 2.6 | 4.1 | 21,428 | 20,801 | 3.0 | ||||||||||||||||||||||||
Retail leasing |
8,383 | 8,150 | 7,762 | 2.9 | 8.0 | 8,173 | 7,142 | 14.4 | ||||||||||||||||||||||||
Home equity and second mortgages |
16,000 | 16,048 | 16,299 | (.3) | (1.8) | 16,080 | 16,270 | (1.2) | ||||||||||||||||||||||||
Other |
31,520 | 31,265 | 32,008 | .8 | (1.5) | 31,882 | 31,423 | 1.5 | ||||||||||||||||||||||||
Total other retail |
55,903 | 55,463 | 56,069 | .8 | (.3) | 56,135 | 54,835 | 2.4 | ||||||||||||||||||||||||
Total loans, excluding covered loans |
278,309 | 275,727 | 274,279 | .9 | 1.5 | 276,799 | 271,916 | 1.8 | ||||||||||||||||||||||||
Covered loans |
2,756 | 2,897 | 3,347 | (4.9) | (17.7) | 2,900 | 3,538 | (18.0) | ||||||||||||||||||||||||
Total loans |
$281,065 | $278,624 | $277,626 | .9 | 1.2 | $279,699 | $275,454 | 1.5 | ||||||||||||||||||||||||
Average total loans were $3.4 billion (1.2 percent) higher than the third quarter of 2017 (1.8 percent excluding the impact of the second quarter of 2018 student loan portfolio sale). The increase was due to growth in residential mortgages (5.1 percent), total commercial loans (2.5 percent), credit card loans (4.1 percent), and retail leasing (8.0 percent). These increases were partially offset by a decrease in total commercial real estate loans (5.0 percent) due to disciplined underwriting and customers paying down balances over the past year. Loan growth was also impacted by continued run-off of the covered loans portfolio (17.7 percent) and the sale of the student loan portfolio in the second quarter of 2018. Average total loans were $2.4 billion (0.9 percent) higher than the second quarter of 2018 driven by growth in residential mortgages (2.0 percent), total commercial loans (0.7 percent), credit card loans (2.6 percent) and retail leasing (2.9 percent), partially offset by continued pay-offs of commercial real estate loans (0.8 percent) and run-off of covered loans (4.9 percent). At the end of the third quarter, approximately $1.3 billion of covered loans were transferred from the loan portfolio to loans held for sale.
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U.S. Bancorp Third Quarter 2018 Results | |
AVERAGE DEPOSITS | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q | 2Q | 3Q | 3Q18 vs | 3Q18 vs | YTD | YTD | Percent | |||||||||||||||||||||||||
2018 | 2018 | 2017 | 2Q18 | 3Q17 | 2018 | 2017 | Change | |||||||||||||||||||||||||
Noninterest-bearing deposits |
$77,192 | $78,987 | $81,964 | (2.3) | (5.8) | $78,546 | $81,808 | (4.0) | ||||||||||||||||||||||||
Interest-bearing savings deposits |
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Interest checking |
69,330 | 69,918 | 68,066 | (.8) | 1.9 | 69,865 | 67,021 | 4.2 | ||||||||||||||||||||||||
Money market savings |
100,688 | 103,333 | 105,072 | (2.6) | (4.2) | 102,453 | 106,856 | (4.1) | ||||||||||||||||||||||||
Savings accounts |
44,848 | 45,069 | 43,649 | (.5) | 2.7 | 44,770 | 43,265 | 3.5 | ||||||||||||||||||||||||
Total savings deposits |
214,866 | 218,320 | 216,787 | (1.6) | (.9) | 217,088 | 217,142 | -- | ||||||||||||||||||||||||
Time deposits |
38,063 | 37,515 | 36,400 | 1.5 | 4.6 | 37,525 | 32,660 | 14.9 | ||||||||||||||||||||||||
Total interest-bearing deposits |
252,929 | 255,835 | 253,187 | (1.1) | (.1) | 254,613 | 249,802 | 1.9 | ||||||||||||||||||||||||
Total deposits |
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$330,121 |
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$334,822 |
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$335,151 |
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(1.4) |
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(1.5) |
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$333,159 |
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$331,610 |
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.5 |
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Average total deposits for the third quarter of 2018 were $5.0 billion (1.5 percent) lower than the third quarter of 2017. Average noninterest-bearing deposits decreased $4.8 billion (5.8 percent) year-over-year primarily due to decreases in business deposits within Corporate and Commercial Banking and corporate trust balances within Wealth Management and Investment Services. Average total savings deposits were $1.9 billion (0.9 percent) lower year-over-year driven by decreases in Wealth Management and Investment Services and Corporate and Commercial Banking, partially offset by an increase in Consumer and Business Banking. Average time deposits were $1.7 billion (4.6 percent) higher 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.
Average total deposits decreased $4.7 billion (1.4 percent) from the second quarter of 2018. On a linked quarter basis, average noninterest-bearing deposits decreased $1.8 billion (2.3 percent) primarily due to decreases in Wealth Management and Investment Services and Corporate and Commercial Banking, partially offset by an increase in consumer balances within Consumer and Business Banking. Noninterest bearing deposit declines were primarily a result of business customers deploying deposit balances to support business growth, the migration of balances to alternative investment vehicles, and the change in deposit balances associated with the timing of receipt and distribution of funds in the corporate trust business.
Average total savings deposits decreased $3.5 billion (1.6 percent) on a linked quarter basis primarily due to decreases in Corporate and Commercial Banking as well as Wealth Management and Investment Services. The decline in Corporate and Commercial Banking savings balances reflects expected run-off related to the business merger of a large financial customer. The decline is expected to moderate in future quarters. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, increased $548 million (1.5 percent). Time deposits are experiencing some growth as customers search for higher yield.
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U.S. Bancorp Third Quarter 2018 Results | |
NONINTEREST INCOME | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q | 2Q | 3Q | 3Q18 vs | 3Q18 vs | YTD | YTD | Percent | |||||||||||||||||||||||||
2018 | 2018 | 2017 | 2Q18 | 3Q17 | 2018 | 2017 | Change | |||||||||||||||||||||||||
Credit and debit card revenue |
$344 | $351 | $318 | (2.0) | 8.2 | $1,019 | $947 | 7.6 | ||||||||||||||||||||||||
Corporate payment products revenue |
169 | 158 | 150 | 7.0 | 12.7 | 481 | 427 | 12.6 | ||||||||||||||||||||||||
Merchant processing services |
392 | 387 | 377 | 1.3 | 4.0 | 1,142 | 1,112 | 2.7 | ||||||||||||||||||||||||
ATM processing services |
85 | 90 | 77 | (5.6) | 10.4 | 254 | 223 | 13.9 | ||||||||||||||||||||||||
Trust and investment management fees |
411 | 401 | 380 | 2.5 | 8.2 | 1,210 | 1,128 | 7.3 | ||||||||||||||||||||||||
Deposit service charges |
198 | 183 | 187 | 8.2 | 5.9 | 563 | 538 | 4.6 | ||||||||||||||||||||||||
Treasury management fees |
146 | 155 | 153 | (5.8) | (4.6) | 451 | 466 | (3.2) | ||||||||||||||||||||||||
Commercial products revenue |
216 | 234 | 240 | (7.7) | (10.0) | 670 | 730 | (8.2) | ||||||||||||||||||||||||
Mortgage banking revenue |
174 | 191 | 213 | (8.9) | (18.3) | 549 | 632 | (13.1) | ||||||||||||||||||||||||
Investment products fees |
47 | 47 | 42 | -- | 11.9 | 140 | 128 | 9.4 | ||||||||||||||||||||||||
Securities gains (losses), net |
10 | 10 | 9 | -- | 11.1 | 25 | 47 | (46.8) | ||||||||||||||||||||||||
Other |
226 | 207 | 194 | 9.2 | 16.5 | 600 | 569 | 5.4 | ||||||||||||||||||||||||
Total noninterest income |
|
$2,418 |
|
|
$2,414 |
|
|
$2,340 |
|
|
.2 |
|
|
3.3 |
|
|
$7,104 |
|
|
$6,947 |
|
|
2.3 |
| ||||||||
Third quarter noninterest income of $2,418 million was $78 million (3.3 percent) higher than the third quarter of 2017 led by strong growth in payment services revenue and trust and investment management fees. Other noninterest income also increased year-over-year primarily due to higher equity investment income and tax-advantaged syndication revenue. These increases were partially offset by lower mortgage banking revenue and commercial products revenue, which were impacted by industry trends in these revenue categories. Payment services revenue increased $60 million (7.1 percent) due to higher credit and debit card revenue of $26 million (8.2 percent), an increase in corporate payment products revenue of $19 million (12.7 percent), and higher merchant processing services of $15 million (4.0 percent) all driven by higher sales volumes. Trust and investment management fees increased $31 million (8.2 percent) due to business growth and favorable market conditions. The decrease in mortgage banking revenue of $39 million (18.3 percent) was primarily due to lower mortgage production and the adverse impact on gain on sale margins due to excess capacity in the industry in the near term. Commercial products revenue decreased $24 million (10.0 percent) primarily due to lower corporate bond underwriting fees and loan syndication fees.
Noninterest income was $4 million (0.2 percent) higher in the third quarter of 2018 compared with the second quarter of 2018 reflecting higher payment services revenue as corporate payment products revenue grew $11 million (7.0 percent) due to seasonally higher sales volumes and merchant processing services increased $5 million (1.3 percent) primarily due to seasonally higher fee revenue, partially offset by a seasonal decrease of $7 million (2.0 percent) in credit and debit card revenue. Deposit service charges increased $15 million (8.2 percent) as a result of seasonally higher incidence rates and other noninterest income increased $19 million (9.2 percent) primarily due to higher equity investment income and tax-advantaged syndication revenue. Partially offsetting these increases were a decrease in commercial products revenue of $18 million (7.7 percent) due mainly to lower corporate bond underwriting fees and a decrease in mortgage banking revenue of $17 million (8.9 percent) driven by an unfavorable change in the valuation of mortgage servicing rights, net of hedging activities.
6
|
U.S. Bancorp Third Quarter 2018 Results | |
NONINTEREST EXPENSE | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q 2018 |
2Q 2018 |
3Q 2017 |
3Q18 vs 2Q18 |
3Q18 vs 3Q17 |
YTD 2018 |
YTD 2017 |
Percent Change |
|||||||||||||||||||||||||
Compensation |
$1,529 | $1,542 | $1,440 | (.8) | 6.2 | $4,594 | $4,247 | 8.2 | ||||||||||||||||||||||||
Employee benefits |
294 | 299 | 268 | (1.7) | 9.7 | 923 | 843 | 9.5 | ||||||||||||||||||||||||
Net occupancy and equipment |
270 | 262 | 258 | 3.1 | 4.7 | 797 | 760 | 4.9 | ||||||||||||||||||||||||
Professional services |
96 | 95 | 104 | 1.1 | (7.7) | 274 | 305 | (10.2) | ||||||||||||||||||||||||
Marketing and business development |
106 | 111 | 92 | (4.5) | 15.2 | 314 | 291 | 7.9 | ||||||||||||||||||||||||
Technology and communications |
247 | 242 | 227 | 2.1 | 8.8 | 724 | 667 | 8.5 | ||||||||||||||||||||||||
Postage, printing and supplies |
84 | 80 | 82 | 5.0 | 2.4 | 244 | 244 | -- | ||||||||||||||||||||||||
Other intangibles |
41 | 40 | 44 | 2.5 | (6.8) | 120 | 131 | (8.4) | ||||||||||||||||||||||||
Other |
377 | 414 | 483 | (8.9) | (21.9) | 1,194 | 1,403 | (14.9) | ||||||||||||||||||||||||
Total noninterest expense |
|
$3,044 |
|
|
$3,085 |
|
|
$2,998 |
|
|
(1.3) |
|
|
1.5 |
|
|
$9,184 |
|
|
$8,891 |
|
|
3.3 |
| ||||||||
Third quarter noninterest expense of $3,044 million was $46 million (1.5 percent) higher than the third quarter of 2017 primarily due to higher personnel costs and technology investment, partially offset by lower other noninterest expense. Compensation expense increased $89 million (6.2 percent) principally due to the impact of hiring to support business growth and compliance programs, merit increases, and higher variable compensation related to business production. Employee benefits expense increased $26 million (9.7 percent) primarily driven by increased medical costs and staffing. Other noninterest expense decreased $106 million (21.9 percent) due to lower costs related to tax-advantaged projects, lower FDIC insurance expense, a reduction in mortgage servicing costs, and lower pension related costs.
Noninterest expense decreased $41 million (1.3 percent) on a linked quarter basis primarily due to a reduction in compensation expense including lower incentives and a seasonal decline in contract labor costs as well as lower other noninterest expense as a result of lower costs related to tax-advantaged projects driven by syndicating tax credits following tax reform and the change in accruals related to legal and insurance matters.
Provision for Income Taxes
The provision for income taxes for the third quarter of 2018 resulted in a tax rate of 21.2 percent on a taxable-equivalent basis (effective tax rate of 20.2 percent), compared with 29.0 percent (effective tax rate of 27.3 percent) in the third quarter of 2017, and 21.1 percent on a taxable-equivalent basis (effective tax rate of 20.1 percent) in the second quarter of 2018. The lower 2018 tax rates reflect the tax reform legislation enacted during the fourth quarter of 2017.
7
|
U.S. Bancorp Third Quarter 2018 Results | |
ALLOWANCE FOR CREDIT LOSSES | ||||||||||||||||||||||||||||||||||||||||
($ in millions) | 3Q | 2Q | 1Q | 4Q | 3Q | |||||||||||||||||||||||||||||||||||
2018 | % (b) | 2018 | % (b) | 2018 | % (b) | 2017 | % (b) | 2017 | % (b) | |||||||||||||||||||||||||||||||
Balance, beginning of period |
$4,411 | $4,417 | $4,417 | $4,407 | $4,377 | |||||||||||||||||||||||||||||||||||
Net charge-offs |
||||||||||||||||||||||||||||||||||||||||
Commercial |
63 | .27 | 54 | .23 | 56 | .25 | 22 | .09 | 79 | .34 | ||||||||||||||||||||||||||||||
Lease financing |
3 | .22 | 4 | .29 | 4 | .29 | 6 | .44 | 4 | .29 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Total commercial |
66 | .26 | 58 | .24 | 60 | .25 | 28 | .11 | 83 | .34 | ||||||||||||||||||||||||||||||
Commercial mortgages |
(5 | ) | (.07 | ) | -- | -- | (4 | ) | (.06 | ) | 18 | .24 | (2 | ) | (.03 | ) | ||||||||||||||||||||||||
Construction and development |
(4 | ) | (.14 | ) | -- | -- | 1 | .04 | -- | -- | (5 | ) | (.17 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Total commercial real estate |
(9 | ) | (.09 | ) | -- | -- | (3 | ) | (.03 | ) | 18 | .17 | (7 | ) | (.07 | ) | ||||||||||||||||||||||||
Residential mortgages |
4 | .03 | 4 | .03 | 7 | .05 | 10 | .07 | 7 | .05 | ||||||||||||||||||||||||||||||
Credit card |
206 | 3.75 | 210 | 3.97 | 211 | 4.02 | 205 | 3.83 | 187 | 3.55 | ||||||||||||||||||||||||||||||
Retail leasing |
3 | .14 | 3 | .15 | 3 | .15 | 3 | .15 | 2 | .10 | ||||||||||||||||||||||||||||||
Home equity and second mortgages |
(1 | ) | (.02 | ) | (2 | ) | (.05 | ) | (1 | ) | (.03 | ) | (2 | ) | (.05 | ) | (1 | ) | (.02 | ) | ||||||||||||||||||||
Other |
59 | .74 | 59 | .76 | 64 | .79 | 63 | .76 | 59 | .73 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Total other retail |
61 | .43 | 60 | .43 | 66 | .47 | 64 | .44 | 60 | .42 | ||||||||||||||||||||||||||||||
Total net charge-offs, |
-- | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
excluding covered loans |
328 | .47 | 332 | .48 | 341 | .50 | 325 | .47 | 330 | .48 | ||||||||||||||||||||||||||||||
Covered loans |
-- | -- | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Total net charge-offs |
328 | .46 | 332 | .48 | 341 | .49 | 325 | .46 | 330 | .47 | ||||||||||||||||||||||||||||||
Provision for credit losses |
343 | 327 | 341 | 335 | 360 | |||||||||||||||||||||||||||||||||||
Other changes (a) |
-- | (1 | ) | -- | -- | -- | ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Balance, end of period |
$4,426 | $4,411 | $4,417 | $4,417 | $4,407 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Components |
||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses |
$3,954 | $3,920 | $3,918 | $3,925 | $3,908 | |||||||||||||||||||||||||||||||||||
Liability for unfunded credit commitments |
472 | 491 | 499 | 492 | 499 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Total allowance for credit losses |
$4,426 | $4,411 | $4,417 | $4,417 | $4,407 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Gross charge-offs |
$428 | $437 | $453 | $464 | $433 | |||||||||||||||||||||||||||||||||||
Gross recoveries |
$100 | $105 | $112 | $139 | $103 | |||||||||||||||||||||||||||||||||||
Allowance for credit losses as a percentage of |
|
|||||||||||||||||||||||||||||||||||||||
Period-end loans |
1.57 | 1.57 | 1.59 | 1.58 | 1.58 | |||||||||||||||||||||||||||||||||||
Nonperforming loans |
544 | 484 | 431 | 438 | 426 | |||||||||||||||||||||||||||||||||||
Nonperforming assets |
441 | 404 | 367 | 368 | 352 | |||||||||||||||||||||||||||||||||||
(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
|
|
8
|
U.S. Bancorp Third Quarter 2018 Results | |
Credit quality was relatively stable on a linked quarter and year-over-year basis. The Companys provision for credit losses for the third quarter of 2018 was $343 million, which was $16 million (4.9 percent) higher than the prior quarter and $17 million (4.7 percent) lower than the third quarter of 2017.
Total net charge-offs in the third quarter of 2018 were $328 million, compared with $332 million in the second quarter of 2018, and $330 million in the third quarter of 2017. Net charge-offs decreased $4 million (1.2 percent) compared with the second quarter of 2018 mainly due to lower total commercial real estate net charge-offs, partially offset by higher total commercial net charge-offs. Net charge-offs decreased $2 million (0.6 percent) compared with the third quarter of 2017 primarily due to lower total commercial net charge-offs and lower residential mortgage net charge-offs mostly offset by higher credit card net charge-offs. The net charge-off ratio was 0.46 percent in the third quarter of 2018, compared with 0.48 percent in the second quarter of 2018 and 0.47 percent in the third quarter of 2017.
The allowance for credit losses was $4,426 million at September 30, 2018, compared with $4,411 million at June 30, 2018, and $4,407 million at September 30, 2017. The ratio of the allowance for credit losses to period-end loans was 1.57 percent at September 30, 2018, and at June 30, 2018, compared with 1.58 percent at September 30, 2017. The ratio of the allowance for credit losses to nonperforming loans was 544 percent at September 30, 2018, compared with 484 percent at June 30, 2018, and 426 percent at September 30, 2017.
Nonperforming assets were $1,004 million at September 30, 2018, compared with $1,091 million at June 30, 2018, and $1,251 million at September 30, 2017. The ratio of nonperforming assets to loans and other real estate was 0.36 percent at September 30, 2018, compared with 0.39 percent at June 30, 2018, and 0.45 percent at September 30, 2017. The year-over-year decrease in nonperforming assets was driven by improvements in nonperforming residential mortgages, total commercial loans, and other real estate owned, partially offset by increases in nonperforming other retail loans and other nonperforming assets. Accruing loans 90 days or more past due were $551 million at September 30, 2018, compared with $640 million at June 30, 2018, and $649 million at September 30, 2017.
DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES | ||||||||||||||||||||
(Percent) | Sep 30 2018 |
Jun 30 2018 |
Mar 31 2018 |
Dec 31 2017 |
Sep 30 2017 | |||||||||||||||
Delinquent loan ratios - 90 days or more past due excluding nonperforming loans |
|
|||||||||||||||||||
Commercial |
.06 | .06 | .06 | .06 | .05 | |||||||||||||||
Commercial real estate |
.01 | .01 | .01 | .01 | .01 | |||||||||||||||
Residential mortgages |
.19 | .18 | .22 | .22 | .18 | |||||||||||||||
Credit card |
1.18 | 1.15 | 1.29 | 1.28 | 1.20 | |||||||||||||||
Other retail |
.17 | .16 | .18 | .17 | .15 | |||||||||||||||
Total loans, excluding covered loans |
.19 | .19 | .21 | .21 | .18 | |||||||||||||||
Covered loans (a) |
.86 | 4.46 | 4.57 | 4.74 | 4.66 | |||||||||||||||
Total loans |
.20 | .23 | .25 | .26 | .23 | |||||||||||||||
Delinquent loan ratios - 90 days or more past due including nonperforming loans |
|
|||||||||||||||||||
Commercial |
.28 | .28 | .37 | .31 | .33 | |||||||||||||||
Commercial real estate |
.27 | .27 | .31 | .37 | .30 | |||||||||||||||
Residential mortgages |
.69 | .84 | .93 | .96 | .98 | |||||||||||||||
Credit card |
1.18 | 1.15 | 1.29 | 1.28 | 1.20 | |||||||||||||||
Other retail |
.49 | .48 | .48 | .46 | .43 | |||||||||||||||
Total loans, excluding covered loans |
.48 | .51 | .58 | .57 | .55 | |||||||||||||||
Covered loans (a) |
.86 | 4.68 | 4.77 | 4.93 | 4.84 | |||||||||||||||
Total loans |
.48 | .55 | .62 | .62 | .60 | |||||||||||||||
(a) Effective September 30, 2018, the Company transferred $1.3 billion of covered loans to loans held for sale. Included in the amount transferred were $108 million of loans 90 days or more past due and $6 million that were nonperforming. |
| |||||||||||||||||||
9
|
U.S. Bancorp Third Quarter 2018 Results | |
ASSET QUALITY (a) | ||||||||||||||||||||
($ in millions) | ||||||||||||||||||||
Sep 30 2018 |
Jun 30 2018 |
Mar 31 2018 |
Dec 31 2017 |
Sep 30 2017 | ||||||||||||||||
Nonperforming loans |
||||||||||||||||||||
Commercial |
$193 | $199 | $274 | $225 | $231 | |||||||||||||||
Lease financing |
23 | 25 | 27 | 24 | 38 | |||||||||||||||
Total commercial |
216 | 224 | 301 | 249 | 269 | |||||||||||||||
Commercial mortgages |
77 | 72 | 86 | 108 | 89 | |||||||||||||||
Construction and development |
28 | 32 | 33 | 34 | 33 | |||||||||||||||
Total commercial real estate |
105 | 104 | 119 | 142 | 122 | |||||||||||||||
Residential mortgages |
317 | 400 | 430 | 442 | 474 | |||||||||||||||
Credit card |
-- | -- | -- | 1 | 1 | |||||||||||||||
Other retail |
175 | 178 | 168 | 168 | 163 | |||||||||||||||
Total nonperforming loans, excluding covered loans |
813 | 906 | 1,018 | 1,002 | 1,029 | |||||||||||||||
Covered loans |
-- | 6 | 6 | 6 | 6 | |||||||||||||||
Total nonperforming loans |
813 | 912 | 1,024 | 1,008 | 1,035 | |||||||||||||||
Other real estate |
100 | 108 | 124 | 141 | 164 | |||||||||||||||
Covered other real estate |
19 | 20 | 20 | 21 | 26 | |||||||||||||||
Other nonperforming assets |
72 | 51 | 36 | 30 | 26 | |||||||||||||||
Total nonperforming assets |
$1,004 | $1,091 | $1,204 | $1,200 | $1,251 | |||||||||||||||
Accruing loans 90 days or more past due |
$551 | $640 | $702 | $720 | $649 | |||||||||||||||
Performing restructured loans, excluding GNMA and covered loans |
$2,262 | $2,164 | $2,190 | $2,306 | $2,419 | |||||||||||||||
Performing restructured GNMA and covered loans |
$1,678 | $1,695 | $1,598 | $1,713 | $1,600 | |||||||||||||||
Nonperforming assets to loans plus ORE (%) |
.36 | .39 | .43 | .43 | .45 | |||||||||||||||
(a) Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due
|
|
10
|
U.S. Bancorp Third Quarter 2018 Results | |
COMMON SHARES | ||||||||||||||||||||
(Millions) | 3Q 2018 |
2Q 2018 |
1Q 2018 |
4Q 2017 |
3Q 2017 | |||||||||||||||
Beginning shares outstanding |
1,636 | 1,649 | 1,656 | 1,667 | 1,679 | |||||||||||||||
Shares issued for stock incentive plans, acquisitions and other corporate purposes |
1 | -- | 4 | 1 | -- | |||||||||||||||
Shares repurchased |
(14) | (13) | (11) | (12) | (12) | |||||||||||||||
|
|
| ||||||||||||||||||
Ending shares outstanding |
1,623 | 1,636 | 1,649 | 1,656 | 1,667 | |||||||||||||||
|
|
| ||||||||||||||||||
CAPITAL POSITION | ||||||||||||||||||||
($ in millions) | Sep 30 2018 |
Jun 30 2018 |
Mar 31 2018 |
Dec 31 2017 |
Sep 30 2017 |
|||||||||||||||
Total U.S. Bancorp shareholders equity |
$ | 50,375 | $ | 49,628 | $ | 49,187 | $ | 49,040 | $ | 48,723 | ||||||||||
Basel III Standardized Approach (a) |
||||||||||||||||||||
Common equity tier 1 capital |
$ | 34,097 | $ | 34,161 | $ | 33,539 | $ | 34,369 | $ | 34,876 | ||||||||||
Tier 1 capital |
40,114 | 39,611 | 38,991 | 39,806 | 40,411 | |||||||||||||||
Total risk-based capital |
47,531 | 47,258 | 46,640 | 47,503 | 48,104 | |||||||||||||||
Fully implemented common equity tier 1 capital ratio (a) |
9.0 | % | 9.1 | % | 9.0 | % | 9.1 | % (b) | 9.4 | % (b) | ||||||||||
Tier 1 capital ratio |
10.6 | 10.5 | 10.4 | 10.8 | 11.1 | |||||||||||||||
Total risk-based capital ratio |
12.6 | 12.6 | 12.5 | 12.9 | 13.2 | |||||||||||||||
Leverage ratio |
9.0 | 8.9 | 8.8 | 8.9 | 9.1 | |||||||||||||||
Basel III Advanced Approaches (a) |
||||||||||||||||||||
Fully implemented common equity tier 1 capital ratio (a) |
11.8 | 11.6 | 11.5 | 11.6 | (b) | 11.8 | (b) | |||||||||||||
Tangible common equity to tangible assets (b) |
7.7 | 7.8 | 7.7 | 7.6 | 7.7 | |||||||||||||||
Tangible common equity to risk-weighted assets (b) |
9.3 | 9.3 | 9.3 | 9.4 | 9.5 | |||||||||||||||
Common equity tier 1 capital ratio calculated under the transitional standardized approach (a) |
-- | -- | -- | 9.3 | 9.6 | |||||||||||||||
Common equity tier 1 capital ratio calculated under the transitional advanced approaches (a) |
-- | -- | -- | 12.0 | 12.1 | |||||||||||||||
(a) Beginning January 1, 2018, the regulatory capital requirements fully reflect implementation of Basel III. Prior to 2018, the Companys capital ratios reflected certain transitional adjustments. 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.
(b) See Non-GAAP Financial Measures reconciliation on page 16
|
|
Total U.S. Bancorp shareholders equity was $50.4 billion at September 30, 2018, compared with $49.6 billion at June 30, 2018, and $48.7 billion at September 30, 2017. During the third 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 common equity tier 1 capital to risk-weighted assets ratio using the Basel III standardized approach was 9.0 percent at September 30, 2018, compared with 9.1 percent at June 30, 2018, and 9.6 percent at September 30, 2017. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III advanced approaches method was 11.8 percent at September 30, 2018, compared with 11.6 percent at June 30, 2018, and 12.1 percent at September 30, 2017.
11
|
U.S. Bancorp Third Quarter 2018 Results | |
Investor Conference Call
|
On Wednesday, October 17, 2018, at 8:00 a.m. CDT, Andy Cecere, chairman, 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, visit U.S. Bancorps website at usbank.com and click on About US, Investor Relations and Webcasts & Presentations. 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 7338239. For those unable to participate during the live call, a recording will be available at approximately 11:00 a.m. CDT on Wednesday, October 17 and will be accessible until Wednesday, October 24 at 11:00 p.m. CDT. To access the recorded message within the United States and Canada, please 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 7338239.
About U.S. Bancorp
|
U.S. Bancorp, with 74,000 employees and $465 billion in assets as of September 30, 2018, is the parent company of U.S. Bank, the fifth-largest commercial bank in the United States. The Minneapolis-based bank blends its relationship teams, branches and ATM network with mobile and online tools that allow customers to bank how, when and where they prefer. U.S. Bank is committed to serving its millions of retail, business, wealth management, payment, commercial and corporate, and investment services customers across the country and around the world as a trusted financial partner, a commitment recognized by the Ethisphere Institute naming the bank a 2018 Worlds Most Ethical Company. Visit U.S. Bank at www.usbank.com or follow on social media to stay up to date with company news.
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. Deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorps revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price 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 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 its investment securities; 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, 2017, on file with the Securities and Exchange Commission, including the sections entitled Corporate Risk Profile and Risk Factors 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.
12
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U.S. Bancorp Third Quarter 2018 Results | |
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 |
| Return on tangible common equity |
These capital measures are viewed by management as useful additional methods of evaluating the Companys utilization of its capital held and the level of capital available to withstand unexpected negative 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 capital measures are not defined in generally accepted accounting principles (GAAP), or are not defined in banking regulations. As a result, these capital measures disclosed by the Company may be considered non-GAAP financial measures. In addition, certain capital measures related to prior periods are presented on the same basis as those capital measures in the current period. The effective capital ratios defined by banking regulations for these periods were subject to certain transitional provisions. Management believes this information helps investors assess trends in the Companys capital adequacy.
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.
13
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CONSOLIDATED STATEMENT OF INCOME
|
||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
(Dollars and Shares in Millions, Except Per Share Data) | September 30, | September 30, | ||||||||||||||
(Unaudited) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Interest Income |
||||||||||||||||
Loans |
$3,353 | $3,049 | $9,645 | $8,728 | ||||||||||||
Loans held for sale |
36 | 40 | 108 | 104 | ||||||||||||
Investment securities |
661 | 568 | 1,927 | 1,653 | ||||||||||||
Other interest income |
73 | 47 | 182 | 131 | ||||||||||||
Total interest income |
4,123 | 3,704 | 11,862 | 10,616 | ||||||||||||
Interest Expense |
||||||||||||||||
Deposits |
491 | 293 | 1,263 | 730 | ||||||||||||
Short-term borrowings |
104 | 39 | 265 | 96 | ||||||||||||
Long-term debt |
277 | 196 | 718 | 585 | ||||||||||||
Total interest expense |
872 | 528 | 2,246 | 1,411 | ||||||||||||
Net interest income |
3,251 | 3,176 | 9,616 | 9,205 | ||||||||||||
Provision for credit losses |
343 | 360 | 1,011 | 1,055 | ||||||||||||
Net interest income after provision for credit losses |
2,908 | 2,816 | 8,605 | 8,150 | ||||||||||||
Noninterest Income |
||||||||||||||||
Credit and debit card revenue |
344 | 318 | 1,019 | 947 | ||||||||||||
Corporate payment products revenue |
169 | 150 | 481 | 427 | ||||||||||||
Merchant processing services |
392 | 377 | 1,142 | 1,112 | ||||||||||||
ATM processing services |
85 | 77 | 254 | 223 | ||||||||||||
Trust and investment management fees |
411 | 380 | 1,210 | 1,128 | ||||||||||||
Deposit service charges |
198 | 187 | 563 | 538 | ||||||||||||
Treasury management fees |
146 | 153 | 451 | 466 | ||||||||||||
Commercial products revenue |
216 | 240 | 670 | 730 | ||||||||||||
Mortgage banking revenue |
174 | 213 | 549 | 632 | ||||||||||||
Investment products fees |
47 | 42 | 140 | 128 | ||||||||||||
Securities gains (losses), net |
10 | 9 | 25 | 47 | ||||||||||||
Other |
226 | 194 | 600 | 569 | ||||||||||||
Total noninterest income |
2,418 | 2,340 | 7,104 | 6,947 | ||||||||||||
Noninterest Expense |
||||||||||||||||
Compensation |
1,529 | 1,440 | 4,594 | 4,247 | ||||||||||||
Employee benefits |
294 | 268 | 923 | 843 | ||||||||||||
Net occupancy and equipment |
270 | 258 | 797 | 760 | ||||||||||||
Professional services |
96 | 104 | 274 | 305 | ||||||||||||
Marketing and business development |
106 | 92 | 314 | 291 | ||||||||||||
Technology and communications |
247 | 227 | 724 | 667 | ||||||||||||
Postage, printing and supplies |
84 | 82 | 244 | 244 | ||||||||||||
Other intangibles |
41 | 44 | 120 | 131 | ||||||||||||
Other |
377 | 483 | 1,194 | 1,403 | ||||||||||||
Total noninterest expense |
3,044 | 2,998 | 9,184 | 8,891 | ||||||||||||
Income before income taxes |
2,282 | 2,158 | 6,525 | 6,206 | ||||||||||||
Applicable income taxes |
460 | 589 | 1,263 | 1,639 | ||||||||||||
Net income |
1,822 | 1,569 | 5,262 | 4,567 | ||||||||||||
Net (income) loss attributable to noncontrolling interests |
(7) | (6) | (22) | (31) | ||||||||||||
Net income attributable to U.S. Bancorp |
$1,815 | $1,563 | $5,240 | $4,536 | ||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$1,732 | $1,485 | $5,007 | $4,302 | ||||||||||||
Earnings per common share |
$1.06 | $.89 | $3.05 | $2.56 | ||||||||||||
Diluted earnings per common share |
$1.06 | $.88 | $3.04 | $2.55 | ||||||||||||
Dividends declared per common share |
$.37 | $.30 | $.97 | $.86 | ||||||||||||
Average common shares outstanding |
1,629 | 1,672 | 1,641 | 1,683 | ||||||||||||
Average diluted common shares outstanding |
1,633 | 1,678 | 1,645 | 1,689 |
14
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CONSOLIDATED ENDING BALANCE SHEET
|
||||||||||||
September 30, | December 31, | September 30, | ||||||||||
(Dollars in Millions) | 2018 | 2017 | 2017 | |||||||||
Assets |
(Unaudited | ) | (Unaudited | ) | ||||||||
Cash and due from banks |
$20,082 | $19,505 | $20,540 | |||||||||
Investment securities |
||||||||||||
Held-to-maturity |
46,046 | 44,362 | 44,018 | |||||||||
Available-for-sale |
64,912 | 68,137 | 67,772 | |||||||||
Loans held for sale |
4,533 | 3,554 | 3,757 | |||||||||
Loans |
||||||||||||
Commercial |
99,273 | 97,561 | 96,928 | |||||||||
Commercial real estate |
39,966 | 40,463 | 41,430 | |||||||||
Residential mortgages |
62,904 | 59,783 | 59,317 | |||||||||
Credit card |
21,869 | 22,180 | 20,923 | |||||||||
Other retail |
56,049 | 57,324 | 56,859 | |||||||||
Total loans, excluding covered loans |
280,061 | 277,311 | 275,457 | |||||||||
Covered loans |
1,400 | 3,121 | 3,262 | |||||||||
Total loans |
281,461 | 280,432 | 278,719 | |||||||||
Less allowance for loan losses |
(3,954 | ) | (3,925 | ) | (3,908 | ) | ||||||
Net loans |
277,507 | 276,507 | 274,811 | |||||||||
Premises and equipment |
2,438 | 2,432 | 2,402 | |||||||||
Goodwill |
9,530 | 9,434 | 9,370 | |||||||||
Other intangible assets |
3,544 | 3,228 | 3,193 | |||||||||
Other assets |
36,015 | 34,881 | 33,364 | |||||||||
Total assets |
$464,607 | $462,040 | $459,227 | |||||||||
Liabilities and Shareholders Equity |
||||||||||||
Deposits |
||||||||||||
Noninterest-bearing |
$77,146 | $87,557 | $82,152 | |||||||||
Interest-bearing |
254,032 | 259,658 | 260,437 | |||||||||
Total deposits |
331,178 | 347,215 | 342,589 | |||||||||
Short-term borrowings |
23,868 | 16,651 | 15,856 | |||||||||
Long-term debt |
40,894 | 32,259 | 34,515 | |||||||||
Other liabilities |
17,660 | 16,249 | 16,916 | |||||||||
Total liabilities |
413,600 | 412,374 | 409,876 | |||||||||
Shareholders equity |
||||||||||||
Preferred stock |
5,984 | 5,419 | 5,419 | |||||||||
Common stock |
21 | 21 | 21 | |||||||||
Capital surplus |
8,479 | 8,464 | 8,457 | |||||||||
Retained earnings |
57,878 | 54,142 | 53,023 | |||||||||
Less treasury stock |
(19,414 | ) | (17,602 | ) | (16,978 | ) | ||||||
Accumulated other comprehensive income (loss) |
(2,573 | ) | (1,404 | ) | (1,219 | ) | ||||||
Total U.S. Bancorp shareholders equity |
50,375 | 49,040 | 48,723 | |||||||||
Noncontrolling interests |
632 | 626 | 628 | |||||||||
Total equity |
51,007 | 49,666 | 49,351 | |||||||||
Total liabilities and equity |
$464,607 | $462,040 | $459,227 |
15
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NON-GAAP FINANCIAL MEASURES | ||||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
(Dollars in Millions, Unaudited) | 2018 | 2018 | 2018 | 2017 | 2017 | |||||||||||||||
Total equity |
$51,007 | $50,257 | $49,812 | $49,666 | $49,351 | |||||||||||||||
Preferred stock |
(5,984) | (5,419) | (5,419) | (5,419) | (5,419) | |||||||||||||||
Noncontrolling interests |
(632) | (629) | (625) | (626) | (628) | |||||||||||||||
Goodwill (net of deferred tax liability) (1) |
(8,682) | (8,585) | (8,609) | (8,613) | (8,141) | |||||||||||||||
Intangible assets, other than mortgage servicing rights |
(627) | (571) | (608) | (583) | (595) | |||||||||||||||
Tangible common equity (a) |
35,082 | 35,053 | 34,551 | 34,425 | 34,568 | |||||||||||||||
Total assets |
464,607 | 461,329 | 460,119 | 462,040 | 459,227 | |||||||||||||||
Goodwill (net of deferred tax liability) (1) |
(8,682) | (8,585) | (8,609) | (8,613) | (8,141) | |||||||||||||||
Intangible assets, other than mortgage servicing rights |
(627) | (571) | (608) | (583) | (595) | |||||||||||||||
Tangible assets (b) |
455,298 | 452,173 | 450,902 | 452,844 | 450,491 | |||||||||||||||
Risk-weighted assets, determined in accordance with the Basel III standardized approach (c) |
377,713 | * | 375,466 | 373,141 | 367,771 | 363,957 | ||||||||||||||
Tangible common equity (as calculated above) |
34,425 | 34,568 | ||||||||||||||||||
Adjustments (2) |
(550) | (52) | ||||||||||||||||||
Common equity tier 1 capital estimated for the Basel III fully implemented standardized and advanced approaches (d) |
33,875 | 34,516 | ||||||||||||||||||
Risk-weighted assets, determined in accordance with prescribed transitional standardized approach regulatory requirements |
367,771 | 363,957 | ||||||||||||||||||
Adjustments (3) |
4,473 | 3,907 | ||||||||||||||||||
Risk-weighted assets estimated for the Basel III fully implemented standardized approach (e) |
372,244 | 367,864 | ||||||||||||||||||
Risk-weighted assets, determined in accordance with prescribed transitional advanced approaches regulatory requirements |
287,211 | 287,800 | ||||||||||||||||||
Adjustments (4) |
4,769 | 4,164 | ||||||||||||||||||
Risk-weighted assets estimated for the Basel III fully implemented advanced approaches (f) |
291,980 | 291,964 | ||||||||||||||||||
Ratios* |
||||||||||||||||||||
Tangible common equity to tangible assets (a)/(b) |
7.7 | % | 7.8 | % | 7.7 | % | 7.6 | % | 7.7 | % | ||||||||||
Tangible common equity to risk-weighted assets (a)/(c) |
9.3 | 9.3 | 9.3 | 9.4 | 9.5 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach (d)/(e) |
9.1 | 9.4 | ||||||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches (d)/(f) |
11.6 | 11.8 | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
2018 | 2018 | 2018 | 2017 | 2017 | ||||||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$1,732 | $1,678 | $1,597 | $1,611 | $1,485 | |||||||||||||||
Intangibles amortization (net-of-tax) |
32 | 32 | 31 | 28 | 29 | |||||||||||||||
Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization |
1,764 | 1,710 | 1,628 | 1,639 | 1,514 | |||||||||||||||
Annualized net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization (g) |
6,998 | 6,859 | 6,602 | 6,503 | 6,007 | |||||||||||||||
Average total equity |
50,768 | 49,950 | 49,450 | 49,461 | 49,447 | |||||||||||||||
Less: Average preferred stock |
5,714 | 5,419 | 5,419 | 5,419 | 5,419 | |||||||||||||||
Less: Average noncontrolling interests |
630 | 628 | 625 | 627 | 628 | |||||||||||||||
Less: Average goodwill (net of deferred tax liability) (1) |
8,620 | 8,602 | 8,627 | 8,154 | 8,153 | |||||||||||||||
Less: Average intangible assets, other than mortgage servicing rights |
584 | 588 | 603 | 591 | 615 | |||||||||||||||
Average U.S. Bancorp common shareholders equity, excluding intangible assets (h) |
35,220 | 34,713 | 34,176 | 34,670 | 34,632 | |||||||||||||||
Return on tangible common equity (g)/(h) |
19.9 | % | 19.8 | % | 19.3 | % | 18.8 | % | 17.3 | % |
* | 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. |
16
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NON-GAAP FINANCIAL MEASURES
|
||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
(Dollars in Millions, Unaudited) |
|
September 30, 2018 |
|
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June 30, 2018 |
|
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March 31, 2018 |
|
|
December 31, 2017 |
|
|
September 30, 2017 |
|
|
September 30, 2018 |
|
|
September 30, 2017 |
| |||||||
Net interest income |
$3,251 | $3,197 | $3,168 | $3,175 | $3,176 | $9,616 | $9,205 | |||||||||||||||||||||
Taxable-equivalent adjustment (1) |
30 | 29 | 29 | 53 | 51 | 88 | 152 | |||||||||||||||||||||
Net interest income, on a taxable-equivalent basis |
3,281 | 3,226 | 3,197 | 3,228 | 3,227 | 9,704 | 9,357 | |||||||||||||||||||||
Net interest income, on a taxable-equivalent basis (as calculated above) |
3,281 | 3,226 | 3,197 | 3,228 | 3,227 | 9,704 | 9,357 | |||||||||||||||||||||
Noninterest income |
2,418 | 2,414 | 2,272 | 2,370 | 2,340 | 7,104 | 6,947 | |||||||||||||||||||||
Less: Securities gains (losses), net |
10 | 10 | 5 | 10 | 9 | 25 | 47 | |||||||||||||||||||||
Total net revenue, excluding net securities gains (losses) (a) |
5,689 | 5,630 | 5,464 | 5,588 | 5,558 | 16,783 | 16,257 | |||||||||||||||||||||
Noninterest expense (b) |
3,044 | 3,085 | 3,055 | 3,899 | 2,998 | 9,184 | 8,891 | |||||||||||||||||||||
Less: Intangible amortization |
41 | 40 | 39 | 44 | 44 | 120 | 131 | |||||||||||||||||||||
Noninterest expense, excluding intangible amortization (c) |
3,003 | 3,045 | 3,016 | 3,855 | 2,954 | 9,064 | 8,760 | |||||||||||||||||||||
Efficiency ratio (b)/(a) |
53.5 | % | 54.8 | % | 55.9 | % | 69.8 | % | 53.9 | % | 54.7 | % | 54.7 | % | ||||||||||||||
Tangible efficiency ratio (c)/(a) |
52.8 | 54.1 | 55.2 | 69.0 | 53.1 | 54.0 | 53.9 |
(1) Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent for 2018 and 35 percent for 2017.
17
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LINE OF BUSINESS FINANCIAL PERFORMANCE (a) | ||||||||||||||||||||||||||||||||||||
($ in millions) | Net Income Attributable | Net Income Attributable | ||||||||||||||||||||||||||||||||||
to U.S. Bancorp | Percent Change | to U.S. Bancorp | 3Q 2018 | |||||||||||||||||||||||||||||||||
Business Line | 3Q 2018 |
2Q 2018 |
3Q 2017 |
3Q18 vs 2Q18 |
3Q18 vs 3Q17 |
YTD 2018 |
YTD 2017 |
Percent Change |
Earnings Composition |
|||||||||||||||||||||||||||
Corporate and Commercial Banking |
$394 | $419 | $364 | (6.0) | 8.2 | $1,202 | $1,079 | 11.4 | 22 | % | ||||||||||||||||||||||||||
Consumer and Business Banking |
596 | 557 | 482 | 7.0 | 23.7 | 1,709 | 1,357 | 25.9 | 33 | |||||||||||||||||||||||||||
Wealth Management and Investment Services |
221 | 193 | 162 | 14.5 | 36.4 | 623 | 478 | 30.3 | 12 | |||||||||||||||||||||||||||
Payment Services |
393 | 363 | 311 | 8.3 | 26.4 | 1,099 | 892 | 23.2 | 22 | |||||||||||||||||||||||||||
Treasury and Corporate Support |
211 | 218 | 244 | (3.2) | (13.5) | 607 | 730 | (16.8 | ) | 11 | ||||||||||||||||||||||||||
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Consolidated Company |
$1,815 | $1,750 | $1,563 | 3.7 | 16.1 | $5,240 | $4,536 | 15.5 | 100 | % | ||||||||||||||||||||||||||
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(a) preliminary data
|
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Lines of Business
The Companys major lines of business are Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate resources and assess performance. Noninterest expenses incurred by centrally managed operations or business lines that directly support another business lines operations are charged to the applicable business line based on its utilization of those services, primarily measured by the volume of customer activities, number of employees or other relevant factors. These allocated expenses are reported as net shared services expense within noninterest expense. Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Companys diverse customer base. During 2018, certain organization and methodology changes were made and, accordingly, prior period results were restated and presented on a comparable basis.
2
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CORPORATE AND COMMERCIAL BANKING (a) | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q | 2Q | 3Q | 3Q18 vs | 3Q18 vs | YTD | YTD | Percent Change |
|||||||||||||||||||||||||
2018 | 2018 | 2017 | 2Q18 | 3Q17 | 2018 | 2017 | ||||||||||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$739 | $726 | $735 | 1.8 | .5 | $2,186 | $2,170 | .7 | ||||||||||||||||||||||||
Noninterest income |
201 | 224 | 219 | (10.3) | (8.2) | 632 | 709 | (10.9) | ||||||||||||||||||||||||
Securities gains (losses), net |
-- | -- | -- | -- | -- | -- | (3) | nm | ||||||||||||||||||||||||
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|||||||||||||||||||||||||||||
Total net revenue |
940 | 950 | 954 | (1.1) | (1.5) | 2,818 | 2,876 | (2.0) | ||||||||||||||||||||||||
Noninterest expense |
379 | 402 | 389 | (5.7) | (2.6) | 1,175 | 1,167 | .7 | ||||||||||||||||||||||||
Other intangibles |
1 | 1 | 1 | -- | -- | 3 | 3 | -- | ||||||||||||||||||||||||
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|
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Total noninterest expense |
380 | 403 | 390 | (5.7) | (2.6) | 1,178 | 1,170 | .7 | ||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||
Income before provision and taxes |
560 | 547 | 564 | 2.4 | (.7) | 1,640 | 1,706 | (3.9) | ||||||||||||||||||||||||
Provision for credit losses |
35 | (12) | (9) | nm | nm | 37 | 9 | nm | ||||||||||||||||||||||||
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|
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|||||||||||||||||||||||||||||
Income before income taxes |
525 | 559 | 573 | (6.1) | (8.4) | 1,603 | 1,697 | (5.5) | ||||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
131 | 140 | 209 | (6.4) | (37.3) | 401 | 618 | (35.1) | ||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||
Net income |
394 | 419 | 364 | (6.0) | 8.2 | 1,202 | 1,079 | 11.4 | ||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
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Net income attributable to U.S. Bancorp |
$394 | $419 | $364 | (6.0) | 8.2 | $1,202 | $1,079 | 11.4 | ||||||||||||||||||||||||
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Average Balance Sheet Data |
||||||||||||||||||||||||||||||||
Loans |
$93,364 | $93,456 | $93,942 | (.1) | (.6) | $93,570 | $93,925 | (.4) | ||||||||||||||||||||||||
Other earning assets |
3,042 | 3,092 | 2,855 | (1.6) | 6.5 | 2,998 | 2,948 | 1.7 | ||||||||||||||||||||||||
Goodwill |
1,647 | 1,647 | 1,647 | -- | -- | 1,647 | 1,647 | -- | ||||||||||||||||||||||||
Other intangible assets |
10 | 11 | 13 | (9.1) | (23.1) | 11 | 14 | (21.4) | ||||||||||||||||||||||||
Assets |
102,146 | 102,524 | 102,267 | (.4) | (.1) | 102,417 | 102,520 | (.1) | ||||||||||||||||||||||||
Noninterest-bearing deposits |
32,539 | 33,383 | 35,401 | (2.5) | (8.1) | 33,438 | 36,256 | (7.8) | ||||||||||||||||||||||||
Interest-bearing deposits |
68,554 | 70,353 | 74,461 | (2.6) | (7.9) | 69,612 | 71,300 | (2.4) | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total deposits |
101,093 | 103,736 | 109,862 | (2.5) | (8.0) | 103,050 | 107,556 | (4.2) | ||||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
10,426 | 10,498 | 9,951 | (.7) | 4.8 | 10,447 | 9,850 | 6.1 | ||||||||||||||||||||||||
(a) preliminary data
|
Corporate and Commercial Banking 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.
Corporate and Commercial Banking contributed $394 million of the Companys net income in the third quarter of 2018, compared with $364 million in the third quarter of 2017. Total net revenue decreased $14 million (1.5 percent) due to a $4 million (0.5 percent) increase in net interest income offset by an $18 million (8.2 percent) decrease in total noninterest income. Net interest income increased slightly primarily due to the impact of rising rates on the margin benefit from deposits, offset by lower spreads on loans, reflecting a competitive marketplace, loan mix and lower deposits. Noninterest bearing deposits are declining as customers deploy balances to support business growth. Interest-bearing deposits reflect expected balance run-off related to the business merger of a larger financial services customer. Total noninterest income decreased year-over-year primarily due to lower corporate bond underwriting fees and syndication fees. Total noninterest expense was $10 million (2.6 percent) lower compared with a year ago primarily due to lower FDIC insurance expense and lower variable compensation expense related to capital markets activities, partially offset by an increase in net shared services expense driven by technology development and investment in infrastructure. The provision for credit losses increased $44 million reflecting an unfavorable change in the reserve allocation partially offset by lower net charge-offs.
3
|
||
CONSUMER AND BUSINESS BANKING (a) | ||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||
3Q | 2Q | 3Q | 3Q18 vs | 3Q18 vs | YTD | YTD | Percent | |||||||||||||||||||||||
2018 | 2018 | 2017 | 2Q18 | 3Q17 | 2018 | 2017 | Change | |||||||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$1,557 | $1,519 | $1,475 | 2.5 | 5.6 | $4,587 | $4,337 | 5.8 | ||||||||||||||||||||||
Noninterest income |
582 | 588 | 616 | (1.0) | (5.5) | 1,741 | 1,792 | (2.8) | ||||||||||||||||||||||
Securities gains (losses), net |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||
Total net revenue |
2,139 | 2,107 | 2,091 | 1.5 | 2.3 | 6,328 | 6,129 | 3.2 | ||||||||||||||||||||||
Noninterest expense |
1,283 | 1,302 | 1,232 | (1.5) | 4.1 | 3,863 | 3,731 | 3.5 | ||||||||||||||||||||||
Other intangibles |
7 | 7 | 8 | -- | (12.5) | 21 | 22 | (4.5) | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||
Total noninterest expense |
1,290 | 1,309 | 1,240 | (1.5) | 4.0 | 3,884 | 3,753 | 3.5 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||
Income before provision and taxes |
849 | 798 | 851 | 6.4 | (.2) | 2,444 | 2,376 | 2.9 | ||||||||||||||||||||||
Provision for credit losses |
54 | 55 | 93 | (1.8) | (41.9) | 164 | 242 | (32.2) | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||
Income before income taxes |
795 | 743 | 758 | 7.0 | 4.9 | 2,280 | 2,134 | 6.8 | ||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
199 | 186 | 276 | 7.0 | (27.9) | 571 | 777 | (26.5) | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||
Net income |
596 | 557 | 482 | 7.0 | 23.7 | 1,709 | 1,357 | 25.9 | ||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$596 | $557 | $482 | 7.0 | 23.7 | $1,709 | $1,357 | 25.9 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||||||||||||
Loans |
$141,339 | $139,904 | $140,075 | 1.0 | .9 | * | $140,779 | $138,566 | 1.6 | |||||||||||||||||||||
Other earning assets |
3,385 | 3,810 | 4,304 | (11.2) | (21.4) | 3,535 | 3,844 | (8.0) | ||||||||||||||||||||||
Goodwill |
3,631 | 3,632 | 3,632 | -- | -- | 3,632 | 3,632 | -- | ||||||||||||||||||||||
Other intangible assets |
2,974 | 2,932 | 2,702 | 1.4 | 10.1 | 2,926 | 2,733 | 7.1 | ||||||||||||||||||||||
Assets |
155,586 | 154,641 | 154,748 | .6 | .5 | 155,239 | 152,879 | 1.5 | ||||||||||||||||||||||
Noninterest-bearing deposits |
28,005 | 27,262 | 28,389 | 2.7 | (1.4) | 27,443 | 27,387 | .2 | ||||||||||||||||||||||
Interest-bearing deposits |
125,553 | 125,259 | 120,862 | .2 | 3.9 | 124,669 | 120,222 | 3.7 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||
Total deposits |
153,558 | 152,521 | 149,251 | .7 | 2.9 | 152,112 | 147,609 | 3.1 | ||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
11,847 | 11,861 | 11,147 | (.1) | 6.3 | 11,850 | 11,154 | 6.2 | ||||||||||||||||||||||
(a) preliminary data |
||||||||||||||||||||||||||||||
* Average total loan growth was 2.1% year-over-year, excluding the impact of the student loan portfolio sale |
Consumer and 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 Business Banking contributed $596 million of the Companys net income in the third quarter of 2018, compared with $482 million in the third quarter of 2017. Total net revenue increased $48 million (2.3 percent) due to an $82 million (5.6 percent) increase in net interest income, partially offset by a $34 million (5.5 percent) decrease in total noninterest income. Net interest income increased primarily due to the impact of rising rates on the margin benefit from deposits along with growth in average loan and core deposit balances, partially offset by lower spreads on loans. Total noninterest income decreased principally driven by lower mortgage banking revenue, in line with industry trends, primarily due to lower mortgage production and gain on sale margins, and a reduction in other noninterest income driven by lower end of term gains in retail leasing due to lower vehicle sales and the related average gain on sale. These decreases were partially offset by higher deposit service charges and ATM processing services fees reflecting higher transaction volumes. Total noninterest expense in the third quarter of 2018 increased $50 million (4.0 percent) primarily due to higher net shared services expense and higher personnel expense, reflecting the impact of investments supporting business growth and development as well as higher production related incentives. The provision for credit losses decreased $39 million (41.9 percent) primarily reflecting a favorable change in the reserve allocation.
4
|
||
WEALTH MANAGEMENT AND INVESTMENT SERVICES (a) |
| |||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q | 2Q | 3Q | 3Q18 vs | 3Q18 vs | YTD | YTD | Percent | |||||||||||||||||||||||||
2018 | 2018 | 2017 | 2Q18 | 3Q17 | 2018 | 2017 | Change | |||||||||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$281 | $283 | $252 | (.7) | 11.5 | $840 | $743 | 13.1 | ||||||||||||||||||||||||
Noninterest income |
444 | 430 | 411 | 3.3 | 8.0 | 1,305 | 1,221 | 6.9 | ||||||||||||||||||||||||
Securities gains (losses), net |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total net revenue |
725 | 713 | 663 | 1.7 | 9.4 | 2,145 | 1,964 | 9.2 | ||||||||||||||||||||||||
Noninterest expense |
429 | 452 | 403 | (5.1) | 6.5 | 1,304 | 1,197 | 8.9 | ||||||||||||||||||||||||
Other intangibles |
4 | 4 | 5 | -- | (20.0) | 12 | 15 | (20.0 | ) | |||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total noninterest expense |
433 | 456 | 408 | (5.0) | 6.1 | 1,316 | 1,212 | 8.6 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Income before provision and taxes |
292 | 257 | 255 | 13.6 | 14.5 | 829 | 752 | 10.2 | ||||||||||||||||||||||||
Provision for credit losses |
(3 | ) | -- | 1 | nm | nm | (2 | ) | 1 | nm | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Income before income taxes |
295 | 257 | 254 | 14.8 | 16.1 | 831 | 751 | 10.7 | ||||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
74 | 64 | 92 | 15.6 | (19.6) | 208 | 273 | (23.8 | ) | |||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Net income |
221 | 193 | 162 | 14.5 | 36.4 | 623 | 478 | 30.3 | ||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$221 | $193 | $162 | 14.5 | 36.4 | $623 | $478 | 30.3 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||||||||||||||
Loans |
$9,483 | $9,223 | $8,708 | 2.8 | 8.9 | $9,231 | $8,406 | 9.8 | ||||||||||||||||||||||||
Other earning assets |
172 | 166 | 158 | 3.6 | 8.9 | 167 | 153 | 9.2 | ||||||||||||||||||||||||
Goodwill |
1,618 | 1,619 | 1,618 | (.1) | -- | 1,619 | 1,617 | .1 | ||||||||||||||||||||||||
Other intangible assets |
61 | 66 | 79 | (7.6) | (22.8) | 66 | 83 | (20.5 | ) | |||||||||||||||||||||||
Assets |
12,663 | 12,246 | 11,657 | 3.4 | 8.6 | 12,313 | 11,620 | 6.0 | ||||||||||||||||||||||||
Noninterest-bearing deposits |
13,190 | 14,780 | 14,742 | (10.8) | (10.5) | 14,106 | 14,860 | (5.1 | ) | |||||||||||||||||||||||
Interest-bearing deposits |
55,937 | 56,841 | 56,830 | (1.6) | (1.6) | 56,576 | 57,351 | (1.4 | ) | |||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total deposits |
69,127 | 71,621 | 71,572 | (3.5) | (3.4) | 70,682 | 72,211 | (2.1 | ) | |||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
2,486 | 2,476 | 2,434 | .4 | 2.1 | 2,471 | 2,428 | 1.8 | ||||||||||||||||||||||||
(a) preliminary data
|
Wealth Management and Investment 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 Investment Services contributed $221 million of the Companys net income in the third quarter of 2018, compared with $162 million in the third quarter of 2017. Total net revenue increased $62 million (9.4 percent) year-over-year driven by increases in net interest income of $29 million (11.5 percent) and total noninterest income of $33 million (8.0 percent). Net interest income increased year-over-year primarily due to the impact of rising rates on the margin benefit from deposits. Total noninterest income increased year-over-year principally due to favorable market conditions, business growth, and net asset inflows. Total noninterest expense increased $25 million (6.1 percent) primarily due to increased net shared services expense and higher personnel expense driven by investments to support business growth, higher production related incentives and increased staffing to support business development. The provision for credit losses decreased $4 million reflecting a favorable change in the reserve allocation.
5
|
||
PAYMENT SERVICES (a) | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q 2018 |
2Q 2018 |
3Q 2017 |
3Q18 vs 2Q18 |
3Q18 vs 3Q17 |
YTD 2018 |
YTD 2017 |
Percent Change |
|||||||||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$619 | $592 | $614 | 4.6 | .8 | $1,822 | $1,792 | 1.7 | ||||||||||||||||||||||||
Noninterest income |
911 | 903 | 851 | .9 | 7.1 | 2,662 | 2,499 | 6.5 | ||||||||||||||||||||||||
Securities gains (losses), net |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total net revenue |
1,530 | 1,495 | 1,465 | 2.3 | 4.4 | 4,484 | 4,291 | 4.5 | ||||||||||||||||||||||||
Noninterest expense |
713 | 702 | 676 | 1.6 | 5.5 | 2,117 | 1,983 | 6.8 | ||||||||||||||||||||||||
Other intangibles |
29 | 28 | 30 | 3.6 | (3.3) | 84 | 91 | (7.7 | ) | |||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total noninterest expense |
742 | 730 | 706 | 1.6 | 5.1 | 2,201 | 2,074 | 6.1 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Income before provision and taxes |
788 | 765 | 759 | 3.0 | 3.8 | 2,283 | 2,217 | 3.0 | ||||||||||||||||||||||||
Provision for credit losses |
264 | 281 | 270 | (6.0) | (2.2) | 817 | 794 | 2.9 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Income before income taxes |
524 | 484 | 489 | 8.3 | 7.2 | 1,466 | 1,423 | 3.0 | ||||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
131 | 121 | 178 | 8.3 | (26.4) | 367 | 518 | (29.2 | ) | |||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Net income |
393 | 363 | 311 | 8.3 | 26.4 | 1,099 | 905 | 21.4 | ||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | -- | (13) | nm | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$393 | $363 | $311 | 8.3 | 26.4 | $1,099 | $892 | 23.2 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||||||||||||||
Loans |
$31,443 | $30,591 | $29,612 | 2.8 | 6.2 | $30,704 | $29,209 | 5.1 | ||||||||||||||||||||||||
Other earning assets |
266 | 302 | 241 | (11.9) | 10.4 | 281 | 246 | 14.2 | ||||||||||||||||||||||||
Goodwill |
2,563 | 2,535 | 2,468 | 1.1 | 3.8 | 2,546 | 2,459 | 3.5 | ||||||||||||||||||||||||
Other intangible assets |
400 | 392 | 384 | 2.0 | 4.2 | 396 | 409 | (3.2 | ) | |||||||||||||||||||||||
Assets |
37,128 | 36,538 | 35,019 | 1.6 | 6.0 | 36,614 | 34,781 | 5.3 | ||||||||||||||||||||||||
Noninterest-bearing deposits |
1,064 | 1,085 | 1,029 | (1.9) | 3.4 | 1,092 | 1,023 | 6.7 | ||||||||||||||||||||||||
Interest-bearing deposits |
111 | 109 | 104 | 1.8 | 6.7 | 109 | 102 | 6.9 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total deposits |
1,175 | 1,194 | 1,133 | (1.6) | 3.7 | 1,201 | 1,125 | 6.8 | ||||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
6,584 | 6,601 | 6,205 | (.3) | 6.1 | 6,602 | 6,279 | 5.1 | ||||||||||||||||||||||||
(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 $393 million of the Companys net income in the third quarter of 2018, compared with $311 million in the third quarter of 2017. Total net revenue increased $65 million (4.4 percent) due to increases in net interest income of $5 million (0.8 percent) and total noninterest income of $60 million (7.1 percent). Net interest income increased year-over-year primarily due to higher loan volumes offset by compression on loan rates in a rising rate environment. Total noninterest income increased year-over-year mainly due to higher credit and debit card revenue, higher corporate payment products revenue and higher merchant processing services driven by sales volumes. Total noninterest expense increased $36 million (5.1 percent) over the third quarter of 2017 principally due to higher net shared services expense and personnel expense driven by implementation costs of capital investments, higher production related incentives and increased staffing to support business development. The provision for credit losses decreased $6 million (2.2 percent) reflecting a favorable change in the reserve allocation, mostly offset by higher net charge-offs.
6
|
||
TREASURY AND CORPORATE SUPPORT (a) | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q | 2Q | 3Q | 3Q18 vs | 3Q18 vs | YTD | YTD | Percent | |||||||||||||||||||||||||
2018 | 2018 | 2017 | 2Q18 | 3Q17 | 2018 | 2017 | Change | |||||||||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$85 | $106 | $151 | (19.8) | (43.7) | $269 | $315 | (14.6) | ||||||||||||||||||||||||
Noninterest income |
270 | 259 | 234 | 4.2 | 15.4 | 739 | 679 | 8.8 | ||||||||||||||||||||||||
Securities gains (losses), net |
10 | 10 | 9 | -- | 11.1 | 25 | 50 | (50.0) | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total net revenue |
365 | 375 | 394 | (2.7) | (7.4) | 1,033 | 1,044 | (1.1) | ||||||||||||||||||||||||
Noninterest expense |
199 | 187 | 254 | 6.4 | (21.7) | 605 | 682 | (11.3) | ||||||||||||||||||||||||
Other intangibles |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total noninterest expense |
199 | 187 | 254 | 6.4 | (21.7) | 605 | 682 | (11.3) | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Income before provision and taxes |
166 | 188 | 140 | (11.7) | 18.6 | 428 | 362 | 18.2 | ||||||||||||||||||||||||
Provision for credit losses |
(7) | 3 | 5 | nm | nm | (5 | ) | 9 | nm | |||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Income before income taxes |
173 | 185 | 135 | (6.5) | 28.1 | 433 | 353 | 22.7 | ||||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
(45) | (41) | (115) | (9.8) | 60.9 | (196 | ) | (395) | 50.4 | |||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Net income |
218 | 226 | 250 | (3.5) | (12.8) | 629 | 748 | (15.9) | ||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(7) | (8) | (6) | 12.5 | (16.7) | (22 | ) | (18) | (22.2) | |||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$211 | $218 | $244 | (3.2) | (13.5) | $607 | $730 | (16.8) | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||||||||||||||
Loans |
$5,436 | $5,450 | $5,289 | (.3) | 2.8 | $5,415 | $5,348 | 1.3 | ||||||||||||||||||||||||
Other earning assets |
127,247 | 126,682 | 123,641 | .4 | 2.9 | 126,566 | 121,386 | 4.3 | ||||||||||||||||||||||||
Goodwill |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Other intangible assets |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Assets |
149,393 | 148,540 | 146,939 | .6 | 1.7 | 148,658 | 144,249 | 3.1 | ||||||||||||||||||||||||
Noninterest-bearing deposits |
2,394 | 2,477 | 2,403 | (3.4) | (.4) | 2,467 | 2,282 | 8.1 | ||||||||||||||||||||||||
Interest-bearing deposits |
2,774 | 3,273 | 930 | (15.2) | nm | 3,647 | 827 | nm | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total deposits |
5,168 | 5,750 | 3,333 | (10.1) | 55.1 | 6,114 | 3,109 | 96.7 | ||||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
18,795 | 17,886 | 19,082 | 5.1 | (1.5) | 18,063 | 18,631 | (3.0) | ||||||||||||||||||||||||
(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 $211 million in the third quarter of 2018, compared with $244 million in the third quarter of 2017. Total net revenue decreased $29 million (7.4 percent) year-over-year driven by a decrease in net interest income of $66 million (43.7 percent) and an increase of $37 million (15.2 percent) in total noninterest income. Net interest income decreased year-over-year primarily due to higher funding costs, partially offset by growth in the investment portfolio. Total noninterest income increased year-over-year reflecting changes in equity investment income and tax-advantaged syndication revenue. Total noninterest expense decreased $55 million (21.7 percent) year-over-year primarily due to a favorable change in net shared services expense allocated to manage the business, lower costs related to tax-advantaged projects, and higher accruals for legal and regulatory matters in the prior year quarter. These decreases were partially offset by higher personnel expense driven by increased staffing, higher variable compensation, and technology development related to business development efforts. The provision for credit losses was $12 million lower year-over-year due to a favorable change in the reserve allocation.
Income taxes are assessed to each line of business at a managerial rate of 25.0 percent starting in the first quarter of 2018 due to tax reform, compared with 36.4 percent in 2017. The residual tax expense or benefit to arrive at the consolidated effective tax rate is included in Treasury and Corporate Support.
7
U.S. Bancorp 3Q18 Earnings Conference Call October 17, 2018 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. Deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price 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 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, 2017, 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.
3Q18 Highlights * Taxable-equivalent basis; see slide 26 for calculation ** Excluding the impact of student loans sold in 2Q18, average total loans grew 0.9 percent linked quarter and 1.8 percent year-over-year
Performance Ratios Efficiency Ratio* & Net Interest Margin** * Non-GAAP; see slides 25 and 26 for calculations ** Taxable-equivalent basis Return on Average Common Equity Return on Tangible Common Equity* Return on Average Assets
Average Loans +0.9% linked quarter +1.2% year-over-year On both a linked quarter and year-over-year basis, growth in average total loans was driven by growth in residential mortgages, commercial loans, credit card loans and retail leasing. On both a linked quarter and year-over-year basis, growth in average total loans was partially offset by a decline in commercial real estate loans due to continued paydowns and disciplined underwriting. $ in billions
Average Deposits -1.4% linked quarter -1.5% year-over-year $ in billions Rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent for 2018 and 35 percent for 2017 Interest-bearing Deposits Average noninterest-bearing deposits decreased 2.3 percent linked quarter and 5.8 percent year-over-year, primarily driven by decreases in business deposits within Corporate and Commercial Banking as well as corporate trust balances within Wealth Management and Investment Services. On a linked quarter basis, the decreases in business and corporate trust deposits were partially offset by an increase in consumer balances within Consumer and Business Banking.
Credit Quality $ in millions NCO Ratio -2 bps QoQ -1 bp YoY NPAs -8.0% QoQ -19.7% YoY
Earnings Summary
Net Interest Income Linked Quarter Net interest income growth was primarily driven by the impact of higher interest rates, earning asset growth and an additional day in the quarter, partially offset by deposit and funding mix shift. The increase in net interest margin was primarily due to the impact of higher interest rates, partially offset by deposit and funding mix and higher cash balances. Year-over-Year Growth in net interest income was primarily driven by the impact of rising interest rates, growth in earning assets and higher securities yields. Net interest margin expansion, primarily due to higher interest rates, was partially offset by deposit and funding mix, compressed loan spreads due to mix and the impact of tax reform. $ in millions Taxable-equivalent basis +1.7% linked quarter +1.7% 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 All other = commercial products, investment products fees, securities gains (losses) and other $2,340 $2,414 $2,418 Linked Quarter Payment services revenue growth was driven by seasonally higher sales volumes in corporate payment products and seasonally higher merchant processing fee revenue. Deposit service charges increased as a result of seasonally higher incidence rates. Growth in other noninterest income was primarily driven by higher equity investment income and tax-advantaged syndication revenue. Total noninterest income growth was partially offset by decreases in commercial products revenue and mortgage banking revenue. Year-over-Year Strong payment services revenue growth was driven by higher sales volumes across all businesses. Solid growth in trust and investment management fees was driven by business growth and favorable market conditions. Mortgage banking revenue and commercial products revenue declined due to the impact of industry trends. +0.2% linked quarter +3.3% year-over-year
Noninterest Expense Linked Quarter Noninterest expense decreased primarily due to a reduction in compensation expense including lower incentives and a seasonal decline in labor costs. Other noninterest expense declined as a result of lower costs related to tax-advantaged projects and the change in accruals related to legal and insurance matters. Year-over-Year Noninterest expense growth was primarily driven by higher personnel costs and technology investment, partially offset by lower other noninterest expense. Higher compensation expense was driven by hiring to support business growth and compliance programs, merit increases and higher variable compensation tied to business production. Higher employee benefits expense was primarily driven by increased medical costs and staffing. Lower other noninterest expense was driven by lower costs related to tax-advantaged projects, lower FDIC insurance expense, lower mortgage servicing costs and lower pension-related expense. $ in millions PPS = postage, printing and supplies -1.3% linked quarter +1.5% year-over-year $2,998 $3,085 $3,044
Capital Position * See Non-GAAP Financial Measures reconciliation on slide 24
Appendix
Average Loans vs. 3Q17 Average total loans increased by $3.4 billion, or 1.2% Average residential mortgage loans increased by $3.0 billion, or 5.1% Average commercial loans increased by $2.4 billion, or 2.5% Average commercial real estate loans decreased by $2.1 billion, or 5.0% vs. 2Q18 Average total loans increased by $2.4 billion, or 0.9% Average residential mortgage loans increased by $1.2 billion, or 2.0% Average commercial loans increased by $0.7 billion, or 0.7% Average commercial real estate loans declined $0.3 billion, or 0.8% Key Points Year-over-Year Growth 3.0% 2.6% 2.3% 1.1% 1.2% Covered Commercial CRE Res Mtg Retail Credit Card $279.4 $277.6 $279.8 6.1% $281.1 Average Loans ($bn) $278.6
Average Deposits Key Points Average Deposits ($bn) vs. 3Q17 Average total deposits decreased by $5.0 billion, or 1.5% Average low-cost deposits (NIB, interest checking, savings and money market) declined $6.7 billion, or 2.2% vs. 2Q18 Average total deposits decreased by $4.7 billion, or 1.4% Average low-cost deposits declined $5.2 billion, or 1.8% Year-over-Year Growth 5.2% 3.0% 1.9% 1.1% (1.5%) Time Money Market Checking and Savings Noninterest-bearing $330.1 $335.2 $339.2 $334.6 $334.8
Credit Quality – Commercial Loans Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm3Q172Q183Q18 Average Loans$96,633$98,353$99,048 30-89 Delinquencies0.22%0.23%0.23% 90+ Delinquencies0.05%0.06%0.06% Nonperforming Loans0.28%0.23%0.22% Linked Quarter Growth 1.0% 1.0% (0.1%) 0.9% 0.7% Linked quarter growth was modest at 0.7%, while line utilization remained relatively stable Net charge-offs increased slightly due to higher gross charge-offs, but remain below prior year levels
Investor $18,283 Owner Occupied $10,079 A&D Const $302 Multi-family $4,015 Retail $409 Residential Construction $2,110 Office $955 Other $2,722 Resi Land $667 $mm3Q172Q183Q18 Average Loans$41,621$39,857$39,542 30-89 Delinquencies0.15%0.11%0.08% 90+ Delinquencies0.01%0.01%0.01% Nonperforming Loans0.29%0.26%0.26% Performing TDRs*$141$126$222 Credit Quality – Commercial Real Estate Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points * TDR = troubled debt restructuring Linked Quarter Growth (2.2%) (1.5%) (1.6%) (1.3%) (0.8%) Average loans declined on both a linked quarter and year-over-year basis due to high market liquidity resulting in continued early payoffs Credit quality remained strong and stable; nonperforming loans remain low and unchanged from the prior quarter
Credit Quality – Residential Mortgage Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm3Q172Q183Q18 Average Loans$59,030$60,834$62,042 30-89 Delinquencies0.26%0.27%0.27% 90+ Delinquencies0.18%0.18%0.19% Nonperforming Loans0.80%0.65%0.50% * Excludes GNMA loans, whose repayments are insured by the FHA or guaranteed by the Department of VA ($1,668 million in 3Q18) Linked Quarter Growth 0.8% 1.0% 0.9% 1.1% 2.0% Originations continued to be high credit quality (weighted average FICO of 760, weighted average LTV of 73%) More than 93% of balances have been originated since the beginning of 2009; the origination quality metrics and performance to date have significantly outperformed prior vintages with similar seasoning
Credit Quality – Credit Card Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm3Q172Q183Q18 Average Loans$20,926$21,220$21,774 30-89 Delinquencies1.42%1.22%1.42% 90+ Delinquencies1.20%1.15%1.18% Nonperforming Loans0.00%0.00%0.00% Linked Quarter Growth 1.4% 1.4% 0.3% (0.3%) 2.6% Year-over-year average loan growth of 4.1% was driven by high credit quality originations The commitment weighted average FICO on new originations remained strong at 757 Charge-offs were up moderately year-over-year driven by continued vintage maturation
Credit Quality – Home Equity Average Loans ($mm) and Net Charge-offs Ratio Key Points Key Statistics $mm3Q172Q183Q18 Average Loans$16,299$16,048$16,000 30-89 Delinquencies0.38%0.39%0.45% 90+ Delinquencies0.24%0.29%0.32% Nonperforming Loans0.75%0.81%0.78% Subprime: 1% Wtd Avg LTV*: 87% NCO: 0.0% Prime: 98% Wtd Avg LTV*: 72% NCO: -0.03% Other: 1% Wtd Avg LTV*: 69% NCO: 0.00% *LTV at origination Linked Quarter Growth 0.3% 0.0% (0.6%) (0.9%) (0.3%) High-quality originations (weighted average FICO on commitments of 764, weighted average CLTV of 69%) were originated primarily through the retail branch network to existing bank customers on their primary residences Net charge-offs were stable year-over-year with strong recoveries due to continued strength in home values
Credit Quality – Retail Leasing Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm3Q172Q183Q18 Average Loans$7,762$8,150$8,383 30-89 Delinquencies0.31%0.30%0.38% 90+ Delinquencies0.03%0.02%0.02% Nonperforming Loans0.09%0.12%0.13% * Manheim Used Vehicle Value Index source: www.manheimconsulting.com, January 1995 = 100, quarter value = average monthly ending values Linked Quarter Growth 8.1% 2.8% 0.0% 2.1% 2.9% Continued high-quality originations during 3Q18 (weighted average FICO of 782) Delinquencies and net charge-offs remained at low levels
Credit Quality – Other Retail Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm3Q172Q183Q18 Average Loans$32,008$31,265$31,520 30-89 Delinquencies0.75%0.75%0.83% 90+ Delinquencies0.13%0.13%0.14% Nonperforming Loans0.10%0.12%0.12% Linked Quarter Growth 2.6% 2.6% 0.1% (4.9%) 0.8% Linked quarter average loans were essentially flat while the decrease year-over-year was primarily driven by the 2Q18 student loan portfolio sale Net charge-offs, delinquencies and nonperforming loans were all relatively stable and consistent with the low levels experienced in recent quarters
Credit Quality – Auto Loans Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm3Q172Q183Q18 Average Loans$18,008$18,599$18,563 30-89 Delinquencies0.89%0.90%1.00% 90+ Delinquencies0.08%0.08%0.08% Nonperforming Loans0.11%0.13%0.14% Direct: 5% Wtd Avg FICO: 747 NCO: 0.06% Indirect: 95% Wtd Avg FICO: 773 NCO: 0.36% Auto loans are included in Other Retail category Linked Quarter Growth 2.7% 4.1% 0.6% (1.4%) (0.2)% Year-over-year growth in average loans continued to be driven by high quality originations in the Indirect channel (weighted average FICO of 779) Net charge-offs and late stage delinquencies remained relatively stable
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.
Non-GAAP Financial Measures (1) Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.
Non-GAAP Financial Measures (1) Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent for 2018 and 35 percent for 2017.
U.S. Bancorp 3Q18 Earnings Conference Call October 17, 2018
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