UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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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:
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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 April 14, 2022, U.S. Bancorp (the “Company”) issued a press release reporting quarter-ended March 31, 2022 results, and posted on its website its 1Q22 Earnings Conference Call Presentation, which contains certain additional historical and forward-looking information relating to the Company. The press release is included as Exhibit 99.1 hereto and is incorporated herein by reference. The information included in the press release is considered to be “furnished” under the Securities Exchange Act of 1934. The 1Q22 Earnings Conference Call Presentation is included as Exhibit 99.2 hereto and is incorporated herein by reference. The information included in the 1Q22 Earnings Conference Call Presentation is considered to be “furnished” under the Securities Exchange Act of 1934. The press release and 1Q22 Earnings Conference Call Presentation shall not be deemed incorporated by reference in any filings under the Securities Act of 1933. The press release and 1Q22 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.
(d) Exhibits.
99.1 |
99.2 |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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/ Lisa R. Stark |
Lisa R. Stark |
Executive Vice President and Controller |
DATE: April 14, 2022
Exhibit 99.1
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U.S. Bancorp Reports First Quarter 2022 Results
Net income of $1.6 billion and net revenue of $5.6 billion Return on average assets of 1.09% and return on average common equity of 12.7% Common Equity Tier 1 capital ratio of 9.8% and strong levels of liquidity
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1Q22 Key Financial Data |
1Q22 Highlights |
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||||||||||||
PROFITABILITY METRICS |
1Q22 | 4Q21 | 1Q21 | |||||||||
Return on average assets (%) |
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1.09 |
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1.16 | 1.69 | |||||||
Return on average common equity (%) |
12.7 | 13.0 | 19.0 | |||||||||
Return on tangible common equity (%) (a) |
16.6 | 16.6 | 24.3 | |||||||||
Net interest margin (%) |
2.44 | 2.40 | 2.50 | |||||||||
Efficiency ratio (%) (a)
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62.8 |
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62.3 | 62.1 | |||||||
INCOME STATEMENT (b) |
1Q22 | 4Q21 | 1Q21 | |||||||||
Net interest income (taxable-equivalent basis) |
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$3,200 |
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$3,150 | $3,089 | |||||||
Noninterest income |
$2,396 | $2,534 | $2,381 | |||||||||
Net income attributable to U.S. Bancorp |
$1,557 | $1,673 | $2,280 | |||||||||
Diluted earnings per common share |
$.99 | $1.07 | $1.45 | |||||||||
Dividends declared per common share
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$.46 |
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$.46 | $.42 | |||||||
BALANCE SHEET (b) |
1Q22 | 4Q21 | 1Q21 | |||||||||
Average total loans |
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$312,966 |
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$302,755 | $293,989 | |||||||
Average total deposits |
$454,176 | $449,838 | $426,364 | |||||||||
Net charge-off ratio |
.21% | .17% | .31% | |||||||||
Book value per common share (period end) |
$29.87 | $32.71 | $30.53 | |||||||||
Basel III standardized CET1 (c)
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9.8% |
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10.0% | 9.9% | |||||||
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(a) See Non-GAAP Financial Measures reconciliation on page 16 |
(b) Dollars in millions, except per share data |
(c) CET1 = Common equity tier 1 capital ratio |
Net income of $1,557 million and diluted earnings per common share of $0.99
Return on average assets of 1.09% and return on average common equity of 12.7%
Net revenue of $5,596 million including $3,200 million of net interest income and $2,396 million of noninterest income
Average total loans and earning assets growth of 6.5% year-over-year. Average total loans grew 3.4% on a linked quarter basis
Average total deposits growth of 6.5% year-over-year and 1.0% linked quarter
Net charge-off ratio of 0.21% in 1Q22 compared with 0.17% in 4Q21 and 0.31% in 1Q21
Nonperforming assets decreased 7.6% on a linked quarter basis and 32.5% year-over-year
CET1 capital ratio of 9.8% at March 31, 2022, compared with 10.0% at December 31, 2021, driven by strong loan growth
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CEO Commentary
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In the first quarter, we reported earnings per share of $0.99 and a return on tangible common equity of 16.6%. Our results benefitted from healthy trends in consumer and business activity. We saw very strong loan growth, which drove solid growth in net interest income. Our fee revenue growth was supported by improving business activity and new business wins. Notably, we continued to see good momentum in our payments businesses reflecting both continued cyclical recovery in pandemic impacted industries, particularly travel and entertainment sectors, as well as the benefit from previous investments. We continue to manage our operating expenses prudently, even as we invest for the future, and we continue to benefit from the progress we are making on initiatives aimed at advancing our digital offerings, expanding our payment services capabilities and enhancing our core technology. We continue to work on integration activities related to our planned acquisition of Union Bank and we remain confident the strategic and financial merits of this deal will meaningfully enhance shareholder value and the combination will benefit our customers, our communities and our employees for years to come. Our credit quality remains strong, and we continue to approach credit decisions with a through the cycle lens. In summary, the year is off to a good start, and I would like to thank our employees for their hard work and dedication to serving all our constituents.
Andy Cecere, Chairman, President and CEO, U.S. Bancorp
In the Spotlight
Most Ethical
For the eighth consecutive year, U.S. Bank has been named one of the Worlds Most Ethical Companies® by the Ethisphere Institute, a global leader in defining and advancing the standards of ethical business practices. Ethisphere recognized 136 honorees spanning 22 countries and 45 industries. U.S. Bank is one of five honorees in the banking category. The award recognizes companies dedication to integrity, sustainability, governance and community.
U.S. Bank Partners with Microsoft as its Primary Cloud Provider
U.S. Bank announced plans for modernizing its technology foundation through the selection of Microsoft Azure as its primary cloud provider for the future. Powering the majority of its infrastructure and application portfolio with cloud computing will enable U.S. Bank to work more effectively in an increasingly digital world including the ability to rapidly access and analyze data, expediting time to market while more quickly scaling innovative products to customers and partners, and empowering its increasingly agile workforce.
U.S. Bank and Driveway
U.S. Bank showcases its real-time payments capabilities collaborating with Driveway to pay car sellers immediately, with Driveway becoming the first online car dealership to pay customers over the RTP (real-time payments) network. Customers selling a car on Driveway.com can now have the payment deposited instantly into their bank account after a sale is complete and before the vehicle even leaves their driveway.
U.S. Bank to Provide ESG Data Solutions
U.S. Bank recently announced it will leverage Sustainalytics, a Morningstar Company and a leading global provider of ESG research and ratings, to offer environmental, social and governance (ESG) data solutions to U.S. Bank Global Fund Services clients where independent ESG analytics and reporting services are required.
Investor contact: Jennifer Thompson, 612.303.0778 | Media contact: Jeff Shelman, 612.303.9933
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U.S. Bancorp First Quarter 2022 Results | |
INCOME STATEMENT HIGHLIGHTS | ||||||||||||||||||||
($ in millions, except per-share data) | Percent Change | |||||||||||||||||||
1Q 2022 |
4Q 2021 |
1Q 2021 |
1Q22 vs 4Q21 |
1Q22 vs 1Q21 |
||||||||||||||||
Net interest income |
$3,173 | $3,123 | $3,063 | 1.6 | 3.6 | |||||||||||||||
Taxable-equivalent adjustment |
27 | 27 | 26 | -- | 3.8 | |||||||||||||||
Net interest income (taxable-equivalent basis) |
3,200 | 3,150 | 3,089 | 1.6 | 3.6 | |||||||||||||||
Noninterest income |
2,396 | 2,534 | 2,381 | (5.4 | ) | .6 | ||||||||||||||
Total net revenue |
5,596 | 5,684 | 5,470 | (1.5 | ) | 2.3 | ||||||||||||||
Noninterest expense |
3,502 | 3,533 | 3,379 | (.9 | ) | 3.6 | ||||||||||||||
Income before provision and income taxes |
2,094 | 2,151 | 2,091 | (2.6 | ) | .1 | ||||||||||||||
Provision for credit losses |
112 | (13 | ) | (827 | ) | nm | nm | |||||||||||||
Income before taxes |
1,982 | 2,164 | 2,918 | (8.4 | ) | (32.1) | ||||||||||||||
Income taxes and taxable-equivalent adjustment |
424 | 486 | 633 | (12.8 | ) | (33.0) | ||||||||||||||
Net income |
1,558 | 1,678 | 2,285 | (7.2 | ) | (31.8) | ||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(1 | ) | (5 | ) | (5 | ) | 80.0 | 80.0 | ||||||||||||
Net income attributable to U.S. Bancorp |
$1,557 | $1,673 | $2,280 | (6.9 | ) | (31.7) | ||||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$1,466 | $1,582 | $2,175 | (7.3 | ) | (32.6) | ||||||||||||||
Diluted earnings per common share |
$.99 | $1.07 | $1.45 | (7.5 | ) | (31.7) | ||||||||||||||
Net income attributable to U.S. Bancorp was $1,557 million for the first quarter of 2022, which was $723 million lower than the $2,280 million for the first quarter of 2021, and $116 million lower than the $1,673 million for the fourth quarter of 2021. Diluted earnings per common share were $0.99 in the first quarter of 2022, compared with $1.45 in the first quarter of 2021 and $1.07 in the fourth quarter of 2021.
The decrease in net income year-over-year was primarily due to a higher provision for credit losses. Pretax income before the provision for credit losses was essentially flat compared to a year ago. Net interest income increased 3.6 percent on a year-over-year taxable-equivalent basis due to higher loan and investment securities balances and favorable deposit and funding mix due in part to higher noninterest-bearing deposits, partially offset by lower loan yields and mix as well as lower loan fees driven by the impact of loan forgiveness related to the SBA Paycheck Protection Program (PPP) in the first quarter of 2021. The net interest margin declined from 2.50 percent in the first quarter of 2021 to 2.44 percent in the current quarter primarily due to changes in loan mix and lower loan spreads within fixed-rate portfolios from a year ago, partially offset by funding and yield curve favorability. Noninterest income increased 0.6 percent compared with a year ago primarily reflecting stronger payment services revenue, trust and investment management fees, deposit service charges and treasury management fees, mostly offset by lower commercial products revenue related to capital markets activities, mortgage banking revenue as refinancing activities decline, and other noninterest income. Noninterest expense increased 3.6 percent reflecting increases in compensation expense, professional services expense and marketing and business development expense. Provision for credit losses was higher due to reductions in the allowance for credit losses in the first quarter of 2021.
Net income decreased on a linked quarter basis due to higher provision for credit losses and seasonally lower noninterest income, partially offset by growth in net interest income and lower noninterest expense. Net interest income increased 1.6 percent on a taxable-equivalent basis primarily due to higher loan and investment portfolio balances as well as higher yields in the investment portfolio, partially offset by lower loan fees primarily driven by lower PPP loan forgiveness, loan mix, and two fewer days in the quarter. The net interest margin increased four basis points on a linked quarter basis reflecting the changing yield curve and lower cash balances, partially offset by the impact of loan mix. Noninterest income decreased 5.4 percent compared with the fourth quarter of 2021 driven by seasonally lower credit and debit card revenue, deposit service charges and mortgage banking revenue, partially offset by growth in trust and investment management fees. Noninterest expense decreased 0.9 percent on a linked quarter basis reflecting lower professional services expense, marketing and business development expense and technology and communications expense, partially offset by increases in employee benefits expense and other noninterest expense.
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U.S. Bancorp First Quarter 2022 Results | |
NET INTEREST INCOME | ||||||||||||||||||||
(Taxable-equivalent basis; $ in millions) | Change | |||||||||||||||||||
1Q 2022 |
4Q 2021 |
1Q 2021 |
1Q22 vs 4Q21 |
1Q22 vs 1Q21 |
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Components of net interest income |
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Income on earning assets |
$3,445 | $3,382 | $3,367 | $63 | $78 | |||||||||||||||
Expense on interest-bearing liabilities |
245 | 232 | 278 | 13 | (33) | |||||||||||||||
Net interest income |
$3,200 | $3,150 | $3,089 | $50 | $111 | |||||||||||||||
Average yields and rates paid |
||||||||||||||||||||
Earning assets yield |
2.62% | 2.58% | 2.73% | .04% | (.11)% | |||||||||||||||
Rate paid on interest-bearing liabilities |
.26 | .25 | .31 | .01 | (.05) | |||||||||||||||
Gross interest margin |
2.36% | 2.33% | 2.42% | .03% | (.06)% | |||||||||||||||
Net interest margin |
2.44% | 2.40% | 2.50% | .04% | (.06)% | |||||||||||||||
Average balances |
||||||||||||||||||||
Investment securities (a) |
$174,762 | $160,784 | $145,520 | $13,978 | $29,242 | |||||||||||||||
Loans |
312,966 | 302,755 | 293,989 | 10,211 | 18,977 | |||||||||||||||
Interest-bearing deposits with banks |
29,851 | 45,751 | 41,784 | (15,900) | (11,933) | |||||||||||||||
Earning assets |
529,837 | 522,535 | 497,711 | 7,302 | 32,126 | |||||||||||||||
Interest-bearing liabilities |
378,223 | 363,880 | 360,582 | 14,343 | 17,641 | |||||||||||||||
(a) Excludes unrealized gain (loss) |
Net interest income on a taxable-equivalent basis in the first quarter of 2022 was $3,200 million, an increase of $111 million (3.6 percent) compared with the first quarter of 2021. The increase was primarily due to higher loan and investment securities balances and favorable deposit and funding mix due in part to higher noninterest-bearing deposits, partially offset by lower loan yields and mix as well as lower loan fees, driven by the impact of loan forgiveness related to PPP in the first quarter of 2021. Average earning assets were $32.1 billion (6.5 percent) higher than the first quarter of 2021, reflecting an increase of $29.2 billion (20.1 percent) in average investment securities and an increase of $19.0 billion (6.5 percent) in average total loans, while average interest-bearing deposits with banks decreased $11.9 billion (28.6 percent).
Net interest income on a taxable-equivalent basis increased $50 million (1.6 percent) on a linked quarter basis primarily due to higher loan and investment portfolio balances as well as higher yields in the investment portfolio, partially offset by lower loan fees primarily driven by lower PPP loan forgiveness, loan mix, and two fewer days in the quarter. Average earning assets were $7.3 billion (1.4 percent) higher on a linked quarter basis, reflecting increases of $14.0 billion (8.7 percent) in average investment securities and $10.2 billion (3.4 percent) in average loans, while average interest-bearing deposits with banks decreased $15.9 billion (34.8 percent).
The net interest margin in the first quarter of 2022 was 2.44 percent, compared with 2.50 percent in the first quarter of 2021 and 2.40 percent in the fourth quarter of 2021. The decrease in the net interest margin from the prior year was primarily due to the mix of loans and lower loan spreads within fixed-rate portfolios, partially offset by funding and yield curve favorability. The increase in interest margin on a linked quarter basis reflected the changing yield curve and lower cash balances, partially offset by the impact of loan mix. The increase in average investment securities year-over-year and on a linked quarter basis was due to purchases of mortgage-backed and U.S. Treasury securities, net of prepayments, sales and maturities.
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U.S. Bancorp First Quarter 2022 Results | |
AVERAGE LOANS | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q 2022 |
4Q 2021 |
1Q 2021 |
1Q22 vs 4Q21 |
1Q22 vs 1Q21 |
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Commercial |
$107,819 | $99,433 | $96,757 | 8.4 | 11.4 | |||||||||||||||
Lease financing |
5,003 | 5,075 | 5,334 | (1.4 | ) | (6.2 | ) | |||||||||||||
Total commercial |
112,822 | 104,508 | 102,091 | 8.0 | 10.5 | |||||||||||||||
Commercial mortgages |
28,826 | 28,216 | 27,968 | 2.2 | 3.1 | |||||||||||||||
Construction and development |
10,258 | 10,635 | 10,818 | (3.5 | ) | (5.2 | ) | |||||||||||||
Total commercial real estate |
39,084 | 38,851 | 38,786 | .6 | .8 | |||||||||||||||
Residential mortgages |
77,449 | 75,858 | 75,201 | 2.1 | 3.0 | |||||||||||||||
Credit card |
21,842 | 22,399 | 21,144 | (2.5 | ) | 3.3 | ||||||||||||||
Retail leasing |
7,110 | 7,354 | 7,975 | (3.3 | ) | (10.8 | ) | |||||||||||||
Home equity and second mortgages |
10,394 | 10,568 | 12,062 | (1.6 | ) | (13.8 | ) | |||||||||||||
Other |
44,265 | 43,217 | 36,730 | 2.4 | 20.5 | |||||||||||||||
Total other retail |
61,769 | 61,139 | 56,767 | 1.0 | 8.8 | |||||||||||||||
Total loans |
$312,966 | $302,755 | $293,989 | 3.4 | 6.5 |
Average total loans for the first quarter of 2022 were $19.0 billion (6.5 percent) higher than the first quarter of 2021. The increase was primarily due to growth in commercial loans (11.4 percent), residential mortgages (3.0 percent) and other retail loans (20.5 percent), partially offset by lower home equity and second mortgages (13.8 percent). The strong growth in other retail loans was driven by auto and recreational vehicle lending during 2021. The increase in commercial loans was due to higher utilization driven by working capital needs of corporate customers, slower pay-offs given higher volatility in the capital markets and core growth, partly offset by expected reductions related to the forgiveness of loans in the SBA Paycheck Protection Program. The increase in residential mortgages was driven by stronger on-balance sheet loan activities and slower refinance activity. In addition, credit card loans increased 7.9 percent on a year-over-year basis, adjusting for the impact of a card portfolio transferred to loans held-for-sale during the fourth quarter of 2021.
Average total loans were $10.2 billion (3.4 percent) higher than the fourth quarter of 2021 primarily due to higher commercial loans (8.4 percent) driven by continued strong new business and higher utilization, residential mortgages (2.1 percent) and other retail loans (2.4 percent). Adjusting for the impact of the card portfolio transferred to loans held-for sale in the fourth quarter of 2021, credit card loans were 0.5 percent higher on a linked quarter basis.
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U.S. Bancorp First Quarter 2022 Results | |
AVERAGE DEPOSITS | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q | 4Q | 1Q | 1Q22 vs | 1Q22 vs | ||||||||||||||||
2022 | 2021 | 2021 | 4Q21 | 1Q21 | ||||||||||||||||
Noninterest-bearing deposits |
$ | 127,963 | $ | 135,936 | $ | 118,352 | (5.9 | ) | 8.1 | |||||||||||
Interest-bearing savings deposits |
||||||||||||||||||||
Interest checking |
115,062 | 108,889 | 97,385 | 5.7 | 18.2 | |||||||||||||||
Money market savings |
119,588 | 117,462 | 124,825 | 1.8 | (4.2 | ) | ||||||||||||||
Savings accounts |
66,978 | 64,763 | 58,848 | 3.4 | 13.8 | |||||||||||||||
Total savings deposits |
301,628 | 291,114 | 281,058 | 3.6 | 7.3 | |||||||||||||||
Time deposits |
24,585 | 22,788 | 26,954 | 7.9 | (8.8 | ) | ||||||||||||||
Total interest-bearing deposits |
326,213 | 313,902 | 308,012 | 3.9 | 5.9 | |||||||||||||||
Total deposits |
$ | 454,176 | $ | 449,838 | $ | 426,364 | 1.0 | 6.5 |
Average total deposits for the first quarter of 2022 were $27.8 billion (6.5 percent) higher than the first quarter of 2021. Average noninterest-bearing deposits increased $9.6 billion (8.1 percent) primarily within Corporate and Commercial Banking and Wealth Management and Investment Services. Average total savings deposits were $20.6 billion (7.3 percent) higher year-over-year driven by Consumer and Business Banking and Corporate and Commercial Banking, partially offset by a decrease in Wealth Management and Investment Services. Average time deposits were $2.4 billion (8.8 percent) lower than the prior year primarily within Consumer and Business Banking and Wealth Management and Investment Services, partially offset by an increase in Corporate and Commercial Banking. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.
Average total deposits grew $4.3 billion (1.0 percent) from the fourth quarter of 2021. On a linked quarter basis, average noninterest-bearing deposits were lower by $8.0 billion (5.9 percent) with seasonal decreases across all business lines. Average total savings deposits increased $10.5 billion (3.6 percent) compared with the fourth quarter of 2021 driven by increases in Corporate and Commercial Banking and Consumer and Business Banking, partially offset by a decrease in Wealth Management and Investment Services. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, were $1.8 billion (7.9 percent) higher on a linked quarter basis primarily within Corporate and Commercial Banking.
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U.S. Bancorp First Quarter 2022 Results | |
NONINTEREST INCOME | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q | 4Q | 1Q | 1Q22 vs | 1Q22 vs | ||||||||||||||||
2022 | 2021 | 2021 | 4Q21 | 1Q21 | ||||||||||||||||
Credit and debit card revenue |
$338 | $382 | $336 | (11.5 | ) | .6 | ||||||||||||||
Corporate payment products revenue |
158 | 155 | 126 | 1.9 | 25.4 | |||||||||||||||
Merchant processing services |
363 | 365 | 318 | (.5 | ) | 14.2 | ||||||||||||||
Trust and investment management fees |
500 | 483 | 444 | 3.5 | 12.6 | |||||||||||||||
Deposit service charges |
177 | 193 | 161 | (8.3 | ) | 9.9 | ||||||||||||||
Treasury management fees |
156 | 152 | 147 | 2.6 | 6.1 | |||||||||||||||
Commercial products revenue |
266 | 265 | 280 | .4 | (5.0 | ) | ||||||||||||||
Mortgage banking revenue |
200 | 298 | 299 | (32.9 | ) | (33.1 | ) | |||||||||||||
Investment products fees |
62 | 62 | 55 | -- | 12.7 | |||||||||||||||
Securities gains (losses), net |
18 | 15 | 25 | 20.0 | (28.0 | ) | ||||||||||||||
Other |
158 | 164 | 190 | (3.7 | ) | (16.8 | ) | |||||||||||||
Total noninterest income |
$ | 2,396 | $ | 2,534 | $ | 2,381 | (5.4 | ) | .6 |
First quarter noninterest income of $2,396 million was $15 million (0.6 percent) higher than the first quarter of 2021 reflecting strong payment services revenue, growth in trust and investment management fees, and improving deposit service charges, and treasury management fees, mostly offset by lower commercial products revenue, mortgage banking revenue, and other noninterest income. Payment services revenue increased $79 million (10.1 percent) compared with the first quarter of 2021 as corporate payment products revenue increased $32 million (25.4 percent) primarily due to higher sales volume and merchant processing services revenue increased $45 million (14.2 percent) driven by higher sales volumes and merchant fees. Trust and investment management fees increased $56 million (12.6 percent) driven by business growth, favorable market conditions and activity related to the fourth quarter of 2021 acquisition of PFM Asset Management LLC (PFM), partially offset by higher fee waivers. Deposit service charges increased $16 million (9.9 percent) primarily due to higher customer spend activity, net of the impact of the elimination of certain consumer NSF fees in the first quarter of 2022. Treasury management fees increased $9 million (6.1 percent) primarily due to core growth given the continued recovery in the economy. Partially offsetting these increases, commercial products revenue decreased $14 million (5.0 percent) primarily due to lower corporate bond fees and trading revenue within the capital markets business. Mortgage banking revenue decreased $99 million (33.1 percent) compared with the first quarter of 2021 due to lower application volumes, given declining refinance activities, and lower related gain on sale margins, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities, as well as higher performing loan sales. Other noninterest income decreased $32 million (16.8 percent) driven by the impact of prior year asset sales and lower retail leasing end-of-term residual gains in the first quarter of 2022.
Noninterest income was $138 million (5.4 percent) lower in the first quarter of 2022 compared with the fourth quarter of 2021 reflecting lower credit and debit card revenue, deposit service charges and mortgage banking revenue, partially offset by higher trust and investment management fees. Credit and debit card revenue decreased $44 million (11.5 percent) due to seasonally lower sales volume and rate as well as lower prepaid card processing fees. Deposit service charges decreased $16 million (8.3 percent) on a linked quarter basis primarily due to seasonally lower volumes and the impact of the elimination of certain consumer NSF fees in the first quarter of 2022 net of higher customer activity. Mortgage banking revenue decreased $98 million (32.9 percent) driven by lower application volume and related gain on sale margins as well as lower performing loan sales, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities. Partially offsetting these decreases, trust and investment management fees increased $17 million (3.5 percent) driven by the PFM acquisition, partially offset by unfavorable market conditions and lower fees.
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U.S. Bancorp First Quarter 2022 Results | |
NONINTEREST EXPENSE | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q 2022 |
4Q 2021 |
1Q 2021 |
1Q22 vs 4Q21 |
1Q22 vs 1Q21 |
||||||||||||||||
Compensation |
$ | 1,853 | $ | 1,851 | $ | 1,803 | .1 | 2.8 | ||||||||||||
Employee benefits |
396 | 372 | 384 | 6.5 | 3.1 | |||||||||||||||
Net occupancy and equipment |
269 | 268 | 263 | .4 | 2.3 | |||||||||||||||
Professional services |
114 | 160 | 98 | (28.8 | ) | 16.3 | ||||||||||||||
Marketing and business development |
80 | 129 | 48 | (38.0 | ) | 66.7 | ||||||||||||||
Technology and communications |
349 | 372 | 359 | (6.2 | ) | (2.8 | ) | |||||||||||||
Postage, printing and supplies |
72 | 71 | 69 | 1.4 | 4.3 | |||||||||||||||
Other intangibles |
47 | 40 | 38 | 17.5 | 23.7 | |||||||||||||||
Other |
322 | 270 | 317 | 19.3 | 1.6 | |||||||||||||||
Total noninterest expense |
$ | 3,502 | $ | 3,533 | $ | 3,379 | (.9 | ) | 3.6 | |||||||||||
First quarter noninterest expense of $3,502 million was $123 million (3.6 percent) higher than the first quarter of 2021 reflecting increases in compensation expense, professional services expense and marketing and business development expense. Compensation expense increased $50 million (2.8 percent) compared with the first quarter of 2021 primarily due to merit and hiring to support business growth, partially offset by lower performance-based incentives. Professional services expense increased $16 million (16.3 percent) primarily due to an increase in business investment and related initiatives. Marketing and business development expense increased $32 million (66.7 percent) due to the timing of marketing campaigns as well as increased travel and entertainment.
Noninterest expense decreased $31 million (0.9 percent) on a linked quarter basis reflecting lower professional services expense, and marketing and business development expense, partially offset by a seasonal increase in employee benefits expense and higher other noninterest expense. Professional services expense decreased $46 million (28.8 percent) primarily due to timing of certain initiatives in the fourth quarter of 2021. Marketing and business development expense decreased $49 million (38.0 percent) due to the timing of marketing campaigns. Partially offsetting these decreases, employee benefits expense increased $24 million (6.5 percent) mainly driven by seasonally higher payroll taxes. Other noninterest expense increased $52 million (19.3 percent) primarily due to higher FDIC insurance costs as well as other accruals, mostly offset by seasonally lower costs related to tax-advantaged investments.
Provision for Income Taxes
The provision for income taxes for the first quarter of 2022 resulted in a tax rate of 21.4 percent on a taxable-equivalent basis (effective tax rate of 20.3 percent), compared with 21.7 percent on a taxable-equivalent basis (effective tax rate of 21.0 percent) in the first quarter of 2021, and a tax rate of 22.5 percent on a taxable-equivalent basis (effective tax rate of 21.5 percent) in the fourth quarter of 2021.
7
|
U.S. Bancorp First Quarter 2022 Results | |
ALLOWANCE FOR CREDIT LOSSES | ||||||||||||||||||||||||||||||||||||||||
($ in millions) | 1Q 2022 |
% (a) | 4Q 2021 |
% (a) | 3Q 2021 |
% (a) | 2Q 2021 |
% (a) | 1Q 2021 |
% (a) | ||||||||||||||||||||||||||||||
Balance, beginning of period |
$ | 6,155 | $ | 6,300 | $ | 6,610 | $ | 6,960 | $ | 8,010 | ||||||||||||||||||||||||||||||
Net charge-offs |
||||||||||||||||||||||||||||||||||||||||
Commercial |
26 | .10 | 6 | .02 | 13 | .05 | 26 | .11 | 52 | .22 | ||||||||||||||||||||||||||||||
Lease financing |
6 | .49 | -- | -- | 1 | .08 | 1 | .08 | 4 | .30 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total commercial |
32 | .12 | 6 | .02 | 14 | .05 | 27 | .11 | 56 | .22 | ||||||||||||||||||||||||||||||
Commercial mortgages |
-- | -- | (3 | ) | (.04 | ) | 1 | .01 | -- | -- | (12 | ) | (.17 | ) | ||||||||||||||||||||||||||
Construction and development |
(5 | ) | (.20 | ) | (1 | ) | (.04 | ) | 12 | .44 | -- | -- | 5 | .19 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total commercial real estate |
(5 | ) | (.05 | ) | (4 | ) | (.04 | ) | 13 | .13 | -- | -- | (7 | ) | (.07 | ) | ||||||||||||||||||||||||
Residential mortgages |
(6 | ) | (.03 | ) | (7 | ) | (.04 | ) | (10 | ) | (.05 | ) | (10 | ) | (.05 | ) | (5 | ) | (.03 | ) | ||||||||||||||||||||
Credit card |
112 | 2.08 | 109 | 1.93 | 111 | 2.01 | 148 | 2.81 | 144 | 2.76 | ||||||||||||||||||||||||||||||
Retail leasing |
1 | .06 | 1 | .05 | 1 | .05 | (1 | ) | (.05 | ) | 1 | .05 | ||||||||||||||||||||||||||||
Home equity and second mortgages |
(2 | ) | (.08 | ) | (2 | ) | (.08 | ) | (3 | ) | (.11 | ) | (3 | ) | (.11 | ) | (2 | ) | (.07 | ) | ||||||||||||||||||||
Other |
30 | .27 | 29 | .27 | 21 | .20 | 19 | .20 | 36 | .40 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total other retail |
29 | .19 | 28 | .18 | 19 | .13 | 15 | .10 | 35 | .25 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total net charge-offs |
162 | .21 | 132 | .17 | 147 | .20 | 180 | .25 | 223 | .31 | ||||||||||||||||||||||||||||||
Provision for credit losses |
112 | (13 | ) | (163 | ) | (170 | ) | (827 | ) | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Balance, end of period |
$ | 6,105 | $ | 6,155 | $ | 6,300 | $ | 6,610 | $ | 6,960 | ||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Components |
||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses |
$ | 5,664 | $ | 5,724 | $ | 5,792 | $ | 6,026 | $ | 6,343 | ||||||||||||||||||||||||||||||
Liability for unfunded credit commitments |
441 | 431 | 508 | 584 | 617 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total allowance for credit losses |
$ | 6,105 | $ | 6,155 | $ | 6,300 | $ | 6,610 | $ | 6,960 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Gross charge-offs |
$ | 280 | $ | 254 | $ | 266 | $ | 314 | $ | 374 | ||||||||||||||||||||||||||||||
Gross recoveries |
$ | 118 | $ | 122 | $ | 119 | $ | 134 | $ | 151 | ||||||||||||||||||||||||||||||
Allowance for credit losses as a percentage of Period-end loans |
1.91 | 1.97 | 2.12 | 2.23 | 2.36 | |||||||||||||||||||||||||||||||||||
Nonperforming loans |
798 | 738 | 695 | 649 | 617 | |||||||||||||||||||||||||||||||||||
Nonperforming assets |
753 | 701 | 667 | 624 | 579 | |||||||||||||||||||||||||||||||||||
(a) Annualized and calculated on average loan balances |
|
8
|
U.S. Bancorp First Quarter 2022 Results | |
The Companys provision for credit losses for the first quarter of 2022 was $112 million, compared with a benefit of $13 million in the fourth quarter of 2021 and a benefit of $827 million in the first quarter of 2021. During 2021, factors affecting economic conditions, including passing of additional government stimulus and widespread vaccine availability in the U.S., contributed to economic improvement and related reserve releases. The consumer portfolio performance continues to be supported by strong credit quality and asset values, while select commercial portfolios continue to recover from the effects of the pandemic. Economic uncertainty remains high associated with supply chain concerns, rising inflationary concerns, market volatility, rising oil prices from the Russia-Ukraine conflict and additional virus variants. In addition to these factors, expected loss estimates consider various factors including customer specific information impacting changes in risk ratings, projected delinquencies and potential effects of diminishing liquidity without the support of mortgage forbearance and direct federal stimulus.
Total net charge-offs in the first quarter of 2022 were $162 million, compared with $132 million in the fourth quarter of 2021 and $223 million in the first quarter of 2021. The net charge-off ratio was 0.21 percent in the first quarter of 2022, compared with 0.17 percent in the fourth quarter of 2021 and 0.31 percent in the first quarter of 2021. Net charge-offs increased $30 million (22.7 percent) compared with the fourth quarter of 2021 reflecting limited commercial credit losses in the prior period. Net charge-offs decreased $61 million (27.4 percent) compared with the first quarter of 2021 reflecting improvement across most loan categories. Improvements from the prior year reflect borrower liquidity and strong asset prices in the market supporting repayment and recovery of problem loans.
The allowance for credit losses was $6,105 million at March 31, 2022, compared with $6,155 million at December 31, 2021, and $6,960 million at March 31, 2021. The decrease on a linked quarter basis was driven by continued strong credit quality and collateral performance, partially offset by loan growth. The ratio of the allowance for credit losses to period-end loans was 1.91 percent at March 31, 2022, compared with 1.97 percent at December 31, 2021, and 2.36 percent at March 31, 2021. The ratio of the allowance for credit losses to nonperforming loans was 798 percent at March 31, 2022, compared with 738 percent at December 31, 2021, and 617 percent at March 31, 2021.
Nonperforming assets were $811 million at March 31, 2022, compared with $878 million at December 31, 2021, and $1,202 million at March 31, 2021. The ratio of nonperforming assets to loans and other real estate was 0.25 percent at March 31, 2022, compared with 0.28 percent at December 31, 2021, and 0.41 percent at March 31, 2021. The year-over-year decrease in nonperforming assets was primarily due to decreases in total commercial nonperforming loans, total commercial real estate nonperforming loans and residential mortgages, while the decrease on a linked quarter basis was primarily due to decreases in total commercial real estate nonperforming loans. Accruing loans 90 days or more past due were $450 million at March 31, 2022, compared with $472 million at December 31, 2021, and $476 million at March 31, 2021.
9
|
U.S. Bancorp First Quarter 2022 Results | |
DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES | ||||||||||||||||||||
(Percent) | Mar 31 2022 |
Dec 31 2021 |
Sep 30 2021 |
Jun 30 2021 |
Mar 31 2021 |
|||||||||||||||
Delinquent loan ratios - 90 days or more past due excluding nonperforming loans |
|
|||||||||||||||||||
Commercial |
.06 | .04 | .04 | .04 | .06 | |||||||||||||||
Commercial real estate |
-- | .03 | .05 | .01 | .01 | |||||||||||||||
Residential mortgages |
.18 | .24 | .15 | .16 | .19 | |||||||||||||||
Credit card |
.74 | .73 | .66 | .70 | .95 | |||||||||||||||
Other retail |
.11 | .11 | .11 | .10 | .12 | |||||||||||||||
Total loans |
.14 | .15 | .13 | .13 | .16 | |||||||||||||||
Delinquent loan ratios - 90 days or more past due including nonperforming loans |
|
|||||||||||||||||||
Commercial |
.21 | .20 | .25 | .32 | .39 | |||||||||||||||
Commercial real estate |
.55 | .76 | .82 | .81 | .94 | |||||||||||||||
Residential mortgages |
.45 | .53 | .47 | .49 | .54 | |||||||||||||||
Credit card |
.74 | .73 | .66 | .70 | .95 | |||||||||||||||
Other retail |
.37 | .35 | .36 | .39 | .42 | |||||||||||||||
Total loans |
.38 | .42 | .43 | .47 | .54 | |||||||||||||||
ASSET QUALITY (a) | ||||||||||||||||||||
($ in millions) | ||||||||||||||||||||
Mar 31 2022 |
Dec 31 2021 |
Sep 30 2021 |
Jun 30 2021 |
Mar 31 2021 |
||||||||||||||||
Nonperforming loans |
||||||||||||||||||||
Commercial |
$139 | $139 | $179 | $247 | $298 | |||||||||||||||
Lease financing |
35 | 35 | 37 | 44 | 49 | |||||||||||||||
Total commercial |
174 | 174 | 216 | 291 | 347 | |||||||||||||||
Commercial mortgages |
178 | 213 | 215 | 224 | 266 | |||||||||||||||
Construction and development |
38 | 71 | 81 | 88 | 90 | |||||||||||||||
Total commercial real estate |
216 | 284 | 296 | 312 | 356 | |||||||||||||||
Residential mortgages |
214 | 226 | 237 | 244 | 253 | |||||||||||||||
Credit card |
-- | -- | -- | -- | -- | |||||||||||||||
Other retail |
161 | 150 | 157 | 171 | 172 | |||||||||||||||
Total nonperforming loans |
765 | 834 | 906 | 1,018 | 1,128 | |||||||||||||||
Other real estate |
23 | 22 | 17 | 17 | 19 | |||||||||||||||
Other nonperforming assets |
23 | 22 | 21 | 24 | 55 | |||||||||||||||
Total nonperforming assets |
$811 | $878 | $944 | $1,059 | $1,202 | |||||||||||||||
Accruing loans 90 days or more past due |
$450 | $472 | $385 | $376 | $476 | |||||||||||||||
Nonperforming assets to loans plus ORE (%) |
.25 | .28 | .32 | .36 | .41 | |||||||||||||||
(a) Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due
|
|
10
|
U.S. Bancorp First Quarter 2022 Results | |
COMMON SHARES | ||||||||||||||||||||
(Millions) | 1Q 2022 |
4Q 2021 |
3Q 2021 |
2Q 2021 |
1Q 2021 |
|||||||||||||||
Beginning shares outstanding |
1,484 | 1,483 | 1,483 | 1,497 | 1,507 | |||||||||||||||
Shares issued for stock incentive plans, acquisitions and other corporate purposes |
3 | 1 | -- | 1 | 3 | |||||||||||||||
Shares repurchased |
(1 | ) | -- | -- | (15 | ) | (13 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending shares outstanding |
1,486 | 1,484 | 1,483 | 1,483 | 1,497 | |||||||||||||||
|
|
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|
|
|
|
|||||||||||
CAPITAL POSITION | ||||||||||||||||||||
($ in millions) | Mar 31 | Dec 31 | Sep 30 | Jun 30 | Mar 31 | |||||||||||||||
2022 | 2021 | 2021 | 2021 | 2021 | ||||||||||||||||
Total U.S. Bancorp shareholders equity |
$ | 51,200 | $ | 54,918 | $ | 53,743 | $ | 53,039 | $ | 51,678 | ||||||||||
Basel III Standardized Approach (a) |
||||||||||||||||||||
Common equity tier 1 capital |
$ | 41,950 | $ | 41,701 | $ | 41,014 | $ | 39,691 | $ | 39,103 | ||||||||||
Tier 1 capital |
49,198 | 48,516 | 47,426 | 46,103 | 45,517 | |||||||||||||||
Total risk-based capital |
57,403 | 56,250 | 54,178 | 53,625 | 53,625 | |||||||||||||||
Common equity tier 1 capital ratio |
9.8 | % | 10.0 | % | 10.2 | % | 9.9 | % | 9.9 | % | ||||||||||
Tier 1 capital ratio |
11.5 | 11.6 | 11.7 | 11.5 | 11.5 | |||||||||||||||
Total risk-based capital ratio |
13.4 | 13.4 | 13.4 | 13.4 | 13.5 | |||||||||||||||
Leverage ratio |
8.6 | 8.6 | 8.7 | 8.5 | 8.4 | |||||||||||||||
Tangible common equity to tangible assets (b) |
6.0 | 6.8 | 6.8 | 6.8 | 6.6 | |||||||||||||||
Tangible common equity to risk-weighted assets (b) |
8.0 | 9.2 | 9.4 | 9.3 | 9.1 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (b) |
9.5 | 9.6 | 9.7 | 9.5 | 9.5 | |||||||||||||||
(a) Amounts and ratios calculated in accordance with transitional regulatory requirements related to the current expected credit losses methodology |
| |||||||||||||||||||
(b) See Non-GAAP Financial Measures reconciliation on page 16 |
Total U.S. Bancorp shareholders equity was $51.2 billion at March 31, 2022, compared with $54.9 billion at December 31, 2021, and $51.7 billion at March 31, 2021. The Company suspended all common stock repurchases at the beginning of the third quarter of 2021, except for those done exclusively in connection with its stock-based compensation programs, due to its pending acquisition of MUFG Union Banks core regional banking franchise. The Company expects to operate at a CET1 capital ratio between our target ratio and 9.0 percent after closing of the acquisition. The Company does not expect to commence repurchasing its common stock until after the acquisition closes and the CET1 ratio approximates 9.0 percent.
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 9.8 percent at March 31, 2022, compared with 10.0 percent at December 31, 2021, and 9.9 percent at March 31, 2021. The Companys common equity tier 1 capital to risk-weighted assets ratio, reflecting the full implementation of the current expected credit losses methodology was 9.5 percent at March 31, 2022, compared with 9.6 percent at December 31, 2021, and 9.5 percent at March 31, 2021.
11
|
U.S. Bancorp First Quarter 2022 Results | |
Investor Conference Call |
On Thursday, April 14, 2022 at 8 a.m. CT, Chairman, President and Chief Executive Officer Andy Cecere and Vice Chair and Chief Financial Officer Terry Dolan 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 1698510. For those unable to participate during the live call, a recording will be available at approximately 11 a.m. CT on Thursday, April 14, 2022 and will be accessible until Thursday, April 21, 2022 at 10:59 p.m. CT. 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 698510.
About U.S. Bancorp |
U.S. Bancorp, with nearly 70,000 employees and $587 billion in assets as of March 31, 2022, is the parent company of U.S. Bank National Association. The Minneapolis-based company serves millions of customers locally, nationally and globally through a diversified mix of businesses: Consumer and Business Banking; Payment Services; Corporate & Commercial Banking; and Wealth Management and Investment Services. The company has been recognized for its approach to digital innovation, social responsibility, and customer service, including being named one of the 2022 Worlds Most Ethical Companies and Fortunes most admired superregional bank. Learn more at usbank.com/about.
Forward-looking Statements |
Safe Harbor Statement under 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 often use words such as anticipates, targets, expects, hopes, estimates, projects, forecasts, intends, plans, goals, believes, continue and other similar expressions or future or conditional verbs such as will, may, might, should, would and could.
Forward-looking statements involve inherent risks and uncertainties, including the following risks and uncertainties and the risks and uncertainties more fully discussed in the section entitled Risk Factors of Exhibit 13 to U.S. Bancorps Annual Report on Form 10-K for the year ended December 31, 2021, which could cause actual results to differ materially from those anticipated. The COVID-19 pandemic is adversely affecting U.S. Bancorp, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is uncertain. Continued 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. 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; increases in unemployment 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; civil unrest; the effects of climate change; changes in customer behavior and preferences; breaches in data security, including as a result of work-from-home arrangements; failures to safeguard personal information; the impacts of international hostilities or geopolitical events; 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 reputation risk. In addition, U.S. Bancorps proposed acquisition of MUFG Union Bank presents risks and uncertainties, including, among others: the risk that the cost savings, any revenue synergies and other anticipated benefits of the proposed acquisition may not be realized or may take longer than anticipated to be realized; the risk that U.S. Bancorps business could be disrupted as a result of the announcement and pendency of the proposed acquisition and diversion of managements attention from ongoing business operations and opportunities; the possibility that the proposed
12
|
U.S. Bancorp First Quarter 2022 Results | |
acquisition, including the integration of MUFG Union Bank, may be more costly or difficult to complete than anticipated; delays in closing the proposed acquisition; and the failure of required governmental approvals to be obtained or any other closing conditions in the definitive purchase agreement to be satisfied.
For discussion of these and other risks that may cause actual results to differ from those described in forward-looking statements, refer to U.S. Bancorps Annual Report on Form 10-K for the year ended December 31, 2021, 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. In addition, factors other than these risks also could adversely affect U.S. Bancorps results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements. 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.
Non-GAAP Financial Measures |
In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:
| Tangible common equity to tangible assets |
| Tangible common equity to risk-weighted assets |
| Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology, and |
| 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 currently effective or defined in banking regulations. In addition, certain of these measures differ from currently effective capital ratios defined by banking regulations principally in that the currently effective ratios, which are subject to certain transitional provisions, temporarily exclude the impact of the 2020 adoption of accounting guidance related to impairment of financial instruments based on the current expected credit losses methodology. As a result, these capital measures disclosed by the Company may be considered non-GAAP financial measures. 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
|
CONSOLIDATED STATEMENT OF INCOME | ||||||||
(Dollars and Shares in Millions, Except Per Share Data) | Three Months Ended March 31, |
|||||||
(Unaudited) | 2022 | 2021 | ||||||
Interest Income |
||||||||
Loans |
$2,599 | $2,724 | ||||||
Loans held for sale |
60 | 67 | ||||||
Investment securities |
717 | 517 | ||||||
Other interest income |
42 | 33 | ||||||
Total interest income |
3,418 | 3,341 | ||||||
Interest Expense |
||||||||
Deposits |
80 | 85 | ||||||
Short-term borrowings |
21 | 16 | ||||||
Long-term debt |
144 | 177 | ||||||
Total interest expense |
245 | 278 | ||||||
Net interest income |
3,173 | 3,063 | ||||||
Provision for credit losses |
112 | (827 | ) | |||||
Net interest income after provision for credit losses |
3,061 | 3,890 | ||||||
Noninterest Income |
||||||||
Credit and debit card revenue |
338 | 336 | ||||||
Corporate payment products revenue |
158 | 126 | ||||||
Merchant processing services |
363 | 318 | ||||||
Trust and investment management fees |
500 | 444 | ||||||
Deposit service charges |
177 | 161 | ||||||
Treasury management fees |
156 | 147 | ||||||
Commercial products revenue |
266 | 280 | ||||||
Mortgage banking revenue |
200 | 299 | ||||||
Investment products fees |
62 | 55 | ||||||
Securities gains (losses), net |
18 | 25 | ||||||
Other |
158 | 190 | ||||||
Total noninterest income |
2,396 | 2,381 | ||||||
Noninterest Expense |
||||||||
Compensation |
1,853 | 1,803 | ||||||
Employee benefits |
396 | 384 | ||||||
Net occupancy and equipment |
269 | 263 | ||||||
Professional services |
114 | 98 | ||||||
Marketing and business development |
80 | 48 | ||||||
Technology and communications |
349 | 359 | ||||||
Postage, printing and supplies |
72 | 69 | ||||||
Other intangibles |
47 | 38 | ||||||
Other |
322 | 317 | ||||||
Total noninterest expense |
3,502 | 3,379 | ||||||
Income before income taxes |
1,955 | 2,892 | ||||||
Applicable income taxes |
397 | 607 | ||||||
Net income |
1,558 | 2,285 | ||||||
Net (income) loss attributable to noncontrolling interests |
(1 | ) | (5 | ) | ||||
Net income attributable to U.S. Bancorp |
$1,557 | $2,280 | ||||||
Net income applicable to U.S. Bancorp common shareholders |
$1,466 | $2,175 | ||||||
Earnings per common share |
$.99 | $1.45 | ||||||
Diluted earnings per common share |
$.99 | $1.45 | ||||||
Dividends declared per common share |
$.46 | $.42 | ||||||
Average common shares outstanding |
1,485 | 1,502 | ||||||
Average diluted common shares outstanding |
1,486 | 1,503 |
14
|
CONSOLIDATED ENDING BALANCE SHEET |
|
|||||||||||
(Dollars in Millions) | March 31, 2022 |
December 31, 2021 |
March 31, 2021 |
|||||||||
Assets |
(Unaudited | ) | (Unaudited | ) | ||||||||
Cash and due from banks |
$44,303 | $28,905 | $43,501 | |||||||||
Investment securities |
||||||||||||
Held-to-maturity |
43,654 | 41,858 | -- | |||||||||
Available-for-sale |
123,593 | 132,963 | 156,003 | |||||||||
Loans held for sale |
3,321 | 7,775 | 8,991 | |||||||||
Loans |
||||||||||||
Commercial |
117,470 | 112,023 | 104,158 | |||||||||
Commercial real estate |
39,191 | 39,053 | 38,432 | |||||||||
Residential mortgages |
78,487 | 76,493 | 73,624 | |||||||||
Credit card |
22,163 | 22,500 | 20,872 | |||||||||
Other retail |
61,623 | 61,959 | 57,341 | |||||||||
Total loans |
318,934 | 312,028 | 294,427 | |||||||||
Less allowance for loan losses |
(5,664 | ) | (5,724 | ) | (6,343 | ) | ||||||
Net loans |
313,270 | 306,304 | 288,084 | |||||||||
Premises and equipment |
3,207 | 3,305 | 3,388 | |||||||||
Goodwill |
10,250 | 10,262 | 9,905 | |||||||||
Other intangible assets |
4,194 | 3,738 | 3,462 | |||||||||
Other assets |
40,725 | 38,174 | 40,041 | |||||||||
Total assets |
$586,517 | $573,284 | $553,375 | |||||||||
Liabilities and Shareholders Equity |
||||||||||||
Deposits |
||||||||||||
Noninterest-bearing |
$129,793 | $134,901 | $126,754 | |||||||||
Interest-bearing |
331,753 | 321,182 | 307,007 | |||||||||
Total deposits |
461,546 | 456,083 | 433,761 | |||||||||
Short-term borrowings |
21,042 | 11,796 | 12,098 | |||||||||
Long-term debt |
32,931 | 32,125 | 37,419 | |||||||||
Other liabilities |
19,330 | 17,893 | 17,789 | |||||||||
Total liabilities |
534,849 | 517,897 | 501,067 | |||||||||
Shareholders equity |
||||||||||||
Preferred stock |
6,808 | 6,371 | 5,968 | |||||||||
Common stock |
21 | 21 | 21 | |||||||||
Capital surplus |
8,515 | 8,539 | 8,487 | |||||||||
Retained earnings |
69,987 | 69,201 | 65,740 | |||||||||
Less treasury stock |
(27,193 | ) | (27,271 | ) | (26,443 | ) | ||||||
Accumulated other comprehensive income (loss) |
(6,938 | ) | (1,943 | ) | (2,095 | ) | ||||||
Total U.S. Bancorp shareholders equity |
51,200 | 54,918 | 51,678 | |||||||||
Noncontrolling interests |
468 | 469 | 630 | |||||||||
Total equity |
51,668 | 55,387 | 52,308 | |||||||||
Total liabilities and equity |
$586,517 | $573,284 | $553,375 |
15
|
NON-GAAP FINANCIAL MEASURES |
| |||||||||||||||||||
(Dollars in Millions, Unaudited) | March 31, 2022 |
December 31, 2021 |
September 30, 2021 |
June 30, 2021 |
March 31, 2021 |
|||||||||||||||
Total equity |
$51,668 | $55,387 | $54,378 | $53,674 | $52,308 | |||||||||||||||
Preferred stock |
(6,808 | ) | (6,371 | ) | (5,968 | ) | (5,968 | ) | (5,968 | ) | ||||||||||
Noncontrolling interests |
(468 | ) | (469 | ) | (635 | ) | (635 | ) | (630 | ) | ||||||||||
Goodwill (net of deferred tax liability) (1) |
(9,304 | ) | (9,323 | ) | (9,063 | ) | (8,987 | ) | (8,992 | ) | ||||||||||
Intangible assets, other than mortgage servicing rights |
(762 | ) | (785 | ) | (618 | ) | (650 | ) | (675 | ) | ||||||||||
Tangible common equity (a) |
34,326 | 38,439 | 38,094 | 37,434 | 36,043 | |||||||||||||||
Common equity tier 1 capital, determined in accordance with transitional regulatory capital requirements related to the current expected credit losses methodology implementation |
41,950 | 41,701 | 41,014 | 39,691 | 39,103 | |||||||||||||||
Adjustments (2) |
(1,298 | ) | (1,733 | ) | (1,733 | ) | (1,732 | ) | (1,732 | ) | ||||||||||
Common equity tier 1 capital, reflecting the full implementation of the current expected credit
losses |
40,652 | 39,968 | 39,281 | 37,959 | 37,371 | |||||||||||||||
Total assets |
586,517 | 573,284 | 567,495 | 558,886 | 553,375 | |||||||||||||||
Goodwill (net of deferred tax liability) (1) |
(9,304 | ) | (9,323 | ) | (9,063 | ) | (8,987 | ) | (8,992 | ) | ||||||||||
Intangible assets, other than mortgage servicing rights |
(762 | ) | (785 | ) | (618 | ) | (650 | ) | (675 | ) | ||||||||||
Tangible assets (c) |
576,451 | 563,176 | 557,814 | 549,249 | 543,708 | |||||||||||||||
Risk-weighted assets, determined in accordance with transitional regulatory capital requirements related to the current expected credit losses methodology implementation (d) |
426,932 | * | 418,571 | 404,021 | 401,301 | 396,351 | ||||||||||||||
Adjustments (3) |
(354 | )* | (357 | ) | (684 | ) | (1,027 | ) | (1,440 | ) | ||||||||||
Risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (e) |
426,578 | * | 418,214 | 403,337 | 400,274 | 394,911 | ||||||||||||||
Ratios* |
||||||||||||||||||||
Tangible common equity to tangible assets (a)/(c) |
6.0 | % | 6.8 | % | 6.8 | % | 6.8 | % | 6.6 | % | ||||||||||
Tangible common equity to risk-weighted assets (a)/(d) |
8.0 | 9.2 | 9.4 | 9.3 | 9.1 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (b)/(e) |
9.5 | 9.6 | 9.7 | 9.5 | 9.5 | |||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, 2022 |
December 31, 2021 |
September 30, 2021 |
June 30, 2021 |
March 31, 2021 |
||||||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$1,466 | $1,582 | $1,934 | $1,914 | $2,175 | |||||||||||||||
Intangibles amortization (net-of-tax) |
37 | 32 | 32 | 32 | 30 | |||||||||||||||
Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization |
1,503 | 1,614 | 1,966 | 1,946 | 2,205 | |||||||||||||||
Annualized net income applicable to U.S. Bancorp common shareholders, excluding intangible |
6,096 | 6,403 | 7,800 | 7,805 | 8,943 | |||||||||||||||
Average total equity |
53,934 | 55,875 | 54,908 | 53,593 | 53,359 | |||||||||||||||
Average preferred stock |
(6,619 | ) | (6,865 | ) | (5,968 | ) | (5,968 | ) | (6,213 | ) | ||||||||||
Average noncontrolling interests |
(468 | ) | (633 | ) | (635 | ) | (631 | ) | (630 | ) | ||||||||||
Average goodwill (net of deferred tax liability) (1) |
(9,320 | ) | (9,115 | ) | (9,019 | ) | (9,003 | ) | (9,010 | ) | ||||||||||
Average intangible assets, other than mortgage servicing rights |
(779 | ) | (656 | ) | (632 | ) | (662 | ) | (649 | ) | ||||||||||
Average tangible common equity (g) |
36,748 | 38,606 | 38,654 | 37,329 | 36,857 | |||||||||||||||
Return on tangible common equity (f)/(g) |
16.6 | % | 16.6 | % | 20.2 | % | 20.9 | % | 24.3 | % | ||||||||||
Net interest income |
$3,173 | $3,123 | $3,171 | $3,137 | $3,063 | |||||||||||||||
Taxable-equivalent adjustment (4) |
27 | 27 | 26 | 27 | 26 | |||||||||||||||
Net interest income, on a taxable-equivalent basis |
3,200 | 3,150 | 3,197 | 3,164 | 3,089 | |||||||||||||||
Net interest income, on a taxable-equivalent basis |
||||||||||||||||||||
(as calculated above) |
3,200 | 3,150 | 3,197 | 3,164 | 3,089 | |||||||||||||||
Noninterest income |
2,396 | 2,534 | 2,693 | 2,619 | 2,381 | |||||||||||||||
Less: Securities gains (losses), net |
18 | 15 | 20 | 43 | 25 | |||||||||||||||
Total net revenue, excluding net securities gains (losses) (h) |
5,578 | 5,669 | 5,870 | 5,740 | 5,445 | |||||||||||||||
Noninterest expense (i) |
3,502 | 3,533 | 3,429 | 3,387 | 3,379 | |||||||||||||||
Efficiency ratio (i)/(h) |
62.8 | % | 62.3 | % | 58.4 | % | 59.0 | % | 62.1 | % |
* | Preliminary data. Subject to change prior to filings with applicable regulatory agencies. |
(1) | Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements. |
(2) | Includes the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology net of deferred taxes. |
(3) | Includes the impact of the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology. |
(4) | Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes. |
16
|
||
LINE OF BUSINESS FINANCIAL PERFORMANCE (a) | ||||||||||||||||||||||
($ in millions) | Net Income Attributable | |||||||||||||||||||||
to U.S. Bancorp | Percent Change | |||||||||||||||||||||
Business Line | 1Q 2022 |
4Q 2021 |
1Q 2021 |
1Q22 vs 4Q21 |
1Q22 vs 1Q21 |
|||||||||||||||||
Corporate and Commercial Banking |
$418 | $313 | $469 | 33.5 | (10.9 | ) | ||||||||||||||||
Consumer and Business Banking |
393 | 485 | 575 | (19.0 | ) | (31.7 | ) | |||||||||||||||
Wealth Management and Investment Services |
206 | 202 | 225 | 2.0 | (8.4 | ) | ||||||||||||||||
Payment Services |
372 | 371 | 487 | .3 | (23.6 | ) | ||||||||||||||||
Treasury and Corporate Support |
168 | 302 | 524 | (44.4 | ) | (67.9 | ) | |||||||||||||||
Consolidated Company |
$1,557 | $1,673 | $2,280 | (6.9 | ) | (31.7 | ) | |||||||||||||||
(a) preliminary data
|
Lines of Business
The Companys major lines of business are Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate resources and assess performance. Business line results are derived from the Companys business unit profitability reporting systems by specifically attributing managed balance sheet assets, deposits and other liabilities and their related income or expense. Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Companys diverse customer base. During 2022, certain organization and methodology changes were made and, accordingly, prior period results were restated and presented on a comparable basis.
2
|
||
CORPORATE AND COMMERCIAL BANKING (a) | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q 2022 |
4Q 2021 |
1Q 2021 |
1Q22 vs 4Q21 |
1Q22 vs 1Q21 |
||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$735 | $684 | $719 | 7.5 | 2.2 | |||||||||||||||
Noninterest income |
245 | 249 | 268 | (1.6 | ) | (8.6 | ) | |||||||||||||
Securities gains (losses), net |
-- | -- | -- | -- | -- | |||||||||||||||
Total net revenue |
980 | 933 | 987 | 5.0 | (.7 | ) | ||||||||||||||
Noninterest expense |
419 | 418 | 409 | .2 | 2.4 | |||||||||||||||
Other intangibles |
-- | -- | -- | -- | -- | |||||||||||||||
Total noninterest expense |
419 | 418 | 409 | .2 | 2.4 | |||||||||||||||
Income before provision and taxes |
561 | 515 | 578 | 8.9 | (2.9 | ) | ||||||||||||||
Provision for credit losses |
3 | 98 | (48) | (96.9 | ) | nm | ||||||||||||||
Income before income taxes |
558 | 417 | 626 | 33.8 | (10.9 | ) | ||||||||||||||
Income taxes and taxable-equivalent adjustment |
140 | 104 | 157 | 34.6 | (10.8 | ) | ||||||||||||||
Net income |
418 | 313 | 469 | 33.5 | (10.9 | ) | ||||||||||||||
Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | |||||||||||||||
Net income attributable to U.S. Bancorp |
$418 | $313 | $469 | 33.5 | (10.9 | ) | ||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||
Loans |
$115,634 | $106,262 | $101,927 | 8.8 | 13.4 | |||||||||||||||
Other earning assets |
4,676 | 4,690 | 4,321 | (.3 | ) | 8.2 | ||||||||||||||
Goodwill |
1,912 | 1,912 | 1,647 | -- | 16.1 | |||||||||||||||
Other intangible assets |
4 | 4 | 5 | -- | (20.0 | ) | ||||||||||||||
Assets |
127,651 | 118,035 | 114,069 | 8.1 | 11.9 | |||||||||||||||
Noninterest-bearing deposits |
62,285 | 65,450 | 56,281 | (4.8 | ) | 10.7 | ||||||||||||||
Interest-bearing deposits |
86,618 | 75,243 | 71,377 | 15.1 | 21.4 | |||||||||||||||
Total deposits |
148,903 | 140,693 | 127,658 | 5.8 | 16.6 | |||||||||||||||
Total U.S. Bancorp shareholders equity |
13,710 | 13,666 | 14,354 | .3 | (4.5 | ) | ||||||||||||||
(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 $418 million of the Companys net income in the first quarter of 2022, compared with $469 million in the first quarter of 2021. Total net revenue was $7 million (0.7 percent) lower due to a decrease of $23 million (8.6 percent) in total noninterest income, partially offset by an increase of $16 million (2.2 percent) in net interest income. Net interest income increased primarily due to higher loan and deposit balances, partially offset by the impact of loan mix and related yields as well as unfavorable changes in deposit rates. Total noninterest income decreased primarily due to lower corporate bond fees and trading revenue within the capital markets business, partially offset by stronger treasury management fees due to core growth driven by the economic recovery. Total noninterest expense increased $10 million (2.4 percent) compared with a year ago primarily due to an increase in net shared services expense driven by investment in infrastructure and technology development as well as higher compensation expense primarily due to merit and hiring to support business growth, partially offset by lower performance-based incentives related to capital markets activity. The provision for credit losses increased $51 million compared with the first quarter of 2021 primarily due to loan loss provisions supporting stronger growth in loan balances in the current year linked quarter, partially offset by improving portfolio credit quality in the current year.
3
|
||
CONSUMER AND BUSINESS BANKING (a) | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q 2022 |
4Q 2021 |
1Q 2021 |
1Q22 vs 4Q21 |
1Q22 vs 1Q21 |
||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$1,517 | $1,517 | $1,505 | -- | .8 | |||||||||||||||
Noninterest income |
461 | 583 | 569 | (20.9 | ) | (19.0 | ) | |||||||||||||
Securities gains (losses), net |
-- | -- | -- | -- | -- | |||||||||||||||
Total net revenue |
1,978 | 2,100 | 2,074 | (5.8 | ) | (4.6 | ) | |||||||||||||
Noninterest expense |
1,402 | 1,451 | 1,341 | (3.4 | ) | 4.5 | ||||||||||||||
Other intangibles |
3 | 3 | 3 | -- | -- | |||||||||||||||
Total noninterest expense |
1,405 | 1,454 | 1,344 | (3.4 | ) | 4.5 | ||||||||||||||
Income before provision and taxes |
573 | 646 | 730 | (11.3 | ) | (21.5 | ) | |||||||||||||
Provision for credit losses |
49 | (1 | ) | (37) | nm | nm | ||||||||||||||
Income before income taxes |
524 | 647 | 767 | (19.0 | ) | (31.7 | ) | |||||||||||||
Income taxes and taxable-equivalent adjustment |
131 | 162 | 192 | (19.1 | ) | (31.8 | ) | |||||||||||||
Net income |
393 | 485 | 575 | (19.0 | ) | (31.7 | ) | |||||||||||||
Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | |||||||||||||||
Net income attributable to U.S. Bancorp |
$393 | $485 | $575 | (19.0 | ) | (31.7 | ) | |||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||
Loans |
$141,106 | $140,865 | $141,719 | .2 | (.4 | ) | ||||||||||||||
Other earning assets |
4,381 | 6,569 | 10,177 | (33.3 | ) | (57.0 | ) | |||||||||||||
Goodwill |
3,261 | 3,262 | 3,475 | -- | (6.2 | ) | ||||||||||||||
Other intangible assets |
3,176 | 2,966 | 2,493 | 7.1 | 27.4 | |||||||||||||||
Assets |
157,696 | 159,578 | 164,131 | (1.2 | ) | (3.9 | ) | |||||||||||||
Noninterest-bearing deposits |
32,094 | 34,294 | 32,861 | (6.4 | ) | (2.3 | ) | |||||||||||||
Interest-bearing deposits |
166,765 | 162,934 | 151,406 | 2.4 | 10.1 | |||||||||||||||
Total deposits |
198,859 | 197,228 | 184,267 | .8 | 7.9 | |||||||||||||||
Total U.S. Bancorp shareholders equity |
12,275 | 12,231 | 12,496 | .4 | (1.8 | ) | ||||||||||||||
(a) preliminary data
|
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 $393 million of the Companys net income in the first quarter of 2022, compared with $575 million in the first quarter of 2021. Total net revenue was lower by $96 million (4.6 percent) due to a decrease in total noninterest income of $108 million (19.0 percent), partially offset by higher net interest income of $12 million (0.8 percent). Net interest income reflected strong growth in interest-bearing deposit balances and favorable funding mix, partially offset by lower loan fees related to the Paycheck Protection Program (PPP). Total noninterest income decreased primarily due to lower mortgage banking revenue reflecting lower application volumes, given declining refinance activities, and lower related gain on sale margins, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities, as well as higher performing loan sales. Additionally, other noninterest income decreased due to lower retail leasing end-of-term residual gains. Offsetting these decreases, deposit service charges increased driven by higher customer spend activity, net of the impact of the elimination of certain consumer NSF fees in the first quarter of 2022. Total noninterest expense increased $61 million (4.5 percent) primarily due to increases in net shared services expense due to investments in digital capabilities and higher compensation expense from merit and core business growth. The provision for credit losses increased $86 million due to higher loan loss provisions reflecting relatively stable ending balances and credit quality in the current quarter, compared with balance reductions and credit quality improvement in the prior year linked quarter.
4
|
||
WEALTH MANAGEMENT AND INVESTMENT SERVICES (a) | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q 2022 |
4Q 2021 |
1Q 2021 |
1Q22 vs 4Q21 |
1Q22 vs 1Q21 |
||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$274 | $246 | $268 | 11.4 | 2.2 | |||||||||||||||
Noninterest income |
596 | 583 | 531 | 2.2 | 12.2 | |||||||||||||||
Securities gains (losses), net |
-- | -- | -- | -- | -- | |||||||||||||||
Total net revenue |
870 | 829 | 799 | 4.9 | 8.9 | |||||||||||||||
Noninterest expense |
577 | 550 | 492 | 4.9 | 17.3 | |||||||||||||||
Other intangibles |
10 | 4 | 2 | nm | nm | |||||||||||||||
Total noninterest expense |
587 | 554 | 494 | 6.0 | 18.8 | |||||||||||||||
Income before provision and taxes |
283 | 275 | 305 | 2.9 | (7.2 | ) | ||||||||||||||
Provision for credit losses |
8 | 5 | 5 | 60.0 | 60.0 | |||||||||||||||
Income before income taxes |
275 | 270 | 300 | 1.9 | (8.3 | ) | ||||||||||||||
Income taxes and taxable-equivalent adjustment |
69 | 68 | 75 | 1.5 | (8.0 | ) | ||||||||||||||
Net income |
206 | 202 | 225 | 2.0 | (8.4 | ) | ||||||||||||||
Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | |||||||||||||||
Net income attributable to U.S. Bancorp |
$206 | $202 | $225 | 2.0 | (8.4 | ) | ||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||
Loans |
$20,666 | $19,614 | $16,846 | 5.4 | 22.7 | |||||||||||||||
Other earning assets |
259 | 229 | 279 | 13.1 | (7.2 | ) | ||||||||||||||
Goodwill |
1,761 | 1,656 | 1,619 | 6.3 | 8.8 | |||||||||||||||
Other intangible assets |
265 | 130 | 42 | nm | nm | |||||||||||||||
Assets |
24,446 | 22,963 | 20,120 | 6.5 | 21.5 | |||||||||||||||
Noninterest-bearing deposits |
27,350 | 29,220 | 21,338 | (6.4 | ) | 28.2 | ||||||||||||||
Interest-bearing deposits |
69,909 | 74,192 | 83,474 | (5.8 | ) | (16.3 | ) | |||||||||||||
Total deposits |
97,259 | 103,412 | 104,812 | (5.9 | ) | (7.2 | ) | |||||||||||||
Total U.S. Bancorp shareholders equity |
3,595 | 3,318 | 3,034 | 8.3 | 18.5 | |||||||||||||||
(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 four businesses: Wealth Management, Global Corporate Trust & Custody, U.S. Bancorp Asset Management and Fund Services.
Wealth Management and Investment Services contributed $206 million of the Companys net income in the first quarter of 2022, compared with $225 million in the first quarter of 2021. Total net revenue increased $71 million (8.9 percent) year-over-year reflecting an increase of $6 million (2.2 percent) in net interest income and an increase of $65 million (12.2 percent) in total noninterest income. Net interest income increased slightly year-over-year primarily due to higher average noninterest-bearing deposits as well as higher average loan balances. Total noninterest income increased primarily due to core business growth in trust and investment management fees and investment products fees both driven by favorable market conditions as well as the impact of the PFM acquisition on trust and investment fees, partially offset by higher fee waivers related to money market funds. Total noninterest expense increased $93 million (18.8 percent) compared with the first quarter of 2021 reflecting the PFM acquisition, compensation expense as a result of merit and performance-based incentives, litigation settlements, fraud related losses and core business growth. The provision for credit losses increased $3 million (60.0 percent) due to increased loan loss provisions supporting stronger growth in ending loans and a modest shift in credit quality in the current period compared with the prior year quarter.
5
|
||
PAYMENT SERVICES (a) | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q 2022 |
4Q 2021 |
1Q 2021 |
1Q22 vs 4Q21 |
1Q22 vs 1Q21 |
||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$622 | $617 | $629 | .8 | (1.1 | ) | ||||||||||||||
Noninterest income |
858 | 906 | 785 | (5.3 | ) | 9.3 | ||||||||||||||
Securities gains (losses), net |
-- | -- | -- | -- | -- | |||||||||||||||
Total net revenue |
1,480 | 1,523 | 1,414 | (2.8 | ) | 4.7 | ||||||||||||||
Noninterest expense |
820 | 862 | 772 | (4.9 | ) | 6.2 | ||||||||||||||
Other intangibles |
34 | 33 | 33 | 3.0 | 3.0 | |||||||||||||||
Total noninterest expense |
854 | 895 | 805 | (4.6 | ) | 6.1 | ||||||||||||||
Income before provision and taxes |
626 | 628 | 609 | (.3 | ) | 2.8 | ||||||||||||||
Provision for credit losses |
130 | 133 | (41) | (2.3 | ) | nm | ||||||||||||||
Income before income taxes |
496 | 495 | 650 | .2 | (23.7 | ) | ||||||||||||||
Income taxes and taxable-equivalent adjustment |
124 | 124 | 163 | -- | (23.9 | ) | ||||||||||||||
Net income |
372 | 371 | 487 | .3 | (23.6 | ) | ||||||||||||||
Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | |||||||||||||||
Net income attributable to U.S. Bancorp |
$372 | $371 | $487 | .3 | (23.6 | ) | ||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||
Loans |
$31,740 | $32,351 | $29,630 | (1.9 | ) | 7.1 | ||||||||||||||
Other earning assets |
1,023 | 356 | 5 | nm | nm | |||||||||||||||
Goodwill |
3,325 | 3,219 | 3,173 | 3.3 | 4.8 | |||||||||||||||
Other intangible assets |
464 | 473 | 542 | (1.9 | ) | (14.4 | ) | |||||||||||||
Assets |
38,540 | 38,282 | 35,091 | .7 | 9.8 | |||||||||||||||
Noninterest-bearing deposits |
3,673 | 4,247 | 5,264 | (13.5 | ) | (30.2 | ) | |||||||||||||
Interest-bearing deposits |
160 | 155 | 132 | 3.2 | 21.2 | |||||||||||||||
Total deposits |
3,833 | 4,402 | 5,396 | (12.9 | ) | (29.0 | ) | |||||||||||||
Total U.S. Bancorp shareholders equity |
8,019 | 7,936 | 7,658 | 1.0 | 4.7 | |||||||||||||||
(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 $372 million of the Companys net income in the first quarter of 2022, compared with $487 million in the first quarter of 2021. Total net revenue increased $66 million (4.7 percent) primarily due to higher total noninterest income of $73 million (9.3 percent), partially offset by lower net interest income of $7 million (1.1 percent). Net interest income decreased slightly primarily due to lower loan yields driven by declining customer revolve rates, mostly offset by higher loan balances due to investment in customer acquisition. Total noninterest income increased year-over-year mainly due to continued strengthening of consumer and business spending across most sectors as local jurisdictions reduce pandemic related restrictions and consumer behaviors normalize. As a result, there was strong growth in merchant processing services revenue driven by higher sales volume and higher merchant fees, partially offset by higher rebates. There was also solid growth in corporate payment products revenue driven by improving business spending across nearly all product groups. Strong sales also drove an increase in credit and debit card revenue, mostly offset by declining prepaid processing fees as the beneficial impact of government stimulus programs continues to dissipate. Total noninterest expense increased $49 million (6.1 percent) reflecting higher net shared services expense driven by investment in infrastructure and technology development in addition to higher compensation expense as a result of merit, performance-based incentives and core business growth. The provision for credit losses increased $171 million primarily due to ending loan balance growth and relatively stable credit quality in the current period compared with a reduction in loan balances and delinquencies in the prior year quarter.
6
|
||
TREASURY AND CORPORATE SUPPORT (a) | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q 2022 |
4Q 2021 |
1Q 2021 |
1Q22 vs 4Q21 |
1Q22 vs 1Q21 |
||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$52 | $86 | $(32) | (39.5 | ) | nm | ||||||||||||||
Noninterest income |
218 | 198 | 203 | 10.1 | 7.4 | |||||||||||||||
Securities gains (losses), net |
18 | 15 | 25 | 20.0 | (28.0 | ) | ||||||||||||||
Total net revenue |
288 | 299 | 196 | (3.7 | ) | 46.9 | ||||||||||||||
Noninterest expense |
237 | 212 | 327 | 11.8 | (27.5 | ) | ||||||||||||||
Other intangibles |
-- | -- | -- | -- | -- | |||||||||||||||
Total noninterest expense |
237 | 212 | 327 | 11.8 | (27.5 | ) | ||||||||||||||
Income (loss) before provision and taxes |
51 | 87 | (131) | (41.4 | ) | nm | ||||||||||||||
Provision for credit losses |
(78 | ) | (248 | ) | (706) | 68.5 | 89.0 | |||||||||||||
Income (loss) before income taxes |
129 | 335 | 575 | (61.5 | ) | (77.6 | ) | |||||||||||||
Income taxes and taxable-equivalent adjustment |
(40 | ) | 28 | 46 | nm | nm | ||||||||||||||
Net income (loss) |
169 | 307 | 529 | (45.0 | ) | (68.1 | ) | |||||||||||||
Net (income) loss attributable to noncontrolling interests |
(1 | ) | (5 | ) | (5) | 80.0 | 80.0 | |||||||||||||
Net income (loss) attributable to U.S. Bancorp |
$168 | $302 | $524 | (44.4 | ) | (67.9 | ) | |||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||
Loans |
$3,820 | $3,663 | $3,867 | 4.3 | (1.2 | ) | ||||||||||||||
Other earning assets |
206,532 | 207,936 | 188,940 | (.7 | ) | 9.3 | ||||||||||||||
Goodwill |
-- | -- | -- | -- | -- | |||||||||||||||
Other intangible assets |
-- | -- | -- | -- | -- | |||||||||||||||
Assets |
229,069 | 233,501 | 215,323 | (1.9 | ) | 6.4 | ||||||||||||||
Noninterest-bearing deposits |
2,561 | 2,725 | 2,608 | (6.0 | ) | (1.8 | ) | |||||||||||||
Interest-bearing deposits |
2,761 | 1,378 | 1,623 | nm | 70.1 | |||||||||||||||
Total deposits |
5,322 | 4,103 | 4,231 | 29.7 | 25.8 | |||||||||||||||
Total U.S. Bancorp shareholders equity |
15,867 | 18,091 | 15,187 | (12.3 | ) | 4.5 | ||||||||||||||
(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 contributed $168 million of the Companys net income in the first quarter of 2022, compared with $524 million in the first quarter of 2021. Total net revenue was higher by $92 million (46.9 percent) due to an increase of $84 million in net interest income and an increase in total noninterest income of $8 million (3.5 percent). Net interest income increased primarily due to higher investment portfolio balances. The increase in total noninterest income was primarily due to the impact of COVID-related deposit service charges refunds in the first quarter of 2021. Total noninterest expense decreased $90 million (27.5 percent) primarily due to lower performance-based incentives and lower costs related to tax-advantaged investments, partially offset by higher costs of capital investments to support business growth and compensation expense as a result of merit. The provision for credit losses increased $628 million (89.0 percent) reflecting the residual impact of changes in the allowance for credit losses being impacted by the relatively stable economic conditions relative to the more substantial impact to the allowance for credit losses associated with improving economic conditions in the first quarter of 2021. Income taxes are assessed to each line of business at a managerial tax rate of 25.0 percent with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in Treasury and Corporate Support.
7
U.S. Bancorp 1Q22 Earnings Conference Call April 14, 2022 Exhibit 99.2
Forward-looking Statements and Additional Information The following information appears in accordance with the Private Securities Litigation Reform Act of 1995: This 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 often use words such as “anticipates,” “targets,” “expects,” “hopes,” “estimates,” “projects,” “forecasts,” “intends,” “plans,” “goals,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Forward-looking statements involve inherent risks and uncertainties, including the following risks and uncertainties and the risks and uncertainties more fully discussed in the section entitled “Risk Factors” of Exhibit 13 to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2021, which could cause actual results to differ materially from those anticipated. The COVID-19 pandemic is adversely affecting U.S. Bancorp, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is uncertain. Continued 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. 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; increases in unemployment 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; civil unrest; the effects of climate change; changes in customer behavior and preferences; breaches in data security, including as a result of work-from-home arrangements; failures to safeguard personal information; the impacts of international hostilities or geopolitical events; 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 reputation risk. In addition, U.S. Bancorp’s proposed acquisition of MUFG Union Bank presents risks and uncertainties, including, among others: the risk that the cost savings, any revenue synergies and other anticipated benefits of the proposed acquisition may not be realized or may take longer than anticipated to be realized; the risk that U.S. Bancorp’s business could be disrupted as a result of the announcement and pendency of the proposed acquisition and diversion of management’s attention from ongoing business operations and opportunities; the possibility that the proposed acquisition, including the integration of MUFG Union Bank, may be more costly or difficult to complete than anticipated; delays in closing the proposed acquisition; and the failure of required governmental approvals to be obtained or any other closing conditions in the definitive purchase agreement to be satisfied. For discussion of these and other risks that may cause actual results to differ from those described in forward-looking statements, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2021, 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. In addition, factors other than these risks also could adversely affect U.S. Bancorp’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements. 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.
1Q22 Highlights 1Taxable-equivalent basis; see slide 26 for calculation 2 Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology was 9.5% as of 3/31/22. 3 Earnings returned (millions) = total common dividends paid and aggregate value of common shares repurchased
Performance Ratios Efficiency Ratio1 & Net Interest Margin2 Return on Average Common Equity Return on Tangible Common Equity1 Return on Average Assets 1 Non-GAAP; see slides 26 and 27 for calculations 2 Net interest margin on a taxable-equivalent basis
Digital Engagement Trends Three months ended 1 Represents core Consumer Banking customers active in at least one channel in the previous 90 days 2 Interactive Voice Response Total Digital includes both online and mobile platforms 2/28/22
With 1.1 million business1 banking relationships, there is a significant opportunity for us to deepen current relationships and acquire new customers. talech is a great example of how we are capitalizing on this opportunity. Banking and Payments2 Relationships Business Banking only Business Banking & Payments Payments only Business Banking & Payments 1 Defined as businesses with under $25M in revenue 2 Payments includes Merchant Acquiring and card relationships within Retail Payment Solutions 3 Data as of 2/28/22 Business Banking and Payments Trends New talech Customers talech helps small businesses tackle accounts receivable and operational tasks >5x ~1.5x FY20
Average Loans +3.4% linked quarter +6.5% year-over-year On a linked quarter basis, average total loans were higher primarily due to higher commercial loans, higher residential mortgages, and higher other retail loans. On a year-over-year basis, average total loans were higher primarily due to growth in commercial loans, residential mortgages, and other retail loans. The increase in other retail loans was driven by strong auto and recreational vehicle lending during 2021. $ in billions
Average Deposits +1.0% linked quarter +6.5% year-over-year Interest-bearing Deposits Average noninterest-bearing (NIB) deposits decreased on a linked quarter basis and increased on a year-over-year basis. On a linked quarter basis, the decrease was driven by seasonal decreases across all business lines, while the year-over-year increase was primarily driven by Corporate and Commercial Banking and Wealth Management and Investment Services. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, were higher on a linked quarter basis and lower on a year-over-year basis. $ in billions
Credit Quality NCO Ratio +4 bps QoQ -10 bps YoY NPAs -7.6% QoQ -32.5% YoY $ in millions, except allowance for credit losses in billions Allowance for Credit Losses by Loan Class, 1Q22 Amount ($B) Loans and Leases Outstanding (%) Commercial $1.8 1.6% Commercial Real Estate 1.1 2.7% Residential Mortgage 0.6 0.8% Credit Card 1.6 7.4% Other Retail 1.0 1.5% Total $6.1 1.9%
Earnings Summary
Net Interest Income +1.6% linked quarter +3.6% year-over-year 1 Includes PPP interest income and PPP loan fees $ in millions Net interest income on a taxable-equivalent basis; see slide 26 for calculation Including PPP Excluding PPP +2.4% linked quarter +5.9% year-over-year $3,089 $3,150 $3,200 Linked Quarter Net interest income increased, primarily due to higher loan and investment portfolio balances as well as higher yields in the investment portfolio, partially offset by lower loan fees. The net interest margin increased, reflecting the changing yield curve and lower cash balances, partially offset by the impact of loan mix. Year-over-Year Net interest income increased, primarily due to higher loan and investment securities balances and favorable deposit and funding mix, partially offset by lower loan yields and mix as well as lower loan fees. The net interest margin decreased, primarily due to the mix of loans and lower loan spreads, partially offset by funding and yield curve favorability. PPP Impact 1
Noninterest Income -5.4% linked quarter +0.6% year-over-year Linked Quarter Mortgage banking revenue decreased, driven by lower application volume and related gain on sale margins as well as lower performing loan sales, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities. Payment services revenue decreased, as credit card revenue decreased due to lower sales volume and rate as well as lower prepaid card fees. Deposit service charges decreased, primarily due to seasonally lower volumes and the impact of the elimination of certain consumer NSF fees in the first quarter of 2022 net of higher customer activity. Year-over-Year Payment services revenue increased, due to growth in corporate payment products revenue driven by higher sales volume and growth in merchant processing services revenue driven by higher sales volume as well as higher merchant fees. Trust and Investment Management fees increased, driven by business growth, favorable market conditions and activity related to the 2021 acquisition of PFM Asset Management LLC, partially offset by higher fee waivers. Mortgage banking revenue decreased, driven by lower application volume, given declining refinancing activity, and related gain on sale margins, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities, as well as higher performing loan sales. $ in millions Payments = credit and debit card, corporate payment products and merchant processing Service charges = deposit service charges and treasury management All other = commercial products, investment products fees, securities gains (losses) and other
Payment Services Payments Revenue Breakdown Merchant Processing Credit and Debit Card1 Corporate Payments All Other Revenue Total payments revenue, which includes net interest income and fee revenue, accounted for 26% of 1Q22 net revenue Total payment fee revenue grew 10% year-over-year on the back of the cyclical recovery leading to increased sales volumes, and secular growth materializing as our investments pay-off Seasonal Considerations COVID-19 Impacted Industries Continue to Recover Historical Linked Quarter Seasonal Trends for Payment Fees Revenue2 0% Airline -Merchant Processing Travel4 - Credit and Debit Card Travel & Entertainment - Corporate Payments In 1Q22, total sales volumes in each of our three payments businesses exceeded 1Q19 levels despite the lagging travel recovery Volume Growth vs. 2019 Comparable Period3 1 Includes prepaid card 2 Linked quarter change based on trends from 2015 – 2019 3 Monthly data ranging from January 2020 – March 2022 4 Travel includes airlines, auto rental, hotel, other transportation, and travel agencies Payment Fees as a % of Net Revenue (1Q22) 1Q payments fee revenue is typically seasonally down on a linked quarter basis reflecting lower post-holiday sales activity Payments fee revenue growth, on a linked quarter basis, is typically seasonally strongest in 2Q
Payment Services Fee Revenue Growth In 1Q22, prepaid card related fee revenue was 12% of total credit and debit card fee revenue (compared to 11% in FY 19). 1 Includes prepaid card
Noninterest Expense -0.9% linked quarter +3.6% year-over-year Linked Quarter Professional services expense decreased, primarily due to the timing of certain initiatives in the fourth quarter of 2021. Marketing and business development expense decreased due to the timing of marketing campaigns. Employee benefits expense increased, driven by seasonally higher payroll taxes. Year-over-Year Compensation expense increased, primarily due to merit and hiring to support business growth, partially offset by lower performance-based incentives. Professional services expense increased, primarily due to an increase in business investment and related initiatives. Marketing and business development expense increased, due to the timing of marketing campaigns as well as increased travel and entertainment. $ in millions PPS = postage, printing and supplies
Capital Position 1Ratios calculated in accordance with transitional regulatory requirements related to the current expected credit losses methodology 2 Non-GAAP; see slide 28 for calculations
Strategic and Financial Thesis Intact and Compelling Progress What’s Next Financial Impact1 EPS Accretion2 ~6% / ~8% Synergies realized 75% / 100% Cost Synergies ~$900MM / ~40% Internal Rate of Return ~20% TBVPS Impact3 Dilution ~1% Capitalized Value of Net Cost Synergies4 $7.1 B Working on integration activities including technology and business line operations Participated in numerous stakeholder town-hall meetings Continuing to work with regulators in the normal course of action Strategic and financial thesis intact and remains compelling Participated in a joint public meeting with the Fed and OCC Targeting transaction closing in 1H22, subject to regulatory approval Finalizing integration and conversion plans across all business and corporate functions Conversion anticipated in 2H22 Execute conversion and integration plan Disclosed with deal announcement: 1 Metrics do not include revenue synergies. 2 2023E GAAP EPS accretion with synergies illustratively realized 75% and 100% in 2023. 3 Tangible book value per share dilution at close inclusive of one-time restructuring charges and non-purchase credit deteriorated CECL provision. 4 Pre tax cost synergies of $900MM ($666MM after tax), multiplied by 12x P/E multiple, net of restructuring charges of $1.2B pre-tax ($888MM after tax). Assumes 26% tax rate. Union Bank Acquisition Update
Appendix
Average Loans Linked Quarter Average total loans increased by $10.2 billion, or 3.4% Average commercial loans increased by $8.3 billion, or 8.0% Average residential mortgage loans increased by $1.6 billion, or 2.1% Average other retail loans increased by $0.6 billion, or 1.0% Year-over-Year Average total loans increased by $19.0 billion, or 6.5% Average commercial loans increased by $10.7 billion, or 10.5% Average other retail loans increased $5.0 billion, or 8.8% Average residential mortgage loans increased by $2.2 billion, or 3.0% Key Points Year-over-Year Growth (1.2%) (7.5%) (4.6%) 0.1% 6.5% Commercial CRE Res Mtg Other Retail Credit Card Average Loans ($bn)
Year-over-Year Growth 17.5% 6.4% 6.4% 6.5% 6.5% Time Money Market Checking and Savings Noninterest-bearing Average Deposits Key Points Average Deposits ($bn) Linked Quarter Average total deposits increased by $4.4 billion, or 1.0% Average low-cost deposits (NIB, interest checking, savings and money market) increased by $2.5 billion, or 0.6% Year-over-Year Average total deposits increased by $27.8 billion, or 6.5% Average low-cost deposits (NIB, interest checking, savings and money market) increased by $30.2 billion, or 7.6% $454.2
Credit Quality – Commercial Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm1Q21 4Q21 1Q22 Average Loans$102,091 $104,508 $112,822 30-89 Delinquencies0.19% 0.47% 0.20% 90+ Delinquencies0.06% 0.04% 0.06% Nonperforming Loans0.33% 0.16% 0.15% Linked Quarter Growth, including PPP (4.1%) 0.9% (1.1%) 2.6% 8.0% Average loans increased 8% on a linked quarter basis and excluding the runoff of the Paycheck Protection Program (PPP) loans, average loan growth was 8.8%. Average PPP loans represented 0.9% of total average commercial loans in 1Q22 compared to 6% in 1Q21 Net charge-offs ratio remained low at 0.12%, while 30-89 day delinquencies decreased during the quarter $102,091 $102,974 $101,832 $104,508 $112,822 Linked Quarter Growth, excluding PPP (3.7%) 0.7% 1.7% 4.6% 8.8%
$mm1Q21 4Q21 1Q22 Average Loans$38,786 $38,851 $39,084 30-89 Delinquencies0.31% 0.20%0.22% 90+ Delinquencies0.01%0.03%- % Nonperforming Loans0.93% 0.73% 0.55% Credit Quality – Commercial Real Estate Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points Linked Quarter Growth (3.3%) (0.6%) 0.9% (0.2%) 0.6% Average loans increased by 0.6% on a linked quarter basis Net recoveries during the quarter and performance continued to reflect the sustained general economic recovery
Credit Quality – Residential Mortgage Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm1Q214Q211Q22 Average Loans$75,201 $75,858 $77,449 30-89 Delinquencies0.28%0.15%0.13% 90+ Delinquencies0.19% 0.24% 0.18% Nonperforming Loans0.34%0.30%0.27% Linked Quarter Growth (2.1%) (2.5%) 1.0% 2.4% 2.1% Originations continued to be high credit quality (weighted average FICO of 768, weighted average LTV of 66%) Net recovery performance continued to reflect overall portfolio credit quality and strength in housing values
Credit Quality – Credit Card Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm1Q214Q211Q22 Average Loans$21,144 $22,399$21,842 30-89 Delinquencies0.90% 0.86%0.88% 90+ Delinquencies0.95%0.73%0.74% Nonperforming Loans- %- %- % Linked Quarter Growth (3.6%) (0.1%) 3.7% 2.3% (2.5%) Linked quarter average loans impacted by movement of a small portfolio moved to held for sale at 12/31/21 Net charge-off ratio remained low during the quarter driven by sustained borrower liquidity
Credit Quality – Other Retail Average Loans ($mm) and Net Charge-offs Ratio Key Points Linked Quarter Growth Key Statistics Key Statistics $mm1Q214Q211Q22 Average Loans$56,767 $61,139$61,769 30-89 Delinquencies0.39%0.44%0.38% 90+ Delinquencies0.12%0.11%0.11% Nonperforming Loans0.30%0.24%0.26% Continued relative low net charge-offs were supported by strong portfolio credit quality and collateral values in housing and used autos Stable credit performance on a linked quarter basis included low net charge-offs, delinquencies, and nonperforming loan levels (0.5%) 2.7% 2.9% 1.9% 1.0%
Non-GAAP Financial Measures (1) – see slide 29 for corresponding notes
Non-GAAP Financial Measures (1) – see slide 29 for corresponding notes
Non-GAAP Financial Measures * Preliminary data. Subject to change prior to filings with applicable regulatory agencies. (1), (2), (3) – see slide 29 for corresponding notes
Notes Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements. Includes the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology net of deferred taxes. Includes the impact of the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology. Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.
U.S. Bancorp 1Q22 Earnings Conference Call April 14, 2022
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