- Net revenue of $5,469 million and net
income of $1,675 million
- Industry leading return on average
assets of 1.50% and return on average common equity of 14.9%
- Return on tangible common equity of
19.3%
U.S. Bancorp (NYSE: USB):
1Q18 Key Financial Data
PROFITABILITY
METRICS 1Q18 4Q17 1Q17 Return on average
assets (%) 1.50 1.46 1.35 Return on average common equity (%) 14.9
14.7 13.3 Return on tangible common equity (%) (a) 19.3 18.8 17.2
Net interest margin (%) 3.13 3.11 3.06 Efficiency ratio (%) (a)
55.9 69.8 55.3
INCOME STATEMENT (b) 1Q18 4Q17 1Q17 Net
interest income (taxable-equivalent basis) $3,197 $3,228 $3,030
Noninterest income $2,272 $2,370 $2,259 Net income attributable to
U.S. Bancorp $1,675 $1,682 $1,473 Diluted earnings per common share
$.96 $.97 $.82 Dividends declared per common share $.30 $.30 $.28
BALANCE SHEET
(b) 1Q18 4Q17 1Q17 Average total loans
$279,388 $279,751 $273,158 Average total deposits $334,580 $339,162
$328,433 Net charge-off ratio .49% .46% .50% Book value per common
share (period end) $26.54 $26.34 $25.05 Basel III standardized CET1
(c) 9.0% 9.1% 9.2%
(a) See Non-GAAP Financial Measures reconciliation on pages 16-17
(b) Dollars in millions, except per share data (c) CET1 = Common
equity tier 1 capital ratio, 4Q17 and 1Q17 as if fully implemented
1Q18 Highlights
- Net income of $1,675 million and
diluted earnings per common share of $0.96 in the first quarter of
2018
- Industry leading return on average
assets of 1.50% and return on average common equity of 14.9%
- Returned 68% of 1Q earnings to
shareholders through dividends and share buybacks
- Net interest income grew 5.5%
year-over-year
- Total net revenue grew 3.4% year-over
year
- Payment services revenue grew 6.5%
- Trust and investment management fees
increased 8.2%
- Deposit service charges increased
5.8%
- Net interest margin of 3.13% was 7
basis points higher than 1Q17 and 2 basis points higher than 4Q17
(4 basis points excluding the impact of tax reform)
- Average total loans grew 2.3%
year-over-year
CEO Commentary
“We reported a solid first quarter, highlighted by a 19.3%
return on average tangible common equity. We delivered solid growth
in net interest income and high return fee businesses such as
corporate payments, credit card, and wealth management and
investment services. We continue to invest for the future and I’m
pleased with the progress we are making on initiatives aimed at
advancing our digital offerings and expanding our treasury
management and payment services capabilities. This is a rapidly
evolving banking environment and we are positioning this company to
be a trusted partner to our customers, with the products and
services that enable them to do what they want, when, where and how
they want. As we continue on this journey, I am grateful to our
customers for their trust and to our employees for their commitment
to our continued success.”
— Andy Cecere, Chairman, President
and CEO, U.S. Bancorp
In the Spotlight
Most Admired Super-Regional BankFortune has named U.S.
Bank a World’s Most Admired Company, naming it the world’s most
admired super-regional bank for the eighth consecutive year and
recognizing several of U.S. Bank’s attributes as most admired among
all companies including being #1 in the categories of Management
Quality and Use of Corporate Assets.
Best Employer for DiversityForbes magazine has named U.S.
Bank a Best Employer for Diversity, including the bank in a
first-ever list of top employers based on employee surveys,
reputation research and public diversity leadership data.
One of the World’s Most Ethical CompaniesEthisphere
Institute, the global leader in defining and advancing the
standards of ethical business practices, has recognized U.S. Bank
as a 2018 World's Most Ethical Company®. This marks the fourth
consecutive year U.S. Bank has earned this recognition.
A "Best Place to Work"The Human Rights Campaign
Foundation designated U.S. Bank as a “Best Place to Work” with a
high score of 100 on its LGBTQ rights-focused Corporate Equality
Index. Through its index, the Foundation evaluates businesses from
a diverse set of industries in regards to their policies and
benefits. As of 2018, U.S. Bank has proudly earned a score of 100
percent for 11 years in a row.
INCOME STATEMENT HIGHLIGHTS ($ in
millions, except per-share data)
Percent Change
1Q 4Q 1Q 1Q18 vs 1Q18 vs
2018 2017 2017
4Q17 1Q17 Net interest income
$3,168 $3,175 $2,980 (.2 ) 6.3 Taxable-equivalent adjustment 29
53 50 (45.3 ) (42.0 ) Net
interest income (taxable-equivalent basis) 3,197 3,228 3,030 (1.0 )
5.5 Noninterest income 2,272 2,370
2,259 (4.1 ) .6 Total net revenue 5,469 5,598 5,289 (2.3 )
3.4 Noninterest expense 3,055 3,899
2,909 (21.6 ) 5.0 Income before provision and income taxes
2,414 1,699 2,380 42.1 1.4 Provision for credit losses 341
335 345 1.8 (1.2 ) Income before taxes
2,073 1,364 2,035 52.0 1.9
Income taxes and
taxable-equivalent adjustment
391 (322 ) 549 nm (28.8 ) Net income
1,682 1,686 1,486 (.2 ) 13.2
Net (income) loss attributable
to noncontrolling interests
(7 ) (4 ) (13 ) (75.0 ) 46.2 Net income attributable
to U.S. Bancorp $1,675 $1,682 $1,473
(.4 ) 13.7
Net income applicable to U.S.
Bancorp common shareholders
$1,597 $1,611 $1,387 (.9 ) 15.1
Diluted earnings per common share $.96 $.97
$.82 (1.0 ) 17.1
Net income attributable to U.S. Bancorp was $1,675 million for
the first quarter of 2018, 13.7 percent higher than the $1,473
million for the first quarter of 2017, and 0.4 percent lower than
the $1,682 million for the fourth quarter of 2017. Excluding
notable items in the fourth quarter of 2017, net income
attributable to U.S. Bancorp increased 9.3 percent. Diluted
earnings per common share were $0.96 in the first quarter of 2018.
Results for the first quarter of 2018 included favorable tax
matters partially offset by the impact of a transitional change in
stock-based compensation vesting provisions, that combined,
increased diluted earnings per common share by $0.01. Diluted
earnings per common share were $0.97 in the fourth quarter of 2017,
which included $0.09 of notable items, including a benefit of $910
million related to the estimated impact of tax reform on the
Company’s tax related assets and liabilities, partially offset by a
$608 million accrual for regulatory and legal matters, and $152
million, net of tax, for a charitable contribution to the U.S. Bank
Foundation and a special bonus to certain eligible employees. The
increase in net income year-over-year was primarily due to total
net revenue growth of 3.4 percent (3.9 percent excluding the impact
of tax reform related to taxable-equivalent adjustments for tax
exempt assets), including an increase in net interest income of 5.5
percent, mainly a result of the impact of rising interest rates and
loan growth. Noninterest income increased 0.6 percent principally
due to higher payment services revenue, trust and investment
management fees and deposit service charges, offset by decreases in
mortgage banking revenue and commercial product revenue in addition
to lower equity investment income and securities gains compared
with a year ago. The increase in total net revenue was partially
offset by higher noninterest expense of 5.0 percent (3.7 percent
excluding the impact of stock-based compensation vesting changes),
primarily due to increased compensation expense related to hiring
to support business growth and compliance programs, merit
increases, variable compensation related to revenue growth,
increased expense from a change to a shorter vesting period for new
stock-based compensation grants, and higher employee benefits
expense, partially offset by lower professional services expense
driven by lower consulting costs for risk and compliance programs,
and other expenses.
Excluding the fourth quarter 2017 notable items, net income
increased on a linked quarter basis primarily due to the impact of
the lower corporate tax rate effective in 2018. Total net revenue
decreased 2.3 percent and noninterest expense decreased 0.6
percent. The decrease in total net revenue reflected a decrease in
net interest income of 1.0 percent, due to two fewer days in the
first quarter, and a decrease in noninterest income of 4.1 percent
driven by seasonally lower payment services fees and mortgage
banking revenue and lower equity investment income. The decrease in
noninterest expense was primarily driven by seasonally lower costs
related to investments in tax-advantaged projects, mortgage banking
costs and professional services expense, offset by increased
compensation expense primarily related to the timing of stock-based
compensation grants, and associated vesting period changes, and
seasonally higher employee benefits expense.
NET INTEREST INCOME (Taxable-equivalent basis; $ in
millions)
Change 1Q
4Q 1Q 1Q18 vs 1Q18 vs
2018 2017 2017
4Q17 1Q17 Components of net interest income
Income on earning assets $3,822 $3,785 $3,444 $37 $378 Expense on
interest-bearing liabilities 625 557
414 68 211 Net interest income
$3,197 $3,228 $3,030 $(31
) $167 Average yields and rates paid Earning
assets yield 3.75 % 3.64 % 3.48 % .11 % .27 % Rate paid on
interest-bearing liabilities .81 .72
.57 .09 .24 Gross interest
margin 2.94 % 2.92 % 2.91 % .02 % .03 %
Net interest margin 3.13 % 3.11 % 3.06 % .02 %
.07 % Average balances Investment securities (a)
$113,493 $113,287 $110,764 $206 $2,729 Loans 279,388 279,751
273,158 (363 ) 6,230 Earning assets 411,849 413,510 399,281 (1,661
) 12,568 Interest-bearing liabilities 311,615 308,976 296,170 2,639
15,445 (a) Excludes unrealized gain (loss)
Net interest income on a taxable-equivalent basis in the first
quarter of 2018 was $3,197 million, an increase of $167 million
(5.5 percent) over the first quarter of 2017. The increase was
principally driven by the impact of rising interest rates and loan
growth, partially offset by deposit and funding mix and the impact
of tax reform which reduced the taxable-equivalent adjustment
benefit related to tax exempt assets. Average earning assets were
$12.6 billion (3.1 percent) higher than the first quarter of 2017,
reflecting increases of $6.2 billion (2.3 percent) in average total
loans, $2.7 billion (2.5 percent) in average investment securities
and $4.1 billion (34.9 percent) in average other earning assets.
Net interest income on a taxable-equivalent basis decreased $31
million (1.0 percent) on a linked quarter basis primarily driven by
the impact of two fewer days in the first quarter, tax reform, and
deposit and funding mix, partially offset by the impact of higher
rates. Average earning assets were $1.7 billion (0.4 percent) lower
on a linked quarter basis, reflecting decreases of $363 million
(0.1 percent) in average total loans and $717 million (4.3 percent)
in average other earning assets, partially offset by an increase of
$206 million (0.2 percent) in average investment securities.
The net interest margin in the first quarter of 2018 was 3.13
percent, compared with 3.06 percent in the first quarter of 2017,
and 3.11 percent in the fourth quarter of 2017. Excluding the
impact of tax reform related to tax exempt income, the linked
quarter increase in net interest margin was 4 basis points. The
increase in the net interest margin year-over-year and on a linked
quarter basis was primarily due to higher interest rates, partially
offset by loan mix, higher funding costs and higher cash balances
year-over-year. The first quarter 2018 adoption of a new accounting
standard related to revenue recognition increased net interest
income and the related margin compared with previously reported
results. All periods have been adjusted to reflect this change.
Average investment securities in the first quarter of 2018 were
$2.7 billion (2.5 percent) higher year-over-year and $206 million
(0.2 percent) higher than the prior quarter. The increase
year-over-year was primarily due to purchases of U.S. Treasury and
U.S. government mortgage-backed securities, net of prepayments and
maturities, in support of liquidity management.
AVERAGE LOANS ($ in millions)
Percent Change 1Q 4Q 1Q 1Q18
vs 1Q18 vs 2018
2017 2017 4Q17
1Q17 Commercial $91,933 $92,101 $88,284 (.2 ) 4.1
Lease financing 5,532 5,457 5,455 1.4 1.4 Total
commercial 97,465 97,558 93,739 (.1 ) 4.0 Commercial
mortgages 29,176 29,543 31,461 (1.2 ) (7.3 ) Construction and
development 11,190 11,466 11,697 (2.4 ) (4.3 ) Total
commercial real estate 40,366 41,009 43,158 (1.6 ) (6.5 )
Residential mortgages 60,174 59,639 57,900 .9 3.9 Credit
card 21,284 21,218 20,845 .3 2.1 Retail leasing 7,982 7,982
6,469 -- 23.4 Home equity and second mortgages 16,195 16,299 16,259
(.6 ) (.4 ) Other 32,874 32,856 31,056 .1 5.9 Total
other retail 57,051 57,137 53,784 (.2 ) 6.1
Total loans, excluding covered loans 276,340 276,561
269,426 (.1 ) 2.6 Covered loans 3,048 3,190
3,732 (4.5 ) (18.3 ) Total loans $279,388 $279,751
$273,158 (.1 ) 2.3
Average total loans were $6.2 billion (2.3 percent) higher than
the first quarter of 2017. The increase was due to growth in total
commercial loans (4.0 percent), residential mortgages (3.9
percent), retail leasing (23.4 percent) and other retail loans (5.9
percent). These increases were muted somewhat by a decrease in
total commercial real estate loans (6.5 percent) due to disciplined
underwriting and customers paying down balances. Loan growth was
also muted by continued run-off of the covered loans portfolio
(18.3 percent). Average total loans were $363 million (0.1 percent)
lower than the fourth quarter of 2017. This decrease reflects
continued pay-offs of commercial real estate loans (1.6 percent)
and the run-off of covered loans (4.5 percent), offset by growth in
residential mortgages (0.9 percent). At the end of the first
quarter, approximately $1.5 billion of student loans were
transferred from the loan portfolio to loans held for sale.
AVERAGE DEPOSITS ($ in millions)
Percent Change 1Q 4Q 1Q 1Q18
vs 1Q18 vs 2018
2017 2017 4Q17
1Q17 Noninterest-bearing deposits $79,482 $82,303
$80,738 (3.4 ) (1.6 ) Interest-bearing savings deposits Interest
checking 70,358 70,717 65,681 (.5 ) 7.1 Money market savings
103,367 105,348 108,759 (1.9 ) (5.0 ) Savings accounts 44,388
43,772 42,609 1.4 4.2 Total savings deposits 218,113
219,837 217,049 (.8 ) .5 Time deposits 36,985 37,022
30,646 (.1 ) 20.7 Total interest-bearing deposits 255,098
256,859 247,695 (.7 ) 3.0 Total deposits $334,580
$339,162 $328,433 (1.4 ) 1.9
Average total deposits for the first quarter of 2018 were $6.1
billion (1.9 percent) higher than the first quarter of 2017.
Average noninterest-bearing deposits decreased $1.3 billion (1.6
percent) year-over-year primarily due to a decrease in Corporate
and Commercial Banking, partially offset by increases in Consumer
and Business Banking and Wealth Management and Investment Services.
Average total savings deposits were $1.1 billion (0.5 percent)
higher year-over-year driven by growth in Consumer and Business
Banking, partially offset by a decrease in Corporate and Commercial
Banking. Average time deposits were $6.3 billion (20.7 percent)
higher than the prior year quarter. Changes in time deposits are
largely related to those deposits managed as an alternative to
other funding sources such as wholesale borrowing, based largely on
relative pricing and liquidity characteristics.
Average total deposits decreased $4.6 billion (1.4 percent) from
the fourth quarter of 2017. On a linked quarter basis, average
noninterest-bearing deposits decreased $2.8 billion (3.4 percent)
across all business lines primarily due to seasonality. This
compares with a decline in noninterest-bearing deposits of $4.2
billion (4.9 percent) in the first quarter of 2017 compared with
the fourth quarter of 2016. Average total savings deposits
decreased $1.7 billion (0.8 percent) reflecting a decline in Wealth
Management and Investment Services of $2.1 billion and Corporate
and Commercial Banking of $1.3 billion, partially offset by growth
in average savings balances within Consumer and Business Banking.
The change in Corporate and Commercial Banking balances primarily
reflects seasonality, while the decline in Wealth Management and
Investment Services is the result of seasonally lower trust
balances, timing of escrowed balances, deployment of cash balances
by investment managers and the impact of rising interest rates.
Average time deposits, which are managed based on funding needs,
relative pricing and liquidity characteristics, were flat on a
linked quarter basis.
NONINTEREST INCOME ($ in millions)
Percent Change 1Q 4Q 1Q
1Q18 vs 1Q18 vs 2018
2017 2017 4Q17
1Q17 Credit and debit card revenue $324 $342 $299
(5.3 ) 8.4 Corporate payment products revenue 154 148 137 4.1 12.4
Merchant processing services 363 374 354 (2.9 ) 2.5 ATM processing
services 79 80 71 (1.3 ) 11.3 Trust and investment management fees
398 394 368 1.0 8.2 Deposit service charges 182 194 172 (6.2 ) 5.8
Treasury management fees 150 152 153 (1.3 ) (2.0 ) Commercial
products revenue 220 224 247 (1.8 ) (10.9 ) Mortgage banking
revenue 184 202 207 (8.9 ) (11.1 ) Investment products fees 46 45
42 2.2 9.5 Securities gains (losses), net 5 10 29 (50.0 ) (82.8 )
Other 167 205 180 (18.5 ) (7.2 ) Total
noninterest income $2,272 $2,370 $2,259 (4.1 ) .6
First quarter noninterest income of $2,272 million was $13
million (0.6 percent) higher than the first quarter of 2017
reflecting strong growth in payment services revenue, trust and
investment management fees, and deposit service charges, partially
offset by lower commercial products revenue and mortgage banking
revenue reflecting industry trends in these revenue categories.
Payment services revenue increased 6.5 percent due to stronger
credit and debit card revenue of $25 million (8.4 percent) and an
increase in corporate payment products revenue of $17 million (12.4
percent), and improving merchant processing revenue due to higher
sales volumes. Trust and investment management fees increased $30
million (8.2 percent) due to business growth, net asset inflows and
favorable market conditions. Deposit service charges increased $10
million (5.8 percent) primarily due to higher transaction volumes
and account growth. These increases were partially offset by a
decrease in commercial products revenue of $27 million (10.9
percent) mainly due to lower corporate bond underwriting fees and
syndication fees. Mortgage banking revenue decreased $23 million
(11.1 percent) primarily due to lower margin on mortgage loan
sales.
Noninterest income was $98 million (4.1 percent) lower in the
first quarter of 2018 compared with the fourth quarter of 2017
reflecting seasonally lower payment services revenue, mortgage
banking revenue and deposit service charges. In addition, other
revenue decreased $38 million (18.5 percent) primarily due to lower
equity investment income. Payment services revenue decreased
principally due to seasonally lower sales volume after the
holidays. Credit and debit card revenue declined $18 million (5.3
percent) while merchant processing services revenue declined $11
million (2.9 percent). Corporate payments products revenue
increased from the fourth quarter by 4.1 percent reflecting
stronger corporate and government spending. Mortgage banking
revenue decreased $18 million (8.9 percent) primarily due to lower
margin on mortgage loan sales, partially offset by the valuation of
mortgage servicing rights, net of hedging activities. Deposit
service charges decreased $12 million (6.2 percent) due to
seasonally lower transaction volumes.
NONINTEREST EXPENSE ($ in millions)
Percent Change 1Q 4Q 1Q
1Q18 vs 1Q18 vs 2018
2017 2017 4Q17
1Q17 Compensation $1,523 $1,499 $1,391 1.6 9.5
Employee benefits 330 291 301 13.4 9.6 Net occupancy and equipment
265 259 247 2.3 7.3 Professional services 83 114 96 (27.2 ) (13.5 )
Marketing and business development 97 251 90 (61.4 ) 7.8 Technology
and communications 235 236 217 (.4 ) 8.3 Postage, printing and
supplies 80 79 81 1.3 (1.2 ) Other intangibles 39 44 44 (11.4 )
(11.4 ) Other 403 1,126 442 (64.2 ) (8.8 )
Total noninterest expense $3,055 $3,899 $2,909 (21.6
) 5.0
First quarter noninterest expense of $3,055 million was $146
million (5.0 percent) higher than the first quarter of 2017
primarily due to higher personnel expense, occupancy costs,
technology investment and seasonal marketing and development
expenses, partially offset by lower professional services expense
and other noninterest expense. Compensation expense increased $132
million (9.5 percent) principally due to the impact of hiring to
support business growth and compliance programs, merit increases,
and higher variable compensation related to business production,
and the impact of changes in vesting provisions related to
stock-based compensation programs. Excluding the impact of the
change in vesting provisions, compensation would have increased 6.9
percent from a year ago. Employee benefits expense increased $29
million (9.6 percent) primarily driven by increased medical costs
and staffing. Other noninterest expense decreased $39 million (8.8
percent) due to lower mortgage servicing-related costs and lower
pension-related costs as a result of contributions to the plans in
2017. Professional services expense decreased $13 million (13.5
percent) primarily due to fewer consulting services as compliance
programs near maturity.
Noninterest expense decreased $844 million (21.6 percent) on a
linked quarter basis primarily due to notable items recognized in
the fourth quarter of 2017. Excluding the notable items,
noninterest expense was $19 million (0.6 percent) lower in the
first quarter of 2018 compared with the fourth quarter of 2017
primarily due to seasonally lower costs related to investments in
tax-advantaged projects and professional services expense,
partially offset by higher personnel expense. Compensation expense
increased $82 million (5.7 percent) reflecting the impact of
variable compensation including the timing of stock-based
compensation grants due to the vesting change, and merit increases,
as well as a seasonal increase in employee benefits expense of $48
million (17.0 percent) primarily driven by seasonally higher
payroll taxes.
Provision for Income Taxes
The provision for income taxes for the first quarter of 2018
resulted in a tax rate of 18.9 percent on a taxable-equivalent
basis (effective tax rate of 17.7 percent), compared with 27.0
percent (effective tax rate of 25.1 percent) in the first quarter
of 2017, and a tax benefit of 23.6 percent on a taxable-equivalent
basis (effective tax benefit of 28.6 percent) in the fourth quarter
of 2017. The first quarter of 2018 tax rate reflected the tax
reform legislation enacted during the fourth quarter of 2017,
favorable settlement of tax matters, and the tax benefit of
restricted stock vesting and option exercises.
ALLOWANCE FOR CREDIT LOSSES ($ in millions)
1Q 4Q 3Q
2Q 1Q
2018 % (b) 2017 %
(b) 2017 % (b) 2017
% (b) 2017 % (b)
Balance, beginning of period $4,417 $4,407 $4,377 $4,366 $4,357
Net charge-offs Commercial 56 .25 22 .09 79 .34 75 .33 71
.33 Lease financing 4 .29 6 .44 4 .29 3
.22 4 .30 Total commercial 60 .25 28 .11 83 .34 78 .33 75
.32 Commercial mortgages (4 ) (.06 ) 18 .24 (2 ) (.03 ) (7 ) (.09 )
(1 ) (.01 ) Construction and development 1 .04 -- --
(5 ) (.17 ) (2 ) (.07 ) (1 ) (.03 ) Total commercial real estate (3
) (.03 ) 18 .17 (7 ) (.07 ) (9 ) (.08 ) (2 ) (.02 )
Residential mortgages 7 .05 10 .07 7 .05 8 .05 12 .08 Credit
card 211 4.02 205 3.83 187 3.55 204 3.97 190 3.70 Retail
leasing 3 .15 3 .15 2 .10 2 .11 3 .19 Home equity and second
mortgages (1 ) (.03 ) (2 ) (.05 ) (1 ) (.02 ) (1 ) (.02 ) (1 ) (.02
) Other 64 .79 63 .76 59 .73 58 .75 58
.76 Total other retail 66 .47 64 .44 60 .42 59 .43 60 .45
Total net charge-offs, excluding
covered loans 341 .50 325 .47 330 .48 340 .50 335 .50 Covered loans
-- -- -- -- -- -- -- -- -- --
Total net charge-offs 341 .49 325 .46 330 .47 340 .49 335 .50
Provision for credit losses 341 335 360 350 345 Other changes (a)
-- -- -- 1 (1 ) Balance, end of period
$4,417 $4,417 $4,407 $4,377 $4,366
Components Allowance for loan losses $3,918 $3,925
$3,908 $3,856 $3,816
Liability for unfunded credit
commitments
499 492 499 521 550 Total
allowance for credit losses $4,417 $4,417 $4,407
$4,377 $4,366 Gross charge-offs $453
$464 $433 $437 $417 Gross recoveries $112 $139 $103 $97 $82
Allowance for credit losses as a percentage of
Period-end loans, excluding covered
loans
1.60 1.58 1.59 1.59 1.61
Nonperforming loans, excluding
covered loans
431 438 425 385 338
Nonperforming assets, excluding
covered assets
373 374 359 331 296 Period-end loans 1.59 1.58 1.58 1.58
1.60 Nonperforming loans 431 438 426 383 338 Nonperforming assets
367 368 352 324 292
(a) Includes net changes in credit losses
to be reimbursed by the FDIC and reductions in the allowance for
covered loans where the reversal of a previously recorded
allowance was offset by an associated decrease in the
indemnification asset, and the impact of any loan sales.
(b) Annualized and calculated on average loan balances
The Company’s provision for credit losses for the first quarter
of 2018 was $341 million, which was $6 million (1.8 percent) higher
than the prior quarter and $4 million (1.2 percent) lower than the
first quarter of 2017. Credit quality was relatively stable
compared with the fourth quarter of 2017.
Total net charge-offs in the first quarter of 2018 were $341
million, compared with $325 million in the fourth quarter of 2017,
and $335 million in the first quarter of 2017. Net charge-offs
increased $16 million (4.9 percent) compared with the fourth
quarter of 2017 mainly due to higher total commercial loan net
charge-offs driven by lower recoveries, partially offset by lower
total commercial real estate net charge-offs. Net charge-offs
increased $6 million (1.8 percent) compared with the first quarter
of 2017 primarily due to higher credit card loan net charge-offs,
partially offset by lower total commercial loan net charge-offs
driven by higher recoveries. The net charge-off ratio was 0.49
percent in the first quarter of 2018, compared with 0.46 percent in
the fourth quarter of 2017 and 0.50 percent in the first quarter of
2017.
The allowance for credit losses was $4,417 million at March 31,
2018, and at December 31, 2017, compared with $4,366 million at
March 31, 2017. The ratio of the allowance for credit losses to
period-end loans was 1.59 percent at March 31, 2018, compared with
1.58 percent at December 31, 2017, and 1.60 percent at March 31,
2017. The ratio of the allowance for credit losses to nonperforming
loans was 431 percent at March 31, 2018, compared with 438 percent
at December 31, 2017, and 338 percent at March 31, 2017.
Nonperforming assets were $1,204 million at March 31, 2018,
compared with $1,200 million at December 31, 2017, and $1,495
million at March 31, 2017. The ratio of nonperforming assets to
loans and other real estate was 0.43 percent at March 31, 2018, and
at December 31, 2017, compared with 0.55 percent at March 31, 2017.
The year-over-year decrease in nonperforming assets was driven by
improvements in nonperforming total commercial loans, residential
mortgages and other real estate owned, partially offset by
increases in nonperforming other retail loans and total commercial
real estate loans. Accruing loans 90 days or more past due were
$702 million ($566 million excluding covered loans) at March 31,
2018, compared with $720 million ($572 million excluding covered
loans) at December 31, 2017, and $718 million ($524 million
excluding covered loans) at March 31, 2017.
DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN
BALANCES (Percent)
Mar 31 Dec 31
Sep 30 Jun 30 Mar 31
2018 2017 2017
2017 2017 Delinquent loan ratios
- 90 days or more past due
excluding nonperforming loans
Commercial .06 .06 .05 .05 .06 Commercial real estate .01 .01 .01
-- .01 Residential mortgages .22 .22 .18 .20 .24 Credit card 1.29
1.28 1.20 1.10 1.23 Other retail .18 .17 .15 .14 .14 Total loans,
excluding covered loans .21 .21 .18 .17 .19 Covered loans 4.57 4.74
4.66 4.71 5.34 Total loans .25 .26 .23 .23 .26 Delinquent
loan ratios - 90 days or more past due
including
nonperforming loans Commercial .37 .31 .33 .39 .52 Commercial real
estate .31 .37 .30 .29 .27 Residential mortgages .93 .96 .98 1.10
1.23 Credit card 1.29 1.28 1.20 1.10 1.24 Other retail .48 .46 .43
.42 .43 Total loans, excluding covered loans .58 .57 .55 .59 .67
Covered loans 4.77 4.93 4.84 5.06 5.53 Total loans .62 .62 .60 .64
.73
ASSET QUALITY (a) ($ in
millions)
Mar 31 Dec
31 Sep 30 Jun 30 Mar 31
2018 2017 2017
2017 2017 Nonperforming loans Commercial $274
$225 $231 $283 $397 Lease financing 27 24 38
39 42 Total commercial 301 249 269 322 439 Commercial
mortgages 86 108 89 84 74 Construction and development 33 34
33 35 36 Total commercial real estate 119 142
122 119 110 Residential mortgages 430 442 474 530 575 Credit
card -- 1 1 1 2 Other retail 168 168 163 158
157 Total nonperforming loans, excluding covered loans 1,018
1,002 1,029 1,130 1,283 Covered loans 6 6 6
12 7 Total nonperforming loans 1,024 1,008 1,035
1,142 1,290 Other real estate 124 141 164 157 155 Covered
other real estate 20 21 26 25 22 Other nonperforming assets 36
30 26 25 28 Total nonperforming
assets $1,204 $1,200 $1,251 $1,349
$1,495 Total nonperforming assets, excluding covered assets
$1,178 $1,173 $1,219 $1,312 $1,466
Accruing loans 90 days or more past
due, excluding covered loans
$566 $572 $497 $477 $524
Accruing loans 90 days or more past due $702 $720
$649 $639 $718
Performing restructured loans, excluding
GNMA and covered loans
$2,190 $2,306 $2,419 $2,473 $2,478
Performing restructured GNMA and covered loans $1,598
$1,713 $1,600 $1,803 $1,746
Nonperforming assets to loans plus
ORE, excluding covered assets (%)
.43 .42 .44 .48 .54 Nonperforming assets to loans plus ORE
(%) .43 .43 .45 .49 .55 (a) Throughout this document,
nonperforming assets and related ratios do not include accruing
loans 90 days or more past due
COMMON
SHARES (Millions)
1Q 4Q
3Q 2Q 1Q
2018 2017 2017
2017 2017 Beginning shares outstanding
1,656 1,667 1,679 1,692 1,697
Shares issued for stock incentive
plans, acquisitions and other corporate purposes
4 1 -- 1 6 Shares repurchased (11 ) (12 ) (12 )
(14 ) (11 ) Ending shares outstanding 1,649
1,656 1,667 1,679
1,692
CAPITAL POSITION ($ in
millions)
Mar 31 Dec 31 Sep
30 Jun 30 Mar 31 2018
2017 2017
2017 2017 Total U.S. Bancorp
shareholders' equity $49,187 $49,040 $48,723 $48,320 $47,798
Basel III Standardized Approach (a) Common equity tier 1
capital $33,539 $34,369 $34,876 $34,408 $33,847 Tier 1 capital
38,991 39,806 40,411 39,943 39,374 Total risk-based capital 46,640
47,503 48,104 47,824 47,279 Fully implemented common equity
tier 1 capital ratio (a) 9.0 % 9.1
% (b)
9.4
% (b)
9.3
% (b)
9.2
% (b)
Tier 1 capital ratio 10.4 10.8 11.1 11.1 11.0 Total risk-based
capital ratio 12.5 12.9 13.2 13.2 13.3 Leverage ratio 8.8 8.9 9.1
9.1 9.1
Basel III Advanced Approaches (a) Fully
implemented common equity tier 1 capital ratio (a) 11.5 11.6 (b)
11.8 (b) 11.7 (b) 11.5 (b)
Tangible common equity to
tangible assets (b) 7.7 7.6 7.7 7.5 7.6
Tangible common
equity to risk-weighted assets (b) 9.3 9.4 9.5 9.4 9.4
Common equity tier 1 capital ratio
calculated under the transitional standardized approach
(a)
-- 9.3 9.6 9.5 9.5
Common equity tier 1 capital ratio
calculated under the transitional advanced approaches (a)
-- 12.0 12.1 12.0 11.8
(a) Beginning January 1, 2018, the
regulatory capital requirements fully reflect implementation of
Basel III. Prior to 2018, the Company's capital ratios reflected
certain transitional adjustments. Basel III includes two
comprehensive methodologies for calculating risk-weighted assets: a
general standardized approach and more risk-sensitive
advanced approaches, with the Company's capital adequacy being
evaluated against the methodology that is most restrictive.
(b) See Non-GAAP Financial Measures reconciliation on page 16
Total U.S. Bancorp shareholders’ equity was $49.2 billion at
March 31, 2018, compared with $49.0 billion at December 31, 2017,
and $47.8 billion at March 31, 2017. During the first quarter, the
Company returned 68 percent of earnings to shareholders through
dividends and share buybacks.
All regulatory ratios continue to be in excess of
“well-capitalized” requirements. The common equity tier 1 capital
to risk-weighted assets ratio using the Basel III standardized
approach was 9.0 percent at March 31, 2018, compared with 9.3
percent at December 31, 2017, and 9.5 percent at March 31, 2017.
The common equity tier 1 capital to risk-weighted assets ratio
using the Basel III advanced approaches method was 11.5 percent at
March 31, 2018, compared with 12.0 percent at December 31, 2017,
and 11.8 percent at March 31, 2017.
Investor Conference Call
On Wednesday, April 18, 2018, at 8:00 a.m. CDT, Andy Cecere,
Chairman, President and Chief Executive Officer, and Terry Dolan,
Vice Chairman and Chief Financial Officer, will host a conference
call to review the financial results. The conference call will be
available online or by telephone. To access the webcast and
presentation, visit U.S. Bancorp’s 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 8771339. For those unable to participate during the
live call, a recording will be available at approximately 11:00
a.m. CDT on Wednesday, April 18 and will be accessible until
Wednesday, April 25 at 11:00 p.m. CDT. To access the recorded
message within the United States and Canada, please dial
855-859-2056. If calling from outside the United States and Canada,
please dial 404-537-3406 to access the recording. The conference ID
is 8771339.
About U.S. Bancorp
Minneapolis-based U.S. Bancorp (NYSE: USB), with $460 billion in
assets as of March 31, 2018, is the parent company of U.S. Bank
National Association, the fifth largest commercial bank in the
United States. The Company operates 3,054 banking offices in 25
states and 4,729 ATMs and provides a comprehensive line of banking,
investment, mortgage, trust and payment services products to
consumers, businesses and institutions. Visit U.S. Bancorp on the
web at www.usbank.com.
Forward-looking Statements
The following information appears in accordance with the Private
Securities Litigation Reform Act of 1995:
This press release contains forward-looking statements about
U.S. Bancorp. Statements that are not historical or current facts,
including statements about beliefs and expectations, are
forward-looking statements and are based on the information
available to, and assumptions and estimates made by, management as
of the date hereof. These forward-looking statements cover, among
other things, anticipated future revenue and expenses and the
future plans and prospects of U.S. Bancorp. Forward-looking
statements involve inherent risks and uncertainties, and important
factors could cause actual results to differ materially from those
anticipated. A reversal or slowing of the current economic recovery
or another severe contraction could adversely affect U.S. Bancorp’s
revenues and the values of its assets and liabilities. Global
financial markets could experience a recurrence of significant
turbulence, which could reduce the availability of funding to
certain financial institutions and lead to a tightening of credit,
a reduction of business activity, and increased market volatility.
Stress in the commercial real estate markets, as well as a downturn
in the residential real estate markets could cause credit losses
and deterioration in asset values. In addition, changes to
statutes, regulations, or regulatory policies or practices could
affect U.S. Bancorp in substantial and unpredictable ways. U.S.
Bancorp’s results could also be adversely affected by deterioration
in general business and economic conditions; changes in interest
rates; deterioration in the credit quality of its loan portfolios
or in the value of the collateral securing those loans;
deterioration in the value of its investment securities; legal and
regulatory developments; litigation; increased competition from
both banks and non-banks; changes in customer behavior and
preferences; breaches in data security; effects of mergers and
acquisitions and related integration; effects of critical
accounting policies and judgments; and management’s ability to
effectively manage credit risk, market risk, operational risk,
compliance risk, strategic risk, interest rate risk, liquidity risk
and reputational risk.
For discussion of these and other risks that could cause actual
results to differ from expectations, refer to U.S. Bancorp’s Annual
Report on Form 10-K for the year ended December 31, 2017, on file
with the Securities and Exchange Commission, including the sections
entitled “Corporate Risk Profile” and “Risk Factors” contained in
Exhibit 13, and all subsequent filings with the Securities and
Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934. However, factors other than these
also could adversely affect U.S. Bancorp’s results, and the reader
should not consider these factors to be a complete set of all
potential risks or uncertainties. Forward-looking statements speak
only as of the date hereof, and U.S. Bancorp undertakes no
obligation to update them in light of new information or future
events.
Non-GAAP Financial Measures
In addition to capital ratios defined by banking regulators, the
Company considers various other measures when evaluating capital
utilization and adequacy, including:
- Tangible common equity to tangible
assets
- Tangible common equity to risk-weighted
assets
- Return on tangible common equity
These capital measures are viewed by management as useful
additional methods of evaluating the Company’s 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 Company’s capital position
relative to other financial services companies. These capital
measures are not defined in generally accepted accounting
principles (“GAAP”) or are not defined in federal banking
regulations. As a result, these capital measures disclosed by the
Company may be considered non-GAAP financial measures. In addition,
certain capital measures related to prior periods are presented on
the same basis as those in the current period. The effective
capital ratios defined by banking regulations for these periods
were subject to certain transitional provisions. Management
believes this information helps investors assess trends in the
Company’s 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 Company’s calculation of these non-GAAP financial
measures.
CONSOLIDATED STATEMENT OF
INCOME (Dollars and Shares in Millions, Except Per Share Data)
Three Months Ended March 31, (Unaudited) 2018
2017
Interest Income Loans $3,095 $2,790 Loans held
for sale 33 35 Investment securities 613 530 Other interest income
50 38 Total interest income 3,791 3,393
Interest Expense Deposits 345 199 Short-term borrowings 75
24 Long-term debt 203 190 Total interest
expense 623 413 Net interest income 3,168
2,980 Provision for credit losses 341 345 Net
interest income after provision for credit losses 2,827 2,635
Noninterest Income Credit and debit card revenue 324 299
Corporate payment products revenue 154 137 Merchant processing
services 363 354 ATM processing services 79 71 Trust and investment
management fees 398 368 Deposit service charges 182 172 Treasury
management fees 150 153 Commercial products revenue 220 247
Mortgage banking revenue 184 207 Investment products fees 46 42
Securities gains (losses), net 5 29 Other 167 180
Total noninterest income 2,272 2,259
Noninterest
Expense Compensation 1,523 1,391 Employee benefits 330 301 Net
occupancy and equipment 265 247 Professional services 83 96
Marketing and business development 97 90 Technology and
communications 235 217 Postage, printing and supplies 80 81 Other
intangibles 39 44 Other 403 442 Total
noninterest expense 3,055 2,909 Income before
income taxes 2,044 1,985 Applicable income taxes 362
499 Net income 1,682 1,486 Net (income) loss attributable to
noncontrolling interests (7 ) (13 ) Net income attributable
to U.S. Bancorp $1,675 $1,473 Net income
applicable to U.S. Bancorp common shareholders $1,597
$1,387 Earnings per common share $.97 $.82 Diluted
earnings per common share $.96 $.82 Dividends declared per common
share $.30 $.28 Average common shares outstanding 1,652 1,694
Average diluted common shares outstanding 1,657
1,701
CONSOLIDATED ENDING BALANCE
SHEET March 31, December 31, March 31,
(Dollars in Millions) 2018 2017 2017
Assets (Unaudited) (Unaudited) Cash and due from banks
$19,246 $19,505 $20,319 Investment securities Held-to-maturity
44,612 44,362 43,393 Available-for-sale 67,125 68,137 67,031 Loans
held for sale 4,777 3,554 2,738 Loans Commercial 98,097 97,561
94,491 Commercial real estate 40,140 40,463 42,832 Residential
mortgages 60,477 59,783 58,266 Credit card 20,901 22,180 20,387
Other retail 55,317 57,324 53,966
Total loans, excluding covered loans 274,932 277,311 269,942
Covered loans 2,979 3,121 3,635
Total loans 277,911 280,432 273,577 Less allowance for loan losses
(3,918 ) (3,925 ) (3,816 ) Net loans 273,993 276,507
269,761 Premises and equipment 2,441 2,432 2,432 Goodwill 9,440
9,434 9,348 Other intangible assets 3,388 3,228 3,313 Other assets
35,097 34,881 31,187 Total
assets $460,119 $462,040 $449,522
Liabilities and Shareholders' Equity Deposits
Noninterest-bearing $82,211 $87,557 $85,222 Interest-bearing
262,315 259,658 251,651 Total
deposits 344,526 347,215 336,873 Short-term borrowings 17,703
16,651 12,183 Long-term debt 33,201 32,259 35,948 Other liabilities
14,877 16,249 16,085 Total
liabilities 410,307 412,374 401,089 Shareholders' equity Preferred
stock 5,419 5,419 5,419 Common stock 21 21 21 Capital surplus 8,438
8,464 8,388 Retained earnings 55,549 54,142 51,069 Less treasury
stock (18,047 ) (17,602 ) (15,660 ) Accumulated other comprehensive
income (loss) (2,193 ) (1,404 ) (1,439 ) Total U.S.
Bancorp shareholders' equity 49,187 49,040 47,798 Noncontrolling
interests 625 626 635 Total
equity 49,812 49,666 48,433
Total liabilities and equity $460,119 $462,040
$449,522
NON-GAAP FINANCIAL
MEASURES March 31, December
31, September 30, June 30, March 31, (Dollars in Millions,
Unaudited) 2018 2017 2017
2017 2017 Total equity $49,812 $49,666
$49,351 $48,949 $48,433 Preferred stock (5,419 ) (5,419 ) (5,419 )
(5,419 ) (5,419 ) Noncontrolling interests (625 ) (626 ) (628 )
(629 ) (635 ) Goodwill (net of deferred tax liability) (1) (8,609 )
(8,613 ) (8,141 ) (8,181 ) (8,186 ) Intangible assets, other than
mortgage servicing rights (608 ) (583 )
(595 ) (634 ) (671 ) Tangible
common equity (a) 34,551 34,425 34,568 34,086 33,522 Total
assets 460,119 462,040 459,227 463,844 449,522 Goodwill (net of
deferred tax liability) (1) (8,609 ) (8,613 ) (8,141 ) (8,181 )
(8,186 ) Intangible assets, other than mortgage servicing rights
(608 ) (583 ) (595 ) (634
) (671 ) Tangible assets (b) 450,902 452,844
450,491 455,029 440,665
Risk-weighted assets, determined in
accordance with the Basel III standardized approach (c)
373,141 * 367,771 363,957 361,164 356,373 Tangible common
equity (as calculated above) 34,425 34,568 34,086 33,522
Adjustments (2) (550 ) (52 ) (51 )
(136 )
Common equity tier 1 capital estimated for
the Basel III fully implemented standardized and advanced
approaches (d)
33,875 34,516 34,035 33,386
Risk-weighted assets, determined in
accordance with prescribed transitional standardized approach
regulatory requirements
367,771 363,957 361,164 356,373 Adjustments (3) 4,473
3,907 3,967 4,731
Risk-weighted assets estimated for the
Basel III fully implemented standardized approach (e)
372,244 367,864 365,131 361,104
Risk-weighted assets, determined in
accordance with prescribed transitional advanced approaches
regulatory requirements
287,211 287,800 287,124 285,963 Adjustments (4) 4,769
4,164 4,231 5,046
Risk-weighted assets estimated for the
Basel III fully implemented advanced approaches (f)
291,980 291,964 291,355 291,009
Ratios * Tangible
common equity to tangible assets (a)/(b) 7.7 % 7.6 % 7.7 % 7.5 %
7.6 % Tangible common equity to risk-weighted assets (a)/(c) 9.3
9.4 9.5 9.4 9.4
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully
implemented standardized approach (d)/(e)
9.1 9.4 9.3 9.2
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully
implemented advanced approaches (d)/(f)
11.6 11.8 11.7 11.5 Three Months Ended March 31,
December 31, September 30, June 30, March 31, 2018
2017 2017 2017 2017
Net income applicable to U.S. Bancorp common shareholders
$1,597 $1,611 $1,485 $1,430 $1,387 Intangibles amortization
(net-of-tax) 31 28 29
28 29
Net income applicable to U.S. Bancorp
common shareholders, excluding intangibles amortization
1,628 1,639 1,514 1,458 1,416
Annualized net income applicable to U.S.
Bancorp common shareholders, excluding intangibles
amortization (g)
6,602 6,503 6,007 5,848 5,743 Average total equity 49,450
49,461 49,447 48,909 48,558 Less: Average preferred stock 5,419
5,419 5,419 5,419 5,706 Less: Average noncontrolling interests 625
627 628 636 635 Less: Average goodwill (net of deferred tax
liability) (1) 8,627 8,154 8,153 8,160 8,175 Less: Average
intangible assets, other than mortgage servicing rights 603
591 615 650
691
Average U.S. Bancorp common shareholders'
equity, excluding intangible assets (h)
34,176 34,670 34,632 34,044 33,351 Return on tangible common
equity (g)/(h) 19.3 % 18.8 %
17.3 % 17.2 % 17.2 %
* Preliminary data. Subject to
change prior to filings with applicable regulatory agencies.
(1) Includes goodwill related to certain investments in
unconsolidated financial institutions per prescribed regulatory
requirements. (2) Includes net losses on cash flow hedges included
in accumulated other comprehensive income (loss) and other
adjustments. (3) Includes higher risk-weighting for unfunded loan
commitments, investment securities, residential mortgages, mortgage
servicing rights and other adjustments. (4) Primarily reflects
higher risk-weighting for mortgage servicing rights.
NON-GAAP FINANCIAL MEASURES Three Months Ended
(Dollars in Millions, Unaudited)
March 31, December 31, September 30, June 30,
March 31, 2018 2017 2017
2017 2017 Net interest income
$3,168 $3,175 $3,176 $3,049 $2,980 Taxable-equivalent adjustment
(1) 29 53 51 51
50 Net interest income, on a taxable-equivalent basis
3,197 3,228 3,227 3,100 3,030 Net interest income, on a
taxable-equivalent basis (as calculated above) 3,197 3,228 3,227
3,100 3,030 Noninterest income 2,272 2,370 2,340 2,348 2,259 Less:
Securities gains (losses), net 5 10 9
9 29 Total net revenue,
excluding net securities gains (losses) (a) 5,464 5,588 5,558 5,439
5,260 Noninterest expense (b) 3,055 3,899 2,998 2,984 2,909
Less: Intangible amortization 39 44 44
43 44 Noninterest expense,
excluding intangible amortization (c) 3,016 3,855 2,954 2,941 2,865
Efficiency ratio (b)/(a) 55.9 % 69.8 % 53.9 % 54.9 % 55.3 %
Tangible efficiency ratio (c)/(a) 55.2 69.0
53.1 54.1 54.5
(1) Interest and rates are presented
on a fully taxable-equivalent basis based on a federal income tax
rate of 21 percent for 2018 and 35 percent for 2017.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180418005188/en/
U.S. BancorpInvestor contact:Jennifer Thompson,
612-303-0778orMedia contact:Stacey Wempen, 612-303-7620
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