Achieves Record Net Income and EPS for the
Full Year 2015
Full year return on average assets of 1.44
percent and average common equity of 14.0 percent
Returned 72 percent of full year earnings to
shareholders
U.S. Bancorp (NYSE:USB) today reported net income of $1,476
million for the fourth quarter of 2015, or $0.80 per diluted common
share, compared with $1,488 million, or $0.79 per diluted common
share, in the fourth quarter of 2014. The fourth quarter of 2015
reflected a gain on the sale of a deposit portfolio, partially
offset by accruals related to legal and compliance matters that,
combined, increased diluted earnings per common share by $.01.
Highlights for the full year of 2015 included:
- Record full year diluted earnings per
common share of $3.16, which were 2.6 percent higher than 2014
- Industry-leading return on average
assets of 1.44 percent and average common equity of 14.0
percent
- Returned 72 percent of 2015 earnings to
shareholders through dividends and share buybacks
Highlights for the fourth quarter of 2015 included:
- Record quarterly revenue
- Growth in average total loans of 4.2
percent over the fourth quarter of 2014 and 1.7 percent on a linked
quarter basis (excluding student loans, which were transferred to
held for sale at the end of the first quarter of 2015 and returned
to held for investment on September 1, 2015)
- Growth in average total commercial
loans of 9.0 percent over the fourth quarter of 2014 and 2.5
percent over the third quarter of 2015
- Growth in average auto loans of 13.0
percent over the fourth quarter of 2014 and 2.0 percent over the
third quarter of 2015
- Growth in average total deposits of 6.9
percent over the fourth quarter of 2014 and 1.7 percent on a linked
quarter basis
- Growth in average low-cost deposits,
including noninterest-bearing and total savings deposits, of 11.4
percent year-over-year and 2.4 percent on a linked quarter
basis
- Net interest income growth of 2.6
percent year-over-year and 1.8 percent linked quarter
- Growth in average earnings assets of
5.1 percent year-over-year, and 1.0 percent on a linked quarter
basis
- Net interest margin relatively stable
at 3.06 percent for the fourth quarter of 2015 compared with 3.04
percent in the prior quarter
- Continued momentum in payment-related
fee revenue led by year-over-year increases in credit and debit
card revenue of 8.1 percent
- Operating leverage improving at 0.6
percent year-over-year
- Strong capital position. At December
31, 2015, common equity tier 1 capital to risk-weighted assets
estimated for the Basel III fully implemented standardized approach
was 9.1 percent and for the Basel III fully implemented advanced
approaches was 11.9 percent.
EARNINGS
SUMMARY
Table 1 ($ in millions, except
per-share data)
Percent Percent
Change Change 4Q
3Q 4Q 4Q15 vs 4Q15 vs Full Year
Full Year Percent 2015
2015 2014 3Q15
4Q14 2015
2014 Change Net income
attributable to U.S. Bancorp $1,476 $1,489 $1,488 (.9 ) (.8 )
$5,879 $5,851 .5 Diluted earnings per common share $.80 $.81 $.79
(1.2 ) 1.3 $3.16 $3.08 2.6 Return on average assets (%) 1.41
1.44 1.50 1.44 1.54 Return on average common equity (%) 13.7 14.1
14.4 14.0 14.7 Net interest margin (%) 3.06 3.04 3.14 3.05 3.23
Efficiency ratio (%) (a) 53.9 53.9 54.3 53.8 53.2 Tangible
efficiency ratio (%) (a) 53.0 53.1 53.3 53.0 52.2 Dividends
declared per common share $.255 $.255 $.245 -- 4.1 $1.010 $.965 4.7
Book value per common share (period end) $23.28 $22.99 $21.68 1.3
7.4
(a) Computed as noninterest expense
divided by the sum of net interest income on a taxable-equivalent
basis and noninterest income excluding net securities gains
(losses), and for tangible efficiency ratio, intangible
amortization.
Net income attributable to U.S. Bancorp was $1,476 million for
the fourth quarter of 2015, 0.8 percent lower than the $1,488
million for the fourth quarter of 2014, and 0.9 percent lower than
the $1,489 million for the third quarter of 2015. Diluted earnings
per common share of $0.80 in the fourth quarter of 2015 were $0.01
higher than the fourth quarter of 2014 and $0.01 lower than the
previous quarter. The decrease in net income year-over-year was due
to a higher provision for credit losses, lower noninterest income,
impacted by the 2014 Nuveen gain, partially offset by increases in
payments-related revenue and trust and investment management fees
and the gain on the sale of a Health Savings Account deposit
portfolio (“HSA deposit sale”), along with an increase in net
interest income primarily driven by growth in earning assets. The
decrease in net income on a linked quarter basis was primarily due
to a seasonal increase in noninterest expense and the provision for
credit losses, partially offset by higher net interest income
primarily due to loan growth.
U.S. Bancorp Chairman, President and Chief Executive Officer
Richard K. Davis said, “U.S. Bancorp delivered a remarkable
performance in 2015; a year underscored by persistent and
historically low interest rates, modest economic growth, and
increasing regulatory requirements. More than any year in recent
history, 2015 required strong management focus as we balanced
decisions on operating efficiencies with opportunities for
investing in future growth and addressing our customers’ needs.
U.S. Bancorp rose to that challenge, delivering record net income
and diluted EPS for the year and continuing with industry-leading
performance metrics. We are well positioned as we move into 2016 –
as indicated by our record fourth quarter revenue, strong momentum
toward positive operating leverage during the quarter and the
continued stability in our net interest margin. We also created
value for our shareholders as we returned 72 percent of our 2015
earnings back to shareholders through dividends and share
buybacks.
“As the operating environment continues to improve, we are
optimistic about the momentum building in our core businesses,
particularly within our Wealth Management and Security Services and
Payment Services businesses. We recently announced an exciting new
agreement with Fidelity Investments. U.S. Bank will become the
exclusive issuer of the Fidelity® Rewards Visa Signature® Card and
the Fidelity Investments 529 College Rewards® Visa Signature® Card.
This program reflects the strength of our Payment Services business
and strategic significance of our diversified business model.
“I am very proud of our 67,000 employees and their passionate
commitment to creating value for our shareholders, customers, and
communities. We were recently named one of the Most Ethical
Companies in the World by the Ethisphere Institute. We also became
one of the few banks to offer all the “Pays” – Apple Pay, Samsung
Pay, and Android Pay – to our customers. We were one of the top
three Small Business Administration (SBA) lenders, fueling economic
growth and progress across the country. And we invested millions of
dollars and thousands of hours into improving our communities. As
we look to 2016, we are well positioned to continue providing
quality products and services to our customers and exceptional
value to our shareholders from a position of strength and stability
that our stakeholders have come to expect from U.S. Bancorp.”
INCOME STATEMENT HIGHLIGHTS
Table 2 (Taxable-equivalent basis, $ in
millions,
Percent Percent
except per-share data)
Change
Change 4Q 3Q 4Q 4Q15 vs 4Q15
vs Full Year Full Year Percent 2015
2015 2014
3Q15 4Q14 2015
2014 Change Net
interest income $2,871 $2,821 $2,799 1.8 2.6 $11,214 $10,997 2.0
Noninterest income 2,340 2,326
2,370 .6 (1.3 ) 9,092 9,164
(.8 ) Total net revenue 5,211 5,147 5,169 1.2 .8 20,306
20,161 .7 Noninterest expense 2,809 2,775
2,804 1.2 .2 10,931
10,715 2.0 Income before provision and taxes 2,402
2,372 2,365 1.3 1.6 9,375 9,446 (.8 ) Provision for credit losses
305 282 288 8.2
5.9 1,132 1,229 (7.9 ) Income before
taxes 2,097 2,090 2,077 .3 1.0 8,243 8,217 .3 Taxable-equivalent
adjustment 52 53 55 (1.9 ) (5.5 ) 213 222 (4.1 ) Applicable income
taxes 556 534 521
4.1 6.7 2,097 2,087 .5 Net income 1,489
1,503 1,501 (.9 ) (.8 ) 5,933 5,908 .4
Net (income) loss attributable to
noncontrolling interests
(13 ) (14 ) (13 ) 7.1 -- (54 )
(57 ) 5.3 Net income attributable to U.S. Bancorp $1,476
$1,489 $1,488 (.9
) (.8 ) $5,879 $5,851 .5 Net income
applicable to U.S. Bancorp common shareholders $1,404
$1,422 $1,420 (1.3 ) (1.1 )
$5,608 $5,583 .4 Diluted earnings per
common share $.80 $.81
$.79 (1.2 ) 1.3 $3.16 $3.08 2.6
NET INTEREST
INCOME
Table 3 (Taxable-equivalent basis; $ in
millions)
Change Change 4Q 3Q 4Q 4Q15
vs 4Q15 vs Full Year Full Year 2015
2015 2014
3Q15 4Q14 2015
2014 Change Components of
net interest income Income on earning assets $3,209 $3,171 $3,158
$38 $51 $12,619 $12,454 $165 Expense on interest-bearing
liabilities 338 350 359
(12 ) (21 ) 1,405
1,457 (52 ) Net interest
income $2,871 $2,821
$2,799 $50 $72
$11,214 $10,997
$217 Average yields and rates paid Earning
assets yield 3.42 % 3.42 % 3.54 % -- % (.12 )% 3.43 % 3.65 % (.22
)% Rate paid on interest-bearing liabilities .50
.52 .55 (.02 )
(.05 ) .52 .58
(.06 ) Gross interest margin 2.92 %
2.90 % 2.99 % .02 %
(.07 )% 2.91 % 3.07 %
(.16 )% Net interest margin 3.06 % 3.04 %
3.14 % .02 % (.08 )%
3.05 % 3.23 % (.18 )%
Average balances Investment securities (a) $105,536 $103,943
$98,164 $1,593 $7,372 $103,161 $90,327 $12,834 Loans 256,692
250,536 246,421 6,156 10,271 250,459 241,692 8,767 Earning assets
373,091 369,265 354,961 3,826 18,130 367,445 340,994 26,451
Interest-bearing liabilities 269,940 269,479 259,938 461 10,002
269,474 249,972 19,502 (a) Excludes unrealized gain (loss)
Net Interest Income
Net interest income on a taxable-equivalent basis in the fourth
quarter of 2015 was $2,871 million, an increase of $72 million (2.6
percent) over the fourth quarter of 2014. The increase was the
result of growth in average earning assets, partially offset by a
continued shift in loan portfolio mix. Average earning assets were
$18.1 billion (5.1 percent) higher than the fourth quarter of 2014,
driven by increases of $10.3 billion (4.2 percent) in average total
loans and $7.4 billion (7.5 percent) in average investment
securities. Net interest income increased $50 million (1.8 percent)
on a linked quarter basis, primarily due to higher average total
loans. Average total loans were $4.2 billion (1.7 percent) higher
on a linked quarter basis, excluding the student loan
reclassification.
The net interest margin in the fourth quarter of 2015 was 3.06
percent, compared with 3.14 percent in the fourth quarter of 2014,
and 3.04 percent in the third quarter of 2015. The decrease in the
net interest margin on a year-over-year basis primarily reflected a
change in loan portfolio mix, as well as growth in the investment
portfolio at lower average rates and lower reinvestment rates on
investment securities. On a linked quarter basis, the increase in
the net interest margin was principally due to loan growth which
also resulted in lower cash balances.
Investment Securities
Average investment securities in the fourth quarter of 2015 were
$7.4 billion (7.5 percent) higher year-over-year and $1.6 billion
(1.5 percent) higher than the prior quarter. These increases were
primarily due to purchases of U.S. government agency-backed
securities, net of prepayments and maturities, to support
regulatory liquidity coverage ratio requirements.
AVERAGE
LOANS
Table 4 ($ in millions)
Percent
Percent
Change Change 4Q 3Q 4Q 4Q15
vs 4Q15 vs Full Year Full Year
Percent 2015 2015
2014 3Q15 4Q14
2015 2014
Change Commercial $81,592 $79,486 $74,333 2.6 9.8
$78,815 $70,549 11.7 Lease financing 5,211 5,218
5,292 (.1 ) (1.5 ) 5,268 5,185 1.6
Total commercial 86,803 84,704 79,625 2.5 9.0 84,083 75,734 11.0
Commercial mortgages 31,830 32,083 31,783 (.8 ) .1 32,378
31,949 1.3 Construction and development 10,401 10,233
9,183 1.6 13.3 10,037 8,643 16.1 Total
commercial real estate 42,231 42,316 40,966 (.2 ) 3.1 42,415 40,592
4.5 Residential mortgages 52,970 51,831 51,872 2.2 2.1
51,840 51,818 -- Credit card 18,838 17,944 17,990 5.0 4.7
18,057 17,635 2.4 Retail leasing 5,265 5,480 5,939 (3.9 )
(11.3 ) 5,563 5,981 (7.0 ) Home equity and second mortgages 16,241
16,083 15,853 1.0 2.4 16,046 15,564 3.1 Other 29,556
27,286 27,317 8.3 8.2 27,470 26,808 2.5
Total other retail 51,062 48,849 49,109
4.5 4.0 49,079 48,353 1.5 Total loans,
excluding covered loans 251,904 245,644
239,562 2.5 5.2 245,474 234,132 4.8 Covered
loans 4,788 4,892 6,859 (2.1 ) (30.2 )
4,985 7,560 (34.1 ) Total loans $256,692
$250,536 $246,421 2.5 4.2 $250,459
$241,692 3.6
Loans
Average total loans were $10.3 billion (4.2 percent) higher in
the fourth quarter of 2015 than the fourth quarter of 2014, due to
growth in total commercial loans (9.0 percent), credit card loans
(4.7 percent), total other retail loans (4.0 percent) total
commercial real estate loans (3.1 percent) and residential
mortgages (2.1 percent). These increases were partially offset by a
decline in covered loans (30.2 percent), including the impact of
the expiration of the loss sharing agreements on commercial and
commercial real estate assets at the end of 2014. Average total
loans were $6.2 billion (2.5 percent) higher in the fourth quarter
of 2015 than the third quarter of 2015. Excluding the student loan
reclassification, average total loans were $4.2 billion (1.7
percent) higher in the fourth quarter of 2015 than the third
quarter of 2015. The increase was driven by growth in total
commercial loans (2.5 percent), credit card (5.0 percent) and
residential mortgages (2.2 percent). The Company also acquired a
$1.6 billion credit card portfolio at the end of the fourth quarter
of 2015 which did not have a material impact to average balances
for the quarter.
AVERAGE
DEPOSITS
Table 5 ($ in millions)
Percent
Percent
Change Change 4Q 3Q 4Q
4Q15 vs 4Q15 vs Full Year Full Year
Percent 2015 2015
2014 3Q15 4Q14
2015 2014
Change Noninterest-bearing deposits $83,894 $80,940
$76,958 3.6 9.0 $79,203 $73,455 7.8 Interest-bearing savings
deposits Interest checking 57,109 56,888 54,199 .4 5.4 55,974
53,248 5.1 Money market savings 82,828 80,338 68,914 3.1 20.2
79,266 63,977 23.9 Savings accounts 37,991 37,480
34,955 1.4 8.7 37,150 34,196 8.6 Total
of savings deposits 177,928 174,706 158,068 1.8 12.6 172,390
151,421 13.8 Time deposits 32,683 34,046
40,453 (4.0 ) (19.2 ) 35,558 41,764 (14.9 )
Total interest-bearing deposits 210,611 208,752
198,521 .9 6.1 207,948 193,185 7.6
Total deposits $294,505 $289,692
$275,479 1.7 6.9 $287,151 $266,640 7.7
Deposits
Average total deposits for the fourth quarter of 2015 were $19.0
billion (6.9 percent) higher than the fourth quarter of 2014.
Average noninterest-bearing deposits increased $6.9 billion (9.0
percent) year-over-year, mainly in Wholesale Banking and Commercial
Real Estate and Consumer and Small Business Banking. Average total
savings deposits were $19.9 billion (12.6 percent) higher
year-over-year, the result of growth in corporate trust, Wholesale
Banking and Commercial Real Estate, and Consumer and Small Business
Banking balances. Growth in Consumer and Small Business Banking
total savings deposits included net new account growth of 3.2
percent. Average time deposits were $7.8 billion (19.2 percent)
lower than the prior year quarter. Changes in time deposits are
largely related to those deposits managed as an alternative to
other wholesale funding sources, based on funding needs and
relative pricing.
Average total deposits increased $4.8 billion (1.7 percent) over
the third quarter of 2015. Average noninterest-bearing deposits
increased $3.0 billion (3.6 percent) on a linked quarter basis, due
to higher balances in Wholesale Banking and Commercial Real Estate
and corporate trust. Average total savings deposits increased $3.2
billion (1.8 percent), reflecting increases in Wholesale Banking
and Commercial Real Estate and Consumer and Small Business Banking.
Average time deposits, which are managed based on funding needs and
relative pricing, decreased $1.4 billion (4.0 percent) on a linked
quarter basis
NONINTEREST
INCOME
Table 6 ($ in millions)
Percent
Percent
Change Change 4Q 3Q 4Q 4Q15
vs 4Q15 vs Full Year Full Year
Percent 2015 2015
2014 3Q15 4Q14
2015 2014
Change Credit and debit card revenue $294 $269 $272
9.3 8.1 $1,070 $1,021 4.8 Corporate payment products revenue 170
190 174 (10.5 ) (2.3 ) 708 724 (2.2 ) Merchant processing services
393 400 384 (1.8 ) 2.3 1,547 1,511 2.4 ATM processing services 79
81 80 (2.5 ) (1.3 ) 318 321 (.9 ) Trust and investment management
fees 336 329 322 2.1 4.3 1,321 1,252 5.5 Deposit service charges
182 185 180 (1.6 ) 1.1 702 693 1.3 Treasury management fees 139 143
136 (2.8 ) 2.2 561 545 2.9 Commercial products revenue 222 231 219
(3.9 ) 1.4 867 854 1.5 Mortgage banking revenue 211 224 235 (5.8 )
(10.2 ) 906 1,009 (10.2 ) Investment products fees 44 46 49 (4.3 )
(10.2 ) 185 191 (3.1 ) Securities gains (losses), net 1 (1 ) 1 nm
-- -- 3 nm Other 269 229 318
17.5 (15.4 ) 907 1,040 (12.8 ) Total
noninterest income $2,340 $2,326
$2,370 .6 (1.3 ) $9,092 $9,164 (.8 )
Noninterest Income
Fourth quarter noninterest income was $2,340 million, which was
$30 million (1.3 percent) lower than the fourth quarter of 2014 and
$14 million (0.6 percent) higher than the third quarter of 2015.
The year-over-year decrease in noninterest income was primarily due
to the impact of the 2014 Nuveen gain, partially offset by fee
revenue growth and the HSA deposit sale. Higher credit and debit
card revenue, trust and investment management fees, and merchant
processing services were partially offset by a decrease in mortgage
banking revenue, primarily due to an unfavorable change in the
valuation of mortgage servicing rights (“MSRs”), net of hedging
activities. Credit and debit card revenue increased $22 million
(8.1 percent) due to higher transaction volumes. Trust and
investment management fees increased $14 million (4.3 percent),
reflecting the benefits of the Company’s investments in corporate
trust and fund services businesses, as well as account growth and
improved market conditions and lower fee waivers. Merchant
processing services increased $9 million (2.3 percent) as a result
of higher transaction volumes, along with account growth and
equipment sales to merchants related to new chip card technology
requirements, which decreased in the fourth quarter of 2015
compared with the third quarter of 2015. Adjusted for the
approximate $16 million impact of foreign currency rate changes,
year-over-year merchant processing services growth would have been
approximately 6.5 percent.
Noninterest income was $14 million (0.6 percent) higher in the
fourth quarter of 2015 than the third quarter of 2015. The increase
in noninterest income on a linked quarter basis was primarily due
to the HSA deposit sale and credit and debit card revenue,
partially offset by seasonally lower corporate payment products
revenue and lower mortgage banking revenue. Credit and debit card
revenue increased $25 million (9.3 percent), primarily due to
seasonally higher sales volumes. Other income increased $40 million
(17.5 percent) reflecting the impact of the prior quarter notable
items including the Visa Inc. Class B common stock sales and the
student loan market adjustment, offset by the HSA deposit sale and
other equity investment income. Corporate payment products revenue
decreased $20 million (10.5 percent), reflecting the impact of
seasonally higher third quarter government-related transaction
volumes and mortgage banking revenue decreased $13 million (5.8
percent), primarily due to lower origination revenue.
NONINTEREST
EXPENSE
Table 7 ($ in millions)
Percent
Percent
Change Change 4Q 3Q 4Q 4Q15
vs 4Q15 vs Full Year Full Year
Percent 2015 2015 2014 3Q15
4Q14 2015 2014 Change
Compensation $1,212 $1,225 $1,151 (1.1 ) 5.3 $4,812 $4,523 6.4
Employee benefits 272 285 245 (4.6 ) 11.0 1,167 1,041 12.1 Net
occupancy and equipment 246 251 248 (2.0 ) (.8 ) 991 987 .4
Professional services 125 115 132 8.7 (5.3 ) 423 414 2.2 Marketing
and business development 96 99 129 (3.0 ) (25.6 ) 361 382 (5.5 )
Technology and communications 230 222 219 3.6 5.0 887 863 2.8
Postage, printing and supplies 74 77 86 (3.9 ) (14.0 ) 297 328 (9.5
) Other intangibles 46 42 51 9.5 (9.8 ) 174 199 (12.6 ) Other 508
459 543 10.7 (6.4 ) 1,819
1,978 (8.0 ) Total noninterest expense $2,809
$2,775 $2,804 1.2 .2 $10,931 $10,715
2.0
Noninterest Expense
Fourth quarter noninterest expense was $2,809 million, which was
$5 million (0.2 percent) higher than the fourth quarter of 2014.
Compensation expense increased $61 million (5.3 percent),
reflecting the impact of merit increases and higher staffing for
risk and compliance activities, while employee benefits expense was
$27 million (11.0 percent) higher, mainly due to increased pension
costs. Offsetting these increases was a $33 million (25.6 percent)
decline in marketing and business development, principally due to
charitable contributions in the fourth quarter of 2014, and $35
million (6.4 percent) lower other noninterest expense, reflecting
the impact of prior year legal accruals partially offset by higher
compliance-related expenses.
Noninterest expense increased $34 million (1.2 percent) on a
linked quarter basis, reflecting seasonally higher costs related to
investments in tax-advantaged projects and accruals related to
legal and compliance matters, partially offset by the favorable
impact of reduced mortgage-related compliance and talent upgrade
costs which were elevated in the third quarter 2015. Compensation
expense declined $13 million (1.1 percent), reflecting the impact
of expense management initiatives and decreases in variable
compensation, and a $13 million (4.6 percent) decrease in employee
benefits expense was driven by lower payroll tax expense and
healthcare costs.
Provision for Income Taxes
The provision for income taxes for the fourth quarter of 2015
resulted in a tax rate on a taxable-equivalent basis of 29.0
percent (effective tax rate of 27.2 percent), compared with 27.7
percent (effective tax rate of 25.8 percent) in the fourth quarter
of 2014, and 28.1 percent (effective tax rate of 26.2 percent) in
the third quarter of 2015.
ALLOWANCE FOR CREDIT LOSSES
Table 8 ($ in millions)
4Q 3Q
2Q
1Q 4Q
2015
% (b)
2015
% (b)
2015
% (b)
2015
% (b)
2014
% (b)
Balance, beginning of period $4,306 $4,326 $4,351 $4,375
$4,414 Net charge-offs Commercial 58 .28 68 .34 39 .20 40
.21 48 .26 Lease financing 5 .38 3 .23 3 .23 3
.23 (2 ) (.15 ) Total commercial 63 .29 71 .33 42 .20 43 .21
46 .23 Commercial mortgages 2 .02 -- -- 4 .05 (1 ) (.01 ) (3 ) (.04
) Construction and development (2 ) (.08 ) (11 ) (.43 ) (3 ) (.12 )
(17 ) (.72 ) (7 ) (.30 ) Total commercial real estate -- -- (11 )
(.10 ) 1 .01 (18 ) (.17 ) (10 ) (.10 ) Residential mortgages
16 .12 25 .19 33 .26 35 .28 39 .30 Credit card 166 3.50 153
3.38 169 3.85 163 3.71 160 3.53 Retail leasing 1 .08 2 .14 1
.07 1 .07 1 .07 Home equity and second mortgages 6 .15 7 .17 11 .28
14 .36 17 .43 Other 53 .71 45 .65 39 .62 41
.60 52 .76 Total other retail 60 .47 54
.44 51 .43 56 .46 70 .57
Total net charge-offs, excluding covered
loans
305 .48 292 .47 296 .49 279 .47 305 .51 Covered loans -- --
-- -- -- -- -- -- 3 .17 Total net
charge-offs 305 .47 292 .46 296 .48 279 .46 308 .50 Provision for
credit losses 305 282 281 264 288 Other changes (a) -- (10 )
(10 ) (9 ) (19 ) Balance, end of period $4,306 $4,306
$4,326 $4,351 $4,375 Components
Allowance for loan losses $3,863 $3,965 $4,013 $4,023 $4,039
Liability for unfunded credit
commitments
443 341 313 328 336 Total
allowance for credit losses $4,306 $4,306 $4,326
$4,351 $4,375 Gross charge-offs $381
$372 $380 $383 $415 Gross recoveries $76 $80 $84 $104 $107
Allowance for credit losses as a percentage of
Period-end loans, excluding covered
loans
1.67 1.71 1.76 1.79 1.78
Nonperforming loans, excluding covered
loans
360 347 348 321 297
Nonperforming assets, excluding covered
assets
288 280 279 261 245 Period-end loans 1.65
1.69 1.74 1.77 1.77 Nonperforming loans 361 347 349 322 298
Nonperforming assets 283 275 274 257 242
(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
Credit Quality
The Company’s provision for credit losses for the fourth quarter
of 2015 was $305 million, which was $23 million (8.2 percent)
higher than the prior quarter and $17 million (5.9 percent) higher
than the fourth quarter of 2014. The provision for credit losses
was equal to net charge-offs in the fourth quarter of 2015, $10
million lower than net charge-offs in the third quarter of 2015,
and $20 million lower than net charge-offs in the fourth quarter of
2014. Total net charge-offs in the fourth quarter of 2015 were $305
million, compared with $292 million in the third quarter of 2015,
and $308 million in the fourth quarter of 2014. Net charge-offs
increased $13 million (4.5 percent) on a linked quarter basis due
to seasonally higher credit card charge-offs and lower commercial
mortgage and construction and development recoveries, while the $3
million (1.0 percent) decrease in net charge-offs on a
year-over-year basis reflected improvements in residential
mortgages and total other retail loans. Given current economic
conditions, the Company expects the level of net charge-offs to
remain relatively stable in the first quarter of 2016.
The allowance for credit losses was $4,306 million at December
31, 2015, and at September 30, 2015, compared with $4,375 million
at December 31, 2014. The ratio of the allowance for credit losses
to period-end loans was 1.65 percent at December 31, 2015, compared
with 1.69 percent at September 30, 2015, and 1.77 percent at
December 31, 2014. The ratio of the allowance for credit losses to
nonperforming loans was 361 percent at December 31, 2015, compared
with 347 percent at September 30, 2015, and 298 percent at December
31, 2014.
At December 31, 2015, approximately $3.2 billion of commercial
loans (approximately 1.2 percent of total loans outstanding) were
to customers in energy-related businesses. The decline in energy
prices over the past year has resulted in deterioration of a
portion of these loans; however, the impact of this deterioration
was not significant to the Company during 2015. Based on the
uncertain outlook for commodity prices in the near term and the
potential for further energy price declines, the Company may see
additional stress within its energy and metals-related loan
portfolios in 2016. At December 31, 2015, the Company had credit
reserves of approximately 5 percent of total energy loan
balances.
DELINQUENT LOAN
RATIOS AS A PERCENT OF ENDING LOAN BALANCES
Table 9 (Percent)
Dec 31
Sep 30
Jun 30
Mar 31
Dec 31
2015 2015 2015
2015 2014
Delinquent loan ratios - 90 days or more past due
excluding
nonperforming loans Commercial .05 .05 .05 .05 .05 Commercial real
estate .03 .05 .05 .07 .05 Residential mortgages .33 .33 .30 .33
.40 Credit card 1.09 1.10 1.03 1.19 1.13 Other retail .15 .14 .14
.15 .15 Total loans, excluding covered loans .21 .20 .19 .22 .23
Covered loans 6.31 6.57 6.66 7.01 7.48 Total loans .32 .32 .32 .36
.38 Delinquent loan ratios - 90 days or more past due
including nonperforming loans Commercial .25 .25 .16 .16 .19
Commercial real estate .33 .39 .46 .58 .65 Residential mortgages
1.66 1.73 1.80 1.95 2.07 Credit card 1.13 1.16 1.12 1.32 1.30 Other
retail .46 .47 .51 .55 .53 Total loans, excluding covered loans .67
.70 .70 .77 .83 Covered loans 6.48 6.80 6.88 7.25 7.74 Total loans
.78 .81 .82 .91 .97
ASSET QUALITY
Table 10 ($ in millions)
Dec 31
Sep 30
Jun 30
Mar 31
Dec 31
2015 2015 2015
2015 2014 Nonperforming
loans Commercial $160 $157 $78 $74 $99 Lease financing 14
12 12 13 13 Total
commercial 174 169 90 87 112 Commercial mortgages 92 105 116
142 175 Construction and development 35 39
59 75 84 Total commercial real
estate 127 144 175 217 259 Residential mortgages 712 735 769
825 864 Credit card 9 12 16 22 30 Other retail 162
171 178 187 187 Total
nonperforming loans, excluding covered loans 1,184 1,231 1,228
1,338 1,452 Covered loans 8 11
11 12 14 Total nonperforming loans
1,192 1,242 1,239 1,350 1,466 Other real estate (a) 280 276
287 293 288 Covered other real estate (a) 32 31 35 37 37 Other
nonperforming assets 19 18 16
16 17 Total nonperforming assets (b)
$1,523 $1,567 $1,577
$1,696 $1,808 Total nonperforming assets,
excluding covered assets $1,483 $1,525
$1,531 $1,647 $1,757
Accruing loans 90 days or more past due,
excluding covered loans
$541 $510 $469 $521
$550 Accruing loans 90 days or more past due
$831 $825 $801 $880
$945
Performing restructured loans, excluding
GNMA and covered loans
$2,766 $2,746 $2,815
$2,684 $2,832 Performing restructured GNMA and
covered loans $1,944 $2,031 $2,111
$2,186 $2,273
Nonperforming assets to loans plus ORE,
excluding covered assets (%)
.58 .61 .63 .68 .72 Nonperforming assets to loans plus ORE
(%) .58 .61 .63 .69 .73 (a) Includes equity investments in
entities whose principal assets are other real estate owned. (b)
Does not include accruing loans 90 days or more past due.
Nonperforming assets decreased on a linked quarter and
year-over-year basis to $1,523 million at December 31, 2015,
compared with $1,567 million at September 30, 2015, and $1,808
million at December 31, 2014. The ratio of nonperforming assets to
loans and other real estate was 0.58 percent at December 31, 2015,
compared with 0.61 percent at September 30, 2015, and 0.73 percent
at December 31, 2014. The decrease in nonperforming assets on a
year-over-year basis was driven primarily by reductions in the
commercial real estate portfolios and residential mortgages, as
economic conditions continued to slowly improve. Accruing loans 90
days or more past due were $831 million ($541 million excluding
covered loans) at December 31, 2015, compared with $825 million
($510 million excluding covered loans) at September 30, 2015, and
$945 million ($550 million excluding covered loans) at December 31,
2014. The Company expects total nonperforming assets to remain
relatively stable in the first quarter of 2016.
COMMON
SHARES
Table 11 (Millions)
4Q 3Q 2Q
1Q 4Q
2015
2015
2015
2015
2014
Beginning shares outstanding 1,754 1,767 1,780 1,786 1,795
Shares issued for stock incentive plans,
acquisitions and other corporate purposes
1 3 1 6 2 Shares repurchased (10 ) (16 )
(14 ) (12 ) (11 ) Ending shares
outstanding 1,745 1,754
1,767 1,780 1,786
Capital Management
Total U.S. Bancorp shareholders’ equity was $46.1 billion at
December 31, 2015, compared with $45.1 billion at September 30,
2015, and $43.5 billion at December 31, 2014. Including fourth
quarter distributions, the Company returned 72 percent of earnings
to shareholders for the full year.
CAPITAL POSITION
Table 12 ($ in millions)
Dec 31 Sep 30 Jun
30 Mar 31 Dec 31
2015 2015
2015 2015
2014 Total U.S. Bancorp shareholders' equity $46,131
$45,075 $44,537 $44,277 $43,479
Standardized Approach
Basel III transitional standardized approach Common equity
tier 1 capital $32,612 $32,124 $31,674 $31,308 $30,856 Tier 1
capital 38,431 37,197 36,748 36,382 36,020 Total risk-based capital
45,313 44,015 43,526 43,558 43,208 Common equity tier 1
capital ratio 9.6 % 9.6 % 9.5 % 9.6 % 9.7 % Tier 1 capital ratio
11.3 11.1 11.0 11.1 11.3 Total risk-based capital ratio 13.3 13.1
13.1 13.3 13.6 Leverage ratio 9.5 9.3 9.2 9.3 9.3
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully implemented
standardized approach
9.1 9.2 9.2 9.2 9.0
Advanced Approaches
Common equity tier 1 capital to
risk-weighted assets for the Basel III transitional advanced
approaches
12.5 13.0 12.9 12.3 12.4
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully implemented
advanced approaches
11.9 12.4 12.4 11.8 11.8
Tangible common equity to
tangible assets 7.6 7.7 7.5 7.6 7.5
Tangible common equity
to risk-weighted assets 9.2 9.3 9.2 9.3 9.3 Beginning
January 1, 2014, the regulatory capital requirements effective for
the Company follow Basel III, subject to certain transition
provisions from Basel I over the following four years to full
implementation by January 1, 2018. Basel III includes two
comprehensive methodologies for calculating risk-weighted assets: a
general standardized approach and more risk-sensitive advanced
approaches, with the Company's capital adequacy being evaluated
against the methodology that is most restrictive.
All regulatory ratios continue to be in excess of
“well-capitalized” requirements. The common equity tier 1 capital
to risk-weighted assets ratio estimated for the Basel III
standardized approach as if fully implemented was 9.1 percent at
December 31, 2015, compared with 9.2 percent at September 30, 2015,
and 9.0 percent at December 31, 2014. The common equity tier 1
capital to risk-weighted assets ratio estimated for the Basel III
advanced approaches as if fully implemented was 11.9 percent at
December 31, 2015, compared with 12.4 percent at September 30,
2015, and 11.8 percent at December 31, 2014.
On Friday, January 15, 2016, at 8:00 a.m. CST, Richard K.
Davis, chairman, president and chief executive officer, and Kathy
Rogers, vice chair and chief financial officer, will host a
conference call to review the financial results. The conference
call will be available online or by telephone. To access the
webcast and presentation, go to www.usbank.com and
click on “About U.S. Bank.” The “Webcasts &
Presentations” link can be found under the Investor/Shareholder
information heading, which is at the left side near the bottom of
the page. To access the conference call from locations within the
United States and Canada, please dial 866-316-1409. Participants
calling from outside the United States and Canada, please dial
706-634-9086. The conference ID number for all participants is
76889596. For those unable to participate during the live call, a
recording will be available at approximately 11:00 a.m. CST on
Friday, January 15 and be accessible through Friday, January 22 at
11:00 p.m. CST. To access the recorded message within the United
States and Canada, dial 855-859-2056. If calling from outside the
United States and Canada, please dial 404-537-3406 to access the
recording. The conference ID is 76889596.
Minneapolis-based U.S. Bancorp (“USB”), with $422 billion in
assets as of December 31, 2015, is the parent company of U.S. Bank
National Association, the fifth largest commercial bank in the
United States. The Company operates 3,133 banking offices in 25
states and 4,936 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, U.S. Bancorp’s
business and financial performance is likely to be negatively
impacted by recently enacted and future legislation and regulation.
U.S. Bancorp’s results could also be adversely affected by
deterioration in general business and economic conditions; changes
in interest rates; deterioration in the credit quality of its loan
portfolios or in the value of the collateral securing those loans;
deterioration in the value of securities held in its investment
securities portfolio; legal and regulatory developments;
litigation; increased competition from both banks and non-banks;
changes in customer behavior and preferences; breaches in data
security; effects of mergers and acquisitions and related
integration; effects of critical accounting policies and judgments;
and management’s ability to effectively manage credit risk, market
risk, operational risk, compliance risk, strategic risk, interest
rate risk, liquidity risk and reputational risk.
For discussion of these and other risks that may cause actual
results to differ from expectations, refer to U.S. Bancorp’s Annual
Report on Form 10-K for the year ended December 31, 2014, on file
with the Securities and Exchange Commission, including the sections
entitled “Risk Factors” and “Corporate Risk Profile” contained in
Exhibit 13, and all subsequent filings with the Securities and
Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934. However, factors other than these
also could adversely affect U.S. Bancorp’s results, and the reader
should not consider these factors to be a complete set of all
potential risks or uncertainties. Forward-looking statements speak
only as of the date hereof, and U.S. Bancorp undertakes no
obligation to update them in light of new information or future
events.
Non-GAAP Financial Measures
In addition to capital ratios defined by banking regulators, the
Company considers various other measures when evaluating capital
utilization and adequacy, including:
- Tangible common equity to tangible
assets,
- Tangible common equity to risk-weighted
assets,
- Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully implemented
standardized approach, and
- Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully implemented
advanced approaches.
These measures are viewed by management as useful additional
methods of reflecting the level of capital available to withstand
unexpected market or economic conditions. Additionally,
presentation of these measures allows investors, analysts and
banking regulators to assess the Company’s capital position
relative to other financial services companies. These measures
differ from currently effective capital ratios defined by banking
regulations principally in that the numerator includes unrealized
gains and losses related to available-for-sale securities and
excludes preferred securities, including preferred stock, the
nature and extent of which varies among different financial
services companies. These measures are not defined in generally
accepted accounting principles (“GAAP”), or are not currently
effective or defined in federal banking regulations. As a result,
these measures disclosed by the Company may be considered non-GAAP
financial measures.
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.
U.S.
Bancorp
Consolidated Statement of Income Three Months Ended
Year Ended (Dollars and Shares in Millions, Except Per Share Data)
December 31, December 31, (Unaudited) 2015
2014 2015 2014
Interest
Income Loans $2,583 $ 2,541 $10,059 $10,113 Loans held for sale
40 41 206 128 Investment securities 499 488 2,001 1,866 Other
interest income 34 32 136
121 Total interest income 3,156 3,102
12,402 12,228
Interest Expense Deposits 113 117 457 465
Short-term borrowings 56 59 245 263 Long-term debt 168
182 699 725
Total interest expense 337 358
1,401 1,453 Net interest
income 2,819 2,744 11,001 10,775 Provision for credit losses 305
288 1,132
1,229 Net interest income after provision for credit
losses 2,514 2,456 9,869 9,546
Noninterest Income Credit and
debit card revenue 294 272 1,070 1,021 Corporate payment products
revenue 170 174 708 724 Merchant processing services 393 384 1,547
1,511 ATM processing services 79 80 318 321 Trust and investment
management fees 336 322 1,321 1,252 Deposit service charges 182 180
702 693 Treasury management fees 139 136 561 545 Commercial
products revenue 222 219 867 854 Mortgage banking revenue 211 235
906 1,009 Investment products fees 44 49 185 191 Securities gains
(losses), net 1 1 -- 3 Other 269 318
907 1,040 Total
noninterest income 2,340 2,370 9,092 9,164
Noninterest
Expense Compensation 1,212 1,151 4,812 4,523 Employee benefits
272 245 1,167 1,041 Net occupancy and equipment 246 248 991 987
Professional services 125 132 423 414 Marketing and business
development 96 129 361 382 Technology and communications 230 219
887 863 Postage, printing and supplies 74 86 297 328 Other
intangibles 46 51 174 199 Other 508 543
1,819 1,978 Total
noninterest expense 2,809 2,804
10,931 10,715 Income before
income taxes 2,045 2,022 8,030 7,995 Applicable income taxes 556
521 2,097
2,087 Net income 1,489 1,501 5,933 5,908 Net (income)
loss attributable to noncontrolling interests (13 )
(13 ) (54 ) (57 ) Net income
attributable to U.S. Bancorp $1,476 $ 1,488
$5,879 $5,851 Net
income applicable to U.S. Bancorp common shareholders $1,404
$ 1,420 $5,608
$5,583 Earnings per common share $.80 $ .79
$3.18 $3.10 Diluted earnings per common share $.80 $ .79 $3.16
$3.08 Dividends declared per common share $.255 $ .245 $1.010 $.965
Average common shares outstanding 1,747 1,787 1,764 1,803 Average
diluted common shares outstanding 1,754
1,796 1,772 1,813
U.S. Bancorp
Consolidated Ending Balance Sheet December 31,
December 31, (Dollars in Millions) 2015
2014
Assets Cash and due from banks $11,147 $10,654
Investment securities Held-to-maturity 43,590 44,974
Available-for-sale 61,997 56,069 Loans held for sale 3,184 4,792
Loans Commercial 88,402 80,377 Commercial real estate 42,137 42,795
Residential mortgages 53,496 51,619 Credit card 21,012 18,515 Other
retail 51,206 49,264 Total loans,
excluding covered loans 256,253 242,570 Covered loans 4,596
5,281 Total loans 260,849 247,851 Less
allowance for loan losses (3,863 ) (4,039 ) Net loans
256,986 243,812 Premises and equipment 2,513 2,618 Goodwill 9,361
9,389 Other intangible assets 3,350 3,162 Other assets 29,725
27,059 Total assets $421,853
$402,529
Liabilities and
Shareholders' Equity Deposits Noninterest-bearing $83,766
$77,323 Interest-bearing 216,634 205,410
Total deposits 300,400 282,733 Short-term borrowings 27,877
29,893 Long-term debt 32,078 32,260 Other liabilities 14,681
13,475 Total liabilities 375,036 358,361
Shareholders' equity Preferred stock 5,501 4,756 Common stock 21 21
Capital surplus 8,376 8,313 Retained earnings 46,377 42,530 Less
treasury stock (13,125 ) (11,245 ) Accumulated other comprehensive
income (loss) (1,019 ) (896 ) Total U.S. Bancorp
shareholders' equity 46,131 43,479 Noncontrolling interests 686
689 Total equity 46,817
44,168 Total liabilities and equity
$421,853 $402,529 U.S.
Bancorp
Non-GAAP Financial Measures
December 31,
September 30,
June 30,
March 31,
December 31, (Dollars in Millions, Unaudited) 2015
2015 2015
2015 2014 Total equity $46,817
$45,767 $45,231 $44,965 $44,168 Preferred stock (5,501 ) (4,756 )
(4,756 ) (4,756 ) (4,756 ) Noncontrolling interests (686 ) (692 )
(694 ) (688 ) (689 ) Goodwill (net of deferred tax liability) (1)
(8,295 ) (8,324 ) (8,350 ) (8,360 ) (8,403 ) Intangible assets,
other than mortgage servicing rights (838 )
(779 ) (744 ) (783 )
(824 ) Tangible common equity (a)
31,497 31,216 30,687 30,378 29,496 Tangible common equity
(as calculated above) 31,497 31,216 30,687 30,378 29,496
Adjustments (2) 67 118
125 158
172
Common equity tier 1 capital estimated for
the Basel III fully implemented standardized and advanced
approaches (b)
31,564 31,334 30,812 30,536 29,668 Total assets 421,853
415,943 419,075 410,233 402,529 Goodwill (net of deferred tax
liability) (1) (8,295 ) (8,324 ) (8,350 ) (8,360 ) (8,403 )
Intangible assets, other than mortgage servicing rights (838 )
(779 ) (744 )
(783 ) (824 ) Tangible
assets (c) 412,720 406,840 409,981 401,090 393,302
Risk-weighted assets, determined in
accordance with prescribed transitional standardized approach
regulatory requirements (d)
341,360 * 336,227 333,177 327,709 317,398 Adjustments (3) 3,892
* 3,532 3,532
3,153
11,110
Risk-weighted assets estimated for the
Basel III fully implemented standardized approach (e)
345,252 * 339,759 336,709 330,862 328,508
Risk-weighted assets, determined in
accordance with prescribed transitional advanced approaches
regulatory requirements
261,668 * 248,048 245,038 254,892 248,596 Adjustments (4) 4,099
* 3,723 3,721
3,321 3,270
Risk-weighted assets estimated for the
Basel III fully implemented advanced approaches (f)
265,767 * 251,771 248,759 258,213 251,866
Ratios *
Tangible common equity to tangible assets (a)/(c) 7.6 % 7.7 % 7.5 %
7.6 % 7.5 % Tangible common equity to risk-weighted assets (a)/(d)
9.2 9.3 9.2 9.3 9.3
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully implemented
standardized approach (b)/(e)
9.1 9.2 9.2 9.2 9.0
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully implemented
advanced approaches (b)/(f)
11.9 12.4
12.4 11.8
11.8
* 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160115005068/en/
U.S. BancorpMedia:Dana Ripley,
612-303-3167orInvestors/Analysts:Sean O'Connor, 612-303-0778
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