Earnings Per Diluted Common Share of
$0.76
Return on average assets of 1.32 percent and
average common equity of 13.0 percent
U.S. Bancorp (NYSE: USB) today reported net income of $1,386
million for the first quarter of 2016, or $0.76 per diluted common
share, compared with $1,431 million, or $0.76 per diluted common
share, in the first quarter of 2015.
Highlights for the first quarter of 2016 included:
- Industry-leading return on average
assets of 1.32 percent, return on average common equity of 13.0
percent and efficiency ratio of 54.6 percent
- Returned 80 percent of first quarter
earnings to shareholders through dividends and share buybacks
- Average total loans grew 5.8 percent
over the first quarter of 2015 and 2.2 percent on a linked quarter
basis (1.6 percent excluding the credit card portfolio acquisition
at the end of the fourth quarter 2015)
- Average total commercial loans grew
10.2 percent over the first quarter of 2015 and 3.5 percent over
the fourth quarter of 2015
- Average total deposits grew 6.3 percent
over the first quarter of 2015 and 0.5 percent on a linked quarter
basis
- Average low-cost deposits, including
noninterest-bearing and total savings deposits, grew 9.7 percent
year-over-year
- Net interest income grew 4.9 percent
year-over-year and 0.6 percent linked quarter
- Average earnings assets grew 4.8
percent year-over-year, and 1.4 percent on a linked quarter
basis
- Net interest margin of 3.06 percent for
the first quarter of 2016 was the same as the fourth quarter of
2015, down 2 basis points from 3.08 percent in the first quarter of
2015
- Payments-related fee revenue grew 5.1
percent year-over-year, driven by an increase in credit and debit
card revenue, including the impact of recent portfolio
acquisitions, and merchant processing services revenue
- Credit quality was relatively stable
other than energy-related commercial loans, the deterioration of
which impacted the amount of nonperforming assets and the provision
for credit losses
- Energy-related commercial nonperforming
assets increased $257 million linked quarter
- Reserves for energy-related commercial
loans were 9.1 percent of outstanding balances at March 31, 2016,
compared with 5.4 percent at December 31, 2015
- Strong capital position. At March 31,
2016, the estimated common equity tier 1 capital to risk-weighted
assets ratio was 9.2 percent using the Basel III fully implemented
standardized approach and was 11.9 percent using the Basel III
fully implemented advanced approaches method
EARNINGS SUMMARY
Table 1
($ in millions, except per-share data)
PercentChange
PercentChange
1Q 4Q 1Q 1Q16 vs 1Q16 vs
2016 2015 2015
4Q15 1Q15 Net income attributable to
U.S. Bancorp $1,386 $1,476 $1,431 (6.1 ) (3.1 ) Diluted earnings
per common share $.76 $.80 $.76 (5.0 )
--
Return on average assets (%) 1.32 1.41 1.44 Return on
average common equity (%) 13.0 13.7 14.1 Net interest margin (%)
3.06 3.06 3.08 Efficiency ratio (%) (a) 54.6 53.9 54.3 Tangible
efficiency ratio (%) (a) 53.7 53.0 53.4 Dividends declared
per common share $.255 $.255 $.245
--
4.1
Book value per common share (period end) $23.82 $23.28 $22.20
2.3
7.3
(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 $1,386 million for
the first quarter of 2016, 3.1 percent lower than the $1,431
million for the first quarter of 2015, and 6.1 percent lower than
the $1,476 million for the fourth quarter of 2015. Diluted earnings
per common share were $0.76 in the first quarter of 2016, the same
as the first quarter of 2015 and $0.04 lower than the $0.80
reported for fourth quarter of 2015. The decrease in net income
year-over-year was primarily due to a higher provision for credit
losses driven by energy-related commercial loan downgrades, lower
mortgage banking revenue due to lower production and higher
noninterest expense driven by higher compensation expense related
to the impact of merit increases and higher variable compensation
expense, as well as compliance-related matters, partially offset by
an increase in net interest income driven by strong loan growth.
The decrease in net income on a linked quarter basis was
principally due to typical seasonality in some of our business
lines, a higher provision for credit losses driven by
energy-related loans, as well as the impact of the fourth quarter
2015 gain on the sale of the Health Savings Account deposit
portfolio (“HSA deposit sale”). The linked quarter seasonality
reflects decreases in fee-based revenue, primarily related to
payments and deposit services, and lower costs related to
investments in tax-advantaged projects. Other expense increases
included higher stock-based and other variable compensation
expense.
U.S. Bancorp Chairman and Chief Executive Officer Richard K.
Davis said, “U.S. Bancorp is off to a solid start in 2016 as we
once again delivered industry-leading performance metrics against a
backdrop of global concerns driving long-term interest rates lower
and continuing pressure in the energy sector. We continued to
produce strong loan and deposit growth which combined with a stable
net interest margin, resulted in growth in net interest income. Our
payments-related businesses remain strong and we continue to invest
in those businesses, as demonstrated by the acquisition of the $1.6
billion retail card portfolio at the end of 2015. Although the
pressures from the energy industry negatively impacted the quarter,
we took appropriate measures and remain confident that we are well
positioned to continue delivering industry-leading returns
throughout the year.
“In addition to these strong fundamentals of our business, we
also created value for our shareholders as we returned 80 percent
of our first quarter earnings back to shareholders through
dividends and share buybacks. We remain committed to balancing
decisions about operating efficiencies with opportunities for
investments in our franchise as we navigate through a slowly
recovering economy. This focus by our management team is vital in
order to protect our strong financial position and to ensure that
we are delivering the products and services that our customers
value.
“I am extremely proud that once again, during the first quarter,
U.S. Bancorp was named one of the Most Ethical Companies in the
WorldTM by the Ethisphere Institute, and for the sixth year in a
row, the number one Superregional bank by FORTUNE magazine. It is a
perfect example of how our 67,000 employees work hard every day to
be the most trusted choice for our shareholders, customers, and
communities. Every quarter we introduce new products and services
to our customers that are designed to improve and unify our
customers’ experience with us. We have continued to invest heavily
in our mobile banking app and were recognized as a leader in this
space by both Keynote and Corporate Insights. These are important
developments in a dynamic marketplace where customer needs and
expectations are evolving rapidly. We are proud to have an
innovation focus – built on a foundation of trust – backing all our
financial and competitive strength.
“U.S. Bancorp continues to deliver consistent, predictable,
repeatable, industry-leading financial results. Our shareholders,
customers, and communities know that we will do it well and we will
do it right. We have a proven track record of success and we remain
confident in our ability to address our customers’ and clients’
distinct financial objectives.”
INCOME STATEMENT
HIGHLIGHTS
Table 2
(Taxable-equivalent basis, $ in millions,
except per-share data)
PercentChange
PercentChange
1Q 4Q 1Q 1Q16 vs 1Q16 vs
2016 2015 2015
4Q15 1Q15 Net interest income $2,888
$2,871 $2,752
.6
4.9
Noninterest income 2,149 2,340 2,154
(8.2 ) (.2 ) Total net revenue 5,037 5,211 4,906 (3.3 )
2.7
Noninterest expense 2,749 2,809 2,665
(2.1 )
3.2
Income before provision and taxes 2,288 2,402 2,241 (4.7 )
2.1
Provision for credit losses 330 305 264
8.2
25.0
Income before taxes 1,958 2,097 1,977 (6.6 ) (1.0 )
Taxable-equivalent adjustment 53 52 54
1.9
(1.9 ) Applicable income taxes 504 556
479 (9.4 )
5.2
Net income 1,401 1,489 1,444 (5.9 ) (3.0 )
Net (income) loss attributable
to noncontrolling interests
(15 ) (13 ) (13 ) (15.4 ) (15.4 ) Net income
attributable to U.S. Bancorp $1,386 $1,476
$1,431 (6.1 ) (3.1 )
Net income applicable to U.S.
Bancorp common shareholders
$1,329 $1,404 $1,365 (5.3 ) (2.6
) Diluted earnings per common share $.76 $.80
$.76 (5.0 ) --
NET INTEREST
INCOME
Table 3 (Taxable-equivalent basis; $ in
millions)
Change
Change 1Q 4Q 1Q 1Q16 vs 1Q16
vs 2016 2015 2015
4Q15 1Q15 Components of net interest income
Income on earning assets $3,275 $3,209 $3,116 $66 $159 Expense on
interest-bearing liabilities 387 338
364 49 23 Net interest income
$2,888 $2,871 $2,752 $17
$136 Average yields and rates paid
Earning assets yield 3.48 % 3.42 % 3.49 % .06 % (.01 )% Rate paid
on interest-bearing liabilities .56 .50
.55 .06 .01 Gross interest
margin 2.92 % 2.92 % 2.94 % -- % (.02
)% Net interest margin 3.06 % 3.06 % 3.08 % --
% (.02 )% Average balances Investment securities (a)
$106,031 $105,536 $100,712 $495 $5,319 Loans 262,281 256,692
247,950 5,589 14,331 Earning assets 378,208 373,091 360,841 5,117
17,367 Interest-bearing liabilities 279,516 269,940 267,882 9,576
11,634 (a) Excludes unrealized gain (loss)
Net Interest Income
Net interest income on a taxable-equivalent basis in the first
quarter of 2016 was $2,888 million, an increase of $136 million
(4.9 percent) over the first quarter of 2015. The increase was
driven by loan growth and higher rates, partially offset by the
impact of a continued shift in loan portfolio mix. Average earning
assets were $17.4 billion (4.8 percent) higher than the first
quarter of 2015, driven by increases of $14.3 billion (5.8 percent)
in average total loans and $5.3 billion (5.3 percent) in average
investment securities. Net interest income increased $17 million
(0.6 percent) on a linked quarter basis, primarily due to growth in
average total loans and the impact of higher rates, partially
offset by one less day in the current quarter. Average total loans
were $5.6 billion (2.2 percent) higher on a linked quarter basis
($4.1 billion (1.6 percent) excluding the credit card portfolio
acquisition at the end of the fourth quarter of 2015.)
The net interest margin in the first quarter of 2016 was 3.06
percent, compared with 3.08 percent in the first quarter of 2015,
and 3.06 percent in the fourth quarter of 2015. The decrease in the
net interest margin on a year-over-year basis primarily reflected
the impact of higher rates offset by a continued shift in loan
portfolio mix, as well as lower average rates on new securities
purchases and lower reinvestment rates on maturing securities. On a
linked quarter basis, the stable net interest margin was
principally due to the impact of higher rates, partially offset by
the continued change in loan portfolio mix.
Investment Securities
Average investment securities in the first quarter of 2016 were
$5.3 billion (5.3 percent) higher year-over-year and $495 million
(0.5 percent) higher than the prior quarter. These increases were
primarily due to purchases of U.S. Treasury securities, net of
prepayments and maturities, to support regulatory liquidity
coverage ratio requirements.
AVERAGE LOANS
Table 4
($ in millions)
Percent
Percent Change Change 1Q
4Q 1Q 1Q16 vs 1Q16 vs 2016
2015 2015 4Q15
1Q15 Commercial $84,582 $81,592 $76,183 3.7 11.0
Lease financing 5,238 5,211 5,325 .5 (1.6 )
Total commercial 89,820 86,803 81,508 3.5 10.2 Commercial
mortgages 31,836 31,830 33,119 -- (3.9 ) Construction and
development 10,565 10,401 9,552 1.6 10.6 Total
commercial real estate 42,401 42,231 42,671 .4 (.6 )
Residential mortgages 54,208 52,970 51,426 2.3 5.4 Credit
card 20,244 18,838 17,823 7.5 13.6 Retail leasing 5,179
5,265 5,819 (1.6 ) (11.0 ) Home equity and second mortgages 16,368
16,241 15,897 .8 3.0 Other 29,550 29,556 27,604
-- 7.0 Total other retail 51,097 51,062 49,320
.1 3.6 Total loans, excluding covered loans 257,770
251,904 242,748 2.3 6.2 Covered loans
4,511 4,788 5,202 (5.8 ) (13.3 ) Total
loans $262,281 $256,692 $247,950 2.2 5.8
Loans
Average total loans were $14.3 billion (5.8 percent) higher in
the first quarter of 2016 than the first quarter of 2015, due to
growth in total commercial loans (10.2 percent), credit card loans
(13.6 percent), residential mortgages (5.4 percent), and total
other retail loans (3.6 percent). These increases were partially
offset by a decline in total commercial real estate loans (0.6
percent) and covered loans (13.3 percent). Average total loans were
$5.6 billion (2.2 percent) higher in the first quarter of 2016 than
the fourth quarter of 2015. The increase was driven by growth in
total commercial loans (3.5 percent), residential mortgages (2.3
percent) and credit card loans (7.5 percent). At the end of the
fourth quarter of 2015, the Company acquired a credit card
portfolio which increased first quarter of 2016 average credit card
loans by approximately $1.5 billion. Excluding the credit card
portfolio acquisition, average total loans in the first quarter of
2016 were approximately $4.1 billion (1.6 percent) higher than the
fourth quarter of 2015 and $12.8 billion (5.2 percent) higher than
the first quarter of 2015.
AVERAGE DEPOSITS
Table 5
($ in millions)
Percent
Percent Change Change 1Q
4Q 1Q 1Q16 vs 1Q16 vs 2016
2015 2015 4Q15
1Q15 Noninterest-bearing deposits $78,569 $83,894
$74,511 (6.3 ) 5.4 Interest-bearing savings deposits Interest
checking 57,910 57,109 54,658 1.4 5.9 Money market savings 86,462
82,828 73,889 4.4 17.0 Savings accounts 39,250 37,991
36,033 3.3 8.9 Total of savings deposits 183,622 177,928
164,580 3.2 11.6 Time deposits 33,687 32,683 39,369
3.1 (14.4 ) Total interest-bearing deposits 217,309
210,611 203,949 3.2 6.6 Total deposits $295,878
$294,505 $278,460 .5 6.3
Deposits
Average total deposits for the first quarter of 2016 were $17.4
billion (6.3 percent) higher than the first quarter of 2015.
Average noninterest-bearing deposits increased $4.1 billion (5.4
percent) year-over-year, mainly in Wholesale Banking and Commercial
Real Estate and Consumer and Small Business Banking. Average total
savings deposits were $19.0 billion (11.6 percent) higher
year-over-year, the result of growth in Wholesale Banking and
Commercial Real Estate, Consumer and Small Business Banking, and
Wealth Management and Securities Services. Growth in Consumer and
Small Business Banking total savings deposits included net new
account growth of 3.2 percent. Average time deposits were $5.7
billion (14.4 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 $1.4 billion (0.5 percent) over
the fourth quarter of 2015. Average noninterest-bearing deposits
decreased $5.3 billion (6.3 percent) on a linked quarter basis, due
to seasonally lower balances in corporate trust and Wholesale
Banking and Commercial Real Estate. Average total savings deposits
increased $5.7 billion (3.2 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, increased $1.0 billion (3.1
percent) on a linked quarter basis.
NONINTEREST INCOME
Table 6
($ in millions)
Percent
Percent Change Change 1Q
4Q 1Q 1Q16 vs 1Q16 vs 2016
2015 2015 4Q15
1Q15 Credit and debit card revenue $266 $294 $241
(9.5 ) 10.4 Corporate payment products revenue 170 170 170 -- --
Merchant processing services 373 393 359 (5.1 ) 3.9 ATM processing
services 80 79 78 1.3 2.6 Trust and investment management fees 339
336 322 .9 5.3 Deposit service charges 168 182 161 (7.7 ) 4.3
Treasury management fees 142 139 137 2.2 3.6 Commercial products
revenue 197 222 200 (11.3 ) (1.5 ) Mortgage banking revenue 187 211
240 (11.4 ) (22.1 ) Investment products fees 40 44 47 (9.1 ) (14.9
) Securities gains (losses), net 3 1 --
nm
nm
Other 184 269 199 (31.6 ) (7.5 ) Total
noninterest income $2,149 $2,340 $2,154 (8.2 )
(.2 )
Noninterest Income
First quarter noninterest income was $2,149 million, which was
$5 million (0.2 percent) lower than the first quarter of 2015. The
year-over-year decrease in noninterest income was primarily due to
a decrease in mortgage banking revenue, partially offset by
increases in credit and debit card revenue, trust and investment
management fees, and merchant processing services revenue. Mortgage
banking revenue decreased $53 million (22.1 percent) primarily due
to lower origination and sales revenue driven by lower volume (a 10
percent decline) and lower pricing as a result of market
competition. Credit and debit card revenue increased $25 million
(10.4 percent) reflecting higher transaction volumes including
acquired portfolios. Trust and investment management fees increased
$17 million (5.3 percent), reflecting lower fee waivers. Merchant
processing services revenue increased $14 million (3.9 percent) as
a result of higher transaction volumes and equipment sales to
merchants related to new chip card technology requirements.
Adjusted for the approximate $9 million impact of foreign currency
rate changes, year-over-year merchant processing services revenue
growth would have been approximately 6.4 percent.
Noninterest income was $191 million (8.2 percent) lower in the
first quarter of 2016 than the fourth quarter of 2015. The decrease
in noninterest income on a linked quarter basis reflected the
impact of the fourth quarter 2015 HSA deposit sale along with
seasonally lower fee-based revenue. Seasonally lower fee-based
revenue includes credit and debit card revenue, merchant processing
services revenue and deposit service charges. Credit and debit card
revenue decreased $28 million (9.5 percent), primarily due to
seasonally lower transaction volumes, partially offset by the
impact of recent portfolio acquisitions. Merchant processing
services revenue decreased $20 million (5.1 percent) as a result of
seasonally lower product fees and lower equipment sales to
merchants related to chip card technology requirements. Deposit
service charges decreased $14 million (7.7 percent) due to
seasonally lower transaction volumes. Commercial products revenue
decreased $25 million (11.3 percent) due to lower commercial
leasing revenue and lower syndication fees, while mortgage banking
revenue was $24 million (11.4 percent) lower, driven by an
unfavorable change in the valuation of mortgage servicing rights,
net of hedging activities. Other income decreased $85 million (31.6
percent) reflecting the impact of the prior quarter HSA deposit
sale, lower sales of tax credits and lower retail leasing revenue
due to lower end-of-term gains on auto leases driven by lower used
car values.
NONINTEREST EXPENSE
Table 7
($ in millions)
Percent Percent Change Change
1Q 4Q 1Q 1Q16 vs 1Q16 vs
2016 2015 2015
4Q15 1Q15 Compensation $1,249 $1,212
$1,179 3.1 5.9 Employee benefits 300 272 317 10.3 (5.4 ) Net
occupancy and equipment 248 246 247 .8 .4 Professional services 98
125 77 (21.6 ) 27.3 Marketing and business development 77 96 70
(19.8 ) 10.0 Technology and communications 233 230 214 1.3 8.9
Postage, printing and supplies 79 74 82 6.8 (3.7 ) Other
intangibles 45 46 43 (2.2 ) 4.7 Other 420 508 436
(17.3 ) (3.7 ) Total noninterest expense $2,749
$2,809 $2,665 (2.1 ) 3.2
Noninterest Expense
First quarter noninterest expense was $2,749 million, which was
$84 million (3.2 percent) higher than the first quarter of 2015
primarily due to increased compensation expense, professional
services expense, and technology and communications expense,
partially offset by lower employee benefits and other noninterest
expense. Compensation expense increased $70 million (5.9 percent),
principally due to the impact of merit increases and one additional
day in the first quarter of 2016 along with higher variable
compensation including performance-based incentives and stock-based
compensation, which included a one-time all-employee grant.
Professional services expense increased $21 million (27.3 percent)
primarily due to compliance-related matters, while technology and
communications expense increased $19 million (8.9 percent)
reflecting acquisition conversion costs. Offsetting these increases
were lower employee benefits expense of $17 million (5.4 percent),
mainly due to lower pension costs, and a $16 million (3.7 percent)
decrease in other noninterest expense, primarily reflecting the
impact of lower mortgage servicing-related expenses as well as
proceeds from an insurance recovery.
Noninterest expense decreased $60 million (2.1 percent) on a
linked quarter basis driven by seasonally lower costs related to
investments in tax-advantaged projects and lower professional
services expense, partially offset by higher compensation and
employee benefits expense. Other noninterest expense decreased $88
million (17.3 percent) reflecting seasonally lower costs related to
investments in tax-advantaged projects and the insurance recovery.
Professional services expense was $27 million (21.6 percent) lower
compared with the fourth quarter of 2015 due to lower costs related
to legal and other compliance-related matters. Partially offsetting
these declines was an increase in compensation expense of $37
million (3.1 percent) reflecting the seasonal impact of variable
compensation including stock-based compensation grants, and a $28
million (10.3 percent) increase in employee benefits expense,
driven by seasonally higher payroll tax expense.
Provision for Income Taxes
The provision for income taxes for the first quarter of 2016
resulted in a tax rate on a taxable-equivalent basis of 28.4
percent (effective tax rate of 26.5 percent), compared with 27.0
percent (effective tax rate of 24.9 percent) in the first quarter
of 2015, and 29.0 percent (effective tax rate of 27.2 percent) in
the fourth quarter of 2015. The year-over-year increase was the
result of resolution of certain tax matters in the first quarter of
2015.
ALLOWANCE FOR CREDIT
LOSSES
Table 8
($ in millions)
1Q 4Q
3Q 2Q
1Q 2016 % (b) 2015
% (b) 2015 % (b)
2015 % (b) 2015 %
(b) Balance, beginning of period $4,306 $4,306 $4,326
$4,351 $4,375 Net charge-offs Commercial 78 .37 58 .28 68
.34 39 .20 40 .21 Lease financing 5 .38 5 .38 3
.23 3 .23 3 .23 Total commercial 83 .37 63 .29
71 .33 42 .20 43 .21 Commercial mortgages (2 ) (.03 ) 2 .02 -- -- 4
.05 (1 ) (.01 ) Construction and development (3 ) (.11 ) (2 ) (.08
) (11 ) (.43 ) (3 ) (.12 ) (17 ) (.72 ) Total commercial real
estate (5 ) (.05 ) -- -- (11 ) (.10 ) 1 .01 (18 ) (.17 )
Residential mortgages 19 .14 16 .12 25 .19 33 .26 35 .28
Credit card 164 3.26 166 3.50 153 3.38 169 3.85 163 3.71
Retail leasing 1 .08 1 .08 2 .14 1 .07 1 .07 Home equity and second
mortgages 2 .05 6 .15 7 .17 11 .28 14 .36 Other 51 .69 53
.71 45 .65 39 .62 41 .60 Total other
retail 54 .43 60 .47 54 .44 51 .43 56 .46 Total net charge-offs,
excluding covered loans 315 .49
305 .48 292 .47 296 .49 279 .47 Covered loans -- -- --
-- -- -- -- -- -- -- Total net
charge-offs 315 .48 305 .47 292 .46 296 .48 279 .46 Provision for
credit losses 330 305 282 281 264 Other changes (a) (1 ) --
(10 ) (10 ) (9 ) Balance, end of period $4,320 $4,306
$4,306 $4,326 $4,351 Components
Allowance for loan losses $3,853 $3,863 $3,965 $4,013 $4,023
Liability for unfunded credit
commitments
467 443 341 313 328 Total
allowance for credit losses $4,320 $4,306 $4,306
$4,326 $4,351 Gross charge-offs $405
$381 $372 $380 $383 Gross recoveries $90 $76 $80 $84 $104
Allowance for credit losses as a percentage of Period-end loans,
excluding covered loans 1.65 1.67 1.71 1.76 1.79 Nonperforming
loans, excluding covered loans 302 360 347 348 321 Nonperforming
assets, excluding covered assets 255 288 280 279 261
Period-end loans 1.63 1.65 1.69 1.74 1.77 Nonperforming loans 303
361 347 349 322 Nonperforming assets 251 283 275 274 257
(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 first quarter
of 2016 was $330 million, which was $25 million (8.2 percent)
higher than the prior quarter and $66 million (25.0 percent) higher
than the first quarter of 2015. The increase in provision was
driven by deterioration in the Company’s energy-related commercial
loan portfolio, reflected by an increase in the Company’s
criticized and nonperforming loans. Credit quality, excluding the
energy-related loan portfolio, was relatively stable.
The provision for credit losses was $15 million higher than net
charge-offs in the first quarter of 2016, equal to net charge-offs
in the fourth quarter of 2015 and $15 million lower than net
charge-offs in the first quarter of 2015. The first quarter
provision reflects an increase in energy-related credit reserves
partially offset by lower reserves related to the Company’s retail
portfolios. Total net charge-offs in the first quarter of 2016 were
$315 million, compared with $305 million in the fourth quarter of
2015, and $279 million in the first quarter of 2015. Net
charge-offs increased $10 million (3.3 percent) compared with the
fourth quarter of 2015 mainly due to higher commercial loan
charge-offs primarily related to the energy portfolio. Net
charge-offs increased $36 million (12.9 percent) compared with the
first quarter of 2015 primarily due to higher commercial loan net
charge-offs mainly related to the energy portfolio, partially
offset by lower charge-offs related to residential mortgages. The
net charge-off ratio was 0.48 percent in the first quarter of 2016
compared with 0.47 percent in the fourth quarter of 2015 and 0.46
percent in the first quarter of 2015.
Nonperforming assets increased to $1,719 million at March 31,
2016, compared with $1,523 million at December 31, 2015, and $1,696
million at March 31, 2015. The ratio of nonperforming assets to
loans and other real estate was 0.65 percent at March 31, 2016,
compared with 0.58 percent at December 31, 2015, and 0.69 percent
at March 31, 2015. The increase in nonperforming assets on both a
year-over-year and linked quarter basis was driven by commercial
loans to energy-related businesses, partially offset by
improvements in the Company’s residential and commercial real
estate portfolios. Accruing loans 90 days or more past due were
$804 million ($528 million excluding covered loans) at March 31,
2016 compared with $831 million ($541 million excluding covered
loans) at December 31, 2015, and $880 million ($521 million
excluding covered loans) at March 31, 2015.
The allowance for credit losses was $4,320 million at March 31,
2016, compared with $4,306 at December 31, 2015, and $4,351 at
March 31, 2015. The ratio of the allowance for credit losses to
period-end loans was 1.63 percent at March 31, 2016, compared with
1.65 percent at December 31, 2015, and 1.77 percent at March 31,
2015. The ratio of the allowance for credit losses to nonperforming
loans was 303 percent at March 31, 2016, compared with 361 percent
at December 31, 2015, and 322 percent at March 31, 2015.
At March 31, 2016, approximately $3.4 billion of commercial
loans ($11.9 billion of commitments) were to customers in
energy-related businesses. Energy-related loans represent 1.3
percent of the Company’s total loans outstanding. The continued
uncertainty in energy prices has resulted in further deterioration
of a portion of these loans which led to an increase in criticized
commitments and nonperforming loans on both a year-over-year and
linked quarter basis. Energy-related criticized commitments
increased by $2.3 billion in the quarter. Excluding energy-related
commitments, criticized assets were 4.8 percent higher linked
quarter. Energy-related nonperforming loans increased by $257
million in the first quarter of 2016. Excluding energy-related
loans, nonperforming assets decreased 4.1 percent linked quarter.
At March 31, 2016, the Company had credit reserves of 9.1 percent
of total outstanding energy loan balances, compared with 5.4
percent of total outstanding energy loan balances at December 31,
2015.
DELINQUENT LOAN RATIOS AS A
PERCENT OF ENDING LOAN BALANCES Table 9
(Percent)
Mar 31
Dec 31 Sep 30 Jun 30 Mar 31 2016
2015 2015 2015
2015 Delinquent loan ratios - 90 days or more past
due
excluding nonperforming loans Commercial .05 .05 .05 .05
.05 Commercial real estate .04 .03 .05 .05 .07 Residential
mortgages .31 .33 .33 .30 .33 Credit card 1.10 1.09 1.10 1.03 1.19
Other retail .15 .15 .14 .14 .15 Total loans, excluding covered
loans .20 .21 .20 .19 .22 Covered loans 6.23 6.31 6.57 6.66 7.01
Total loans .30 .32 .32 .32 .36 Delinquent loan ratios - 90
days or more past due
including nonperforming loans
Commercial .57 .25 .25 .16 .16 Commercial real estate .28 .33 .39
.46 .58 Residential mortgages 1.54 1.66 1.73 1.80 1.95 Credit card
1.14 1.13 1.16 1.12 1.32 Other retail .45 .46 .47 .51 .55 Total
loans, excluding covered loans .75 .67 .70 .70 .77 Covered loans
6.39 6.48 6.80 6.88 7.25 Total loans .84 .78 .81 .82 .91
ASSET QUALITY Table
10 ($ in millions)
Mar 31 Dec 31 Sep 30 Jun
30 Mar 31 2016 2015
2015 2015 2015 Nonperforming
loans Commercial $457 $160 $157 $78 $74 Lease financing 16
14 12 12 13 Total commercial 473 174 169 90 87
Commercial mortgages 94 92 105 116 142 Construction and
development 10 35 39 59 75 Total
commercial real estate 104 127 144 175 217 Residential
mortgages 677 712 735 769 825 Credit card 7 9 12 16 22 Other retail
157 162 171 178 187 Total nonperforming
loans, excluding covered loans 1,418 1,184 1,231 1,228 1,338
Covered loans 7 8 11 11 12 Total
nonperforming loans 1,425 1,192 1,242 1,239 1,350 Other real
estate (a) 242 280 276 287 293 Covered other real estate (a) 33 32
31 35 37 Other nonperforming assets 19 19 18
16 16 Total nonperforming assets (b) $1,719
$1,523 $1,567 $1,577 $1,696 Total
nonperforming assets, excluding covered assets $1,679 $1,483
$1,525 $1,531 $1,647
Accruing loans 90 days or more past
due, excluding covered loans
$528 $541 $510 $469 $521
Accruing loans 90 days or more past due $804 $831
$825 $801 $880
Performing restructured loans, excluding
GNMA and covered loans
$2,735 $2,766 $2,746 $2,815 $2,684
Performing restructured GNMA and covered loans $1,851
$1,944 $2,031 $2,111 $2,186
Nonperforming assets to loans plus
ORE, excluding covered assets (%)
.64 .58 .61 .63 .68 Nonperforming assets to loans plus ORE
(%) .65 .58 .61 .63 .69 (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.
COMMON SHARES
Table 11 (Millions)
1Q
4Q 3Q 2Q 1Q
2016 2015 2015
2015 2015 Beginning shares outstanding
1,745 1,754 1,767 1,780 1,786
Shares issued for stock incentive
plans, acquisitions and other corporate purposes
3 1 3 1 6 Shares repurchased (16 ) (10 ) (16 )
(14 ) (12 ) Ending shares outstanding 1,732
1,745 1,754 1,767 1,780
Capital Management
Total U.S. Bancorp shareholders’ equity was $46.8 billion at
March 31, 2016, compared with $46.1 billion at December 31, 2015,
and $44.3 billion at March 31, 2015. During the first quarter, the
Company returned 80 percent of earnings to shareholders through
dividends and share buybacks.
CAPITAL POSITION
Table 12
($ in millions)
Mar 31 Dec 31
Sep 30 Jun 30 Mar 31
2016 2015 2015
2015 2015 Total
U.S. Bancorp shareholders' equity $46,755 $46,131 $45,075 $44,537
$44,277
Standardized Approach Basel III
transitional standardized approach Common equity tier 1 capital
$32,827 $32,612 $32,124 $31,674 $31,308 Tier 1 capital 38,532
38,431 37,197 36,748 36,382 Total risk-based capital 45,412 45,313
44,015 43,526 43,558 Common equity tier 1 capital ratio 9.5
% 9.6 % 9.6 % 9.5 % 9.6 % Tier 1 capital ratio 11.1 11.3 11.1 11.0
11.1 Total risk-based capital ratio 13.1 13.3 13.1 13.1 13.3
Leverage ratio 9.3 9.5 9.3 9.2 9.3
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III
fully implemented standardized approach
9.2 9.1 9.2 9.2 9.2
Advanced Approaches
Common equity tier 1 capital to
risk-weighted assets for the Basel III transitional advanced
approaches
12.3 12.5 13.0 12.9 12.3
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III
fully implemented advanced approaches
11.9 11.9 12.4 12.4 11.8
Tangible common equity to
tangible assets 7.7 7.6 7.7 7.5 7.6
Tangible common equity
to risk-weighted assets 9.3 9.2 9.3 9.2 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 estimated common equity tier 1
capital to risk-weighted assets ratio using the Basel III fully
implemented standardized approach was 9.2 percent at March 31,
2016, compared with 9.1 percent at December 31, 2015, and 9.2
percent at March 31, 2015. The estimated common equity tier 1
capital to risk-weighted assets ratio using the Basel III fully
implemented advanced approaches method was 11.9 percent at March
31, 2016, compared with 11.9 percent at December 31, 2015, and 11.8
percent at March 31, 2015.
On Wednesday, April 20, 2016, at 8:00 a.m. CDT, Richard K.
Davis, chairman 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 43811314. For those unable to participate
during the live call, a recording will be available at
approximately 11:00 a.m. CDT on Wednesday, April 20 and be
accessible through Wednesday, April 27 at 11:00 p.m. CDT. 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 43811314.
Minneapolis-based U.S. Bancorp (“USB”), with $429 billion in
assets as of March 31, 2016, is the parent company of U.S. Bank
National Association, the fifth largest commercial bank in the
United States. The Company operates 3,129 banking offices in 25
states and 4,954 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, 2015, 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 (Dollars and Shares in Millions, Except
Per Share Data) March 31, (Unaudited) 2016
2015
Interest Income Loans $2,644
$2,493 Loans held for sale 31 41 Investment securities 517 495
Other interest income 29 32 Total
interest income 3,221 3,061
Interest Expense Deposits 139
118 Short-term borrowings 65 61 Long-term debt 182
184 Total interest expense 386
363 Net interest income 2,835 2,698 Provision for credit
losses 330 264 Net interest income
after provision for credit losses 2,505 2,434
Noninterest
Income Credit and debit card revenue 266 241 Corporate payment
products revenue 170 170 Merchant processing services 373 359 ATM
processing services 80 78 Trust and investment management fees 339
322 Deposit service charges 168 161 Treasury management fees 142
137 Commercial products revenue 197 200 Mortgage banking revenue
187 240 Investment products fees 40 47 Securities gains (losses),
net 3 -- Other 184 199 Total
noninterest income 2,149 2,154
Noninterest Expense
Compensation 1,249 1,179 Employee benefits 300 317 Net occupancy
and equipment 248 247 Professional services 98 77 Marketing and
business development 77 70 Technology and communications 233 214
Postage, printing and supplies 79 82 Other intangibles 45 43 Other
420 436 Total noninterest expense 2,749
2,665 Income before income taxes 1,905
1,923 Applicable income taxes 504 479
Net income 1,401 1,444 Net (income) loss attributable to
noncontrolling interests (15 ) (13 ) Net income
attributable to U.S. Bancorp $1,386 $1,431
Net income applicable to U.S. Bancorp common shareholders
$1,329 $1,365 Earnings per
common share $.77 $.77 Diluted earnings per common share $.76 $.76
Dividends declared per common share $.255 $.245 Average common
shares outstanding 1,737 1,781 Average diluted common shares
outstanding 1,743 1,789
U.S. Bancorp
Consolidated Ending Balance Sheet
March 31, December 31, March 31, (Dollars in
Millions) 2016 2015 2015
Assets
(Unaudited) (Unaudited) Cash and due from banks $10,981 $11,147
$14,072 Investment securities Held-to-maturity 42,113 43,590 45,597
Available-for-sale 64,912 61,997 56,826 Loans held for sale 4,005
3,184 8,012 Loans Commercial 91,277 88,402 82,732 Commercial real
estate 42,743 42,137 42,409 Residential mortgages 54,955 53,496
51,089 Credit card 19,957 21,012 17,504 Other retail 51,161
51,206 46,449 Total loans, excluding
covered loans 260,093 256,253 240,183 Covered loans 4,429
4,596 5,118 Total loans 264,522 260,849
245,301 Less allowance for loan losses (3,853 ) (3,863 )
(4,023 ) Net loans 260,669 256,986 241,278 Premises and
equipment 2,486 2,513 2,575 Goodwill 9,368 9,361 9,363 Other
intangible assets 3,042 3,350 3,033 Other assets 31,062
29,725 29,477 Total assets $428,638
$421,853 $410,233
Liabilities and Shareholders' Equity Deposits
Noninterest-bearing $80,407 $83,766 $79,220 Interest-bearing
225,941 216,634 207,381 Total
deposits 306,348 300,400 286,601 Short-term borrowings 23,777
27,877 28,226 Long-term debt 34,872 32,078 35,104 Other liabilities
16,248 14,681 15,337 Total
liabilities 381,245 375,036 365,268 Shareholders' equity Preferred
stock 5,501 5,501 4,756 Common stock 21 21 21 Capital surplus 8,368
8,376 8,315 Retained earnings 47,267 46,377 43,463 Less treasury
stock (13,658 ) (13,125 ) (11,564 ) Accumulated other comprehensive
income (loss) (744 ) (1,019 ) (714 ) Total U.S.
Bancorp shareholders' equity 46,755 46,131 44,277 Noncontrolling
interests 638 686 688 Total
equity 47,393 46,817 44,965
Total liabilities and equity $428,638 $421,853
$410,233
U.S. Bancorp
Non-GAAP Financial Measures March
31, December 31, September 30, June 30, March 31, (Dollars in
Millions, Unaudited) 2016 2015
2015 2015 2015 Total equity
$47,393 $46,817 $45,767 $45,231 $44,965 Preferred stock (5,501 )
(5,501 ) (4,756 ) (4,756 ) (4,756 ) Noncontrolling interests (638 )
(686 ) (692 ) (694 ) (688 ) Goodwill (net of deferred tax
liability) (1) (8,270 ) (8,295 ) (8,324 ) (8,350 ) (8,360 )
Intangible assets, other than mortgage servicing rights (820 )
(838 ) (779 ) (744 )
(783 ) Tangible common equity (a) 32,164
31,497 31,216 30,687 30,378 Tangible common equity (as
calculated above) 32,164 31,497 31,216 30,687 30,378 Adjustments
(2) 99 67 118
125 158
Common equity tier 1 capital estimated for
the Basel III fully implemented standardized and advanced
approaches (b)
32,263 31,564 31,334 30,812 30,536 Total assets 428,638
421,853 415,943 419,075 410,233 Goodwill (net of deferred tax
liability) (1) (8,270 ) (8,295 ) (8,324 ) (8,350 ) (8,360 )
Intangible assets, other than mortgage servicing rights (820 )
(838 ) (779 ) (744 )
(783 ) Tangible assets (c) 419,548 412,720
406,840 409,981 401,090
Risk-weighted assets, determined in
accordance with prescribed transitional standardized approach
regulatory requirements (d)
346,227 * 341,360 336,227 333,177 327,709 Adjustments (3) 3,485
* 3,892 3,532
3,532 3,153
Risk-weighted assets estimated for the
Basel III fully implemented standardized approach (e)
349,712 * 345,252 339,759 336,709 330,862
Risk-weighted assets, determined in
accordance with prescribed transitional advanced approaches
regulatory requirements
267,309 * 261,668 248,048 245,038 254,892 Adjustments (4) 3,707
* 4,099 3,723
3,721 3,321
Risk-weighted assets estimated for the
Basel III fully implemented advanced approaches (f)
271,016 * 265,767 251,771 248,759 258,213
Ratios *
Tangible common equity to tangible assets (a)/(c) 7.7 % 7.6 % 7.7 %
7.5 % 7.6 % Tangible common equity to risk-weighted assets (a)/(d)
9.3 9.2 9.3 9.2 9.3
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully
implemented standardized approach (b)/(e)
9.2 9.1 9.2 9.2 9.2
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully
implemented advanced approaches (b)/(f)
11.9 11.9 12.4
12.4 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/20160420005735/en/
U.S. BancorpDana Ripley, 612-303-3167MediaorJennifer
Thompson, 612-303-0778Investors/Analysts
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