Earnings Per Diluted Common Share of
$0.82
Return on average assets of 1.35 percent and
average common equity of 13.3 percent
Returned 78 percent of earnings to
shareholders
U.S. Bancorp (NYSE: USB) today reported net income of $1,473
million for the first quarter of 2017, or $0.82 per diluted common
share, compared with $1,386 million, or $0.76 per diluted common
share, in the first quarter of 2016.
Highlights for the first quarter of 2017 included:
- Industry-leading return on average
assets of 1.35 percent and return on average common equity of 13.3
percent
- Net interest income (taxable-equivalent
basis) grew 3.7 percent year-over-year and declined slightly on a
linked quarter basis due to fewer days in the quarter
- Net interest margin of 3.03 percent for
the first quarter of 2017 decreased 3 basis points from the first
quarter of 2016, due to loan mix and reinvestment yields, and grew
5 basis points over the fourth quarter of 2016, due to the
favorable impact of higher interest rates
- Average total loans grew 4.1 percent
over the first quarter of 2016 and 0.2 percent linked quarter
- Noninterest income increased 8.4
percent on a year-over-year basis
- Payment services revenue increased 4.9
percent led by credit and debit card revenue growth of 9.8
percent
- Trust and investment management fees
increased 8.6 percent
- Mortgage banking revenue increased 10.7
percent
- Nonperforming assets decreased 13.0
percent on a year-over-year basis and 6.7 percent on a linked
quarter basis
- Strong capital position. At March 31,
2017, the estimated common equity tier 1 capital to risk-weighted
assets ratio was 9.2 percent using the Basel III fully implemented
standardized approach and was 11.5 percent using the Basel III
fully implemented advanced approaches method.
EARNINGS
SUMMARY
Table 1 ($ in millions, except
per-share data)
Percent Percent Change
Change 1Q 4Q 1Q 1Q17 vs 1Q17
vs 2017 2016
2016 4Q16 1Q16
Net income attributable to U.S. Bancorp $1,473 $1,478 $1,386
(.3 ) 6.3 Diluted earnings per common share $.82 $.82 $.76 -- 7.9
Return on average assets (%) 1.35 1.32 1.32 Return on
average common equity (%) 13.3 13.1 13.0 Net interest margin (%)
3.03 2.98 3.06 Efficiency ratio (%) (a) 55.6 55.3 54.6 Tangible
efficiency ratio (%) (a) 54.8 54.5 53.7 Dividends declared
per common share $.280 $.280 $.255 -- 9.8 Book value per common
share (period end) $25.05 $24.63 $23.82 1.7 5.2
(a) See Non-GAAP Financial Measures
reconciliation at the end of the release
Net income attributable to U.S. Bancorp was $1,473 million for
the first quarter of 2017, 6.3 percent higher than the $1,386
million for the first quarter of 2016, and 0.3 percent lower than
the $1,478 million for the fourth quarter of 2016. Diluted earnings
per common share of $0.82 in the first quarter of 2017 were $0.06
higher than the first quarter of 2016 and were unchanged from the
fourth quarter of 2016. The increase in net income year-over-year
was principally due to total net revenue growth, including an
increase in net interest income of 3.7 percent on a
taxable-equivalent basis (3.9 percent as reported on a GAAP basis),
mainly a result of loan growth, and an increase in noninterest
income of 8.4 percent, driven by higher payment services revenue,
trust and investment management fees and mortgage banking revenue.
This increase was partially offset by higher noninterest expense
due to increased compensation expense related to hiring to support
business growth and compliance programs as well as merit increases
and higher variable compensation expense. The decrease in net
income on a linked quarter basis was principally due to a decrease
in total net revenue of 2.0 percent, reflecting lower net interest
income of 0.3 percent, due to two fewer days, and a decrease in
noninterest income of 4.2 percent driven by seasonally lower
payment services revenue and a decline in mortgage banking revenue.
These decreases were mostly offset by a decline in noninterest
expense of 2.0 percent mainly from seasonally lower costs from
investments in tax-advantaged projects and professional services
expense, along with lower income tax expense.
U.S. Bancorp President and Chief Executive Officer Andy Cecere
said, “U.S. Bancorp once again delivered industry-leading returns
and profitability in the first quarter of 2017 as we leveraged our
diverse business platform and our investments in innovation to
deliver the entire bank to our customers in the ways they want to
interact with us. We strive to continually improve upon our
best-in-class performance, and we are well positioned to do so
against the backdrop of an evolving economic and regulatory
environment.
“In the first quarter, we maintained our industry-leading
performance - a U.S. Bancorp hallmark. Our return on average common
equity was 13.3 percent and, compared to a year ago, diluted
earnings per share grew by 7.9 percent, supported by strong revenue
growth and stable credit quality. We also returned 78 percent of
earnings to shareholders.
"In everything we do at U.S. Bancorp, we work to become the most
trusted choice for our customers, shareholders and communities. In
the first quarter, we were fortunate to be recognized for our
commitment to ethics and integrity by the Ethisphere Institute,
which named U.S. Bank to its World’s Most Ethical Companies list
for the third year in a row. We are proud of this recognition and
how it affirms our culture of trust. It is a culture that was
fortified by our Executive Chairman Richard Davis and a culture
that I will preserve and cultivate in my new role.
“I am excited for the future and working with our employees who
have a unique capability to help U.S. Bancorp deliver consistent
growth while exploring innovations that create dynamic
opportunities with our customers, and accomplishing it all with a
commitment to being our customers’ most trusted partner. We are
well positioned to create long-term value for our shareholders,
customers, communities and employees.”
INCOME
STATEMENT HIGHLIGHTS
Table 2 ($ in millions,
except per-share data)
Percent Percent
Change Change 1Q 4Q 1Q 1Q17
vs 1Q17 vs 2017 2016
2016 4Q16
1Q16 Net interest income $2,945 $2,955 $2,835 (.3 )
3.9 Taxable-equivalent adjustment 50 49
53 2.0 (5.7 ) Net interest income
(taxable-equivalent basis) 2,995 3,004 2,888 (.3 ) 3.7 Noninterest
income 2,329 2,431 2,149
(4.2 ) 8.4 Total net revenue 5,324 5,435 5,037 (2.0 ) 5.7
Noninterest expense 2,944 3,004
2,749 (2.0 ) 7.1 Income before provision and income
taxes 2,380 2,431 2,288 (2.1 ) 4.0 Provision for credit losses 345
342 330 .9 4.5
Income before taxes 2,035 2,089 1,958 (2.6 ) 3.9
Income taxes and taxable-equivalent
adjustment
549 598 557 (8.2 )
(1.4 ) Net income 1,486 1,491 1,401 (.3 ) 6.1
Net (income) loss attributable to
noncontrolling interests
(13 ) (13 ) (15 ) -- 13.3 Net income
attributable to U.S. Bancorp $1,473 $1,478
$1,386 (.3 ) 6.3
Net income applicable to U.S. Bancorp
common shareholders
$1,387 $1,391 $1,329
(.3 ) 4.4 Diluted earnings per common share $.82
$.82 $.76 -- 7.9
NET INTEREST INCOME
Table 3
(Taxable-equivalent basis; $ in millions)
Change
Change 1Q 4Q 1Q 1Q17 vs 1Q17
vs 2017 2016
2016 4Q16 1Q16
Components of net interest income Income on earning assets $3,451
$3,424 $3,275 $27 $176 Expense on interest-bearing liabilities 456
420 387
36 69 Net interest income $2,995
$3,004 $2,888
$(9 ) $107 Average yields
and rates paid Earning assets yield 3.49 % 3.40 % 3.48 % .09 % .01
% Rate paid on interest-bearing liabilities .62
.57 .56 .05
.06 Gross interest margin 2.87 %
2.83 % 2.92 % .04 % (.05
)% Net interest margin 3.03 % 2.98 %
3.06 % .05 % (.03 )% Average
balances Investment securities (a) $110,764 $110,386 $106,031 $378
$4,733 Loans 273,158 272,671 262,281 487 10,877 Earning assets
399,281 401,971 378,208 (2,690 ) 21,073 Interest-bearing
liabilities 296,170 295,288 279,516 882 16,654 (a) Excludes
unrealized gain (loss)
Net Interest Income
Net interest income on a taxable-equivalent basis in the first
quarter of 2017 was $2,995 million, an increase of $107 million
(3.7 percent) over the first quarter of 2016. The increase was
principally driven by loan growth, partially offset by a lower net
interest margin. Average earning assets were $21.1 billion (5.6
percent) higher than the first quarter of 2016, driven by increases
of $10.9 billion (4.1 percent) in average total loans, $4.7 billion
(4.5 percent) in average investment securities and higher average
cash balances. Net interest income on a taxable-equivalent basis
decreased $9 million (0.3 percent) linked quarter driven by the
impact of two fewer days in the first quarter. In addition, higher
net interest margin was partially offset by lower average earning
assets, mainly average loans held for sale and average cash
balances.
The net interest margin in the first quarter of 2017 was 3.03
percent, compared with 3.06 percent in the first quarter of 2016,
and 2.98 percent in the fourth quarter of 2016. The decrease in the
net interest margin of 3 basis points on a year-over-year basis
reflected the net impact of loan mix, lower yield on securities
purchased, higher rates paid on deposits, and a shift in
interest-bearing liabilities mix. On a linked quarter basis, the
increase of 5 basis points was principally due to the benefit of
asset repricing during a period of rising rates.
Investment Securities
Average investment securities in the first quarter of 2017 were
$4.7 billion (4.5 percent) higher year-over-year and $378 million
(0.3 percent) higher than the prior quarter. These increases were
primarily due to purchases of U.S. Treasury securities, partially
offset by a reduction in U.S. government agency-backed securities,
net of prepayments and maturities, in support of liquidity
management.
AVERAGE
LOANS
Table 4 ($ in millions)
Percent
Percent Change Change 1Q
4Q 1Q 1Q17 vs 1Q17 vs 2017
2016 2016
4Q16 1Q16 Commercial $88,284
$88,448 $84,582 (.2 ) 4.4 Lease financing 5,455 5,359
5,238 1.8 4.1 Total commercial 93,739 93,807 89,820
(.1 ) 4.4 Commercial mortgages 31,461 31,767 31,836 (1.0 )
(1.2 ) Construction and development 11,697 11,624
10,565 .6 10.7 Total commercial real estate 43,158
43,391 42,401 (.5 ) 1.8 Residential mortgages 57,900 56,718
54,208 2.1 6.8 Credit card 20,845 20,942 20,244 (.5 ) 3.0
Retail leasing 6,469 6,191 5,179 4.5 24.9 Home equity and
second mortgages 16,259 16,444 16,368 (1.1 ) (.7 ) Other 31,056
31,245 29,550 (.6 ) 5.1 Total other
retail 53,784 53,880 51,097 (.2 ) 5.3
Total loans, excluding covered loans 269,426
268,738 257,770 .3 4.5 Covered loans 3,732
3,933 4,511 (5.1 ) (17.3 ) Total
loans $273,158 $272,671 $262,281 .2 4.1
Loans
Average total loans were $10.9 billion (4.1 percent) higher in
the first quarter of 2017 than the first quarter of 2016. The
increase was due to growth in total commercial loans (4.4 percent),
residential mortgages (6.8 percent), total other retail loans (5.3
percent), total commercial real estate (1.8 percent) and credit
card loans (3.0 percent). These increases were partially offset by
run-off in the covered loans portfolio (17.3 percent). Average
total loans were $487 million (0.2 percent) higher in the first
quarter of 2017 than the fourth quarter of 2016. This increase was
primarily driven by linked quarter growth in residential mortgages
(2.1 percent) and retail leasing (4.5 percent), partially offset by
a decline in total commercial real estate (0.5 percent), home
equity and second mortgages (1.1 percent) and covered loans (5.1
percent).
AVERAGE
DEPOSITS
Table 5 ($ in millions)
Percent
Percent Change Change 1Q
4Q 1Q 1Q17 vs 1Q17 vs 2017
2016 2016
4Q16 1Q16 Noninterest-bearing
deposits $80,738 $84,892 $78,569 (4.9 ) 2.8 Interest-bearing
savings deposits Interest checking 65,681 64,647 57,910 1.6 13.4
Money market savings 108,759 106,637 86,462 2.0 25.8 Savings
accounts 42,609 41,310 39,250 3.1 8.6
Total savings deposits 217,049 212,594 183,622 2.1 18.2 Time
deposits 30,646 31,697 33,687 (3.3 )
(9.0 ) Total interest-bearing deposits 247,695
244,291 217,309 1.4 14.0 Total deposits $328,433
$329,183 $295,878 (.2 ) 11.0
Deposits
Average total deposits for the first quarter of 2017 were $32.6
billion (11.0 percent) higher than the first quarter of 2016.
Average noninterest-bearing deposits increased $2.2 billion (2.8
percent) year-over-year mainly in Consumer and Small Business
Banking and Wealth Management and Securities Services. Average
total savings deposits were $33.4 billion (18.2 percent) higher
year-over-year, the result of growth across all business lines.
Average time deposits were $3.0 billion (9.0 percent) lower than
the prior year quarter. Changes in time deposits are largely
related to those deposits managed as an alternative to other
funding sources such as wholesale borrowing, based largely on
relative pricing and liquidity characteristics.
Average total deposits decreased $750 million (0.2 percent) from
the fourth quarter of 2016. On a linked quarter basis, average
noninterest-bearing deposits seasonally decreased $4.2 billion (4.9
percent) across all business lines, while average total savings
deposits grew $4.5 billion (2.1 percent) reflecting increases in
Consumer and Small Business Banking and Wealth Management and
Securities Services, partially offset by decreases in Wholesale
Banking and Commercial Real Estate. Average time deposits, which
are managed based on funding needs, relative pricing, and liquidity
characteristics, decreased $1.1 billion (3.3 percent) on a linked
quarter basis.
NONINTEREST
INCOME
Table 6 ($ in millions)
Percent
Percent Change Change 1Q
4Q 1Q 1Q17 vs 1Q17 vs 2017
2016 2016
4Q16 1Q16 Credit and debit card
revenue $292 $316 $266 (7.6 ) 9.8 Corporate payment products
revenue 179 171 170 4.7 5.3 Merchant processing services 378 404
373 (6.4 ) 1.3 ATM processing services 85 87 80 (2.3 ) 6.3 Trust
and investment management fees 368 368 339 -- 8.6 Deposit service
charges 177 186 168 (4.8 ) 5.4 Treasury management fees 153 147 142
4.1 7.7 Commercial products revenue 207 217 197 (4.6 ) 5.1 Mortgage
banking revenue 207 240 187 (13.8 ) 10.7 Investment products fees
40 38 40 5.3 -- Securities gains (losses), net 29 6 3
nm
nm
Other 214 251 184 (14.7 ) 16.3
Total noninterest income $2,329 $2,431
$2,149 (4.2 ) 8.4
Noninterest Income
First quarter noninterest income of $2,329 million was $180
million (8.4 percent) higher than the first quarter of 2016, driven
by increases in payment services revenue, trust and investment
management fees, mortgage banking and other revenue. Payment
services revenue was higher principally due to an increase in
credit and debit card revenue of $26 million (9.8 percent),
reflecting higher sales volumes. Merchant processing services
revenue increased $5 million (1.3 percent). Adjusted for the
approximate $5 million impact of foreign currency rate changes,
year-over-year merchant processing services revenue increased
approximately 2.7 percent. Trust and investment management fees
increased $29 million (8.6 percent) primarily due to improved
market conditions and account growth, along with lower money market
fee waivers. Mortgage banking revenue increased $20 million (10.7
percent) mainly due to the valuation of mortgage servicing rights,
net of hedging activities. Other income increased $30 million (16.3
percent) compared with the prior year quarter, primarily due to
higher equity investment income in the first quarter of 2017.
Noninterest income was $102 million (4.2 percent) lower in the
first quarter of 2017 than the fourth quarter of 2016 driven by an
expected decline in mortgage banking revenue and other income,
along with seasonally lower fee-based revenue including credit and
debit card revenue, merchant processing services revenue and
deposit service charges, partially offset by securities gains.
Mortgage banking revenue decreased $33 million (13.8 percent),
reflecting seasonality and lower origination and sales volume.
Other income decreased $37 million (14.7 percent) primarily driven
by lower syndication revenue related to refinancings from tax
credits. Credit and debit card revenue decreased $24 million (7.6
percent) mainly due to seasonally lower sales volume. Merchant
processing services revenue decreased $26 million (6.4 percent)
primarily as a result of seasonality and the timing of marketing
incentives from card associations. Deposit service charges
decreased $9 million (4.8 percent) due to seasonally lower
transaction volumes, while commercial products revenue decreased
$10 million (4.6 percent) due to lower syndication fees.
NONINTEREST
EXPENSE
Table 7 ($ in millions)
Percent
Percent Change Change 1Q
4Q 1Q 1Q17 vs 1Q17 vs 2017
2016 2016
4Q16 1Q16 Compensation $1,391
$1,357 $1,249 2.5 11.4 Employee benefits 314 261 300 20.3 4.7 Net
occupancy and equipment 247 247 248 -- (.4 ) Professional services
96 156 98 (38.5 ) (2.0 ) Marketing and business development 90 107
77 (15.9 ) 16.9 Technology and communications 235 238 233 (1.3 ) .9
Postage, printing and supplies 81 75 79 8.0 2.5 Other intangibles
44 45 45 (2.2 ) (2.2 ) Other 446 518
420 (13.9 ) 6.2 Total noninterest expense $2,944
$3,004 $2,749 (2.0 ) 7.1
Noninterest Expense
First quarter noninterest expense of $2,944 million was $195
million (7.1 percent) higher than the first quarter of 2016,
primarily due to higher compensation, employee benefits, marketing
and business development expense and other expense. Compensation
expense increased $142 million (11.4 percent) principally due to
the impact of hiring to support business growth and compliance
programs, merit increases, and higher variable compensation.
Employee benefits expense increased $14 million (4.7 percent)
primarily driven by higher payroll taxes. Marketing and business
development expense increased $13 million (16.9 percent) to support
new business development. Other expense was $26 million (6.2
percent) higher primarily reflecting the impact of the FDIC
insurance surcharge, which began in the third quarter of 2016.
Noninterest expense decreased $60 million (2.0 percent) on a
linked quarter basis driven by seasonally lower costs related to
investments in tax-advantaged projects, lower professional services
and marketing and business development expense, partially offset by
higher employee benefits and compensation expense. Other
noninterest expense decreased $72 million (13.9 percent) primarily
due to seasonally lower costs related to investments in
tax-advantaged projects. Professional services expense was $60
million (38.5 percent) lower primarily due to the timing of
business initiatives and a decrease in costs related to compliance
and legal matters. Marketing and business development expense
decreased $17 million (15.9 percent) due to the timing of certain
marketing campaigns and seasonally lower travel costs. Partially
offsetting these declines was a seasonal increase in employee
benefits expense of $53 million (20.3 percent) primarily driven by
seasonally higher payroll tax and healthcare expenses, in addition
to an increase in compensation expense of $34 million (2.5 percent)
reflecting the impact of variable compensation including the timing
of stock-based compensation grants and merit increases.
Provision for Income Taxes
The provision for income taxes for the first quarter of 2017
resulted in a tax rate on a taxable-equivalent basis of 27.0
percent (effective tax rate of 25.1 percent), compared with 28.4
percent (effective tax rate of 26.5 percent) in the first quarter
of 2016, and 28.6 percent (effective tax rate of 26.9 percent) in
the fourth quarter of 2016. The lower tax rate for the first
quarter of 2017 reflects the tax benefit associated with
stock-based compensation under new accounting guidance effective
the first quarter of 2017. The impact of this guidance is expected
to principally be reflected in the first quarter of each year.
ALLOWANCE FOR CREDIT LOSSES
Table 8 ($
in millions)
1Q 4Q
3Q 2Q 1Q
2017 % (b) 2016 %
(b) 2016 % (b) 2016
% (b) 2016 % (b)
Balance, beginning of period $4,357 $4,338 $4,329 $4,320 $4,306
Net charge-offs Commercial 71 .33 71 .32 84 .38 74 .34 78
.37 Lease financing 4 .30 5 .37 3 .23 5
.38 5 .38 Total commercial 75 .32 76 .32 87 .37 79 .34 83
.37 Commercial mortgages (1 ) (.01 ) (3 ) (.04 ) 5 .06 (4 ) (.05 )
(2 ) (.03 ) Construction and development (1 ) (.03 ) (6 ) (.21 ) (4
) (.14 ) 4 .15 (3 ) (.11 ) Total commercial real estate (2 )
(.02 ) (9 ) (.08 ) 1 .01 -- -- (5 ) (.05 ) Residential
mortgages 12 .08 12 .08 12 .08 17 .12 19 .14 Credit card 190
3.70 181 3.44 161 3.11 170 3.39 164 3.26 Retail leasing 3
.19 1 .06 1 .07 2 .15 1 .08 Home equity and second mortgages (1 )
(.02 ) (1 ) (.02 ) 1 .02 (1 ) (.02 ) 2 .05 Other 58 .76 62
.79 52 .68 50 .68 51 .69 Total other
retail 60 .45 62 .46 54 .41 51 .40 54 .43 Total net charge-offs,
excluding covered loans 335 .50
322 .48 315 .47 317 .49 315 .49 Covered loans -- -- --
-- -- -- -- -- -- -- Total net
charge-offs 335 .50 322 .47 315 .46 317 .48 315 .48 Provision for
credit losses 345 342 325 327 330 Other changes (a) (1 ) (1 ) (1 )
(1 ) (1 ) Balance, end of period $4,366 $4,357 $4,338
$4,329 $4,320 Components Allowance for
loan losses $3,816 $3,813 $3,797 $3,806 $3,853
Liability for unfunded credit
commitments
550 544 541 523 467 Total
allowance for credit losses $4,366 $4,357 $4,338
$4,329 $4,320 Gross charge-offs $417
$405 $398 $407 $405 Gross recoveries $82 $83 $83 $90 $90
Allowance for credit losses as a percentage of
Period-end loans, excluding covered
loans
1.61 1.60 1.61 1.62 1.65
Nonperforming loans, excluding covered
loans
338 317 309 311 302
Nonperforming assets, excluding covered
assets
296 275 264 263 255 Period-end loans 1.60 1.59 1.60 1.61
1.63 Nonperforming loans 338 318 310 312 303 Nonperforming assets
292 272 261 259 251
(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 2017 was $345 million, which was $3 million (0.9 percent) higher
than the prior quarter and $15 million (4.5 percent) higher than
the first quarter of 2016. Credit quality was relatively stable
compared with the fourth quarter of 2016.
The provision for credit losses was $10 million higher than net
charge-offs in the first quarter of 2017, $20 million higher than
net charge-offs in the fourth quarter of 2016, and $15 million
higher than net charge-offs in the first quarter of 2016. The
reserve build for the first quarter of 2017 was $10 million lower
than the prior quarter due to lower portfolio growth and stable
credit quality. Total net charge-offs in the first quarter of 2017
were $335 million, compared with $322 million in the fourth quarter
of 2016, and $315 million in the first quarter of 2016. Net
charge-offs increased $13 million (4.0 percent) compared with the
fourth quarter of 2016 mainly due to seasonally higher credit card
loan net charge-offs and lower total commercial real estate
recoveries. Net charge-offs increased $20 million (6.3 percent)
compared with the first quarter of 2016 primarily due to higher
credit card loan and total other retail net charge-offs, partially
offset by lower net charge-offs related to total commercial and
residential mortgages. The net charge-off ratio was 0.50 percent in
the first quarter of 2017, compared with 0.47 percent in the fourth
quarter of 2016 and 0.48 percent in the first quarter of 2016.
The allowance for credit losses was $4,366 million at March 31,
2017, compared with $4,357 million at December 31, 2016, and $4,320
million at March 31, 2016. The ratio of the allowance for credit
losses to period-end loans was 1.60 percent at March 31, 2017,
compared with 1.59 percent at December 31, 2016, and 1.63 percent
at March 31, 2016. The ratio of the allowance for credit losses to
nonperforming loans was 338 percent at March 31, 2017, compared
with 318 percent at December 31, 2016, and 303 percent at March 31,
2016.
Nonperforming assets were $1,495 million at March 31, 2017,
compared with $1,603 million at December 31, 2016, and $1,719
million at March 31, 2016. The ratio of nonperforming assets to
loans and other real estate was 0.55 percent at March 31, 2017,
compared with 0.59 percent at December 31, 2016, and 0.65 percent
at March 31, 2016. The $108 million (6.7 percent) decrease in
nonperforming assets on a linked quarter basis was driven by
improvements in commercial loans, commercial real estate,
residential mortgages and other real estate. The $224 million (13.0
percent) decrease in nonperforming assets on a year-over-year basis
was driven by commercial loans, residential mortgages and other
real estate. Accruing loans 90 days or more past due were $718
million ($524 million excluding covered loans) at March 31, 2017,
compared with $764 million ($552 million excluding covered loans)
at December 31, 2016, and $804 million ($528 million excluding
covered loans) at March 31, 2016.
DELINQUENT LOAN
RATIOS AS A PERCENT OF ENDING LOAN BALANCES
Table 9 (Percent)
Mar 31 Dec 31 Sep
30 Jun 30 Mar 31 2017
2016 2016 2016
2016 Delinquent loan ratios - 90 days
or more past due
excluding nonperforming loans Commercial
.06 .06 .05 .05 .05 Commercial real estate .01 .02 .02 .03 .04
Residential mortgages .24 .27 .28 .27 .31 Credit card 1.23 1.16
1.11 .98 1.10 Other retail .14 .15 .14 .13 .15 Total loans,
excluding covered loans .19 .20 .19 .18 .20 Covered loans 5.34 5.53
5.72 5.81 6.23 Total loans .26 .28 .28 .27 .30 Delinquent
loan ratios - 90 days or more past due
including
nonperforming loans Commercial .52 .57 .61 .58 .57 Commercial real
estate .27 .31 .26 .27 .28 Residential mortgages 1.23 1.31 1.37
1.39 1.54 Credit card 1.24 1.18 1.13 1.00 1.14 Other retail .43 .45
.42 .43 .45 Total loans, excluding covered loans .67 .71 .72 .70
.75 Covered loans 5.53 5.68 5.89 5.98 6.39 Total loans .73 .78 .79
.79 .84
ASSET QUALITY
Table 10 ($ in millions)
Mar 31
Dec 31 Sep 30 Jun 30 Mar 31 2017
2016 2016
2016 2016 Nonperforming loans
Commercial $397 $443 $477 $450 $457 Lease financing 42
40 40 39 16 Total
commercial 439 483 517 489 473 Commercial mortgages 74 87 98
91 94 Construction and development 36 37
7 12 10 Total commercial real
estate 110 124 105 103 104 Residential mortgages 575 595 614
628 677 Credit card 2 3 4 5 7 Other retail 157 157
153 157 157 Total
nonperforming loans, excluding covered loans 1,283 1,362 1,393
1,382 1,418 Covered loans 7 6 7
7 7 Total nonperforming loans 1,290
1,368 1,400 1,389 1,425 Other real estate (a) 155 186 213
229 242 Covered other real estate (a) 22 26 28 34 33 Other
nonperforming assets 28 23 23
20 19 Total nonperforming assets (b)
$1,495 $1,603 $1,664
$1,672 $1,719 Total nonperforming assets,
excluding covered assets $1,466 $1,571
$1,629 $1,631 $1,679
Accruing loans 90 days or more past due,
excluding covered loans
$524 $552 $518 $478
$528 Accruing loans 90 days or more past due
$718 $764 $748 $724
$804
Performing restructured loans, excluding
GNMA and covered loans
$2,478 $2,557 $2,672
$2,676 $2,735 Performing restructured GNMA and
covered loans $1,746 $1,604 $1,375
$1,602 $1,851
Nonperforming assets to loans plus ORE,
excluding covered assets (%)
.54 .58 .61 .62 .64 Nonperforming assets to loans plus ORE
(%) .55 .59 .61 .62 .65 (a) Includes equity investments in
entities whose principal assets are other real estate owned. (b)
Does not include accruing loans 90 days or more past due.
COMMON
SHARES
Table 11 (Millions)
1Q 4Q 3Q
2Q 1Q 2017
2016 2016 2016
2016 Beginning shares outstanding 1,697
1,705 1,719 1,732 1,745
Shares issued for stock incentive plans,
acquisitions and other corporate purposes
6 6 2 2 3 Shares repurchased (11 ) (14 )
(16 ) (15 ) (16 ) Ending shares
outstanding 1,692 1,697
1,705 1,719 1,732
CAPITAL POSITION
Table 12 ($ in
millions)
Mar 31 Dec 31
Sep 30 Jun 30
Mar 31 2017 2016
2016 2016
2016 Total U.S. Bancorp
shareholders' equity $47,798 $47,298 $47,759 $47,390 $46,755
Standardized Approach Basel III transitional
standardized approach Common equity tier 1 capital $33,847 $33,720
$33,827 $33,444 $32,827 Tier 1 capital 39,374 39,421 39,531 39,148
38,532 Total risk-based capital 47,279 47,355 47,452 47,049 45,412
Common equity tier 1 capital ratio 9.5
%
9.4
%
9.5
%
9.5
%
9.5
%
Tier 1 capital ratio 11.0 11.0 11.1 11.1 11.1 Total risk-based
capital ratio 13.3 13.2 13.3 13.4 13.1 Leverage ratio 9.1 9.0 9.2
9.3 9.3
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully implemented
standardized approach (a)
9.2 9.1 9.3 9.3 9.2
Advanced Approaches
Common equity tier 1 capital to
risk-weighted assets for the Basel III transitional advanced
approaches
11.8 12.2 12.4 12.3 12.3
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully implemented
advanced approaches (a)
11.5 11.7 12.1 12.0 11.9
Tangible common equity to
tangible assets (a) 7.6 7.5 7.5 7.6 7.7
Tangible common
equity to risk-weighted assets (a) 9.4 9.2 9.3 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.
(a) See Non-GAAP Financial Measures
reconciliation at the end of the release
Capital Management
Total U.S. Bancorp shareholders’ equity was $47.8 billion at
March 31, 2017, compared with $47.3 billion at December 31, 2016,
and $46.8 billion at March 31, 2016. During the first quarter, the
Company returned 78 percent of earnings to shareholders through
dividends and share buybacks.
All regulatory ratios continue to be in excess of
“well-capitalized” requirements. The 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,
2017, compared with 9.1 percent at December 31, 2016, and 9.2
percent at March 31, 2016. The estimated common equity tier 1
capital to risk-weighted assets ratio using the Basel III fully
implemented advanced approaches method was 11.5 percent at March
31, 2017, compared with 11.7 percent at December 31, 2016, and 11.9
percent at March 31, 2016.
On Wednesday, April 19, 2017, at 8:00 a.m. CT, Andy Cecere,
president and chief executive officer, and Terry Dolan, vice
chairman and chief financial officer, will host a conference call
to review the financial results. The conference call will be
available online or by telephone. To access the webcast and
presentation, 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 73528771. For those
unable to participate during the live call, a recording will be
available at approximately 11:00 a.m. CT on Wednesday, April 19 and
be accessible through Wednesday, April 26 at 11:00 p.m. CT. To
access the recording 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 73528771.
Minneapolis-based U.S. Bancorp (NYSE: USB), with $450 billion in
assets as of March 31, 2017, is the parent company of U.S. Bank
National Association, the fifth largest commercial bank in the
United States. The Company operates 3,091 banking offices in 25
states and 4,838 ATMs and provides a comprehensive line of banking,
investment, mortgage, trust and payment services products to
consumers, businesses and institutions. Visit U.S. Bancorp on the
web at www.usbank.com.
Forward-Looking Statements
The following information appears in accordance with the Private
Securities Litigation Reform Act of 1995:
This press release contains forward-looking statements about
U.S. Bancorp. Statements that are not historical or current facts,
including statements about beliefs and expectations, are
forward-looking statements and are based on the information
available to, and assumptions and estimates made by, management as
of the date hereof. These forward-looking statements cover, among
other things, anticipated future revenue and expenses and the
future plans and prospects of U.S. Bancorp. Forward-looking
statements involve inherent risks and uncertainties, and important
factors could cause actual results to differ materially from those
anticipated. A reversal or slowing of the current economic recovery
or another severe contraction could adversely affect U.S. Bancorp’s
revenues and the values of its assets and liabilities. Global
financial markets could experience a recurrence of significant
turbulence, which could reduce the availability of funding to
certain financial institutions and lead to a tightening of credit,
a reduction of business activity, and increased market volatility.
Stress in the commercial real estate markets, as well as a downturn
in the residential real estate markets could cause credit losses
and deterioration in asset values. In addition, changes to
statutes, regulations, or regulatory policies or practices could
affect U.S. Bancorp in substantial and unpredictable ways. U.S.
Bancorp’s results could also be adversely affected by deterioration
in general business and economic conditions; changes in interest
rates; deterioration in the credit quality of its loan portfolios
or in the value of the collateral securing those loans;
deterioration in the value of 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, 2016, 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 capital 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 of the currently
effective ratios, which are subject to certain transitional
provisions, temporarily excludes a portion of unrealized gains and
losses related to available-for-sale securities and retirement plan
obligations, and includes a portion of capital related to
intangible assets, other than mortgage servicing rights. These
capital 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 capital measures
disclosed by the Company may be considered non-GAAP financial
measures.
The Company also discloses net interest income and related
ratios and analysis on a taxable-equivalent basis, which may also
be considered non-GAAP financial measures. The Company believes
this presentation to be the preferred industry measurement of net
interest income as it provides a relevant comparison of net
interest income arising from taxable and tax-exempt sources. In
addition, certain performance measures, including the efficiency
ratio and net interest margin utilize net interest income on a
taxable-equivalent basis.
There may be limits in the usefulness of these measures to
investors. As a result, the Company encourages readers to consider
the consolidated financial statements and other financial
information contained in this press release in their entirety, and
not to rely on any single financial measure. A table follows that
shows the Company’s calculation of these non-GAAP financial
measures.
U.S. Bancorp
Consolidated Statement
of Income
Three Months
Ended
(Dollars and Shares in Millions, Except Per Share Data) March 31,
(Unaudited) 2017 2016
Interest
Income Loans $2,797 $2,644 Loans held for sale 35 31 Investment
securities 530 517 Other interest income 38 29
Total interest income 3,400 3,221
Interest Expense
Deposits 199 139 Short-term borrowings 66 65 Long-term debt 190
182 Total interest expense 455
386 Net interest income 2,945 2,835 Provision
for credit losses 345 330 Net interest
income after provision for credit losses 2,600 2,505
Noninterest
Income Credit and debit card revenue 292 266 Corporate payment
products revenue 179 170 Merchant processing services 378 373 ATM
processing services 85 80 Trust and investment management fees 368
339 Deposit service charges 177 168 Treasury management fees 153
142 Commercial products revenue 207 197 Mortgage banking revenue
207 187 Investment products fees 40 40 Securities gains (losses),
net 29 3 Other 214 184 Total
noninterest income 2,329 2,149
Noninterest Expense
Compensation 1,391 1,249 Employee benefits 314 300 Net occupancy
and equipment 247 248 Professional services 96 98 Marketing and
business development 90 77 Technology and communications 235 233
Postage, printing and supplies 81 79 Other intangibles 44 45 Other
446 420 Total noninterest expense 2,944
2,749 Income before income taxes 1,985
1,905 Applicable income taxes 499 504
Net income 1,486 1,401 Net (income) loss attributable to
noncontrolling interests (13 ) (15 ) Net income
attributable to U.S. Bancorp $1,473 $1,386
Net income applicable to U.S. Bancorp common shareholders
$1,387 $1,329 Earnings per
common share $.82 $.77 Diluted earnings per common share $.82 $.76
Dividends declared per common share $.280 $.255 Average common
shares outstanding 1,694 1,737 Average diluted common shares
outstanding 1,701 1,743
U.S. Bancorp
Consolidated Ending Balance Sheet March 31, December
31, March 31, (Dollars in Millions) 2017
2016 2016
Assets (Unaudited)
(Unaudited) Cash and due from banks $20,319 $15,705 $10,981
Investment securities Held-to-maturity 43,393 42,991 42,113
Available-for-sale 67,031 66,284 64,912 Loans held for sale 2,738
4,826 4,005 Loans Commercial 94,491 93,386 91,277 Commercial real
estate 42,832 43,098 42,743 Residential mortgages 58,266 57,274
54,955 Credit card 20,387 21,749 19,957 Other retail 53,966
53,864 51,161 Total
loans, excluding covered loans 269,942 269,371 260,093 Covered
loans 3,635 3,836 4,429
Total loans 273,577 273,207 264,522 Less allowance for loan
losses (3,816 ) (3,813 ) (3,853 ) Net
loans 269,761 269,394 260,669 Premises and equipment 2,432 2,443
2,486 Goodwill 9,348 9,344 9,368 Other intangible assets 3,313
3,303 3,042 Other assets 31,187 31,674
31,062 Total assets $449,522
$445,964 $428,638
Liabilities and Shareholders' Equity Deposits
Noninterest-bearing $85,222 $86,097 $80,407 Interest-bearing
251,651 248,493 225,941
Total deposits 336,873 334,590 306,348 Short-term borrowings
12,183 13,963 23,777 Long-term debt 35,948 33,323 34,872 Other
liabilities 16,085 16,155
16,248 Total liabilities 401,089 398,031 381,245
Shareholders' equity Preferred stock 5,419 5,501 5,501 Common stock
21 21 21 Capital surplus 8,388 8,440 8,368 Retained earnings 51,069
50,151 47,267 Less treasury stock (15,660 ) (15,280 ) (13,658 )
Accumulated other comprehensive income (loss) (1,439 )
(1,535 ) (744 ) Total U.S. Bancorp
shareholders' equity 47,798 47,298 46,755 Noncontrolling interests
635 635 638 Total
equity 48,433 47,933
47,393 Total liabilities and equity $449,522
$445,964 $428,638
U.S. Bancorp
Non-GAAP Financial Measures
Mar 31,
Dec 31,
Sep 30,
Jun 30,
Mar 31,
(Dollars in Millions, Unaudited)
2017
2016
2016
2016
2016
Total equity $48,433 $47,933 $48,399 $48,029 $47,393 Preferred
stock (5,419 ) (5,501 ) (5,501 ) (5,501 ) (5,501 ) Noncontrolling
interests (635 ) (635 ) (640 ) (639 ) (638 ) Goodwill (net of
deferred tax liability) (1) (8,186 ) (8,203 ) (8,239 ) (8,246 )
(8,270 ) Intangible assets, other than mortgage servicing rights
(671 ) (712 ) (756 ) (796
) (820 ) Tangible common equity (a) 33,522 32,882
33,263 32,847 32,164 Tangible common equity (as calculated
above) 33,522 32,882 33,263 32,847 32,164 Adjustments (2) (136 )
(55 ) 97 133
99
Common equity tier 1 capital estimated for
the Basel III fully implemented standardized and advanced
approaches (b)
33,386 32,827 33,360 32,980 32,263 Total assets 449,522
445,964 454,134 438,463 428,638 Goodwill (net of deferred tax
liability) (1) (8,186 ) (8,203 ) (8,239 ) (8,246 ) (8,270 )
Intangible assets, other than mortgage servicing rights (671 )
(712 ) (756 ) (796 )
(820 ) Tangible assets (c) 440,665 437,049 445,139
429,421 419,548
Risk-weighted assets, determined in
accordance with prescribed transitional standardized approach
regulatory requirements (d)
356,373
*
358,237 356,733 351,462 346,227 Adjustments (3) 4,731
*
4,027 3,165
3,079 3,485
Risk-weighted assets estimated for the
Basel III fully implemented standardized approach (e)
361,104
*
362,264 359,898 354,541 349,712
Risk-weighted assets, determined in
accordance with prescribed transitional advanced approaches
regulatory requirements
285,963
*
277,141 272,832 271,495 267,309 Adjustments (4) 5,046
*
4,295 3,372
3,283 3,707
Risk-weighted assets estimated for the
Basel III fully implemented advanced approaches (f)
291,009
*
281,436 276,204 274,778 271,016
Ratios * Tangible
common equity to tangible assets (a)/(c) 7.6
%
7.5
%
7.5
%
7.6
%
7.7
%
Tangible common equity to risk-weighted assets (a)/(d) 9.4 9.2 9.3
9.3 9.3
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully implemented
standardized approach (b)/(e)
9.2 9.1 9.3 9.3 9.2
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully implemented
advanced approaches (b)/(f)
11.5 11.7 12.1 12.0 11.9 Three Months Ended
Mar 31,
Dec 31,
Sep 30,
Jun 30,
Mar 31,
2017
2016
2016
2016
2016
Net interest income $2,945 $2,955 $2,893 $2,845 $2,835
Taxable-equivalent adjustment (5) 50 49
50 51 53
Net interest income, on a taxable-equivalent basis 2,995
3,004 2,943 2,896 2,888 Net interest income, on a
taxable-equivalent basis (as calculated above) 2,995 3,004 2,943
2,896 2,888 Noninterest income 2,329 2,431 2,445 2,552 2,149 Less:
Securities gains (losses), net 29 6
10 3 3
Total net revenue, excluding net securities gains (losses)
(g) 5,295 5,429 5,378 5,445 5,034 Noninterest expense (h)
2,944 3,004 2,931 2,992 2,749 Less: Intangible amortization 44
45 45
44 45 Noninterest expense,
excluding intangible amortization (i) 2,900 2,959 2,886 2,948 2,704
Efficiency ratio (h)/(g) 55.6
%
55.3
%
54.5
%
54.9
%
54.6
%
Tangible efficiency ratio (i)/(g) 54.8
54.5 53.7 54.1
53.7 *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. (5)Utilizes a tax
rate of 35 percent for those assets and liabilities whose income or
expense is not included for federal income tax purposes.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170419005098/en/
U.S. BancorpMedia:Dana Ripley,
612-303-3167orInvestors/Analysts:Jennifer Thompson,
612-303-0778
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