- Net revenue of $5,577 million and net
income of $1,699 million
- Industry leading return on average
assets of 1.49% and return on average common equity of 14.3%
U.S. Bancorp (NYSE: USB):
1Q19 Key Financial Data
PROFITABILITY METRICS 1Q19 4Q18
1Q18 Return on average assets (%) 1.49
1.59 1.50 Return on average common equity (%) 14.3
15.8 14.9 Return on tangible common equity (%) (a) 18.4 20.2 19.3
Net interest margin (%) 3.16 3.15 3.13 Efficiency ratio (%) (a)
55.4 56.3 55.9
INCOME STATEMENT (b) 1Q19
4Q18 1Q18 Net interest income
(taxable-equivalent basis) $3,286 $3,331 $3,197 Noninterest income
$2,291 $2,498 $2,272 Net income attributable to U.S. Bancorp $1,699
$1,856 $1,675 Diluted earnings per common share $1.00 $1.10 $.96
Dividends declared per common share $.37 $.37 $.30
BALANCE
SHEET (b) 1Q19 4Q18 1Q18
Average total loans $286,110 $283,677 $279,388 Average total
deposits $335,366 $334,365 $334,580 Net charge-off ratio .52 % .49
% .49 % Book value per common share (period end) $28.81 $28.01
$26.54 Basel III standardized CET1 (c) 9.3 % 9.1 % 9.0 %
(a)
See Non-GAAP Financial Measures reconciliation on page 16 (b)
Dollars in millions, except per share data (c) CET1 = Common equity
tier 1 capital ratio
1Q19 Highlights
- Net income of $1,699 million and
diluted earnings per common share of $1.00
- Industry leading return on average
assets of 1.49% and return on average common equity of 14.3%
- Return on tangible common equity of
18.4%
- Returned 77% of 1Q earnings to
shareholders through dividends and share buybacks
- Net interest income grew 2.9%
year-over-year (2.8% on a taxable-equivalent basis) with positive
operating leverage of 1.0% on a year-over-year basis
- Average total loans grew 0.9% on a
linked quarter basis and 2.4% (3.7% excluding the impact of loan
sales) year-over-year
- Nonperforming assets decreased 16.5% on
a year-over-year basis
CEO Commentary
“As our financial results indicate, we had a good start to the
year with momentum continuing across our lending and fee
businesses. In the first quarter, our industry-leading returns on
assets and equity were supported by solid loan growth, disciplined
expense management and stable credit quality. Our balance sheet is
strong and growing as evidenced by an 8.6% increase in our book
value per share compared with a year ago. During the quarter, we
returned 77 percent of our earnings to shareholders through
dividends and share buybacks. We are pleased with our results this
quarter and remain focused on the long-term success of this company
- and the disciplined investment in people and technology that will
drive that success. We are launching a number of digital
initiatives combining the best of technology and innovation to help
make our customers’ financial lives simpler and more productive. I
would like to thank our employees for all they do to create value
for our customers, communities and shareholders.”
— Andy Cecere, Chairman, President and CEO,
U.S. Bancorp
In the Spotlight
One of the 2019 World’s Most Ethical CompaniesU.S. Bank
has been named one of the 2019 World’s Most Ethical Companies by
the Ethisphere Institute, a global leader in defining and advancing
the standards of ethical business practices. This is the fifth
consecutive year U.S. Bank has received this recognition.
Top Marks Received in 2019 Corporate Equality IndexFor
the 12th time in a row, U.S. Bank received a perfect score of 100
on the Corporate Equality Index, the nation’s premier benchmarking
survey and report on corporate policies and practices related to
LGBTQ workplace equality, administered by the Human Rights Campaign
Foundation. Through its index, the Foundation evaluates policies
and practices of businesses including non-discrimination workplace
protections, domestic partner and inclusive health care benefits,
competency programs, and public engagement with the LGBTQ
community.
Asset Backed Securitization Lending BusinessWe recently
launched a new Asset Backed Securitization Lending business,
underscoring our commitment to our Fixed Income & Capital
Markets platform to provide current and prospective customers with
additional ways to access capital.
New U.S. Bank Mobile AppWe recently unveiled our entirely
redesigned U.S. Bank Mobile App, fueled by extensive research on
how people use their mobile apps and an analysis of consumer needs.
Using a customer-based mindset, the app includes all the tools
identified by consumers that help them quickly, confidently and
securely manage their finances at their fingertips.
INCOME STATEMENT HIGHLIGHTS ($ in millions,
except per-share data)
Percent
Change 1Q 4Q 1Q 1Q19 vs
1Q19 vs 2019 2018
2018 4Q18 1Q18 Net
interest income $3,259 $3,303 $3,168 (1.3 ) 2.9 Taxable-equivalent
adjustment 27 28 29 (3.6 ) (6.9
) Net interest income (taxable-equivalent basis) 3,286 3,331 3,197
(1.4 ) 2.8 Noninterest income 2,291 2,498
2,272 (8.3 ) .8 Total net revenue 5,577 5,829 5,469
(4.3 ) 2.0 Noninterest expense 3,087 3,280
3,055 (5.9 ) 1.0 Income before provision and income
taxes 2,490 2,549 2,414 (2.3 ) 3.1 Provision for credit losses 377
368 341 2.4 10.6 Income before
taxes 2,113 2,181 2,073 (3.1 ) 1.9
Income taxes and
taxable-equivalent adjustment
405 319 391 27.0 3.6 Net income
1,708 1,862 1,682 (8.3 ) 1.5
Net (income) loss attributable
to noncontrolling interests
(9 ) (6 ) (7 ) (50.0 ) (28.6 ) Net income
attributable to U.S. Bancorp $1,699 $1,856
$1,675 (8.5 ) 1.4
Net income applicable to U.S.
Bancorp common shareholders
$1,613 $1,777 $1,597 (9.2 ) 1.0
Diluted earnings per common share $1.00 $1.10
$.96 (9.1 ) 4.2
Net income attributable to U.S. Bancorp was $1,699 million for
the first quarter of 2019, which was 1.4 percent higher than the
first quarter of 2018, and 8.5 percent lower than the fourth
quarter of 2018. Diluted earnings per common share were $1.00 in
the first quarter of 2019, compared with $0.96 in the first quarter
of 2018 and $1.10 in the fourth quarter of 2018. The fourth quarter
of 2018 included $0.03 per diluted common share of notable items
related to the impact of the gain on sale of the Company’s ATM
servicing business and the sale of a majority of the Company’s FDIC
covered loans, charges related to severance, certain asset
impairments, an accrual for legal matters, and the favorable impact
to deferred tax assets and liabilities related to changes in
estimates from tax reform. Given the sale of the third-party ATM
processing business during the fourth quarter of 2018, ATM
processing services revenue and deposit service charges were
combined for reporting purposes.
The increase in net income year-over-year was due to total net
revenue growth of 2.0 percent partially offset by noninterest
expense growth of 1.0 percent. Net interest income increased 2.9
percent (2.8 percent on a taxable-equivalent basis), mainly a
result of the impact of rising interest rates, loan growth, and
higher yields on reinvestment of securities, partially offset by
higher rates on deposits and funding mix. Noninterest income
increased 0.8 percent compared with a year ago, driven by growth in
corporate payment products and merchant processing services
revenue, along with other noninterest revenue, partially offset by
declines in credit and debit card revenue, mortgage banking revenue
and deposit service charges. Deposit service charges include ATM
processing services revenue and decreased as a result of the sale
of the third-party ATM processing business in the fourth quarter of
2018. Noninterest expense increased 1.0 percent primarily due to
increased compensation expense, along with higher technology and
communications expense in support of business growth. Partially
offsetting these expense categories was lower other noninterest
expense driven by lower costs related to tax-advantaged projects
and FDIC assessment costs.
Net income decreased on a linked quarter basis primarily due to
a decrease in total net revenue of 4.3 percent, partially offset by
a reduction in noninterest expense of 5.9 percent. The decrease in
total net revenue reflected a decline in net interest income of 1.3
percent (1.4 percent on a taxable-equivalent basis) primarily due
to two fewer days in the first quarter along with higher rates on
deposits, lower interest recoveries, and funding mix, partially
offset by loan growth. Excluding the fourth quarter of 2018 notable
items, noninterest income decreased 5.4 percent compared with the
fourth quarter of 2018 driven by lower credit and debit card
revenue and lower ATM processing services revenue as a result of
the business sale. Excluding the fourth quarter of 2018 notable
items, noninterest expense decreased 0.6 percent on a linked
quarter basis primarily driven by lower professional services and
marketing and business development expense, partially offset by
seasonally higher employee benefits and an increase in other
noninterest expense.
NET INTEREST INCOME (Taxable-equivalent basis; $ in
millions)
Change 1Q
4Q 1Q 1Q19 vs 1Q19 vs
2019 2018 2018
4Q18 1Q18 Components of net interest income
Income on earning assets $4,381 $4,341 $3,822 $40 $559 Expense on
interest-bearing liabilities 1,095 1,010
625 85 470 Net interest
income $3,286 $3,331 $3,197
$(45 ) $89 Average yields and rates
paid Earning assets yield 4.22 % 4.11 % 3.75 % .11 % .47 % Rate
paid on interest-bearing liabilities 1.38 1.26
.81 .12 .57 Gross
interest margin 2.84 % 2.85 % 2.94 % (.01 )%
(.10 )% Net interest margin 3.16 % 3.15 % 3.13
% .01 % .03 % Average balances Investment
securities (a) $114,179 $114,138 $113,493 $41 $686 Loans 286,110
283,677 279,388 2,433 6,722 Earning assets 419,494 420,472 411,849
(978 ) 7,645 Interest-bearing liabilities 322,156 319,289 311,615
2,867 10,541 (a) Excludes unrealized gain (loss)
Net interest income on a taxable-equivalent basis in the first
quarter of 2019 was $3,286 million, an increase of $89 million (2.8
percent) over the first quarter of 2018. The increase was
principally driven by the impact of rising interest rates, earning
assets growth, and higher yields on securities, partially offset by
deposit pricing and funding mix shift. Average earning assets were
$7.6 billion (1.9 percent) higher than the first quarter of 2018,
reflecting increases of $6.7 billion (2.4 percent) in average total
loans, $686 million (0.6 percent) in average investment securities,
and $1.2 billion (7.8 percent) in average other earning assets.
Excluding the impact of the second quarter of 2018 sale of the
Company’s federally guaranteed student loan portfolio and the
fourth quarter of 2018 sale of the majority of the Company’s FDIC
covered loans, average total loans grew 3.7 percent compared with
the first quarter of 2018.
Net interest income on a taxable-equivalent basis decreased $45
million (1.4 percent) on a linked quarter basis primarily driven by
two fewer days in the first quarter and lower interest recoveries,
partially offset by loan growth. Average earning assets were $978
million (0.2 percent) lower on a linked quarter basis, reflecting
decreases of $2.5 billion (12.5 percent) in average other earning
assets due to a seasonal decrease in cash balances and $1.0 billion
(32.0 percent) in average loans held for sale primarily due to the
sale of the majority of the Company’s FDIC covered loans in the
fourth quarter of 2018, partially offset by an increase of $2.4
billion (0.9 percent) in average total loans.
The net interest margin in the first quarter of 2019 was 3.16
percent, compared with 3.13 percent in the first quarter of 2018
and 3.15 percent in the fourth quarter of 2018. The increase in the
net interest margin year-over-year was primarily due to rising
interest rates, higher reinvestment rates on maturing securities,
and loan portfolio mix, partially offset by deposit and funding
mix. The increase in net interest margin on a linked quarter basis
was primarily due to loan portfolio mix, lower cash balances, and
the impact of the fourth quarter rate hike on assets, partially
offset by the impact of deposit and funding mix.
Average investment securities in the first quarter of 2019
increased $686 million (0.6 percent) over the first quarter of 2018
and $41 million over the fourth quarter of 2018 due to purchases of
mortgage-backed and state and political securities, net of
prepayments and maturities.
AVERAGE LOANS ($ in millions)
Percent Change 1Q 4Q 1Q
1Q19 vs 1Q19 vs 2019
2018 2018 4Q18
1Q18 Commercial $96,447 $95,025 $91,933 1.5 4.9 Lease
financing 5,513 5,490 5,532 .4 (.3 ) Total commercial
101,960 100,515 97,465 1.4 4.6 Commercial mortgages 28,459
28,930 29,176 (1.6 ) (2.5 ) Construction and development 11,011
11,219 11,190 (1.9 ) (1.6 ) Total commercial real
estate 39,470 40,149 40,366 (1.7 ) (2.2 ) Residential
mortgages 65,582 64,476 60,174 1.7 9.0 Credit card 22,597
22,396 21,284 .9 6.2 Retail leasing 8,586 8,489 7,982 1.1
7.6 Home equity and second mortgages 15,993 16,065 16,195 (.4 )
(1.2 ) Other 31,922 31,587 32,874 1.1 (2.9 ) Total
other retail 56,501 56,141 57,051 .6 (1.0 ) Covered loans
(a) -- -- 3,048 -- nm Total loans $286,110
$283,677 $279,388 .9 2.4
(a) During the fourth quarter of 2018, the
majority of the Company's covered loans were sold or the loss
share coverage expired, with any remaining loan balances
reclassified to be included in their respective portfolio
category.
Average total loans were $6.7 billion (2.4 percent) higher than
the first quarter of 2018. Excluding the impact of the second
quarter of 2018 sale of the Company’s federally guaranteed student
loan portfolio and the fourth quarter of 2018 sale of the majority
of the Company’s FDIC covered loans, average total loans grew 3.7
percent over the prior year quarter. The increase was due to growth
in residential mortgages (9.0 percent), total commercial loans (4.6
percent), credit card loans (6.2 percent), and retail leasing (7.6
percent). These increases were partially offset by decreases in
covered loans due to the fourth quarter of 2018 sale, total
commercial real estate loans (2.2 percent) due to customers paying
down balances and other loans (2.9 percent) which were impacted by
the sale of student loans.
Average total loans were $2.4 billion (0.9 percent) higher than
the fourth quarter of 2018 driven by growth in residential
mortgages (1.7 percent) and total commercial loans (1.4 percent),
partially offset by a decrease in total commercial real estate
loans (1.7 percent).
AVERAGE DEPOSITS ($ in millions)
Percent Change 1Q 4Q 1Q 1Q19
vs 1Q19 vs 2019
2018 2018 4Q18
1Q18 Noninterest-bearing deposits $73,433 $77,160
$79,482 (4.8 ) (7.6 ) Interest-bearing savings deposits Interest
checking 72,177 71,013 70,358 1.6 2.6 Money market savings 99,432
99,594 103,367 (.2 ) (3.8 ) Savings accounts 45,216 44,544
44,388 1.5 1.9 Total savings deposits 216,825 215,151
218,113 .8 (.6 ) Time deposits 45,108 42,054 36,985
7.3 22.0 Total interest-bearing deposits 261,933 257,205
255,098 1.8 2.7 Total deposits $335,366 $334,365
$334,580 .3 .2
Average total deposits for the first quarter of 2019 were $786
million (0.2 percent) higher than the first quarter of 2018.
Average noninterest-bearing deposits decreased $6.0 billion (7.6
percent) year-over-year primarily due to the continued deployment
by customers of business deposits within Corporate and Commercial
Banking and corporate trust balances within Wealth Management and
Investment Services. Average total savings deposits were $1.3
billion (0.6 percent) lower year-over-year driven by decreases in
corporate trust balances within Wealth Management and Investment
Services along with the run-off related to the business merger of a
large financial customer, partially offset by increases in Consumer
and Business Banking. Average time deposits were $8.1 billion (22.0
percent) higher than the prior year quarter. Changes in time
deposits are largely related to those deposits managed as an
alternative to other funding sources such as wholesale borrowing,
based largely on relative pricing and liquidity
characteristics.
Average total deposits increased $1.0 billion (0.3 percent) from
the fourth quarter of 2018. On a linked quarter basis, average
noninterest-bearing deposits decreased $3.7 billion (4.8 percent)
reflecting decreases in Corporate and Commercial Banking and
Consumer and Business Banking. Average total savings deposits
increased $1.7 billion (0.8 percent) on a linked quarter basis
primarily due to increases in Consumer and Business Banking and
Corporate and Commercial Banking. Average time deposits, which are
managed based on funding needs, relative pricing and liquidity
characteristics, increased $3.1 billion (7.3 percent) on a linked
quarter basis.
NONINTEREST INCOME ($ in millions)
Percent Change 1Q 4Q
1Q 1Q19 vs 1Q19 vs
2019 2018 2018
4Q18 1Q18 Credit and debit card revenue
$304 $382 $324 (20.4 ) (6.2 ) Corporate payment products revenue
162 163 154 (.6 ) 5.2 Merchant processing services 378 389 363 (2.8
) 4.1 Trust and investment management fees 399 409 398 (2.4 ) .3
Deposit service charges 217 253 261 (14.2 ) (16.9 ) Treasury
management fees 146 143 150 2.1 (2.7 ) Commercial products revenue
219 225 220 (2.7 ) (.5 ) Mortgage banking revenue 169 171 184 (1.2
) (8.2 ) Investment products fees 45 48 46 (6.3 ) (2.2 ) Securities
gains (losses), net 5 5 5 -- -- Other 247 310 167
(20.3 ) 47.9 Total noninterest income $2,291 $2,498
$2,272 (8.3 ) .8
First quarter noninterest income of $2,291 million was $19
million (0.8 percent) higher than the first quarter of 2018 driven
by growth in corporate payment products revenue and merchant
processing services reflecting higher sales volumes. Other
noninterest income also increased year-over-year primarily due to
higher equity investment income, tax-advantaged investment
syndication revenue, and transition services agreement revenue
associated with the ATM processing business sale in 2018. These
increases were partially offset by lower credit and debit card
revenue, lower deposit service charges, and lower mortgage banking
revenue. Credit and debit card revenue decreased $20 million (6.2
percent) reflecting fewer billing cycle processing days in the
first quarter of 2019, a change in the accounting for prepaid card
revenue in the first quarter of 2018, and industry trends in
post-holiday consumer spending. Deposit service charges decreased
$44 million (16.9 percent) driven by the sale of the Company’s ATM
third-party servicing business in 2018. The decrease in mortgage
banking revenue of $15 million (8.2 percent) was due to changes in
mortgage servicing rights valuations, net of hedging activities,
and lower servicing income, partially offset by higher production
volume.
Noninterest income was $207 million (8.3 percent) lower in the
first quarter of 2019 compared with the fourth quarter of 2018
reflecting lower payment services revenue, deposit service charges,
and other noninterest income. Payment services revenue decreased
$90 million (9.6 percent) primarily due to seasonally lower sales
across all payment business segments and fewer billing cycle
processing days within the credit and debit card business segment.
Deposit service charges decreased $36 million (14.2 percent)
primarily due to the sale of the Company’s ATM third-party
servicing business and the seasonal impact of two fewer days in the
first quarter of 2019. Other noninterest income decreased $63
million (20.3 percent) on a linked quarter basis primarily due to
the notable items in the fourth quarter of 2018. Excluding the
notable items, other noninterest income increased 5.6 percent on a
linked quarter basis.
NONINTEREST EXPENSE ($ in millions)
Percent Change 1Q 4Q 1Q
1Q19 vs 1Q19 vs 2019
2018 2018 4Q18
1Q18 Compensation $1,559 $1,568 $1,523 (.6 ) 2.4
Employee benefits 333 308 330 8.1 .9 Net occupancy and equipment
277 266 265 4.1 4.5 Professional services 95 133 83 (28.6 ) 14.5
Marketing and business development 89 115 97 (22.6 ) (8.2 )
Technology and communications 257 254 235 1.2 9.4 Postage, printing
and supplies 72 80 80 (10.0 ) (10.0 ) Other intangibles 40 41 39
(2.4 ) 2.6 Other 365 515 403 (29.1 ) (9.4 )
Total noninterest expense $3,087 $3,280 $3,055 (5.9 )
1.0
First quarter noninterest expense of $3,087 million was $32
million (1.0 percent) higher than the first quarter of 2018
primarily due to higher personnel costs and technology investment,
partially offset by lower other noninterest expense. Compensation
expense increased $36 million (2.4 percent) principally due to the
impact of hiring to support business growth and merit increases.
Other noninterest expense decreased $38 million (9.4 percent) due
to lower FDIC assessment costs, driven by the elimination of the
surcharge in the fourth quarter of 2018, and lower costs related to
tax-advantaged projects, partially offset by other expenses.
Noninterest expense decreased $193 million (5.9 percent) on a
linked quarter basis. The fourth quarter of 2018 included notable
items related to severance charges and legal accruals recorded in
noninterest expense. Excluding the impact of the fourth quarter of
2018 notable items noninterest expense decreased $19 million (0.6
percent) due to seasonally lower costs related to tax-advantaged
projects and professional services, along with lower marketing and
business development expense driven by the timing of certain
marketing campaigns. Partially offsetting these decreases were
increases in employee benefits expense of $25 million (8.1 percent)
due to seasonally higher payroll taxes.
Provision for Income Taxes
The provision for income taxes for the first quarter of 2019
resulted in a tax rate of 19.2 percent on a taxable-equivalent
basis (effective tax rate of 18.1 percent), compared with 18.9
percent (effective tax rate of 17.7 percent) in the first quarter
of 2018, and 14.6 percent on a taxable-equivalent basis (effective
tax rate of 13.5 percent) in the fourth quarter of 2018. Tax
expense for the first quarter of 2019 reflected the favorable
conclusion of a state tax matter. The fourth quarter of 2018 tax
rates reflected the favorable impact of deferred tax assets and
liabilities adjustments related to tax reform estimates. Excluding
the changes in estimates related to deferred tax assets and
liabilities, the taxable-equivalent rate was 20.1 percent in the
fourth quarter of 2018.
ALLOWANCE FOR CREDIT LOSSES ($ in millions)
1Q 4Q 3Q
2Q 1Q
2019 % (a) 2018 %
(a) 2018 % (a) 2018
% (a) 2018 % (a)
Balance, beginning of period $4,441 $4,426 $4,411 $4,417 $4,417
Net charge-offs Commercial 71 .30 64 .27 63 .27 54 .23 56
.25 Lease financing 2 .15 3 .22 3 .22 4
.29 4 .29 Total commercial 73 .29 67 .26 66 .26 58 .24 60
.25 Commercial mortgages -- -- (8 ) (.11 ) (5 ) (.07 ) -- -- (4 )
(.06 ) Construction and development -- -- 1 .04 (4 )
(.14 ) -- -- 1 .04 Total commercial real estate -- --
(7 ) (.07 ) (9 ) (.09 ) -- -- (3 ) (.03 ) Residential
mortgages 3 .02 2 .01 4 .03 4 .03 7 .05 Credit card 225 4.04
219 3.88 206 3.75 210 3.97 211 4.02 Retail leasing 4 .19 3
.14 3 .14 3 .15 3 .15 Home equity and second mortgages (1 ) (.03 )
1 .02 (1 ) (.02 ) (2 ) (.05 ) (1 ) (.03 ) Other 63 .80 68
.85 59 .74 59 .76 64 .79 Total other
retail 66 .47 72 .51 61 .43 60 .43 66
.47 Total net charge-offs 367 .52 353 .49 328 .46 332 .48
341 .49 Provision for credit losses 377 368 343 327 341 Other
changes -- -- -- (1 ) -- Balance, end
of period $4,451 $4,441 $4,426 $4,411
$4,417 Components Allowance for loan losses $3,990
$3,973 $3,954 $3,920 $3,918
Liability for unfunded credit
commitments
461 468 472 491 499 Total
allowance for credit losses $4,451 $4,441 $4,426
$4,411 $4,417 Gross charge-offs $473
$442 $428 $437 $453 Gross recoveries $106 $89 $100 $105 $112
Allowance for credit losses as a percentage of Period-end loans
1.55 1.55 1.57 1.57 1.59 Nonperforming loans 519 544 544 484 431
Nonperforming assets 443 449 441 404 367 (a) Annualized and
calculated on average loan balances
Credit quality was relatively stable on a linked quarter and
year-over-year basis. The Company’s provision for credit losses for
the first quarter of 2019 was $377 million, which was $9 million
(2.4 percent) higher than the prior quarter and $36 million (10.6
percent) higher than the first quarter of 2018.
Total net charge-offs in the first quarter of 2019 were $367
million, compared with $353 million in the fourth quarter of 2018,
and $341 million in the first quarter of 2018. Net charge-offs
increased $14 million (4.0 percent) compared with the fourth
quarter of 2018 due to higher total commercial real estate, total
commercial loans and credit card net charge-offs, partially offset
by lower total other retail net charge-offs. Net charge-offs
increased $26 million (7.6 percent) compared with the first quarter
of 2018 primarily due to higher total commercial loan and credit
card net charge-offs. The net charge-off ratio was 0.52 percent in
the first quarter of 2019, compared with 0.49 percent in the fourth
quarter of 2018 and in the first quarter of 2018.
The allowance for credit losses was $4,451 million at March 31,
2019, compared with $4,441 million at December 31, 2018, and $4,417
million at March 31, 2018. The ratio of the allowance for credit
losses to period-end loans was 1.55 percent at March 31, 2019, and
at December 31, 2018, compared with 1.59 percent at March 31, 2018.
The ratio of the allowance for credit losses to nonperforming loans
was 519 percent at March 31, 2019, compared with 544 percent at
December 31, 2018, and 431 percent at March 31, 2018.
Nonperforming assets were $1,005 million at March 31, 2019,
compared with $989 million at December 31, 2018, and $1,204 million
at March 31, 2018. The ratio of nonperforming assets to loans and
other real estate was 0.35 percent at March 31, 2019, compared with
0.34 percent at December 31, 2018, and 0.43 percent at March 31,
2018. The year-over-year decrease in nonperforming assets was
driven by decreases in nonperforming residential mortgages, total
commercial loans, and other real estate owned. Accruing loans 90
days or more past due were $595 million at March 31, 2019, compared
with $584 million at December 31, 2018, and $702 million at March
31, 2018.
DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN
BALANCES (Percent)
Mar 31 Dec 31
Sep 30 Jun 30 Mar 31
2019 2018 2018
2018 2018 Delinquent loan ratios
- 90 days or more past due
excluding nonperforming loans
Commercial .07 .07 .06 .06 .06 Commercial real estate .01 -- .01
.01 .01 Residential mortgages .18 .18 .19 .18 .22 Credit card 1.29
1.25 1.18 1.15 1.29 Other retail .19 .19 .17 .16 .18 Covered loans
-- -- .86 4.46 4.57 Total loans .21 .20 .20 .23 .25
Delinquent loan ratios - 90 days or more past due
including
nonperforming loans Commercial .34 .27 .28 .28 .37 Commercial real
estate .33 .29 .27 .27 .31 Residential mortgages .62 .63 .69 .84
.93 Credit card 1.29 1.25 1.18 1.15 1.29 Other retail .49 .54 .49
.48 .48 Covered loans -- -- .86 4.68 4.77 Total loans .51 .49 .48
.55 .62
ASSET QUALITY (a)
($ in millions)
Mar 31
Dec 31 Sep 30 Jun 30 Mar 31
2019 2018 2018
2018 2018 Nonperforming loans Commercial $247
$186 $193 $199 $274 Lease financing 24 23 23
25 27 Total commercial 271 209 216 224 301 Commercial
mortgages 79 76 77 72 86 Construction and development 48 39
28 32 33 Total commercial real estate 127 115
105 104 119 Residential mortgages 287 296 317 400 430 Credit
card -- -- -- -- -- Other retail 173 197 175 178 168 Covered loans
-- -- -- 6 6 Total nonperforming loans
858 817 813 912 1,024 Other real estate 93 111 100 108 124
Covered other real estate -- -- 19 20 20 Other nonperforming assets
54 61 72 51 36 Total nonperforming
assets $1,005 $989 $1,004 $1,091 $1,204
Accruing loans 90 days or more past due $595 $584
$551 $640 $702 Performing restructured
loans, excluding GNMA $2,173 $2,218 $2,272
$2,194 $2,222 Performing restructured GNMA $1,578
$1,639 $1,668 $1,665 $1,566
Nonperforming assets to loans plus ORE (%) .35 .34 .36 .39 .43
(a) Throughout this document, nonperforming assets and
related ratios do not include accruing loans 90 days or more past
due
COMMON SHARES (Millions)
1Q 4Q 3Q 2Q
1Q 2019 2018
2018 2018 2018 Beginning
shares outstanding 1,608 1,623 1,636 1,649 1,656
Shares issued for stock incentive plans,
acquisitions and other corporate purposes
3 1 1 -- 4 Shares repurchased (12 ) (16 ) (14 )
(13 ) (11 ) Ending shares outstanding 1,599
1,608 1,623 1,636
1,649
CAPITAL POSITION
($ in millions)
Mar 31 Dec 31
Sep 30 Jun 30 Mar 31
2019 2018
2018 2018 2018
Total U.S. Bancorp shareholders' equity $52,057
$51,029 $50,375 $49,628 $49,187
Basel III Standardized
Approach Common equity tier 1 capital $35,732 $34,724 $34,097
$34,161 $33,539 Tier 1 capital 41,748 40,741 40,114 39,611 38,991
Total risk-based capital 49,194 48,178 47,531 47,258 46,640
Common equity tier 1 capital ratio 9.3 % 9.1 % 9.0 % 9.1 % 9.0 %
Tier 1 capital ratio 10.9 10.7 10.6 10.5 10.4 Total risk-based
capital ratio 12.8 12.6 12.6 12.6 12.5 Leverage ratio 9.2 9.0 9.0
8.9 8.8
Basel III Advanced Approaches Common equity
tier 1 capital ratio 12.0 11.8 11.8 11.6 11.5
Tangible
common equity to tangible assets (a) 7.9 7.8 7.7 7.8 7.7
Tangible common equity to risk-weighted assets (a) 9.5 9.4
9.3 9.3 9.3 (a) See Non-GAAP Financial Measures
reconciliation on page 16
Total U.S. Bancorp shareholders’ equity was $52.1 billion at
March 31, 2019, compared with $51.0 billion at December 31, 2018,
and $49.2 billion at March 31, 2018. During the first quarter, the
Company returned 77 percent of earnings to shareholders through
dividends and share buybacks.
All regulatory ratios continue to be in excess of
“well-capitalized” requirements. The common equity tier 1 capital
to risk-weighted assets ratio using the Basel III standardized
approach was 9.3 percent at March 31, 2019, compared with 9.1
percent at December 31, 2018, and 9.0 percent at March 31, 2018.
The common equity tier 1 capital to risk-weighted assets ratio
using the Basel III advanced approaches method was 12.0 percent at
March 31, 2019, compared with 11.8 percent at December 31, 2018,
and 11.5 percent at March 31, 2018.
Investor Conference Call
On Wednesday, April 17, 2019, at 8:00 a.m. CDT, Andy Cecere,
chairman, president and chief executive officer, and Terry Dolan,
vice chairman and chief financial officer, will host a conference
call to review the financial results. The conference call will be
available online or by telephone. To access the webcast and
presentation, visit U.S. Bancorp’s website at usbank.com and click
on “About US”, “Investor Relations” and “Webcasts &
Presentations.” To access the conference call from locations within
the United States and Canada, please dial 866-316-1409.
Participants calling from outside the United States and Canada,
please dial 706-634-9086. The conference ID number for all
participants is 8793888. For those unable to participate during the
live call, a recording will be available at approximately 11:00
a.m. CDT on Wednesday, April 17 and will be accessible until
Wednesday, April 24 at 11:00 p.m. CDT. To access the recorded
message within the United States and Canada, please dial
855-859-2056. If calling from outside the United States and Canada,
please dial 404-537-3406 to access the recording. The conference ID
is 8793888.
About U.S. Bancorp
U.S. Bancorp, with 74,000 employees and $476 billion in assets
as of March 31, 2019, is the parent company of U.S. Bank, the
fifth-largest commercial bank in the United States. The
Minneapolis-based bank blends its relationship teams, branches and
ATM network with mobile and online tools that allow customers to
bank how, when and where they prefer. U.S. Bank is committed to
serving its millions of retail, business, wealth management,
payment, commercial and corporate, and investment services
customers across the country and around the world as a trusted
financial partner, a commitment recognized by the Ethisphere
Institute naming the bank a 2019 World’s Most Ethical Company.
Visit U.S. Bank at www.usbank.com or follow on social media to stay
up to date with company news.
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. Deterioration in general business and economic
conditions or turbulence in domestic or global financial markets
could adversely affect U.S. Bancorp’s revenues and the values of
its assets and liabilities, reduce the availability of funding to
certain financial institutions, lead to a tightening of credit, and
increase stock price volatility. 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 changes in interest rates;
deterioration in the credit quality of its loan portfolios or in
the value of the collateral securing those loans; deterioration in
the value of its investment securities; legal and regulatory
developments; litigation; increased competition from both banks and
non-banks; changes in the level of tariffs and other trade policies
of the United States and its global trading partners; changes in
customer behavior and preferences; breaches in data security;
failures to safeguard personal information; 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, 2018, on file
with the Securities and Exchange Commission, including the sections
entitled “Corporate Risk Profile” and “Risk Factors” contained in
Exhibit 13, and all subsequent filings with the Securities and
Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934. In addition, factors other than
these risks also could adversely affect U.S. Bancorp’s results, and
the reader should not consider these risks to be a complete set of
all potential risks or uncertainties. Forward-looking statements
speak only as of the date hereof, and U.S. Bancorp undertakes no
obligation to update them in light of new information or future
events.
Non-GAAP Financial Measures
In addition to capital ratios defined by banking regulators, the
Company considers various other measures when evaluating capital
utilization and adequacy, including:
- Tangible common equity to tangible
assets
- Tangible common equity to risk-weighted
assets
- Return on tangible common equity
These capital measures are viewed by management as useful
additional methods of evaluating the Company’s utilization of its
capital held and the level of capital available to withstand
unexpected negative market or economic conditions. Additionally,
presentation of these measures allows investors, analysts and
banking regulators to assess the Company’s capital position
relative to other financial services companies. These capital
measures are not defined in generally accepted accounting
principles (“GAAP”), or are not defined in banking regulations. As
a result, these capital measures disclosed by the Company may be
considered non-GAAP financial measures. In addition, certain
capital measures related to prior periods are presented on the same
basis as those capital measures in the current period. The
effective capital ratios defined by banking regulations for these
periods were subject to certain transitional provisions. Management
believes this information helps investors assess trends in the
Company’s capital adequacy.
The Company also discloses net interest income and related
ratios and analysis on a taxable-equivalent basis, which may also
be considered non-GAAP financial measures. The Company believes
this presentation to be the preferred industry measurement of net
interest income as it provides a relevant comparison of net
interest income arising from taxable and tax-exempt sources. In
addition, certain performance measures, including the efficiency
ratio and net interest margin utilize net interest income on a
taxable-equivalent basis.
There may be limits in the usefulness of these measures to
investors. As a result, the Company encourages readers to consider
the consolidated financial statements and other financial
information contained in this press release in their entirety, and
not to rely on any single financial measure. A table follows that
shows the Company’s calculation of these non-GAAP financial
measures
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended (Dollars and Shares in Millions,
Except Per Share Data) March 31, (Unaudited) 2019
2018
Interest Income Loans $3,540
$3,095 Loans held for sale 25 33 Investment securities 705 613
Other interest income 81 50 Total interest
income 4,351 3,791
Interest Expense Deposits 695 345
Short-term borrowings 93 75 Long-term debt 304 203
Total interest expense 1,092 623 Net
interest income 3,259 3,168 Provision for credit losses 377
341 Net interest income after provision for credit
losses 2,882 2,827
Noninterest Income Credit and debit card
revenue 304 324 Corporate payment products revenue 162 154 Merchant
processing services 378 363 Trust and investment management fees
399 398 Deposit service charges 217 261 Treasury management fees
146 150 Commercial products revenue 219 220 Mortgage banking
revenue 169 184 Investment products fees 45 46 Securities gains
(losses), net 5 5 Other 247 167 Total
noninterest income 2,291 2,272
Noninterest Expense
Compensation 1,559 1,523 Employee benefits 333 330 Net occupancy
and equipment 277 265 Professional services 95 83 Marketing and
business development 89 97 Technology and communications 257 235
Postage, printing and supplies 72 80 Other intangibles 40 39 Other
365 403 Total noninterest expense 3,087
3,055 Income before income taxes 2,086 2,044
Applicable income taxes 378 362 Net income
1,708 1,682 Net (income) loss attributable to noncontrolling
interests (9 ) (7 ) Net income attributable to U.S. Bancorp
$1,699 $1,675 Net income applicable to U.S.
Bancorp common shareholders $1,613 $1,597
Earnings per common share $1.01 $.97 Diluted earnings per
common share $1.00 $.96 Dividends declared per common share $.37
$.30 Average common shares outstanding 1,602 1,652 Average diluted
common shares outstanding 1,605 1,657
CONSOLIDATED ENDING BALANCE
SHEET March 31, December 31, March 31,
(Dollars in Millions) 2019 2018
2018
Assets (Unaudited) (Unaudited) Cash and due from
banks $18,115 $21,453 $19,246 Investment securities
Held-to-maturity 46,285 46,050 44,612 Available-for-sale 68,113
66,115 67,125 Loans held for sale 2,725 2,056 4,777 Loans
Commercial 103,069 102,444 98,097 Commercial real estate 39,421
39,539 40,140 Residential mortgages 66,243 65,034 60,477 Credit
card 22,268 23,363 20,901 Other retail 56,698 56,430 55,317 Covered
loans -- -- 2,979 Total loans
287,699 286,810 277,911 Less allowance for loan losses (3,990 )
(3,973 ) (3,918 ) Net loans 283,709 282,837 273,993
Premises and equipment 3,686 2,457 2,441 Goodwill 9,547 9,369 9,440
Other intangible assets 3,341 3,392 3,388 Other assets 40,254
33,645 35,097 Total assets
$475,775 $467,374 $460,119
Liabilities and Shareholders' Equity Deposits
Noninterest-bearing $74,587 $81,811 $82,211 Interest-bearing
273,500 263,664 262,315 Total
deposits 348,087 345,475 344,526 Short-term borrowings 15,396
14,139 17,703 Long-term debt 40,680 41,340 33,201 Other liabilities
18,926 14,763 14,877 Total
liabilities 423,089 415,717 410,307 Shareholders' equity Preferred
stock 5,984 5,984 5,419 Common stock 21 21 21 Capital surplus 8,432
8,469 8,438 Retained earnings 60,092 59,065 55,549 Less treasury
stock (20,699 ) (20,188 ) (18,047 ) Accumulated other comprehensive
income (loss) (1,773 ) (2,322 ) (2,193 ) Total U.S.
Bancorp shareholders' equity 52,057 51,029 49,187 Noncontrolling
interests 629 628 625 Total
equity 52,686 51,657 49,812
Total liabilities and equity $475,775 $467,374
$460,119
NON-GAAP FINANCIAL MEASURES
March 31, December 31, September 30, June 30,
March 31, (Dollars in Millions, Unaudited) 2019
2018 2018
2018 2018 Total equity $52,686
$51,657 $51,007 $50,257 $49,812 Preferred stock (5,984 ) (5,984 )
(5,984 ) (5,419 ) (5,419 ) Noncontrolling interests (629 ) (628 )
(632 ) (629 ) (625 ) Goodwill (net of deferred tax liability) (1)
(8,716 ) (8,549 ) (8,682 ) (8,585 ) (8,609 ) Intangible assets,
other than mortgage servicing rights (685 ) (601 )
(627 ) (571 ) (608 )
Tangible common equity (a) 36,672 35,895 35,082 35,053
34,551 Total assets 475,775 467,374 464,607 461,329 460,119
Goodwill (net of deferred tax liability) (1) (8,716 ) (8,549 )
(8,682 ) (8,585 ) (8,609 ) Intangible assets, other than mortgage
servicing rights (685 ) (601 ) (627 )
(571 ) (608 ) Tangible assets
(b) 466,374 458,224 455,298 452,173 450,902
Risk-weighted assets, determined in
accordance with the Basel III standardized approach (c)
384,394
* 381,661 377,713 375,466 373,141
Ratios * Tangible
common equity to tangible assets (a)/(b) 7.9 % 7.8 % 7.7 % 7.8 %
7.7 % Tangible common equity to risk-weighted assets (a)/(c) 9.5
9.4 9.3 9.3 9.3 Three Months Ended March 31, December
31, September 30, June 30, March 31, 2019 2018
2018 2018
2018 Net income applicable to U.S. Bancorp
common shareholders $1,613 $1,777 $1,732 $1,678 $1,597 Intangibles
amortization (net-of-tax) 32 32
32 32 31
Net income applicable to U.S. Bancorp
common shareholders, excluding intangibles amortization
1,645 1,809 1,764 1,710 1,628
Annualized net income applicable to U.S.
Bancorp common shareholders, excluding intangibles amortization
(d)
6,671 7,177 6,998 6,859 6,602 Average total equity 52,218
51,370 50,768 49,950 49,450 Less: Average preferred stock 5,984
5,984 5,714 5,419 5,419 Less: Average noncontrolling interests 629
630 630 628 625 Less: Average goodwill (net of deferred tax
liability) (1) 8,732 8,574 8,620 8,602 8,627 Less: Average
intangible assets, other than mortgage servicing rights 671
605 584 588
603
Average U.S. Bancorp common shareholders'
equity, excluding intangible assets (e)
36,202 35,577 35,220 34,713 34,176 Return on tangible common
equity (d)/(e) 18.4 % 20.2 % 19.9
% 19.8 % 19.3 %
Net interest income $3,259 $3,303 $3,251 $3,197 $3,168
Taxable-equivalent adjustment (2) 27 28
30 29 29
Net interest income, on a taxable-equivalent basis
3,286 3,331 3,281 3,226 3,197 Net interest income, on a
taxable-equivalent basis (as calculated above) 3,286 3,331 3,281
3,226 3,197 Noninterest income 2,291 2,498 2,418 2,414 2,272 Less:
Securities gains (losses), net 5 5
10 10 5
Total net revenue, excluding net securities gains
(losses) (f) 5,572 5,824 5,689 5,630 5,464 Noninterest
expense (g) 3,087 3,280 3,044 3,085 3,055 Less: Intangible
amortization 40 41 41
40 39
Noninterest expense, excluding intangible amortization (h) 3,047
3,239 3,003 3,045 3,016 Efficiency ratio (g)/(f) 55.4 % 56.3
% 53.5 % 54.8 % 55.9 % Tangible efficiency ratio (h)/(f)
54.7 55.6 52.8
54.1 55.2
* Preliminary data. Subject to
change prior to filings with applicable regulatory agencies.
(1) Includes goodwill related to certain investments in
unconsolidated financial institutions per prescribed regulatory
requirements. (2) Based on a federal income tax rate of 21 percent
for those assets and liabilities whose income or expense is not
included for federal income tax purposes.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190417005073/en/
Investor contact: Jennifer Thompson, 612.303.0778Media contact:
Rebekah Fawcett, 612.303.9986
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