U.S. Bancorp Reports Fourth Quarter and Full Year 2017 Earnings

January 17, 2018

Record Earnings Per Diluted Common Share for Full Year 2017

Full year return on average assets of 1.39 percent and average common equity of 13.8 percent

Returned 77 percent of full year earnings to shareholders

MINNEAPOLIS--(BUSINESS WIRE)--Jan. 17, 2018-- U.S. Bancorp (NYSE: USB) today reported net income of $1,682 million for the fourth quarter of 2017, or $0.97 per diluted common share, compared with $1,478 million, or $0.82 per diluted common share, in the fourth quarter of 2016. The fourth quarter of 2017 included notable items related to the impacts of tax reform, a special employee bonus, a charitable contribution to the U.S. Bank Foundation, and a regulatory and legal accrual that, combined, increased diluted earnings per common share by $0.09.

Highlights for the full year of 2017 included:

  • Record diluted earnings per common share of $3.51, record net revenue of $22,057 million, and record net income of $6,218 million. Earnings to common shareholders were $3.42 per diluted common share for 2017, excluding notable items.
  • Industry-leading return on average assets of 1.39 percent and return on average common equity of 13.8 percent (1.35 percent and 13.4 percent, respectively, excluding notable items)
  • Returned 77 percent of 2017 earnings to shareholders through dividends and share buybacks

Highlights for the fourth quarter of 2017 included:

  • Record net revenue, both as reported and excluding notable items
  • Diluted earnings per common share of $0.88 in the fourth quarter of 2017, excluding notable items
  • Return on average assets of 1.46 percent and return on average common equity of 14.7 percent (1.33 percent and 13.4 percent, respectively, excluding notable items)
  • Returned 72 percent of fourth quarter earnings to shareholders through dividends and share buybacks
  • Net interest income grew 6.4 percent year-over-year and 0.3 percent on a linked quarter basis
  • Net interest margin of 3.08 percent for the fourth quarter of 2017 was 10 basis points higher than the fourth quarter of 2016 and 2 basis points lower than the third quarter of 2017
  • Positive operating leverage in the fourth quarter of 2017, on a year-over-year basis, excluding notable items
  • Nonperforming assets decreased 25.1 percent on a year-over-year basis and 4.1 percent on a linked quarter basis
  • Average total loans grew 2.6 percent over the fourth quarter of 2016 and 0.8 percent on a linked quarter basis
    • Average total commercial loans grew 4.0 percent over the fourth quarter of 2016 and 1.0 percent on a linked quarter basis
    • Average total other retail loans grew 6.0 percent over the fourth quarter of 2016 and 1.9 percent on a linked quarter basis
  • Strong capital position. At December 31, 2017, the estimated common equity tier 1 capital to risk-weighted assets ratio was 9.1 percent using the Basel III fully implemented standardized approach and was 11.6 percent using the Basel III fully implemented advanced approaches method.
                                 
EARNINGS SUMMARY                               Table 1
($ in millions, except per-share data)         Percent   Percent      
Change Change
4Q 3Q 4Q 4Q17 vs 4Q17 vs Full Year Full Year Percent
2017   2017   2016   3Q17   4Q16   2017   2016   Change
 
Net income attributable to U.S. Bancorp $1,682 $1,563 $1,478 7.6 13.8 $6,218 $5,888 5.6
Diluted earnings per common share $.97 $.88 $.82 10.2 18.3 $3.51 $3.24 8.3
 
Return on average assets (%) 1.46 1.38 1.32 1.39 1.36
Return on average common equity (%) 14.7 13.6 13.1 13.8 13.4
Net interest margin (%) 3.08 3.10 2.98 3.06 3.01
Efficiency ratio (%) (a) 70.0 54.3 55.3 58.8 54.9
Tangible efficiency ratio (%) (a) 69.2 53.5 54.5 58.0 54.0
 
Dividends declared per common share $.30 $.30 $.28 -- 7.1 $1.16 $1.07 8.4
Book value per common share (period end) $26.34 $25.98 $24.63 1.4 6.9
 
(a) See Non-GAAP Financial Measures reconciliation on page 23
 
 

Net income attributable to U.S. Bancorp was $1,682 million for the fourth quarter of 2017, 13.8 percent higher than the $1,478 million for the fourth quarter of 2016, and 7.6 percent higher than the $1,563 million for the third quarter of 2017. Diluted earnings per common share of $0.97 in the fourth quarter of 2017 were $0.15 higher than the fourth quarter of 2016 and $0.09 higher than the third quarter of 2017. The fourth quarter of 2017 included $0.09 of notable items, including a benefit of $910 million related to the estimated impact of tax reform on the Company’s tax related assets and liabilities, partially offset by a $608 million accrual for regulatory and legal matters, and $152 million, net of tax, for a charitable contribution to the U.S. Bank Foundation and a special bonus to certain eligible employees. The regulatory and legal accrual is related to previously disclosed matters related to Bank Secrecy Act/anti-money laundering compliance program adequacy and investigations by the United States Attorney’s Office in Manhattan into that program and U.S. Bank National Association’s legacy banking relationship with payday lending businesses associated with a former customer. The increase in net income year-over-year was primarily due to total net revenue growth, including an increase in net interest income of 6.4 percent, mainly a result of the impact of rising interest rates and loan growth. Noninterest income increased 0.4 percent principally due to higher payment services revenue, trust and investment management fees and deposit service charges, mostly offset by a decrease in mortgage banking revenue and lower equity investment income. Excluding the notable items, the increase in total net revenue was partially offset by higher noninterest expense, primarily due to increased compensation expense related to hiring to support business growth and compliance programs, merit increases, variable compensation related to revenue growth and higher employee benefits expense, partially offset by lower professional services expense driven by lower consulting costs for risk and compliance programs. Excluding notable items, net income decreased slightly on a linked quarter basis principally due to a seasonal increase in noninterest expense of 2.5 percent driven by seasonally higher costs related to investments in tax-advantaged projects in addition to higher employee benefits and professional services expense. These increases were partially offset by an increase in total net revenue of 0.5 percent, reflecting an increase in net interest income of 0.3 percent primarily driven by loan growth, and an increase in noninterest income of 0.8 percent related to higher trust and investment management fees and payment services revenue.

U.S. Bancorp President and Chief Executive Officer Andy Cecere said, “Our fourth quarter results were a strong end to what was a record year for U.S. Bancorp on several measures: we delivered record net revenue, net income, and diluted earnings per common share. Excluding notable items, our fourth quarter performance metrics were highlighted by a return on average common equity of 13.4 percent and a return on average assets of 1.33 percent. In the fourth quarter we returned 72 percent of earnings to shareholders through dividends and share buybacks.

“The economic backdrop is favorable, and tax reform legislation enacted late last year has provided us an opportunity to accelerate investment in our businesses, our people, and our communities, while at the same time enhancing shareholder value through the potential for increased payouts. We previously announced that we will raise our minimum wage in the United States to $15 per hour, provide one-time bonuses to certain eligible employees, and contribute an additional $150 million to the U.S. Bank Foundation, which will help revitalize our communities for years to come. With the ongoing benefit provided by a lower corporate tax rate we plan to increase our investments in technology and innovation, with a focus on enhancing the customer experience and improving operational efficiency that drives long-term growth and creates value for shareholders.

“The successes of 2017 were a direct result of the outstanding dedication and effort of our employees. I want to thank our amazing team members who work tirelessly to be our customers’ most trusted partner. We are operating from a position of strength as we enter 2018 and we will continue to work every day to create value for our investors, our customers, our communities, and our employees.”

                                       
INCOME STATEMENT HIGHLIGHTS                                     Table 2
($ in millions, except per-share data)         Percent   Percent      
Change Change
4Q 3Q 4Q 4Q17 vs 4Q17 vs Full Year Full Year Percent
2017   2017   2016   3Q17   4Q16   2017   2016   Change
 
Net interest income $3,144 $3,135 $2,955 .3 6.4 $12,241 $11,528 6.2
Taxable-equivalent adjustment 53     51     49   3.9 8.2 205     203   1.0
Net interest income (taxable-equivalent basis) 3,197     3,186     3,004   .3 6.4 12,446     11,731   6.1
Noninterest income 2,441     2,422     2,431   .8 .4 9,611     9,577   .4
Total net revenue 5,638 5,608 5,435 .5 3.7 22,057 21,308 3.5
Noninterest expense 3,939     3,039     3,004   29.6 31.1 12,945     11,676   10.9
Income before provision and income taxes 1,699 2,569 2,431 (33.9 ) (30.1 ) 9,112 9,632 (5.4 )
Provision for credit losses 335     360     342   (6.9 ) (2.0 ) 1,390     1,324   5.0
Income before taxes 1,364     2,209     2,089   (38.3 ) (34.7 ) 7,722     8,308   (7.1 )

Income taxes and taxable-equivalent adjustment

(322 )   640     598   nm nm 1,469     2,364   (37.9 )
Net income 1,686 1,569 1,491 7.5 13.1 6,253 5,944 5.2

Net (income) loss attributable to noncontrolling interests

(4 )   (6 )   (13 ) 33.3 69.2 (35 )   (56 ) 37.5
Net income attributable to U.S. Bancorp $1,682     $1,563     $1,478   7.6 13.8 $6,218     $5,888   5.6

Net income applicable to U.S. Bancorp common shareholders

$1,611     $1,485     $1,391   8.5 15.8 $5,913     $5,589   5.8
Diluted earnings per common share $.97     $.88     $.82   10.2 18.3 $3.51     $3.24   8.3
                                                 
 
                                 
NET INTEREST INCOME                               Table 3
(Taxable-equivalent basis; $ in millions)                
Change Change
4Q 3Q 4Q 4Q17 vs 4Q17 vs Full Year Full Year
2017   2017   2016   3Q17   4Q16   2017   2016   Change
Components of net interest income
Income on earning assets $3,795 $3,768 $3,424 $27 $371 $14,598 $13,375 $1,223
Expense on interest-bearing liabilities 598     582     420     16     178     2,152     1,644     508  
Net interest income $3,197     $3,186     $3,004     $11     $193     $12,446     $11,731     $715  
 
Average yields and rates paid
Earning assets yield 3.65 % 3.67 % 3.40 % (.02 )% .25 % 3.59 % 3.43 % .16 %
Rate paid on interest-bearing liabilities .77     .76     .57     .01     .20     .71     .57     .14  
Gross interest margin 2.88 %   2.91 %   2.83 %   (.03 )%   .05 %   2.88 %   2.86 %   .02 %
Net interest margin 3.08 %   3.10 %   2.98 %   (.02 )%   .10 %   3.06 %   3.01 %   .05 %
 
Average balances
Investment securities (a) $113,287 $111,832 $110,386 $1,455 $2,901 $111,820 $107,922 $3,898
Loans 279,751 277,626 272,671 2,125 7,080 276,537 267,811 8,726
Earning assets 413,510 408,825 401,971 4,685 11,539 406,421 389,877 16,544
Interest-bearing liabilities 308,976 304,236 295,288 4,740 13,688 302,204 287,760 14,444
 
(a) Excludes unrealized gain (loss)
 
 

Net Interest Income

Net interest income on a taxable-equivalent basis in the fourth quarter of 2017 was $3,197 million, an increase of $193 million (6.4 percent) over the fourth quarter of 2016. The increase was principally driven by the impact of rising interest rates and loan growth. Average earning assets were $11.5 billion (2.9 percent) higher than the fourth quarter of 2016, reflecting increases of $7.1 billion (2.6 percent) in average total loans, $2.9 billion (2.6 percent) in average investment securities and $2.7 billion (19.4 percent) in average other earning assets. Net interest income on a taxable-equivalent basis increased $11 million (0.3 percent) on a linked quarter basis primarily driven by loan growth and higher interest rates. Average earning assets were $4.7 billion (1.1 percent) higher on a linked quarter basis, reflecting increases of $2.1 billion (0.8 percent) in average total loans, $1.5 billion (1.3 percent) in average investment securities and $1.1 billion (7.3 percent) in average other earning assets.

The net interest margin in the fourth quarter of 2017 was 3.08 percent, compared with 2.98 percent in the fourth quarter of 2016, and 3.10 percent in the third quarter of 2017. The increase in the net interest margin year-over-year was primarily due to higher interest rates and loan mix, partially offset by higher funding costs and higher cash balances. The decrease in net interest margin on a linked quarter basis was primarily due to higher interest recoveries in the third quarter of 2017.

Investment Securities

Average investment securities in the fourth quarter of 2017 were $2.9 billion (2.6 percent) higher year-over-year and $1.5 billion (1.3 percent) higher than the prior quarter. These increases were primarily due to purchases of U.S. Treasury and U.S. government mortgage-backed securities, net of prepayments and maturities, in support of liquidity management.

                                 
AVERAGE LOANS                               Table 4
($ in millions)         Percent   Percent      
Change Change
4Q 3Q 4Q 4Q17 vs 4Q17 vs Full Year Full Year Percent
2017   2017   2016   3Q17   4Q16   2017   2016   Change
 
Commercial $92,101 $91,077 $88,448 1.1 4.1 $90,393 $86,754 4.2
Lease financing 5,457   5,556   5,359 (1.8 ) 1.8 5,511   5,289 4.2
Total commercial 97,558 96,633 93,807 1.0 4.0 95,904 92,043 4.2
 
Commercial mortgages 29,543 30,114 31,767 (1.9 ) (7.0 ) 30,430 31,860 (4.5 )
Construction and development 11,466   11,507   11,624 (.4 ) (1.4 ) 11,647 11,180 4.2
Total commercial real estate 41,009 41,621 43,391 (1.5 ) (5.5 ) 42,077 43,040 (2.2 )
 
Residential mortgages 59,639 59,030 56,718 1.0 5.2 58,784 55,682 5.6
 
Credit card 21,218 20,926 20,942 1.4 1.3 20,906 20,490 2.0
 
Retail leasing 7,982 7,762 6,191 2.8 28.9 7,354 5,619 30.9
Home equity and second mortgages 16,299 16,299 16,444 -- (.9 ) 16,278 16,419 (.9 )
Other 32,856   32,008   31,245 2.6 5.2 31,784   30,292 4.9
Total other retail 57,137   56,069   53,880 1.9 6.0 55,416   52,330 5.9
 
Total loans, excluding covered loans 276,561   274,279   268,738 .8 2.9 273,087   263,585 3.6
 
Covered loans 3,190   3,347   3,933 (4.7 ) (18.9 ) 3,450   4,226 (18.4 )
 
Total loans $279,751   $277,626   $272,671 .8 2.6 $276,537   $267,811 3.3
                                 
 

Loans

Average total loans were $7.1 billion (2.6 percent) higher than the fourth quarter of 2016. The increase was due to growth in total commercial loans (4.0 percent), residential mortgages (5.2 percent), retail leasing (28.9 percent) and other retail loans (5.2 percent). These increases were partially offset by a decrease in total commercial real estate loans (5.5 percent) due to disciplined underwriting of construction and development loans and payoffs of commercial mortgages given recent capital market financing by customers. Loan growth was also muted by run-off in the covered loans portfolio (18.9 percent). Average total loans were $2.1 billion (0.8 percent) higher than the third quarter of 2017. This increase was primarily driven by linked quarter growth in total other retail loans (1.9 percent), total commercial loans (1.0 percent) and residential mortgages (1.0 percent), partially offset by decreases in total commercial real estate loans (1.5 percent) and covered loans (4.7 percent).

                                 
AVERAGE DEPOSITS                               Table 5
($ in millions)         Percent   Percent      
Change Change
4Q 3Q 4Q 4Q17 vs 4Q17 vs Full Year Full Year Percent
2017   2017   2016   3Q17   4Q16   2017   2016   Change
 
Noninterest-bearing deposits $82,303 $81,964 $84,892 .4 (3.0 ) $81,933 $81,176 .9
Interest-bearing savings deposits
Interest checking 70,717 68,066 64,647 3.9 9.4 67,953 61,726 10.1
Money market savings 105,348 105,072 106,637 .3 (1.2 ) 106,476 96,518 10.3
Savings accounts 43,772   43,649   41,310 .3 6.0 43,393   40,382 7.5
Total savings deposits 219,837 216,787 212,594 1.4 3.4 217,822 198,626 9.7
Time deposits 37,022   36,400   31,697 1.7 16.8 33,759   33,008 2.3
Total interest-bearing deposits 256,859   253,187   244,291 1.5 5.1 251,581   231,634 8.6
Total deposits $339,162   $335,151   $329,183 1.2 3.0 $333,514   $312,810 6.6
                                 
 

Deposits

Average total deposits for the fourth quarter of 2017 were $10.0 billion (3.0 percent) higher than the fourth quarter of 2016. Average noninterest-bearing deposits decreased $2.6 billion (3.0 percent) year-over-year primarily due to a decrease in Corporate and Commercial Banking. Average total savings deposits were $7.2 billion (3.4 percent) higher year-over-year driven by growth in Consumer and Business Banking and Wealth Management and Investment Services, partially offset by a decrease in Corporate and Commercial Banking. Average time deposits were $5.3 billion (16.8 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 $4.0 billion (1.2 percent) over the third quarter of 2017. On a linked quarter basis, average noninterest-bearing deposits increased slightly and average total savings deposits grew $3.1 billion (1.4 percent) reflecting increases in Consumer and Business Banking and Wealth Management and Investment Services. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, increased $622 million (1.7 percent) on a linked quarter basis.

                                   
NONINTEREST INCOME                               Table 6
($ in millions)         Percent   Percent      
Change Change
4Q 3Q 4Q 4Q17 vs 4Q17 vs Full Year Full Year Percent
2017   2017   2016   3Q17   4Q16   2017   2016   Change
 
Credit and debit card revenue $333 $308 $316 8.1 5.4 $1,252 $1,177 6.4
Corporate payment products revenue 189 201 171 (6.0 ) 10.5 753 712 5.8
Merchant processing services 400 405 404 (1.2 ) (1.0 ) 1,590 1,592 (.1 )
ATM processing services 95 92 87 3.3 9.2 362 338 7.1
Trust and investment management fees 394 380 368 3.7 7.1 1,522 1,427 6.7
Deposit service charges 198 192 186 3.1 6.5 751 725 3.6
Treasury management fees 152 153 147 (.7 ) 3.4 618 583 6.0
Commercial products revenue 211 221 217 (4.5 ) (2.8 ) 849 871 (2.5 )
Mortgage banking revenue 202 213 240 (5.2 ) (15.8 ) 834 979 (14.8 )
Investment products fees 43 39 38 10.3 13.2 163 158 3.2
Securities gains (losses), net 10 9 6 11.1 66.7 57 22 nm
Other 214   209   251 2.4 (14.7 ) 860   993 (13.4 )
 
Total noninterest income $2,441   $2,422   $2,431 .8 .4 $9,611   $9,577 .4
                                   
 

Noninterest Income

Fourth quarter noninterest income of $2,441 million was $10 million (0.4 percent) higher than the fourth quarter of 2016 principally due to higher payment services revenue, trust and investment management fees, and deposit service charges, partially offset by lower mortgage banking and other revenue. Payment services revenue was higher due to an increase in corporate payment products revenue of $18 million (10.5 percent) and an increase in credit and debit card revenue of $17 million (5.4 percent), both driven by higher sales volumes. These increases were partially offset by a decrease in merchant processing services revenue of $4 million (1.0 percent) mainly due to exiting certain joint ventures in the second quarter of 2017. Trust and investment management fees increased $26 million (7.1 percent) principally due to favorable market conditions and net asset and account growth. Deposit service charges increased $12 million (6.5 percent) primarily due to higher transaction volumes and account growth. Mortgage banking revenue decreased $38 million (15.8 percent) primarily due to lower origination and sales volumes from home refinancing activities which were higher in the prior year quarter and lower margins on mortgage loan sales. Other revenue decreased $37 million (14.7 percent) primarily due to lower equity investment income in the current quarter.

Noninterest income was $19 million (0.8 percent) higher in the fourth quarter of 2017 than the third quarter of 2017 reflecting growth in trust and investment management fees, payment services revenue and deposit service charges, partially offset by lower mortgage banking revenue and commercial products revenue. Trust and investment management fees increased $14 million (3.7 percent) driven by account growth and favorable market conditions. Payment services revenue was higher due to an increase in credit and debit card revenue of $25 million (8.1 percent) primarily due to seasonally higher sales volumes. This increase was partially offset by an expected seasonal decline in corporate payment products revenue of $12 million (6.0 percent) and merchant processing services revenue of $5 million (1.2 percent) due to seasonally lower sales volumes. Deposit service charges increased $6 million (3.1 percent) due to higher transaction volumes. Mortgage banking revenue decreased $11 million (5.2 percent) primarily due to the valuation of mortgage servicing rights, net of hedging activities, along with lower origination and sales volumes and lower margins on related sales. Commercial products revenue decreased $10 million (4.5 percent) primarily driven by lower corporate bond fees.

                                     
NONINTEREST EXPENSE                                   Table 7
($ in millions)         Percent   Percent      
Change Change
4Q 3Q 4Q 4Q17 vs 4Q17 vs Full Year Full Year Percent
2017   2017   2016   3Q17   4Q16   2017   2016   Change
 
Compensation $1,499 $1,440 $1,357 4.1 10.5 $5,746 $5,212 10.2
Employee benefits 304 281 261 8.2 16.5 1,186 1,119 6.0
Net occupancy and equipment 259 258 247 .4 4.9 1,019 988 3.1
Professional services 114 104 156 9.6 (26.9 ) 419 502 (16.5 )
Marketing and business development 251 92 107 nm nm 542 435 24.6
Technology and communications 254 246 238 3.3 6.7 977 955 2.3
Postage, printing and supplies 79 82 75 (3.7 ) 5.3 323 311 3.9
Other intangibles 44 44 45 -- (2.2 ) 175 179 (2.2 )
Other 1,135   492   518 nm nm 2,558   1,975 29.5
 
Total noninterest expense $3,939   $3,039   $3,004 29.6 31.1 $12,945   $11,676 10.9
                                       
 

Noninterest Expense

Fourth quarter noninterest expense of $3,939 million was $935 million (31.1 percent) higher than the fourth quarter of 2016 primarily due to notable items which totaled $825 million. This amount consisted of a special bonus to eligible employees, a charitable contribution to the U.S. Bank Foundation, and a $608 million accrual for previously disclosed regulatory and legal matters related to Bank Secrecy Act/anti-money laundering compliance program adequacy and investigations by the United States Attorney’s Office in Manhattan into that program and U.S. Bank National Association’s legacy relationship with payday lending businesses associated with a former customer. The Company is working on a definitive settlement of these matters, which is expected to finalize soon. Excluding the notable items, fourth quarter noninterest expense increased $110 million (3.6 percent) year-over-year primarily due to higher compensation and employee benefits expense, partially offset by lower professional services expense. Compensation expense increased principally due to the impact of hiring to support business growth and compliance programs, merit increases, and higher variable compensation related to business production. The increase in employee benefits expense was primarily driven by increased medical costs. Professional services expense decreased $42 million (26.9 percent) primarily due to fewer consulting services as compliance programs near maturity.

Noninterest expense increased $900 million (29.6 percent) on a linked quarter basis primarily due to the notable items. Excluding the notable items, noninterest expense was $75 million (2.5 percent) higher in the fourth quarter of 2017 than the third quarter of 2017 driven by seasonally higher costs related to investments in tax-advantaged projects and seasonally higher professional services expense in addition to an increase in employee benefits expense due to increased medical costs.

Provision for Income Taxes

During the fourth quarter of 2017, tax legislation was enacted that, among other provisions, reduced the statutory tax rate for corporations from 35 percent to 21 percent effective in 2018. In accordance with generally accepted accounting principles, the Company revalued deferred tax assets and liabilities at the end of the fourth quarter of 2017 resulting in an estimated net tax benefit of $910 million during the fourth quarter of 2017. The provision for income taxes for the fourth quarter of 2017 reflects this benefit resulting in a tax benefit of 23.6 percent on a taxable-equivalent basis (effective tax benefit of 28.6 percent), compared with tax expense of 28.6 percent (effective tax rate of 26.9 percent) in the fourth quarter of 2016, and 29.0 percent (effective tax rate of 27.3 percent) in the third quarter of 2017.

                                         
ALLOWANCE FOR CREDIT LOSSES                                 Table 8
($ in millions)   4Q     3Q     2Q     1Q     4Q  
2017   % (b)   2017   % (b)   2017   % (b)   2017   % (b)   2016   % (b)
 
Balance, beginning of period $4,407 $4,377 $4,366 $4,357 $4,338
 
Net charge-offs
Commercial 22 .09 79 .34 75 .33 71 .33 71 .32
Lease financing 6   .44 4   .29 3   .22 4   .30 5   .37
Total commercial 28 .11 83 .34 78 .33 75 .32 76 .32
Commercial mortgages 18 .24 (2 ) (.03 ) (7 ) (.09 ) (1 ) (.01 ) (3 ) (.04 )
Construction and development --   -- (5 ) (.17 ) (2 ) (.07 ) (1 ) (.03 ) (6 ) (.21 )
Total commercial real estate 18 .17 (7 ) (.07 ) (9 ) (.08 ) (2 ) (.02 ) (9 ) (.08 )
 
Residential mortgages 10 .07 7 .05 8 .05 12 .08 12 .08
 
Credit card 205 3.83 187 3.55 204 3.97 190 3.70 181 3.44
 
Retail leasing 3 .15 2 .10 2 .11 3 .19 1 .06
Home equity and second mortgages (2 ) (.05 ) (1 ) (.02 ) (1 ) (.02 ) (1 ) (.02 ) (1 ) (.02 )
Other 63   .76 59   .73 58   .75 58   .76 62   .79
Total other retail 64 .44 60 .42 59 .43 60 .45 62 .46
Total net charge-offs,          
excluding covered loans 325 .47 330 .48 340 .50 335 .50 322 .48
Covered loans --   -- --   -- --   -- --   -- --   --
Total net charge-offs 325 .46 330 .47 340 .49 335 .50 322 .47
Provision for credit losses 335 360 350 345 342
Other changes (a) --   --   1   (1 ) (1 )
Balance, end of period $4,417   $4,407   $4,377   $4,366   $4,357  
 
Components
Allowance for loan losses $3,925 $3,908 $3,856 $3,816 $3,813

Liability for unfunded credit commitments

492   499   521   550   544  
Total allowance for credit losses $4,417   $4,407   $4,377   $4,366   $4,357  
 
Gross charge-offs $464 $433 $437 $417 $405
Gross recoveries $139 $103 $97 $82 $83
 
Allowance for credit losses as a percentage of

Period-end loans, excluding covered loans

1.58 1.59 1.59 1.61 1.60

Nonperforming loans, excluding covered loans

438 425 385 338 317

Nonperforming assets, excluding covered assets

374 359 331 296 275
 
Period-end loans 1.58 1.58 1.58 1.60 1.59
Nonperforming loans 438 426 383 338 318
Nonperforming assets 368 352 324 292 272
 

(a) Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the indemnification asset, and the impact of any loan sales.

(b) Annualized and calculated on average loan balances
   
 

Credit Quality

The Company’s provision for credit losses for the fourth quarter of 2017 was $335 million, which was $25 million (6.9 percent) lower than the prior quarter and $7 million (2.0 percent) lower than the fourth quarter of 2016. Credit quality was relatively stable compared with the third quarter of 2017.

Total net charge-offs in the fourth quarter of 2017 were $325 million, compared with $330 million in the third quarter of 2017, and $322 million in the fourth quarter of 2016. Net charge-offs decreased $5 million (1.5 percent) compared with the third quarter of 2017 mainly due to lower total commercial loan net charge-offs driven by higher recoveries, partially offset by higher total commercial real estate and credit card loan net charge-offs. Net charge-offs increased $3 million (0.9 percent) compared with the fourth quarter of 2016 primarily due to higher total commercial real estate and credit card loan net charge-offs, mostly offset by lower total commercial loan net charge-offs driven by higher recoveries. The net charge-off ratio was 0.46 percent in the fourth quarter of 2017, compared with 0.47 percent in the third quarter of 2017 and in the fourth quarter of 2016.

The allowance for credit losses was $4,417 million at December 31, 2017, compared with $4,407 million at September 30, 2017, and $4,357 million at December 31, 2016. The ratio of the allowance for credit losses to period-end loans was 1.58 percent at December 31, 2017 and at September 30, 2017, compared with 1.59 percent at December 31, 2016. The ratio of the allowance for credit losses to nonperforming loans was 438 percent at December 31, 2017, compared with 426 percent at September 30, 2017, and 318 percent at December 31, 2016.

Nonperforming assets were $1,200 million at December 31, 2017, compared with $1,251 million at September 30, 2017, and $1,603 million at December 31, 2016. The ratio of nonperforming assets to loans and other real estate was 0.43 percent at December 31, 2017, compared with 0.45 percent at September 30, 2017, and 0.59 percent at December 31, 2016. The linked quarter and year-over-year decreases in nonperforming assets were driven by improvements in total commercial loans, residential mortgages and other real estate owned, partially offset by an increase in total commercial real estate loans. Accruing loans 90 days or more past due were $720 million ($572 million excluding covered loans) at December 31, 2017, compared with $649 million ($497 million excluding covered loans) at September 30, 2017, and $764 million ($552 million excluding covered loans) at December 31, 2016.

                     

DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES

 

Table 9

(Percent)        
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31
2017   2017   2017   2017   2016
 
Delinquent loan ratios - 90 days or more past due excluding nonperforming loans
Commercial .06 .05 .05 .06 .06
Commercial real estate .01 .01 -- .01 .02
Residential mortgages .22 .18 .20 .24 .27
Credit card 1.28 1.20 1.10 1.23 1.16
Other retail .17 .15 .14 .14 .15
Total loans, excluding covered loans .21 .18 .17 .19 .20
Covered loans 4.74 4.66 4.71 5.34 5.53
Total loans .26 .23 .23 .26 .28
 
Delinquent loan ratios - 90 days or more past due including nonperforming loans
Commercial .31 .33 .39 .52 .57
Commercial real estate .37 .30 .29 .27 .31
Residential mortgages .96 .98 1.10 1.23 1.31
Credit card 1.28 1.20 1.10 1.24 1.18
Other retail .46 .43 .42 .43 .45
Total loans, excluding covered loans .57 .55 .59 .67 .71
Covered loans 4.93 4.84 5.06 5.53 5.68
Total loans .62 .60 .64 .73 .78
                     
 
                     
ASSET QUALITY               Table 10
($ in millions)          
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31
2017   2017   2017   2017   2016
Nonperforming loans
Commercial $225 $231 $283 $397 $443
Lease financing 24   38   39   42   40
Total commercial 249 269 322 439 483
 
Commercial mortgages 108 89 84 74 87
Construction and development 34   33   35   36   37
Total commercial real estate 142 122 119 110 124
 
Residential mortgages 442 474 530 575 595
Credit card 1 1 1 2 3
Other retail 168   163   158   157   157
Total nonperforming loans, excluding covered loans 1,002 1,029 1,130 1,283 1,362
 
Covered loans 6   6   12   7   6
Total nonperforming loans 1,008 1,035 1,142 1,290 1,368
 
Other real estate (a) 141 164 157 155 186
Covered other real estate (a) 21 26 25 22 26
Other nonperforming assets 30   26   25   28   23
 
Total nonperforming assets (b) $1,200   $1,251   $1,349   $1,495   $1,603
 
Total nonperforming assets, excluding covered assets $1,173   $1,219   $1,312   $1,466   $1,571
 

Accruing loans 90 days or more past due, excluding covered loans

$572   $497   $477   $524   $552
 
Accruing loans 90 days or more past due $720   $649   $639   $718   $764
 

Performing restructured loans, excluding GNMA and covered loans

$2,306   $2,419   $2,473   $2,478   $2,557
 
Performing restructured GNMA and covered loans $1,713   $1,600   $1,803   $1,746   $1,604
 

Nonperforming assets to loans plus ORE, excluding covered assets (%)

.42 .44 .48 .54 .58
 
Nonperforming assets to loans plus ORE (%) .43 .45 .49 .55 .59
 
(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)   4Q   3Q   2Q   1Q   4Q
2017   2017   2017   2017   2016
 
Beginning shares outstanding 1,667 1,679 1,692 1,697 1,705

Shares issued for stock incentive plans, acquisitions and other corporate purposes

1 -- 1 6 6
Shares repurchased (12 )   (12 )   (14 )   (11 )   (14 )
Ending shares outstanding 1,656     1,667     1,679     1,692     1,697  
                               
 
                             
CAPITAL POSITION                     Table 12
($ in millions)   Dec 31   Sep 30   Jun 30   Mar 31   Dec 31
2017   2017   2017   2017   2016
 
Total U.S. Bancorp shareholders' equity $49,040 $48,723 $48,320 $47,798 $47,298
 
Standardized Approach
 
Basel III transitional standardized approach
Common equity tier 1 capital $34,369 $34,876 $34,408 $33,847 $33,720
Tier 1 capital 39,806 40,411 39,943 39,374 39,421
Total risk-based capital 47,503 48,104 47,824 47,279 47,355
 
Common equity tier 1 capital ratio 9.3 % 9.6 % 9.5 % 9.5 % 9.4 %
Tier 1 capital ratio 10.8 11.1 11.1 11.0 11.0
Total risk-based capital ratio 12.9 13.2 13.2 13.3 13.2
Leverage ratio 8.9 9.1 9.1 9.1 9.0
 

Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach (a)

9.1 9.4 9.3 9.2 9.1
 
Advanced Approaches
 

Common equity tier 1 capital to risk-weighted assets for the Basel III transitional advanced approaches

12.0 12.1 12.0 11.8 12.2
 

Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches (a)

11.6 11.8 11.7 11.5 11.7
 
Tangible common equity to tangible assets (a) 7.6 7.7 7.5 7.6 7.5
Tangible common equity to risk-weighted assets (a) 9.4 9.5 9.4 9.4 9.2
 
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 on page 23
                         
 

Capital Management

Total U.S. Bancorp shareholders’ equity was $49.0 billion at December 31, 2017, compared with $48.7 billion at September 30, 2017, and $47.3 billion at December 31, 2016. During the fourth quarter, the Company returned 72 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 9.1 percent at December 31, 2017, compared with 9.4 percent at September 30, 2017, and 9.1 percent at December 31, 2016. The estimated common equity tier 1 capital to risk-weighted assets ratio using the Basel III fully implemented advanced approaches method was 11.6 percent at December 31, 2017, compared with 11.8 percent at September 30, 2017, and 11.7 percent at December 31, 2016.

On Wednesday, January 17, 2018, at 8:00 a.m. CST, 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 8669609. For those unable to participate during the live call, a recording will be available at approximately 11:00 a.m. CST on Wednesday, January 17 and will be accessible through Wednesday, January 24 at 11:00 p.m. CST. 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 8669609.

Minneapolis-based U.S. Bancorp (NYSE: USB), with $462 billion in assets as of December 31, 2017, is the parent company of U.S. Bank National Association, the fifth largest commercial bank in the United States. The Company operates 3,067 banking offices in 25 states and 4,771 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 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 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.

In addition, certain performance measures are presented excluding notable items in the fourth quarter of 2017. Management believes this information helps investors understand the effect of these items on reported results.

There may be limits in the usefulness of these measures to investors. As a result, the Company encourages readers to consider the consolidated financial statements and other financial information contained in this press release in their entirety, and not to rely on any single financial measure. A table follows that shows the Company’s calculation of these non-GAAP financial measures.

       
U.S. Bancorp
Consolidated Statement of Income
Three Months Ended Year Ended
(Dollars and Shares in Millions, Except Per Share Data) December 31,   December 31,
(Unaudited)   2017   2016   2017   2016
Interest Income
Loans $3,070 $2,771 $11,827 $10,810
Loans held for sale 40 44 144 154
Investment securities 579 523 2,232 2,078
Other interest income 51     36     182     125  
Total interest income 3,740 3,374 14,385 13,167
Interest Expense
Deposits 311 170 1,041 622
Short-term borrowings 86 62 319 263
Long-term debt 199     187     784     754  
Total interest expense 596     419     2,144     1,639  
Net interest income 3,144 2,955 12,241 11,528
Provision for credit losses 335     342     1,390     1,324  
Net interest income after provision for credit losses 2,809 2,613 10,851 10,204
Noninterest Income
Credit and debit card revenue 333 316 1,252 1,177
Corporate payment products revenue 189 171 753 712
Merchant processing services 400 404 1,590 1,592
ATM processing services 95 87 362 338
Trust and investment management fees 394 368 1,522 1,427
Deposit service charges 198 186 751 725
Treasury management fees 152 147 618 583
Commercial products revenue 211 217 849 871
Mortgage banking revenue 202 240 834 979
Investment products fees 43 38 163 158
Securities gains (losses), net 10 6 57 22
Other 214     251     860     993  
Total noninterest income 2,441 2,431 9,611 9,577
Noninterest Expense
Compensation 1,499 1,357 5,746 5,212
Employee benefits 304 261 1,186 1,119
Net occupancy and equipment 259 247 1,019 988
Professional services 114 156 419 502
Marketing and business development 251 107 542 435
Technology and communications 254 238 977 955
Postage, printing and supplies 79 75 323 311
Other intangibles 44 45 175 179
Other 1,135     518     2,558     1,975  
Total noninterest expense 3,939     3,004     12,945     11,676  
Income before income taxes 1,311 2,040 7,517 8,105
Applicable income taxes (375 )   549     1,264     2,161  
Net income 1,686 1,491 6,253 5,944
Net (income) loss attributable to noncontrolling interests (4 )   (13 )   (35 )   (56 )
Net income attributable to U.S. Bancorp $1,682     $1,478     $6,218     $5,888  
Net income applicable to U.S. Bancorp common shareholders $1,611     $1,391     $5,913     $5,589  
 
Earnings per common share $.97 $.82 $3.53 $3.25
Diluted earnings per common share $.97 $.82 $3.51 $3.24
Dividends declared per common share $.30 $.28 $1.16 $1.07
Average common shares outstanding 1,659 1,700 1,677 1,718
Average diluted common shares outstanding   1,664     1,705     1,683     1,724  
 
   
U.S. Bancorp
Consolidated Ending Balance Sheet
 
December 31, December 31,
(Dollars in Millions)   2017   2016
Assets
Cash and due from banks $19,505 $15,705
Investment securities
Held-to-maturity 44,362 42,991
Available-for-sale 68,137 66,284
Loans held for sale 3,554 4,826
Loans
Commercial 97,561 93,386
Commercial real estate 40,463 43,098
Residential mortgages 59,783 57,274
Credit card 22,180 21,749
Other retail 57,324     53,864  
Total loans, excluding covered loans 277,311 269,371
Covered loans 3,121     3,836  
Total loans 280,432 273,207
Less allowance for loan losses (3,925 )   (3,813 )
Net loans 276,507 269,394
Premises and equipment 2,432 2,443
Goodwill 9,434 9,344
Other intangible assets 3,228 3,303
Other assets 34,881     31,674  
Total assets $462,040     $445,964  
 
Liabilities and Shareholders' Equity
Deposits
Noninterest-bearing $87,557 $86,097
Interest-bearing 259,658     248,493  
Total deposits 347,215 334,590
Short-term borrowings 16,651 13,963
Long-term debt 32,259 33,323
Other liabilities 16,249     16,155  
Total liabilities 412,374 398,031
Shareholders' equity
Preferred stock 5,419 5,501
Common stock 21 21
Capital surplus 8,464 8,440
Retained earnings 54,142 50,151
Less treasury stock (17,602 ) (15,280 )
Accumulated other comprehensive income (loss) (1,404 )   (1,535 )
Total U.S. Bancorp shareholders' equity 49,040 47,298
Noncontrolling interests 626     635  
Total equity 49,666     47,933  
Total liabilities and equity $462,040     $445,964  
 
 
U.S. Bancorp
Non-GAAP Financial Measures
                   
December 31, September 30, June 30, March 31, December 31,
(Dollars in Millions, Unaudited)       2017   2017   2017     2017   2016
Total equity $49,666 $49,351 $48,949 $48,433 $47,933
Preferred stock (5,419 ) (5,419 ) (5,419 ) (5,419 ) (5,501 )
Noncontrolling interests (626 ) (628 ) (629 ) (635 ) (635 )
Goodwill (net of deferred tax liability) (1) (8,613 ) (8,141 ) (8,181 ) (8,186 ) (8,203 )
Intangible assets, other than mortgage servicing rights (583 )     (595 )     (634 )       (671 )     (712 )  
Tangible common equity (a) 34,425 34,568 34,086 33,522 32,882
 
Tangible common equity (as calculated above) 34,425 34,568 34,086 33,522 32,882
Adjustments (2) (550 )     (52 )     (51 )       (136 )     (55 )  

Common equity tier 1 capital estimated for the Basel III fully implemented standardized and advanced approaches (b)

33,875 34,516 34,035 33,386 32,827
 
Total assets 462,040 459,227 463,844 449,522 445,964
Goodwill (net of deferred tax liability) (1) (8,613 ) (8,141 ) (8,181 ) (8,186 ) (8,203 )
Intangible assets, other than mortgage servicing rights (583 )     (595 )     (634 )       (671 )     (712 )  
Tangible assets (c) 452,844 450,491 455,029 440,665 437,049
 

Risk-weighted assets, determined in accordance with prescribed transitional standardized approach regulatory requirements (d)

367,771 * 363,957 361,164 356,373 358,237
Adjustments (3) 4,473   *   3,907       3,967         4,731       4,027    

Risk-weighted assets estimated for the Basel III fully implemented standardized approach (e)

372,244 * 367,864 365,131 361,104 362,264
 

Risk-weighted assets, determined in accordance with prescribed transitional advanced approaches regulatory requirements

287,211 * 287,800 287,124 285,963 277,141
Adjustments (4) 4,769   *   4,164       4,231         5,046       4,295    

Risk-weighted assets estimated for the Basel III fully implemented advanced approaches (f)

291,980 * 291,964 291,355 291,009 281,436
 
Ratios *
Tangible common equity to tangible assets (a)/(c) 7.6 % 7.7 % 7.5 % 7.6 % 7.5

 

%

Tangible common equity to risk-weighted assets (a)/(d) 9.4 9.5 9.4 9.4 9.2

Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach (b)/(e)

9.1 9.4 9.3 9.2 9.1

Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches (b)/(f)

11.6 11.8 11.7 11.5 11.7
 
 
Three Months Ended     Year Ended
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
2017   2017   2017   2017   2016     2017   2016
Net interest income $3,144 $3,135 $3,017 $2,945 $2,955 $12,241 $11,528
Taxable-equivalent adjustment (5) 53       51       51       50       49         205       203    
Net interest income, on a taxable-equivalent basis 3,197 3,186 3,068 2,995 3,004 12,446 11,731
 
Net interest income, on a taxable-equivalent basis (as calculated above) 3,197 3,186 3,068 2,995 3,004 12,446 11,731
Noninterest income 2,441 2,422 2,419 2,329 2,431 9,611 9,577
Less: Securities gains (losses), net 10       9       9       29       6         57       22    
Total net revenue, excluding net securities gains (losses) (g) 5,628 5,599 5,478 5,295 5,429 22,000 21,286
 
Noninterest expense (h) 3,939 3,039 3,023 2,944 3,004 12,945 11,676
Less: Intangible amortization 44       44       43       44       45         175       179    
Noninterest expense, excluding intangible amortization (i) 3,895 2,995 2,980 2,900 2,959 12,770 11,497
 
Efficiency ratio (h)/(g) 70.0 % 54.3 % 55.2 % 55.6 % 55.3 % 58.8 % 54.9

 

%

Tangible efficiency ratio (i)/(g)   69.2       53.5       54.4       54.8       54.5         58.0       54.0    
 

 * 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.

 
 
U.S. Bancorp
Non-GAAP Financial Measures (continued)
       
Three Months
Ended Year Ended
(Dollars and Shares in Millions, Except Per Share Data) December 31, December 31,
(Unaudited)   2017   2017
Net income applicable to U.S. Bancorp common shareholders $1,611 $5,913
Less: Notable items (1) 150     150  
Net income applicable to U.S. Bancorp common shareholders, excluding notable items (a) $1,461 $5,763
 
Average diluted common shares outstanding (b) 1,664 1,683
 
Diluted earnings per common share, excluding notable items (a)/(b) $.88 $3.42
 
Net income attributable to U.S. Bancorp $1,682 $6,218
Less: Notable items (1) 150     150  
Net income attributable to U.S. Bancorp, excluding notable items $1,532 $6,068
Annualized net income attributable to U.S. Bancorp, excluding notable items (c) $6,078 $6,068
 
Average assets (d) $456,098 $448,582
 
Return on average assets, excluding notable items (c)/(d) 1.33 % 1.35 %
 
Net income applicable to U.S. Bancorp common shareholders, excluding notable items (as calculated above) $1,461 $5,763
Annualized net income applicable to U.S. Bancorp common shareholders, excluding notable items (e) $5,796 $5,763
 
Average common equity (f) $43,415 $42,976
 
Return on average common equity, excluding notable items (e)/(f)   13.4 %   13.4 %
 

(1) Notable items for the three months ended December 31, 2017, include: $910 million reduction in income tax expense due to tax reform legislation, $608 million regulatory and legal accrual, $105 million (after-tax) contribution to the U.S. Bank Foundation and $47 million (after-tax) one-time bonus to certain eligible employees.

 

Source: U.S. Bancorp

U.S. Bancorp
Dana Ripley, 612-303-3167
Media
or
Jennifer Thompson, 612-303-0778
Investors/Analysts

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