8-K
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 15, 2020

U.S. BANCORP

(Exact name of registrant as specified in its charter)

1-6880

(Commission File Number)

DELAWARE

 

41-0255900

(State or other jurisdiction

 

(I.R.S. Employer Identification

of incorporation)

 

Number)

800 Nicollet Mall

Minneapolis, Minnesota 55402

(Address of principal executive offices and zip code)

(651) 466-3000

(Registrant’s telephone number, including area code)

(not applicable)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 Under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading
symbol

 

Name of each exchange
on which registered

Common Stock, $.01 par value per share

 

USB

 

New York Stock Exchange

Depositary Shares (each representing 1/100th interest in a share of Series A Non-Cumulative Perpetual Preferred Stock, par value $1.00)

 

USB PrA

 

New York Stock Exchange

Depositary Shares (each representing 1/1,000th interest in a share of Series B Non-Cumulative Perpetual Preferred Stock, par value $1.00)

 

USB PrH

 

New York Stock Exchange

Depositary Shares (each representing 1/1,000th interest in a share of Series F Non-Cumulative Perpetual Preferred Stock, par value $1.00)

 

USB PrM

 

New York Stock Exchange

Depositary Shares (each representing 1/1,000th interest in a share of Series H Non-Cumulative Perpetual Preferred Stock, par value $1.00)

 

USB PrO

 

New York Stock Exchange

Depositary Shares (each representing 1/1,000th interest in a share of Series K Non-Cumulative Perpetual Preferred Stock, par value $1.00)

 

USB PrP

 

New York Stock Exchange

0.850% Medium-Term Notes, Series X (Senior), due June 7, 2024

 

USB/24B

 

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule l2b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section l3(a) of the Exchange Act.  

 

 


ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On January 15, 2020, U.S. Bancorp (the “Company”) issued a press release reporting quarter-ended December 31, 2019 results, and posted on its website its 4Q19 Earnings Conference Call Presentation, which contains certain additional historical and forward-looking information relating to the Company. The press release is included as Exhibit 99.1 hereto and is incorporated herein by reference. The information included in the press release is considered to be “filed” under the Securities Exchange Act of 1934. The 4Q19 Earnings Conference Call Presentation is included as Exhibit 99.2 hereto and is incorporated herein by reference. The information included in the 4Q19 Earnings Conference Call Presentation is considered to be “furnished” under the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference in any filings under the Securities Act of 1933. The press release and 4Q19 Earnings Conference Call Presentation contain forward-looking statements regarding the Company and each includes a cautionary statement identifying important factors that could cause actual results to differ materially from those anticipated.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits.

  99.1 Press Release issued by U.S. Bancorp on January 15, 2020, deemed “filed” under the Securities Exchange Act of 1934.

  99.2 4Q19 Earnings Conference Call Presentation, deemed “furnished” under the Securities Exchange Act of 1934.

   104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

U.S. BANCORP

 

By /s/    Lisa R. Stark

Lisa R. Stark

Executive Vice President and
Controller

DATE: January 15, 2020

EX-99.1

Exhibit 99.1

 

    

       LOGO

 

 

     

 

U.S. Bancorp Reports Fourth Quarter and Full Year 2019 Results

 Full year net revenue  of $22,986 million and diluted earnings per share of $4.16

 Returned $2,947 million of earnings in 4Q19 to shareholders through dividends and share buybacks

 

 

    4Q19 and Full Year Key Financial Data

 

 

   

 

4Q19 and Full Year Highlights

 

             
 PROFITABILITY
 METRICS
  4Q19      3Q19      4Q18     

Full Year 

2019 

   

Full Year 

2018 

       

 

 

  Net income of $1,486 million and diluted earnings
    per common share of $0.90 for 4Q19, including
    $272 million of notable items, net of taxes,
    representing a decrease of $0.18 per diluted common
    share

 

 Returned $2,947 million of earnings in 4Q19 to
   shareholders through dividends and an expanded share
   buyback program

 

 Average total loans grew 0.8% on a linked
   quarter basis

 

 Average total deposits grew 1.9% on a linked quarter
   basis and 6.6% year-over-year

 

 Nonperforming assets decreased 15.3% on a linked
   quarter basis and 16.2% year-over-year

 

 

 Full year record net revenue of $22,986 million and diluted
   earnings per common share of $4.16

 

 Full year average total loan growth was 3.6%, 4.2%
   excluding loan sales during 2018

 

 Full year average total deposits grew 4.0%
   during 2019

 

 Positive operating leverage for full year 2019, excluding
   notable items, with net revenue increase of 2.5% and
   noninterest expense increase of 2.4%

 

 Return on average
assets (%)

    1.21        1.57        1.59        1.45        1.55     

 Return on average common equity (%)

    11.8        15.3        15.8        14.1        15.4     

 Return on tangible common
equity (%) (a)

    15.2        19.4        20.2        18.0        19.8     

 Net interest
margin (%)

    2.92        3.02        3.15        3.06        3.14     

 Efficiency ratio (%) (a)

    60.3        53.3        56.3        55.8        55.1     
 INCOME STATEMENT (b)     4Q19        3Q19        4Q18       

 Full Year

2019 

 

 

   

Full Year 

2018 

 

 

 

 Net interest income (taxable-equivalent basis)

    $3,231        $3,306        $3,331        $13,155        $13,035     

 Noninterest income

    $2,436        $2,614        $2,498        $9,831        $9,602     

 Net income attributable to U.S. Bancorp

    $1,486        $1,908        $1,856        $6,914        $7,096     

 Diluted earnings per common share

    $.90        $1.15        $1.10        $4.16        $4.14     

 Dividends declared per common share

    $.42        $.42        $.37     

 

$1.58 

 

    $1.34     
 BALANCE SHEET (b)     4Q19        3Q19        4Q18       

Full Year 

2019 

 

 

   

 Full Year

2018 

 

 

 

 Average total loans

    $294,865        $292,436        $283,677        $290,686        $280,701     

 Average total deposits

    $356,452        $349,933        $334,365        $346,812        $333,462     

 Net charge-off ratio

    .52%        .48%        .49%        .50%        .48%     

 Book value per common share (period end)

    $29.90        $30.26        $28.01         

 Basel III standardized CET1 (c)

 

   

 

9.1% 

 

 

 

   

 

9.6% 

 

 

 

   

 

9.1% 

 

 

 

                 

 

 (a) See Non-GAAP Financial Measures reconciliation on pages 16-17

 

 

 

 (b) Dollars in millions, except per share data

 

 

 

 (c) CET1 = Common equity tier 1 capital ratio

 

 

 

CEO Commentary

 

 

“As our fourth quarter financial results indicate we ended 2019 on a good note and we enter a new year, and a new decade, in a strong position. Our focus on value creation supported continued customer acquisition and deepening of existing relationships across our franchise, which in turn drove strong account and volume growth in our fee businesses and strong loan and deposit growth in our banking businesses. During the quarter, we returned $2.9 billion of earnings to shareholders through dividends and an expanded share buyback program. We remain committed to delivering best-in-class products and services and this coming year we will continue to enhance our digital capabilities aimed at improving the customer experience and making it simpler and more productive to do business with us. I want to thank our employees for all their hard work in building the solid foundation from which we will grow in 2020 and beyond.”

 

— Andy Cecere, Chairman, President and CEO, U.S. Bancorp                            

 

 

In the Spotlight

 

Incremental Share Repurchase Plan

U.S. Bancorp began repurchasing additional outstanding shares of its common stock, incremental to the authorization approved earlier this year, reflecting the Company’s ability to prudently manage capital as it responds to changes in the regulatory landscape, while continuing to invest in the future.

Investing to Advance Affordable Home Ownership

U.S. Bank recently announced $4.8 million in home grant and corporate contributions focused on advancing affordable home ownership. U.S. Bank Community Development Corporation has provided more than $125 million in new market tax credit investments to Habitat for Humanity to date that have helped build 3,000 homes in 75 cities across the country.

New eBill Servicing Offering

U.S. Bank recently launched a new simple-to-use electronic bill presentment and payment solution designed for both billers and payers. U.S. Bank eBill Service helps customers get paid faster by giving clients simple and secure ways to make payments how, when and where they want.

European Expansion

Elavon, global merchant acquirer and subsidiary of U.S. Bancorp, has recently agreed to acquire Sage Pay, a well-known and established payments gateway business in the United Kingdom and Ireland. The acquisition is part of Elavon’s strategy to help its business customers grow as the global economy becomes more digital, and as businesses look to streamline their operations with software that includes payments capabilities.

 

 

LOGO

        Investor contact: Jennifer Thompson, 612.303.0778 | Media contact: Rebekah Fawcett, 612.303.9986


LOGO

   U.S. Bancorp Fourth Quarter 2019 Results
      

 

  INCOME STATEMENT HIGHLIGHTS                                                
  ($ in millions, except per-share data)                   Percent Change                         
     

4Q 

2019 

  

3Q 

2019 

  

4Q 

2018 

  

4Q19 vs

3Q19

    

4Q19 vs

4Q18

    

Full Year

2019

     Full Year 
2018 
    

Percent

Change

 

Net interest income

     $3,207         $3,281         $3,303         (2.3)        (2.9)        $13,052         $12,919         1.0   

Taxable-equivalent adjustment

     24         25         28         (4.0)        (14.3)        103         116         (11.2)  

Net interest income (taxable-equivalent basis)

     3,231         3,306         3,331         (2.3)        (3.0)        13,155         13,035         .9   

Noninterest income

     2,436         2,614         2,498         (6.8)        (2.5)        9,831         9,602         2.4   

Total net revenue

     5,667         5,920         5,829         (4.3)        (2.8)        22,986         22,637         1.5   

Noninterest expense

     3,401         3,144         3,280         8.2         3.7         12,785         12,464         2.6   

Income before provision and income taxes

     2,266         2,776         2,549         (18.4)        (11.1)        10,201         10,173         .3   

Provision for credit losses

     395         367         368         7.6         7.3         1,504         1,379         9.1   

Income before taxes

     1,871         2,409         2,181         (22.3)        (14.2)        8,697         8,794         (1.1)  

Income taxes and taxable-equivalent adjustment

     378         492         319         (23.2)        18.5         1,751         1,670         4.9   

Net income

     1,493         1,917         1,862         (22.1)        (19.8)        6,946         7,124         (2.5)  

Net (income) loss attributable to noncontrolling interests

     (7)        (9)        (6)        22.2         (16.7)        (32)        (28)        (14.3)  

Net income attributable to U.S. Bancorp

     $1,486         $1,908         $1,856         (22.1)        (19.9)        $6,914         $7,096         (2.6)  

Net income applicable to U.S. Bancorp common shareholders

     $1,408         $1,821         $1,777         (22.7)        (20.8)        $6,583         $6,784         (3.0)  

Diluted earnings per common share

     $.90         $1.15         $1.10         (21.7)        (18.2)        $4.16         $4.14         .5   
   

 

Net income attributable to U.S. Bancorp was $1,486 million for the fourth quarter of 2019, which was 19.9 percent lower than the $1,856 million for the fourth quarter of 2018, and 22.1 percent lower than the $1,908 million for the third quarter of 2019. Diluted earnings per common share were $0.90 in the fourth quarter of 2019, compared with $1.10 in the fourth quarter of 2018 and $1.15 in the third quarter of 2019. The fourth quarter of 2019 included $(0.18) per diluted common share of notable items related to restructuring charges including severance and certain asset impairments, and increased derivative liability related to Visa shares, from their initial public offering, previously sold by the Company. By comparison, the fourth quarter of 2018 included $0.03 per diluted common share of notable items related to the gain from the 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.

The decrease in net income year-over-year was due to lower total net revenue of 2.8 percent and an increase in noninterest expense of 3.7 percent. Net interest income decreased 2.9 percent (3.0 percent on a taxable-equivalent basis), mainly a result of the impact of the yield curve and deposit and funding mix, partially offset by higher yields on reinvestment of securities in addition to loan growth. Excluding notable items in both the fourth quarter of 2019 and the fourth quarter of 2018, noninterest income increased 6.4 percent compared with a year ago, driven by growth in payment services revenue, trust and investment management fees, mortgage banking revenue, and higher other noninterest income, partially offset by a decrease in deposit service charges. Excluding notable items in both the fourth quarter of 2019 and the fourth quarter of 2018, noninterest expense increased 3.1 percent primarily due to personnel expense driven by stronger fee revenue production in mortgage activities, technology and communications expense in support of business growth, and net occupancy and equipment expense due to capital expenditures in support of business growth.

Net income decreased on a linked quarter basis primarily due to lower total net revenue of 4.3 percent and an increase in noninterest expense of 8.2 percent. Net interest income decreased 2.3 percent primarily due to earning asset growth being more than offset by the impact of declining short-term interest rates, higher premium amortization in the investment portfolio, and earning asset mix. Excluding the notable item in the fourth quarter of 2019, noninterest income decreased 1.5 percent compared with the third quarter of 2019 driven by seasonally lower payment services revenue, commercial products revenue, and mortgage banking revenue, partially offset by higher trust and investment management fees due to core business growth and favorable market conditions. Excluding the notable items in the fourth quarter of 2019, noninterest expense increased 1.8 percent primarily driven by seasonally higher professional services expense, technology and communications expense in support of business growth, and tax credit amortization included in other noninterest expense, partially offset by a decrease in employee benefits expense due to seasonally lower payroll taxes.

 

 

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        2


LOGO

   U.S. Bancorp Fourth Quarter 2019 Results
      

 

 NET INTEREST INCOME  

 (Taxable-equivalent basis; $ in millions)

                   Change                       
     

4Q

2019

    

3Q

2019

    

4Q

2018

    

4Q19 vs

3Q19

     4Q19 vs
4Q18
    

Full Year

2019

    

Full Year

2018

     Change  

Components of net interest income
Income on earning assets

     $4,281           $4,465         $4,341         $(184)         $(60)         $17,607         $16,298         $1,309   

Expense on interest-bearing liabilities

     1,050         1,159         1,010         (109)         40         4,452         3,263         1,189   

Net interest income

     $3,231         $3,306         $3,331         $(75)         $(100)         $13,155         $13,035         $120   

Average yields and rates paid

                                                           

Earning assets yield

     3.87%         4.08%         4.11%         (.21)%         (.24)%         4.09%         3.93%         .16%   

Rate paid on interest-bearing liabilities

     1.22            1.37            1.26            (.15)            (.04)            1.34            1.04            .30      

Gross interest margin

     2.65%         2.71%         2.85%         (.06)%         (.20)%         2.75%         2.89%         (.14)%   

Net interest margin

     2.92%         3.02%         3.15%         (.10)%         (.23)%         3.06%         3.14%         (.08)%   

Average balances

                                                           

Investment securities (a)

     $121,668         $117,213         $114,138         $4,455         $7,530         $117,150         $113,940         $3,210   

Loans

     294,865         292,436         283,677         2,429         11,188         290,686         280,701         9,985   

Earning assets

     439,770         435,673         420,472         4,097         19,298         430,537         415,067         15,470   

Interest-bearing liabilities

     341,848         336,627         319,289         5,221         22,559         332,658         314,506         18,152   

(a) Excludes unrealized gain (loss)

 

 

 

Net interest income on a taxable-equivalent basis in the fourth quarter of 2019 was $3,231 million, a decrease of $100 million (3.0 percent) compared with the fourth quarter of 2018. The decrease was principally driven by the impact of lower interest rates and a flatter yield curve in addition to deposit and funding mix, partially offset by higher yields on reinvestment of securities and loan growth. Average earning assets were $19.3 billion (4.6 percent) higher than the fourth quarter of 2018, reflecting increases of $11.2 billion (3.9 percent) in average total loans and $7.5 billion (6.6 percent) in average investment securities. Average other earning assets decreased $1.6 billion (7.9 percent).

Net interest income on a taxable-equivalent basis decreased $75 million (2.3 percent) on a linked quarter basis primarily driven by declining short-term interest rates, higher premium amortization in the investment securities portfolio, and the mix of earning assets. Average earning assets were $4.1 billion (0.9 percent) higher on a linked quarter basis, reflecting increases of $2.4 billion (0.8 percent) in average total loans and $4.5 billion (3.8 percent) in average investment securities. Average other earning assets decreased $3.6 billion (16.6 percent).

The net interest margin in the fourth quarter of 2019 was 2.92 percent, compared with 3.15 percent in the fourth quarter of 2018 and 3.02 percent in the third quarter of 2019. The decrease in the net interest margin year-over-year was primarily due to the impact of declining interest rates on the yield curve in addition to deposit and funding mix. The decrease in net interest margin on a linked quarter basis reflects continued yield curve compression, premium amortization in the investment securities portfolio, and earning asset mix.

The increase in average investment securities in the fourth quarter of 2019 compared with the fourth quarter of 2018 and the third quarter of 2019 was primarily due to purchases of mortgage-backed securities, net of prepayments and maturities. At December 31, 2019, the Company transferred all held-to-maturity investment securities to its available-for-sale investment securities portfolio, as a result of changes in regulatory capital requirements.

 

 

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   U.S. Bancorp Fourth Quarter 2019 Results
      

 

 AVERAGE LOANS  
 ($ in millions)                         Percent Change                        
      4Q
2019
     3Q
2019
     4Q
2018
     4Q19 vs
3Q19
    4Q19 vs
4Q18
    Full Year
2019
     Full Year
2018
    

Percent

Change

 

Commercial

     $98,362         $98,175         $95,025         .2       3.5       $97,697         $93,342         4.7  

Lease financing

     5,549         5,485         5,490         1.2       1.1       5,501         5,512         (.2

Total commercial

     103,911         103,660         100,515         .2       3.4       103,198         98,854         4.4  

Commercial mortgages

     29,133         28,319         28,930         2.9       .7       28,595         28,793         (.7

Construction and development

     10,589         10,671         11,219         (.8     (5.6     10,791         11,184         (3.5

Total commercial real estate

     39,722         38,990         40,149         1.9       (1.1     39,386         39,977         (1.5

Residential mortgages

     69,909         68,608         64,476         1.9       8.4       67,747         61,893         9.5  

Credit card

     24,107         23,681         22,396         1.8       7.6       23,309         21,672         7.6  

Retail leasing

     8,486         8,442         8,489         .5       --       8,515         8,253         3.2  

Home equity and second mortgages

     15,221         15,601         16,065         (2.4     (5.3     15,659         16,076         (2.6

Other

     33,509         33,454         31,587         .2       6.1       32,872         31,807         3.3  

Total other retail

     57,216         57,497         56,141         (.5     1.9       57,046         56,136         1.6  

Covered loans (a)

     --          --          --          --        --       --          2,169         nm  

Total loans

     $294,865         $292,436         $283,677         .8       3.9       $290,686         $280,701         3.6  

(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 for the fourth quarter of 2019 were $11.2 billion (3.9 percent) higher than the fourth quarter of 2018. The increase was due to growth in residential mortgages (8.4 percent), total commercial loans (3.4 percent), credit card loans (7.6 percent), and other retail loans (6.1 percent). These increases were partially offset by a decrease in total commercial real estate loans (1.1 percent) given the later stage of the business cycle.

Average total loans were $2.4 billion (0.8 percent) higher than the third quarter of 2019 primarily driven by growth in residential mortgages (1.9 percent), total commercial real estate loans (1.9 percent), and credit card loans (1.8 percent).

 

 

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 AVERAGE DEPOSITS  
 ($ in millions)                         Percent Change                        
      4Q
2019
     3Q
2019
     4Q
2018
    

4Q19 vs

3Q19

    

4Q19 vs

4Q18

    Full Year
2019
     Full Year
2018
    

Percent

Change

 

Noninterest-bearing deposits

     $74,313         $74,594         $77,160         (.4)        (3.7     $73,863         $78,196         (5.5

Interest-bearing savings deposits

                                                    

Interest checking

     75,563         72,007         71,013         4.9         6.4       72,553         70,154         3.4  

Money market savings

     116,619         114,475         99,594         1.9         17.1       109,849         101,732         8.0  

Savings accounts

     46,945         46,348         44,544         1.3         5.4       46,130         44,713         3.2  

Total savings deposits

     239,127         232,830         215,151         2.7         11.1       228,532         216,599         5.5  

Time deposits

     43,012         42,509         42,054         1.2         2.3       44,417         38,667         14.9  

Total interest-bearing deposits

     282,139         275,339         257,205         2.5         9.7       272,949         255,266         6.9  

Total deposits

     $356,452         $349,933         $334,365         1.9         6.6       $346,812         $333,462         4.0  
   

Average total deposits for the fourth quarter of 2019 were $22.1 billion (6.6 percent) higher than the fourth quarter of 2018. Average noninterest-bearing deposits decreased $2.8 billion (3.7 percent) year-over-year primarily due to the migration of balances to interest-bearing deposits and the continued deployment by customers of business deposits within Corporate and Commercial Banking. Average total savings deposits were $24.0 billion (11.1 percent) higher year-over-year driven by Wealth Management and Investment Services, Corporate and Commercial Banking and Consumer and Business Banking. Average time deposits were $958 million (2.3 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, based largely on relative pricing and liquidity characteristics. In addition, there was growth in consumer time deposits related to the migration of balances to higher yielding products.

Average total deposits increased $6.5 billion (1.9 percent) from the third quarter of 2019. On a linked quarter basis, average noninterest-bearing deposits decreased $281 million (0.4 percent). Average total savings deposits increased $6.3 billion (2.7 percent) on a linked quarter basis primarily due to increases in Wealth Management and Investment Services, Corporate and Commercial Banking, and Consumer and Business Banking. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, increased $503 million (1.2 percent) on a linked quarter basis.

 

 

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 NONINTEREST INCOME                                                 
 ($ in millions)                     Percent Change                    
    4Q     3Q     4Q     4Q19 vs     4Q19 vs     Full Year     Full Year     Percent  
     2019     2019     2018     3Q19     4Q18     2019     2018     Change  

Credit and debit card revenue

    $378        $366        $382        3.3        (1.0)       $1,413        $1,401        .9   

Corporate payment products revenue

    158        177        163        (10.7)       (3.1)       664        644        3.1   

Merchant processing services

    409        410        389        (.2)       5.1        1,601        1,531        4.6   

Trust and investment management fees

    438        421        409        4.0        7.1        1,673        1,619        3.3   

Deposit service charges

    231        234        253        (1.3)       (8.7)       909        1,070        (15.0)  

Treasury management fees

    140        139        143        .7        (2.1)       578        594        (2.7)  

Commercial products revenue

    226        240        225        (5.8)       .4        934        895        4.4   

Mortgage banking revenue

    244        272        171        (10.3)       42.7        874        720        21.4   

Investment products fees

    48        46        48        4.3        --         186        188        (1.1)  

Securities gains (losses), net

    26        25              4.0        nm         73        30        nm   

Other

    138        284        310        (51.4)       (55.5)       926        910        1.8   

Total noninterest income

    $2,436        $2,614        $2,498        (6.8)       (2.5)       $9,831        $9,602        2.4   
                                                                 

Fourth quarter noninterest income of $2,436 million was $62 million (2.5 percent) lower than the fourth quarter of 2018. Excluding notable items in both the fourth quarter of 2019 and the fourth quarter of 2018, noninterest income increased $154 million (6.4 percent) led by growth in payment services revenue, trust and investment management fees, mortgage banking revenue, and other noninterest income. Payment services revenue increased $11 million (1.2 percent) due to higher merchant processing services of $20 million (5.1 percent) driven by higher sales volumes and merchant fees, partially offset by slightly lower credit and debit card revenue of $4 million (1.0 percent) and corporate payment products revenue of $5 million (3.1 percent). The decline in corporate payment products revenue was driven by lower commercial business sales volumes. Trust and investment management fees increased $29 million (7.1 percent) due to business growth and favorable market conditions. Mortgage banking revenue increased $73 million (42.7 percent) driven by higher mortgage production and gain on sale margins. Other noninterest income in the fourth quarter of 2019 included a charge of $140 million for increased derivative liability related to Visa shares previously sold by the Company. Other noninterest income in the fourth quarter of 2018 included the impacts of notable items related to a gain from the sale of the Company’s ATM servicing business of $340 million and charges for asset impairments related to the sale of a majority of the Company’s covered loans and other certain assets of $264 million. Excluding these notable items, other noninterest income increased by $44 million year-over-year primarily due to a gain on the sale of a loan portfolio. Partially offsetting these increases was a decline in deposit service charges of $22 million (8.7 percent) primarily due to the sale of the Company’s ATM servicing business in the fourth quarter of 2018.

Noninterest income was $178 million (6.8 percent) lower in the fourth quarter of 2019 compared with the third quarter of 2019. Excluding the fourth quarter notable item, noninterest income was $38 million (1.5 percent) lower than the third quarter of 2019, reflecting lower payment services revenue, commercial products revenue, and mortgage banking revenue, partially offset by higher trust and investment management fees. Payment services revenue decreased slightly compared with the third quarter of 2019 driven by lower corporate payment products revenue of $19 million (10.7 percent) due to seasonally lower sales volumes, partially offset by higher credit and debit card revenue of $12 million (3.3 percent) due to seasonally higher sales volumes and higher fees. Commercial products revenue was $14 million (5.8 percent) lower on a linked quarter basis driven by a seasonal reduction in corporate bond fees and trading income. Mortgage banking revenue decreased $28 million (10.3 percent) due to seasonally lower application volumes and an unfavorable change in the valuation of mortgage servicing rights, net of hedging activities. Partially offsetting these decreases was an increase in trust and investment management fees of $17 million (4.0 percent) driven by business growth, billing cycle timing, and favorable market conditions.

 

 

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 NONINTEREST EXPENSE                                                        
 ($ in millions)                     Percent Change                    
    4Q     3Q     4Q     4Q19 vs     4Q19 vs     Full Year     Full Year     Percent  
     2019     2019     2018     3Q19     4Q18     2019     2018     Change  

Compensation

    $1,597        $1,595        $1,568        .1        1.8        $6,325        $6,162        2.6   

Employee benefits

    315        324        308        (2.8)       2.3        1,286        1,231        4.5   

Net occupancy and equipment

    286        279        266        2.5        7.5        1,123        1,063        5.6   

Professional services

    139        114        133        21.9        4.5        454        407        11.5   

Marketing and business development

    117        109        115        7.3        1.7        426        429        (.7)  

Technology and communications

    291        277        254        5.1        14.6        1,095        978        12.0   

Postage, printing and supplies

    71        74        80        (4.1)       (11.3)       290        324        (10.5)  

Other intangibles

    44        42        41        4.8        7.3        168        161        4.3   

Other

    541        330        515        63.9        5.0        1,618        1,709        (5.3)  

Total noninterest expense

    $3,401        $3,144        $3,280        8.2        3.7        $12,785        $12,464        2.6   
                                                                 

Fourth quarter noninterest expense of $3,401 million was $121 million (3.7 percent) higher than the fourth quarter of 2018. Included in the fourth quarter were notable items related to severance charges and other accruals of $200 million in 2019 and severance charges and accruals of legal matters of $174 million in 2018. Excluding notable items from both periods, fourth quarter noninterest expense increased $95 million (3.1 percent) compared with the fourth quarter of 2018 primarily due to increased personnel expense, higher technology and communications expense, and higher net occupancy and equipment expense. Compensation expense increased $29 million (1.8 percent) compared with the fourth quarter of 2018 driven by the impact of hiring to support business growth, merit increases, and higher variable compensation related to business production in mortgage banking. Employee benefits expense increased $7 million (2.3 percent) primarily due to higher medical costs compared with a year ago. Technology and communications expense increased $37 million (14.6 percent) and net occupancy and equipment expense increased $20 million (7.5 percent) primarily to support business growth.

Noninterest expense increased $257 million (8.2 percent) on a linked quarter basis. Excluding the impact of the current quarter notable items, fourth quarter noninterest expense increased $57 million (1.8 percent) primarily due to seasonally higher professional services expense of $25 million (21.9 percent) and an increase of $14 million (5.1 percent) in technology and communications expense driven by capital expenditures to support business growth. Partially offsetting these increases, employee benefits expense decreased $9 million (2.8 percent) driven by seasonally lower payroll taxes.

Provision for Income Taxes

The provision for income taxes for the fourth quarter of 2019 resulted in a tax rate of 20.2 percent on a taxable-equivalent basis (effective tax rate of 19.2 percent), compared with 14.6 percent on a taxable-equivalent basis (effective tax rate of 13.5 percent) in the fourth quarter of 2018, and a tax rate of 20.4 percent on a taxable-equivalent basis (effective tax rate of 19.6 percent) in the third quarter of 2019. 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 in the fourth quarter of 2018, the taxable-equivalent rate was 20.1 percent.

 

 

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 ALLOWANCE FOR CREDIT LOSSES                                       
 ($ in millions)   4Q       3Q       2Q       1Q       4Q      
     2019   % (a)    2019   % (a)    2019   % (a)    2019   % (a)    2018   % (a)   

 

Balance, beginning of period

    $4,481          $4,466          $4,451          $4,441          $4,426     

Net charge-offs

                   

Commercial

    74       .30        72       .29        56       .23        71       .30        64       .27  

Lease financing

    4       .29       3       .22       3       .22       2       .15       3       .22  
 

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

Total commercial

    78       .30       75       .29       59       .23       73       .29       67       .26  

Commercial mortgages

    7       .10       3       .04       2       .03       --        --        (8     (.11

Construction and development

    --        --        3       .11       (1     (.04     --        --        1       .04  
 

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

Total commercial real estate

    7       .07       6       .06       1       .01       --        --        (7     (.07

Residential mortgages

    (1     (.01     (3     (.02     4       .02       3       .02       2       .01  

Credit card

    230       3.79       211       3.53       227       3.99       225       4.04       219       3.88  

Retail leasing

    4       .19       3       .14       2       .09       4       .19       3       .14  

Home equity and second mortgages

    --        --        (1     (.03     (1     (.03     (1     (.03     1       .02  

Other

    67       .79       61       .72       58       .71       63       .80       68       .85  
 

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

Total other retail

    71       .49       63       .43       59       .42       66       .47       72       .51  
 

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

Total net charge-offs

    385       .52       352       .48       350       .49       367       .52       353       .49  

Provision for credit losses

    395         367         365         377         368    
 

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

Balance, end of period

    $4,491         $4,481         $4,466         $4,451         $4,441    
 

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

Components

                   

Allowance for loan losses

    $4,020         $4,007         $4,019         $3,990         $3,973    

Liability for unfunded credit commitments

    471         474         447         461         468    
 

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

Total allowance for credit losses

    $4,491         $4,481         $4,466         $4,451         $4,441    
 

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

Gross charge-offs

    $479         $451         $464         $473         $442    

Gross recoveries

    $94         $99         $114         $106         $89    

Allowance for credit losses as a percentage of

                   

Period-end loans

    1.52         1.52         1.53         1.55         1.55    

Nonperforming loans

    649         541         556         519         544    

Nonperforming assets

    542         458         469         443         449    

(a)  Annualized and calculated on average loan balances

   

                                                                       

 

 

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Credit quality was relatively stable on both a linked quarter and year-over-year basis. The Company’s provision for credit losses for the fourth quarter of 2019 was $395 million, which was $28 million (7.6 percent) higher than the prior quarter and $27 million (7.3 percent) higher than the fourth quarter of 2018, primarily reflecting loan growth.

Total net charge-offs in the fourth quarter of 2019 were $385 million, compared with $352 million in the third quarter of 2019, and $353 million in the fourth quarter of 2018. Net charge-offs increased $33 million (9.4 percent) compared with the third quarter of 2019 mainly due to seasonally lower credit card net charge-offs in the third quarter and higher total other retail net charge-offs in the fourth quarter. Net charge-offs increased $32 million (9.1 percent) compared with the fourth quarter of 2018 primarily due to higher total commercial, total commercial real estate, and credit card net charge-offs, in line with loan growth. The net charge-off ratio was 0.52 percent in the fourth quarter of 2019, compared with 0.48 percent in in the third quarter of 2019 and 0.49 percent in the fourth quarter of 2018.

The allowance for credit losses was $4,491 million at December 31, 2019, compared with $4,481 million at September 30, 2019, and $4,441 million at December 31, 2018. The ratio of the allowance for credit losses to period-end loans was 1.52 percent at December 31, 2019, and at September 30, 2019, compared with 1.55 percent at December 31, 2018. The ratio of the allowance for credit losses to nonperforming loans was 649 percent at December 31, 2019, compared with 541 percent at September 30, 2019, and 544 percent at December 31, 2018.

Nonperforming assets were $829 million at December 31, 2019, compared with $979 million at September 30, 2019, and $989 million at December 31, 2018. The ratio of nonperforming assets to loans and other real estate was 0.28 percent at December 31, 2019, compared with 0.33 percent at September 30, 2019, and 0.34 percent at December 31, 2018. The year-over-year decrease in nonperforming assets was driven by improvements in nonperforming residential mortgages, total commercial real estate loans, other retail loans, and other real estate owned. Accruing loans 90 days or more past due were $605 million at December 31, 2019, compared with $600 million at September 30, 2019, and $584 million at December 31, 2018.

 

 DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES                  
 (Percent)    Dec 31      Sep 30      Jun 30      Mar 31      Dec 31  
      2019      2019      2019      2019      2018  

Delinquent loan ratios - 90 days or more past due excluding nonperforming loans

 

     

Commercial

     .08        .10        .26        .07        .07    

Commercial real estate

     .01        .01        --         .01        --     

Residential mortgages

     .17        .17        .17        .18        .18    

Credit card

     1.23        1.16        1.14        1.29        1.25    

Other retail

     .17        .18        .17        .19        .19    

Total loans

     .20        .20        .26        .21        .20    

Delinquent loan ratios - 90 days or more past due including nonperforming loans

 

     

Commercial

     .27        .40        .53        .34        .27   

Commercial real estate

     .21        .23        .24        .33        .29   

Residential mortgages

     .51        .53        .55        .62        .63   

Credit card

     1.23        1.16        1.14        1.29        1.25   

Other retail

     .46        .47        .47        .49        .54   

Total loans

     .44        .49        .53        .51        .49   
                                              

 

 

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 ASSET QUALITY (a)                                        
 ($ in millions)                                   
     Dec 31      Sep 30      Jun 30      Mar 31      Dec 31   
      2019      2019      2019      2019      2018   

Nonperforming loans

              

Commercial

     $172         $290         $254         $247         $186   

Lease financing

     32         29         25         24         23   

Total commercial

     204         319         279         271         209   

Commercial mortgages

     74         82         81         79         76   

Construction and development

                   11         48         39   

Total commercial real estate

     82         89         92         127         115   

Residential mortgages

     241         251         263         287         296   

Credit card

     --         --         --         --         --   

Other retail

     165         170         169         173         197   

Total nonperforming loans

     692         829         803         858         817   

Other real estate

     78         84         88         93         111   

Other nonperforming assets

     59         66         62         54         61   

Total nonperforming assets

     $829         $979         $953         $1,005         $989   

 

Accruing loans 90 days or more past due

  

 

 

 

$605 

 

 

  

 

 

 

$600 

 

 

  

 

 

 

$752 

 

 

  

 

 

 

$595 

 

 

  

 

 

 

$584 

 

 

Performing restructured loans, excluding GNMA

     $2,129         $2,145         $2,142         $2,173         $2,218   

Performing restructured GNMA

     $1,622         $1,690         $1,598         $1,578         $1,639   

Nonperforming assets to loans plus ORE (%)

     .28         .33         .33         .35         .34   

(a) Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due

 

 

 

 

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   U.S. Bancorp Fourth Quarter 2019 Results
      

 

 

 COMMON SHARES                                        
 (Millions)   

4Q

2019

    

3Q

2019

    

2Q

2019

    

1Q

2019

    

4Q

2018

 

Beginning shares outstanding

     1,571         1,584         1,599         1,608         1,623   

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

                   --                  

Shares repurchased

     (40)        (14)        (15)        (12)        (16)  

Ending shares outstanding

     1,534         1,571         1,584         1,599         1,608   
                                              

 

 CAPITAL POSITION                                    
 ($ in millions)   

Dec 31

2019

   

Sep 30

2019

   

Jun 30

2019

   

Mar 31

2019

   

Dec 31

2018

 

Total U.S. Bancorp shareholders’ equity

   $ 51,853      $ 53,517      $ 52,913      $ 52,057      $ 51,029   

Basel III Standardized Approach

          

Common equity tier 1 capital

   $ 35,713      $ 37,653      $ 36,909      $ 35,732      $ 34,724   

Tier 1 capital

     41,721        43,667        42,923        41,748        40,741   

Total risk-based capital

     49,744        51,684        50,370        49,194        48,178   

Common equity tier 1 capital ratio

     9.1    %      9.6    %      9.5    %      9.3    %      9.1    % 

Tier 1 capital ratio

     10.7        11.2        11.0        10.9        10.7   

Total risk-based capital ratio

     12.7        13.2        13.0        12.8        12.6   

Leverage ratio

     8.8        9.3        9.3        9.2        9.0   

Basel III Advanced Approaches

          

Common equity tier 1 capital ratio

     11.9        12.6        12.3        12.0        11.8   

Tangible common equity to tangible assets (a)

     7.5        8.0        7.9        7.9        7.8   

Tangible common equity to risk-weighted assets (a)

     9.3        9.7        9.7        9.5        9.4   

(a) See Non-GAAP Financial Measures reconciliation on page 16

 

 

                               

Total U.S. Bancorp shareholders’ equity was $51.9 billion at December 31, 2019, compared with $53.5 billion at September 30, 2019, and $51.0 billion at December 31, 2018. During the fourth quarter, the Company returned $2,947 million 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 9.1 percent at December 31, 2019, compared with 9.6 percent at September 30, 2019, and 9.1 percent at December 31, 2018. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III advanced approaches method was 11.9 percent at December 31, 2019, compared with 12.6 percent at September 30, 2019, and 11.8 percent at December 31, 2018.

 

 

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   U.S. Bancorp Fourth Quarter 2019 Results
      

 

 

  Investor Conference Call

 

On Wednesday, Jan. 15, 2020, at 8 a.m. CT, Chairman, President and Chief Executive Officer Andy Cecere and Vice Chairman and Chief Financial Officer Terry Dolan 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 5218746. For those unable to participate during the live call, a recording will be available at approximately 11:00 a.m. CT on Wednesday, Jan. 15 and will be accessible until Wednesday, Jan. 22 at 11:59 p.m. CT. 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 5218746.

 

 

  About U.S. Bancorp

 

U.S. Bancorp, with 74,000 employees and $495 billion in assets as of December 31, 2019, is the parent company of U.S. Bank National Association, 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

 

“Safe Harbor” Statement under 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.

 

 

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   U.S. Bancorp Fourth Quarter 2019 Results
      

 

 

  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. 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.

 

 

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 CONSOLIDATED STATEMENT OF INCOME                

 (Dollars and Shares in Millions, Except Per Share Data)

 (Unaudited)

 

    Three Months Ended    

December 31,

   

Year Ended

December 31,

 
  2019     2018     2019     2018  

Interest Income

         

Loans

    $3,422       $3,475       $14,099       $13,120  

Loans held for sale

    55       57       162       165  

Investment securities

    709       689       2,893       2,616  

Other interest income

    69       90       340       272  

Total interest income

    4,255       4,311       17,494       16,173  

Interest Expense

         

Deposits

    654       606       2,855       1,869  

Short-term borrowings

    79       113       360       378  

Long-term debt

    315       289       1,227       1,007  

Total interest expense

    1,048       1,008       4,442       3,254  

Net interest income

    3,207       3,303       13,052       12,919  

Provision for credit losses

    395       368       1,504       1,379  

Net interest income after provision for credit losses

    2,812       2,935       11,548       11,540  

Noninterest Income

         

Credit and debit card revenue

    378       382       1,413       1,401  

Corporate payment products revenue

    158       163       664       644  

Merchant processing services

    409       389       1,601       1,531  

Trust and investment management fees

    438       409       1,673       1,619  

Deposit service charges

    231       253       909       1,070  

Treasury management fees

    140       143       578       594  

Commercial products revenue

    226       225       934       895  

Mortgage banking revenue

    244       171       874       720  

Investment products fees

    48       48       186       188  

Securities gains (losses), net

    26       5       73       30  

Other

    138       310       926       910  

Total noninterest income

    2,436       2,498       9,831       9,602  

Noninterest Expense

         

Compensation

    1,597       1,568       6,325       6,162  

Employee benefits

    315       308       1,286       1,231  

Net occupancy and equipment

    286       266       1,123       1,063  

Professional services

    139       133       454       407  

Marketing and business development

    117       115       426       429  

Technology and communications

    291       254       1,095       978  

Postage, printing and supplies

    71       80       290       324  

Other intangibles

    44       41       168       161  

Other

    541       515       1,618       1,709  

Total noninterest expense

    3,401       3,280       12,785       12,464  

Income before income taxes

    1,847       2,153       8,594       8,678  

Applicable income taxes

    354       291       1,648       1,554  

Net income

    1,493       1,862       6,946       7,124  

Net (income) loss attributable to noncontrolling interests

    (7     (6     (32     (28

Net income attributable to U.S. Bancorp

    $1,486       $1,856       $6,914       $7,096  

Net income applicable to U.S. Bancorp common shareholders

    $1,408       $1,777       $6,583       $6,784  

Earnings per common share

    $.91       $1.10       $4.16       $4.15  

Diluted earnings per common share

    $.90       $1.10       $4.16       $4.14  

Dividends declared per common share

    $.42       $.37       $1.58       $1.34  

Average common shares outstanding

    1,556       1,615       1,581       1,634  

Average diluted common shares outstanding

    1,558       1,618       1,583       1,638  

 

 

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 CONSOLIDATED ENDING BALANCE SHEET  
 (Dollars in Millions)   

December 31,

2019

    

December 31,

2018

 

Assets

     

Cash and due from banks

     $22,405        $21,453  

Investment securities

     

Held-to-maturity

     --         46,050  

Available-for-sale

     122,613        66,115  

Loans held for sale

     5,578        2,056  

Loans

     

Commercial

     103,863        102,444  

Commercial real estate

     39,746        39,539  

Residential mortgages

     70,586        65,034  

Credit card

     24,789        23,363  

Other retail

     57,118        56,430  

Total loans

     296,102        286,810  

Less allowance for loan losses

     (4,020      (3,973

Net loans

     292,082        282,837  

Premises and equipment

     3,702        2,457  

Goodwill

     9,655        9,369  

Other intangible assets

     3,223        3,392  

Other assets

     36,168        33,645  

Total assets

     $495,426        $467,374  

Liabilities and Shareholders’ Equity

     

Deposits

     

Noninterest-bearing

     $75,590        $81,811  

Interest-bearing

     286,326        263,664  

Total deposits

     361,916        345,475  

Short-term borrowings

     23,723        14,139  

Long-term debt

     40,167        41,340  

Other liabilities

     17,137        14,763  

Total liabilities

     442,943        415,717  

Shareholders’ equity

     

Preferred stock

     5,984        5,984  

Common stock

     21        21  

Capital surplus

     8,475        8,469  

Retained earnings

     63,186        59,065  

Less treasury stock

     (24,440      (20,188

Accumulated other comprehensive income (loss)

     (1,373      (2,322

Total U.S. Bancorp shareholders’ equity

     51,853        51,029  

Noncontrolling interests

     630        628  

Total equity

     52,483        51,657  

Total liabilities and equity

     $495,426        $467,374  

 

 

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 NON-GAAP FINANCIAL MEASURES  
 (Dollars in Millions, Unaudited)    December 31,
2019
    September 30,
2019
    June 30,
2019
    March 31,
2019
    December 31,
2018
 

Total equity

     $52,483       $54,147       $53,540       $52,686       $51,657  

Preferred stock

     (5,984     (5,984     (5,984     (5,984     (5,984

Noncontrolling interests

     (630     (630     (627     (629     (628

Goodwill (net of deferred tax liability) (1)

     (8,788     (8,781     (8,708     (8,716     (8,549

Intangible assets, other than mortgage servicing rights

     (677     (687     (703     (685     (601

Tangible common equity (a)

     36,404       38,065       37,518       36,672       35,895  

Total assets

     495,426       487,671       481,719       475,775       467,374  

Goodwill (net of deferred tax liability) (1)

     (8,788     (8,781     (8,708     (8,716     (8,549

Intangible assets, other than mortgage servicing rights

     (677     (687     (703     (685     (601

Tangible assets (b)

     485,961       478,203       472,308       466,374       458,224  

Risk-weighted assets, determined in accordance with the Basel III
standardized approach (c)

     391,269   *      390,622       388,709       384,394       381,661  

Ratios*

          

Tangible common equity to tangible assets (a)/(b)

     7.5   %      8.0   %      7.9   %      7.9   %      7.8   % 

Tangible common equity to risk-weighted assets (a)/(c)

     9.3       9.7       9.7       9.5       9.4  
          
     Three Months Ended  
     December 31,
2019
    September 30,
2019
    June 30,
2019
    March 31,
2019
    December 31,
2018
 

Net income applicable to U.S. Bancorp common shareholders

     $1,408       $1,821       $1,741       $1,613       $1,777  

Intangibles amortization (net-of-tax)

     35       33       33       32       32  

Net income applicable to U.S. Bancorp common shareholders,
excluding intangibles amortization

     1,443       1,854       1,774       1,645       1,809  

Annualized net income applicable to U.S. Bancorp common
shareholders, excluding intangible amortization (d)

     5,725       7,356       7,115       6,671       7,177  

Average total equity

     53,777       53,921       53,066       52,218       51,370  

Average preferred stock

     (5,984     (5,984     (5,984     (5,984     (5,984

Average noncontrolling interests

     (630     (629     (628     (629     (630

Average goodwill (net of deferred tax liability) (1)

     (8,796     (8,725     (8,715     (8,732     (8,574

Average intangible assets, other than mortgage servicing rights

     (683     (689     (681     (671     (605

Average tangible common equity (e)

     37,684       37,894       37,058       36,202       35,577  

Return on tangible common equity (d)/(e)

     15.2   %      19.4   %      19.2   %      18.4   %      20.2   % 

Net interest income

     $3,207       $3,281       $3,305       $3,259       $3,303  

Taxable-equivalent adjustment (2)

     24       25       27       27       28  

Net interest income, on a taxable-equivalent basis

     3,231       3,306       3,332       3,286       3,331  

Net interest income, on a taxable-equivalent basis (as calculated
above)

     3,231       3,306       3,332       3,286       3,331  

Noninterest income

     2,436       2,614       2,490       2,291       2,498  

Less: Securities gains (losses), net

     26       25       17       5       5  

Total net revenue, excluding net securities gains (losses) (f)

     5,641       5,895       5,805       5,572       5,824  

Noninterest expense (g)

     3,401       3,144       3,153       3,087       3,280  

Less: Intangible amortization

     44       42       42       40       41  

Noninterest expense, excluding intangible amortization (h)

     3,357       3,102       3,111       3,047       3,239  

Efficiency ratio (g)/(f)

     60.3   %      53.3   %      54.3   %      55.4   %      56.3   % 

Tangible efficiency ratio (h)/(f)

     59.5       52.6       53.6       54.7       55.6  

 

   *

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.

 

 

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 NON-GAAP FINANCIAL MEASURES  
     Year Ended  
 (Dollars in Millions, Unaudited)    December 31,
2019
    December 31,
2018
 

Net income applicable to U.S. Bancorp common shareholders

     $6,583       $6,784  

Intangibles amortization (net-of-tax)

     133       127  

Net income applicable to U.S. Bancorp common shareholders,
excluding intangibles amortization (a)

     6,716       6,911  

Average total equity

     53,252       50,391  

Average preferred stock

     (5,984     (5,636

Average noncontrolling interests

     (629     (628

Average goodwill (net of deferred tax liability) (1)

     (8,742     (8,606

Average intangible assets, other than mortgage servicing rights

     (681     (595

Average tangible common equity (b)

     37,216       34,926  

Return on tangible common equity (a)/(b)

     18.0   %      19.8   % 

Net interest income

     $13,052       $12,919  

Taxable-equivalent adjustment (2)

     103       116  

Net interest income, on a taxable-equivalent basis

     13,155       13,035  

Net interest income, on a taxable-equivalent basis (as calculated
above)

     13,155       13,035  

Noninterest income

     9,831       9,602  

Less: Securities gains (losses), net

     73       30  

Total net revenue, excluding net securities gains (losses) (c)

     22,913       22,607  

Noninterest expense (d)

     12,785       12,464  

Less: Intangible amortization

     168       161  

Noninterest expense, excluding intangible amortization (e)

     12,617       12,303  

Efficiency ratio (d)/(c)

     55.8   %      55.1   % 

Tangible efficiency ratio (e)/(c)

     55.1       54.4  

 

(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.

 

 

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LINE OF BUSINESS FINANCIAL PERFORMANCE (a)         
($ in millions)    Net Income Attributable to
U.S. Bancorp
     Percent Change     Net Income Attributable to
U.S. Bancorp
           4Q 2019        
Business Line    4Q
2019
    3Q
2019
     4Q  
2018  
     4Q19 vs
3Q19
    4Q19 vs
4Q18
    Full Year
2019
     Full Year  
2018  
     Percent
Change
    Earnings
Composition
        

Corporate and Commercial Banking

     $355       $366        $397          (3.0     (10.6     $1,536        $1,588          (3.3     24       %  

Consumer and Business Banking

     526       642        571          (18.1     (7.9     2,274        2,236          1.7       36      

Wealth Management and Investment Services

     211       235        190          (10.2     11.1       895        814          10.0       14      

Payment Services

     405       418        397          (3.1     2.0       1,516        1,491          1.7       27      

Treasury and Corporate Support

     (11     247        301          nm       nm       693        967          (28.3     (1    
         

Consolidated Company

       $1,486       $1,908        $1,856          (22.1     (19.9     $6,914        $7,096          (2.6             100       %  
   

(a) preliminary data

 

                                                                                    

Lines of Business

The Company’s major lines of business are Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate resources and assess performance. Noninterest expenses incurred by centrally managed operations or business lines that directly support another business line’s operations are charged to the applicable business line based on its utilization of those services, primarily measured by the volume of customer activities, number of employees or other relevant factors. These allocated expenses are reported as net shared services expense within noninterest expense. Income taxes are assessed to each line of business at a managerial tax rate of 25.0 percent with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in Treasury and Corporate Support. Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Company’s diverse customer base. During 2019, certain organization and methodology changes were made and, accordingly, prior period results were restated and presented on a comparable basis.

 

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CORPORATE AND COMMERCIAL BANKING (a)                       
($ in millions)                     Percent Change              
    

4Q 

2019 

   

3Q

2019

   

4Q

2018

   

4Q19 vs

3Q19

   

4Q19 vs

4Q18

   

Full Year 

2019 

   

Full Year

2018

   

Percent

Change

 

Condensed Income Statement

                 

Net interest income (taxable-equivalent basis)

    $718        $709       $747       1.3       (3.9     $2,871        $2,936       (2.2

Noninterest income

    200        213       213       (6.1     (6.1     867        843       2.8  

Securities gains (losses), net

    --         --       --         --         --         --         --       --    

Total net revenue

    918        922       960       (.4     (4.4     3,738        3,779       (1.1

Noninterest expense

    393        393       401       --         (2.0     1,607        1,591       1.0  

Other intangibles

          1       1       --         --               4       --    

Total noninterest expense

    394        394       402       --         (2.0     1,611        1,595       1.0  

Income before provision and taxes

    524        528       558       (.8     (6.1     2,127        2,184       (2.6

Provision for credit losses

    51        40       28       27.5       82.1       78        65       20.0  

Income before income taxes

    473        488       530       (3.1     (10.8     2,049        2,119       (3.3

Income taxes and taxable-equivalent adjustment

    118        122       133       (3.3     (11.3     513        531       (3.4

Net income

    355        366       397       (3.0     (10.6     1,536       1,588       (3.3

Net (income) loss attributable to noncontrolling interests

    --         --       --       --         --         --         --       --    

Net income attributable to U.S. Bancorp

    $355        $366       $397       (3.0     (10.6     $1,536        $1,588       (3.3
   

Average Balance Sheet Data

                 

Loans

    $97,258        $96,232       $94,792       1.1       2.6       $96,608        $93,854       2.9  

Other earning assets

    3,926        4,016       3,292       (2.2     19.3       3,751        3,072       22.1  

Goodwill

    1,647        1,647       1,647       --         --         1,647        1,647       --    

Other intangible assets

          8       10       (12.5     (30.0           11       (27.3

Assets

    107,942        107,128       104,039       .8       3.8       106,716        102,801       3.8  
   

Noninterest-bearing deposits

    28,893        28,861       31,859       .1       (9.3     29,152        32,938       (11.5

Interest-bearing deposits

    77,190        72,061       70,780       7.1       9.1       72,780        69,913       4.1  

Total deposits

    106,083        100,922       102,639       5.1       3.4       101,932        102,851       (.9
   

Total U.S. Bancorp shareholders’ equity

    10,429        10,379       10,519       .5       (.9     10,399        10,463       (.6
   

(a) preliminary data

 

                                                               

Corporate and Commercial Banking offers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets services, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution, non-profit and public sector clients.

Corporate and Commercial Banking contributed $355 million of the Company’s net income in the fourth quarter of 2019, compared with $397 million in the fourth quarter of 2018. Total net revenue decreased $42 million (4.4 percent) due to a decrease of $29 million (3.9 percent) in net interest income and a decrease of $13 million (6.1 percent) in total noninterest income. Net interest income decreased primarily due to lower noninterest bearing deposit balances compared with the prior year, loan mix, and lower spreads on loans, reflecting a competitive marketplace, partially offset by loan and interest-bearing deposit growth. Noninterest bearing deposits are declining as customers deploy balances to support business growth. Total noninterest income decreased year-over-year primarily due to lower capital markets revenue, partially offset by higher trading revenue and corporate bond underwriting fees. Total noninterest expense was $8 million (2.0 percent) lower compared with a year ago primarily due to lower FDIC assessment costs and lower legal and professional expense, partially offset by higher loan costs. The provision for credit losses increased $23 million (82.1 percent) primarily due to higher net charge-offs.

 

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CONSUMER AND BUSINESS BANKING (a)  
($ in millions)                         Percent Change                       
     

4Q 

2019 

    

3Q

2019

    

4Q 

2018 

    

4Q19 vs

3Q19

    

4Q19 vs

4Q18

    

Full Year

2019

    

Full Year 

2018 

    

Percent

Change

 

Condensed Income Statement

                         

Net interest income (taxable-equivalent basis)

     $1,541         $1,580        $1,575         (2.5)        (2.2)        $6,261        $6,156         1.7   

Noninterest income

     617         668        562         (7.6)        9.8         2,387        2,316         3.1   

Securities gains (losses), net

     --         --         --         --         --         --         --         --   
    

 

 

          

 

 

      

Total net revenue

     2,158         2,248        2,137         (4.0)        1.0         8,648        8,472         2.1   

Noninterest expense

     1,359         1,318        1,302         3.1         4.4         5,285        5,232         1.0   

Other intangibles

            5               --         (16.7)        20        27         (25.9)  
    

 

 

          

 

 

      

Total noninterest expense

     1,364         1,323        1,308         3.1         4.3         5,305        5,259         .9   
    

 

 

          

 

 

      

Income before provision and taxes

     794         925        829         (14.2)        (4.2)        3,343        3,213         4.0   

Provision for credit losses

     92         69        68         33.3         35.3         310        232         33.6   
    

 

 

          

 

 

      

Income before income taxes

     702         856        761         (18.0)        (7.8)        3,033        2,981         1.7   

Income taxes and taxable-equivalent adjustment

     176         214        190         (17.8)        (7.4)        759        745         1.9   
    

 

 

          

 

 

      

Net income

     526         642        571         (18.1)        (7.9)        2,274        2,236         1.7   

Net (income) loss attributable to noncontrolling interests

     --         --         --         --         --         --         --         --   
    

 

 

          

 

 

      

Net income attributable to U.S. Bancorp

     $526         $642        $571         (18.1)        (7.9)        $2,274        $2,236         1.7   
    

 

 

          

 

 

      
   

Average Balance Sheet Data

                         

Loans

     $146,843         $145,921        $141,041         .6         4.1         $144,595        $140,875         2.6   

Other earning assets

     5,480         4,711        3,400         16.3         61.2         3,989        3,501         13.9   

Goodwill

     3,475         3,475        3,526         --         (1.4)        3,475        3,604         (3.6)  

Other intangible assets

     2,435         2,442        3,034         (.3)        (19.7)        2,617        2,953         (11.4)  

Assets

     162,448         160,842        155,426         1.0         4.5         158,884        155,267         2.3   
   

Noninterest-bearing deposits

     29,186         28,632        27,935         1.9         4.5         27,876        27,691         .7   

Interest-bearing deposits

     131,236         129,668        125,726         1.2         4.4         129,289        124,934         3.5   
    

 

 

          

 

 

      

Total deposits

     160,422         158,300        153,661         1.3         4.4         157,165        152,625         3.0   
   

Total U.S. Bancorp shareholders’ equity

     11,704         11,668        11,713         .3         (.1)        11,713        11,812         (.8)  
   

(a) preliminary data

                                                                       

Consumer and Business Banking delivers products and services through banking offices, telephone servicing and sales, on-line services, direct mail, ATM processing and mobile devices. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking.

Consumer and Business Banking contributed $526 million of the Company’s net income in the fourth quarter of 2019, compared with $571 million in the fourth quarter of 2018. Total net revenue increased $21 million (1.0 percent) reflecting a decrease in net interest income of $34 million (2.2 percent) and an increase of $55 million (9.8 percent) in total noninterest income. Net interest income decreased primarily due to lower spreads on loans driven by the decline in interest rates, partially offset by growth in noninterest-bearing and interest-bearing deposit balances as well as higher loan volumes. Total noninterest income increased primarily due to higher mortgage banking revenue driven by higher production and gain on sale margins, partially offset by the reduction in ATM processing services revenue due to the sale of the Company’s ATM third-party servicing business in 2018. Total noninterest expense in the fourth quarter of 2019 increased $56 million (4.3 percent) primarily due to higher net shared services expense, reflecting the impact of technology development and investment in infrastructure supporting business growth, as well as costs to manage the business and higher production incentives in support of business growth. Partially offsetting these increases were lower FDIC assessment costs. The provision for credit losses increased $24 million (35.3 percent) primarily due to an unfavorable change in the reserve allocation, partially offset by lower net charge-offs.

 

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 WEALTH MANAGEMENT AND INVESTMENT SERVICES (a)

 

                       
 ($ in millions)                        Percent Change                    
     

4Q

2019

   

3Q

2019

    

4Q

2018

    

4Q19 vs

3Q19

   

4Q19 vs

4Q18

   

Full Year

2019

   

Full Year

2018

   

Percent

Change

 

Condensed Income Statement

                    

Net interest income (taxable-equivalent basis)

     $269       $294        $287        (8.5     (6.3     $1,157       $1,131       2.3  

Noninterest income

     472       452        443        4.4       6.5       1,799       1,748       2.9  

Securities gains (losses), net

     --       --        --        --       --       --       --       --  

Total net revenue

     741       746        730        (.7     1.5       2,956       2,879       2.7  

Noninterest expense

     458       429        472        6.8       (3.0     1,752       1,778       (1.5

Other intangibles

     4       3        4        33.3       --       13       16       (18.8

Total noninterest expense

     462       432        476        6.9       (2.9     1,765       1,794       (1.6

Income before provision and taxes

     279       314        254        (11.1     9.8       1,191       1,085       9.8  

Provision for credit losses

     (3     1        --        nm       nm       (3     (2     (50.0

Income before income taxes

     282       313        254        (9.9     11.0       1,194       1,087       9.8  

Income taxes and taxable-equivalent adjustment

     71       78        64        (9.0     10.9       299       273       9.5  

Net income

     211       235        190        (10.2     11.1       895       814       10.0  

Net (income) loss attributable to noncontrolling interests

     --       --        --        --       --       --       --       --  

Net income attributable to U.S. Bancorp

     $211       $235        $190        (10.2     11.1       $895       $814       10.0  
   

Average Balance Sheet Data

                    

Loans

     $10,335       $10,260        $9,777        .7       5.7       $10,080       $9,364       7.6  

Other earning assets

     277       265        232        4.5       19.4       282       184       53.3  

Goodwill

     1,617       1,617        1,618        --       (.1     1,617       1,618       (.1

Other intangible assets

     46       47        57        (2.1     (19.3     49       63       (22.2

Assets

     13,409       13,543        12,822        (1.0     4.6       13,330       12,437       7.2  

Noninterest-bearing deposits

     12,354       13,575        13,723        (9.0     (10.0     13,195       14,006       (5.8

Interest-bearing deposits

     66,553       65,858        54,329        1.1       22.5       62,031       56,000       10.8  

Total deposits

     78,907       79,433        68,052        (.7     16.0       75,226       70,006       7.5  
   

Total U.S. Bancorp shareholders’ equity

     2,526       2,530        2,488        (.2     1.5       2,525       2,476       2.0  
   

(a) preliminary data

 

                                                                  

Wealth Management and Investment Services provides private banking, financial advisory services, investment management, retail brokerage services, insurance, trust, custody and fund servicing through four businesses: Wealth Management, Global Corporate Trust & Custody, U.S. Bancorp Asset Management and Fund Services.

Wealth Management and Investment Services contributed $211 million of the Company’s net income in the fourth quarter of 2019, compared with $190 million in the fourth quarter of 2018. Total net revenue increased $11 million (1.5 percent) year-over-year reflecting a decrease in net interest income of $18 million (6.3 percent) and an increase of $29 million (6.5 percent) in noninterest income. Net interest income decreased year-over-year primarily due to funding mix, partially offset by the impact of higher deposit balances. Total noninterest income increased primarily due to favorable market conditions and business growth. Total noninterest expense decreased $14 million (2.9 percent) compared with the fourth quarter of 2018 reflecting lower costs related to FDIC assessment and litigation settlements, partially offset by increased net shared services expense due to technology development and higher compensation expense, reflecting the impact of merit increases, increased staffing, and an increase in medical costs. The provision for credit losses decreased $3 million reflecting a favorable change in the reserve allocation and lower net charge-offs.

 

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PAYMENT SERVICES (a)                                                              
($ in millions)           Percent Change                      
     

4Q

2019

    

3Q

2019

    

4Q

2018

    

4Q19 vs

3Q19

   

4Q19 vs

4Q18

   

Full Year

2019

    

Full Year

2018

     Percent
Change
 

Condensed Income Statement

                       

Net interest income (taxable-equivalent basis)

     $645        $634        $622          1.7       3.7       $2,493        $2,443        2.0  

Noninterest income

     949        957        939          (.8     1.1       3,707        3,599        3.0  

Securities gains (losses), net

     --        --        --          --       --       --        --        --  
    

 

 

        

 

 

      

Total net revenue

     1,594        1,591        1,561          .2       2.1       6,200        6,042        2.6  

Noninterest expense

     753        741        737          1.6       2.2       2,940        2,859        2.8  

Other intangibles

     34        33        30          3.0       13.3       131        114        14.9  
    

 

 

        

 

 

      

Total noninterest expense

     787        774        767          1.7       2.6       3,071        2,973        3.3  
    

 

 

        

 

 

      

Income before provision and taxes

     807        817        794          (1.2     1.6       3,129        3,069        2.0  

Provision for credit losses

     267        260        264          2.7       1.1       1,108        1,081        2.5  
    

 

 

        

 

 

      

Income before income taxes

     540        557        530          (3.1     1.9       2,021        1,988        1.7  

Income taxes and taxable-equivalent adjustment

     135        139        133          (2.9     1.5       505        497        1.6  
    

 

 

        

 

 

      

Net income

     405        418        397          (3.1     2.0       1,516        1,491        1.7  

Net (income) loss attributable to noncontrolling interests

     --        --        --          --       --       --        --        --  
    

 

 

        

 

 

      

Net income attributable to U.S. Bancorp

     $405        $418        $397          (3.1     2.0       $1,516        $1,491        1.7  
    

 

 

        

 

 

      
   

Average Balance Sheet Data

                       

Loans

     $34,500        $34,044        $32,285          1.3       6.9       $33,566        $31,102        7.9  

Other earning assets

     276        343        320          (19.5     (13.8     348        291        19.6  

Goodwill

     2,909        2,825        2,631          3.0       10.6       2,839        2,570        10.5  

Other intangible assets

     552        550        435          .4       26.9       538        406        32.5  

Assets

     40,682        40,171        37,807          1.3       7.6       39,743        36,912        7.7  

Noninterest-bearing deposits

     1,312        1,200        1,121          9.3       17.0       1,205        1,099        9.6  

Interest-bearing deposits

     115        117        111          (1.7     3.6       115        110        4.5  
    

 

 

        

 

 

      

Total deposits

     1,427        1,317        1,232          8.4       15.8       1,320        1,209        9.2  
   

 

Total U.S. Bancorp shareholders’ equity

     7,198        7,058        6,710          2.0       7.3       7,084        6,629        6.9  

(a) preliminary data

 

                                                                     

Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services, consumer lines of credit and merchant processing.

Payment Services contributed $405 million of the Company’s net income in the fourth quarter of 2019, compared with $397 million in the fourth quarter of 2018. Total net revenue increased $33 million (2.1 percent) due to increases of $23 million (3.7 percent) in net interest income and $10 million (1.1 percent) in total noninterest income. Net interest income increased primarily due to growth in loans and loan fees, partially offset by compression on loan rates. Total noninterest income increased year-over-year mainly due to higher merchant processing services driven by higher sales volumes and merchant fees, partially offset by slightly lower credit and debit card and corporate payment products revenue. Total noninterest expense increased $20 million (2.6 percent) over the fourth quarter of 2018 principally due to higher net shared services expense to support business growth, technology development and investment in infrastructure. The provision for credit losses increased $3 million (1.1 percent) reflecting higher net charge-offs, partially offset by a favorable change in the reserve allocation.

 

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TREASURY AND CORPORATE SUPPORT (a)                          
($ in millions)                       Percent Change                       
     

4Q

2019

   

3Q

2019

   

4Q  

2018  

     4Q19 vs 
3Q19  
     4Q19 vs
4Q18
     Full Year 
2019 
     Full Year   
2018   
     Percent
Change
 

Condensed Income Statement

                       

Net interest income (taxable-equivalent basis)

     $58       $89       $100          (34.8)        (42.0)        $373         $369           1.1   

Noninterest income

     172       299       336          (42.5)        (48.8)        998         1,066           (6.4)  

Securities gains (losses), net

     26       25       5          4.0         nm         73         30           nm   
    

 

 

          

 

 

      

Total net revenue

     256       413       441          (38.0)        (42.0)        1,444         1,465           (1.4)   

Noninterest expense

     394       221       327          78.3         20.5         1,033         843           22.5   

Other intangibles

     --       --       --          --          --          --          --            --    
    

 

 

          

 

 

      

Total noninterest expense

     394       221       327          78.3         20.5         1,033         843           22.5   
    

 

 

          

 

 

      

Income before provision and taxes

     (138     192       114          nm         nm         411         622           (33.9)  

Provision for credit losses

     (12     (3     8          nm         nm         11         3           nm   
    

 

 

          

 

 

      

Income before income taxes

     (126     195       106          nm         nm         400         619           (35.4)  

Income taxes and taxable-equivalent adjustment

     (122     (61     (201)         nm         39.3         (325)        (376)          13.6   
    

 

 

          

 

 

      

Net income

     (4     256       307         nm         nm         725         995           (27.1)  

Net (income) loss attributable to noncontrolling interests

     (7     (9     (6)         22.2         (16.7)        (32)        (28)          (14.3)  
    

 

 

          

 

 

      

Net income attributable to U.S. Bancorp

     $(11     $247       $301          nm         nm         $693         $967           (28.3)  
    

 

 

          

 

 

      
   

Average Balance Sheet Data

                       

Loans

         $5,929       $5,979       $5,782          (.8)        2.5         $5,837         $5,506           6.0   

Other earning assets

     134,946       133,902       129,551          .8         4.2         131,481         127,318           3.3   

Goodwill

     --       --       --          --         --          --          --            --    

Other intangible assets

     --       --       --          --         --          --          --            --    

Assets

     161,372       159,770       152,182          1.0         6.0         156,980         149,597           4.9   
   

Noninterest-bearing deposits

     2,568       2,326       2,522          10.4         1.8         2,435         2,462           (1.1)   

Interest-bearing deposits

     7,045       7,635       6,259          (7.7)        12.6         8,734         4,309           nm   
    

 

 

          

 

 

      

Total deposits

     9,613       9,961       8,781          (3.5)        9.5         11,169         6,771           65.0   
   

Total U.S. Bancorp shareholders’ equity

     21,290       21,657       19,310          (1.7)        10.3         20,902         18,383           13.7   
   

(a) preliminary data

 

                                                                     

Treasury and Corporate Support includes the Company’s investment portfolios, funding, capital management, interest rate risk management, income taxes not allocated to the business lines, including most investments in tax-advantaged projects, and the residual aggregate of those expenses associated with corporate activities that are managed on a consolidated basis.

Treasury and Corporate Support recorded a net loss of $(11) million in the fourth quarter of 2019, compared with net income of $301 million in the fourth quarter of 2018. Total net revenue decreased $185 million (42.0 percent) year-over-year driven by decreases in net interest income of $42 million (42.0 percent) and $143 million (41.9 percent) in total noninterest income. Net interest income decreased primarily due to funding mix, partially offset by growth in the investment portfolio. Total noninterest income decreased year-over-year primarily due to notable items in both quarters. The fourth quarter of 2019 notable item was for an increased derivative liability related to Visa shares previously sold by the Company, while fourth quarter of 2018 notable items related to the gain on sale of the Company’s ATM servicing business, offset by certain asset impairments. The impact of the notable items is partially offset by a gain on the sale of a loan portfolio and an increase in gains on the sale of securities. Total noninterest expense increased $67 million (20.5 percent) year-over-year primarily due to notable items booked in both quarters. Included in the fourth quarter are notable items related to severance charges and other accruals in 2019 and severance charges and accruals of legal matters in 2018. In addition to the notable items, noninterest expense increased due to higher compensation expense, reflecting the impact of increased staffing and merit increases, and higher implementation costs of capital investments to support business growth. These increases were partially offset by lower net shared services expense and lower costs related to tax-advantaged projects. The provision for credit losses decreased $20 million reflecting a favorable change in the reserve allocation and lower net charge-offs.

 

LOGO

 

        7

EX-99.2

Slide 1

U.S. Bancorp 4Q19 Earnings Conference Call January 15, 2020 Exhibit 99.2


Slide 2

Forward-looking Statements and Additional Information The following information appears in accordance with the Private Securities Litigation Reform Act of 1995: Today’s presentation 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 “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. 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. This presentation includes non-GAAP financial measures to describe U.S. Bancorp’s performance. The calculations of these measures are provided in the Appendix. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.


Slide 3

4Q19 Highlights * Taxable-equivalent basis; see slide 26 for calculation


Slide 4

Digital Engagement Trends * Represents core Consumer Banking customers active in at least one channel in the previous 90 days Total Digital includes both online and mobile platforms Three months ended Three months ended


Slide 5

Performance Ratios Efficiency Ratio** & Net Interest Margin*** * Excluding notable items; see slides 26 and 27 for calculations ** Non-GAAP; see slides 26 and 27 for calculations *** Net interest margin on a taxable-equivalent basis Return on Average Common Equity Return on Tangible Common Equity** Return on Average Assets 56.3% 1.59% 15.8% 60.3% 20.2%


Slide 6

Average Loans +0.8% linked quarter +3.9% year-over-year On a linked quarter basis, average total loan growth was driven by growth in residential mortgages, total commercial real estate loans, and credit card loans. On a year-over-year basis, growth in average total loans was primarily driven by growth in residential mortgages, total commercial loans, credit card loans, and total other retail loans. $ in billions


Slide 7

Average Deposits $ in billions +1.9% linked quarter +6.6% year-over-year Interest-bearing Deposits Average noninterest-bearing (NIB) deposits decreased on a linked quarter basis. On a year-over-year basis, average NIB deposits decreased primarily due to the migration of balances to interest-bearing deposits and the continued deployment by customers of business deposits within Corporate and Commercial Banking. Average total savings deposits (which include money market, interest checking and savings accounts) grew on both a linked quarter and year-over-year basis, primarily due to increases in Wealth Management and Investment Services, Corporate and Commercial Banking, and Consumer and Business Banking. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, increased on both a linked quarter and year-over-year basis. Year-over-year growth, in part, reflects consumer deposit migration as customers seek higher yields.


Slide 8

Credit Quality $ in millions NCO Ratio +4 bps QoQ +3 bps YoY NPAs -0.05% QoQ -0.06% YoY


Slide 9

Earnings Summary


Slide 10

Notable Items


Slide 11

Net Interest Income Linked Quarter Net interest income decreased, primarily driven by declining short-term interest rates, higher premium amortization in the investment securities portfolio, and the mix of earning assets. The net interest margin declined, primarily due to continued yield curve compression, premium amortization in the investment securities portfolio, and earning asset mix. Year-over-Year Net interest income decreased, principally driven by the impact of lower interest rates and a flatter yield curve in addition to deposit and funding mix, partially offset by higher yields on reinvestment of securities and loan growth. The net interest margin declined, primarily due to the impact of lower interest rates on the yield curve in addition to deposit and funding mix. $ in millions Net interest income on a taxable-equivalent basis; see slide 26 for calculation -2.3% linked quarter -3.0% year-over-year


Slide 12

Noninterest Income $ in millions Payments = credit and debit card, corporate payment products and merchant processing Service charges = deposit service charges and treasury management All other = commercial products, investment products fees, securities gains (losses) and other $2,498 $2,614 $2,436 -6.8% linked quarter -1.5% excluding notable items -2.5% year-over-year +6.4% excluding notable items Linked Quarter Payment services revenue declined slightly, driven by lower corporate payment products revenue due to seasonally lower sales volumes, partially offset by higher credit and debit card revenue due to seasonally higher sales volumes and higher fees. Mortgage banking revenue declined, reflecting seasonally lower volumes and an unfavorable change in the valuation of mortgage servicing rights, net of hedging activities. Commercial products revenue declined, driven by a seasonal reduction in corporate bond fees and trading income. Year-over-Year Payment services revenue growth reflects higher merchant processing services driven by higher sales volumes and merchant fees. Trust and investment management fee revenue increase driven by business growth and favorable market conditions. Mortgage banking revenue growth reflects higher mortgage production and gain on sale margins. Other noninterest income decreased primarily due to a charge related to previously sold Visa shares.


Slide 13

Noninterest Expense $ in millions PPS = postage, printing and supplies $3,280 $3,144 $3,401 +8.2% linked quarter +1.8% excluding notable items +3.7% year-over-year +3.1% excluding notable items Linked Quarter Employee benefits expense decreased, driven by seasonally lower payroll taxes. Technology and communications expense increased, driven by capital expenditures to support business growth. Year-over-Year Compensation expense increased, driven by the impact of hiring to support business growth, merit increases, and higher variable compensation related to business production in mortgage banking. Employee benefits expense increased, primarily due to higher medical costs. Technology and communications expense increased to support business growth.


Slide 14

Capital Position * Non-GAAP; see slide 28 for calculations


Slide 15

Appendix


Slide 16

Average Loans vs. 4Q18 Average total loans increased by $11.2 billion, or 3.9% Average residential mortgage loans increased by $5.4 billion, or 8.4% Average commercial loans increased by $3.4 billion, or 3.4% Average credit card loans increased by $1.7 billion, or 7.6% Average retail loans increased by $1.1 billion, or 1.9% Average commercial real estate loans decreased by $0.4 billion, or 1.1% vs. 3Q19 Average total loans increased by $2.4 billion, or 0.8% Average residential mortgage loans increased by $1.3 billion, or 1.9% Average credit card loans increased by $0.4 billion, or 1.8% Key Points Year-over-Year Growth 1.4% 2.4% 3.8% 4.0% 3.9% Commercial CRE Res Mtg Retail Credit Card Average Loans ($bn)


Slide 17

Average Deposits Key Points Average Deposits ($bn) vs. 4Q18 Average total deposits increased by $22.1 billion, or 6.6% Average low-cost deposits (NIB, interest checking, savings and money market) increased by $21.1 billion, or 7.2% vs. 3Q19 Average total deposits increased by $6.5 billion, or 1.9% Average low-cost deposits (NIB, interest checking, savings and money market) increased by $6.0 billion, or 2.0% Year-over-Year Growth (1.4%) 0.2% 3.1% 6.0% 6.6% Time Money Market Checking and Savings Noninterest-bearing


Slide 18

Credit Quality – Commercial Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm4Q183Q194Q19 Average Loans$100,515$103,660 $103,911 30-89 Delinquencies0.31% 0.43%0.30% 90+ Delinquencies0.07%0.10%0.08% Nonperforming Loans0.20%0.30%0.20% Linked Quarter Growth 1.5% 1.4% 1.2% 0.4% 0.2% Linked quarter growth was modest at 0.2% and year-over-year growth was 3.4% Net charge-offs remained relatively stable on a linked quarter basis


Slide 19

Investor $20,106 Owner Occupied $9,027 A&D Const $267 Multi-family $3,586 Retail $289 Residential Construction $2,486 Office $797 Other $2,529 Resi Land $635 $mm4Q183Q194Q19 Average Loans$40,149$ 38,990 $39,722 30-89 Delinquencies0.18% 0.13%0.09% 90+ Delinquencies0.00%0.01%0.01% Nonperforming Loans0.29%0.23%0.21% Performing TDRs*$164$145$160 Credit Quality – Commercial Real Estate Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points * TDR = troubled debt restructuring Linked Quarter Growth 1.5% (1.7%) (0.3%) (1.0%) 1.9% Average loans increased by 1.9% on a linked quarter basis, however, decreased year-over-year due to high market liquidity resulting in continued early payoffs Credit quality remains strong and stable; nonperforming loans remain low


Slide 20

Credit Quality – Residential Mortgage Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm4Q183Q194Q19 Average Loans$64,476$ 68,608 $69,909 30-89 Delinquencies0.27%0.24%0.22% 90+ Delinquencies0.18%0.17%0.17% Nonperforming Loans0.46%0.36%0.34% * Excludes GNMA loans, whose repayments are insured by the FHA or guaranteed by the Department of VA ($1,622 million in 4Q19) Linked Quarter Growth 3.9% 1.7% 1.9% 2.7% 1.9% Originations continued to be high credit quality (weighted average FICO of 764, weighted average LTV of 70%) More than 94% of balances have been originated since the beginning of 2009; the origination quality metrics and performance to date have significantly outperformed prior vintages with similar seasoning


Slide 21

Credit Quality – Credit Card Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm4Q183Q194Q19 Average Loans$22,396$ 23,681 $24,107 30-89 Delinquencies1.39%1.33%1.30% 90+ Delinquencies1.25%1.16%1.23% Nonperforming Loans0.00%0.00%0.00% Linked Quarter Growth 2.9% 0.9% 1.0% 3.7% 1.8% Year-over-year average loan growth of 7.6% was driven by origination of new accounts and portfolio acquisitions Weighted average FICO on new originations remained strong at 775 Year-over-year delinquency was stable and charge-offs were favorably driven by stronger collection results


Slide 22

Credit Quality – Home Equity Average Loans ($mm) and Net Charge-offs Ratio Key Points Linked Quarter Growth 0.4% (0.4%) (1.0%) (1.5%) (2.4%) Key Statistics Key Statistics $mm4Q183Q194Q19 Average Loans$16,065$15,601$15,221 30-89 Delinquencies0.56%0.55%0.51% 90+ Delinquencies0.35%0.34%0.32% Nonperforming Loans0.90%0.75%0.77% Loans: 11% Wtd Avg LTV*: 77% Wtd Avg FICO*: 751 Lines: 89% Wtd Avg LTV*: 71% Wtd Avg FICO*: 754 *LTV and FICO at origination High-quality originations (weighted average FICO on commitments of 783, weighted average CLTV of 67%) were originated primarily through the retail branch network to existing bank customers on their primary residences Net charge-offs were stable year-over-year with strong recoveries due to continued strength in home values


Slide 23

Credit Quality – Retail Leasing Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm4Q183Q194Q19 Average Loans$8,489$8,442$8,486 30-89 Delinquencies0.43%0.48%0.53% 90+ Delinquencies0.04%0.05%0.05% Nonperforming Loans0.14%0.14%0.15% * Manheim Used Vehicle Value Index source: www.manheimconsulting.com, January 1995 = 100, quarter value = average monthly ending values Linked Quarter Growth 1.3% 1.1% (0.5%) (1.2%) 0.5% Continued high-quality originations during 4Q19 (weighted average FICO of 782) Delinquencies and net charge-offs remained at low levels


Slide 24

Credit Quality – Other Retail Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm4Q183Q194Q19 Average Loans$31,587$33,454$33,509 30-89 Delinquencies0.87%0.78%0.81% 90+ Delinquencies0.15%0.14%0.13% Nonperforming Loans0.13%0.13%0.11% Linked Quarter Growth 0.2% 1.1% 2.1% 2.7 % 0.2% Loan growth continues to be driven by auto and installment loans Net charge-offs, delinquencies and nonperforming loans were all relatively stable


Slide 25

Credit Quality – Auto Loans Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm4Q183Q194Q19 Average Loans$18,500$19,426$19,434 30-89 Delinquencies1.04%1.04%1.06% 90+ Delinquencies0.09%0.11%0.10% Nonperforming Loans0.14%0.17%0.15% Direct: 4% Wtd Avg FICO: 750 NCO: 0.35% Indirect: 96% Wtd Avg FICO: 777 NCO: 0.47% Auto loans are included in Other Retail category Linked Quarter Growth (0.3%) 1.8% 1.0% 2.1% 0.0% Loan growth continues to be driven by high quality originations in the indirect channel (weighted average FICO of 784) Net charge-offs, delinquencies and nonperforming loans were all relatively stable


Slide 26

Non-GAAP Financial Measures (2), (3), (4), (5) – see slide 29 for corresponding notes


Slide 27

Non-GAAP Financial Measures (1), (5) – see slide 29 for corresponding notes


Slide 28

Non-GAAP Financial Measures * Preliminary data. Subject to change prior to filings with applicable regulatory agencies. (1) – see slide 29 for corresponding note


Slide 29

Notes Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements. 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. Notable items related to noninterest income for the three months ended December 31, 2019 include: $140 million derivative liability charge related to previously sold Visa shares. Notable items related to noninterest income for the three months ended December 31, 2018 include: $340 million gain on sale of ATM servicing business and $264 million of asset impairments. Notable items related to noninterest expense for the three months ended December 31, 2019 include: $200 million of severance charges and asset impairments. Notable items related to noninterest expense for the three months ended December 31, 2018 include: $174 million of severance charges and legal accruals. Notable items for the three months ended December 31, 2019 include: $112 million (after-tax) derivative liability charge related to previously sold Visa shares and $160 million (after-tax) of severance charges and asset impairments. Notable items for the three months ended December 31, 2018 include: $271 million (after-tax) gain on sale of ATM servicing business, $210 million (after-tax) of asset impairments, $139 million (after-tax) of severance charges and legal accruals, $120 million reduction in income tax expense due to tax reform legislation estimate changes and $3 million noncontrolling interest adjustment.


Slide 30

U.S. Bancorp 4Q19 Earnings Conference Call January 15, 2020

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