UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
(Exact name of registrant as specified in its charter)
(Commission File Number)
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(Address of principal executive offices and zip code)
(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:
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Written communications pursuant to Rule 425 Under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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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:
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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 October 16, 2019, U.S. Bancorp (the “Company”) issued a press release reporting quarter-ended September 30, 2019 results, and posted on its website its 3Q19 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 3Q19 Earnings Conference Call Presentation is included as Exhibit 99.2 hereto and is incorporated herein by reference. The information included in the 3Q19 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 3Q19 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 October 16, 2019, deemed “filed” under the Securities Exchange Act of 1934. |
99.2 | 3Q19 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/ Craig E. Gifford |
Craig E. Gifford |
Executive Vice President and |
DATE: October 16, 2019
Exhibit 99.1
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U.S. Bancorp Reports Third Quarter 2019 Results Record net revenue of $5,920 million, net income of $1,908 million and diluted earnings per share of $1.15 Industry leading return on average assets of 1.57% and return on average common equity of 15.3%
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3Q19 Key Financial Data
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3Q19 Highlights
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PROFITABILITY METRICS | 3Q19 | 2Q19 | 3Q18 |
Net income of $1,908 million and diluted earnings per
Industry leading return on average assets of 1.57% and
Return on tangible common equity of 19.4%
Returned 80% of 3Q earnings to shareholders through
Noninterest income grew 5.0% on a linked quarter basis
Total net revenue grew 3.9% year-over-year with positive
Average
total loans grew 1.1% on a linked quarter basis
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Return on average assets (%) |
1.57 | 1.55 | 1.58 | |||||||||||||
Return on average common equity (%) |
15.3 | 15.0 | 15.5 | |||||||||||||
Return on tangible common equity (%) (a) |
19.4 | 19.2 | 19.9 | |||||||||||||
Net interest margin (%) |
3.02 | 3.13 | 3.15 | |||||||||||||
Efficiency ratio (%) (a) |
53.3 | 54.3 | 53.5 | |||||||||||||
INCOME STATEMENT (b) | 3Q19 | 2Q19 | 3Q18 | |||||||||||||
Net interest income (taxable-equivalent basis) |
$3,306 | $3,332 | $3,281 | |||||||||||||
Noninterest income |
$2,614 | $2,490 | $2,418 | |||||||||||||
Net income attributable to U.S. Bancorp |
$1,908 | $1,821 | $1,815 | |||||||||||||
Diluted earnings per common share |
$1.15 | $1.09 | $1.06 | |||||||||||||
Dividends declared per common share |
$.42 | $.37 | $.37 | |||||||||||||
BALANCE SHEET (b) | 3Q19 | 2Q19 | 3Q18 | |||||||||||||
Average total loans |
$292,436 | $289,218 | $281,065 | |||||||||||||
Average total deposits |
$349,933 | $345,232 | $330,121 | |||||||||||||
Net charge-off ratio |
.48% | .49% | .46% | |||||||||||||
Book value per common share (period end) |
$30.26 | $29.63 | $27.35 | |||||||||||||
Basel III standardized CET1 (c)
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9.6%
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9.5%
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9.0%
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(a) See Non-GAAP Financial Measures reconciliation on page 16 | ||||||||||||||||
(b) Dollars in millions, except per share data | ||||||||||||||||
(c) CET1 = Common equity tier 1 capital ratio
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CEO Commentary
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Despite a challenging interest rate environment, we posted record revenue, net income and earnings per share in the third quarter, delivered industry leading returns on assets and equity, and grew our book value by over 10% from a year earlier. During the quarter we returned 80% of our earnings to shareholders through dividends and share buybacks. Third quarter loan and deposit growth were solid and momentum in our core fee businesses was supported by strong sales and volume growth. Mortgage revenue was particularly robust this quarter, reflecting both market conditions and the benefits of the investments we have made in our retail platform over the past several years. As we head into the final quarter of 2019, we feel good about our opportunity to gain market share across our franchise and our ability to prudently manage our operating expenses even as we invest in our digital capabilities and key business initiatives. Id like to thank our employees for their hard work and dedication to delivering value to each of our constituents.
Andy Cecere, Chairman, President and CEO, U.S. Bancorp
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In the Spotlight
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Investor contact: Jennifer Thompson, 612.303.0778 | Media contact: Rebekah Fawcett, 612.303.9986
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U.S. Bancorp Third Quarter 2019 Results | |
INCOME STATEMENT HIGHLIGHTS | ||||||||||||||||||||||||||||||||
($ in millions, except per-share data) | Percent Change | |||||||||||||||||||||||||||||||
3Q | 2Q | 3Q | 3Q19 vs | 3Q19 vs | YTD | YTD | Percent | |||||||||||||||||||||||||
2019 | 2019 | 2018 | 2Q19 | 3Q18 | 2019 | 2018 | Change | |||||||||||||||||||||||||
Net interest income |
$3,281 | $3,305 | $3,251 | (.7 | ) | .9 | $9,845 | $9,616 | 2.4 | |||||||||||||||||||||||
Taxable-equivalent adjustment |
25 | 27 | 30 | (7.4 | ) | (16.7) | 79 | 88 | (10.2) | |||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
3,306 | 3,332 | 3,281 | (.8 | ) | .8 | 9,924 | 9,704 | 2.3 | |||||||||||||||||||||||
Noninterest income |
2,614 | 2,490 | 2,418 | 5.0 | 8.1 | 7,395 | 7,104 | 4.1 | ||||||||||||||||||||||||
Total net revenue |
5,920 | 5,822 | 5,699 | 1.7 | 3.9 | 17,319 | 16,808 | 3.0 | ||||||||||||||||||||||||
Noninterest expense |
3,144 | 3,153 | 3,044 | (.3 | ) | 3.3 | 9,384 | 9,184 | 2.2 | |||||||||||||||||||||||
Income before provision and income taxes |
2,776 | 2,669 | 2,655 | 4.0 | 4.6 | 7,935 | 7,624 | 4.1 | ||||||||||||||||||||||||
Provision for credit losses |
367 | 365 | 343 | .5 | 7.0 | 1,109 | 1,011 | 9.7 | ||||||||||||||||||||||||
Income before taxes |
2,409 | 2,304 | 2,312 | 4.6 | 4.2 | 6,826 | 6,613 | 3.2 | ||||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
492 | 476 | 490 | 3.4 | .4 | 1,373 | 1,351 | 1.6 | ||||||||||||||||||||||||
Net income |
1,917 | 1,828 | 1,822 | 4.9 | 5.2 | 5,453 | 5,262 | 3.6 | ||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(9) | (7) | (7) | (28.6) | (28.6) | (25) | (22) | (13.6) | ||||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$1,908 | $1,821 | $1,815 | 4.8 | 5.1 | $5,428 | $5,240 | 3.6 | ||||||||||||||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$1,821 | $1,741 | $1,732 | 4.6 | 5.1 | $5,175 | $5,007 | 3.4 | ||||||||||||||||||||||||
Diluted earnings per common share |
$1.15 | $1.09 | $1.06 | 5.5 | 8.5 | $3.25 | $3.04 | 6.9 | ||||||||||||||||||||||||
Net income attributable to U.S. Bancorp was $1,908 million for the third quarter of 2019, which was 5.1 percent higher than the third quarter of 2018, and 4.8 percent higher than the second quarter of 2019. Diluted earnings per common share were $1.15 in the third quarter of 2019, compared with $1.06 in the third quarter of 2018 and $1.09 in the second quarter of 2019.
The increase in net income year-over-year was driven by total net revenue growth of 3.9 percent partially offset by noninterest expense growth of 3.3 percent. Net interest income increased 0.9 percent (0.8 percent on a taxable-equivalent basis), mainly a result of loan growth and higher yields on reinvestment of securities, partially offset by the yield curve and deposit and funding mix. Noninterest income increased 8.1 percent compared with a year ago, driven by growth in payment services revenue, commercial products revenue, mortgage banking revenue and other noninterest income, partially offset by a decline in deposit service charges. Noninterest expense increased 3.3 percent primarily due to higher personnel expense, in part due to higher fee revenue production in mortgage and capital market activities, and higher technology investment costs in support of business growth. Partially offsetting these increases was lower other noninterest expense driven by lower FDIC assessment costs.
Net income increased on a linked quarter basis primarily due to an increase in total net revenue of 1.7 percent and a decrease in noninterest expense of 0.3 percent. The increase in total net revenue reflected higher noninterest income of 5.0 percent, partially offset by lower net interest income of 0.7 percent (0.8 percent on a taxable-equivalent basis) primarily due to the adverse impact of the yield curve and lower interest recoveries, partially offset by loan growth and an additional day in the third quarter. Noninterest income increased compared with the second quarter of 2019 driven by higher payment services revenue, mortgage banking revenue and other noninterest income. Noninterest expense decreased 0.3 percent on a linked quarter basis primarily driven by lower other noninterest expense, partially offset by higher personnel expense.
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U.S. Bancorp Third Quarter 2019 Results | |
NET INTEREST INCOME | ||||||||||||||||||||||||||||||||
(Taxable-equivalent basis; $ in millions) | Change | |||||||||||||||||||||||||||||||
3Q 2019 |
2Q 2019 |
3Q 2018 |
3Q19 vs 2Q19 |
3Q19 vs 3Q18 |
YTD 2019 |
YTD 2018 |
Change | |||||||||||||||||||||||||
Components of net interest income |
$4,465 | $4,480 | $4,155 | $(15) | $310 | $13,326 | $11,957 | $1,369 | ||||||||||||||||||||||||
Expense on interest-bearing liabilities |
1,159 | 1,148 | 874 | 11 | 285 | 3,402 | 2,253 | 1,149 | ||||||||||||||||||||||||
Net interest income |
$3,306 | $3,332 | $3,281 | $(26) | $25 | $9,924 | $9,704 | $220 | ||||||||||||||||||||||||
Average yields and rates paid |
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Earning assets yield |
4.08% | 4.21% | 3.98% | (.13)% | .10% | 4.16% | 3.86% | .30% | ||||||||||||||||||||||||
Rate paid on interest-bearing liabilities |
1.37 | 1.40 | 1.10 | (.03) | .27 | 1.38 | .96 | .42 | ||||||||||||||||||||||||
Gross interest margin |
2.71% | 2.81% | 2.88% | (.10)% | (.17)% | 2.78% | 2.90% | (.12)% | ||||||||||||||||||||||||
Net interest margin |
3.02% | 3.13% | 3.15% | (.11)% | (.13)% | 3.10% | 3.14% | (.04)% | ||||||||||||||||||||||||
Average balances |
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Investment securities (a) |
$117,213 | $115,460 | $113,547 | $1,753 | $3,666 | $115,628 | $113,873 | $1,755 | ||||||||||||||||||||||||
Loans |
292,436 | 289,218 | 281,065 | 3,218 | 11,371 | 289,278 | 279,699 | 9,579 | ||||||||||||||||||||||||
Earning assets |
435,673 | 426,933 | 415,177 | 8,740 | 20,496 | 427,426 | 413,246 | 14,180 | ||||||||||||||||||||||||
Interest-bearing liabilities |
336,627 | 329,743 | 314,816 | 6,884 | 21,811 | 329,562 | 312,894 | 16,668 |
(a) Excludes unrealized gain (loss)
Net interest income on a taxable-equivalent basis in the third quarter of 2019 was $3,306 million, an increase of $25 million (0.8 percent) over the third quarter of 2018. The increase was principally driven by earning assets growth and higher yields on securities, partially offset by declining rates and flatter yield curve as well as deposit and funding mix. Average earning assets were $20.5 billion (4.9 percent) higher than the third quarter of 2018, reflecting increases of $11.4 billion (4.0 percent) in average total loans, $3.7 billion (3.2 percent) in average investment securities and $4.1 billion (23.4 percent) in average other earning assets. Excluding the impact of the fourth quarter of 2018 sale of the majority of the Companys FDIC covered loans, average total loans grew 4.7 percent compared with the third quarter of 2018.
Net interest income on a taxable-equivalent basis decreased $26 million (0.8 percent) on a linked quarter basis primarily driven by the impact of declining rates, flatter yield curve and lower interest recoveries, partially offset by earning assets growth and an additional day in the third quarter. Average earning assets were $8.7 billion (2.0 percent) higher on a linked quarter basis, reflecting increases of $3.2 billion (1.1 percent) in average total loans, $1.8 billion (1.5 percent) in average investment securities and $2.5 billion (12.9 percent) in average other earning assets.
The net interest margin in the third quarter of 2019 was 3.02 percent, compared with 3.15 percent in the third quarter of 2018 and 3.13 percent in the second quarter of 2019. Net interest margin decreased year-over-year primarily due to the impacts of the yield curve as well as deposit and funding mix and higher cash balances. The decrease in net interest margin on a linked quarter basis was primarily due to changes in the yield curve during the quarter and higher cash balances, in part, related to a change in policy on affiliate balances by the regulator of the Companys Irish subsidiary.
Average investment securities in the third quarter of 2019 increased $3.7 billion (3.2 percent) over the third quarter of 2018 and $1.8 billion (1.5 percent) over the second quarter of 2019 primarily due to purchases of mortgage-backed securities, net of prepayments and maturities.
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U.S. Bancorp Third Quarter 2019 Results | |
AVERAGE LOANS | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q 2019 |
2Q 2019 |
3Q 2018 |
3Q19 vs 2Q19 |
3Q19 vs 3Q18 |
YTD 2019 |
YTD 2018 |
Percent Change |
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Commercial |
$98,175 | $97,776 | $93,541 | .4 | 5.0 | $97,472 | $92,776 | 5.1 | ||||||||||||||||||||||||
Lease financing |
5,485 | 5,457 | 5,507 | .5 | (.4 | ) | 5,485 | 5,519 | (.6 | ) | ||||||||||||||||||||||
Total commercial |
103,660 | 103,233 | 99,048 | .4 | 4.7 | 102,957 | 98,295 | 4.7 | ||||||||||||||||||||||||
Commercial mortgages |
28,319 | 28,465 | 28,362 | (.5 | ) | (.2 | ) | 28,414 | 28,746 | (1.2 | ) | |||||||||||||||||||||
Construction and development |
10,671 | 10,900 | 11,180 | (2.1 | ) | (4.6 | ) | 10,860 | 11,172 | (2.8 | ) | |||||||||||||||||||||
Total commercial real estate |
38,990 | 39,365 | 39,542 | (1.0 | ) | (1.4 | ) | 39,274 | 39,918 | (1.6 | ) | |||||||||||||||||||||
Residential mortgages |
68,608 | 66,834 | 62,042 | 2.7 | 10.6 | 67,019 | 61,023 | 9.8 | ||||||||||||||||||||||||
Credit card |
23,681 | 22,830 | 21,774 | 3.7 | 8.8 | 23,040 | 21,428 | 7.5 | ||||||||||||||||||||||||
Retail leasing |
8,442 | 8,547 | 8,383 | (1.2 | ) | .7 | 8,524 | 8,173 | 4.3 | |||||||||||||||||||||||
Home equity and second mortgages |
15,601 | 15,831 | 16,000 | (1.5 | ) | (2.5 | ) | 15,807 | 16,080 | (1.7 | ) | |||||||||||||||||||||
Other |
33,454 | 32,578 | 31,520 | 2.7 | 6.1 | 32,657 | 31,882 | 2.4 | ||||||||||||||||||||||||
Total other retail |
57,497 | 56,956 | 55,903 | .9 | 2.9 | 56,988 | 56,135 | 1.5 | ||||||||||||||||||||||||
Covered loans (a) |
-- | -- | 2,756 | -- | nm | -- | 2,900 | nm | ||||||||||||||||||||||||
Total loans |
$292,436 | $289,218 | $281,065 | 1.1 | 4.0 | $289,278 | $279,699 | 3.4 | ||||||||||||||||||||||||
(a) During the fourth quarter of 2018, the majority of the Companys covered loans were sold or the loss share coverage expired, with any remaining loan balances reclassified to be included in their respective portfolio category.
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Average total loans were $11.4 billion (4.0 percent) higher than the third quarter of 2018. Excluding the impact of the fourth quarter of 2018 sale of the majority of the Companys FDIC covered loans, average total loans grew 4.7 percent over the prior year quarter. The increase was due to growth in residential mortgages (10.6 percent), total commercial loans (4.7 percent), credit card loans (8.8 percent), and total other retail loans (2.9 percent). These increases were partially offset by decreases in total commercial real estate loans (1.4 percent) given the later stage of the business cycle and the sale of covered loans in the fourth quarter of 2018.
Average total loans were $3.2 billion (1.1 percent) higher than the second quarter of 2019 primarily driven by growth in residential mortgages (2.7 percent) and credit card loans (3.7 percent).
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U.S. Bancorp Third Quarter 2019 Results | |
AVERAGE DEPOSITS | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q 2019 |
2Q 2019 |
3Q 2018 |
3Q19 vs 2Q19 |
3Q19 vs 3Q18 |
YTD 2019 |
YTD 2018 |
Percent Change |
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Noninterest-bearing deposits |
$74,594 | $73,096 | $77,192 | 2.0 | (3.4 | ) | $73,711 | $78,546 | (6.2 | ) | ||||||||||||||||||||||
Interest-bearing savings deposits |
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Interest checking |
72,007 | 70,433 | 69,330 | 2.2 | 3.9 | 71,539 | 69,865 | 2.4 | ||||||||||||||||||||||||
Money market savings |
114,475 | 108,633 | 100,688 | 5.4 | 13.7 | 107,568 | 102,453 | 5.0 | ||||||||||||||||||||||||
Savings accounts |
46,348 | 45,988 | 44,848 | .8 | 3.3 | 45,855 | 44,770 | 2.4 | ||||||||||||||||||||||||
Total savings deposits |
232,830 | 225,054 | 214,866 | 3.5 | 8.4 | 224,962 | 217,088 | 3.6 | ||||||||||||||||||||||||
Time deposits |
42,509 | 47,082 | 38,063 | (9.7) | 11.7 | 44,890 | 37,525 | 19.6 | ||||||||||||||||||||||||
Total interest-bearing deposits |
275,339 | 272,136 | 252,929 | 1.2 | 8.9 | 269,852 | 254,613 | 6.0 | ||||||||||||||||||||||||
Total deposits |
$349,933 | $345,232 | $330,121 | 1.4 | 6.0 | $343,563 | $333,159 | 3.1 | ||||||||||||||||||||||||
Average total deposits for the third quarter of 2019 were $19.8 billion (6.0 percent) higher than the third quarter of 2018. Average noninterest-bearing deposits decreased $2.6 billion (3.4 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 given higher earning credit rates from a year ago. Average total savings deposits were $18.0 billion (8.4 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 $4.4 billion (11.7 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 $4.7 billion (1.4 percent) from the second quarter of 2019. On a linked quarter basis, average noninterest-bearing deposits increased $1.5 billion (2.0 percent). Average total savings deposits increased $7.8 billion (3.5 percent) on a linked quarter basis primarily due to increases in Wealth Management and Investment Services and Corporate and Commercial Banking. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, decreased $4.6 billion (9.7 percent) on a linked quarter basis.
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U.S. Bancorp Third Quarter 2019 Results | |
NONINTEREST INCOME | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q | 2Q | 3Q | 3Q19 vs | 3Q19 vs | YTD | YTD | Percent | |||||||||||||||||||||||||
2019 | 2019 | 2018 | 2Q19 | 3Q18 | 2019 | 2018 | Change | |||||||||||||||||||||||||
Credit and debit card revenue |
$366 | $365 | $344 | .3 | 6.4 | $1,035 | $1,019 | 1.6 | ||||||||||||||||||||||||
Corporate payment products revenue |
177 | 167 | 169 | 6.0 | 4.7 | 506 | 481 | 5.2 | ||||||||||||||||||||||||
Merchant processing services |
410 | 404 | 392 | 1.5 | 4.6 | 1,192 | 1,142 | 4.4 | ||||||||||||||||||||||||
Trust and investment management fees |
421 | 415 | 411 | 1.4 | 2.4 | 1,235 | 1,210 | 2.1 | ||||||||||||||||||||||||
Deposit service charges |
234 | 227 | 283 | 3.1 | (17.3) | 678 | 817 | (17.0) | ||||||||||||||||||||||||
Treasury management fees |
139 | 153 | 146 | (9.2) | (4.8) | 438 | 451 | (2.9) | ||||||||||||||||||||||||
Commercial products revenue |
240 | 249 | 216 | (3.6) | 11.1 | 708 | 670 | 5.7 | ||||||||||||||||||||||||
Mortgage banking revenue |
272 | 189 | 174 | 43.9 | 56.3 | 630 | 549 | 14.8 | ||||||||||||||||||||||||
Investment products fees |
46 | 47 | 47 | (2.1) | (2.1) | 138 | 140 | (1.4) | ||||||||||||||||||||||||
Securities gains (losses), net |
25 | 17 | 10 | 47.1 | nm | 47 | 25 | 88.0 | ||||||||||||||||||||||||
Other |
284 | 257 | 226 | 10.5 | 25.7 | 788 | 600 | 31.3 | ||||||||||||||||||||||||
Total noninterest income |
$2,614 | $2,490 | $2,418 | 5.0 | 8.1 | $7,395 | $7,104 | 4.1 | ||||||||||||||||||||||||
Third quarter noninterest income of $2,614 million was $196 million (8.1 percent) higher than the third quarter of 2018 driven by growth in payment services revenue, commercial products revenue, mortgage banking revenue and other noninterest income, partially offset by a decline in deposit service charges. Payment services revenue increased $48 million (5.3 percent) due to $22 million (6.4 percent) higher credit and debit card revenue primarily driven by core business growth and processing days, as well as an increase in corporate payment products revenue of $8 million (4.7 percent), and higher merchant processing services revenue of $18 million (4.6%), both driven by higher sales volumes. Commercial products revenue increased $24 million (11.1 percent) primarily due to higher corporate bond fees and trading revenue related to stronger capital markets activities. Mortgage banking revenue increased $98 million (56.3 percent) reflecting higher origination and sales volumes related to home sales and refinancing activities given changing interest rates relative to a year ago. Other noninterest income also increased year-over-year primarily due to higher equity investment income and transition services agreement revenue associated with the sale of the Companys ATM third-party servicing business in 2018. These increases were partially offset by lower deposit service charges which decreased $49 million (17.3 percent) primarily due to the ATM third-party servicing sale in 2018.
Noninterest income was $124 million (5.0 percent) higher in the third quarter of 2019 compared with the second quarter of 2019 driven by higher payment services revenue, mortgage banking revenue and other noninterest income. Payment services revenue increased $17 million (1.8 percent) as corporate payment products revenue grew $10 million (6.0 percent) driven by seasonally higher sales volumes and merchant processing services revenue increased $6 million (1.5 percent) primarily due to seasonally higher fee revenue. Mortgage banking revenue increased $83 million (43.9 percent) reflecting higher origination and sales volumes. Other noninterest income increased $27 million (10.5 percent) on a linked quarter basis primarily due to higher equity investment income.
6
|
U.S. Bancorp Third Quarter 2019 Results | |
NONINTEREST EXPENSE | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q | 2Q | 3Q | 3Q19 vs | 3Q19 vs | YTD | YTD | Percent | |||||||||||||||||||||||||
2019 | 2019 | 2018 | 2Q19 | 3Q18 | 2019 | 2018 | Change | |||||||||||||||||||||||||
Compensation |
$1,595 | $1,574 | $1,529 | 1.3 | 4.3 | $4,728 | $4,594 | 2.9 | ||||||||||||||||||||||||
Employee benefits |
324 | 314 | 294 | 3.2 | 10.2 | 971 | 923 | 5.2 | ||||||||||||||||||||||||
Net occupancy and equipment |
279 | 281 | 270 | (.7) | 3.3 | 837 | 797 | 5.0 | ||||||||||||||||||||||||
Professional services |
114 | 106 | 96 | 7.5 | 18.8 | 315 | 274 | 15.0 | ||||||||||||||||||||||||
Marketing and business development |
109 | 111 | 106 | (1.8) | 2.8 | 309 | 314 | (1.6) | ||||||||||||||||||||||||
Technology and communications |
277 | 270 | 247 | 2.6 | 12.1 | 804 | 724 | 11.0 | ||||||||||||||||||||||||
Postage, printing and supplies |
74 | 73 | 84 | 1.4 | (11.9) | 219 | 244 | (10.2) | ||||||||||||||||||||||||
Other intangibles |
42 | 42 | 41 | -- | 2.4 | 124 | 120 | 3.3 | ||||||||||||||||||||||||
Other |
330 | 382 | 377 | (13.6) | (12.5) | 1,077 | 1,194 | (9.8) | ||||||||||||||||||||||||
Total noninterest expense |
$3,144 | $3,153 | $3,044 | (.3) | 3.3 | $9,384 | $9,184 | 2.2 | ||||||||||||||||||||||||
Third quarter noninterest expense of $3,144 million was $100 million (3.3 percent) higher than the third quarter of 2018 primarily due to higher personnel costs, professional services expense, and technology investment, partially offset by lower other noninterest expense. Compensation expense increased $66 million (4.3 percent), from a year ago, principally due to the impact of merit increases and higher variable compensation related to business production within mortgage banking and the capital markets business lines. Employee benefits expense increased $30 million (10.2 percent) primarily due to increased medical costs. Professional services expense increased $18 million (18.8 percent) primarily due to business investments and enhancements to risk management programs. Technology and communications expense increased $30 million (12.1 percent) primarily driven by capital expenditures to support business growth. Partially offsetting these increases was a decrease in other noninterest expense of $47 million (12.5 percent) due to lower FDIC assessment costs, driven by the elimination of the surcharge in the fourth quarter of 2018, and lower costs related to tax-advantaged projects.
Noninterest expense decreased $9 million (0.3 percent) on a linked quarter basis. Compensation expense increased $21 million (1.3 percent) primarily due to an additional business day in the third quarter and variable compensation related to business production. Employee benefits expense increased $10 million (3.2 percent) primarily due to increased medical costs. Offsetting these increases was a decrease in other noninterest expense of $52 million (13.6 percent) primarily due to lower costs related to tax-advantaged projects and a seasonal decrease in merchant related charge-back liabilities.
Provision for Income Taxes
The provision for income taxes for the third quarter of 2019 resulted in a tax rate of 20.4 percent on a taxable-equivalent basis (effective tax rate of 19.6 percent), compared with 21.2 percent (effective tax rate of 20.2 percent) in the third quarter of 2018, and 20.7 percent on a taxable-equivalent basis (effective tax rate of 19.7 percent) in the second quarter of 2019.
7
|
U.S. Bancorp Third Quarter 2019 Results | |
ALLOWANCE FOR CREDIT LOSSES | ||||||||||||||||||||||||||||||||||||||||
($ in millions) | 3Q | 2Q | 1Q | 4Q | 3Q | |||||||||||||||||||||||||||||||||||
2019 | % (a) | 2019 | % (a) | 2019 | % (a) | 2018 | % (a) | 2018 | % (a) | |||||||||||||||||||||||||||||||
Balance, beginning of period |
|
$4,466 |
|
|
$4,451 |
|
|
$4,441 |
|
|
$4,426 |
|
|
$4,411 |
|
|||||||||||||||||||||||||
Net charge-offs |
||||||||||||||||||||||||||||||||||||||||
Commercial |
72 | .29 | 56 | .23 | 71 | .30 | 64 | .27 | 63 | .27 | ||||||||||||||||||||||||||||||
Lease financing |
3 | .22 | 3 | .22 | 2 | .15 | 3 | .22 | 3 | .22 | ||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Total commercial |
75 | .29 | 59 | .23 | 73 | .29 | 67 | .26 | 66 | .26 | ||||||||||||||||||||||||||||||
Commercial mortgages |
3 | .04 | 2 | .03 | -- | -- | (8 | ) | (.11 | ) | (5 | ) | (.07 | ) | ||||||||||||||||||||||||||
Construction and development |
3 | .11 | (1 | ) | (.04 | ) | -- | -- | 1 | .04 | (4 | ) | (.14 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Total commercial real estate |
6 | .06 | 1 | .01 | -- | -- | (7 | ) | (.07 | ) | (9 | ) | (.09 | ) | ||||||||||||||||||||||||||
Residential mortgages |
(3 | ) | (.02 | ) | 4 | .02 | 3 | .02 | 2 | .01 | 4 | .03 | ||||||||||||||||||||||||||||
Credit card |
211 | 3.53 | 227 | 3.99 | 225 | 4.04 | 219 | 3.88 | 206 | 3.75 | ||||||||||||||||||||||||||||||
Retail leasing |
3 | .14 | 2 | .09 | 4 | .19 | 3 | .14 | 3 | .14 | ||||||||||||||||||||||||||||||
Home equity and second mortgages |
(1 | ) | (.03 | ) | (1 | ) | (.03 | ) | (1 | ) | (.03 | ) | 1 | .02 | (1 | ) | (.02 | ) | ||||||||||||||||||||||
Other |
61 | .72 | 58 | .71 | 63 | .80 | 68 | .85 | 59 | .74 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Total other retail |
63 | .43 | 59 | .42 | 66 | .47 | 72 | .51 | 61 | .43 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Total net charge-offs |
352 | .48 | 350 | .49 | 367 | .52 | 353 | .49 | 328 | .46 | ||||||||||||||||||||||||||||||
Provision for credit losses |
367 | 365 | 377 | 368 | 343 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Balance, end of period |
$4,481 | $4,466 | $4,451 | $4,441 | $4,426 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Components |
||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses |
$4,007 | $4,019 | $3,990 | $3,973 | $3,954 | |||||||||||||||||||||||||||||||||||
Liability for unfunded credit commitments |
474 | 447 | 461 | 468 | 472 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Total allowance for credit losses |
$4,481 | $4,466 | $4,451 | $4,441 | $4,426 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Gross charge-offs |
$451 | $464 | $473 | $442 | $428 | |||||||||||||||||||||||||||||||||||
Gross recoveries |
$99 | $114 | $106 | $89 | $100 | |||||||||||||||||||||||||||||||||||
Allowance for credit losses as a percentage of |
|
|||||||||||||||||||||||||||||||||||||||
Period-end loans |
1.52 | 1.53 | 1.55 | 1.55 | 1.57 | |||||||||||||||||||||||||||||||||||
Nonperforming loans |
541 | 556 | 519 | 544 | 544 | |||||||||||||||||||||||||||||||||||
Nonperforming assets |
458 | 469 | 443 | 449 | 441 | |||||||||||||||||||||||||||||||||||
(a) Annualized and calculated on average loan balances |
|
8
|
U.S. Bancorp Third Quarter 2019 Results | |
Credit quality was relatively stable on a linked quarter and year-over-year basis. The Companys provision for credit losses for the third quarter of 2019 was $367 million, which was $2 million (0.5 percent) higher than the prior quarter and $24 million (7.0 percent) higher than the third quarter of 2018, primarily reflecting loan growth.
Total net charge-offs in the third quarter of 2019 were $352 million, compared with $350 million in the second quarter of 2019, and $328 million in the third quarter of 2018. Net charge-offs increased $2 million (0.6 percent) compared with the second quarter of 2019 primarily due to higher total commercial and total commercial real estate net charge-offs, mostly offset by lower credit card and residential mortgage net charge-offs. Net charge-offs increased $24 million (7.3 percent) compared with the third quarter of 2018 primarily due to higher total commercial and total commercial real estate net charge-offs in addition to higher credit card net charge-offs, partially offset by lower residential mortgage net charge-offs. The net charge-off ratio was 0.48 percent in the third quarter of 2019, compared with 0.49 percent in the second quarter of 2019 and 0.46 percent in the third quarter of 2018.
The allowance for credit losses was $4,481 million at September 30, 2019, compared with $4,466 million at June 30, 2019, and $4,426 million at September 30, 2018. The ratio of the allowance for credit losses to period-end loans was 1.52 percent at September 30, 2019, compared with 1.53 percent at June 30, 2019, and 1.57 percent at September 30, 2018. The ratio of the allowance for credit losses to nonperforming loans was 541 percent at September 30, 2019, compared with 556 percent at June 30, 2019, and 544 percent at September 30, 2018.
Nonperforming assets were $979 million at September 30, 2019, compared with $953 million at June 30, 2019, and $1,004 million at September 30, 2018. The ratio of nonperforming assets to loans and other real estate was 0.33 percent at September 30, 2019, compared with 0.33 percent at June 30, 2019, and 0.36 percent at September 30, 2018. The increase in nonperforming assets on a linked quarter basis was driven by increases in nonperforming total commercial loans, partially offset by lower nonperforming residential mortgages. The decrease in nonperforming assets on a year-over-year basis was driven by decreases in nonperforming residential mortgages, total commercial real estate, and other real estate owned, partially offset by an increase in nonperforming total commercial loans. Accruing loans 90 days or more past due were $600 million at September 30, 2019, compared with $752 million at June 30, 2019, and $551 million at September 30, 2018. The June 30, 2019, commercial loan 90 days past due delinquencies were elevated related to one customer that was resolved in the third quarter without a credit loss.
DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES | ||||||||||||||||||||
(Percent) | Sep 30 | Jun 30 | Mar 31 | Dec 31 | Sep 30 | |||||||||||||||
2019 | 2019 | 2019 | 2018 | 2018 | ||||||||||||||||
Delinquent loan ratios - 90 days or more past due excluding nonperforming loans |
|
|||||||||||||||||||
Commercial |
.10 | .26 | .07 | .07 | .06 | |||||||||||||||
Commercial real estate |
.01 | -- | .01 | -- | .01 | |||||||||||||||
Residential mortgages |
.17 | .17 | .18 | .18 | .19 | |||||||||||||||
Credit card |
1.16 | 1.14 | 1.29 | 1.25 | 1.18 | |||||||||||||||
Other retail |
.18 | .17 | .19 | .19 | .17 | |||||||||||||||
Covered loans |
-- | -- | -- | -- | .86 | |||||||||||||||
Total loans |
.20 | .26 | .21 | .20 | .20 | |||||||||||||||
Delinquent loan ratios - 90 days or more past due including nonperforming loans |
|
|||||||||||||||||||
Commercial |
.40 | .53 | .34 | .27 | .28 | |||||||||||||||
Commercial real estate |
.23 | .24 | .33 | .29 | .27 | |||||||||||||||
Residential mortgages |
.53 | .55 | .62 | .63 | .69 | |||||||||||||||
Credit card |
1.16 | 1.14 | 1.29 | 1.25 | 1.18 | |||||||||||||||
Other retail |
.47 | .47 | .49 | .54 | .49 | |||||||||||||||
Covered loans |
-- | -- | -- | -- | .86 | |||||||||||||||
Total loans |
.49 | .53 | .51 | .49 | .48 | |||||||||||||||
9
|
U.S. Bancorp Third Quarter 2019 Results | |
ASSET QUALITY (a) | ||||||||||||||||||||
($ in millions) | ||||||||||||||||||||
Sep 30 | Jun 30 | Mar 31 | Dec 31 | Sep 30 | ||||||||||||||||
2019 | 2019 | 2019 | 2018 | 2018 | ||||||||||||||||
Nonperforming loans |
||||||||||||||||||||
Commercial |
$290 | $254 | $247 | $186 | $193 | |||||||||||||||
Lease financing |
29 | 25 | 24 | 23 | 23 | |||||||||||||||
Total commercial |
319 | 279 | 271 | 209 | 216 | |||||||||||||||
Commercial mortgages |
82 | 81 | 79 | 76 | 77 | |||||||||||||||
Construction and development |
7 | 11 | 48 | 39 | 28 | |||||||||||||||
Total commercial real estate |
89 | 92 | 127 | 115 | 105 | |||||||||||||||
Residential mortgages |
251 | 263 | 287 | 296 | 317 | |||||||||||||||
Credit card |
-- | -- | -- | -- | -- | |||||||||||||||
Other retail |
170 | 169 | 173 | 197 | 175 | |||||||||||||||
Covered loans |
-- | -- | -- | -- | -- | |||||||||||||||
Total nonperforming loans |
829 | 803 | 858 | 817 | 813 | |||||||||||||||
Other real estate |
84 | 88 | 93 | 111 | 100 | |||||||||||||||
Covered other real estate |
-- | -- | -- | -- | 19 | |||||||||||||||
Other nonperforming assets |
66 | 62 | 54 | 61 | 72 | |||||||||||||||
Total nonperforming assets |
$979 | $953 | $1,005 | $989 | $1,004 | |||||||||||||||
Accruing loans 90 days or more past due |
|
$600 |
|
|
$752 |
|
|
$595 |
|
|
$584 |
|
|
$551 |
| |||||
Performing restructured loans, excluding GNMA |
$2,145 | $2,142 | $2,173 | $2,218 | $2,272 | |||||||||||||||
Performing restructured GNMA |
$1,690 | $1,598 | $1,578 | $1,639 | $1,668 | |||||||||||||||
Nonperforming assets to loans plus ORE (%) |
.33 | .33 | .35 | .34 | .36 | |||||||||||||||
(a) Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due
|
|
10
|
U.S. Bancorp Third Quarter 2019 Results | |
COMMON SHARES | ||||||||||||||||||||
(Millions) | 3Q 2019 |
2Q 2019 |
1Q 2019 |
4Q 2018 |
3Q 2018 |
|||||||||||||||
Beginning shares outstanding |
1,584 | 1,599 | 1,608 | 1,623 | 1,636 | |||||||||||||||
Shares issued for stock incentive plans, acquisitions and other corporate purposes |
1 | -- | 3 | 1 | 1 | |||||||||||||||
Shares repurchased |
(14) | (15) | (12) | (16) | (14) | |||||||||||||||
Ending shares outstanding |
1,571 | 1,584 | 1,599 | 1,608 | 1,623 | |||||||||||||||
CAPITAL POSITION | ||||||||||||||||||||
($ in millions) | Sep 30 2019 |
Jun 30 2019 |
Mar 31 2019 |
Dec 31 2018 |
Sep 30 2018 |
|||||||||||||||
Total U.S. Bancorp shareholders equity |
$ | 53,517 | $ | 52,913 | $ | 52,057 | $ | 51,029 | $ | 50,375 | ||||||||||
Basel III Standardized Approach |
||||||||||||||||||||
Common equity tier 1 capital |
$ | 37,653 | $ | 36,909 | $ | 35,732 | $ | 34,724 | $ | 34,097 | ||||||||||
Tier 1 capital |
43,667 | 42,923 | 41,748 | 40,741 | 40,114 | |||||||||||||||
Total risk-based capital |
51,684 | 50,370 | 49,194 | 48,178 | 47,531 | |||||||||||||||
Common equity tier 1 capital ratio |
9.6 | % | 9.5 | % | 9.3 | % | 9.1 | % | 9.0 | % | ||||||||||
Tier 1 capital ratio |
11.2 | 11.0 | 10.9 | 10.7 | 10.6 | |||||||||||||||
Total risk-based capital ratio |
13.2 | 13.0 | 12.8 | 12.6 | 12.6 | |||||||||||||||
Leverage ratio |
9.3 | 9.3 | 9.2 | 9.0 | 9.0 | |||||||||||||||
Basel III Advanced Approaches |
||||||||||||||||||||
Common equity tier 1 capital ratio |
12.6 | 12.3 | 12.0 | 11.8 | 11.8 | |||||||||||||||
Tangible common equity to tangible assets (a) |
8.0 | 7.9 | 7.9 | 7.8 | 7.7 | |||||||||||||||
Tangible common equity to risk-weighted assets (a) |
9.7 | 9.7 | 9.5 | 9.4 | 9.3 | |||||||||||||||
(a) See Non-GAAP Financial Measures reconciliation on page 16
|
Total U.S. Bancorp shareholders equity was $53.5 billion at September 30, 2019, compared with $52.9 billion at June 30, 2019, and $50.4 billion at September 30, 2018. During the third quarter, the Company returned 80 percent of earnings to shareholders through dividends and share buybacks.
All regulatory ratios continue to be in excess of well-capitalized requirements. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III standardized approach was 9.6 percent at September 30, 2019, compared with 9.5 percent at June 30, 2019, and 9.0 percent at September 30, 2018. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III advanced approaches method was 12.6 percent at September 30, 2019, compared with 12.3 percent at June 30, 2019, and 11.8 percent at September 30, 2018.
11
|
U.S. Bancorp Third Quarter 2019 Results | |
Investor Conference Call
|
On Wednesday, October 16, 2019, at 8:30 a.m. CDT, Chairman, President and Chief Executive Officer Andy Cecere along with 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. Bancorps 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 3878343. For those unable to participate during the live call, a recording will be available at approximately 11:30 a.m. CDT on Wednesday, October 16 and will be accessible until Wednesday, October 23 at 11:59 p.m. CDT. To access the recorded message within the United States and Canada, please dial 855-859-2056. If calling from outside the United States and Canada, please dial 404-537-3406 to access the recording. The conference ID is 3878343.
About U.S. Bancorp
|
U.S. Bancorp, with 74,000 employees and $488 billion in assets as of September 30, 2019, is the parent company of U.S. Bank, the fifth-largest commercial bank in the United States. The Minneapolis-based bank blends its relationship teams, branches and ATM network with mobile and online tools that allow customers to bank how, when and where they prefer. U.S. Bank is committed to serving its millions of retail, business, wealth management, payment, commercial and corporate, and investment services customers across the country and around the world as a trusted financial partner, a commitment recognized by the Ethisphere Institute naming the bank a 2019 Worlds Most Ethical Company. Visit U.S. Bank at www.usbank.com or follow on social media to stay up to date with company news.
Forward-looking Statements
|
The following information appears in accordance with the Private Securities Litigation Reform Act of 1995:
This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. Deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorps 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. Bancorps 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 managements 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. Bancorps 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. Bancorps 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.
12
|
U.S. Bancorp Third 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 Companys 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 Companys 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. Management believes this information helps investors assess trends in the Companys 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 Companys calculation of these non-GAAP financial measures.
13
|
CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||
(Dollars and Shares in Millions, Except Per Share Data) (Unaudited) |
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Interest Income |
||||||||||||||||
Loans |
$3,555 | $3,353 | $10,677 | $9,645 | ||||||||||||
Loans held for sale |
48 | 36 | 107 | 108 | ||||||||||||
Investment securities |
734 | 661 | 2,184 | 1,927 | ||||||||||||
Other interest income |
100 | 73 | 271 | 182 | ||||||||||||
Total interest income |
4,437 | 4,123 | 13,239 | 11,862 | ||||||||||||
Interest Expense |
||||||||||||||||
Deposits |
744 | 491 | 2,201 | 1,263 | ||||||||||||
Short-term borrowings |
97 | 104 | 281 | 265 | ||||||||||||
Long-term debt |
315 | 277 | 912 | 718 | ||||||||||||
Total interest expense |
1,156 | 872 | 3,394 | 2,246 | ||||||||||||
Net interest income |
3,281 | 3,251 | 9,845 | 9,616 | ||||||||||||
Provision for credit losses |
367 | 343 | 1,109 | 1,011 | ||||||||||||
Net interest income after provision for credit losses |
2,914 | 2,908 | 8,736 | 8,605 | ||||||||||||
Noninterest Income |
||||||||||||||||
Credit and debit card revenue |
366 | 344 | 1,035 | 1,019 | ||||||||||||
Corporate payment products revenue |
177 | 169 | 506 | 481 | ||||||||||||
Merchant processing services |
410 | 392 | 1,192 | 1,142 | ||||||||||||
Trust and investment management fees |
421 | 411 | 1,235 | 1,210 | ||||||||||||
Deposit service charges |
234 | 283 | 678 | 817 | ||||||||||||
Treasury management fees |
139 | 146 | 438 | 451 | ||||||||||||
Commercial products revenue |
240 | 216 | 708 | 670 | ||||||||||||
Mortgage banking revenue |
272 | 174 | 630 | 549 | ||||||||||||
Investment products fees |
46 | 47 | 138 | 140 | ||||||||||||
Securities gains (losses), net |
25 | 10 | 47 | 25 | ||||||||||||
Other |
284 | 226 | 788 | 600 | ||||||||||||
Total noninterest income |
2,614 | 2,418 | 7,395 | 7,104 | ||||||||||||
Noninterest Expense |
||||||||||||||||
Compensation |
1,595 | 1,529 | 4,728 | 4,594 | ||||||||||||
Employee benefits |
324 | 294 | 971 | 923 | ||||||||||||
Net occupancy and equipment |
279 | 270 | 837 | 797 | ||||||||||||
Professional services |
114 | 96 | 315 | 274 | ||||||||||||
Marketing and business development |
109 | 106 | 309 | 314 | ||||||||||||
Technology and communications |
277 | 247 | 804 | 724 | ||||||||||||
Postage, printing and supplies |
74 | 84 | 219 | 244 | ||||||||||||
Other intangibles |
42 | 41 | 124 | 120 | ||||||||||||
Other |
330 | 377 | 1,077 | 1,194 | ||||||||||||
Total noninterest expense |
3,144 | 3,044 | 9,384 | 9,184 | ||||||||||||
Income before income taxes |
2,384 | 2,282 | 6,747 | 6,525 | ||||||||||||
Applicable income taxes |
467 | 460 | 1,294 | 1,263 | ||||||||||||
Net income |
1,917 | 1,822 | 5,453 | 5,262 | ||||||||||||
Net (income) loss attributable to noncontrolling interests |
(9 | ) | (7 | ) | (25 | ) | (22 | ) | ||||||||
Net income attributable to U.S. Bancorp |
$1,908 | $1,815 | $5,428 | $5,240 | ||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$1,821 | $1,732 | $5,175 | $5,007 | ||||||||||||
Earnings per common share |
$1.16 | $1.06 | $3.26 | $3.05 | ||||||||||||
Diluted earnings per common share |
$1.15 | $1.06 | $3.25 | $3.04 | ||||||||||||
Dividends declared per common share |
$.42 | $.37 | $1.16 | $.97 | ||||||||||||
Average common shares outstanding |
1,575 | 1,629 | 1,589 | 1,641 | ||||||||||||
Average diluted common shares outstanding |
1,578 | 1,633 | 1,592 | 1,645 |
14
|
CONSOLIDATED ENDING BALANCE SHEET | ||||||||||||
(Dollars in Millions) | September 30, 2019 |
December 31, 2018 |
September 30, 2018 |
|||||||||
Assets |
(Unaudited | ) | (Unaudited | ) | ||||||||
Cash and due from banks |
$15,272 | $21,453 | $20,082 | |||||||||
Investment securities |
||||||||||||
Held-to-maturity |
46,481 | 46,050 | 46,046 | |||||||||
Available-for-sale |
74,598 | 66,115 | 64,912 | |||||||||
Loans held for sale |
4,528 | 2,056 | 4,533 | |||||||||
Loans |
||||||||||||
Commercial |
104,654 | 102,444 | 99,273 | |||||||||
Commercial real estate |
39,268 | 39,539 | 39,966 | |||||||||
Residential mortgages |
69,378 | 65,034 | 62,904 | |||||||||
Credit card |
23,890 | 23,363 | 21,869 | |||||||||
Other retail |
57,448 | 56,430 | 56,049 | |||||||||
Covered loans |
-- | -- | 1,400 | |||||||||
Total loans |
294,638 | 286,810 | 281,461 | |||||||||
Less allowance for loan losses |
(4,007 | ) | (3,973 | ) | (3,954 | ) | ||||||
Net loans |
290,631 | 282,837 | 277,507 | |||||||||
Premises and equipment |
3,673 | 2,457 | 2,438 | |||||||||
Goodwill |
9,632 | 9,369 | 9,530 | |||||||||
Other intangible assets |
2,983 | 3,392 | 3,544 | |||||||||
Other assets |
39,873 | 33,645 | 36,015 | |||||||||
Total assets |
$487,671 | $467,374 | $464,607 | |||||||||
Liabilities and Shareholders Equity |
||||||||||||
Deposits |
||||||||||||
Noninterest-bearing |
$82,232 | $81,811 | $77,146 | |||||||||
Interest-bearing |
277,483 | 263,664 | 254,032 | |||||||||
Total deposits |
359,715 | 345,475 | 331,178 | |||||||||
Short-term borrowings |
14,579 | 14,139 | 23,868 | |||||||||
Long-term debt |
41,274 | 41,340 | 40,894 | |||||||||
Other liabilities |
17,956 | 14,763 | 17,660 | |||||||||
Total liabilities |
433,524 | 415,717 | 413,600 | |||||||||
Shareholders equity |
||||||||||||
Preferred stock |
5,984 | 5,984 | 5,984 | |||||||||
Common stock |
21 | 21 | 21 | |||||||||
Capital surplus |
8,490 | 8,469 | 8,479 | |||||||||
Retained earnings |
62,419 | 59,065 | 57,878 | |||||||||
Less treasury stock |
(22,224 | ) | (20,188 | ) | (19,414 | ) | ||||||
Accumulated other comprehensive income (loss) |
(1,173 | ) | (2,322 | ) | (2,573 | ) | ||||||
Total U.S. Bancorp shareholders equity |
53,517 | 51,029 | 50,375 | |||||||||
Noncontrolling interests |
630 | 628 | 632 | |||||||||
Total equity |
54,147 | 51,657 | 51,007 | |||||||||
Total liabilities and equity |
$487,671 | $467,374 | $464,607 |
15
|
NON-GAAP FINANCIAL MEASURES | ||||||||||||||||||||
(Dollars in Millions, Unaudited) | September 30, 2019 |
June 30, 2019 |
March 31, 2019 |
December 31, 2018 |
September 30, 2018 |
|||||||||||||||
Total equity |
$54,147 | $53,540 | $52,686 | $51,657 | $51,007 | |||||||||||||||
Preferred stock |
(5,984 | ) | (5,984 | ) | (5,984 | ) | (5,984 | ) | (5,984 | ) | ||||||||||
Noncontrolling interests |
(630 | ) | (627 | ) | (629 | ) | (628 | ) | (632 | ) | ||||||||||
Goodwill (net of deferred tax liability) (1) |
(8,781 | ) | (8,708 | ) | (8,716 | ) | (8,549 | ) | (8,682 | ) | ||||||||||
Intangible assets, other than mortgage servicing rights |
(687 | ) | (703 | ) | (685 | ) | (601 | ) | (627 | ) | ||||||||||
Tangible common equity (a) |
38,065 | 37,518 | 36,672 | 35,895 | 35,082 | |||||||||||||||
Total assets |
487,671 | 481,719 | 475,775 | 467,374 | 464,607 | |||||||||||||||
Goodwill (net of deferred tax liability) (1) |
(8,781 | ) | (8,708 | ) | (8,716 | ) | (8,549 | ) | (8,682 | ) | ||||||||||
Intangible assets, other than mortgage servicing rights |
(687 | ) | (703 | ) | (685 | ) | (601 | ) | (627 | ) | ||||||||||
Tangible assets (b) |
478,203 | 472,308 | 466,374 | 458,224 | 455,298 | |||||||||||||||
Risk-weighted assets, determined in accordance with the Basel III |
390,622 | * | 388,709 | 384,394 | 381,661 | 377,713 | ||||||||||||||
Ratios* |
||||||||||||||||||||
Tangible common equity to tangible assets (a)/(b) |
8.0 | % | 7.9 | % | 7.9 | % | 7.8 | % | 7.7 | % | ||||||||||
Tangible common equity to risk-weighted assets (a)/(c) |
9.7 | 9.7 | 9.5 | 9.4 | 9.3 | |||||||||||||||
Three Months Ended | ||||||||||||||||||||
September 30, 2019 |
June 30, 2019 |
March 31, 2019 |
December 31, 2018 |
September 30, 2018 |
||||||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$1,821 | $1,741 | $1,613 | $1,777 | $1,732 | |||||||||||||||
Intangibles amortization (net-of-tax) |
33 | 33 | 32 | 32 | 32 | |||||||||||||||
Net income applicable to U.S. Bancorp common shareholders, |
1,854 | 1,774 | 1,645 | 1,809 | 1,764 | |||||||||||||||
Annualized net income applicable to U.S. Bancorp common |
7,356 | 7,115 | 6,671 | 7,177 | 6,998 | |||||||||||||||
Average total equity |
53,921 | 53,066 | 52,218 | 51,370 | 50,768 | |||||||||||||||
Average preferred stock |
(5,984 | ) | (5,984 | ) | (5,984 | ) | (5,984 | ) | (5,714 | ) | ||||||||||
Average noncontrolling interests |
(629 | ) | (628 | ) | (629 | ) | (630 | ) | (630 | ) | ||||||||||
Average goodwill (net of deferred tax liability) (1) |
(8,725 | ) | (8,715 | ) | (8,732 | ) | (8,574 | ) | (8,620 | ) | ||||||||||
Average intangible assets, other than mortgage servicing rights |
(689 | ) | (681 | ) | (671 | ) | (605 | ) | (584 | ) | ||||||||||
Average tangible common equity (e) |
37,894 | 37,058 | 36,202 | 35,577 | 35,220 | |||||||||||||||
Return on tangible common equity (d)/(e) |
19.4 | % | 19.2 | % | 18.4 | % | 20.2 | % | 19.9 | % | ||||||||||
Net interest income |
$3,281 | $3,305 | $3,259 | $3,303 | $3,251 | |||||||||||||||
Taxable-equivalent adjustment (2) |
25 | 27 | 27 | 28 | 30 | |||||||||||||||
Net interest income, on a taxable-equivalent basis |
3,306 | 3,332 | 3,286 | 3,331 | 3,281 | |||||||||||||||
Net interest income, on a taxable-equivalent basis (as calculated |
3,306 | 3,332 | 3,286 | 3,331 | 3,281 | |||||||||||||||
Noninterest income |
2,614 | 2,490 | 2,291 | 2,498 | 2,418 | |||||||||||||||
Less: Securities gains (losses), net |
25 | 17 | 5 | 5 | 10 | |||||||||||||||
Total net revenue, excluding net securities gains (losses) (f) |
5,895 | 5,805 | 5,572 | 5,824 | 5,689 | |||||||||||||||
Noninterest expense (g) |
3,144 | 3,153 | 3,087 | 3,280 | 3,044 | |||||||||||||||
Less: Intangible amortization |
42 | 42 | 40 | 41 | 41 | |||||||||||||||
Noninterest expense, excluding intangible amortization (h) |
3,102 | 3,111 | 3,047 | 3,239 | 3,003 | |||||||||||||||
Efficiency ratio (g)/(f) |
53.3 | % | 54.3 | % | 55.4 | % | 56.3 | % | 53.5 | % | ||||||||||
Tangible efficiency ratio (h)/(f) |
52.6 | 53.6 | 54.7 | 55.6 | 52.8 |
* | Preliminary data. Subject to change prior to filings with applicable regulatory agencies. |
(1) | Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements. |
(2) | Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes. |
16
|
||
LINE OF BUSINESS FINANCIAL PERFORMANCE (a) | ||||||||||||||||||||||||||||||||||||||||
($ in millions) | Net Income Attributable to U.S. Bancorp |
Percent Change | Net Income Attributable to U.S. Bancorp |
3Q 2019 | ||||||||||||||||||||||||||||||||||||
Business Line | 3Q 2019 |
2Q 2019 |
3Q 2018 |
3Q19 vs 2Q19 |
3Q19 vs 3Q18 |
YTD 2019 |
YTD 2018 |
Percent Change |
Earnings Composition |
|||||||||||||||||||||||||||||||
Corporate and Commercial Banking |
$365 | $415 | $391 | (12.0 | ) | (6.6 | ) | $1,181 | $1,191 | (.8 | ) | 19 | % | |||||||||||||||||||||||||||
Consumer and Business Banking |
640 | 557 | 580 | 14.9 | 10.3 | 1,747 | 1,665 | 4.9 | 34 | |||||||||||||||||||||||||||||||
Wealth Management and Investment Services |
234 | 231 | 223 | 1.3 | 4.9 | 682 | 625 | 9.1 | 12 | |||||||||||||||||||||||||||||||
Payment Services |
416 | 362 | 392 | 14.9 | 6.1 | 1,108 | 1,097 | 1.0 | 22 | |||||||||||||||||||||||||||||||
Treasury and Corporate Support |
253 | 256 | 229 | (1.2 | ) | 10.5 | 710 | 662 | 7.3 | 13 | ||||||||||||||||||||||||||||||
Consolidated Company |
$1,908 | $1,821 | $1,815 | 4.8 | 5.1 | $5,428 | $5,240 | 3.6 | 100 | % | ||||||||||||||||||||||||||||||
(a) preliminary data
|
Lines of Business
The Companys major lines of business are Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate resources and assess performance. Noninterest expenses incurred by centrally managed operations or business lines that directly support another business lines operations are charged to the applicable business line based on its utilization of those services, primarily measured by the volume of customer activities, number of employees or other relevant factors. These allocated expenses are reported as net shared services expense within noninterest expense. Income taxes are assessed to each line of business at a managerial tax rate of 25.0 percent with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in Treasury and Corporate Support. Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Companys diverse customer base. During 2019, certain organization and methodology changes were made and, accordingly, prior period results were restated and presented on a comparable basis.
2
|
||
CORPORATE AND COMMERCIAL BANKING (a) | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q 2019 |
2Q 2019 |
3Q 2018 |
3Q19 vs 2Q19 |
3Q19 vs 3Q18 |
YTD 2019 |
YTD 2018 |
Percent Change |
|||||||||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$709 | $718 | $741 | (1.3 | ) | (4.3 | ) | $2,153 | $2,189 | (1.6 | ) | |||||||||||||||||||||
Noninterest income |
213 | 245 | 200 | (13.1 | ) | 6.5 | 667 | 630 | 5.9 | |||||||||||||||||||||||
Securities gains (losses), net |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Total net revenue |
922 | 963 | 941 | (4.3 | ) | (2.0 | ) | 2,820 | 2,819 | -- | ||||||||||||||||||||||
Noninterest expense |
394 | 410 | 383 | (3.9 | ) | 2.9 | 1,214 | 1,190 | 2.0 | |||||||||||||||||||||||
Other intangibles |
1 | 1 | 1 | -- | -- | 3 | 3 | -- | ||||||||||||||||||||||||
Total noninterest expense |
395 | 411 | 384 | (3.9 | ) | 2.9 | 1,217 | 1,193 | 2.0 | |||||||||||||||||||||||
Income before provision and taxes |
527 | 552 | 557 | (4.5 | ) | (5.4 | ) | 1,603 | 1,626 | (1.4 | ) | |||||||||||||||||||||
Provision for credit losses |
40 | (2 | ) | 35 | nm | 14.3 | 27 | 37 | (27.0 | ) | ||||||||||||||||||||||
Income before income taxes |
487 | 554 | 522 | (12.1 | ) | (6.7 | ) | 1,576 | 1,589 | (.8 | ) | |||||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
122 | 139 | 131 | (12.2 | ) | (6.9 | ) | 395 | 398 | (.8 | ) | |||||||||||||||||||||
Net income |
365 | 415 | 391 | (12.0 | ) | (6.6 | ) | 1,181 | 1,191 | (.8 | ) | |||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$365 | $415 | $391 | (12.0 | ) | (6.6 | ) | $1,181 | $1,191 | (.8 | ) | |||||||||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||||||||||||||
Loans |
$96,260 | $96,587 | $93,362 | (.3 | ) | 3.1 | $96,420 | $93,568 | 3.0 | |||||||||||||||||||||||
Other earning assets |
4,016 | 3,883 | 3,042 | 3.4 | 32.0 | 3,692 | 2,998 | 23.1 | ||||||||||||||||||||||||
Goodwill |
1,647 | 1,647 | 1,647 | -- | -- | 1,647 | 1,647 | -- | ||||||||||||||||||||||||
Other intangible assets |
8 | 9 | 10 | (11.1 | ) | (20.0 | ) | 9 | 11 | (18.2 | ) | |||||||||||||||||||||
Assets |
107,156 | 106,679 | 102,143 | .4 | 4.9 | 106,335 | 102,414 | 3.8 | ||||||||||||||||||||||||
Noninterest-bearing deposits |
28,863 | 28,880 | 32,376 | (.1 | ) | (10.9 | ) | 29,242 | 33,305 | (12.2 | ) | |||||||||||||||||||||
Interest-bearing deposits |
72,061 | 70,697 | 68,569 | 1.9 | 5.1 | 71,293 | 69,622 | 2.4 | ||||||||||||||||||||||||
Total deposits |
100,924 | 99,577 | 100,945 | 1.4 | -- | 100,535 | 102,927 | (2.3 | ) | |||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
10,381 | 10,355 | 10,426 | .3 | (.4 | ) | 10,391 | 10,447 | (.5 | ) | ||||||||||||||||||||||
(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 $365 million of the Companys net income in the third quarter of 2019, compared with $391 million in the third quarter of 2018. Total net revenue decreased $19 million (2.0 percent) due to a decrease of $32 million (4.3 percent) in net interest income, partially offset by an increase of $13 million (6.5 percent) in total noninterest income. Net interest income decreased primarily due to lower noninterest bearing deposit balances compared with last year and lower spreads on loans, reflecting a competitive marketplace, partially offset by the impact of higher rates on the margin benefit from deposits and loan growth. Noninterest bearing deposits are declining as customers deploy balances to support business growth. Total noninterest income increased year-over-year primarily due to higher trading revenue and corporate bond underwriting fees. Total noninterest expense was $11 million (2.9 percent) higher compared with a year ago primarily due to an increase in net shared services expense driven by technology development and investment in infrastructure, higher salary expense driven by merit increases, and an increase in production incentives within capital markets. These increases were partially offset by lower FDIC assessment costs. The provision for credit losses increased $5 million (14.3 percent) reflecting an unfavorable change in the reserve allocation and slightly higher net charge-offs.
3
|
||
CONSUMER AND BUSINESS BANKING (a) | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q 2019 |
2Q 2019 |
3Q 2018 |
3Q19 vs 2Q19 |
3Q19 vs 3Q18 |
YTD 2019 |
YTD 2018 |
Percent Change |
|||||||||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$1,580 | $1,577 | $1,554 | .2 | 1.7 | $4,720 | $4,581 | 3.0 | ||||||||||||||||||||||||
Noninterest income |
668 | 567 | 583 | 17.8 | 14.6 | 1,770 | 1,754 | .9 | ||||||||||||||||||||||||
Securities gains (losses), net |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total net revenue |
2,248 | 2,144 | 2,137 | 4.9 | 5.2 | 6,490 | 6,335 | 2.4 | ||||||||||||||||||||||||
Noninterest expense |
1,321 | 1,317 | 1,302 | .3 | 1.5 | 3,927 | 3,930 | (.1) | ||||||||||||||||||||||||
Other intangibles |
5 | 5 | 7 | -- | (28.6) | 15 | 21 | (28.6) | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total noninterest expense |
1,326 | 1,322 | 1,309 | .3 | 1.3 | 3,942 | 3,951 | (.2) | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Income before provision and taxes |
922 | 822 | 828 | 12.2 | 11.4 | 2,548 | 2,384 | 6.9 | ||||||||||||||||||||||||
Provision for credit losses |
69 | 79 | 54 | (12.7) | 27.8 | 218 | 164 | 32.9 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Income before income taxes |
853 | 743 | 774 | 14.8 | 10.2 | 2,330 | 2,220 | 5.0 | ||||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
213 | 186 | 194 | 14.5 | 9.8 | 583 | 555 | 5.0 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Net income |
640 | 557 | 580 | 14.9 | 10.3 | 1,747 | 1,665 | 4.9 | ||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$640 | $557 | $580 | 14.9 | 10.3 | $1,747 | $1,665 | 4.9 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||||||||||||||
Loans |
$145,893 | $143,726 | $141,349 | 1.5 | 3.2 | $143,809 | $140,788 | 2.1 | ||||||||||||||||||||||||
Other earning assets |
4,711 | 3,333 | 3,385 | 41.3 | 39.2 | 3,486 | 3,535 | (1.4) | ||||||||||||||||||||||||
Goodwill |
3,475 | 3,475 | 3,631 | -- | (4.3) | 3,475 | 3,631 | (4.3) | ||||||||||||||||||||||||
Other intangible assets |
2,442 | 2,717 | 2,974 | (10.1) | (17.9) | 2,679 | 2,926 | (8.4) | ||||||||||||||||||||||||
Assets |
160,814 | 157,395 | 155,537 | 2.2 | 3.4 | 157,655 | 155,184 | 1.6 | ||||||||||||||||||||||||
Noninterest-bearing deposits |
28,630 | 27,075 | 28,196 | 5.7 | 1.5 | 27,433 | 27,607 | (.6) | ||||||||||||||||||||||||
Interest-bearing deposits |
129,668 | 128,904 | 125,549 | .6 | 3.3 | 128,634 | 124,668 | 3.2 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total deposits |
158,298 | 155,979 | 153,745 | 1.5 | 3.0 | 156,067 | 152,275 | 2.5 | ||||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
11,666 | 11,737 | 11,841 | (.6) | (1.5) | 11,714 | 11,843 | (1.1) | ||||||||||||||||||||||||
(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 $640 million of the Companys net income in the third quarter of 2019, compared with $580 million in the third quarter of 2018. Total net revenue increased $111 million (5.2 percent) due to a $26 million (1.7 percent) increase in net interest income and an $85 million (14.6 percent) increase in total noninterest income. Net interest income increased primarily due to the impact of higher rates on the margin benefit from deposits as well as growth in both interest-bearing deposit balances and loan volumes, partially offset by lower spreads on loans. Total noninterest income increased primarily due to higher mortgage banking revenue driven by higher origination and sales volumes, as well as transition services agreement revenue associated with the sale of the Companys ATM third-party servicing business in 2018, partially offset by the reduction in ATM processing services revenue due to the sale. Total noninterest expense in the third quarter of 2019 increased $17 million (1.3 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 and lower mortgage banking costs. The provision for credit losses increased $15 million (27.8 percent) primarily due to an unfavorable change in the reserve allocation and higher net charge-offs.
4
|
||
WEALTH MANAGEMENT AND INVESTMENT SERVICES (a) |
|
|||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q 2019 |
2Q 2019 |
3Q 2018 |
3Q19 vs 2Q19 |
3Q19 vs 3Q18 |
YTD 2019 |
YTD 2018 |
Percent Change |
|||||||||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$294 | $302 | $284 | (2.6 | ) | 3.5 | $888 | $844 | 5.2 | |||||||||||||||||||||||
Noninterest income |
452 | 445 | 444 | 1.6 | 1.8 | 1,327 | 1,305 | 1.7 | ||||||||||||||||||||||||
Securities gains (losses), net |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Total net revenue |
746 | 747 | 728 | (.1 | ) | 2.5 | 2,215 | 2,149 | 3.1 | |||||||||||||||||||||||
Noninterest expense |
430 | 434 | 429 | (.9 | ) | .2 | 1,297 | 1,304 | (.5 | ) | ||||||||||||||||||||||
Other intangibles |
3 | 3 | 4 | -- | (25.0 | ) | 9 | 12 | (25.0 | ) | ||||||||||||||||||||||
Total noninterest expense |
433 | 437 | 433 | (.9 | ) | -- | 1,306 | 1,316 | (.8 | ) | ||||||||||||||||||||||
Income before provision and taxes |
313 | 310 | 295 | 1.0 | 6.1 | 909 | 833 | 9.1 | ||||||||||||||||||||||||
Provision for credit losses |
1 | 2 | (3 | ) | (50.0 | ) | nm | -- | (2 | ) | nm | |||||||||||||||||||||
Income before income taxes |
312 | 308 | 298 | 1.3 | 4.7 | 909 | 835 | 8.9 | ||||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
78 | 77 | 75 | 1.3 | 4.0 | 227 | 210 | 8.1 | ||||||||||||||||||||||||
Net income |
234 | 231 | 223 | 1.3 | 4.9 | 682 | 625 | 9.1 | ||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$234 | $231 | $223 | 1.3 | 4.9 | $682 | $625 | 9.1 | ||||||||||||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||||||||||||||
Loans |
$10,260 | $9,896 | $9,475 | 3.7 | 8.3 | $9,993 | $9,224 | 8.3 | ||||||||||||||||||||||||
Other earning assets |
265 | 341 | 172 | (22.3 | ) | 54.1 | 284 | 167 | 70.1 | |||||||||||||||||||||||
Goodwill |
1,617 | 1,617 | 1,618 | -- | (.1 | ) | 1,617 | 1,619 | (.1 | ) | ||||||||||||||||||||||
Other intangible assets |
47 | 50 | 61 | (6.0 | ) | (23.0 | ) | 50 | 66 | (24.2 | ) | |||||||||||||||||||||
Assets |
13,543 | 13,175 | 12,655 | 2.8 | 7.0 | 13,302 | 12,306 | 8.1 | ||||||||||||||||||||||||
Noninterest-bearing deposits |
13,575 | 13,582 | 13,184 | (.1 | ) | 3.0 | 13,478 | 14,101 | (4.4 | ) | ||||||||||||||||||||||
Interest-bearing deposits |
65,858 | 61,401 | 55,921 | 7.3 | 17.8 | 60,508 | 56,562 | 7.0 | ||||||||||||||||||||||||
Total deposits |
79,433 | 74,983 | 69,105 | 5.9 | 14.9 | 73,986 | 70,663 | 4.7 | ||||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
2,530 | 2,529 | 2,486 | -- | 1.8 | 2,525 | 2,472 | 2.1 | ||||||||||||||||||||||||
(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 $234 million of the Companys net income in the third quarter of 2019, compared with $223 million in the third quarter of 2018. Total net revenue increased $18 million (2.5 percent) year-over-year due to increases in net interest income of $10 million (3.5 percent) and noninterest income of $8 million (1.8 percent). Net interest income increased year-over-year primarily due to the impact of higher deposit balances. Total noninterest income increased primarily due to favorable market conditions and business growth. Total noninterest expense was flat to the third 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 increased $4 million reflecting an unfavorable change in the reserve allocation.
5
|
||
PAYMENT SERVICES (a) | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q 2019 | 2Q 2019 |
3Q 2018 |
3Q19 vs 2Q19 |
3Q19 vs 3Q18 |
YTD 2019 | YTD 2018 |
Percent Change |
|||||||||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$634 | $591 | $619 | 7.3 | 2.4 | $1,848 | $1,821 | 1.5 | ||||||||||||||||||||||||
Noninterest income |
957 | 950 | 910 | .7 | 5.2 | 2,758 | 2,660 | 3.7 | ||||||||||||||||||||||||
Securities gains (losses), net |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total net revenue |
1,591 | 1,541 | 1,529 | 3.2 | 4.1 | 4,606 | 4,481 | 2.8 | ||||||||||||||||||||||||
Noninterest expense |
743 | 730 | 713 | 1.8 | 4.2 | 2,190 | 2,116 | 3.5 | ||||||||||||||||||||||||
Other intangibles |
33 | 33 | 29 | -- | 13.8 | 97 | 84 | 15.5 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total noninterest expense |
776 | 763 | 742 | 1.7 | 4.6 | 2,287 | 2,200 | 4.0 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Income before provision and taxes |
815 | 778 | 787 | 4.8 | 3.6 | 2,319 | 2,281 | 1.7 | ||||||||||||||||||||||||
Provision for credit losses |
260 | 295 | 264 | (11.9 | ) | (1.5 | ) | 841 | 817 | 2.9 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Income before income taxes |
555 | 483 | 523 | 14.9 | 6.1 | 1,478 | 1,464 | 1.0 | ||||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
139 | 121 | 131 | 14.9 | 6.1 | 370 | 367 | .8 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Net income |
416 | 362 | 392 | 14.9 | 6.1 | 1,108 | 1,097 | 1.0 | ||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$416 | $362 | $392 | 14.9 | 6.1 | $1,108 | $1,097 | 1.0 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||||||||||||||
Loans |
$34,044 | $33,277 | $31,443 | 2.3 | 8.3 | $33,251 | $30,704 | 8.3 | ||||||||||||||||||||||||
Other earning assets |
343 | 327 | 266 | 4.9 | 28.9 | 372 | 281 | 32.4 | ||||||||||||||||||||||||
Goodwill |
2,825 | 2,806 | 2,563 | .7 | 10.2 | 2,815 | 2,547 | 10.5 | ||||||||||||||||||||||||
Other intangible assets |
550 | 533 | 400 | 3.2 | 37.5 | 532 | 396 | 34.3 | ||||||||||||||||||||||||
Assets |
40,171 | 39,519 | 37,125 | 1.6 | 8.2 | 39,432 | 36,610 | 7.7 | ||||||||||||||||||||||||
Noninterest-bearing deposits |
1,200 | 1,148 | 1,064 | 4.5 | 12.8 | 1,168 | 1,092 | 7.0 | ||||||||||||||||||||||||
Interest-bearing deposits |
117 | 115 | 111 | 1.7 | 5.4 | 114 | 109 | 4.6 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total deposits |
1,317 | 1,263 | 1,175 | 4.3 | 12.1 | 1,282 | 1,201 | 6.7 | ||||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
7,058 | 7,050 | 6,583 | .1 | 7.2 | 7,046 | 6,602 | 6.7 | ||||||||||||||||||||||||
(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 $416 million of the Companys net income in the third quarter of 2019, compared with $392 million in the third quarter of 2018. Total net revenue increased $62 million (4.1 percent) due to increases of $15 million (2.4 percent) in net interest income and $47 million (5.2 percent) in total noninterest income. Net interest income increased primarily due to growth in loans as well as loan fees, offset by compression on loan rates. Total noninterest income increased year-over-year mainly due to higher credit and debit card revenue primarily driven by processing days, as well as merchant processing services and corporate payment products revenue, both driven by higher sales volumes. Total noninterest expense increased $34 million (4.6 percent) over the third quarter of 2018 principally due to higher net shared services expense to support business growth, technology development and investment in infrastructure, in addition to an increase in personnel expense in support of business development and merit increases. The provision for credit losses decreased $4 million (1.5 percent) reflecting a favorable change in the reserve allocation, partially offset by higher net charge-offs.
6
|
||
TREASURY AND CORPORATE SUPPORT (a) | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
3Q 2019 | 2Q 2019 |
3Q 2018 |
3Q19 vs 2Q19 |
3Q19 vs 3Q18 |
YTD 2019 |
YTD 2018 |
Percent Change |
|||||||||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$89 | $144 | $83 | (38.2) | 7.2 | $315 | $269 | 17.1 | ||||||||||||||||||||||||
Noninterest income |
299 | 266 | 271 | 12.4 | 10.3 | 826 | 730 | 13.2 | ||||||||||||||||||||||||
Securities gains (losses), net |
25 | 17 | 10 | 47.1 | nm | 47 | 25 | 88.0 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total net revenue |
413 | 427 | 364 | (3.3) | 13.5 | 1,188 | 1,024 | 16.0 | ||||||||||||||||||||||||
Noninterest expense |
214 | 220 | 176 | (2.7) | 21.6 | 632 | 524 | 20.6 | ||||||||||||||||||||||||
Other intangibles |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total noninterest expense |
214 | 220 | 176 | (2.7) | 21.6 | 632 | 524 | 20.6 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Income before provision and taxes |
199 | 207 | 188 | (3.9) | 5.9 | 556 | 500 | 11.2 | ||||||||||||||||||||||||
Provision for credit losses |
(3 | ) | (9 | ) | (7) | 66.7 | 57.1 | 23 | (5) | nm | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Income before income taxes |
202 | 216 | 195 | (6.5) | 3.6 | 533 | 505 | 5.5 | ||||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
(60 | ) | (47 | ) | (41) | (27.7) | (46.3) | (202) | (179) | (12.8) | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Net income |
262 | 263 | 236 | (.4) | 11.0 | 735 | 684 | 7.5 | ||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(9 | ) | (7 | ) | (7) | (28.6) | (28.6) | (25) | (22) | (13.6) | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$253 | $256 | $229 | (1.2) | 10.5 | $710 | $662 | 7.3 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Average Balance Sheet Data |
||||||||||||||||||||||||||||||||
Loans |
$5,979 | $5,732 | $5,436 | 4.3 | 10.0 | $5,805 | $5,415 | 7.2 | ||||||||||||||||||||||||
Other earning assets |
133,902 | 129,831 | 127,247 | 3.1 | 5.2 | 130,314 | 126,566 | 3.0 | ||||||||||||||||||||||||
Goodwill |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Other intangible assets |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Assets |
159,770 | 154,830 | 149,456 | 3.2 | 6.9 | 155,492 | 148,727 | 4.5 | ||||||||||||||||||||||||
Noninterest-bearing deposits |
2,326 | 2,411 | 2,372 | (3.5) | (1.9) | 2,390 | 2,441 | (2.1) | ||||||||||||||||||||||||
Interest-bearing deposits |
7,635 | 11,019 | 2,779 | (30.7) | nm | 9,303 | 3,652 | nm | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total deposits |
9,961 | 13,430 | 5,151 | (25.8) | 93.4 | 11,693 | 6,093 | 91.9 | ||||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
21,657 | 20,767 | 18,802 | 4.3 | 15.2 | 20,770 | 18,069 | 14.9 | ||||||||||||||||||||||||
(a) preliminary data
|
Treasury and Corporate Support includes the Companys 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 net income of $253 million in the third quarter of 2019, compared with $229 million in the third quarter of 2018. Total net revenue increased $49 million (13.5 percent) year-over-year driven by increases in net interest income of $6 million (7.2 percent) and $43 million (15.3 percent) in total noninterest income. Net interest income increased year-over-year primarily due to growth in the investment portfolio. Total noninterest income increased year-over-year primarily reflecting higher income from equity investments and gain on the sale of securities. Total noninterest expense increased $38 million (21.6 percent) year-over-year 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 increased $4 million (57.1 percent) reflecting higher net charge-offs.
7
U.S. Bancorp 3Q19 Earnings Conference Call October 16, 2019 Exhibit 99.2
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.
3Q19 Highlights * Taxable-equivalent basis; see slide 25 for calculation ** Excluding the impact of FDIC covered loans sold in 4Q18, average total loans grew 4.7% vs. 3Q18
Performance Ratios Efficiency Ratio* & Net Interest Margin** * Non-GAAP; see slides 25 and 26 for calculations ** Net interest margin on a taxable-equivalent basis Return on Average Common Equity Return on Tangible Common Equity* Return on Average Assets
Average Loans +1.1% linked quarter +4.0% year-over-year On a linked quarter basis, average total loan growth was driven by growth in residential mortgages 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. Year-over-year average total loan growth was partially offset by a decrease in total commercial real estate loans given the later stage of the business cycle. $ in billions
Average Deposits $ in billions +1.4% linked quarter +6.0% year-over-year Interest-bearing Deposits Average noninterest-bearing (NIB) deposits increased on a linked quarter basis. Average total savings deposits (which include money market, interest checking and savings accounts) grew on both a linked quarter and year-over-year basis, reflecting growth across all business lines. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, declined on a linked quarter basis. Year-over-year growth, in part, reflects consumer deposit migration as customers seek higher yields. Year-over-year, average NIB deposits declined due to balance migration to interest-bearing deposits as well as customers’ continued deployment of business deposits.
Credit Quality $ in millions NCO Ratio -1 bp QoQ +2 bps YoY NPAs +2.7% QoQ -2.5% YoY
Earnings Summary
Net Interest Income Linked Quarter Net interest income decreased, primarily driven by the impact of declining rates, the flatter yield curve and lower interest recoveries, partially offset by growth in earning assets and an additional day in the third quarter. The net interest margin declined, primarily due to changes in the yield curve during the quarter as well as higher cash balances. Year-over-Year Net interest income growth was primarily driven by growth in earning assets and higher yields on reinvested securities, partially offset by declining rates and a flatter yield curve, as well as deposit and funding mix. The net interest margin declined, primarily due to the impacts of the yield curve, deposit and funding mix, and higher cash balances. $ in millions Net interest income on a taxable-equivalent basis; see slide 25 for calculation -0.8% linked quarter +0.8% year-over-year
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 $2,418 $2,490 $2,614 Linked Quarter Payment services revenue growth was driven by seasonally higher corporate payment products sales volume and merchant processing services fee revenue. Mortgage banking revenue growth reflects higher origination and sales volumes as well as a favorable change in the valuation of mortgage servicing rights, net of hedging activities. Other noninterest income increased primarily due to higher equity investment income. Year-over-Year Payment services revenue growth reflects higher sales volumes across all businesses. Commercial products revenue increased, primarily due to higher corporate bond fees and trading revenue. Mortgage banking revenue increased, reflecting higher origination and sales volumes. Other noninterest income increased, primarily due to higher equity investment income and transition services agreement revenue associated with the sale of the Company’s ATM third-party servicing business in 2018. Deposit service charges declined, primarily due to the 2018 sale of the Company’s ATM third-party servicing business. +5.0% linked quarter +8.1% year-over-year
Noninterest Expense Linked Quarter Compensation expense increased primarily due to an additional day in the third quarter and variable compensation related to business production. Employee benefits expense increased primarily due to increased medical costs. Other noninterest expense decreased due to lower costs related to tax-advantaged projects and a decrease in merchant related reserves. Year-over-Year Compensation expense increased, primarily due to the impact of merit increases and higher variable compensation related to business production. Employee benefits expense increased, primarily due to increased medical costs. Technology and communications expense increased, primarily driven by capital expenditures to support business growth. Other noninterest expense decreased due to lower FDIC assessment costs and lower costs related to tax-advantaged projects. $ in millions PPS = postage, printing and supplies $3,044 $3,153 $3,144 -0.3% linked quarter +3.3% year-over-year
Capital Position * Non-GAAP; see slide 27 for calculations
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
Appendix
Average Loans vs. 3Q18 Average total loans increased by $11.3 billion, or 4.0% Average residential mortgage loans increased by $6.6 billion, or 10.6% Average commercial loans increased by $4.6 billion, or 4.7% Average credit card loans increased by $1.9 billion, or 8.8% Average retail loans increased by $1.6 billion, or 2.9% Average commercial real estate loans decreased by $0.6 billion, or 1.4% vs. 2Q19 Average total loans increased by $3.2 billion, or 1.1% Average residential mortgage loans increased by $1.8 billion, or 2.7% Average credit card loans increased by $0.9 billion, or 3.7% Key Points Year-over-Year Growth 1.2% 1.4% 2.4% 3.8% 4.0% Covered Commercial CRE Res Mtg Retail Credit Card $286.1 $281.1 $283.7 (0.3%) $292.4 Average Loans ($bn) $289.2
Average Deposits Key Points Average Deposits ($bn) vs. 3Q18 Average total deposits increased by $19.8 billion, or 6.0% Average low-cost deposits (NIB, interest checking, savings and money market) increased by $15.4 billion, or 5.3% vs. 2Q19 Average total deposits increased by $4.7 billion, or 1.4% Average low-cost deposits (NIB, interest checking, savings and money market) increased by $9.3 billion, or 3.1% Year-over-Year Growth (1.5%) (1.4%) 0.2% 3.1% 6.0% Time Money Market Checking and Savings Noninterest-bearing $349.9 $330.1 $334.4 $335.4 $345.2
Credit Quality – Commercial Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm3Q182Q193Q19 Average Loans$99,048$103,233 $103,660 30-89 Delinquencies0.23% 0.34%0.43% 90+ Delinquencies0.06%0.26%0.10% Nonperforming Loans0.22%0.27%0.30% Linked Quarter Growth 0.7% 1.5% 1.4% 1.2% 0.4% Linked quarter growth was modest at 0.4% and year-over-year growth was 4.7% Decrease in late stage delinquencies driven by a prior administrative delinquency that is substantially resolved Net charge-offs increased on a linked quarter basis due to lower recoveries, but remain at historically low levels
Investor $19,257 Owner Occupied $9,062 A&D Const $316 Multi-family $3, 740 Retail $334 Residential Construction $2,446 Office $844 Other $2,389 Resi Land $602 $mm3Q182Q193Q19 Average Loans$39,542$39,365 $38,990 30-89 Delinquencies0.08% 0.07%0.13% 90+ Delinquencies0.01%0.00%0.01% Nonperforming Loans0.26%0.23%0.23% Performing TDRs*$222$137$145 Credit Quality – Commercial Real Estate Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points * TDR = troubled debt restructuring Linked Quarter Growth (0.8%) 1.5% (1.7%) (0.3%) (1.0%) Average loans decreased by 1.0% on a linked quarter basis and were down year-over-year as well due to high market liquidity resulting in continued early payoffs Credit quality remains strong and stable; nonperforming loans remain low
Credit Quality – Residential Mortgage Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm3Q182Q193Q19 Average Loans$62,042$66,834$68,608 30-89 Delinquencies0.27%0.26%0.24% 90+ Delinquencies0.19%0.17%0.17% Nonperforming Loans0.50%0.39%0.36% * Excludes GNMA loans, whose repayments are insured by the FHA or guaranteed by the Department of VA ($1,690 million in 3Q19) Linked Quarter Growth 2.0% 3.9% 1.7% 1.9% 2.7% Originations continued to be high credit quality (weighted average FICO of 763, weighted average LTV of 72%) More than 93% of balances have been originated since the beginning of 2009; the origination quality metrics and performance to date have significantly outperformed prior vintages with similar seasoning
Credit Quality – Credit Card Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm3Q182Q193Q19 Average Loans$21,774$22,830$23,681 30-89 Delinquencies1.42%1.23%1.33% 90+ Delinquencies1.18%1.14%1.16% Nonperforming Loans0.00%0.00%0.00% Linked Quarter Growth 2.6% 2.9% 0.9% 1.0% 3.7% Year-over-year average loan growth of 8.8% was driven by origination of new accounts and portfolio acquisitions Commitment weighted average FICO on new originations remained strong at 775 Year-over-year delinquency was stable and charge-offs were favorably driven by stronger collection results
Credit Quality – Home Equity Average Loans ($mm) and Net Charge-offs Ratio Key Points Linked Quarter Growth (0.3%) 0.4% (0.4%) (1.0%) (1.5%) Key Statistics Key Statistics $mm3Q182Q193Q19 Average Loans$16,000$15,831$15,601 30-89 Delinquencies0.45%0.51%0.55% 90+ Delinquencies0.32%0.34%0.34% Nonperforming Loans0.78%0.75%0.75% Loans: 11% Wtd Avg LTV*: 77% Wtd Avg FICO*: 751 Lines: 89% Wtd Avg LTV*: 71% Wtd Avg FICO*: 754 *LTV and FICO at origination High-quality originations (weighted average FICO on commitments of 781, weighted average CLTV of 68%) were originated primarily through the retail branch network to existing bank customers on their primary residences Net charge-offs were stable year-over-year with strong recoveries due to continued strength in home values
Credit Quality – Retail Leasing Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm3Q182Q193Q19 Average Loans$8,383$8,547$8,442 30-89 Delinquencies0.38%0.45%0.48% 90+ Delinquencies0.02%0.02%0.05% Nonperforming Loans0.13%0.13%0.14% * Manheim Used Vehicle Value Index source: www.manheimconsulting.com, January 1995 = 100, quarter value = average monthly ending values Linked Quarter Growth 2.9% 1.3% 1.1% (0.5%) (1.2%) Continued high-quality originations during 3Q19 (weighted average FICO of 780) Delinquencies and net charge-offs remained at low levels
Credit Quality – Other Retail Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm3Q182Q193Q19 Average Loans$31,520$32,578$33,454 30-89 Delinquencies0.83%0.80%0.78% 90+ Delinquencies0.14%0.13%0.14% Nonperforming Loans0.12%0.12%0.13% Linked Quarter Growth 0.8% 0.2% 1.1% 2.1 % 2.7% Loan growth continues to be driven by auto and installment loans Net charge-offs, delinquencies and nonperforming loans were all relatively stable
Credit Quality – Auto Loans Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm3Q182Q193Q19 Average Loans$18,563$19,023$19,426 30-89 Delinquencies1.00%1.01%1.04% 90+ Delinquencies0.08%0.09%0.11% Nonperforming Loans0.14%0.15%0.18% Direct: 4% Wtd Avg FICO: 748 NCO: 0.46% Indirect: 96% Wtd Avg FICO: 776 NCO: 0.39% Auto loans are included in Other Retail category Linked Quarter Growth (0.2%) (0.3%) 1.8% 1.0% 2.1% Loan growth continues to be driven by high quality originations in the indirect channel (weighted average FICO of 783) Net charge-offs, delinquencies and nonperforming loans were all relatively stable
Non-GAAP Financial Measures (1) 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.
Non-GAAP Financial Measures (1) Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.
Non-GAAP Financial Measures * 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.
U.S. Bancorp 3Q19 Earnings Conference Call October 16, 2019
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