Exhibit 99.1
U.S. Bancorp Reports First Quarter 2018 Results • Net revenue of $5,469 million and net income of $1,675 million • Industry leading return on average assets of 1.50% and return on average common equity of 14.9% • Return on tangible common equity of 19.3%
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1Q18 Key Financial Data
| 1Q18 Highlights | |||||||||||||||||
PROFITABILITY METRICS | 1Q18 | 4Q17 | 1Q17 | |||||||||||||||
Return on average assets (%) | 1.50 | 1.46 | 1.35 | • Net income of $1,675 million and diluted earnings per common share of $0.96 in the first quarter of 2018
• Industry leading return on average assets of 1.50% and return on average common equity of 14.9%
• Returned 68% of 1Q earnings to shareholders through dividends and share buybacks
• Net interest income grew 5.5% year-over-year
• Total net revenue grew 3.4% year-over year ◇ Payment services revenue grew 6.5% ◇ Trust and investment management fees increased 8.2% ◇ Deposit service charges increased 5.8%
• Net interest margin of 3.13% was 7 basis points higher than 1Q17 and 2 basis points higher than 4Q17 (4 basis points excluding the impact of tax reform)
• Average total loans grew 2.3% year-over-year | ||||||||||||||
Return on average common equity (%) | 14.9 | 14.7 | 13.3 | |||||||||||||||
Return on tangible common equity (%) (a) | 19.3 | 18.8 | 17.2 | |||||||||||||||
Net interest margin (%) | 3.13 | 3.11 | 3.06 | |||||||||||||||
Efficiency ratio (%) (a)
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| 55.9
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| 69.8
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| 55.3
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INCOME STATEMENT (b) | 1Q18 | 4Q17 | 1Q17 | |||||||||||||||
Net interest income(taxable-equivalent basis) | $3,197 | $3,228 | $3,030 | |||||||||||||||
Noninterest income | $2,272 | $2,370 | $2,259 | |||||||||||||||
Net income attributable to U.S. Bancorp | $1,675 | $1,682 | $1,473 | |||||||||||||||
Diluted earnings per common share | $.96 | $.97 | $.82 | |||||||||||||||
Dividends declared per common share
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| $.30
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| $.30
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| $.28
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BALANCE SHEET (b) | 1Q18 | 4Q17 | 1Q17 | |||||||||||||||
Average total loans | $279,388 | $279,751 | $273,158 | |||||||||||||||
Average total deposits | $334,580 | $339,162 | $328,433 | |||||||||||||||
Netcharge-off ratio | .49% | .46% | .50% | |||||||||||||||
Book value per common share(period end) | $26.54 | $26.34 | $25.05 | |||||||||||||||
Basel III standardized CET1 (c) | 9.0% | 9.1% | 9.2% | |||||||||||||||
(a) SeeNon-GAAP Financial Measures reconciliation on pages16-17
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(b) Dollars in millions, except per share data
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(c) CET1 = Common equity tier 1 capital ratio, 4Q17 and 1Q17 as if fully implemented |
CEO Commentary
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”We reported a solid first quarter, highlighted by a 19.3% return on average tangible common equity. We delivered solid growth in net interest income and high return fee businesses such as corporate payments, credit card, and wealth management and investment services. We continue to invest for the future and I’m pleased with the progress we are making on initiatives aimed at advancing our digital offerings and expanding our treasury management and payment services capabilities. This is a rapidly evolving banking environment and we are positioning this company to be a trusted partner to our customers, with the products and services that enable them to do what they want, when, where and how they want. As we continue on this journey, I am grateful to our customers for their trust and to our employees for their commitment to our continued success.”
— Andy Cecere, Chairman, President and CEO, U.S. Bancorp
In the Spotlight
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Most Admired Super-Regional Bank
Fortune has named U.S. Bank a World’s Most Admired Company, naming it the world’s most admired super-regional bank for the eighth consecutive year and recognizing several of U.S. Bank’s attributes as most admired among all companies including being #1 in the categories of Management Quality and Use of Corporate Assets.
Best Employer for Diversity
Forbes magazine has named U.S. Bank a Best Employer for Diversity, including the bank in a first-ever list of top employers based on employee surveys, reputation research and public diversity leadership data.
One of the World’s Most Ethical Companies
Ethisphere Institute, the global leader in defining and advancing the standards of ethical business practices, has recognized U.S. Bank as a 2018 World’s Most Ethical Company®. This marks the fourth consecutive year U.S. Bank has earned this recognition.
A “Best Place to Work”
The Human Rights Campaign Foundation designated U.S. Bank as a “Best Place to Work” with a high score of 100 on its LGBTQ rights-focused Corporate Equality Index. Through its index, the Foundation evaluates businesses from a diverse set of industries in regards to their policies and benefits. As of 2018, U.S. Bank has proudly earned a score of 100 percent for 11 years in a row.
Investor contact: Jennifer Thompson, 612.303.0778 | Media contact: Stacey Wempen, 612.303.7620
U.S. Bancorp First Quarter 2018 Results | ||
INCOME STATEMENT HIGHLIGHTS | ||||||||||||||||||||
($ in millions, exceptper-share data) | Percent Change | |||||||||||||||||||
1Q | 4Q | 1Q | 1Q18 vs | 1Q18 vs | ||||||||||||||||
2018 | 2017 | 2017 | 4Q17 | 1Q17 | ||||||||||||||||
Net interest income | $3,168 | $3,175 | $2,980 | (.2) | 6.3 | |||||||||||||||
Taxable-equivalent adjustment | 29 | 53 | 50 | (45.3) | (42.0) | |||||||||||||||
Net interest income (taxable-equivalent basis) | 3,197 | 3,228 | 3,030 | (1.0) | 5.5 | |||||||||||||||
Noninterest income | 2,272 | 2,370 | 2,259 | (4.1) | .6 | |||||||||||||||
Total net revenue | 5,469 | 5,598 | 5,289 | (2.3) | 3.4 | |||||||||||||||
Noninterest expense | 3,055 | 3,899 | 2,909 | (21.6) | 5.0 | |||||||||||||||
Income before provision and income taxes | 2,414 | 1,699 | 2,380 | 42.1 | 1.4 | |||||||||||||||
Provision for credit losses | 341 | 335 | 345 | 1.8 | (1.2) | |||||||||||||||
Income before taxes | 2,073 | 1,364 | 2,035 | 52.0 | 1.9 | |||||||||||||||
Income taxes and taxable-equivalent adjustment | 391 | (322) | 549 | nm | (28.8) | |||||||||||||||
Net income | 1,682 | 1,686 | 1,486 | (.2) | 13.2 | |||||||||||||||
Net (income) loss attributable to noncontrolling interests | (7) | (4) | (13) | (75.0) | 46.2 | |||||||||||||||
Net income attributable to U.S. Bancorp | $1,675 | $1,682 | $1,473 | (.4) | 13.7 | |||||||||||||||
Net income applicable to U.S. Bancorp common shareholders | $1,597 | $1,611 | $1,387 | (.9) | 15.1 | |||||||||||||||
Diluted earnings per common share | $.96 | $.97 | $.82 | (1.0) | 17.1 | |||||||||||||||
Net income attributable to U.S. Bancorp was $1,675 million for the first quarter of 2018, 13.7 percent higher than the $1,473 million for the first quarter of 2017, and 0.4 percent lower than the $1,682 million for the fourth quarter of 2017. Excluding notable items in the fourth quarter of 2017, net income attributable to U.S. Bancorp increased 9.3 percent. Diluted earnings per common share were $0.96 in the first quarter of 2018. Results for the first quarter of 2018 included favorable tax matters partially offset by the impact of a transitional change in stock-based compensation vesting provisions, that combined, increased diluted earnings per common share by $0.01. Diluted earnings per common share were $0.97 in the fourth quarter of 2017, which included $0.09 of notable items, including a benefit of $910 million related to the estimated impact of tax reform on the Company’s tax related assets and liabilities, partially offset by a $608 million accrual for regulatory and legal matters, and $152 million, net of tax, for a charitable contribution to the U.S. Bank Foundation and a special bonus to certain eligible employees. The increase in net income year-over-year was primarily due to total net revenue growth of 3.4 percent (3.9 percent excluding the impact of tax reform related to taxable-equivalent adjustments for tax exempt assets), including an increase in net interest income of 5.5 percent, mainly a result of the impact of rising interest rates and loan growth. Noninterest income increased 0.6 percent principally due to higher payment services revenue, trust and investment management fees and deposit service charges, offset by decreases in mortgage banking revenue and commercial product revenue in addition to lower equity investment income and securities gains compared with a year ago. The increase in total net revenue was partially offset by higher noninterest expense of 5.0 percent (3.7 percent excluding the impact of stock-based compensation vesting changes), primarily due to increased compensation expense related to hiring to support business growth and compliance programs, merit increases, variable compensation related to revenue growth, increased expense from a change to a shorter vesting period for new stock-based compensation grants, and higher employee benefits expense, partially offset by lower professional services expense driven by lower consulting costs for risk and compliance programs, and other expenses.
Excluding the fourth quarter 2017 notable items, net income increased on a linked quarter basis primarily due to the impact of the lower corporate tax rate effective in 2018. Total net revenue decreased 2.3 percent and noninterest expense decreased 0.6 percent. The decrease in total net revenue reflected a decrease in net interest income of 1.0 percent, due to two fewer days in the first quarter, and a decrease in noninterest income of 4.1 percent driven by seasonally lower payment services fees and mortgage banking revenue and lower equity investment income. The decrease in noninterest expense was primarily driven by seasonally lower costs related to investments intax-advantaged projects, mortgage banking costs and professional services expense, offset by increased compensation expense primarily related to the timing of stock-based compensation grants, and associated vesting period changes, and seasonally higher employee benefits expense.
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U.S. Bancorp First Quarter 2018 Results | ||
NET INTEREST INCOME | ||||||||||||||||||||
(Taxable-equivalent basis; $ in millions) | Change | |||||||||||||||||||
1Q | 4Q | 1Q | 1Q18 vs | 1Q18 vs | ||||||||||||||||
2018 | 2017 | 2017 | 4Q17 | 1Q17 | ||||||||||||||||
Components of net interest income | ||||||||||||||||||||
Income on earning assets | $3,822 | $3,785 | $3,444 | $37 | $378 | |||||||||||||||
Expense on interest-bearing liabilities | 625 | 557 | 414 | 68 | 211 | |||||||||||||||
Net interest income | $3,197 | $3,228 | $3,030 | $(31) | $167 | |||||||||||||||
Average yields and rates paid | ||||||||||||||||||||
Earning assets yield | 3.75% | 3.64% | 3.48% | .11% | .27% | |||||||||||||||
Rate paid on interest-bearing liabilities | .81 | .72 | .57 | .09 | .24 | |||||||||||||||
Gross interest margin | 2.94% | 2.92% | 2.91% | .02% | .03% | |||||||||||||||
Net interest margin | 3.13% | 3.11% | 3.06% | .02% | .07% | |||||||||||||||
Average balances | ||||||||||||||||||||
Investment securities (a) | $113,493 | $113,287 | $110,764 | $206 | $2,729 | |||||||||||||||
Loans | 279,388 | 279,751 | 273,158 | (363) | 6,230 | |||||||||||||||
Earning assets | 411,849 | 413,510 | 399,281 | (1,661) | 12,568 | |||||||||||||||
Interest-bearing liabilities | 311,615 | 308,976 | 296,170 | 2,639 | 15,445 | |||||||||||||||
(a) Excludes unrealized gain (loss) | ||||||||||||||||||||
Net interest income on a taxable-equivalent basis in the first quarter of 2018 was $3,197 million, an increase of $167 million (5.5 percent) over the first quarter of 2017. The increase was principally driven by the impact of rising interest rates and loan growth, partially offset by deposit and funding mix and the impact of tax reform which reduced the taxable-equivalent adjustment benefit related to tax exempt assets. Average earning assets were $12.6 billion (3.1 percent) higher than the first quarter of 2017, reflecting increases of $6.2 billion (2.3 percent) in average total loans, $2.7 billion (2.5 percent) in average investment securities and $4.1 billion (34.9 percent) in average other earning assets. Net interest income on a taxable-equivalent basis decreased $31 million (1.0 percent) on a linked quarter basis primarily driven by the impact of two fewer days in the first quarter, tax reform, and deposit and funding mix, partially offset by the impact of higher rates. Average earning assets were $1.7 billion (0.4 percent) lower on a linked quarter basis, reflecting decreases of $363 million (0.1 percent) in average total loans and $717 million (4.3 percent) in average other earning assets, partially offset by an increase of $206 million (0.2 percent) in average investment securities.
The net interest margin in the first quarter of 2018 was 3.13 percent, compared with 3.06 percent in the first quarter of 2017, and 3.11 percent in the fourth quarter of 2017. Excluding the impact of tax reform related to tax exempt income, the linked quarter increase in net interest margin was 4 basis points. The increase in the net interest margin year-over-year and on a linked quarter basis was primarily due to higher interest rates, partially offset by loan mix, higher funding costs and higher cash balances year-over-year. The first quarter 2018 adoption of a new accounting standard related to revenue recognition increased net interest income and the related margin compared with previously reported results. All periods have been adjusted to reflect this change.
Average investment securities in the first quarter of 2018 were $2.7 billion (2.5 percent) higher year-over-year and $206 million (0.2 percent) higher than the prior quarter. The increase year-over-year was primarily due to purchases of U.S. Treasury and U.S. government mortgage-backed securities, net of prepayments and maturities, in support of liquidity management.
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U.S. Bancorp First Quarter 2018 Results | ||
AVERAGE LOANS | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q 2018 | 4Q 2017 | 1Q 2017 | 1Q18 vs 4Q17 | 1Q18 vs 1Q17 | ||||||||||||||||
Commercial | $91,933 | $92,101 | $88,284 | (.2) | 4.1 | |||||||||||||||
Lease financing | 5,532 | 5,457 | 5,455 | 1.4 | 1.4 | |||||||||||||||
Total commercial | 97,465 | 97,558 | 93,739 | (.1) | 4.0 | |||||||||||||||
Commercial mortgages | 29,176 | 29,543 | 31,461 | (1.2) | (7.3) | |||||||||||||||
Construction and development | 11,190 | 11,466 | 11,697 | (2.4) | (4.3) | |||||||||||||||
Total commercial real estate | 40,366 | 41,009 | 43,158 | (1.6) | (6.5) | |||||||||||||||
Residential mortgages | 60,174 | 59,639 | 57,900 | .9 | 3.9 | |||||||||||||||
Credit card | 21,284 | 21,218 | 20,845 | .3 | 2.1 | |||||||||||||||
Retail leasing | 7,982 | 7,982 | 6,469 | -- | 23.4 | |||||||||||||||
Home equity and second mortgages | 16,195 | 16,299 | 16,259 | (.6) | (.4) | |||||||||||||||
Other | 32,874 | 32,856 | 31,056 | .1 | 5.9 | |||||||||||||||
Total other retail | 57,051 | 57,137 | 53,784 | (.2) | 6.1 | |||||||||||||||
Total loans, excluding covered loans |
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276,340 |
| 276,561 | 269,426 | (.1) | 2.6 | |||||||||||||
Covered loans |
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3,048 |
| 3,190 | 3,732 | (4.5) | (18.3) | |||||||||||||
Total loans |
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$279,388 |
| $279,751 | $273,158 | (.1) | 2.3 | |||||||||||||
Average total loans were $6.2 billion (2.3 percent) higher than the first quarter of 2017. The increase was due to growth in total commercial loans (4.0 percent), residential mortgages (3.9 percent), retail leasing (23.4 percent) and other retail loans (5.9 percent). These increases were muted somewhat by a decrease in total commercial real estate loans (6.5 percent) due to disciplined underwriting and customers paying down balances. Loan growth was also muted by continuedrun-off of the covered loans portfolio (18.3 percent). Average total loans were $363 million (0.1 percent) lower than the fourth quarter of 2017. This decrease reflects continuedpay-offs of commercial real estate loans (1.6 percent) and therun-off of covered loans (4.5 percent), offset by growth in residential mortgages (0.9 percent). At the end of the first quarter, approximately $1.5 billion of student loans were transferred from the loan portfolio to loans held for sale.
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U.S. Bancorp First Quarter 2018 Results | ||
AVERAGE DEPOSITS | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q 2018 | 4Q 2017 | 1Q 2017 | 1Q18 vs 4Q17 | 1Q18 vs 1Q17 | ||||||||||||||||
Noninterest-bearing deposits | $79,482 | $82,303 | $80,738 | (3.4) | (1.6) | |||||||||||||||
Interest-bearing savings deposits | ||||||||||||||||||||
Interest checking | 70,358 | 70,717 | 65,681 | (.5) | 7.1 | |||||||||||||||
Money market savings | 103,367 | 105,348 | 108,759 | (1.9) | (5.0) | |||||||||||||||
Savings accounts | 44,388 | 43,772 | 42,609 | 1.4 | 4.2 | |||||||||||||||
Total savings deposits | 218,113 | 219,837 | 217,049 | (.8) | .5 | |||||||||||||||
Time deposits | 36,985 | 37,022 | 30,646 | (.1) | 20.7 | |||||||||||||||
Total interest-bearing deposits | 255,098 | 256,859 | 247,695 | (.7) | 3.0 | |||||||||||||||
Total deposits |
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$334,580 |
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$339,162 |
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$328,433 |
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(1.4) |
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1.9 |
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Average total deposits for the first quarter of 2018 were $6.1 billion (1.9 percent) higher than the first quarter of 2017. Average noninterest-bearing deposits decreased $1.3 billion (1.6 percent) year-over-year primarily due to a decrease in Corporate and Commercial Banking, partially offset by increases in Consumer and Business Banking and Wealth Management and Investment Services. Average total savings deposits were $1.1 billion (0.5 percent) higher year-over-year driven by growth in Consumer and Business Banking, partially offset by a decrease in Corporate and Commercial Banking. Average time deposits were $6.3 billion (20.7 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 such as wholesale borrowing, based largely on relative pricing and liquidity characteristics.
Average total deposits decreased $4.6 billion (1.4 percent) from the fourth quarter of 2017. On a linked quarter basis, average noninterest-bearing deposits decreased $2.8 billion (3.4 percent) across all business lines primarily due to seasonality. This compares with a decline in noninterest-bearing deposits of $4.2 billion (4.9 percent) in the first quarter of 2017 compared with the fourth quarter of 2016. Average total savings deposits decreased $1.7 billion (0.8 percent) reflecting a decline in Wealth Management and Investment Services of $2.1 billion and Corporate and Commercial Banking of $1.3 billion, partially offset by growth in average savings balances within Consumer and Business Banking. The change in Corporate and Commercial Banking balances primarily reflects seasonality, while the decline in Wealth Management and Investment Services is the result of seasonally lower trust balances, timing of escrowed balances, deployment of cash balances by investment managers and the impact of rising interest rates. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, were flat on a linked quarter basis.
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U.S. Bancorp First Quarter 2018 Results | ||
NONINTEREST INCOME | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q 2018 | 4Q 2017 | 1Q 2017 | 1Q18 vs 4Q17 | 1Q18 vs 1Q17 | ||||||||||||||||
Credit and debit card revenue | $324 | $342 | $299 | (5.3) | 8.4 | |||||||||||||||
Corporate payment products revenue | 154 | 148 | 137 | 4.1 | 12.4 | |||||||||||||||
Merchant processing services | 363 | 374 | 354 | (2.9) | 2.5 | |||||||||||||||
ATM processing services | 79 | 80 | 71 | (1.3) | 11.3 | |||||||||||||||
Trust and investment management fees | 398 | 394 | 368 | 1.0 | 8.2 | |||||||||||||||
Deposit service charges | 182 | 194 | 172 | (6.2) | 5.8 | |||||||||||||||
Treasury management fees | 150 | 152 | 153 | (1.3) | (2.0) | |||||||||||||||
Commercial products revenue | 220 | 224 | 247 | (1.8) | (10.9) | |||||||||||||||
Mortgage banking revenue | 184 | 202 | 207 | (8.9) | (11.1) | |||||||||||||||
Investment products fees | 46 | 45 | 42 | 2.2 | 9.5 | |||||||||||||||
Securities gains (losses), net | 5 | 10 | 29 | (50.0) | (82.8) | |||||||||||||||
Other | 167 | 205 | 180 | (18.5) | (7.2) | |||||||||||||||
Total noninterest income |
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$2,272 |
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$2,370 |
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$2,259 |
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(4.1) |
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.6 |
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First quarter noninterest income of $2,272 million was $13 million (0.6 percent) higher than the first quarter of 2017 reflecting strong growth in payment services revenue, trust and investment management fees, and deposit service charges, partially offset by lower commercial products revenue and mortgage banking revenue reflecting industry trends in these revenue categories. Payment services revenue increased 6.5 percent due to stronger credit and debit card revenue of $25 million (8.4 percent) and an increase in corporate payment products revenue of $17 million (12.4 percent), and improving merchant processing revenue due to higher sales volumes. Trust and investment management fees increased $30 million (8.2 percent) due to business growth, net asset inflows and favorable market conditions. Deposit service charges increased $10 million (5.8 percent) primarily due to higher transaction volumes and account growth. These increases were partially offset by a decrease in commercial products revenue of $27 million (10.9 percent) mainly due to lower corporate bond underwriting fees and syndication fees. Mortgage banking revenue decreased $23 million (11.1 percent) primarily due to lower margin on mortgage loan sales.
Noninterest income was $98 million (4.1 percent) lower in the first quarter of 2018 compared with the fourth quarter of 2017 reflecting seasonally lower payment services revenue, mortgage banking revenue and deposit service charges. In addition, other revenue decreased $38 million (18.5 percent) primarily due to lower equity investment income. Payment services revenue decreased principally due to seasonally lower sales volume after the holidays. Credit and debit card revenue declined $18 million (5.3 percent) while merchant processing services revenue declined $11 million (2.9 percent). Corporate payments products revenue increased from the fourth quarter by 4.1 percent reflecting stronger corporate and government spending. Mortgage banking revenue decreased $18 million (8.9 percent) primarily due to lower margin on mortgage loan sales, partially offset by the valuation of mortgage servicing rights, net of hedging activities. Deposit service charges decreased $12 million (6.2 percent) due to seasonally lower transaction volumes.
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U.S. Bancorp First Quarter 2018 Results | ||
NONINTEREST EXPENSE | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q 2018 | 4Q 2017 | 1Q 2017 | 1Q18 vs 4Q17 | 1Q18 vs 1Q17 | ||||||||||||||||
Compensation | $1,523 | $1,499 | $1,391 | 1.6 | 9.5 | |||||||||||||||
Employee benefits | 330 | 291 | 301 | 13.4 | 9.6 | |||||||||||||||
Net occupancy and equipment | 265 | 259 | 247 | 2.3 | 7.3 | |||||||||||||||
Professional services | 83 | 114 | 96 | (27.2) | (13.5) | |||||||||||||||
Marketing and business development | 97 | 251 | 90 | (61.4) | 7.8 | |||||||||||||||
Technology and communications | 235 | 236 | 217 | (.4) | 8.3 | |||||||||||||||
Postage, printing and supplies | 80 | 79 | 81 | 1.3 | (1.2) | |||||||||||||||
Other intangibles | 39 | 44 | 44 | (11.4) | (11.4) | |||||||||||||||
Other | 403 | 1,126 | 442 | (64.2) | (8.8) | |||||||||||||||
Total noninterest expense | $3,055 | $3,899 | $2,909 | (21.6) | 5.0 | |||||||||||||||
First quarter noninterest expense of $3,055 million was $146 million (5.0 percent) higher than the first quarter of 2017 primarily due to higher personnel expense, occupancy costs, technology investment and seasonal marketing and development expenses, partially offset by lower professional services expense and other noninterest expense. Compensation expense increased $132 million (9.5 percent) principally due to the impact of hiring to support business growth and compliance programs, merit increases, and higher variable compensation related to business production, and the impact of changes in vesting provisions related to stock-based compensation programs. Excluding the impact of the change in vesting provisions, compensation would have increased 6.9 percent from a year ago. Employee benefits expense increased $29 million (9.6 percent) primarily driven by increased medical costs and staffing. Other noninterest expense decreased $39 million (8.8 percent) due to lower mortgage servicing-related costs and lower pension-related costs as a result of contributions to the plans in 2017. Professional services expense decreased $13 million (13.5 percent) primarily due to fewer consulting services as compliance programs near maturity.
Noninterest expense decreased $844 million (21.6 percent) on a linked quarter basis primarily due to notable items recognized in the fourth quarter of 2017. Excluding the notable items, noninterest expense was $19 million (0.6 percent) lower in the first quarter of 2018 compared with the fourth quarter of 2017 primarily due to seasonally lower costs related to investments intax-advantaged projects and professional services expense, partially offset by higher personnel expense. Compensation expense increased $82 million (5.7 percent) reflecting the impact of variable compensation including the timing of stock-based compensation grants due to the vesting change, and merit increases, as well as a seasonal increase in employee benefits expense of $48 million (17.0 percent) primarily driven by seasonally higher payroll taxes.
Provision for Income Taxes
The provision for income taxes for the first quarter of 2018 resulted in a tax rate of 18.9 percent on a taxable-equivalent basis (effective tax rate of 17.7 percent), compared with 27.0 percent (effective tax rate of 25.1 percent) in the first quarter of 2017, and a tax benefit of 23.6 percent on a taxable-equivalent basis (effective tax benefit of 28.6 percent) in the fourth quarter of 2017. The first quarter of 2018 tax rate reflected the tax reform legislation enacted during the fourth quarter of 2017, favorable settlement of tax matters, and the tax benefit of restricted stock vesting and option exercises.
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U.S. Bancorp First Quarter 2018 Results | ||
ALLOWANCE FOR CREDIT LOSSES | ||||||||||||||||||||||||||||||||||||||
($ in millions) | 1Q | 4Q | 3Q | 2Q | 1Q | |||||||||||||||||||||||||||||||||
2018 | % (b) | 2017 | % (b) | 2017 | % (b) | 2017 | % (b) | 2017 | % (b) | |||||||||||||||||||||||||||||
Balance, beginning of period | $4,417 | $4,407 | $4,377 | $4,366 | $4,357 | |||||||||||||||||||||||||||||||||
Net charge-offs | ||||||||||||||||||||||||||||||||||||||
Commercial | 56 | .25 | 22 | .09 | 79 | .34 | 75 | .33 | 71 | .33 | ||||||||||||||||||||||||||||
Lease financing | 4 | .29 | 6 | .44 | 4 | .29 | 3 | .22 | 4 | .30 | ||||||||||||||||||||||||||||
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Total commercial | 60 | .25 | 28 | .11 | 83 | .34 | 78 | .33 | 75 | .32 | ||||||||||||||||||||||||||||
Commercial mortgages | (4) | (.06) | 18 | .24 | (2) | (.03) | (7) | (.09) | (1) | (.01) | ||||||||||||||||||||||||||||
Construction and development | 1 | .04 | -- | -- | (5) | (.17) | (2) | (.07) | (1) | (.03) | ||||||||||||||||||||||||||||
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Total commercial real estate | (3) | (.03) | 18 | .17 | (7) | (.07) | (9) | (.08) | (2) | (.02) | ||||||||||||||||||||||||||||
Residential mortgages | 7 | .05 | 10 | .07 | 7 | .05 | 8 | .05 | 12 | .08 | ||||||||||||||||||||||||||||
Credit card | 211 | 4.02 | 205 | 3.83 | 187 | 3.55 | 204 | 3.97 | 190 | 3.70 | ||||||||||||||||||||||||||||
Retail leasing | 3 | .15 | 3 | .15 | 2 | .10 | 2 | .11 | 3 | .19 | ||||||||||||||||||||||||||||
Home equity and second mortgages | (1) | (.03) | (2) | (.05) | (1) | (.02) | (1) | (.02) | (1) | (.02) | ||||||||||||||||||||||||||||
Other | 64 | .79 | 63 | .76 | 59 | .73 | 58 | .75 | 58 | .76 | ||||||||||||||||||||||||||||
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Total other retail | 66 | .47 | 64 | .44 | 60 | .42 | 59 | .43 | 60 | .45 | ||||||||||||||||||||||||||||
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Total net charge-offs, excluding covered loans | 341 | .50 | 325 | .47 | 330 | .48 | 340 | .50 | 335 | .50 | ||||||||||||||||||||||||||||
Covered loans | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||||||
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|
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|
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| |||||||||||||||||||||||||||||
Total net charge-offs | 341 | .49 | 325 | .46 | 330 | .47 | 340 | .49 | 335 | .50 | ||||||||||||||||||||||||||||
Provision for credit losses | 341 | 335 | 360 | 350 | 345 | |||||||||||||||||||||||||||||||||
Other changes (a) | -- | -- | -- | 1 | (1) | |||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||
Balance, end of period | $4,417 | $4,417 | $4,407 | $4,377 | $4,366 | |||||||||||||||||||||||||||||||||
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Components | ||||||||||||||||||||||||||||||||||||||
Allowance for loan losses | $3,918 | $3,925 | $3,908 | $3,856 | $3,816 | |||||||||||||||||||||||||||||||||
Liability for unfunded credit commitments | 499 | 492 | 499 | 521 | 550 | |||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||
Total allowance for credit losses | $4,417 | $4,417 | $4,407 | $4,377 | $4,366 | |||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||
Gross charge-offs | $453 | $464 | $433 | $437 | $417 | |||||||||||||||||||||||||||||||||
Gross recoveries | $112 | $139 | $103 | $97 | $82 | |||||||||||||||||||||||||||||||||
Allowance for credit losses as a percentage of |
| |||||||||||||||||||||||||||||||||||||
Period-end loans, excluding covered loans | 1.60 | 1.58 | 1.59 | 1.59 | 1.61 | |||||||||||||||||||||||||||||||||
Nonperforming loans, excluding covered loans | 431 | 438 | 425 | 385 | 338 | |||||||||||||||||||||||||||||||||
Nonperforming assets, excluding covered assets | 373 | 374 | 359 | 331 | 296 | |||||||||||||||||||||||||||||||||
Period-end loans | 1.59 | 1.58 | 1.58 | 1.58 | 1.60 | |||||||||||||||||||||||||||||||||
Nonperforming loans | 431 | 438 | 426 | 383 | 338 | |||||||||||||||||||||||||||||||||
Nonperforming assets | 367 | 368 | 352 | 324 | 292 | |||||||||||||||||||||||||||||||||
(a) Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the indemnification asset, and the impact of any loan sales. | ||||||||||||||||||||||||||||||||||||||
(b) Annualized and calculated on average loan balances | ||||||||||||||||||||||||||||||||||||||
8
U.S. Bancorp First Quarter 2018 Results | ||
The Company’s provision for credit losses for the first quarter of 2018 was $341 million, which was $6 million (1.8 percent) higher than the prior quarter and $4 million (1.2 percent) lower than the first quarter of 2017. Credit quality was relatively stable compared with the fourth quarter of 2017.
Total net charge-offs in the first quarter of 2018 were $341 million, compared with $325 million in the fourth quarter of 2017, and $335 million in the first quarter of 2017. Net charge-offs increased $16 million (4.9 percent) compared with the fourth quarter of 2017 mainly due to higher total commercial loan net charge-offs driven by lower recoveries, partially offset by lower total commercial real estate net charge-offs. Net charge-offs increased $6 million (1.8 percent) compared with the first quarter of 2017 primarily due to higher credit card loan net charge-offs, partially offset by lower total commercial loan net charge-offs driven by higher recoveries. The netcharge-off ratio was 0.49 percent in the first quarter of 2018, compared with 0.46 percent in the fourth quarter of 2017 and 0.50 percent in the first quarter of 2017.
The allowance for credit losses was $4,417 million at March 31, 2018, and at December 31, 2017, compared with $4,366 million at March 31, 2017. The ratio of the allowance for credit losses toperiod-end loans was 1.59 percent at March 31, 2018, compared with 1.58 percent at December 31, 2017, and 1.60 percent at March 31, 2017. The ratio of the allowance for credit losses to nonperforming loans was 431 percent at March 31, 2018, compared with 438 percent at December 31, 2017, and 338 percent at March 31, 2017.
Nonperforming assets were $1,204 million at March 31, 2018, compared with $1,200 million at December 31, 2017, and $1,495 million at March 31, 2017. The ratio of nonperforming assets to loans and other real estate was 0.43 percent at March 31, 2018, and at December 31, 2017, compared with 0.55 percent at March 31, 2017. The year-over-year decrease in nonperforming assets was driven by improvements in nonperforming total commercial loans, residential mortgages and other real estate owned, partially offset by increases in nonperforming other retail loans and total commercial real estate loans. Accruing loans 90 days or more past due were $702 million ($566 million excluding covered loans) at March 31, 2018, compared with $720 million ($572 million excluding covered loans) at December 31, 2017, and $718 million ($524 million excluding covered loans) at March 31, 2017.
DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES | ||||||||||||||||||||
(Percent) | Mar 31 2018 | Dec 31 2017 | Sep 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||||||
Delinquent loan ratios - 90 days or more past dueexcluding nonperforming loans |
| |||||||||||||||||||
Commercial | .06 | .06 | .05 | .05 | .06 | |||||||||||||||
Commercial real estate | .01 | .01 | .01 | -- | .01 | |||||||||||||||
Residential mortgages | .22 | .22 | .18 | .20 | .24 | |||||||||||||||
Credit card | 1.29 | 1.28 | 1.20 | 1.10 | 1.23 | |||||||||||||||
Other retail | .18 | .17 | .15 | .14 | .14 | |||||||||||||||
Total loans, excluding covered loans | .21 | .21 | .18 | .17 | .19 | |||||||||||||||
Covered loans | 4.57 | 4.74 | 4.66 | 4.71 | 5.34 | |||||||||||||||
Total loans | .25 | .26 | .23 | .23 | .26 | |||||||||||||||
Delinquent loan ratios - 90 days or more past dueincluding nonperforming loans |
| |||||||||||||||||||
Commercial | .37 | .31 | .33 | .39 | .52 | |||||||||||||||
Commercial real estate | .31 | .37 | .30 | .29 | .27 | |||||||||||||||
Residential mortgages | .93 | .96 | .98 | 1.10 | 1.23 | |||||||||||||||
Credit card | 1.29 | 1.28 | 1.20 | 1.10 | 1.24 | |||||||||||||||
Other retail | .48 | .46 | .43 | .42 | .43 | |||||||||||||||
Total loans, excluding covered loans | .58 | .57 | .55 | .59 | .67 | |||||||||||||||
Covered loans | 4.77 | 4.93 | 4.84 | 5.06 | 5.53 | |||||||||||||||
Total loans | .62 | .62 | .60 | .64 | .73 | |||||||||||||||
9
U.S. Bancorp First Quarter 2018 Results | ||
ASSET QUALITY (a) | ||||||||||||||||||||
($ in millions) | ||||||||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sep 30 2017 | Jun 30 2017 | Mar 31 2017 | ||||||||||||||||
Nonperforming loans | ||||||||||||||||||||
Commercial | $274 | $225 | $231 | $283 | $397 | |||||||||||||||
Lease financing | 27 | 24 | 38 | 39 | 42 | |||||||||||||||
Total commercial | 301 | 249 | 269 | 322 | 439 | |||||||||||||||
Commercial mortgages | 86 | 108 | 89 | 84 | 74 | |||||||||||||||
Construction and development | 33 | 34 | 33 | 35 | 36 | |||||||||||||||
Total commercial real estate | 119 | 142 | 122 | 119 | 110 | |||||||||||||||
Residential mortgages | 430 | 442 | 474 | 530 | 575 | |||||||||||||||
Credit card | -- | 1 | 1 | 1 | 2 | |||||||||||||||
Other retail | 168 | 168 | 163 | 158 | 157 | |||||||||||||||
Total nonperforming loans, excluding covered loans | 1,018 | 1,002 | 1,029 | 1,130 | 1,283 | |||||||||||||||
Covered loans | 6 | 6 | 6 | 12 | 7 | |||||||||||||||
Total nonperforming loans | 1,024 | 1,008 | 1,035 | 1,142 | 1,290 | |||||||||||||||
Other real estate | 124 | 141 | 164 | 157 | 155 | |||||||||||||||
Covered other real estate | 20 | 21 | 26 | 25 | 22 | |||||||||||||||
Other nonperforming assets | 36 | 30 | 26 | 25 | 28 | |||||||||||||||
Total nonperforming assets | $1,204 | $1,200 | $1,251 | $1,349 | $1,495 | |||||||||||||||
Total nonperforming assets, excluding covered assets | $1,178 | $1,173 | $1,219 | $1,312 | $1,466 | |||||||||||||||
Accruing loans 90 days or more past due, excluding covered loans | $566 | $572 | $497 | $477 | $524 | |||||||||||||||
Accruing loans 90 days or more past due | $702 | $720 | $649 | $639 | $718 | |||||||||||||||
Performing restructured loans, excluding GNMA and covered loans | $2,190 | $2,306 | $2,419 | $2,473 | $2,478 | |||||||||||||||
Performing restructured GNMA and covered loans | $1,598 | $1,713 | $1,600 | $1,803 | $1,746 | |||||||||||||||
Nonperforming assets to loans plus ORE, excluding covered assets (%) | .43 | .42 | .44 | .48 | .54 | |||||||||||||||
Nonperforming assets to loans plus ORE (%) | .43 | .43 | .45 | .49 | .55 | |||||||||||||||
(a) Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due
|
|
10
U.S. Bancorp First Quarter 2018 Results | ||
COMMON SHARES | ||||||||||||||||||||
(Millions) | 1Q 2018 | 4Q 2017 | 3Q 2017 | 2Q 2017 | 1Q 2017 | |||||||||||||||
Beginning shares outstanding | 1,656 | 1,667 | 1,679 | 1,692 | 1,697 | |||||||||||||||
Shares issued for stock incentive plans, acquisitions and other corporate purposes | 4 | 1 | -- | 1 | 6 | |||||||||||||||
Shares repurchased | (11) | (12) | (12) | (14) | (11) | |||||||||||||||
|
| |||||||||||||||||||
Ending shares outstanding | 1,649 | 1,656 | 1,667 | 1,679 | 1,692 | |||||||||||||||
|
| |||||||||||||||||||
CAPITAL POSITION | ||||||||||||||||||||
($ in millions) | Mar 31 2018 | Dec 31 2017 | Sep 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||||||
Total U.S. Bancorp shareholders’ equity | $ | 49,187 | $ | 49,040 | $ | 48,723 | $ | 48,320 | $ | 47,798 | ||||||||||
Basel III Standardized Approach (a) | ||||||||||||||||||||
Common equity tier 1 capital | $ | 33,539 | $ | 34,369 | $ | 34,876 | $ | 34,408 | $ | 33,847 | ||||||||||
Tier 1 capital | 38,991 | 39,806 | 40,411 | 39,943 | 39,374 | |||||||||||||||
Total risk-based capital | 46,640 | 47,503 | 48,104 | 47,824 | 47,279 | |||||||||||||||
Fully implemented common equity tier 1 capital ratio (a) | 9.0 | % | 9.1 | % (b) | 9.4 | % (b) | 9.3 | % (b) | 9.2 | % (b) | ||||||||||
Tier 1 capital ratio | 10.4 | 10.8 | 11.1 | 11.1 | 11.0 | |||||||||||||||
Total risk-based capital ratio | 12.5 | 12.9 | 13.2 | 13.2 | 13.3 | |||||||||||||||
Leverage ratio | 8.8 | 8.9 | 9.1 | 9.1 | 9.1 | |||||||||||||||
Basel III Advanced Approaches (a) | ||||||||||||||||||||
Fully implemented common equity tier 1 capital ratio (a) | 11.5 | 11.6 | (b) | 11.8 | (b) | 11.7 | (b) | 11.5 | (b) | |||||||||||
Tangible common equity to tangible assets (b) | 7.7 | 7.6 | 7.7 | 7.5 | 7.6 | |||||||||||||||
Tangible common equity to risk-weighted assets (b) | 9.3 | 9.4 | 9.5 | 9.4 | 9.4 | |||||||||||||||
Common equity tier 1 capital ratio calculated under the transitional standardized approach (a) | -- | 9.3 | 9.6 | 9.5 | 9.5 | |||||||||||||||
Common equity tier 1 capital ratio calculated under the transitional advanced approaches (a) | -- | 12.0 | 12.1 | 12.0 | 11.8 | |||||||||||||||
(a) Beginning January 1, 2018, the regulatory capital requirements fully reflect implementation of Basel III. Prior to 2018, the Company’s capital ratios reflected certain
(b) SeeNon-GAAP Financial Measures reconciliation on page 16
|
Total U.S. Bancorp shareholders’ equity was $49.2 billion at March 31, 2018, compared with $49.0 billion at December 31, 2017, and $47.8 billion at March 31, 2017. During the first quarter, the Company returned 68 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 9.0 percent at March 31, 2018, compared with 9.3 percent at December 31, 2017, and 9.5 percent at March 31, 2017. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III advanced approaches method was 11.5 percent at March 31, 2018, compared with 12.0 percent at December 31, 2017, and 11.8 percent at March 31, 2017.
11
U.S. Bancorp First Quarter 2018 Results | ||
Investor Conference Call
|
On Wednesday, April 18, 2018, at 8:00 a.m. CDT, Andy Cecere, Chairman, President and Chief Executive Officer, and Terry Dolan, Vice Chairman and Chief Financial Officer, will host a conference call to review the financial results. The conference call will be available online or by telephone. To access the webcast and presentation, visit U.S. Bancorp’s website at usbank.com and click on “About US”, “Investor Relations” and “Webcasts & Presentations.” To access the conference call from locations within the United States and Canada, please dial866-316-1409. Participants calling from outside the United States and Canada, please dial706-634-9086. The conference ID number for all participants is 8771339. For those unable to participate during the live call, a recording will be available at approximately 11:00 a.m. CDT on Wednesday, April 18 and will be accessible until Wednesday, April 25 at 11:00 p.m. CDT. To access the recorded message within the United States and Canada, please dial855-859-2056. If calling from outside the United States and Canada, please dial404-537-3406 to access the recording. The conference ID is 8771339.
About U.S. Bancorp
|
Minneapolis-based U.S. Bancorp (NYSE: USB), with $460 billion in assets as of March 31, 2018, is the parent company of U.S. Bank National Association, the fifth largest commercial bank in the United States. The Company operates 3,054 banking offices in 25 states and 4,729 ATMs and provides a comprehensive line of banking, investment, mortgage, trust and payment services products to consumers, businesses and institutions. Visit U.S. Bancorp on the web at www.usbank.com.
Forward-looking Statements
|
The following information appears in accordance with the Private Securities Litigation Reform Act of 1995:
This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. A reversal or slowing of the current economic recovery or another severe contraction could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities. Global financial markets could experience a recurrence of significant turbulence, which could reduce the availability of funding to certain financial institutions and lead to a tightening of credit, a reduction of business activity, and increased market volatility. Stress in the commercial real estate markets, as well as a downturn in the residential real estate markets could cause credit losses and deterioration in asset values. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by deterioration in general business and economic conditions; changes in interest rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks andnon-banks; changes in customer behavior and preferences; breaches in data security; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputational risk.
For discussion of these and other risks that could cause actual results to differ from expectations, refer to U.S. Bancorp’s Annual Report on Form10-K for the year ended December 31, 2017, 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. However, factors other than these also could adversely affect U.S. Bancorp’s results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.
12
U.S. Bancorp First Quarter 2018 Results | ||
Non-GAAP Financial Measures
|
In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:
• | Tangible common equity to tangible assets |
• | Tangible common equity to risk-weighted assets |
• | Return on tangible common equity |
These capital measures are viewed by management as useful additional methods of evaluating the Company’s utilization of its capital held and the level of capital available to withstand unexpected negative market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Company’s capital position relative to other financial services companies. These capital measures are not defined in generally accepted accounting principles (“GAAP”) or are not defined in federal banking regulations. As a result, these capital measures disclosed by the Company may be considerednon-GAAP financial measures. In addition, certain capital measures related to prior periods are presented on the same basis as those in the current period. The effective capital ratios defined by banking regulations for these periods were subject to certain transitional provisions. Management believes this information helps investors assess trends in the Company’s capital adequacy.
The Company also discloses net interest income and related ratios and analysis on a taxable-equivalent basis, which may also be considerednon-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 andtax-exempt sources. In addition, certain performance measures, including the efficiency ratio and net interest margin utilize net interest income on a taxable-equivalent basis.
There may be limits in the usefulness of these measures to investors. As a result, the Company encourages readers to consider the consolidated financial statements and other financial information contained in this press release in their entirety, and not to rely on any single financial measure. A table follows that shows the Company’s calculation of thesenon-GAAP financial measures.
13
CONSOLIDATED STATEMENT OF INCOME | ||||||||
Three Months Ended | ||||||||
(Dollars and Shares in Millions, Except Per Share Data) | March 31, | |||||||
(Unaudited) | 2018 | 2017 | ||||||
Interest Income | ||||||||
Loans | $3,095 | $2,790 | ||||||
Loans held for sale | 33 | 35 | ||||||
Investment securities | 613 | 530 | ||||||
Other interest income | 50 | 38 | ||||||
Total interest income | 3,791 | 3,393 | ||||||
Interest Expense | ||||||||
Deposits | 345 | 199 | ||||||
Short-term borrowings | 75 | 24 | ||||||
Long-term debt | 203 | 190 | ||||||
Total interest expense | 623 | 413 | ||||||
Net interest income | 3,168 | 2,980 | ||||||
Provision for credit losses | 341 | 345 | ||||||
Net interest income after provision for credit losses | 2,827 | 2,635 | ||||||
Noninterest Income | ||||||||
Credit and debit card revenue | 324 | 299 | ||||||
Corporate payment products revenue | 154 | 137 | ||||||
Merchant processing services | 363 | 354 | ||||||
ATM processing services | 79 | 71 | ||||||
Trust and investment management fees | 398 | 368 | ||||||
Deposit service charges | 182 | 172 | ||||||
Treasury management fees | 150 | 153 | ||||||
Commercial products revenue | 220 | 247 | ||||||
Mortgage banking revenue | 184 | 207 | ||||||
Investment products fees | 46 | 42 | ||||||
Securities gains (losses), net | 5 | 29 | ||||||
Other | 167 | 180 | ||||||
Total noninterest income | 2,272 | 2,259 | ||||||
Noninterest Expense | ||||||||
Compensation | 1,523 | 1,391 | ||||||
Employee benefits | 330 | 301 | ||||||
Net occupancy and equipment | 265 | 247 | ||||||
Professional services | 83 | 96 | ||||||
Marketing and business development | 97 | 90 | ||||||
Technology and communications | 235 | 217 | ||||||
Postage, printing and supplies | 80 | 81 | ||||||
Other intangibles | 39 | 44 | ||||||
Other | 403 | 442 | ||||||
Total noninterest expense | 3,055 | 2,909 | ||||||
Income before income taxes | 2,044 | 1,985 | ||||||
Applicable income taxes | 362 | 499 | ||||||
Net income | 1,682 | 1,486 | ||||||
Net (income) loss attributable to noncontrolling interests | (7) | (13) | ||||||
Net income attributable to U.S. Bancorp | $1,675 | $1,473 | ||||||
Net income applicable to U.S. Bancorp common shareholders | $1,597 | $1,387 | ||||||
Earnings per common share | $.97 | $.82 | ||||||
Diluted earnings per common share | $.96 | $.82 | ||||||
Dividends declared per common share | $.30 | $.28 | ||||||
Average common shares outstanding | 1,652 | 1,694 | ||||||
Average diluted common shares outstanding | 1,657 | 1,701 |
14
CONSOLIDATED ENDING BALANCE SHEET | ||||||||||||
March 31, | December 31, | March 31, | ||||||||||
(Dollars in Millions) | 2018 | 2017 | 2017 | |||||||||
Assets | (Unaudited | ) | (Unaudited | ) | ||||||||
Cash and due from banks | $19,246 | $19,505 | $20,319 | |||||||||
Investment securities | ||||||||||||
Held-to-maturity | 44,612 | 44,362 | 43,393 | |||||||||
Available-for-sale | 67,125 | 68,137 | 67,031 | |||||||||
Loans held for sale | 4,777 | 3,554 | 2,738 | |||||||||
Loans | ||||||||||||
Commercial | 98,097 | 97,561 | 94,491 | |||||||||
Commercial real estate | 40,140 | 40,463 | 42,832 | |||||||||
Residential mortgages | 60,477 | 59,783 | 58,266 | |||||||||
Credit card | 20,901 | 22,180 | 20,387 | |||||||||
Other retail | 55,317 | 57,324 | 53,966 | |||||||||
Total loans, excluding covered loans | 274,932 | 277,311 | 269,942 | |||||||||
Covered loans | 2,979 | 3,121 | 3,635 | |||||||||
Total loans | 277,911 | 280,432 | 273,577 | |||||||||
Less allowance for loan losses | (3,918 | ) | (3,925 | ) | (3,816 | ) | ||||||
Net loans | 273,993 | 276,507 | 269,761 | |||||||||
Premises and equipment | 2,441 | 2,432 | 2,432 | |||||||||
Goodwill | 9,440 | 9,434 | 9,348 | |||||||||
Other intangible assets | 3,388 | 3,228 | 3,313 | |||||||||
Other assets | 35,097 | 34,881 | 31,187 | |||||||||
Total assets | $460,119 | $462,040 | $449,522 | |||||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Deposits | ||||||||||||
Noninterest-bearing | $82,211 | $87,557 | $85,222 | |||||||||
Interest-bearing | 262,315 | 259,658 | 251,651 | |||||||||
Total deposits | 344,526 | 347,215 | 336,873 | |||||||||
Short-term borrowings | 17,703 | 16,651 | 12,183 | |||||||||
Long-term debt | 33,201 | 32,259 | 35,948 | |||||||||
Other liabilities | 14,877 | 16,249 | 16,085 | |||||||||
Total liabilities | 410,307 | 412,374 | 401,089 | |||||||||
Shareholders’ equity | ||||||||||||
Preferred stock | 5,419 | 5,419 | 5,419 | |||||||||
Common stock | 21 | 21 | 21 | |||||||||
Capital surplus | 8,438 | 8,464 | 8,388 | |||||||||
Retained earnings | 55,549 | 54,142 | 51,069 | |||||||||
Less treasury stock | (18,047 | ) | (17,602 | ) | (15,660 | ) | ||||||
Accumulated other comprehensive income (loss) | (2,193 | ) | (1,404 | ) | (1,439 | ) | ||||||
Total U.S. Bancorp shareholders’ equity | 49,187 | 49,040 | 47,798 | |||||||||
Noncontrolling interests | 625 | 626 | 635 | |||||||||
Total equity | 49,812 | 49,666 | 48,433 | |||||||||
Total liabilities and equity | $460,119 | $462,040 | $449,522 |
15
NON-GAAP FINANCIAL MEASURES | ||||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
(Dollars in Millions, Unaudited) | 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
Total equity | $49,812 | $49,666 | $49,351 | $48,949 | $48,433 | |||||||||||||||
Preferred stock | (5,419) | (5,419) | (5,419) | (5,419) | (5,419) | |||||||||||||||
Noncontrolling interests | (625) | (626) | (628) | (629) | (635) | |||||||||||||||
Goodwill (net of deferred tax liability) (1) | (8,609) | (8,613) | (8,141) | (8,181) | (8,186) | |||||||||||||||
Intangible assets, other than mortgage servicing rights | (608) | (583) | (595) | (634) | (671) | |||||||||||||||
Tangible common equity (a) | 34,551 | 34,425 | 34,568 | 34,086 | 33,522 | |||||||||||||||
Total assets | 460,119 | 462,040 | 459,227 | 463,844 | 449,522 | |||||||||||||||
Goodwill (net of deferred tax liability) (1) | (8,609) | (8,613) | (8,141) | (8,181) | (8,186) | |||||||||||||||
Intangible assets, other than mortgage servicing rights | (608) | (583) | (595) | (634) | (671) | |||||||||||||||
Tangible assets (b) | 450,902 | 452,844 | 450,491 | 455,029 | 440,665 | |||||||||||||||
Risk-weighted assets, determined in accordance with the Basel III standardized approach (c) | 373,141 | * | 367,771 | 363,957 | 361,164 | 356,373 | ||||||||||||||
Tangible common equity (as calculated above) | 34,425 | 34,568 | 34,086 | 33,522 | ||||||||||||||||
Adjustments (2) | (550) | (52) | (51) | (136) | ||||||||||||||||
Common equity tier 1 capital estimated for the Basel III fully implemented standardized and advanced approaches (d) | 33,875 | 34,516 | 34,035 | 33,386 | ||||||||||||||||
Risk-weighted assets, determined in accordance with prescribed transitional standardized approach regulatory requirements | 367,771 | 363,957 | 361,164 | 356,373 | ||||||||||||||||
Adjustments (3) | 4,473 | 3,907 | 3,967 | 4,731 | ||||||||||||||||
Risk-weighted assets estimated for the Basel III fully implemented standardized approach (e) | 372,244 | 367,864 | 365,131 | 361,104 | ||||||||||||||||
Risk-weighted assets, determined in accordance with prescribed transitional advanced approaches regulatory requirements | 287,211 | 287,800 | 287,124 | 285,963 | ||||||||||||||||
Adjustments (4) | 4,769 | 4,164 | 4,231 | 5,046 | ||||||||||||||||
Risk-weighted assets estimated for the Basel III fully implemented advanced approaches (f) | 291,980 | 291,964 | 291,355 | 291,009 | ||||||||||||||||
Ratios * | ||||||||||||||||||||
Tangible common equity to tangible assets (a)/(b) | 7.7 | % | 7.6 | % | 7.7 | % | 7.5 | % | 7.6 | % | ||||||||||
Tangible common equity to risk-weighted assets (a)/(c) | 9.3 | 9.4 | 9.5 | 9.4 | 9.4 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach (d)/(e) | 9.1 | 9.4 | 9.3 | 9.2 | ||||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches (d)/(f) | 11.6 | 11.8 | 11.7 | 11.5 | ||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
2018 | 2017 | 2017 | 2017 | 2017 | ||||||||||||||||
Net income applicable to U.S. Bancorp common shareholders | $1,597 | $1,611 | $1,485 | $1,430 | $1,387 | |||||||||||||||
Intangibles amortization(net-of-tax) | 31 | 28 | 29 | 28 | 29 | |||||||||||||||
Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization | 1,628 | 1,639 | 1,514 | 1,458 | 1,416 | |||||||||||||||
Annualized net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization (g) | 6,602 | 6,503 | 6,007 | 5,848 | 5,743 | |||||||||||||||
Average total equity | 49,450 | 49,461 | 49,447 | 48,909 | 48,558 | |||||||||||||||
Less: Average preferred stock | 5,419 | 5,419 | 5,419 | 5,419 | 5,706 | |||||||||||||||
Less: Average noncontrolling interests | 625 | 627 | 628 | 636 | 635 | |||||||||||||||
Less: Average goodwill (net of deferred tax liability) (1) | 8,627 | 8,154 | 8,153 | 8,160 | 8,175 | |||||||||||||||
Less: Average intangible assets, other than mortgage servicing rights | 603 | 591 | 615 | 650 | 691 | |||||||||||||||
Average U.S. Bancorp common shareholders’ equity, excluding intangible assets (h) | 34,176 | 34,670 | 34,632 | 34,044 | 33,351 | |||||||||||||||
Return on tangible common equity (g)/(h) | 19.3 | % | 18.8 | % | 17.3 | % | 17.2 | % | 17.2 | % |
* | Preliminary data. Subject to change prior to filings with applicable regulatory agencies. |
(1) | Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements. |
(2) | Includes net losses on cash flow hedges included in accumulated other comprehensive income (loss) and other adjustments. |
(3) | Includes higher risk-weighting for unfunded loan commitments, investment securities, residential mortgages, mortgage servicing rights and other adjustments. |
(4) | Primarily reflects higher risk-weighting for mortgage servicing rights. |
16
NON-GAAP FINANCIAL MEASURES | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
(Dollars in Millions, Unaudited) | | March 31, 2018 | | | December 31, 2017 | | | September 30, 2017 | | | June 30, 2017 | | | March 31, 2017 | | |||||
Net interest income | $3,168 | $3,175 | $3,176 | $3,049 | $2,980 | |||||||||||||||
Taxable-equivalent adjustment (1) | 29 | 53 | 51 | 51 | 50 | |||||||||||||||
Net interest income, on a taxable-equivalent basis | 3,197 | 3,228 | 3,227 | 3,100 | 3,030 | |||||||||||||||
Net interest income, on a taxable-equivalent basis (as calculated above) | 3,197 | 3,228 | 3,227 | 3,100 | 3,030 | |||||||||||||||
Noninterest income | 2,272 | 2,370 | 2,340 | 2,348 | 2,259 | |||||||||||||||
Less: Securities gains (losses), net | 5 | 10 | 9 | 9 | 29 | |||||||||||||||
Total net revenue, excluding net securities gains (losses) (a) | 5,464 | 5,588 | 5,558 | 5,439 | 5,260 | |||||||||||||||
Noninterest expense (b) | 3,055 | 3,899 | 2,998 | 2,984 | 2,909 | |||||||||||||||
Less: Intangible amortization | 39 | 44 | 44 | 43 | 44 | |||||||||||||||
Noninterest expense, excluding intangible amortization (c) | 3,016 | 3,855 | 2,954 | 2,941 | 2,865 | |||||||||||||||
Efficiency ratio (b)/(a) | 55.9 | % | 69.8 | % | 53.9 | % | 54.9 | % | 55.3 | % | ||||||||||
Tangible efficiency ratio (c)/(a) | 55.2 | 69.0 | 53.1 | 54.1 | 54.5 |
(1) Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent for 2018 and 35 percent for 2017.
17
LINE OF BUSINESS FINANCIAL PERFORMANCE (a) | ||||||||||||||||||||||||
($ in millions) | Net Income Attributable | |||||||||||||||||||||||
to U.S. Bancorp | Percent Change | 1Q 2018 | ||||||||||||||||||||||
Business Line | 1Q 2018 | 4Q 2017 | 1Q 2017 | 1Q18 vs 4Q17 | 1Q18 vs 1Q17 | Earnings Composition | ||||||||||||||||||
Corporate and Commercial | ||||||||||||||||||||||||
Banking | $384 | $366 | $334 | 4.9 | 15.0 | 23 | % | |||||||||||||||||
Consumer and Business | ||||||||||||||||||||||||
Banking | 553 | 459 | 422 | 20.5 | 31.0 | 33 | ||||||||||||||||||
Wealth Management and | ||||||||||||||||||||||||
Investment Services | 217 | 177 | 156 | 22.6 | 39.1 | 13 | ||||||||||||||||||
Payment Services | 343 | 315 | 295 | 8.9 | 16.3 | 20 | ||||||||||||||||||
Treasury and Corporate | ||||||||||||||||||||||||
Support | 178 | 365 | 266 | (51.2 | ) | (33.1 | ) | 11 | ||||||||||||||||
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| |||||||||||||||||||||
Consolidated Company | $1,675 | $1,682 | $1,473 | (.4 | ) | 13.7 | 100 | % | ||||||||||||||||
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(a) preliminary data
|
Lines of Business
The Company’s major lines of business are Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate resources and assess performance. Noninterest expenses incurred by centrally managed operations or business lines that directly support another business line’s operations are charged to the applicable business line based on its utilization of those services, primarily measured by the volume of customer activities, number of employees or other relevant factors. These allocated expenses are reported as net shared services expense within noninterest expense. Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Company’s diverse customer base. During 2018, certain organization and methodology changes were made and, accordingly, prior period results were restated and presented on a comparable basis.
Income taxes are assessed to each line of business at a managerial rate of 25 percent starting in the first quarter of 2018 compared with a managerial rate of 36.4 percent during 2017 due to the tax reform legislation enacted during the fourth quarter of 2017. Stock-based compensation is charged to each line of business through net shared services and includes the impact of changes in vesting provisions.
2
CORPORATE AND COMMERCIAL BANKING (a) | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q | 4Q | 1Q | 1Q18 vs | 1Q18 vs | ||||||||||||||||
2018 | 2017 | 2017 | 4Q17 | 1Q17 | ||||||||||||||||
Condensed Income Statement | ||||||||||||||||||||
Net interest income (taxable-equivalent basis) | $724 | $736 | $712 | (1.6 | ) | 1.7 | ||||||||||||||
Noninterest income | 207 | 206 | 247 | .5 | (16.2 | ) | ||||||||||||||
Securities gains (losses), net | -- | -- | (3) | -- | nm | |||||||||||||||
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| |||||||||||||||||||
Total net revenue | 931 | 942 | 956 | (1.2 | ) | (2.6 | ) | |||||||||||||
Noninterest expense | 404 | 389 | 394 | 3.9 | 2.5 | |||||||||||||||
Other intangibles | 1 | 1 | 1 | -- | -- | |||||||||||||||
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| |||||||||||||||||||
Total noninterest expense | 405 | 390 | 395 | 3.8 | 2.5 | |||||||||||||||
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| |||||||||||||||||||
Income before provision and taxes | 526 | 552 | 561 | (4.7 | ) | (6.2 | ) | |||||||||||||
Provision for credit losses | 14 | (23) | 36 | nm | (61.1 | ) | ||||||||||||||
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| |||||||||||||||||||
Income before income taxes | 512 | 575 | 525 | (11.0 | ) | (2.5 | ) | |||||||||||||
Income taxes and taxable-equivalent adjustment | 128 | 209 | 191 | (38.8 | ) | (33.0 | ) | |||||||||||||
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| |||||||||||||||||||
Net income | 384 | 366 | 334 | 4.9 | 15.0 | |||||||||||||||
Net (income) loss attributable to noncontrolling interests | -- | -- | -- | -- | -- | |||||||||||||||
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| |||||||||||||||||||
Net income attributable to U.S. Bancorp | $384 | $366 | $334 | 4.9 | 15.0 | |||||||||||||||
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Average Balance Sheet Data | ||||||||||||||||||||
Loans | $93,951 | $94,047 | $93,727 | (.1 | ) | .2 | ||||||||||||||
Other earning assets | 2,858 | 2,988 | 2,882 | (4.4 | ) | (.8 | ) | |||||||||||||
Goodwill | 1,647 | 1,647 | 1,647 | -- | -- | |||||||||||||||
Other intangible assets | 12 | 12 | 15 | -- | (20.0 | ) | ||||||||||||||
Assets | 102,642 | 102,613 | 102,309 | -- | .3 | |||||||||||||||
Noninterest-bearing deposits | 34,388 | 35,332 | 36,939 | (2.7 | ) | (6.9 | ) | |||||||||||||
Interest-bearing deposits | 69,954 | 73,506 | 70,560 | (4.8 | ) | (.9 | ) | |||||||||||||
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Total deposits | 104,342 | 108,838 | 107,499 | (4.1 | ) | (2.9 | ) | |||||||||||||
Total U.S. Bancorp shareholders’ equity | 10,417 | 9,930 | 9,680 | 4.9 | 7.6 | |||||||||||||||
(a) preliminary data
|
Corporate and Commercial Banking offers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets services, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution,non-profit and public sector clients.
Corporate and Commercial Banking contributed $384 million of the Company’s net income in the first quarter of 2018, compared with $334 million in the first quarter of 2017. Total net revenue decreased $25 million (2.6 percent) due to a $37 million (15.2 percent) decrease in total noninterest income, partially offset by a $12 million (1.7 percent) increase in net interest income. Net interest income grew year-over-year primarily due to the impact of rising rates on the margin benefit from deposits, partially offset by lower rates on loans, reflecting a competitive marketplace, and lower noninterest-bearing deposits. Total noninterest income decreased year-over-year primarily due to stronger capital markets volume in the first quarter of 2017 and lower loan fees in the current year reflecting industry trends in these revenue categories. Total noninterest expense was $10 million (2.5 percent) higher compared with a year ago due to an increase in net shared services expense allocated to manage the business, partially offset by lower variable compensation related to business production. The provision for credit losses decreased $22 million (61.1 percent) primarily due to lower net charge-offs.
3
CONSUMER AND BUSINESS BANKING (a) | ||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||
1Q | 4Q | 1Q | 1Q18 vs | 1Q18 vs | ||||||||||||||
2018 | 2017 | 2017 | 4Q17 | 1Q17 | ||||||||||||||
| ||||||||||||||||||
Condensed Income Statement | ||||||||||||||||||
Net interest income (taxable-equivalent basis) | $1,524 | $1,514 | $1,418 | .7 | 7.5 | |||||||||||||
Noninterest income | 568 | 591 | 571 | (3.9 | ) | (.5) | ||||||||||||
Securities gains (losses), net | -- | -- | -- | -- | -- | |||||||||||||
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| |||||||||||||||||
Total net revenue | 2,092 | 2,105 | 1,989 | (.6 | ) | 5.2 | ||||||||||||
Noninterest expense | 1,291 | 1,274 | 1,253 | 1.3 | 3.0 | |||||||||||||
Other intangibles | 7 | 8 | 7 | (12.5 | ) | -- | ||||||||||||
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Total noninterest expense | 1,298 | 1,282 | 1,260 | 1.2 | 3.0 | |||||||||||||
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Income before provision and taxes | 794 | 823 | 729 | (3.5 | ) | 8.9 | ||||||||||||
Provision for credit losses | 56 | 102 | 65 | (45.1 | ) | (13.8) | ||||||||||||
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Income before income taxes | 738 | 721 | 664 | 2.4 | 11.1 | |||||||||||||
Income taxes and taxable-equivalent adjustment | 185 | 262 | 242 | (29.4 | ) | (23.6) | ||||||||||||
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Net income | 553 | 459 | 422 | 20.5 | 31.0 | |||||||||||||
Net (income) loss attributable to noncontrolling interests | -- | -- | -- | -- | -- | |||||||||||||
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Net income attributable to U.S. Bancorp | $553 | $459 | $422 | 20.5 | 31.0 | |||||||||||||
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Average Balance Sheet Data | ||||||||||||||||||
Loans | $143,179 | $143,395 | $139,107 | (.2 | ) | 2.9 | ||||||||||||
Other earning assets | 3,409 | 4,250 | 4,022 | (19.8 | ) | (15.2) | ||||||||||||
Goodwill | 3,681 | 3,681 | 3,681 | -- | -- | |||||||||||||
Other intangible assets | 2,871 | 2,760 | 2,768 | 4.0 | 3.7 | |||||||||||||
Assets | 157,544 | 158,625 | 153,647 | (.7 | ) | 2.5 | ||||||||||||
Noninterest-bearing deposits | 27,381 | 28,936 | 26,965 | (5.4 | ) | 1.5 | ||||||||||||
Interest-bearing deposits | 123,519 | 122,029 | 119,355 | 1.2 | 3.5 | |||||||||||||
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Total deposits | 150,900 | 150,965 | 146,320 | -- | 3.1 | |||||||||||||
Total U.S. Bancorp shareholders’ equity | 12,219 | 11,424 | 11,522 | 7.0 | 6.0 | |||||||||||||
(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 $553 million of the Company’s net income in the first quarter of 2018, compared with $422 million in the first quarter of 2017. Total net revenue increased $103 million (5.2 percent) due to a $106 million (7.5 percent) increase in net interest income, partially offset by a $3 million (0.5 percent) decrease in total noninterest income. Net interest income increased primarily due to the impact of rising rates on the margin benefit from deposits along with growth in average loan and deposit balances, partially offset by lower rates on loans. Total noninterest income decreased slightly year-over-year principally driven by lower mortgage banking revenue, in line with industry trends, due to lower margin on mortgage loan sales, partially offset by the valuation of mortgage servicing rights, net of hedging activities. Partially offsetting the impact of lower mortgage banking revenue were higher deposit service charges reflecting higher transaction volumes and account growth, and higher ATM processing services fees. Total noninterest expense in the first quarter of 2018 increased $38 million (3.0 percent) primarily due to higher net shared services expense allocated to manage the business, reflecting the impact of investments supporting business growth, and higher personnel expense, reflecting the impact of merit increases and variable compensation related to business production, partially offset by lower mortgage banking costs. The provision for credit losses decreased $9 million (13.8 percent) reflecting a favorable change in the reserve allocation as well as lower net charge-offs.
4
WEALTH MANAGEMENT AND INVESTMENT SERVICES (a) | ||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||
1Q | 4Q | 1Q | 1Q18 vs | 1Q18 vs | ||||||||||||||
2018 | 2017 | 2017 | 4Q17 | 1Q17 | ||||||||||||||
| ||||||||||||||||||
Condensed Income Statement | ||||||||||||||||||
Net interest income (taxable-equivalent basis) | $284 | $272 | $250 | 4.4 | 13.6 | |||||||||||||
Noninterest income | 432 | 423 | 399 | 2.1 | 8.3 | |||||||||||||
Securities gains (losses), net | -- | -- | -- | -- | -- | |||||||||||||
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| |||||||||||||||||
Total net revenue | 716 | 695 | 649 | 3.0 | 10.3 | |||||||||||||
Noninterest expense | 421 | 413 | 398 | 1.9 | 5.8 | |||||||||||||
Other intangibles | 4 | 5 | 5 | (20.0 | ) | (20.0) | ||||||||||||
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Total noninterest expense | 425 | 418 | 403 | 1.7 | 5.5 | |||||||||||||
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| |||||||||||||||||
Income before provision and taxes | 291 | 277 | 246 | 5.1 | 18.3 | |||||||||||||
Provision for credit losses | 1 | (2 | ) | 1 | nm | -- | ||||||||||||
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| |||||||||||||||||
Income before income taxes | 290 | 279 | 245 | 3.9 | 18.4 | |||||||||||||
Income taxes and taxable-equivalent adjustment | 73 | 102 | 89 | (28.4 | ) | (18.0) | ||||||||||||
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Net income | 217 | 177 | 156 | 22.6 | 39.1 | |||||||||||||
Net (income) loss attributable to noncontrolling interests | -- | -- | -- | -- | -- | |||||||||||||
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Net income attributable to U.S. Bancorp | $217 | $177 | $156 | 22.6 | 39.1 | |||||||||||||
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Average Balance Sheet Data | ||||||||||||||||||
Loans | $8,882 | $8,805 | $7,966 | .9 | 11.5 | |||||||||||||
Other earning assets | 164 | 168 | 153 | (2.4 | ) | 7.2 | ||||||||||||
Goodwill | 1,570 | 1,569 | 1,566 | .1 | .3 | |||||||||||||
Other intangible assets | 70 | 74 | 87 | (5.4 | ) | (19.5) | ||||||||||||
Assets | 11,875 | 11,982 | 11,446 | (.9 | ) | 3.7 | ||||||||||||
Noninterest-bearing deposits | 14,329 | 14,765 | 13,841 | (3.0 | ) | 3.5 | ||||||||||||
Interest-bearing deposits | 56,780 | 58,622 | 56,987 | (3.1 | ) | (.4) | ||||||||||||
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Total deposits | 71,109 | 73,387 | 70,828 | (3.1 | ) | .4 | ||||||||||||
Total U.S. Bancorp shareholders’ equity | 2,399 | 2,346 | 2,403 | 2.3 | (.2) | |||||||||||||
(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 five businesses: Wealth Management, Corporate Trust Services, U.S. Bancorp Asset Management, Institutional Trust & Custody and Fund Services.
Wealth Management and Investment Services contributed $217 million of the Company’s net income in the first quarter of 2018, compared with $156 million in the first quarter of 2017. Total net revenue increased $67 million (10.3 percent) year-over-year driven by an increase in net interest income of $34 million (13.6 percent) and a $33 million (8.3 percent) increase in total noninterest income. Net interest income increased year-over-year primarily due to the impact of rising rates on the margin benefit from deposits along with growth in average loan and deposit balances, partially offset by lower rates on loans. Total noninterest income increased year-over-year principally due to business growth, net asset inflows and favorable market conditions. Total noninterest expense increased $22 million (5.5 percent) primarily as a result of higher net shared services expense allocated to manage the business, reflecting the impact of implementation costs of capital investments to support business growth, and higher compensation expense, reflecting higher staffing along with merit increases and variable compensation related to business production, partially offset by lower professional services expense. The provision for credit losses was flat compared with the prior year quarter.
5
PAYMENT SERVICES (a) | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q 2018 | 4Q 2017 | 1Q 2017 | 1Q18 vs 4Q17 | 1Q18 vs 1Q17 | ||||||||||||||||
Condensed Income Statement | ||||||||||||||||||||
Net interest income (taxable-equivalent basis) | $612 | $611 | $595 | .2 | 2.9 | |||||||||||||||
Noninterest income | 847 | 869 | 798 | (2.5 | ) | 6.1 | ||||||||||||||
Securities gains (losses), net | -- | -- | -- | -- | -- | |||||||||||||||
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| |||||||||||||||||||
Total net revenue | 1,459 | 1,480 | 1,393 | (1.4 | ) | 4.7 | ||||||||||||||
Noninterest expense | 702 | 667 | 646 | 5.2 | 8.7 | |||||||||||||||
Other intangibles | 27 | 30 | 31 | (10.0 | ) | (12.9 | ) | |||||||||||||
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| |||||||||||||||||||
Total noninterest expense | 729 | 697 | 677 | 4.6 | 7.7 | |||||||||||||||
|
| |||||||||||||||||||
Income before provision and taxes | 730 | 783 | 716 | (6.8 | ) | 2.0 | ||||||||||||||
Provision for credit losses | 272 | 288 | 241 | (5.6 | ) | 12.9 | ||||||||||||||
|
| |||||||||||||||||||
Income before income taxes | 458 | 495 | 475 | (7.5 | ) | (3.6 | ) | |||||||||||||
Income taxes and | ||||||||||||||||||||
taxable-equivalent adjustment | 115 | 180 | 173 | (36.1 | ) | (33.5 | ) | |||||||||||||
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| |||||||||||||||||||
Net income | 343 | 315 | 302 | 8.9 | 13.6 | |||||||||||||||
Net (income) loss attributable to noncontrolling interests | -- | -- | (7) | -- | nm | |||||||||||||||
|
| |||||||||||||||||||
Net income attributable to U.S. Bancorp | $343 | $315 | $295 | 8.9 | 16.3 | |||||||||||||||
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| |||||||||||||||||||
Average Balance Sheet Data | ||||||||||||||||||||
Loans | $30,062 | $30,157 | $28,936 | (.3 | ) | 3.9 | ||||||||||||||
Other earning assets | 276 | 246 | 257 | 12.2 | 7.4 | |||||||||||||||
Goodwill | 2,542 | 2,482 | 2,453 | 2.4 | 3.6 | |||||||||||||||
Other intangible assets | 396 | 372 | 437 | 6.5 | (9.4 | ) | ||||||||||||||
Assets | 36,173 | 35,704 | 34,566 | 1.3 | 4.6 | |||||||||||||||
Noninterest-bearing deposits | 1,127 | 1,078 | 1,024 | 4.5 | 10.1 | |||||||||||||||
Interest-bearing deposits | 106 | 106 | 100 | -- | 6.0 | |||||||||||||||
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Total deposits | 1,233 | 1,184 | 1,124 | 4.1 | 9.7 | |||||||||||||||
Total U.S. Bancorp shareholders’ equity | 6,622 | 6,249 | 6,405 | 6.0 | 3.4 | |||||||||||||||
(a) preliminary data
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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 $343 million of the Company’s net income in the first quarter of 2018, compared with $295 million in the first quarter of 2017. Total net revenue increased $66 million (4.7 percent) due to a $17 million (2.9 percent) increase in net interest income and a $49 million (6.1 percent) increase in total noninterest income. Net interest income increased year-over-year primarily due to higher loan volumes. Total noninterest income increased year-over-year primarily due to higher credit and debit card revenue and corporate payment products revenue driven by higher sales volumes. Total noninterest expense increased $52 million (7.7 percent) over the first quarter of 2017 principally due to higher net shared services expense allocated to manage the business, reflecting the impact of investments supporting business growth and personnel expense, and higher equipment costs. The provision for credit losses increased $31 million (12.9 percent) primarily due to higher net charge-offs.
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TREASURY AND CORPORATE SUPPORT (a) | ||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||
1Q | 4Q | 1Q | 1Q18 vs | 1Q18 vs | ||||||||||||||||
2018 | 2017 | 2017 | 4Q17 | 1Q17 | ||||||||||||||||
Condensed Income Statement | ||||||||||||||||||||
Net interest income (taxable-equivalent basis) | $53 | $95 | $55 | (44.2 | ) | (3.6 | ) | |||||||||||||
Noninterest income | 213 | 271 | 215 | (21.4 | ) | (.9 | ) | |||||||||||||
Securities gains (losses), net | 5 | 10 | 32 | (50.0 | ) | (84.4 | ) | |||||||||||||
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Total net revenue | 271 | 376 | 302 | (27.9 | ) | (10.3 | ) | |||||||||||||
Noninterest expense | 198 | 1,112 | 174 | (82.2 | ) | 13.8 | ||||||||||||||
Other intangibles | -- | -- | -- | -- | -- | |||||||||||||||
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Total noninterest expense | 198 | 1,112 | 174 | (82.2 | ) | 13.8 | ||||||||||||||
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Income (loss) before provision and taxes | 73 | (736) | 128 | nm | (43.0 | ) | ||||||||||||||
Provision for credit losses | (2) | (30) | 2 | 93.3 | nm | |||||||||||||||
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Income (loss) before income taxes | 75 | (706) | 126 | nm | (40.5 | ) | ||||||||||||||
Income taxes and taxable-equivalent adjustment | (110) | (1,075) | (146) | 89.8 | 24.7 | |||||||||||||||
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Net income | 185 | 369 | 272 | (49.9 | ) | (32.0 | ) | |||||||||||||
Net (income) loss attributable to noncontrolling interests | (7) | (4) | (6) | (75.0 | ) | (16.7 | ) | |||||||||||||
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Net income attributable to U.S. Bancorp | $178 | $365 | $266 | (51.2 | ) | (33.1 | ) | |||||||||||||
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Average Balance Sheet Data | ||||||||||||||||||||
Loans | $3,314 | $3,347 | $3,422 | (1.0 | ) | (3.2 | ) | |||||||||||||
Other earning assets | 125,754 | 126,107 | 118,809 | (.3 | ) | 5.8 | ||||||||||||||
Goodwill | -- | -- | -- | -- | -- | |||||||||||||||
Other intangible assets | -- | -- | -- | -- | -- | |||||||||||||||
Assets | 146,054 | 147,174 | 139,343 | (.8 | ) | 4.8 | ||||||||||||||
Noninterest-bearing deposits | 2,257 | 2,192 | 1,969 | 3.0 | 14.6 | |||||||||||||||
Interest-bearing deposits | 4,739 | 2,596 | 693 | 82.6 | nm | |||||||||||||||
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Total deposits | 6,996 | 4,788 | 2,662 | 46.1 | nm | |||||||||||||||
Total U.S. Bancorp shareholders’ equity | 17,168 | 18,885 | 17,913 | (9.1 | ) | (4.2 | ) | |||||||||||||
(a) preliminary data
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Treasury and Corporate Support includes the Company’s investment portfolios, funding, capital management, interest rate risk management, income taxes not allocated to the business lines, including most investments intax-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 $178 million in the first quarter of 2018, compared with $266 million in the first quarter of 2017. Total net revenue decreased $31 million (10.3 percent) due to a decrease of $29 million (11.7 percent) in total noninterest income primarily due to lower income from equity investments and security gains compared with a year ago. Total noninterest expense increased $24 million (13.8 percent) year-over-year principally due to higher personnel expense, reflecting the impact of increased staffing and merit increases including variable compensation related to the impact of changes in vesting provisions related to stock-based compensation programs, as well as higher net occupancy and equipment costs. These increases were mostly offset by a favorable change in net shared services expense allocated to manage the business. The provision for credit losses was $4 million lower year-over-year due to a favorable change in the reserve allocation.
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