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Share Name | Share Symbol | Market | Type |
---|---|---|---|
US Bancorp | NYSE:USB | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.43 | 1.05% | 41.40 | 41.83 | 41.24 | 41.55 | 5,091,251 | 01:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 15, 2015
U.S. BANCORP
(Exact name of registrant as specified in its charter)
1-6880
(Commission File Number)
DELAWARE | 41-0255900 | |
(State or other jurisdiction | (I.R.S. Employer Identification | |
of incorporation) | Number) |
800 Nicollet Mall
Minneapolis, Minnesota 55402
(Address of principal executive offices and zip code)
(651) 466-3000
(Registrants telephone number, including area code)
(not applicable)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 Under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On July 15, 2015, U.S. Bancorp (the Company) issued a press release reporting quarter ended June 30, 2015 results, and posted on its website its 2Q15 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 furnished under the Securities Exchange Act of 1934. The 2Q15 Earnings Conference Call Presentation is included as Exhibit 99.2 hereto and is incorporated herein by reference. The information included in the 2Q15 Earnings Conference Call Presentation is considered to be furnished under the Securities Exchange Act of 1934. The press release and 2Q15 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.
(c) Exhibits.
99.1 | Press Release issued by U.S. Bancorp on July 15, 2015, deemed furnished under the Securities Exchange Act of 1934. |
99.2 | 2Q15 Earnings Conference Call Presentation, deemed furnished under the Securities Exchange Act of 1934. |
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 Controller |
DATE: July 15, 2015
Exhibit 99.1
|
News Release |
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Contacts: Dana Ripley Media (612) 303-3167 |
Sean OConnor Investors/Analysts (612) 303-0778 |
U.S. BANCORP REPORTS SECOND QUARTER 2015 EARNINGS
Record Earnings Per Diluted Common Share
Return on average assets of 1.46 percent and average common equity of 14.3 percent
Returned 76 percent of second quarter earnings to shareholders
MINNEAPOLIS, July 15, 2015 U.S. Bancorp (NYSE: USB) today reported net income of $1,483 million for the second quarter of 2015, or $0.80 per diluted common share, compared with $1,495 million, or $0.78 per diluted common share, in the second quarter of 2014.
Highlights for the second quarter of 2015 included:
Ø | Return on average assets of 1.46 percent and average common equity of 14.3 percent |
Ø | Growth in average total loans of 4.0 percent over the second quarter of 2014 and 0.7 percent on a linked quarter basis (excluding student loans, which were reclassified to held for sale at the end of the first quarter of 2015) |
¡ | Growth in average total commercial loans of 11.0 percent over the second quarter of 2014 and 2.1 percent over the first quarter of 2015 |
¡ | Growth in average commercial and commercial real estate revolving commitments of 10.5 percent year-over-year and 2.0 percent over the prior quarter |
¡ | Growth in total other retail loans of 5.7 percent over the second quarter of 2014 and 1.7 over the first quarter of 2015 (excluding student loans) |
Ø | Strong new lending activity of $54.2 billion during the second quarter, including: |
¡ | $29.7 billion of new and renewed commercial and commercial real estate commitments |
¡ | $3.1 billion of lines related to new credit card accounts |
¡ | $21.4 billion of mortgage and other retail loan originations |
Ø | Growth in average total deposits of 8.9 percent over the second quarter of 2014 and 2.6 percent on a linked quarter basis |
¡ | Average low cost deposits, including noninterest-bearing and total savings deposits, grew by 13.3 percent year-over-year and 4.4 percent on a linked quarter basis |
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 2
Ø | Net interest income growth over the second quarter of 2014 driven by 9.1 percent growth in average earning assets, partially offset by the impact of the 2014 wind down of the Checking Account Advance (CAA) product. Net interest income increased over the previous quarter mainly due to an additional day in the quarter. |
Ø | Trust and investment management fees increased 7.4 percent on a year-over-year basis |
Ø | Improving trends in payments-related fee revenue led by merchant processing services which increased 7.6 percent on a year-over-year basis (excluding the impact of foreign currency rate changes). |
Ø | Decline in net charge-offs of 15.2 percent on a year-over-year basis. Net charge-offs increased modestly (6.1 percent) over the previous quarter as a result of lower recoveries. Provision for credit losses was $15 million less than net charge-offs in the current quarter. |
Ø | Decreases in nonperforming assets of 7.0 percent on a linked quarter basis and 18.8 percent on a year-over-year basis |
Ø | Capital generation resulted in a return of 76 percent of second quarter earnings to shareholders through dividends and the buyback of 14 million common shares, and continued to reinforce capital position. Ratios at June 30, 2015, were: |
¡ | Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach of 9.2 percent and for the Basel III fully implemented advanced approaches of 12.4 percent |
¡ | Basel III transitional standardized approach: |
¡ | Common equity tier 1 capital ratio of 9.5 percent |
¡ | Tier 1 capital ratio of 11.0 percent |
¡ | Total risk-based capital ratio of 13.1 percent |
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 3
U.S. Bancorp Chairman, President and Chief Executive Officer Richard K. Davis said, U.S. Bancorp once again demonstrated the effectiveness of its business model as we delivered solid second quarter financial results in a challenging operating environment for financial institutions. We achieved net income of $1.48 billion, or $0.80 per diluted common share and continue to realize industry-leading performance measures, with a return on average assets (ROA) of 1.46 percent, return on average common equity (ROE) of 14.3 percent, and an efficiency ratio of 53.2 percent. As we pursue our vision for the future, we must continue to balance the investments we make in our highest return initiatives with prudent financial discipline thats the nature of navigating through this low interest rate environment. Furthermore, because of the overall strength and consistency of our results, we returned 76 percent of our earnings to shareholders through dividends and share buybacks in the second quarter.
Davis continued, Regardless of the operating environment, we are also well positioned to create value for our customers and shareholders, primarily because of our diverse business profile, which allows us to balance revenue generation between our margin and fee businesses. As we execute on the fundamentals of our core businesses, we are also investing in our omnichannel competencies as consumers needs, behaviors, and expectations rapidly evolve. We are intersecting our digital banking channels with our traditional banking channels to provide our customers with U.S. Banks full portfolio of products, services, and capabilities, which we believe will fuel future growth. The investment we are making in our omnichannel initiative is one of the reasons U.S. Banks Digital and Innovation team was named as an innovator to watch in 2015 by Bank Innovation magazine. We are proud of this recognition and it reflects our capacity to focus on the long term, while we manage through a difficult short term.
U.S. Bancorp continues to deliver a solid financial result because of the hard work, dedication, and determination of our people. We have a proven track record of success and we remain confident in our ability to address our customers and clients distinct financial objectives in any economic environment because of our team of 67,000 passionate U.S. Bankers. As we navigate through these uncertain economic times, we will continue to take appropriate and effective actions, including expense controls, to ensure that we are meeting our value creation objectives for customers and shareholders.
Net income attributable to U.S. Bancorp was $1,483 million for the second quarter of 2015, 0.8 percent lower than the $1,495 million for the second quarter of 2014, and 3.6 percent higher than the $1,431 million for the first quarter of 2015. Diluted earnings per common share of $0.80 in the second quarter of 2015 were a record high, $0.02 higher than the second quarter of 2014 and $0.04 higher than the previous quarter.
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 4
Return on average assets and return on average common equity were 1.46 percent and 14.3 percent, respectively, for the second quarter of 2015, compared with 1.60 percent and 15.1 percent, respectively, for the second quarter of 2014. The provision for credit losses was lower than net charge-offs by $15 million in the first and second quarters of 2015 and $25 million lower than net charge-offs in the second quarter of 2014.
EARNINGS SUMMARY |
Table 1 | |||||||||||||||||||||||||||||||
($ in millions, except per-share data) | 2Q 2015 |
1Q 2015 |
2Q 2014 |
Percent Change 2Q15 vs 1Q15 |
Percent Change 2Q15 vs 2Q14 |
YTD 2015 |
YTD 2014 |
Percent Change |
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|
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Net income attributable to U.S. Bancorp |
$1,483 | $1,431 | $1,495 | 3.6 | (.8 | ) | $2,914 | $2,892 | .8 | |||||||||||||||||||||||
Diluted earnings per common share |
$.80 | $.76 | $.78 | 5.3 | 2.6 | $1.56 | $1.51 | 3.3 | ||||||||||||||||||||||||
Return on average assets (%) |
1.46 | 1.44 | 1.60 | 1.45 | 1.58 | |||||||||||||||||||||||||||
Return on average common equity (%) |
14.3 | 14.1 | 15.1 | 14.2 | 14.9 | |||||||||||||||||||||||||||
Net interest margin (%) |
3.03 | 3.08 | 3.27 | 3.05 | 3.31 | |||||||||||||||||||||||||||
Efficiency ratio (%) (a) |
53.2 | 54.3 | 53.1 | 53.7 | 53.0 | |||||||||||||||||||||||||||
Tangible efficiency ratio (%) (a) |
52.3 | 53.4 | 52.1 | 52.9 | 52.0 | |||||||||||||||||||||||||||
Dividends declared per common share |
$.255 | $.245 | $.245 | 4.1 | 4.1 | $.500 | $.475 | 5.3 | ||||||||||||||||||||||||
Book value per common share (period end) |
$22.51 | $22.20 | $20.98 | 1.4 | 7.3 | |||||||||||||||||||||||||||
(a) Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding net securities gains (losses), and for tangible efficiency ratio, intangible amortization. |
|
Net income attributable to U.S. Bancorp for the second quarter of 2015 was $12 million (0.8 percent) lower than the second quarter of 2014, and $52 million (3.6 percent) higher than the first quarter of 2015. The second quarter of 2014 included two previously disclosed notable items impacting other noninterest income and other noninterest expense that, together, had no impact to diluted earnings per common share. The decrease in net income year-over-year was principally due to a reduction in net interest income related to the CAA product wind down, a decrease in mortgage banking revenue primarily due to the valuation of servicing rights net of hedging activities and an increase in noninterest expense (excluding the prior year notable item). Partially offsetting these increases was a decline in the provision for credit losses. The increase in net income on a linked quarter basis was primarily due to increases in fee-based revenue.
Total net revenue on a taxable-equivalent basis for the second quarter of 2015 was $5,042 million, which was $146 million (2.8 percent) lower than the second quarter of 2014, as a result of the prior year notable item (Visa stock sale), partially offset by a 0.9 percent increase in net interest income. The increase
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 5
in net interest income year-over-year was the result of an increase in average earning assets and continued growth in lower cost core deposit funding, partially offset by a $40 million decrease related to the CAA product wind down, lower reinvestment rates on investment securities and continued shift in loan portfolio mix. Noninterest income declined year-over-year as a result of the prior year notable item and lower mortgage banking revenue, partially offset by increases in trust and investment management fees, merchant processing services and credit and debit card revenue. Total net revenue on a taxable-equivalent basis was $136 million (2.8 percent) higher on a linked quarter basis mainly due to seasonally higher fee revenue and an increase in net interest income due to an additional day in the quarter. Growth in noninterest income included increases in merchant processing services, credit and debit card revenue, deposit service charges, commercial products revenue and trust and investment management fees, partially offset by a decrease in mortgage banking revenue.
Total noninterest expense in the second quarter of 2015 was $2,682 million, which was $71 million (2.6 percent) lower than the second quarter of 2014 and $17 million (0.6 percent) higher than the first quarter of 2015. The decrease in total noninterest expense year-over-year was mainly due to a settlement recorded in the prior year relating to the Federal Housing Administrations insurance program (FHA DOJ settlement), partially offset by an increase in compensation expense, reflecting the impact of merit increases, acquisitions, and higher staffing for risk and compliance activities, and increased employee benefits expense mainly due to higher pension costs. The increase in total noninterest expense on a linked quarter basis was primarily due to merit-related increases in compensation expense, along with higher professional services and marketing and business development expenses, partially offset by a decrease in employee benefits expense from seasonally lower payroll taxes.
The Companys provision for credit losses for the second quarter of 2015 was $281 million, $17 million (6.4 percent) higher than the prior quarter and $43 million (13.3 percent) lower than the second quarter of 2014. The provision for credit losses was lower than net charge-offs by $15 million in the first and second quarters of 2015 and $25 million lower than net charge-offs in the second quarter of 2014. Net charge-offs in the second quarter of 2015 were $296 million, compared with $279 million in the first quarter of 2015, and $349 million in the second quarter of 2014. Given current economic conditions, the Company expects the level of net charge-offs to remain relatively stable in the third quarter of 2015.
(MORE)
U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 6
INCOME STATEMENT HIGHLIGHTS |
Table 2 | |||||||||||||||||||||||||||||||
(Taxable-equivalent basis, $ in millions, except per-share data) | 2Q 2015 |
1Q 2015 |
2Q 2014 |
Percent Change 2Q15 vs 1Q15 |
Percent Change 2Q15 vs 2Q14 |
YTD 2015 |
YTD 2014 |
Percent Change |
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Net interest income |
$2,770 | $2,752 | $2,744 | .7 | .9 | $5,522 | $5,450 | 1.3 | ||||||||||||||||||||||||
Noninterest income |
2,272 | 2,154 | 2,444 | 5.5 | (7.0 | ) | 4,426 | 4,552 | (2.8 | ) | ||||||||||||||||||||||
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Total net revenue |
5,042 | 4,906 | 5,188 | 2.8 | (2.8 | ) | 9,948 | 10,002 | (.5 | ) | ||||||||||||||||||||||
Noninterest expense |
2,682 | 2,665 | 2,753 | .6 | (2.6 | ) | 5,347 | 5,297 | .9 | |||||||||||||||||||||||
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Income before provision and taxes |
2,360 | 2,241 | 2,435 | 5.3 | (3.1 | ) | 4,601 | 4,705 | (2.2 | ) | ||||||||||||||||||||||
Provision for credit losses |
281 | 264 | 324 | 6.4 | (13.3 | ) | 545 | 630 | (13.5 | ) | ||||||||||||||||||||||
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Income before taxes |
2,079 | 1,977 | 2,111 | 5.2 | (1.5 | ) | 4,056 | 4,075 | (.5 | ) | ||||||||||||||||||||||
Taxable-equivalent adjustment |
54 | 54 | 55 | | (1.8 | ) | 108 | 111 | (2.7 | ) | ||||||||||||||||||||||
Applicable income taxes |
528 | 479 | 547 | 10.2 | (3.5 | ) | 1,007 | 1,043 | (3.5 | ) | ||||||||||||||||||||||
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Net income |
1,497 | 1,444 | 1,509 | 3.7 | (.8 | ) | 2,941 | 2,921 | .7 | |||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(14 | ) | (13 | ) | (14 | ) | (7.7 | ) | | (27 | ) | (29 | ) | 6.9 | ||||||||||||||||||
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Net income attributable to U.S. Bancorp |
$1,483 | $1,431 | $1,495 | 3.6 | (.8 | ) | $2,914 | $2,892 | .8 | |||||||||||||||||||||||
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Net income applicable to U.S. Bancorp common shareholders |
$1,417 | $1,365 | $1,427 | 3.8 | (.7 | ) | $2,782 | $2,758 | .9 | |||||||||||||||||||||||
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Diluted earnings per common share |
$.80 | $.76 | $.78 | 5.3 | 2.6 | $1.56 | $1.51 | 3.3 | ||||||||||||||||||||||||
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Net Interest Income
Net interest income on a taxable-equivalent basis in the second quarter of 2015 was $2,770 million, an increase of $26 million (0.9 percent) over the second quarter of 2014. The increase was the result of growth in average earning assets, partially offset by lower rates on new loans and a continued shift in loan portfolio mix, lower rates on investment securities and the CAA product wind down. Average earning assets were $30.4 billion (9.1 percent) higher than the second quarter of 2014, driven by increases of $14.8 billion (16.9 percent) in average investment securities, $6.1 billion (2.5 percent) in average total loans (4.0 percent excluding student loans) and $5.7 billion in average loans held for sale. Net interest income increased $18 million (0.7 percent) on a linked quarter basis, due to an additional day in the current quarter relative to the first quarter of 2015, with higher average earning assets offset by continued shift in loan portfolio mix. The net interest margin in the second quarter of 2015 was 3.03 percent, compared with 3.27 percent in the second quarter of 2014, and 3.08 percent in the first quarter of 2015. The decline in the net interest margin on a year-over-year basis primarily reflected growth in the investment portfolio at lower average rates, as well as lower reinvestment rates on investment securities, lower loan fees due to the CAA product wind down, lower rates on new loans and a change in loan portfolio mix, partially offset by lower funding costs. On a linked quarter
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 7
basis, the reduction in the net interest margin was principally due to continued change in loan portfolio mix, the impact of higher cash balances at the Federal Reserve as a result of continued deposit growth, along with growth in lower rate investment securities and lower investment portfolio reinvestment rates.
Average investment securities in the second quarter of 2015 were $14.8 billion (16.9 percent) higher year-over-year and $1.7 billion (1.7 percent) higher than the prior quarter. These increases were primarily due to purchases of U.S. government agency-backed securities, net of prepayments and maturities, to support regulatory liquidity coverage ratio requirements.
NET INTEREST INCOME |
Table 3 | |||||||||||||||||||||||||||||||
(Taxable-equivalent basis; $ in millions) | 2Q 2015 |
1Q 2015 |
2Q 2014 |
Change 2Q15 vs 1Q15 |
Change 2Q15 vs 2Q14 |
YTD 2015 |
YTD 2014 |
Change | ||||||||||||||||||||||||
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Components of net interest income |
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Income on earning assets |
$3,123 | $3,116 | $3,104 | $7 | $19 | $6,239 | $6,182 | $57 | ||||||||||||||||||||||||
Expense on interest-bearing liabilities |
353 | 364 | 360 | (11 | ) | (7 | ) | 717 | 732 | (15 | ) | |||||||||||||||||||||
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Net interest income |
$2,770 | $2,752 | $2,744 | $18 | $26 | $5,522 | $5,450 | $72 | ||||||||||||||||||||||||
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Average yields and rates paid |
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Earning assets yield |
3.42 | % | 3.49 | % | 3.70 | % | (.07 | )% | (.28 | )% | 3.45 | % | 3.75% | (.30)% | ||||||||||||||||||
Rate paid on interest-bearing liabilities |
.52 | .55 | .58 | (.03 | ) | (.06 | ) | .54 | .61 | (.07) | ||||||||||||||||||||||
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Gross interest margin |
2.90 | % | 2.94 | % | 3.12 | % | (.04 | )% | (.22 | )% | 2.91 | % | 3.14% | (.23)% | ||||||||||||||||||
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Net interest margin |
3.03 | % | 3.08 | % | 3.27 | % | (.05 | )% | (.24 | )% | 3.05 | % | 3.31% | (.26)% | ||||||||||||||||||
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Average balances |
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Investment securities (a) |
$102,391 | $100,712 | $87,583 | $1,679 | $14,808 | $101,556 | $84,915 | $16,641 | ||||||||||||||||||||||||
Loans |
246,560 | 247,950 | 240,480 | (1,390 | ) | 6,080 | 247,251 | 238,182 | 9,069 | |||||||||||||||||||||||
Earning assets |
366,428 | 360,841 | 335,992 | 5,587 | 30,436 | 363,650 | 331,136 | 32,514 | ||||||||||||||||||||||||
Interest-bearing liabilities |
270,573 | 267,882 | 246,886 | 2,691 | 23,687 | 269,235 | 242,605 | 26,630 | ||||||||||||||||||||||||
(a) Excludes unrealized gain (loss) |
|
Average total loans were $6.1 billion (2.5 percent) higher in the second quarter of 2015 than the second quarter of 2014, ($9.5 billion, 4.0 percent, excluding student loans), driven by growth in total commercial loans (11.0 percent), total other retail loans (5.7 percent excluding student loans), total commercial real estate (4.8 percent) and credit card (1.3 percent). These increases were partially offset by declines in covered loans (35.4 percent), including the impact of the expiration of the loss sharing agreements on commercial and commercial real estate assets at the end of 2014, and residential mortgages (1.4 percent). Average total loans were $1.4 billion (0.6 percent) lower in the second quarter of 2015 than the first quarter of 2015. Excluding student loans, average total loans were 0.7 percent higher in the second quarter of 2015 than the first quarter
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 8
of 2015. The increase was driven by growth in total commercial loans (2.1 percent), partially offset by declines in covered loans (2.6 percent), credit card (1.2 percent) and residential mortgages (0.6 percent).
AVERAGE LOANS |
Table 4 | |||||||||||||||||||||||||||||||
($ in millions) | 2Q 2015 |
1Q 2015 |
2Q 2014 |
Percent Change 2Q15 vs 1Q15 |
Percent Change 2Q15 vs 2Q14 |
YTD 2015 |
YTD 2014 |
Percent Change |
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Commercial |
$77,932 | $76,183 | $69,920 | 2.3 | 11.5 | $77,062 | $67,794 | 13.7 | ||||||||||||||||||||||||
Lease financing |
5,321 | 5,325 | 5,100 | (.1 | ) | 4.3 | 5,323 | 5,145 | 3.5 | |||||||||||||||||||||||
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Total commercial |
83,253 | 81,508 | 75,020 | 2.1 | 11.0 | 82,385 | 72,939 | 13.0 | ||||||||||||||||||||||||
Commercial mortgages |
32,499 | 33,119 | 32,001 | (1.9 | ) | 1.6 | 32,807 | 32,025 | 2.4 | |||||||||||||||||||||||
Construction and development |
9,947 | 9,552 | 8,496 | 4.1 | 17.1 | 9,751 | 8,250 | 18.2 | ||||||||||||||||||||||||
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Total commercial real estate |
42,446 | 42,671 | 40,497 | (.5 | ) | 4.8 | 42,558 | 40,275 | 5.7 | |||||||||||||||||||||||
Residential mortgages |
51,114 | 51,426 | 51,815 | (.6 | ) | (1.4 | ) | 51,269 | 51,700 | (.8 | ) | |||||||||||||||||||||
Credit card |
17,613 | 17,823 | 17,384 | (1.2 | ) | 1.3 | 17,718 | 17,395 | 1.9 | |||||||||||||||||||||||
Retail leasing |
5,696 | 5,819 | 6,014 | (2.1 | ) | (5.3 | ) | 5,756 | 5,997 | (4.0 | ) | |||||||||||||||||||||
Home equity and second mortgages |
15,958 | 15,897 | 15,327 | .4 | 4.1 | 15,928 | 15,346 | 3.8 | ||||||||||||||||||||||||
Other |
25,415 | 27,604 | 26,587 | (7.9 | ) | (4.4 | ) | 26,504 | 26,450 | .2 | ||||||||||||||||||||||
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Total other retail (a) |
47,069 | 49,320 | 47,928 | (4.6 | ) | (1.8 | ) | 48,188 | 47,793 | .8 | ||||||||||||||||||||||
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Total loans, excluding covered loans |
241,495 | 242,748 | 232,644 | (.5 | ) | 3.8 | 242,118 | 230,102 | 5.2 | |||||||||||||||||||||||
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Covered loans |
5,065 | 5,202 | 7,836 | (2.6 | ) | (35.4 | ) | 5,133 | 8,080 | (36.5 | ) | |||||||||||||||||||||
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Total loans |
$246,560 | $247,950 | $240,480 | (.6 | ) | 2.5 | $247,251 | $238,182 | 3.8 | |||||||||||||||||||||||
|
|
|
|
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(a) The Company transferred all of its student loans to loans held for sale at the end of the first quarter of 2015. |
|
|||||||||||||||||||||||||||||||
Total other retail |
$47,069 | $49,320 | $47,928 | (4.6 | ) | (1.8 | ) | $48,188 | $47,793 | .8 | ||||||||||||||||||||||
Less: Student loans |
| (3,045 | ) | (3,409 | ) | nm | nm | (1,514 | ) | (3,467 | ) | (56.3 | ) | |||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total other retail excluding student loans |
$47,069 | $46,275 | $44,519 | 1.7 | 5.7 | $46,674 | $44,326 | 5.3 | ||||||||||||||||||||||||
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 9
Average total deposits for the second quarter of 2015 were $23.4 billion (8.9 percent) higher than the second quarter of 2014. Average noninterest-bearing deposits increased $5.5 billion (7.7 percent) year-over-year, mainly in Wholesale Banking and Commercial Real Estate and Consumer and Small Business Banking. Average total savings deposits were $23.8 billion (16.1 percent) higher year-over-year, the result of growth in Consumer and Small Business Banking, corporate trust and Wholesale Banking and Commercial Real Estate balances. Growth in total savings deposits is primarily due to continued strong participation in a savings product offered by Consumer and Small Business Banking, including an increase in new accounts and increased balances from existing customers. Average time deposits less than $100,000 were $1.0 billion (9.5 percent) lower due to maturities, while average time deposits greater than $100,000 decreased $4.9 billion (15.7 percent), primarily due to declines in Wholesale Banking and Commercial Real Estate, corporate trust and Consumer and Small Business Banking balances. Time deposits greater than $100,000 are primarily managed as an alternative to other funding sources, such as wholesale borrowing, based largely on funding needs and relative pricing.
Average total deposits increased $7.3 billion (2.6 percent) over the first quarter of 2015. Average noninterest-bearing deposits increased $2.8 billion (3.8 percent) on a linked quarter basis, due to higher balances in corporate trust, Consumer and Small Business Banking, and Wholesale Banking and Commercial Real Estate. Average total savings deposits increased $7.6 billion (4.6 percent), reflecting increases in corporate trust, Consumer and Small Business Banking, and Wholesale Banking and Commercial Real Estate. Compared with the first quarter of 2015, average time deposits less than $100,000 decreased $477 million (4.6 percent) due to maturities. Average time deposits greater than $100,000, which are managed based on funding needs, decreased $2.7 billion (9.2 percent) on a linked quarter basis, principally due to decreases in Wholesale Banking and Commercial Real Estate and Consumer and Small Business Banking balances.
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 10
AVERAGE DEPOSITS |
Table 5 | |||||||||||||||||||||||||||||||
($ in millions) | 2Q 2015 |
1Q 2015 |
2Q 2014 |
Percent Change 2Q15 vs 1Q15 |
Percent Change 2Q15 vs 2Q14 |
YTD 2015 |
YTD 2014 |
Percent Change |
||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Noninterest-bearing deposits |
$ | 77,347 | $ | 74,511 | $ | 71,837 | 3.8 | 7.7 | $ | 75,937 | $ | 71,333 | 6.5 | |||||||||||||||||||
Interest-bearing savings deposits |
||||||||||||||||||||||||||||||||
Interest checking |
55,205 | 54,658 | 52,989 | 1.0 | 4.2 | 54,933 | 52,152 | 5.3 | ||||||||||||||||||||||||
Money market savings |
79,898 | 73,889 | 61,370 | 8.1 | 30.2 | 76,910 | 60,313 | 27.5 | ||||||||||||||||||||||||
Savings accounts |
37,071 | 36,033 | 33,991 | 2.9 | 9.1 | 36,555 | 33,597 | 8.8 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total of savings deposits |
172,174 | 164,580 | 148,350 | 4.6 | 16.1 | 168,398 | 146,062 | 15.3 | ||||||||||||||||||||||||
Time deposits less than $100,000 |
9,933 | 10,410 | 10,971 | (4.6 | ) | (9.5 | ) | 10,170 | 11,206 | (9.2 | ) | |||||||||||||||||||||
Time deposits greater than $100,000 |
26,290 | 28,959 | 31,193 | (9.2 | ) | (15.7 | ) | 27,617 | 31,327 | (11.8 | ) | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total interest-bearing deposits |
208,397 | 203,949 | 190,514 | 2.2 | 9.4 | 206,185 | 188,595 | 9.3 | ||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total deposits |
$ | 285,744 | $ | 278,460 | $ | 262,351 | 2.6 | 8.9 | $ | 282,122 | $ | 259,928 | 8.5 | |||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Noninterest Income
Second quarter noninterest income was $2,272 million, which was $172 million (7.0 percent) lower than the second quarter of 2014 and $118 million (5.5 percent) higher than the first quarter of 2015. The year-over-year decrease in noninterest income was primarily due to a decrease in other income from Visa stock sales and lower mortgage banking revenue. The $47 million (16.9 percent) decrease in mortgage banking revenue was primarily due to an unfavorable change in the valuation of mortgage servicing rights (MSRs), net of hedging activities. Partially offsetting these decreases were increases in trust and investment management fees, merchant processing services and credit and debit card revenue. Trust and investment management fees increased $23 million (7.4 percent) year-over-year, reflecting the benefits of the Companys investments in corporate trust and fund services businesses, as well as account growth and improved market conditions. Merchant processing services increased $11 million as a result of transaction volumes and account growth. Adjusted for the $18 million impact of foreign currency rate changes, merchant processing revenue growth would have been approximately 7.6 percent. Credit and debit card revenue increased $7 million (2.7 percent) due to higher transaction volumes.
Noninterest income was $118 million (5.5 percent) higher in the second quarter of 2015 than the first quarter of 2015, principally due to seasonally higher fee revenue in merchant processing services, credit and debit card revenue and deposit service charges. Commercial products revenue increased $14 million (7.0 percent) primarily due to higher syndication fees. Trust and investment management fees were $12 million
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 11
(3.7 percent) higher than the prior quarter due to increases in corporate trust and fund services revenue. Partially offsetting these increases was a decrease in mortgage banking revenue of $9 million (3.8 percent), primarily due to lower origination revenue.
NONINTEREST INCOME |
Table 6 | |||||||||||||||||||||||||||||||
($ in millions) | 2Q 2015 |
1Q 2015 |
2Q 2014 |
Percent Change 2Q15 vs 1Q15 |
Percent Change 2Q15 vs 2Q14 |
YTD 2015 |
YTD 2014 |
Percent Change |
||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Credit and debit card revenue |
$ | 266 | $ | 241 | $ | 259 | 10.4 | 2.7 | $ | 507 | $ | 498 | 1.8 | |||||||||||||||||||
Corporate payment products revenue |
178 | 170 | 182 | 4.7 | (2.2 | ) | 348 | 355 | (2.0 | ) | ||||||||||||||||||||||
Merchant processing services |
395 | 359 | 384 | 10.0 | 2.9 | 754 | 740 | 1.9 | ||||||||||||||||||||||||
ATM processing services |
80 | 78 | 82 | 2.6 | (2.4 | ) | 158 | 160 | (1.3 | ) | ||||||||||||||||||||||
Trust and investment management fees |
334 | 322 | 311 | 3.7 | 7.4 | 656 | 615 | 6.7 | ||||||||||||||||||||||||
Deposit service charges |
174 | 161 | 171 | 8.1 | 1.8 | 335 | 328 | 2.1 | ||||||||||||||||||||||||
Treasury management fees |
142 | 137 | 140 | 3.6 | 1.4 | 279 | 273 | 2.2 | ||||||||||||||||||||||||
Commercial products revenue |
214 | 200 | 221 | 7.0 | (3.2 | ) | 414 | 426 | (2.8 | ) | ||||||||||||||||||||||
Mortgage banking revenue |
231 | 240 | 278 | (3.8 | ) | (16.9 | ) | 471 | 514 | (8.4 | ) | |||||||||||||||||||||
Investment products fees |
48 | 47 | 47 | 2.1 | 2.1 | 95 | 93 | 2.2 | ||||||||||||||||||||||||
Securities gains (losses), net |
| | | | | | 5 | nm | ||||||||||||||||||||||||
Other |
210 | 199 | 369 | 5.5 | (43.1 | ) | 409 | 545 | (25.0 | ) | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total noninterest income |
$ | 2,272 | $ | 2,154 | $ | 2,444 | 5.5 | (7.0 | ) | $ | 4,426 | $ | 4,552 | (2.8 | ) | |||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Noninterest Expense
Noninterest expense in the second quarter of 2015 totaled $2,682 million, a decrease of $71 million (2.6 percent) from the second quarter of 2014, and a $17 million (0.6 percent) increase over the first quarter of 2015. The decrease in total noninterest expense year-over-year was primarily the result of the second quarter 2014 FHA DOJ settlement. Partially offsetting this decrease was a $71 million (6.3 percent) increase in compensation expense, reflecting the impact of merit increases, acquisitions, and higher staffing for risk and compliance activities, and higher employee benefits expense of $36 million (14.0 percent) primarily driven by higher pension costs. Postage, printing and supplies decreased $16 million (20.0 percent), reflecting reimbursement from a business partner.
Noninterest expense increased $17 million (0.6 percent) on a linked quarter basis, primarily due to increases in professional services of $29 million (37.7 percent) due to mortgage servicing and compliance related matters, marketing and business development of $26 million (37.1 percent) due to the timing of various marketing programs in Consumer and Small Business Banking and Payments Services, and
(MORE)
U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 12
compensation expense of $17 million (1.4 percent), principally reflecting the impact of merit increases. Partially offsetting these increases was a $24 million (7.6 percent) decrease in employee benefits expense primarily resulting from seasonally lower payroll taxes and a $20 million (4.6 percent) decrease in other expense primarily due to insurance-related recoveries.
NONINTEREST EXPENSE |
Table 7 | |||||||||||||||||||||||||||||||
($ in millions) | 2Q 2015 |
1Q 2015 |
2Q 2014 |
Percent Change 2Q15 vs 1Q15 |
Percent Change 2Q15 vs 2Q14 |
YTD 2015 |
YTD 2014 |
Percent Change |
||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Compensation |
$ | 1,196 | $ | 1,179 | $ | 1,125 | 1.4 | 6.3 | $ | 2,375 | $ | 2,240 | 6.0 | |||||||||||||||||||
Employee benefits |
293 | 317 | 257 | (7.6 | ) | 14.0 | 610 | 546 | 11.7 | |||||||||||||||||||||||
Net occupancy and equipment |
247 | 247 | 241 | | 2.5 | 494 | 490 | .8 | ||||||||||||||||||||||||
Professional services |
106 | 77 | 97 | 37.7 | 9.3 | 183 | 180 | 1.7 | ||||||||||||||||||||||||
Marketing and business development |
96 | 70 | 96 | 37.1 | | 166 | 175 | (5.1 | ) | |||||||||||||||||||||||
Technology and communications |
221 | 214 | 214 | 3.3 | 3.3 | 435 | 425 | 2.4 | ||||||||||||||||||||||||
Postage, printing and supplies |
64 | 82 | 80 | (22.0 | ) | (20.0 | ) | 146 | 161 | (9.3 | ) | |||||||||||||||||||||
Other intangibles |
43 | 43 | 48 | | (10.4 | ) | 86 | 97 | (11.3 | ) | ||||||||||||||||||||||
Other |
416 | 436 | 595 | (4.6 | ) | (30.1 | ) | 852 | 983 | (13.3 | ) | |||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Total noninterest expense |
$ | 2,682 | $ | 2,665 | $ | 2,753 | .6 | (2.6 | ) | $ | 5,347 | $ | 5,297 | .9 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Provision for Income Taxes
The provision for income taxes for the second quarter of 2015 resulted in a tax rate on a taxable-equivalent basis of 28.0 percent (effective tax rate of 26.1 percent), compared with 28.5 percent (effective tax rate of 26.6 percent) in the second quarter of 2014, and 27.0 percent (effective tax rate of 24.9 percent) in the first quarter of 2015. The increase was the result of resolution of certain tax matters in the first quarter of 2015.
Credit Quality
The allowance for credit losses was $4,326 million at June 30, 2015, compared with $4,351 million at March 31, 2015, and $4,449 million at June 30, 2014. Nonperforming assets decreased on a linked quarter and year-over-year basis as economic conditions continued to slowly improve. Total net charge-offs in the second quarter of 2015 were $296 million, compared with $279 million in the first quarter of 2015, and $349 million in the second quarter of 2014. The $17 million (6.1 percent) increase in net charge-offs on a linked quarter basis was primarily due to lower recoveries in the current quarter, while the $53 million (15.2
(MORE)
U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 13
percent) decrease in net charge-offs on a year-over-year basis reflected improvements in residential mortgages, total other retail, commercial, and construction and development. The Company recorded $281 million of provision for credit losses in the current quarter, which was $15 million less than net charge-offs.
The ratio of the allowance for credit losses to period-end loans was 1.74 percent at June 30, 2015, compared with 1.77 percent at March 31, 2015, and 1.82 percent at June 30, 2014. The ratio of the allowance for credit losses to nonperforming loans was 349 percent at June 30, 2015, compared with 322 percent at March 31, 2015, and 279 percent at June 30, 2014.
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 14
ALLOWANCE FOR CREDIT LOSSES |
|
Table 8 | ||||||||||||||||||||||||||||||||||||||
($ in millions) | 2Q | 1Q | 4Q | 3Q | 2Q | |||||||||||||||||||||||||||||||||||
2015 | % (b) | 2015 | % (b) | 2014 | % (b) | 2014 | % (b) | 2014 | % (b) | |||||||||||||||||||||||||||||||
Balance, beginning of period |
$ | 4,351 | $ | 4,375 | $ | 4,414 | $ | 4,449 | $ | 4,497 | ||||||||||||||||||||||||||||||
Net charge-offs |
||||||||||||||||||||||||||||||||||||||||
Commercial |
39 | .20 | 40 | .21 | 48 | .26 | 52 | .29 | 52 | .30 | ||||||||||||||||||||||||||||||
Lease financing |
3 | .23 | 3 | .23 | (2 | ) | (.15 | ) | 6 | .46 | 3 | .24 | ||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total commercial |
42 | .20 | 43 | .21 | 46 | .23 | 58 | .30 | 55 | .29 | ||||||||||||||||||||||||||||||
Commercial mortgages |
4 | .05 | (1 | ) | (.01 | ) | (3 | ) | (.04 | ) | 1 | .01 | (6 | ) | (.08 | ) | ||||||||||||||||||||||||
Construction and development |
(3 | ) | (.12 | ) | (17 | ) | (.72 | ) | (7 | ) | (.30 | ) | 3 | .13 | 2 | .09 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total commercial real estate |
1 | .01 | (18 | ) | (.17 | ) | (10 | ) | (.10 | ) | 4 | .04 | (4 | ) | (.04 | ) | ||||||||||||||||||||||||
Residential mortgages |
33 | .26 | 35 | .28 | 39 | .30 | 42 | .32 | 57 | .44 | ||||||||||||||||||||||||||||||
Credit card |
169 | 3.85 | 163 | 3.71 | 160 | 3.53 | 158 | 3.53 | 170 | 3.92 | ||||||||||||||||||||||||||||||
Retail leasing |
1 | .07 | 1 | .07 | 1 | .07 | | | 1 | .07 | ||||||||||||||||||||||||||||||
Home equity and second mortgages |
11 | .28 | 14 | .36 | 17 | .43 | 24 | .61 | 23 | .60 | ||||||||||||||||||||||||||||||
Other |
39 | .62 | 41 | .60 | 52 | .76 | 49 | .72 | 45 | .68 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total other retail |
51 | .43 | 56 | .46 | 70 | .57 | 73 | .59 | 69 | .58 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total net charge-offs, excluding covered loans |
296 | .49 | 279 | .47 | 305 | .51 | 335 | .56 | 347 | .60 | ||||||||||||||||||||||||||||||
Covered loans |
| | | | 3 | .17 | 1 | .05 | 2 | .10 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total net charge-offs |
296 | .48 | 279 | .46 | 308 | .50 | 336 | .55 | 349 | .58 | ||||||||||||||||||||||||||||||
Provision for credit losses |
281 | 264 | 288 | 311 | 324 | |||||||||||||||||||||||||||||||||||
Other changes (a) |
(10 | ) | (9 | ) | (19 | ) | (10 | ) | (23 | ) | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Balance, end of period |
$ | 4,326 | $ | 4,351 | $ | 4,375 | $ | 4,414 | $ | 4,449 | ||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Components |
||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses |
$ | 4,013 | $ | 4,023 | $ | 4,039 | $ | 4,065 | $ | 4,132 | ||||||||||||||||||||||||||||||
Liability for unfunded credit commitments |
313 | 328 | 336 | 349 | 317 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total allowance for credit losses |
$ | 4,326 | $ | 4,351 | $ | 4,375 | $ | 4,414 | $ | 4,449 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Gross charge-offs |
$ | 380 | $ | 383 | $ | 415 | $ | 410 | $ | 432 | ||||||||||||||||||||||||||||||
Gross recoveries |
$ | 84 | $ | 104 | $ | 107 | $ | 74 | $ | 83 | ||||||||||||||||||||||||||||||
Allowance for credit losses as a percentage of Period-end loans, excluding covered loans |
1.76 | 1.79 | 1.78 | 1.81 | 1.83 | |||||||||||||||||||||||||||||||||||
Nonperforming loans, excluding covered loans |
348 | 321 | 297 | 291 | 294 | |||||||||||||||||||||||||||||||||||
Nonperforming assets, excluding covered assets |
279 | 261 | 245 | 245 | 246 | |||||||||||||||||||||||||||||||||||
Period-end loans |
1.74 | 1.77 | 1.77 | 1.80 | 1.82 | |||||||||||||||||||||||||||||||||||
Nonperforming loans |
349 | 322 | 298 | 282 | 279 | |||||||||||||||||||||||||||||||||||
Nonperforming assets |
274 | 257 | 242 | 230 | 229 | |||||||||||||||||||||||||||||||||||
(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
|
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(MORE)
U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 15
Nonperforming assets at June 30, 2015, totaled $1,577 million, compared with $1,696 million at March 31, 2015, and $1,943 million at June 30, 2014. The ratio of nonperforming assets to loans and other real estate was 0.63 percent at June 30, 2015, compared with 0.69 percent at March 31, 2015, and 0.80 percent at June 30, 2014. The decrease in nonperforming assets was driven primarily by reductions in the commercial and total commercial real estate portfolios and in covered loans. The Company expects total nonperforming assets to remain relatively stable in the third quarter of 2015. The ratio of the allowance for credit losses to period-end loans was 1.74 percent at June 30, 2015, compared with 1.77 percent at March 31, 2015, and 1.82 percent at June 30, 2014.
Accruing loans 90 days or more past due were $801 million ($469 million excluding covered loans) at June 30, 2015, compared with $880 million ($521 million excluding covered loans) at March 31, 2015, and $1,038 million ($581 million excluding covered loans) at June 30, 2014.
DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES |
|
Table 9 | ||||||||||||||||||
(Percent) | ||||||||||||||||||||
Jun 30 2015 |
Mar 31 2015 |
Dec 31 2014 |
Sep 30 2014 |
Jun 30 2014 |
||||||||||||||||
|
|
|||||||||||||||||||
Delinquent loan ratios - 90 days or more past due excluding nonperforming loans |
| |||||||||||||||||||
Commercial |
.05 | .05 | .05 | .05 | .06 | |||||||||||||||
Commercial real estate |
.05 | .07 | .05 | .03 | .06 | |||||||||||||||
Residential mortgages |
.30 | .33 | .40 | .41 | .49 | |||||||||||||||
Credit card |
1.03 | 1.19 | 1.13 | 1.10 | 1.06 | |||||||||||||||
Other retail |
.14 | .15 | .15 | .16 | .15 | |||||||||||||||
Total loans, excluding covered loans |
.19 | .22 | .23 | .22 | .25 | |||||||||||||||
Covered loans |
6.66 | 7.01 | 7.48 | 6.10 | 6.14 | |||||||||||||||
Total loans |
.32 | .36 | .38 | .39 | .43 | |||||||||||||||
Delinquent loan ratios - 90 days or more past due including nonperforming loans |
| |||||||||||||||||||
Commercial |
.16 | .16 | .19 | .27 | .30 | |||||||||||||||
Commercial real estate |
.46 | .58 | .65 | .62 | .62 | |||||||||||||||
Residential mortgages |
1.80 | 1.95 | 2.07 | 2.02 | 2.06 | |||||||||||||||
Credit card |
1.12 | 1.32 | 1.30 | 1.32 | 1.35 | |||||||||||||||
Other retail |
.51 | .55 | .53 | .53 | .54 | |||||||||||||||
Total loans, excluding covered loans |
.70 | .77 | .83 | .84 | .87 | |||||||||||||||
Covered loans |
6.88 | 7.25 | 7.74 | 7.34 | 7.73 | |||||||||||||||
Total loans |
.82 | .91 | .97 | 1.03 | 1.08 | |||||||||||||||
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 16
ASSET QUALITY |
Table 10 | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||
Jun 30 2015 |
Mar 31 2015 |
Dec 31 2014 |
Sep 30 2014 |
Jun 30 2014 |
||||||||||||||||
|
|
|||||||||||||||||||
Nonperforming loans |
||||||||||||||||||||
Commercial |
$78 | $74 | $99 | $161 | $174 | |||||||||||||||
Lease financing |
12 | 13 | 13 | 12 | 16 | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial |
90 | 87 | 112 | 173 | 190 | |||||||||||||||
Commercial mortgages |
116 | 142 | 175 | 147 | 121 | |||||||||||||||
Construction and development |
59 | 75 | 84 | 94 | 105 | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial real estate |
175 | 217 | 259 | 241 | 226 | |||||||||||||||
Residential mortgages |
769 | 825 | 864 | 841 | 818 | |||||||||||||||
Credit card |
16 | 22 | 30 | 40 | 52 | |||||||||||||||
Other retail |
178 | 187 | 187 | 184 | 191 | |||||||||||||||
|
|
|||||||||||||||||||
Total nonperforming loans, excluding covered loans |
1,228 | 1,338 | 1,452 | 1,479 | 1,477 | |||||||||||||||
Covered loans |
11 | 12 | 14 | 88 | 119 | |||||||||||||||
|
|
|||||||||||||||||||
Total nonperforming loans |
1,239 | 1,350 | 1,466 | 1,567 | 1,596 | |||||||||||||||
Other real estate (a) |
287 | 293 | 288 | 275 | 279 | |||||||||||||||
Covered other real estate (a) |
35 | 37 | 37 | 72 | 58 | |||||||||||||||
Other nonperforming assets |
16 | 16 | 17 | 9 | 10 | |||||||||||||||
|
|
|||||||||||||||||||
Total nonperforming assets (b) |
$1,577 | $1,696 | $1,808 | $1,923 | $1,943 | |||||||||||||||
|
|
|||||||||||||||||||
Total nonperforming assets, excluding covered assets |
$1,531 | $1,647 | $1,757 | $1,763 | $1,766 | |||||||||||||||
|
|
|||||||||||||||||||
Accruing loans 90 days or more past due, excluding covered loans |
$469 | $521 | $550 | $532 | $581 | |||||||||||||||
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|||||||||||||||||||
Accruing loans 90 days or more past due |
$801 | $880 | $945 | $962 | $1,038 | |||||||||||||||
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Performing restructured loans, excluding GNMA and covered loans |
$2,815 | $2,684 | $2,832 | $2,818 | $2,911 | |||||||||||||||
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|
|||||||||||||||||||
Performing restructured GNMA and covered loans |
$2,111 | $2,186 | $2,273 | $2,685 | $3,072 | |||||||||||||||
|
|
|||||||||||||||||||
Nonperforming assets to loans plus ORE, excluding covered assets (%) |
.63 | .68 | .72 | .74 | .75 | |||||||||||||||
Nonperforming assets to loans plus ORE (%) |
.63 | .69 | .73 | .78 | .80 | |||||||||||||||
(a) Includes equity investments in entities whose principal assets are other real estate owned. |
| |||||||||||||||||||
(b) Does not include accruing loans 90 days or more past due. |
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Capital Management
Total U.S. Bancorp shareholders equity was $44.5 billion at June 30, 2015, compared with $44.3 billion at March 31, 2015, and $42.7 billion at June 30, 2014. During the second quarter, the Company returned 76 percent of second quarter earnings to shareholders, including $452 million in common stock dividends and $624 million of repurchased common stock.
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 17
COMMON SHARES |
Table 11 | |||||||||||||||||||
(Millions) | 2Q 2015 |
1Q 2015 |
4Q 2014 |
3Q 2014 |
2Q 2014 |
|||||||||||||||
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|
|||||||||||||||||||
Beginning shares outstanding |
1,780 | 1,786 | 1,795 | 1,809 | 1,821 | |||||||||||||||
Shares issued for stock incentive plans, acquisitions and other corporate purposes |
1 | 6 | 2 | 2 | 3 | |||||||||||||||
Shares repurchased |
(14 | ) | (12 | ) | (11 | ) | (16 | ) | (15 | ) | ||||||||||
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|||||||||||||||||||
Ending shares outstanding |
1,767 | 1,780 | 1,786 | 1,795 | 1,809 | |||||||||||||||
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All regulatory ratios continue to be in excess of well-capitalized requirements. The common equity tier 1 capital to risk-weighted assets ratio estimated for the Basel III standardized approach as if fully implemented was 9.2 percent at June 30, 2015, and at March 31, 2015, compared with 8.9 percent at June 30, 2014, and the common equity tier 1 capital to risk-weighted assets ratio estimated for the Basel III advanced approaches as if fully implemented was 12.4 percent at June 30, 2015, compared with 11.8 percent at March 31, 2015, and 11.7 percent at June 30, 2014. Under the Basel III transitional standardized approach, the common equity tier 1 capital ratio was 9.5 percent at June 30, 2015, compared with 9.6 percent at March 31, 2015, and at June 30, 2014. The tier 1 capital ratio was 11.0 percent at June 30, 2015, compared with 11.1 percent at March 31, 2015, and 11.3 percent at June 30, 2014. Under the Basel III transitional advanced approaches, the common equity tier 1 capital to risk-weighted assets ratio was 12.9 percent at June 30, 2015, compared with 12.3 percent at March 31, 2015, and at June 30, 2014. The tangible common equity to tangible assets ratio was 7.5 percent at June 30, 2015, compared with 7.6 percent at March 31, 2015, and 7.5 percent at June 30, 2014.
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 18
CAPITAL POSITION | Table 12 | |||||||||||||||||||
($ in millions) | Jun 30 2015 |
Mar 31 2015 |
Dec 31 2014 |
Sep 30 2014 |
Jun 30 2014 |
|||||||||||||||
|
|
|||||||||||||||||||
Total U.S. Bancorp shareholders equity |
$44,537 | $44,277 | $43,479 | $43,141 | $42,700 | |||||||||||||||
Standardized Approach |
||||||||||||||||||||
Basel III transitional standardized approach |
||||||||||||||||||||
Common equity tier 1 capital |
$31,674 | $31,308 | $30,856 | $30,213 | $29,760 | |||||||||||||||
Tier 1 capital |
36,748 | 36,382 | 36,020 | 35,377 | 34,924 | |||||||||||||||
Total risk-based capital |
43,526 | 43,558 | 43,208 | 42,509 | 41,034 | |||||||||||||||
Common equity tier 1 capital ratio |
|
9.5 |
% |
9.6 | % | 9.7 | % | 9.7 | % | 9.6 | % | |||||||||
Tier 1 capital ratio |
11.0 | 11.1 | 11.3 | 11.3 | 11.3 | |||||||||||||||
Total risk-based capital ratio |
13.1 | 13.3 | 13.6 | 13.6 | 13.2 | |||||||||||||||
Leverage ratio |
9.2 | 9.3 | 9.3 | 9.4 | 9.6 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach |
9.2 | 9.2 | 9.0 | 9.0 | 8.9 | |||||||||||||||
Advanced Approaches |
||||||||||||||||||||
Common equity tier 1 capital to risk-weighted assets for the Basel III transitional advanced approaches |
12.9 | 12.3 | 12.4 | 12.4 | 12.3 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches |
12.4 | 11.8 | 11.8 | 11.8 | 11.7 | |||||||||||||||
Tangible common equity to tangible assets |
7.5 | 7.6 | 7.5 | 7.6 | 7.5 | |||||||||||||||
Tangible common equity to risk-weighted assets |
9.2 | 9.3 | 9.3 | 9.3 | 9.2 | |||||||||||||||
Beginning January 1, 2014, the regulatory capital requirements effective for the Company follow Basel III, subject to certain transition provisions from Basel I over the following four years to full implementation by January 1, 2018. Basel III includes two comprehensive methodologies for calculating risk-weighted assets: a general standardized approach and more risk-sensitive advanced approaches, with the Companys capital adequacy being evaluated against the methodology that is most restrictive.
|
|
Lines of Business
The Companys major lines of business are Wholesale Banking and Commercial Real Estate, Consumer and Small Business Banking, Wealth Management and Securities 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
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 19
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 Companys diverse customer base. During 2015, certain organization and methodology changes were made and, accordingly, prior period results were restated and presented on a comparable basis.
Wholesale Banking and Commercial Real Estate offers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution, non-profit and public sector clients. Wholesale Banking and Commercial Real Estate contributed $245 million of the Companys net income in the second quarter of 2015, compared with $272 million in the second quarter of 2014 and $209 million in the first quarter of 2015. Wholesale Banking and Commercial Real Estates net income decreased $27 million (9.9 percent) from the same quarter of 2014 due to a decrease in total net revenue and an increase in total noninterest expense. Total net revenue decreased by $34 million (4.5 percent), due to a 0.4 percent decrease in net interest income and a 12.5 percent decrease in total noninterest income. Net interest income decreased by $2 million (0.4 percent) year-over-year, primarily due to an increase in average total loans and deposits offset by lower rates and fees on loans. Total noninterest income decreased by $32 million (12.5 percent), driven by lower wholesale transaction activity and loan-related fees, partially offset by higher commercial leasing revenue and higher syndication fees. Total noninterest expense was $9 million (2.8 percent) higher compared with a year ago, due to an increase in the FDIC insurance assessment allocation, based on the level of commitments, and variable compensation expense. The provision for credit losses was flat year-over-year.
Wholesale Banking and Commercial Real Estates contribution to net income in the second quarter of 2015 was $36 million (17.2 percent) higher than the first quarter of 2015, due to an increase in total net revenue and a decrease in the provision for credit losses, along with a decrease in total noninterest expense. Total net revenue increased by $11 million (1.5 percent) compared with the prior quarter. Net interest income increased by $7 million (1.4 percent) on a linked quarter basis, primarily due to an additional day in the quarter and higher average loans, partially offset by lower rates and fees on loans. Total noninterest income increased by $4 million (1.8 percent) due to a seasonal increase in treasury management fees and higher equity investment revenue, partially offset by higher loan-related charges. Total noninterest expense decreased by $6 million (1.8 percent) due to lower net shared services expense and a decrease in employee benefits expense due to seasonally lower payroll taxes, partially offset by an increase in production incentive
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 20
costs and an increase in compensation. The provision for credit losses decreased by $39 million (68.4 percent) due to a favorable change in the reserve allocation driven by prior quarter reserves related to energy prices and a decrease in net charge-offs.
Consumer and Small Business Banking delivers products and services through banking offices, telephone servicing and sales, on-line services, direct mail, ATM processing and mobile devices, such as mobile phones and tablet computers. It encompasses community banking, metropolitan banking, in-store banking, small business banking, indirect lending, workplace banking, student banking and omnichannel (collectively, the retail banking division), as well as mortgage banking. Consumer and Small Business Banking contributed $321 million of the Companys net income in the second quarter of 2015, a $66 million (17.1 percent) decrease from the second quarter of 2014 and a $35 million (9.8 percent) decrease from the prior quarter. Within Consumer and Small Business Banking, the retail banking division reported a 5.4 percent decrease in its contribution from the same quarter of last year, principally due to lower total net revenue and an increase in total noninterest expense, partially offset by a lower provision for credit losses. Retail bankings total net revenue was 4.2 percent lower than the second quarter of 2014. Net interest income decreased 5.4 percent, primarily as a result of lower fees due to the wind down of the CAA product and lower rates on loans, partially offset by higher average loan and deposit balances. Total noninterest income for the retail banking division was relatively flat compared with a year ago. Total noninterest expense for the retail banking division in the second quarter of 2015 increased 5.9 percent over the same quarter of the prior year, primarily due to higher compensation and employee benefits expense, primarily due to merit and higher pension costs. The provision for credit losses for the retail banking division decreased 75.8 percent on a year-over-year basis due to a favorable change in the reserve allocation and lower net charge-offs. The contribution of the mortgage banking division was 40.0 percent lower than the second quarter of 2014, reflecting a decrease in total net revenue, an increase in total noninterest expense and an increase in the provision for credit losses. The divisions 5.8 percent decrease in total net revenue was due to a 14.6 percent increase in net interest income, primarily the result of higher average loans held for sale, offset by a 16.5 percent decrease in total noninterest income, principally due to an unfavorable change in the valuation of MSRs, net of hedging activities. Total noninterest expense was 16.0 percent higher compared with the prior year primarily due to higher mortgage servicing-related expenses and increased compensation expense due to higher pension costs. The $23 million increase in the provision for credit losses for the mortgage banking division was due to an unfavorable change in the reserve allocation, partially offset by lower net charge-offs.
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 21
Consumer and Small Business Bankings contribution in the second quarter of 2015 was $35 million (9.8 percent) lower than the first quarter of 2015, primarily due to an increase in the provision for credit losses and an increase in total noninterest expense, partially offset by an increase in total net revenue. Within Consumer and Small Business Banking, the retail banking divisions contribution decreased 3.6 percent, mainly due to an increase in the provision for credit losses and an increase in total noninterest expense, partially offset by an increase in total net revenue. Total net revenue for the retail banking division increased 1.2 percent compared with the previous quarter. Net interest income was 0.2 percent lower primarily due to lower rates on loans, partially offset by higher average loan and deposit balances. Total noninterest income was 4.7 percent higher on a linked quarter basis, driven by seasonally higher deposit service charges. The provision for credit losses increased $22 million on a linked quarter basis due to an unfavorable change in the reserve allocation and higher net charge-offs. The contribution of the mortgage banking division decreased 25.0 percent from the first quarter of 2015 primarily due to higher total noninterest expense and provision for credit losses. Total net revenue decreased 1.3 percent due to a 3.8 percent decrease in total noninterest income, the result of lower mortgage origination revenue. The decrease in total noninterest income was partially offset by a 2.5 percent increase in net interest income, primarily due to an additional day in the quarter and higher average loans held for sale. Total noninterest expense increased 7.9 percent, primarily reflecting higher mortgage servicing-related expenses, along with higher compensation and employee benefits expense related to merit and higher pension costs. The provision for credit losses for the mortgage banking division increased $18 million on a linked quarter basis primarily due to an unfavorable change in the reserve allocation.
Wealth Management and Securities 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 Securities Services contributed $68 million of the Companys net income in the second quarter of 2015, compared with $62 million in the second quarter of 2014 and $55 million in the first quarter of 2015. The business lines contribution was $6 million (9.7 percent) higher than the same quarter of 2014, principally due to an increase in total net revenue, partially offset by an increase in total noninterest expense. Total net revenue increased by $20 million (4.5 percent) year-over-year, driven by a $25 million (7.2 percent) increase in total noninterest income, reflecting the impact of account growth and improved market conditions, partially offset by a decrease in net interest income of $5 million (5.2 percent), principally due to a decrease in the margin benefit from corporate trust
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 22
deposit balances. Total noninterest expense increased by $15 million (4.4 percent) primarily as a result of higher net shared services and compensation and employee benefits expense due to merit and increased pension costs. The provision for credit losses decreased $5 million (83.3 percent) compared with the prior year quarter due to lower net charge-offs and a favorable change in the reserve allocation.
The business lines contribution in the second quarter of 2015 was $13 million (23.6 percent) higher than the prior quarter. Total net revenue increased $19 million (4.3 percent) on a linked quarter basis, reflecting an increase in net interest income of $3 million (3.4 percent), principally due to higher average deposit balances, and noninterest income of $16 million (4.5 percent), reflecting the benefits of the Companys investments in corporate trust and fund services businesses, as well as account growth and improved market conditions. Total noninterest expense was $5 million (1.4 percent) lower than the prior quarter primarily as a result of lower net shared services and employee benefits expense due to the seasonal impact. The provision for credit losses increased $3 million on a linked quarter basis due to an unfavorable change in the reserve allocation.
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 $259 million of the Companys net income in the second quarter of 2015, compared with $287 million in the second quarter of 2014 and $266 million in the first quarter of 2015. The $28 million (9.8 percent) decrease in the business lines contribution from the prior year was due to an increase in total noninterest expense and provision for credit losses, partially offset by an increase in total net revenue. Total net revenue increased by $59 million (4.7 percent) year-over-year. Net interest income increased by $41 million (9.8 percent), primarily due to higher average loan balances and fees and improved loan rates. Total noninterest income was $18 million (2.2 percent) higher year-over-year, due to higher merchant processing services revenue driven by increased transaction volumes and product fees, partially offset by the impact of foreign currency rate changes. Total noninterest expense increased by $80 million (13.3 percent) over the second quarter of 2014, primarily due to the allocation to the business line of a previously reserved regulatory item. The provision for credit losses increased by $26 million (14.3 percent) primarily due to an unfavorable change in the reserve allocation.
Payment Services contribution in the second quarter of 2015 decreased $7 million (2.6 percent) from the first quarter of 2015. Total net revenue increased $65 million (5.2 percent) on a linked quarter basis driven by higher total noninterest income, offset by higher noninterest expense and provision for credit losses. Net interest income was relatively flat compared with the prior quarter. Total noninterest income
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 23
increased by $73 million (9.4 percent), reflecting an increase in merchant processing revenue due to higher product fees and volumes, and an increase in credit and debit card revenue due to higher transaction volumes, along with an increase in corporate payment products revenue on higher volumes. Total noninterest expense was $65 million (10.5 percent) higher on a linked quarter basis primarily due to the allocation to the business line of a previously reserved regulatory item. The provision for credit losses was $11 million (5.6 percent) higher on a linked quarter basis due to higher net charge-offs.
Treasury and Corporate Support includes the Companys investment portfolios, most covered commercial and commercial real estate loans and related other real estate owned, funding, capital management, interest rate risk management, income taxes not allocated to 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 $590 million in the second quarter of 2015, compared with $487 million in the second quarter of 2014 and $545 million in the first quarter of 2015. The increase in net income of $103 million (21.1 percent) over the prior year was primarily due to a decrease in total noninterest expense and an increase in net interest income, partially offset by a decrease in total noninterest income. Net interest income increased by $27 million (5.0 percent) from the second quarter of 2014, principally due to growth in the investment portfolio, partially offset by lower income from the run-off of acquired assets. Total noninterest income decreased by $134 million (40.7 percent) from the second quarter of last year, mainly due to the prior year Visa stock sale notable item. Total noninterest expense decreased by $263 million (73.1 percent), principally due to the FHA DOJ settlement and insurance-related recoveries. The provision for credit losses was $4 million higher year-over-year due to an unfavorable change in the reserve allocation and an increase in net charge-offs.
Net income in the second quarter of 2015 was $45 million (8.3 percent) higher on a linked quarter basis, as a decrease in total noninterest expense and an increase in total net revenue were partially offset by an increase in the provision for credit losses. Total net revenue was $30 million (4.1 percent) higher than the prior quarter primarily due to an increase in commercial products revenue, mainly due to higher syndication fees on tax-advantaged projects. The $63 million (39.4 percent) decrease in total noninterest expense was principally due to a reduction of reserves for losses allocated to business lines and seasonally lower payroll taxes and compensation expense, reflecting the seasonal impact of stock based compensation grants, partially offset by increased professional services and higher costs related to investments in tax-advantaged projects. The provision for credit losses was $2 million higher compared with the first quarter of 2015 due to an increase in net charge-offs, partially offset by a favorable change in the reserve allocation.
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 24
LINE OF BUSINESS FINANCIAL PERFORMANCE (a) |
|
Table 13 | ||||||||||||||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||||||||
Net Income Attributable to U.S. Bancorp |
Percent Change | Net Income Attributable to U.S. Bancorp |
2Q 2015 | |||||||||||||||||||||||||||||||||||
|
|
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|
|
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Business Line | 2Q 2015 |
1Q 2015 |
2Q 2014 |
2Q15 vs 1Q15 |
2Q15 vs 2Q14 |
YTD 2015 |
YTD 2014 |
Percent Change |
Earnings Composition |
|||||||||||||||||||||||||||||
Wholesale Banking and Commercial Real Estate |
$ | 245 | $ | 209 | $ | 272 | 17.2 | (9.9 | ) | $ | 454 | $ | 553 | (17.9 | ) | 16 | % | |||||||||||||||||||||
Consumer and Small Business Banking |
321 | 356 | 387 | (9.8 | ) | (17.1 | ) | 677 | 743 | (8.9 | ) | 22 | ||||||||||||||||||||||||||
Wealth Management and Securities Services |
68 | 55 | 62 | 23.6 | 9.7 | 123 | 124 | (.8 | ) | 5 | ||||||||||||||||||||||||||||
Payment Services |
259 | 266 | 287 | (2.6 | ) | (9.8 | ) | 525 | 525 | | 17 | |||||||||||||||||||||||||||
Treasury and Corporate Support |
590 | 545 | 487 | 8.3 | 21.1 | 1,135 | 947 | 19.9 | 40 | |||||||||||||||||||||||||||||
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Consolidated Company |
$ | 1,483 | $ | 1,431 | $ | 1,495 | 3.6 | (.8 | ) | $ | 2,914 | $ | 2,892 | .8 | 100 | % | ||||||||||||||||||||||
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(a) preliminary data
|
Additional schedules containing more detailed information about the Companys business line results are available on the web at usbank.com or by calling Investor Relations at 612-303-4328.
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 25
On Wednesday, July 15, 2015, at 8:30 a.m. CDT, Richard K. Davis, chairman, president and chief executive officer, and Kathy Rogers, vice chairman and chief financial officer, will host a conference call to review the financial results. The conference call will be available online and by telephone. The presentation used during the call will be available at www.usbank.com. To access the webcast and presentation, go to www.usbank.com and click on About U.S. Bank. The Webcasts & Presentations link can be found under the Investor/Shareholder information heading, which is at the left side near the bottom of the page. To access the conference call from locations within the United States and Canada, please dial 866-316-1409. Participants calling from outside the United States and Canada, please dial 706-634-9086. The conference ID number for all participants is 48520914. For those unable to participate during the live call, a recording of the call will be available at approximately 11:30 a.m. CDT on Wednesday, July 15 and will be accessible through Wednesday, July 22 at 11:00 p.m. CDT. To access the recorded message within the United States and Canada, 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 48520914.
Minneapolis-based U.S. Bancorp (USB), with $419 billion in assets as of June 30, 2015, is the parent company of U.S. Bank National Association, the fifth largest commercial bank in the United States. The Company operates 3,164 banking offices in 25 states and 5,020 ATMs and provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses and institutions. Visit U.S. Bancorp on the web at usbank.com.
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 26
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. Bancorps 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, U.S. Bancorps business and financial performance is likely to be negatively impacted by recently enacted and future legislation and regulation. U.S. Bancorps results could also be adversely affected by deterioration in general business and economic conditions; changes in interest rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of securities held in its investment securities portfolio; legal and regulatory developments; litigation; increased competition from both banks and non-banks; changes in customer behavior and preferences; breaches in data security; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and managements ability to effectively manage credit risk, residual value 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, 2014, on file with the Securities and Exchange Commission, including the sections entitled Risk Factors and Corporate Risk Profile contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. However, factors other than these also could adversely affect U.S. Bancorps 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.
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U.S. Bancorp Reports Second Quarter 2015 Results
July 15, 2015
Page 27
Non-GAAP Financial Measures
In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:
| Tangible common equity to tangible assets, |
| Tangible common equity to risk-weighted assets, |
| Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach, and |
| Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches. |
These measures are viewed by management as useful additional methods of reflecting the level of capital available to withstand unexpected 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 measures differ from currently effective capital ratios defined by banking regulations principally in that the numerator includes unrealized gains and losses related to available-for-sale securities and excludes preferred securities, including preferred stock, the nature and extent of which varies among different financial services companies. These measures are not defined in generally accepted accounting principles (GAAP), or are not currently effective or defined in federal banking regulations. As a result, these measures disclosed by the Company may be considered non-GAAP financial measures.
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.
###
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U.S. Bancorp
|
Consolidated Statement of Income |
(Dollars and Shares in Millions, Except Per Share Data) | Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||
(Unaudited)
|
2015 | 2014 | 2015 | 2014 | ||||||||||||
Interest Income |
||||||||||||||||
Loans |
$2,463 | $2,532 | $4,956 | $5,054 | ||||||||||||
Loans held for sale |
65 | 24 | 106 | 51 | ||||||||||||
Investment securities |
505 | 461 | 1,000 | 902 | ||||||||||||
Other interest income |
35 | 30 | 67 | 62 | ||||||||||||
Total interest income |
3,068 | 3,047 | 6,129 | 6,069 | ||||||||||||
Interest Expense |
||||||||||||||||
Deposits |
113 | 114 | 231 | 233 | ||||||||||||
Short-term borrowings |
62 | 63 | 123 | 132 | ||||||||||||
Long-term debt |
177 | 181 | 361 | 365 | ||||||||||||
Total interest expense |
352 | 358 | 715 | 730 | ||||||||||||
Net interest income |
2,716 | 2,689 | 5,414 | 5,339 | ||||||||||||
Provision for credit losses |
281 | 324 | 545 | 630 | ||||||||||||
Net interest income after provision for credit losses |
2,435 | 2,365 | 4,869 | 4,709 | ||||||||||||
Noninterest Income |
||||||||||||||||
Credit and debit card revenue |
266 | 259 | 507 | 498 | ||||||||||||
Corporate payment products revenue |
178 | 182 | 348 | 355 | ||||||||||||
Merchant processing services |
395 | 384 | 754 | 740 | ||||||||||||
ATM processing services |
80 | 82 | 158 | 160 | ||||||||||||
Trust and investment management fees |
334 | 311 | 656 | 615 | ||||||||||||
Deposit service charges |
174 | 171 | 335 | 328 | ||||||||||||
Treasury management fees |
142 | 140 | 279 | 273 | ||||||||||||
Commercial products revenue |
214 | 221 | 414 | 426 | ||||||||||||
Mortgage banking revenue |
231 | 278 | 471 | 514 | ||||||||||||
Investment products fees |
48 | 47 | 95 | 93 | ||||||||||||
Securities gains (losses), net |
| | | 5 | ||||||||||||
Other |
210 | 369 | 409 | 545 | ||||||||||||
Total noninterest income |
2,272 | 2,444 | 4,426 | 4,552 | ||||||||||||
Noninterest Expense |
||||||||||||||||
Compensation |
1,196 | 1,125 | 2,375 | 2,240 | ||||||||||||
Employee benefits |
293 | 257 | 610 | 546 | ||||||||||||
Net occupancy and equipment |
247 | 241 | 494 | 490 | ||||||||||||
Professional services |
106 | 97 | 183 | 180 | ||||||||||||
Marketing and business development |
96 | 96 | 166 | 175 | ||||||||||||
Technology and communications |
221 | 214 | 435 | 425 | ||||||||||||
Postage, printing and supplies |
64 | 80 | 146 | 161 | ||||||||||||
Other intangibles |
43 | 48 | 86 | 97 | ||||||||||||
Other |
416 | 595 | 852 | 983 | ||||||||||||
Total noninterest expense |
2,682 | 2,753 | 5,347 | 5,297 | ||||||||||||
Income before income taxes |
2,025 | 2,056 | 3,948 | 3,964 | ||||||||||||
Applicable income taxes |
528 | 547 | 1,007 | 1,043 | ||||||||||||
Net income |
1,497 | 1,509 | 2,941 | 2,921 | ||||||||||||
Net (income) loss attributable to noncontrolling interests |
(14 | ) | (14 | ) | (27 | ) | (29 | ) | ||||||||
Net income attributable to U.S. Bancorp |
$1,483 | $1,495 | $2,914 | $2,892 | ||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$1,417 | $1,427 | $2,782 | $2,758 | ||||||||||||
Earnings per common share |
$.80 | $.79 | $1.57 | $1.52 | ||||||||||||
Diluted earnings per common share |
$.80 | $.78 | $1.56 | $1.51 | ||||||||||||
Dividends declared per common share |
$.255 | $.245 | $.500 | $.475 | ||||||||||||
Average common shares outstanding |
1,771 | 1,811 | 1,776 | 1,815 | ||||||||||||
Average diluted common shares outstanding |
1,779 | 1,821 | 1,784 | 1,825 |
Page 28
U.S. Bancorp
|
Consolidated Ending Balance Sheet |
(Dollars in Millions)
|
June 30, 2015 |
December 31, 2014 |
June 30, 2014 |
|||||||||
Assets |
(Unaudited | ) | (Unaudited | ) | ||||||||
Cash and due from banks |
$17,925 | $10,654 | $12,636 | |||||||||
Investment securities |
||||||||||||
Held-to-maturity |
46,233 | 44,974 | 41,995 | |||||||||
Available-for-sale |
57,078 | 56,069 | 48,389 | |||||||||
Loans held for sale |
8,498 | 4,792 | 3,018 | |||||||||
Loans |
||||||||||||
Commercial |
84,620 | 80,377 | 77,454 | |||||||||
Commercial real estate |
42,258 | 42,795 | 40,797 | |||||||||
Residential mortgages |
51,337 | 51,619 | 51,965 | |||||||||
Credit card |
17,788 | 18,515 | 17,642 | |||||||||
Other retail |
47,652 | 49,264 | 48,568 | |||||||||
|
|
|||||||||||
Total loans, excluding covered loans |
243,655 | 242,570 | 236,426 | |||||||||
Covered loans |
4,984 | 5,281 | 7,448 | |||||||||
|
|
|||||||||||
Total loans |
248,639 | 247,851 | 243,874 | |||||||||
Less allowance for loan losses |
(4,013 | ) | (4,039 | ) | (4,132 | ) | ||||||
|
|
|||||||||||
Net loans |
244,626 | 243,812 | 239,742 | |||||||||
Premises and equipment |
2,551 | 2,618 | 2,614 | |||||||||
Goodwill |
9,374 | 9,389 | 9,422 | |||||||||
Other intangible assets |
3,225 | 3,162 | 3,337 | |||||||||
Other assets |
29,565 | 27,059 | 27,912 | |||||||||
|
|
|||||||||||
Total assets |
$419,075 | $402,529 | $389,065 | |||||||||
|
|
|||||||||||
Liabilities and Shareholders Equity |
||||||||||||
Deposits |
||||||||||||
Noninterest-bearing |
$86,189 | $77,323 | $80,266 | |||||||||
Interest-bearing |
186,589 | 177,452 | 166,531 | |||||||||
Time deposits greater than $100,000 |
24,070 | 27,958 | 29,465 | |||||||||
|
|
|||||||||||
Total deposits |
296,848 | 282,733 | 276,262 | |||||||||
Short-term borrowings |
27,784 | 29,893 | 29,101 | |||||||||
Long-term debt |
34,141 | 32,260 | 25,891 | |||||||||
Other liabilities |
15,071 | 13,475 | 14,425 | |||||||||
|
|
|||||||||||
Total liabilities |
373,844 | 358,361 | 345,679 | |||||||||
Shareholders equity |
||||||||||||
Preferred stock |
4,756 | 4,756 | 4,756 | |||||||||
Common stock |
21 | 21 | 21 | |||||||||
Capital surplus |
8,335 | 8,313 | 8,264 | |||||||||
Retained earnings |
44,434 | 42,530 | 40,573 | |||||||||
Less treasury stock |
(12,144 | ) | (11,245 | ) | (10,232 | ) | ||||||
Accumulated other comprehensive income (loss) |
(865 | ) | (896 | ) | (682 | ) | ||||||
|
|
|||||||||||
Total U.S. Bancorp shareholders equity |
44,537 | 43,479 | 42,700 | |||||||||
Noncontrolling interests |
694 | 689 | 686 | |||||||||
|
|
|||||||||||
Total equity |
45,231 | 44,168 | 43,386 | |||||||||
|
|
|||||||||||
Total liabilities and equity |
$419,075 | $402,529 | $389,065 |
Page 29
U.S. Bancorp
| ||||
Non-GAAP Financial Measures |
(Dollars in Millions, Unaudited) | June 30, 2015 |
March 31, 2015 |
December 31, 2014 |
September 30, 2014 |
June 30, 2014 |
|||||||||||||||||
Total equity |
$45,231 | $44,965 | $44,168 | $43,829 | $43,386 | |||||||||||||||||
Preferred stock |
(4,756 | ) | (4,756 | ) | (4,756 | ) | (4,756 | ) | (4,756 | ) | ||||||||||||
Noncontrolling interests |
(694 | ) | (688 | ) | (689 | ) | (688 | ) | (686 | ) | ||||||||||||
Goodwill (net of deferred tax liability) (1) |
(8,350 | ) | (8,360 | ) | (8,403 | ) | (8,503 | ) | (8,548 | ) | ||||||||||||
Intangible assets, other than mortgage servicing rights |
(744 | ) | (783 | ) | (824 | ) | (877 | ) | (925 | ) | ||||||||||||
|
|
|||||||||||||||||||||
Tangible common equity (a) |
30,687 | 30,378 | 29,496 | 29,005 | 28,471 | |||||||||||||||||
Tangible common equity (as calculated above) |
30,687 | 30,378 | 29,496 | 29,005 | 28,471 | |||||||||||||||||
Adjustments (2) |
125 | 158 | 172 | 187 | 224 | |||||||||||||||||
|
|
|||||||||||||||||||||
Common equity tier 1 capital estimated for the Basel III fully implemented standardized and advanced approaches (b) |
30,812 | 30,536 | 29,668 | 29,192 | 28,695 | |||||||||||||||||
Total assets |
419,075 | 410,233 | 402,529 | 391,284 | 389,065 | |||||||||||||||||
Goodwill (net of deferred tax liability) (1) |
(8,350 | ) | (8,360 | ) | (8,403 | ) | (8,503 | ) | (8,548 | ) | ||||||||||||
Intangible assets, other than mortgage servicing rights |
(744 | ) | (783 | ) | (824 | ) | (877 | ) | (925 | ) | ||||||||||||
|
|
|||||||||||||||||||||
Tangible assets (c) |
409,981 | 401,090 | 393,302 | 381,904 | 379,592 | |||||||||||||||||
Risk-weighted assets, determined in accordance with prescribed regulatory requirements (d) |
333,177 | * | 327,709 | 317,398 | 311,914 | 309,929 | ||||||||||||||||
Adjustments (3) |
3,532 | * | 3,153 | 11,110 | 12,837 | 12,753 | ||||||||||||||||
|
|
|||||||||||||||||||||
Risk-weighted assets estimated for the Basel III fully implemented standardized approach (e) |
336,709 | * | 330,862 | 328,508 | 324,751 | 322,682 | ||||||||||||||||
Risk-weighted assets, determined in accordance with prescribed transitional advanced approaches regulatory requirements |
245,038 | * | 254,892 | 248,596 | 243,909 | 241,929 | ||||||||||||||||
Adjustments (4) |
3,721 | * | 3,321 | 3,270 | 3,443 | 3,383 | ||||||||||||||||
|
|
|||||||||||||||||||||
Risk-weighted assets estimated for the Basel III fully implemented advanced approaches (f) |
248,759 | * | 258,213 | 251,866 | 247,352 | 245,312 | ||||||||||||||||
Ratios * |
||||||||||||||||||||||
Tangible common equity to tangible assets (a)/(c) |
7.5 | % | 7.6 | % | 7.5 | % | 7.6 | % | 7.5 | % | ||||||||||||
Tangible common equity to risk-weighted assets (a)/(d) |
9.2 | 9.3 | 9.3 | 9.3 | 9.2 | |||||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach (b)/(e) |
9.2 | 9.2 | 9.0 | 9.0 | 8.9 | |||||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches (b)/(f) |
12.4 | 11.8 | 11.8 | 11.8 | 11.7 |
* 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 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.
Page 30
U.S.
Bancorp 2Q15 Earnings Conference Call
Richard K. Davis Chairman, President and CEO Kathy Rogers Vice Chairman and CFO July 15, 2015 Exhibit 99.2 |
2 | 2Q15 Earnings Conference Call Forward-looking Statements and Additional Information The following information appears in accordance with the Private Securities Litigation Reform Act of 1995: This 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 made. 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.
Bancorps 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, U.S.
Bancorps business and financial performance is likely to be
negatively impacted by recently enacted and future legislation and regulation. U.S. Bancorps results could also be adversely affected by deterioration in general business and economic conditions; changes in interest rates; deterioration in the
credit quality of its loan portfolios or in the value of the collateral
securing those loans; deterioration in the value of securities held in its
investment securities portfolio; legal and regulatory developments; litigation;
increased competition from both banks and non-banks; changes in
customer behavior and preferences; breaches in data security; effects of mergers and
acquisitions and related integration; effects of critical accounting
policies and judgments; and managements ability to effectively manage credit risk, residual value 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, 2014, 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. Forward-looking statements speak only as of the date they are made, 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. Bancorps performance. The calculations of these measures
are provided within or in the appendix of the presentation. 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. |
3 | 2Q15 Earnings Conference Call Net income of $1.5 billion; $0.80 per diluted common share Average loan growth of 4.0% vs. 2Q14 and 0.7% vs. 1Q15 (excluding student loans, which were reclassified to held for sale at the end of 1Q15) Average deposit growth of 8.9% vs. 2Q14 and 2.6% vs. 1Q15 Improving trends in payments-related fee revenue Net charge-offs declined 15.2% vs. 2Q14 and increased 6.1% vs. 1Q15 Nonperforming assets declined 18.8% vs. 2Q14 and 7.0% vs. 1Q15 Capital generation continues to reinforce capital position Common equity tier 1 capital ratio of 9.2% estimated for the Basel III fully implemented standardized approach Returned 76% of earnings to shareholders in 2Q15 Repurchased 14 million shares of common stock during the quarter 2Q15 Highlights |
4 | 2Q15 Earnings Conference Call Return on Average Common Equity and Return on Average Assets Efficiency Ratio and Net Interest Margin Return on Avg Common Equity Return on Avg Assets Efficiency Ratio Net Interest Margin Performance Ratios * Excluding $214 million gain on Visa Inc. Class B common stock sale and $200 million FHA DOJ settlement
** Excluding $124 million gain related to an equity interest in Nuveen and $88 million
expense for charitable contributions and legal accruals Efficiency ratio
computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding net securities gains (losses) 2Q14 3Q14 4Q14 1Q15 2Q15 2Q14 3Q14 4Q14 1Q15 2Q15 8% 11% 14% 17% 20% 1.0% 1.5% 2.0% 2.5% 3.0% 48% 52% 56% 60% 64% 1.6% 2.2% 2.8% 3.4% 4.0% 1.60% 1.51% 1.50% 1.44% 1.46% 15.1% 14.5% 14.4% 14.1% 14.3% 51.3%* 53.8%** 53.1% 52.4% 54.3% 54.3% 53.2% 3.27% 3.16% 3.14% 3.08% 3.03% |
5 | 2Q15 Earnings Conference Call Notable items: 2Q14 Visa gain $214 million, 4Q14 Nuveen gain $124 million Taxable-equivalent basis Year-Over-Year Change 4.9% 2.0% 5.7% 1.9% (2.8%) $ in millions $4,906 $5,188 $4,990 $5,169 $5,042 $214 $124 3,500 4,000 4,500 5,000 5,500 2Q14 3Q14 4Q14 1Q15 2Q15 Revenue Growth 1.4% excluding 2Q14 notable 3.2% excluding 4Q14 notable 0.5% excluding 2Q14 notable |
6 | 2Q15 Earnings Conference Call Year-Over-Year Growth Average Balances 210 230 250 270 290 2Q14 3Q14 4Q14 1Q15 2Q15 Loans Deposits 5.1% $248.0 2.5% $246.6 6.8% $240.5 6.3% $243.9 5.9% $246.4 8.1% $278.5 8.9% $285.7 6.0% $262.4 7.4% $271.0 7.2% $275.5 Loan and Deposit Growth $ in billions 2Q15 adjusted* loan growth = 4.0% * Excluding the impact of the reclassification of approximately $3 billion of student loans to held for sale at the end of 1Q15
|
7 | 2Q15 Earnings Conference Call Net Charge-offs Nonperforming Assets Net Charge-offs (Left Scale) NCOs to Avg Loans (Right Scale) Nonperforming Assets (Left Scale) NPAs to Loans plus ORE (Right Scale) Credit Quality $ in millions 0.00% 0.75% 1.50% 2.25% 3.00% 0 130 260 390 520 2Q14 3Q14 4Q14 1Q15 2Q15 $349 $336 $308 $279 $296 0.58% 0.55% 0.50% 0.46% 0.48% $1,943 $1,923 $1,808 $1,696 $1,577 0.80% 0.78% 0.73% 0.69% 0.63% 0.00% 0.75% 1.50% 2.25% 3.00% 0 700 1,400 2,100 2,800 2Q14 3Q14 4Q14 1Q15 2Q15 |
8 | 2Q15 Earnings Conference Call Taxable-equivalent basis Earnings Summary $ and shares in millions, except per-share data YTD YTD 2Q15 1Q15 2Q14 vs 1Q15 vs 2Q14 2015 2014 %B/(W) Net Interest Income 2,770 $ 2,752 $ 2,744 $ 0.7 0.9 5,522 $ 5,450 $ 1.3 Noninterest Income 2,272 2,154 2,444 5.5 (7.0) 4,426 4,552 (2.8) Net Revenue 5,042 4,906 5,188 2.8 (2.8) 9,948 10,002 (0.5) Noninterest Expense 2,682 2,665 2,753 (0.6) 2.6 5,347 5,297 (0.9) Operating Income 2,360 2,241 2,435 5.3 (3.1) 4,601 4,705 (2.2) Net Charge-offs 296 279 349 (6.1) 15.2 575 690 16.7 Excess Provision (15) (15) (25) - (40.0) (30) (60) (50.0) Income before Taxes 2,079 1,977 2,111 5.2 (1.5) 4,056 4,075 (0.5) Applicable Income Taxes 582 533 602 (9.2) 3.3 1,115 1,154 3.4 Noncontrolling Interests (14) (13) (14) (7.7) - (27) (29) 6.9 Net Income 1,483 1,431 1,495 3.6 (0.8) 2,914 2,892 0.8 Preferred Dividends/Other 66 66 68 - 2.9 132 134 1.5 NI to Common 1,417 $ 1,365 $ 1,427 $ 3.8 (0.7) 2,782 $ 2,758 $ 0.9 Diluted EPS 0.80 $ 0.76 $ 0.78 $ 5.3 2.6 1.56 $ 1.51 $ 3.3 Average Diluted Shares 1,779 1,789 1,821 0.6 2.3 1,784 1,825 2.2 % B/(W) |
9 | 2Q15 Earnings Conference Call Net Interest Income Key Points vs. 2Q14 Average earning assets grew $30.4 billion, or 9.1% Net interest margin lower 24 bps (3.03% vs. 3.27%) Growth in the investment portfolio at lower average rates as well as lower reinvestment rates on investment securities, lower loan fees due to the Checking Account Advance product wind down, lower rates on new loans and a change in loan portfolio mix Partially offset by lower funding costs vs. 1Q15 Average earning assets grew $5.6 billion, or 1.5% Net interest margin lower 5 bps (3.03% vs. 3.08%) Continued change in loan portfolio mix, the impact of higher cash balances at the Federal Reserve as a result of continued deposit growth, along with growth in lower rate investment securities and lower investment portfolio reinvestment rates Year-Over-Year Change 2.7% 1.3% 2.4% 1.7% 0.9% Net Interest Income $ in millions Taxable-equivalent basis $2,744 $2,748 $2,799 $2,752 $2,770 0.0% 2.0% 4.0% 6.0% 8.0% 0 1,000 2,000 3,000 4,000 2Q14 3Q14 4Q14 1Q15 2Q15 Net Interest Income Net Interest Margin 3.27% 3.16% 3.14% 3.08% 3.03% 9 | 2Q15 Earnings Conference Call |
10 | 2Q15 Earnings Conference Call Noninterest Income Noninterest Income Key Points vs. 2Q14 Noninterest income decreased $172 million, or 7.0% (1.9% increase excluding notable item in 2Q14) Higher trust and investment management fees (7.4% increase) Higher merchant processing revenue (2.9% increase, 7.6% increase adjusted for the impact of foreign currency rate changes) Higher credit and debit card revenue (2.7% increase) on volume increase of 6.6% Lower mortgage revenue primarily due to an unfavorable change in the valuation of mortgage servicing rights net of hedging activities vs. 1Q15 Noninterest income increased $118 million, or 5.5% Seasonally higher credit and debit card revenue (10.4% increase), merchant processing services revenue (10.0% increase), and deposit service charges (8.1% increase) Higher trust and investment management fees (3.7% increase) Partially offset by lower mortgage banking revenue Year-Over-Year Change 7.4% 3.0% 9.9% 2.2% (7.0%) $2,444 $2,242 $2,370 $2,154 $2,272 All Other Mortgage Service Charges Trust and Inv Mgmt Payments Notable items: 2Q14 Visa gain $214 million, 4Q14 Nuveen gain $124 million Payments = credit and debit card, corporate payment products and merchant processing
Service charges = deposit service charges, treasury management and ATM
processing $ in millions
$637 $432 $587 $446 $472 $278 $260 $235 $240 $231 $393 $402 $396 $376 $396 $311 $315 $322 $322 $334 $825 $833 $830 $770 $839 0 700 1,400 2,100 2,800 2Q14 3Q14 4Q14 1Q15 2Q15 10 | 2Q15 Earnings Conference Call |
11 | 2Q15 Earnings Conference Call Noninterest Expense $643 $503 $594 $479 $459 $214 $219 $219 $214 $221 $273 $261 $347 $229 $266 $241 $249 $248 $247 $247 $1,382 $1,382 $1,396 $1,496 $1,489 0 800 1,600 2,400 3,200 2Q14 3Q14 4Q14 1Q15 2Q15 Noninterest Expense Key Points vs. 2Q14 Noninterest expense decreased $71 million, or 2.6% (5.1% increase excluding notable item in 2Q14) Higher compensation (6.3% increase) reflecting the impact of merit increases, acquisitions, and higher staffing for risk and compliance activities Higher employee benefits expense (14.0% increase) primarily due to higher pension costs Lower postage, printing and supplies expense (20.0% decrease) vs. 1Q15 Noninterest expense increased $17 million, or 0.6% Higher professional services expense (37.7% increase) due to mortgage servicing and compliance related matters Higher marketing and business development expense (37.1% increase) due to the timing of various marketing programs Partially offset by lower employee benefit expense (7.6% decrease) primarily resulting from seasonally lower payroll taxes Year-Over-Year Change 7.7% 1.9% 4.5% 4.8% (2.6%) $2,753 $2,614 $2,804 $2,665 $2,682 All Other Tech and Communications Prof Svcs, Marketing and PPS Occupancy and Equipment Compensation and Benefits Notable items: 2Q14 FHA DOJ settlement $200 million, 4Q14 charitable contributions and accruals for legal matters $88 million
$ in millions 11 | 2Q15 Earnings Conference Call |
12 | 2Q15 Earnings Conference Call Capital Position *RWA = risk-weighted assets $ in billions 2Q15 1Q15 4Q14 3Q14 2Q14 Total U.S. Bancorp shareholders' equity 44.5 $ 44.3 $ 43.5 $ 43.1 $ 42.7 $ Standardized Approach Basel III transitional standardized approach Common equity tier 1 capital ratio 9.5% 9.6% 9.7% 9.7% 9.6% Tier 1 capital ratio 11.0% 11.1% 11.3% 11.3% 11.3% Total risk-based capital ratio 13.1% 13.3% 13.6% 13.6% 13.2% Leverage ratio 9.2% 9.3% 9.3% 9.4% 9.6% Common equity tier 1 capital to RWA* estimated for the Basel III fully implemented standardized approach 9.2% 9.2% 9.0% 9.0% 8.9% Advanced Approaches Common equity tier 1 capital to RWA for the Basel III transitional advanced approaches 12.9% 12.3% 12.4% 12.4% 12.3% Common equity tier 1 capital to RWA estimated for the Basel III fully implemented advanced approaches 12.4% 11.8% 11.8% 11.8% 11.7% Tangible common equity ratio 7.5% 7.6% 7.5% 7.6% 7.5% Tangible common equity as a % of RWA 9.2% 9.3% 9.3% 9.3% 9.2% |
13 | 2Q15 Earnings Conference Call 76% Reinvest and Acquisitions Dividends Share Repurchases Capital Actions 27% 29% 31% 32% 32% 35% 42% 41% 38% 44% 0% 25% 50% 75% 100% 2012 2013 2014 1Q15 2Q15 Dividends Share Repurchases 62% 70% Payout Ratio 71% 72% Dividend increase announced June 16 Annual dividend increased from $0.98 to $1.02 per share, a 4.1% increase One year authorization to repurchase up to $3.0 billion of outstanding common stock effective April 1, 2015 Returned 76% of earnings to shareholders during 2Q15 Earnings Distribution Target 32% 24% 44% 2Q15 Actual 20 - 40% 30 - 40% 30 - 40% |
Appendix |
15 | 2Q15 Earnings Conference Call 12.4% 13.6% 15.5% 15.1% 11.0% 6.9% 6.1% 4.2% 6.5% 4.8% 10.5% 5.8% 2.2% (0.3%) (1.4%) 5.9% 4.9% 3.6% 2.4% 1.3% 2.3% 3.6% 3.6% 3.5% (1.8%) 0 70 140 210 280 2Q14 3Q14 4Q14 1Q15 2Q15 Average Loans Key Points vs. 2Q14 Average total loans increased by $6.1 billion, or 2.5% ($9.5 billion, or 4.0% increase excluding student loans, which were reclassified to held for sale at the end of 1Q15) Average total commercial loans increased $8.2 billion, or 11.0%; average commercial real estate loans increased $2.0 billion, or 4.8% vs. 1Q15 Average total loans declined by $1.4 billion, or 0.6% (0.7% increase excluding student loans, which were reclassified to held for sale at the end of 1Q15) Average total commercial loans increased $1.7 billion, or 2.1%; average commercial real estate loans decreased $0.2 billion, or 0.5% Year-Over-Year Growth 6.8% 6.3% 5.9% 5.1% 2.5% Covered Commercial CRE Res Mtg Retail Credit Card $246.6 $240.5 $243.9 $246.4 $248.0 Average Loans 4.0%* $ in billions 5.7%* * Excluding the impact of the reclassification of approximately $3 billion of student loans to held for sale at the end of 1Q15
|
16 | 2Q15 Earnings Conference Call (5.9%) (13.1%) (4.9%) (8.2%) (14.1%) 10.8% 18.3% 19.7% 24.7% 30.2% 8.3% 10.9% 8.3% 7.3% 6.1% 7.4% 8.6% 3.3% 5.2% 7.7% 0 80 160 240 320 2Q14 3Q14 4Q14 1Q15 2Q15 Average Deposits Key Points vs. 2Q14 Average total deposits increased by $23.3 billion, or 8.9% Average low-cost deposits (NIB, interest checking, money market and savings) increased by $29.3 billion, or 13.3% vs. 1Q15 Average total deposits increased by $7.3 billion, or 2.6% Average low-cost deposits increased by $10.4 billion, or 4.4% Year-Over-Year Growth 6.0% 7.4% 7.2% 8.1% 8.9% Time Money Market Checking and Savings Noninterest-bearing $262.4 $271.0 $275.5 $278.5 $285.7 Average Deposits $ in billions 16 | 2Q15 Earnings Conference Call |
17 | 2Q15 Earnings Conference Call Average Loans and Net Charge-offs Ratios Key Statistics Key Points Average quarter-over-quarter loan growth of 2.3% and year-over-year loan growth of 11.5% is supported by strong
credit quality Net charge-offs, nonperforming loans and delinquencies remained at historically low levels
2Q14 1Q15 2Q15 Average Loans $69,920 $76,183 $77,932 30-89 Delinquencies 0.23% 0.19% 0.19% 90+ Delinquencies 0.06% 0.06% 0.05% Nonperforming Loans 0.24% 0.10% 0.10% Credit Quality Commercial Loans $ in millions 0.0% 0.5% 1.0% 1.5% 2.0% 0 25,000 50,000 75,000 100,000 2Q14 3Q14 4Q14 1Q15 2Q15 20% 24% 28% 32% 36% Revolving Line Utilization Trend $69,920 $72,190 $74,333 $76,183 $77,932 0.30% 0.29% 0.26% 0.21% 0.20% Average Loans Net Charge-offs Ratio |
18 | 2Q15 Earnings Conference Call Average Loans and Net Charge-offs Ratios Key Statistics Key Points Year-over-year average leases increased 4.3% Net charge-offs, nonperforming loans and delinquencies continued at modest levels
2Q14 1Q15 2Q15 Average Loans $5,100 $5,325 $5,321 30-89 Delinquencies 0.75% 0.84% 0.81% 90+ Delinquencies 0.00% 0.00% 0.00% Nonperforming Loans 0.31% 0.24% 0.23% Credit Quality Commercial Leases $ in millions Small Ticket $3,197 Equipment Finance $2,124 Commercial Leases 18 | 2Q15 Earnings Conference Call $5,100 $5,155 $5,292 $5,325 $5,321 0.7% 0.0% 0.7% 1.4% 2.1% 0 3,000 6,000 9,000 2Q14 3Q14 4Q14 1Q15 2Q15 0.24% 0.46% 0.23% 0.23% Average Loans Net Charge -offs Ratio -0.15% |
19 | 2Q15 Earnings Conference Call Average Loans and Net Charge-offs Ratios Key Statistics Key Points Year-over-year average loans increased 4.8% Historically low delinquency and nonperforming loan levels improved both on a quarter-over-quarter and year-over-
year basis The net charge-off ratio of 0.01% continued a two-year trend of minimal CRE net charge-offs
2Q14 1Q15 2Q15 Average Loans $40,497 $42,671 $42,446 30-89 Delinquencies 0.14% 0.24% 0.12% 90+ Delinquencies 0.06% 0.07% 0.05% Nonperforming Loans 0.55% 0.51% 0.41% Performing TDRs* $330 $259 $240 Credit Quality Commercial Real Estate (CRE) $ in millions Investor $21,028 Owner Occupied $11,471 Multi-family $3,075 Retail $773 Residential Construction $2,103 A&D Construction $666 Office $1,203 Other $2,127 * TDR = troubled debt restructuring CRE Mortgage CRE Construction $40,497 $40,839 $40,966 $42,671 $42,446 -0.04% 0.04% -0.10% -0.17% 0.01% -0.5% 0.0% 0.5% 1.0% 1.5% 0 20,000 40,000 60,000 2Q14 3Q14 4Q14 1Q15 2Q15 Average Loans Net Charge -offs Ratio |
20 | 2Q15 Earnings Conference Call Average Loans and Net Charge-offs Ratios Key Statistics Key Points Originations are of high credit quality (weighted average FICO 757, weighted average LTV 70%)
83% of the 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
Residential Mortgage $ in millions 2Q14 1Q15 2Q15 Average Loans $51,815 $51,426 $51,114 30-89 Delinquencies 0.48% 0.38% 0.38% 90+ Delinquencies 0.49% 0.33% 0.30% Nonperforming Loans 1.57% 1.61% 1.50% *Excludes GNMA loans, whose repayments are insured by the FHA or guaranteed by the Department of VA ($2,080 million in 2Q15)
$51,815 $51,994 $51,872 $51,426 $51,114 0.44% 0.32% 0.30% 0.28% 0.26% 0.0% 0.5% 1.0% 1.5% 2.0% 0 15,000 30,000 45,000 60,000 2Q14 3Q14 4Q14 1Q15 2Q15 Average Loans Net Charge -offs Ratio $1,922 $1,899 $1,866 $1,851 $1,931 0 1,000 2,000 3,000 4,000 2Q14 3Q14 4Q14 1Q15 2Q15 Residential Mortgage Performing TDRs* |
21 | 2Q15 Earnings Conference Call Average Loans and Net Charge-offs Ratios Key Statistics Key Points Average loans increased 1.3% year-over-year driven by high quality originations (weighted average FICO 756)
Delinquencies and losses remain historically low, reflecting stability in both
underwriting and credit quality Nonperforming loans continued to
decline $17,384
$17,753 $17,990 $17,823 $17,613 3.92% 3.53% 3.53% 3.71% 3.85% 0.0% 3.0% 6.0% 9.0% 12.0% 0 6,000 12,000 18,000 24,000 2Q14 3Q14 4Q14 1Q15 2Q15 Average Loans Net Charge-offs Ratio Credit Quality Credit Card $ in millions 2Q14 1Q15 2Q15 Average Loans $17,384 $17,823 $17,613 30-89 Delinquencies 1.13% 1.16% 1.16% 90+ Delinquencies 1.06% 1.19% 1.03% Nonperforming Loans 0.29% 0.13% 0.09% $52 $40 $30 $22 $16 0.29% 0.22% 0.16% 0.13% 0.09% 0.0% 0.5% 1.0% 1.5% 2.0% 0 20 40 60 80 2Q14 3Q14 4Q14 1Q15 2Q15 Credit Card Nonperforming Loans |
22 | 2Q15 Earnings Conference Call Average Loans and Net Charge-offs Ratios Key Statistics Key Points High-quality originations (weighted average FICO on commitments was 768, weighted average CLTV 71%)
originated primarily through the retail branch network to existing bank customers on
their primary residences Net charge-offs ratio declined on a linked
quarter and year-over-year basis Credit Quality
Home Equity $ in millions 2Q14 1Q15 2Q15 Average Loans $15,327 $15,897 $15,958 30-89 Delinquencies 0.50% 0.41% 0.36% 90+ Delinquencies 0.26% 0.25% 0.25% Nonperforming Loans 1.11% 1.07% 0.98% Subprime: 1% Wtd Avg LTV*: 90% NCO: 1.83% Prime: 96% Wtd Avg LTV*: 72% NCO: 0.24% Other: 3% Wtd Avg LTV*: 71% NCO: 0.84% *LTV at origination $15,327 $15,704 $15,853 $15,897 $15,958 0.0% 1.0% 2.0% 3.0% 4.0% 0 5,000 10,000 15,000 20,000 2Q14 3Q14 4Q14 1Q15 2Q15 0.60% 0.61% 0.43% 0.36% 0.28% Average Loans Net Charge-offs Ratio 22 | 2Q15 Earnings Conference Call Home Equity |
23 | 2Q15 Earnings Conference Call Average Loans and Net Charge-offs Ratios Key Statistics Key Points Continued high-quality originations (weighted average FICO 790) support the portfolios stable credit profile
Delinquencies remained relatively stable at very low levels
Strong used auto values continued to contribute to historically low net
charge-offs Credit Quality
Retail Leasing $ in millions 2Q14 1Q15 2Q15 Average Loans $6,014 $5,819 $5,696 30-89 Delinquencies 0.16% 0.12% 0.17% 90+ Delinquencies 0.00% 0.00% 0.00% Nonperforming Loans 0.02% 0.02% 0.04% * Manheim Used Vehicle Value Index source: www.manheimconsulting.com, January 1995 = 100, quarter value = average monthly ending
values Average Loans
Net Charge-offs Ratio
$6,014 $5,991 $5,939 $5,819 $5,696 0.0% 0.2% 0.4% 0.6% 0.8% 0 2,000 4,000 6,000 8,000 2Q14 3Q14 4Q14 1Q15 2Q15 100 110 120 130 140 ManheimUsed Vehicle Index* 0.07% 0.00% 0.07% 0.07% 0.07% |
Average
Loans and Net Charge-offs Ratios Key Statistics
Key Points Student loans were moved to held for sale at the end of the first quarter of 2015
Growth in auto and installment loans partially offset the reclassification of student
loans Net charge-offs and delinquencies remained low on a linked
quarter and year-over-year basis Credit Quality
Other Retail $ in millions 2Q14 1Q15 2Q15 Average Loans $26,587 $27,604 $25,415 30-89 Delinquencies 0.47% 0.44% 0.48% 90+ Delinquencies 0.11% 0.11% 0.10% Nonperforming Loans 0.06% 0.06% 0.07% Installment $6,529 Auto Loans $15,609 Revolving Credit $3,277 $26,587 $27,003 $27,317 $27,604 $25,415 0.68% 0.72% 0.76% 0.60% 0.62% 0.0% 0.5% 1.0% 1.5% 2.0% 0 10,000 20,000 30,000 40,000 2Q14 3Q14 4Q14 1Q15 2Q15 Average Loans Net Charge -offs Ratio 24 | 2Q15 Earnings Conference Call Other Retail |
25 | 2Q15 Earnings Conference Call Average Loans and Net Charge-offs Ratios Key Statistics Key Points Continued growth (10.6% year-over-year) in auto loans driven by high-quality originations in the indirect channel
(weighted average FICO 768)
Net charge-offs seasonally improved on a linked quarter basis and, as expected,
increased slightly year-over-year as growth initiatives continued
to mature Credit Quality
Auto Loans $ in millions 2Q14 1Q15 2Q15 Average Loans $14,108 $15,013 $15,609 30-89 Delinquencies 0.38% 0.30% 0.35% 90+ Delinquencies 0.03% 0.01% 0.02% Nonperforming Loans 0.01% 0.03% 0.04% Direct: 6% Wtd Avg FICO: 748 NCO: 0.11% Indirect: 94% Wtd Avg FICO: 764 NCO: 0.16% Auto Loans are included in Other Retail category $14,108 $14,404 $14,644 $15,013 $15,609 0.0% 0.5% 1.0% 1.5% 2.0% 0 5,000 10,000 15,000 20,000 2Q14 3Q14 4Q14 1Q15 2Q15 0.11% 0.25% 0.33% 0.19% 0.15% Average Loans Net Charge -offs Ratio 25 | 2Q15 Earnings Conference Call Indirect and Direct Channel |
| 2Q15
Earnings Conference Call 26
26 | 2Q15 Earnings Conference Call Non-GAAP Financial Measures June 30, March 31, December 31, September 30, June 30, (Dollars in Millions, Unaudited) 2015 2015 2014 2014 2014 Total equity $45,231 $44,965 $44,168 $43,829 $43,386 Preferred stock (4,756) (4,756) (4,756) (4,756) (4,756) Noncontrolling interests (694) (688) (689) (688) (686) Goodwill (net of deferred tax liability) (1) (8,350) (8,360) (8,403) (8,503) (8,548) Intangible assets, other than mortgage servicing rights (744) (783) (824) (877) (925) Tangible common equity (a) 30,687 30,378 29,496 29,005 28,471 Tangible common equity (as calculated above) 30,687 30,378 29,496 29,005 28,471 Adjustments (2) 125 158 172 187 224 Common equity tier 1 capital estimated for the Basel III fully implemented standardized and advanced approaches (b) 30,812 30,536 29,668 29,192 28,695 Total assets 419,075 410,233 402,529 391,284 389,065 Goodwill (net of deferred tax liability) (1) (8,350) (8,360) (8,403) (8,503) (8,548) Intangible assets, other than mortgage servicing rights (744) (783) (824) (877) (925) Tangible assets (c) 409,981 401,090 393,302 381,904 379,592 Risk-weighted assets, determined in accordance with prescribed regulatory requirements (d) 333,177 * 327,709 317,398 311,914 309,929 Adjustments (3) 3,532 * 3,153 11,110 12,837 12,753 Risk-weighted assets estimated for the Basel III fully implemented
standardized approach (e)
336,709 * 330,862 328,508 324,751 322,682 Risk-weighted assets, determined in accordance with prescribed transitional advanced approaches regulatory requirements 245,038 * 254,892 248,596 243,909 241,929 Adjustments (4) 3,721 * 3,321 3,270 3,443 3,383 Risk-weighted assets estimated for the Basel III fully implemented
advanced approaches (f)
248,759 * 258,213 251,866 247,352 245,312 Ratios * Tangible common equity to tangible assets (a)/(c) 7.5 % 7.6 % 7.5 % 7.6 % 7.5 % Tangible common equity to risk-weighted assets (a)/(d) 9.2 9.3 9.3 9.3 9.2 Common equity tier 1 capital to risk-weighted assets estimated for the
Basel III fully implemented standardized approach (b)/(e)
9.2 9.2 9.0 9.0 8.9 Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches (b)/(f) 12.4 11.8 11.8 11.8 11.7 * 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 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. |
U.S.
Bancorp 2Q15 Earnings Conference Call
July 15, 2015 |
1 Year US Bancorp Chart |
1 Month US Bancorp Chart |
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