U.S. Bancorp Reports Record Revenue and Net Income for the Third Quarter of 2017

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
	0.00	0.00%	41.29				2	09:00:13

US Bancorp (NYSE:USB)
Historical Stock Chart

From Apr 2019 to Apr 2024

Record Earnings Per Diluted Common Share of $0.88

Return on average assets of 1.38 percent and average common equity of 13.6 percent

Returned 79 percent of earnings to shareholders

U.S. Bancorp (NYSE: USB) today reported net income of $1,563 million for the third quarter of 2017, or $0.88 per diluted common share, compared with $1,502 million, or $0.84 per diluted common share, in the third quarter of 2016.

Highlights for the third quarter of 2017 included:

Record diluted earnings per share of $0.88, record net revenue of $5,608 million, record net income of $1,563 million and positive operating leverage
Industry-leading return on average assets of 1.38 percent and return on average common equity of 13.6 percent and efficiency ratio of 54.3 percent
Returned 79 percent of third quarter earnings to shareholders through dividends and share buybacks
Net interest income (taxable-equivalent basis) grew 8.3 percent year-over-year and 3.8 percent on a linked quarter basis
Net interest margin of 3.10 percent for the third quarter of 2017 was 12 basis points higher than the third quarter of 2016 and 6 basis points higher than the second quarter of 2017
Nonperforming assets decreased 24.8 percent on a year-over-year basis and 7.3 percent on a linked quarter basis
Average total loans grew 3.0 percent over the third quarter of 2016 and 0.8 percent on a linked quarter basis
- Average total commercial loans grew 4.6 percent over the third quarter of 2016 and 1.0 percent on a linked quarter basis
- Average total other retail loans grew 6.1 percent over the third quarter of 2016 and 2.6 percent on a linked quarter basis
Strong capital position. At September 30, 2017, the estimated common equity tier 1 capital to risk-weighted assets ratio was 9.4 percent using the Basel III fully implemented standardized approach and was 11.8 percent using the Basel III fully implemented advanced approaches method.

EARNINGS SUMMARY Table 1 ($ in millions, except per-share data) Percent Percent Change Change 3Q 2Q 3Q 3Q17 vs 3Q17 vs YTD YTD Percent 2017 2017 2016 2Q17 3Q16 2017 2016 Change Net income attributable to U.S. Bancorp $1,563 $1,500 $1,502 4.2 4.1 $4,536 $4,410 2.9 Diluted earnings per common share $.88 $.85 $.84 3.5 4.8 $2.55 $2.43 4.9 Return on average assets (%) 1.38 1.35 1.36 1.36 1.37 Return on average common equity (%) 13.6 13.4 13.5 13.4 13.4 Net interest margin (%) 3.10 3.04 2.98 3.06 3.02 Efficiency ratio (%) (a) 54.3 55.2 54.5 55.0 54.7 Tangible efficiency ratio (%) (a) 53.5 54.4 53.7 54.2 53.8 Dividends declared per common share $.30 $.28 $.28 7.1 7.1 $.86 $.79 8.9 Book value per common share (period end) $25.98 $25.55 $24.78 1.7 4.8 (a) See Non-GAAP Financial Measures reconciliation on page 21

Net income attributable to U.S. Bancorp was $1,563 million for the third quarter of 2017, 4.1 percent higher than the $1,502 million for the third quarter of 2016, and 4.2 percent higher than the $1,500 million for the second quarter of 2017. Diluted earnings per common share of $0.88 in the third quarter of 2017 were $0.04 higher than the third quarter of 2016 and $0.03 higher than the second quarter of 2017. The increase in net income year-over-year was principally due to a 4.1 percent increase in total net revenue driven by higher net interest income, partially offset by a 3.7 percent increase in noninterest expense. Net interest income increased 8.3 percent on a taxable-equivalent basis (8.4 percent as reported on a GAAP basis), mainly as a result of loan growth and the impact of rising interest rates. Noninterest income decreased 0.9 percent principally due to lower mortgage banking revenue, primarily the result of strong refinancing activities in the third quarter of 2016, partially offset by increases in trust and investment management fees, payment services revenue, and treasury management fees as well as higher equity investment income. The increase in total net revenue was partially offset by higher noninterest expense, primarily due to increased compensation expense related to hiring to support business growth and compliance programs, merit increases, and higher variable compensation. The increase in net income on a linked quarter basis was principally due to an increase in total net revenue of 2.2 percent, reflecting higher net interest income driven by loan growth, the impact of rising interest rates, higher interest recoveries and an additional day in the current quarter. These increases were partially offset by a slight increase in noninterest expense of 0.5 percent.

U.S. Bancorp President and Chief Executive Officer Andy Cecere said, “In the third quarter, U.S. Bancorp delivered industry leading results, supported by record revenue, net income and earnings per diluted share. We produced best-in-class performance metrics, including return on average assets of 1.38 percent, return on average common equity of 13.6 percent and an improving efficiency ratio of 54.3 percent.

“We remain deeply committed to value creation for our shareholders, and in the third quarter, our dividend increased by 7.1 percent. Overall, we returned 79 percent of our earnings to shareholders through dividends and share buybacks. As we move into the fourth quarter, we plan to build on the momentum we have established.

“Our Company is strong and we are well positioned for growth. We continue to be focused on delivering a great customer experience through our One Bank initiatives, optimization of our businesses, data analytics, process improvements and product delivery. We are investing in innovation and technology to drive growth and improve efficiencies in the future. Our strong revenue base and financial discipline positions us for growth heading into the next year. I’m proud of our employees and the effort they make every day to help us deliver consistently strong financial returns and to become our stakeholders’ most trusted choice.”

INCOME STATEMENT HIGHLIGHTS Table 2 ($ in millions, except per-share data) Percent Percent Change Change 3Q 2Q 3Q 3Q17 vs 3Q17 vs YTD YTD Percent 2017 2017 2016 2Q17 3Q16 2017 2016 Change Net interest income $3,135 $3,017 $2,893 3.9 8.4 $9,097 $8,573 6.1 Taxable-equivalent adjustment 51 51 50 -- 2.0 152 154 (1.3 ) Net interest income (taxable-equivalent basis) 3,186 3,068 2,943 3.8 8.3 9,249 8,727 6.0 Noninterest income 2,422 2,419 2,445 .1 (.9 ) 7,170 7,146 .3 Total net revenue 5,608 5,487 5,388 2.2 4.1 16,419 15,873 3.4 Noninterest expense 3,039 3,023 2,931 .5 3.7 9,006 8,672 3.9 Income before provision and income taxes 2,569 2,464 2,457 4.3 4.6 7,413 7,201 2.9 Provision for credit losses 360 350 325 2.9 10.8 1,055 982 7.4 Income before taxes 2,209 2,114 2,132 4.5 3.6 6,358 6,219 2.2

Income taxes and taxable-equivalent adjustment

640 602 616 6.3 3.9 1,791 1,766 1.4 Net income 1,569 1,512 1,516 3.8 3.5 4,567 4,453 2.6

Net (income) loss attributable to noncontrolling interests

(6 ) (12 ) (14 ) 50.0 57.1 (31 ) (43 ) 27.9 Net income attributable to U.S. Bancorp $1,563 $1,500 $1,502 4.2 4.1 $4,536 $4,410 2.9

Net income applicable to U.S. Bancorp common shareholders

$1,485 $1,430 $1,434 3.8 3.6 $4,302 $4,198 2.5 Diluted earnings per common share $.88 $.85 $.84 3.5 4.8 $2.55 $2.43 4.9 NET INTEREST INCOME Table 3 (Taxable-equivalent basis; $ in millions) Change Change 3Q 2Q 3Q 3Q17 vs 3Q17 vs YTD YTD 2017 2017 2016 2Q17 3Q16 2017 2016 Change Components of net interest income Income on earning assets $3,768 $3,584 $3,371 $184 $397 $10,803 $9,951 $852 Expense on interest-bearing liabilities 582 516 428 66 154 1,554 1,224 330 Net interest income $3,186 $3,068 $2,943 $118 $243 $9,249 $8,727 $522 Average yields and rates paid Earning assets yield 3.67 % 3.56 % 3.41 % .11 % .26 % 3.57 % 3.44 % .13 % Rate paid on interest-bearing liabilities .76 .69 .59 .07 .17 .69 .57 .12 Gross interest margin 2.91 % 2.87 % 2.82 % .04 % .09 % 2.88 % 2.87 % .01 % Net interest margin 3.10 % 3.04 % 2.98 % .06 % .12 % 3.06 % 3.02 % .04 % Average balances Investment securities (a) $111,832 $111,368 $108,109 $464 $3,723 $111,325 $107,095 $4,230 Loans 277,626 275,528 269,637 2,098 7,989 275,454 266,179 9,275 Earning assets 408,825 403,883 393,783 4,942 15,042 404,031 385,816 18,215 Interest-bearing liabilities 304,236 299,271 290,331 4,965 13,905 299,922 285,233 14,689 (a) Excludes unrealized gain (loss)

Net Interest Income

Net interest income on a taxable-equivalent basis in the third quarter of 2017 was $3,186 million, an increase of $243 million (8.3 percent) over the third quarter of 2016. The increase was principally driven by loan growth and the impact of rising interest rates. Average earning assets were $15.0 billion (3.8 percent) higher than the third quarter of 2016, reflecting increases of $8.0 billion (3.0 percent) in average total loans, $4.1 billion (36.0 percent) in average other earning assets and $3.7 billion (3.4 percent) in average investment securities. Net interest income on a taxable-equivalent basis increased $118 million (3.8 percent) on a linked quarter basis driven by loan growth, the impact of rising interest rates, higher interest recoveries and an additional day in the third quarter. In addition, average earning assets were $4.9 billion (1.2 percent) higher on a linked quarter basis, mainly from higher average loans, investment securities and other earning assets.

The net interest margin in the third quarter of 2017 was 3.10 percent, compared with 2.98 percent in the third quarter of 2016, and 3.04 percent in the second quarter of 2017. The increase in the net interest margin year-over-year was due to higher interest rates and loan portfolio mix, partially offset by higher funding costs and higher cash balances. The increase in net interest margin on a linked quarter basis was driven by higher interest rates and a change in loan portfolio mix, partially offset by higher funding costs.

Investment Securities

Average investment securities in the third quarter of 2017 were $3.7 billion (3.4 percent) higher year-over-year and $464 million (0.4 percent) higher than the prior quarter. These increases were primarily due to purchases of U.S. Treasury and U.S. government mortgage-backed securities, net of prepayments and maturities, in support of liquidity management.

AVERAGE LOANS Table 4 ($ in millions) Percent Percent Change Change 3Q 2Q 3Q 3Q17 vs 3Q17 vs YTD YTD Percent 2017 2017 2016 2Q17 3Q16 2017 2016 Change Commercial $91,077 $90,061 $87,067 1.1 4.6 $89,817 $86,186 4.2 Lease financing 5,556 5,577 5,302 (.4 ) 4.8 5,530 5,265 5.0 Total commercial 96,633 95,638 92,369 1.0 4.6 95,347 91,451 4.3 Commercial mortgages 30,114 30,627 31,888 (1.7 ) (5.6 ) 30,729 31,891 (3.6 ) Construction and development 11,507 11,922 11,486 (3.5 ) .2 11,708 11,031 6.1 Total commercial real estate 41,621 42,549 43,374 (2.2 ) (4.0 ) 42,437 42,922 (1.1 ) Residential mortgages 59,030 58,544 56,284 .8 4.9 58,496 55,334 5.7 Credit card 20,926 20,631 20,628 1.4 1.4 20,801 20,339 2.3 Retail leasing 7,762 7,181 5,773 8.1 34.5 7,142 5,427 31.6 Home equity and second mortgages 16,299 16,252 16,470 .3 (1.0 ) 16,270 16,411 (.9 ) Other 32,008 31,194 30,608 2.6 4.6 31,423 29,971 4.8 Total other retail 56,069 54,627 52,851 2.6 6.1 54,835 51,809 5.8 Total loans, excluding covered loans 274,279 271,989 265,506 .8 3.3 271,916 261,855 3.8 Covered loans 3,347 3,539 4,131 (5.4 ) (19.0 ) 3,538 4,324 (18.2 ) Total loans $277,626 $275,528 $269,637 .8 3.0 $275,454 $266,179 3.5

Loans

Average total loans were $8.0 billion (3.0 percent) higher than the third quarter of 2016. The increase was due to growth in total commercial loans (4.6 percent), residential mortgages (4.9 percent), retail leasing (34.5 percent), and other retail loans (4.6 percent). These increases were partially offset by a decrease in total commercial real estate loans (4.0 percent) due to disciplined underwriting of construction and development loans and payoffs of commercial mortgages given recent capital market financing by customers. Loan growth was also muted by run-off in the covered loans portfolio (19.0 percent). Average total loans were $2.1 billion (0.8 percent) higher than the second quarter of 2017. This increase was primarily driven by linked quarter growth in total commercial loans (1.0 percent), other retail loans (2.6 percent), and retail leasing (8.1 percent), partially offset by decreases in total commercial real estate loans (2.2 percent) and covered loans (5.4 percent).

AVERAGE DEPOSITS Table 5 ($ in millions) Percent Percent Change Change 3Q 2Q 3Q 3Q17 vs 3Q17 vs YTD YTD Percent 2017 2017 2016 2Q17 3Q16 2017 2016 Change Noninterest-bearing deposits $81,964 $82,710 $82,021 (.9 ) (.1 ) $81,808 $79,928 2.4 Interest-bearing savings deposits Interest checking 68,066 67,290 63,456 1.2 7.3 67,021 60,746 10.3 Money market savings 105,072 106,777 99,921 (1.6 ) 5.2 106,856 93,121 14.7 Savings accounts 43,649 43,524 40,695 .3 7.3 43,265 40,070 8.0 Total savings deposits 216,787 217,591 204,072 (.4 ) 6.2 217,142 193,937 12.0 Time deposits 36,400 30,871 32,455 17.9 12.2 32,660 33,447 (2.4 ) Total interest-bearing deposits 253,187 248,462 236,527 1.9 7.0 249,802 227,384 9.9 Total deposits $335,151 $331,172 $318,548 1.2 5.2 $331,610 $307,312 7.9

Deposits

Average total deposits for the third quarter of 2017 were $16.6 billion (5.2 percent) higher than the third quarter of 2016. Average noninterest-bearing deposits were essentially flat year-over-year reflecting a decrease in Wholesale Banking and Commercial Real Estate offset by increases in Wealth Management and Securities Services and Consumer and Small Business Banking. Average total savings deposits were $12.7 billion (6.2 percent) higher year-over-year, a result of growth across all business lines. Average time deposits were $3.9 billion (12.2 percent) higher than the prior year quarter. Changes in time deposits are largely related to those deposits managed as an alternative to other funding sources such as wholesale borrowing, based largely on relative pricing and liquidity characteristics.

Average total deposits increased $4.0 billion (1.2 percent) over the second quarter of 2017. On a linked quarter basis, average noninterest-bearing deposits and average total savings deposits decreased slightly. Average time deposits, which are managed based on funding needs, relative pricing, and liquidity characteristics, increased $5.5 billion (17.9 percent) on a linked quarter basis, primarily driven by Wholesale Banking and Commercial Real Estate.

NONINTEREST INCOME Table 6 ($ in millions) Percent Percent Change Change 3Q 2Q 3Q 3Q17 vs 3Q17 vs YTD YTD Percent 2017 2017 2016 2Q17 3Q16 2017 2016 Change Credit and debit card revenue $308 $319 $299 (3.4 ) 3.0 $919 $861 6.7 Corporate payment products revenue 201 184 190 9.2 5.8 564 541 4.3 Merchant processing services 405 407 412 (.5 ) (1.7 ) 1,190 1,188 .2 ATM processing services 92 90 87 2.2 5.7 267 251 6.4 Trust and investment management fees 380 380 362 -- 5.0 1,128 1,059 6.5 Deposit service charges 192 184 192 4.3 -- 553 539 2.6 Treasury management fees 153 160 147 (4.4 ) 4.1 466 436 6.9 Commercial products revenue 221 210 219 5.2 .9 638 654 (2.4 ) Mortgage banking revenue 213 212 314 .5 (32.2 ) 632 739 (14.5 ) Investment products fees 39 41 41 (4.9 ) (4.9 ) 120 120 -- Securities gains (losses), net 9 9 10 -- (10.0 ) 47 16 nm Other 209 223 172 (6.3 ) 21.5 646 742 (12.9 ) Total noninterest income $2,422 $2,419 $2,445 .1 (.9 ) $7,170 $7,146 .3

Noninterest Income

Third quarter noninterest income of $2,422 million was $23 million (0.9 percent) lower than the third quarter of 2016 principally due to lower mortgage banking revenue, partially offset by increases in trust and investment management fees, payment services revenue and other noninterest income. Mortgage banking revenue decreased $101 million (32.2 percent) due to lower origination and sales volumes from home refinancing, as refinancing activities were significantly higher in the third quarter of 2016 due to a decline in longer term interest rates during that period. Trust and investment management fees increased $18 million (5.0 percent) due to favorable market conditions, and net asset and account growth. Payment services revenue was higher due to an increase in corporate payment products revenue of $11 million (5.8 percent) and an increase in credit and debit card revenue of $9 million (3.0 percent), both driven by higher sales volumes. These increases were partially offset by a decrease in merchant processing services revenue of $7 million (1.7 percent) due to exiting certain joint ventures in the second quarter of 2017 and the impacts of recent weather events. Other income increased $37 million (21.5 percent) primarily due to equity investment income in the current quarter.

Noninterest income was $3 million (0.1 percent) higher in the third quarter of 2017 than the second quarter of 2017 reflecting growth in fee-based revenue driven by corporate payment products revenue, commercial products revenue and deposit service charges, partially offset by a decrease in credit and debit card revenue. Corporate payment products revenue increased $17 million (9.2 percent) due to seasonally higher volumes. Commercial products revenue increased $11 million (5.2 percent) primarily driven by higher foreign exchange fees, corporate bond fees and syndication revenue. Deposit service charges increased $8 million (4.3 percent) due to seasonally higher transaction volumes. Credit and debit card revenue decreased $11 million (3.4 percent) primarily due to fewer processing cycles in the third quarter and the impact of previously acquired portfolios.

NONINTEREST EXPENSE Table 7 ($ in millions) Percent Percent Change Change 3Q 2Q 3Q 3Q17 vs 3Q17 vs YTD YTD Percent 2017 2017 2016 2Q17 3Q16 2017 2016 Change Compensation $1,440 $1,416 $1,329 1.7 8.4 $4,247 $3,855 10.2 Employee benefits 281 287 280 (2.1 ) .4 882 858 2.8 Net occupancy and equipment 258 255 250 1.2 3.2 760 741 2.6 Professional services 104 105 127 (1.0 ) (18.1 ) 305 346 (11.8 ) Marketing and business development 92 109 102 (15.6 ) (9.8 ) 291 328 (11.3 ) Technology and communications 246 242 243 1.7 1.2 723 717 .8 Postage, printing and supplies 82 81 80 1.2 2.5 244 236 3.4 Other intangibles 44 43 45 2.3 (2.2 ) 131 134 (2.2 ) Other 492 485 475 1.4 3.6 1,423 1,457 (2.3 ) Total noninterest expense $3,039 $3,023 $2,931 .5 3.7 $9,006 $8,672 3.9

Noninterest Expense

Third quarter noninterest expense of $3,039 million was $108 million (3.7 percent) higher than the third quarter of 2016 primarily due to higher compensation expense, partially offset by lower professional services expense. Compensation expense increased $111 million (8.4 percent) principally due to the impact of hiring to support business growth and compliance programs, merit increases, and higher variable compensation. Professional services expense decreased $23 million (18.1 percent) primarily due to fewer consulting services as compliance programs near maturity.

Noninterest expense increased $16 million (0.5 percent) on a linked quarter basis driven by higher compensation expense, partially offset by lower marketing and business development expense. Compensation expense increased $24 million (1.7 percent) principally due to corporate incentive plans and the impact of hiring to support business growth. Marketing and business development expense decreased $17 million (15.6 percent) due to seasonal timing of certain revenue-related marketing and brand advertising.

Provision for Income Taxes

The provision for income taxes for the third quarter of 2017 resulted in a tax rate on a taxable-equivalent basis of 29.0 percent (effective tax rate of 27.3 percent), compared with 28.9 percent (effective tax rate of 27.2 percent) in the third quarter of 2016, and 28.5 percent (effective tax rate of 26.7 percent) in the second quarter of 2017.

ALLOWANCE FOR CREDIT LOSSES Table 8 ($ in millions) 3Q 2Q 1Q 4Q 3Q 2017 % (b) 2017 % (b) 2017 % (b) 2016 % (b) 2016 % (b) Balance, beginning of period $4,377 $4,366 $4,357 $4,338 $4,329 Net charge-offs Commercial 79 .34 75 .33 71 .33 71 .32 84 .38 Lease financing 4 .29 3 .22 4 .30 5 .37 3 .23 Total commercial 83 .34 78 .33 75 .32 76 .32 87 .37 Commercial mortgages (2 ) (.03 ) (7 ) (.09 ) (1 ) (.01 ) (3 ) (.04 ) 5 .06 Construction and development (5 ) (.17 ) (2 ) (.07 ) (1 ) (.03 ) (6 ) (.21 ) (4 ) (.14 ) Total commercial real estate (7 ) (.07 ) (9 ) (.08 ) (2 ) (.02 ) (9 ) (.08 ) 1 .01 Residential mortgages 7 .05 8 .05 12 .08 12 .08 12 .08 Credit card 187 3.55 204 3.97 190 3.70 181 3.44 161 3.11 Retail leasing 2 .10 2 .11 3 .19 1 .06 1 .07 Home equity and second mortgages (1 ) (.02 ) (1 ) (.02 ) (1 ) (.02 ) (1 ) (.02 ) 1 .02 Other 59 .73 58 .75 58 .76 62 .79 52 .68 Total other retail 60 .42 59 .43 60 .45 62 .46 54 .41 Total net charge-offs, excluding covered loans 330 .48 340 .50 335 .50 322 .48 315 .47 Covered loans -- -- -- -- -- -- -- -- -- -- Total net charge-offs 330 .47 340 .49 335 .50 322 .47 315 .46 Provision for credit losses 360 350 345 342 325 Other changes (a) -- 1 (1 ) (1 ) (1 ) Balance, end of period $4,407 $4,377 $4,366 $4,357 $4,338 Components Allowance for loan losses $3,908 $3,856 $3,816 $3,813 $3,797

Liability for unfunded credit commitments

499 521 550 544 541 Total allowance for credit losses $4,407 $4,377 $4,366 $4,357 $4,338 Gross charge-offs $433 $437 $417 $405 $398 Gross recoveries $103 $97 $82 $83 $83

Allowance for credit losses as a percentage of

Period-end loans, excluding covered loans

1.59 1.59 1.61 1.60 1.61

Nonperforming loans, excluding covered loans

425 385 338 317 309

Nonperforming assets, excluding covered assets

359 331 296 275 264 Period-end loans 1.58 1.58 1.60 1.59 1.60 Nonperforming loans 426 383 338 318 310 Nonperforming assets 352 324 292 272 261

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

(b) Annualized and calculated on average loan balances

Credit Quality

The Company’s provision for credit losses for the third quarter of 2017 was $360 million, which was $10 million (2.9 percent) higher than the prior quarter and $35 million (10.8 percent) higher than the third quarter of 2016. Credit quality was relatively stable compared with the second quarter of 2017.

Total net charge-offs in the third quarter of 2017 were $330 million, compared with $340 million in the second quarter of 2017, and $315 million in the third quarter of 2016. Net charge-offs decreased $10 million (2.9 percent) compared with the second quarter of 2017 mainly due to seasonally lower credit card loan net charge-offs. Net charge-offs increased $15 million (4.8 percent) compared with the third quarter of 2016 primarily due to higher credit card loan net charge-offs related to maturity of vintages within the portfolio, partially offset by lower net charge-offs in residential mortgages and higher recoveries in total commercial. The net charge-off ratio was 0.47 percent in the third quarter of 2017, compared with 0.49 percent in the second quarter of 2017 and 0.46 percent in the third quarter of 2016.

The allowance for credit losses was $4,407 million at September 30, 2017, compared with $4,377 million at June 30, 2017, and $4,338 million at September 30, 2016. The ratio of the allowance for credit losses to period-end loans was 1.58 percent at September 30, 2017 and at June 30, 2017, compared with 1.60 percent at September 30, 2016. The ratio of the allowance for credit losses to nonperforming loans was 426 percent at September 30, 2017, compared with 383 percent at June 30, 2017, and 310 percent at September 30, 2016.

Nonperforming assets were $1,251 million at September 30, 2017, compared with $1,349 million at June 30, 2017, and $1,664 million at September 30, 2016. The ratio of nonperforming assets to loans and other real estate was 0.45 percent at September 30, 2017, compared with 0.49 percent at June 30, 2017, and 0.61 percent at September 30, 2016. The $98 million (7.3 percent) decrease in nonperforming assets on a linked quarter basis was driven by improvements in commercial loans and residential mortgages. The $413 million (24.8 percent) decrease in nonperforming assets on a year-over-year basis was driven by improvements in commercial loans, residential mortgages and other real estate. Accruing loans 90 days or more past due were $649 million ($497 million excluding covered loans) at September 30, 2017, compared with $639 million ($477 million excluding covered loans) at June 30, 2017, and $748 million ($518 million excluding covered loans) at September 30, 2016.

DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES Table 9 (Percent) Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 2017 2017 2017 2016 2016 Delinquent loan ratios - 90 days or more past due excluding nonperforming loans Commercial .05 .05 .06 .06 .05 Commercial real estate .01 -- .01 .02 .02 Residential mortgages .18 .20 .24 .27 .28 Credit card 1.20 1.10 1.23 1.16 1.11 Other retail .15 .14 .14 .15 .14 Total loans, excluding covered loans .18 .17 .19 .20 .19 Covered loans 4.66 4.71 5.34 5.53 5.72 Total loans .23 .23 .26 .28 .28 Delinquent loan ratios - 90 days or more past due including nonperforming loans Commercial .33 .39 .52 .57 .61 Commercial real estate .30 .29 .27 .31 .26 Residential mortgages .98 1.10 1.23 1.31 1.37 Credit card 1.20 1.10 1.24 1.18 1.13 Other retail .43 .42 .43 .45 .42 Total loans, excluding covered loans .55 .59 .67 .71 .72 Covered loans 4.84 5.06 5.53 5.68 5.89 Total loans .60 .64 .73 .78 .79 ASSET QUALITY Table 10 ($ in millions) Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 2017 2017 2017 2016 2016 Nonperforming loans Commercial $231 $283 $397 $443 $477 Lease financing 38 39 42 40 40 Total commercial 269 322 439 483 517 Commercial mortgages 89 84 74 87 98 Construction and development 33 35 36 37 7 Total commercial real estate 122 119 110 124 105 Residential mortgages 474 530 575 595 614 Credit card 1 1 2 3 4 Other retail 163 158 157 157 153 Total nonperforming loans, excluding covered loans 1,029 1,130 1,283 1,362 1,393 Covered loans 6 12 7 6 7 Total nonperforming loans 1,035 1,142 1,290 1,368 1,400 Other real estate (a) 164 157 155 186 213 Covered other real estate (a) 26 25 22 26 28 Other nonperforming assets 26 25 28 23 23 Total nonperforming assets (b) $1,251 $1,349 $1,495 $1,603 $1,664 Total nonperforming assets, excluding covered assets $1,219 $1,312 $1,466 $1,571 $1,629

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

$497 $477 $524 $552 $518 Accruing loans 90 days or more past due $649 $639 $718 $764 $748

Performing restructured loans, excluding GNMA and covered loans

$2,419 $2,473 $2,478 $2,557 $2,672

Performing restructured GNMA and covered loans $1,600 $1,803 $1,746 $1,604 $1,375

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

.44 .48 .54 .58 .61 Nonperforming assets to loans plus ORE (%) .45 .49 .55 .59 .61 (a) Includes equity investments in entities whose principal assets are other real estate owned. (b) Does not include accruing loans 90 days or more past due. COMMON SHARES Table 11 (Millions) 3Q 2Q 1Q 4Q 3Q 2017 2017 2017 2016 2016 Beginning shares outstanding 1,679 1,692 1,697 1,705 1,719

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

-- 1 6 6 2 Shares repurchased (12 ) (14 ) (11 ) (14 ) (16 ) Ending shares outstanding 1,667 1,679 1,692 1,697 1,705 CAPITAL POSITION Table 12 ($ in millions) Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 2017 2017 2017 2016 2016 Total U.S. Bancorp shareholders' equity $48,723 $48,320 $47,798 $47,298 $47,759 Standardized Approach Basel III transitional standardized approach Common equity tier 1 capital $34,876 $34,408 $33,847 $33,720 $33,827 Tier 1 capital 40,411 39,943 39,374 39,421 39,531 Total risk-based capital 48,104 47,824 47,279 47,355 47,452 Common equity tier 1 capital ratio 9.6 % 9.5 % 9.5 % 9.4 % 9.5 % Tier 1 capital ratio 11.1 11.1 11.0 11.0 11.1 Total risk-based capital ratio 13.2 13.2 13.3 13.2 13.3 Leverage ratio 9.1 9.1 9.1 9.0 9.2

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

9.4 9.3 9.2 9.1 9.3 Advanced Approaches

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

12.1 12.0 11.8 12.2 12.4

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

11.8 11.7 11.5 11.7 12.1 Tangible common equity to tangible assets (a) 7.7 7.5 7.6 7.5 7.5 Tangible common equity to risk-weighted assets (a) 9.5 9.4 9.4 9.2 9.3 Beginning January 1, 2014, the regulatory capital requirements effective for the Company follow Basel III, subject to certain transition provisions from Basel I over the following four years to full implementation by January 1, 2018. Basel III includes two comprehensive methodologies for calculating risk-weighted assets: a general standardized approach and more risk-sensitive advanced approaches, with the Company's capital adequacy being evaluated against the methodology that is most restrictive. (a) See Non-GAAP Financial Measures reconciliation on page 21

Capital Management

Total U.S. Bancorp shareholders’ equity was $48.7 billion at September 30, 2017, compared with $48.3 billion at June 30, 2017, and $47.8 billion at September 30, 2016. During the third quarter, the Company returned 79 percent of earnings to shareholders through dividends and share buybacks.

All regulatory ratios continue to be in excess of “well-capitalized” requirements. The estimated common equity tier 1 capital to risk-weighted assets ratio using the Basel III fully implemented standardized approach was 9.4 percent at September 30, 2017, compared with 9.3 percent at June 30, 2017, and at September 30, 2016. The estimated common equity tier 1 capital to risk-weighted assets ratio using the Basel III fully implemented advanced approaches method was 11.8 percent at September 30, 2017, compared with 11.7 percent at June 30, 2017, and 12.1 percent at September 30, 2016.

On Wednesday, October 18, 2017, at 8:00 a.m. CDT, Andy Cecere, president and chief executive officer, and Terry Dolan, vice chairman and chief financial officer, will host a conference call to review the financial results. The conference call will be available online or by telephone. To access the webcast and presentation, go to www.usbank.com and click on “About U.S. Bank.” The “Webcasts & Presentations” link can be found under the Investor/Shareholder information heading, which is at the left side near the bottom of the page. To access the conference call from locations within the United States and Canada, please dial 866-316-1409. Participants calling from outside the United States and Canada, please dial 706-634-9086. The conference ID number for all participants is 75774124. For those unable to participate during the live call, a recording will be available at approximately 11:00 a.m. CDT on Wednesday, October 18 and will be accessible through Wednesday, October 25 at 11:00 p.m. CDT. To access the recorded message within the United States and Canada, please dial 855-859-2056. If calling from outside the United States and Canada, please dial 404-537-3406 to access the recording. The conference ID is 75774124.

Minneapolis-based U.S. Bancorp (NYSE: USB), with $459 billion in assets as of September 30, 2017, is the parent company of U.S. Bank National Association, the fifth largest commercial bank in the United States. The Company operates 3,072 banking offices in 25 states and 4,801 ATMs and provides a comprehensive line of banking, investment, mortgage, trust and payment services products to consumers, businesses and institutions. Visit U.S. Bancorp on the web at www.usbank.com.

Forward-Looking Statements

The following information appears in accordance with the Private Securities Litigation Reform Act of 1995:

This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. A reversal or slowing of the current economic recovery or another severe contraction could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities. Global financial markets could experience a recurrence of significant turbulence, which could reduce the availability of funding to certain financial institutions and lead to a tightening of credit, a reduction of business activity, and increased market volatility. Stress in the commercial real estate markets, as well as a downturn in the residential real estate markets could cause credit losses and deterioration in asset values. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by deterioration in general business and economic conditions; changes in interest rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of securities held in its investment securities portfolio; legal and regulatory developments; litigation; increased competition from both banks and non-banks; changes in customer behavior and preferences; breaches in data security; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputational risk.

For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2016, on file with the Securities and Exchange Commission, including the sections entitled “Risk Factors” and “Corporate Risk Profile” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. However, factors other than these also could adversely affect U.S. Bancorp’s results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.

Non-GAAP Financial Measures

In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:

Tangible common equity to tangible assets,
Tangible common equity to risk-weighted assets,
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach, and
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches.

These capital measures are viewed by management as useful additional methods of reflecting the level of capital available to withstand unexpected negative market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Company’s capital position relative to other financial services companies. These measures differ from currently effective capital ratios defined by banking regulations principally in that the numerator of the currently effective ratios, which are subject to certain transitional provisions, temporarily excludes a portion of unrealized gains and losses related to available-for-sale securities and retirement plan obligations, and includes a portion of capital related to intangible assets, other than mortgage servicing rights. These capital measures are not defined in generally accepted accounting principles (“GAAP”), or are not currently effective or defined in federal banking regulations. As a result, these capital measures disclosed by the Company may be considered non-GAAP financial measures.

The Company also discloses net interest income and related ratios and analysis on a taxable-equivalent basis, which may also be considered non-GAAP financial measures. The Company believes this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable and tax-exempt sources. In addition, certain performance measures, including the efficiency ratio and net interest margin utilize net interest income on a taxable-equivalent basis.

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

U.S. Bancorp Consolidated Statement of Income Three Months Ended Nine Months Ended (Dollars and Shares in Millions, Except Per Share Data) September 30, September 30, (Unaudited) 2017 2016 2017 2016 Interest Income Loans $3,059 $2,731 $8,757 $8,039 Loans held for sale 40 43 104 110 Investment securities 568 515 1,653 1,555 Other interest income 47 31 131 89 Total interest income 3,714 3,320 10,645 9,793 Interest Expense Deposits 293 161 730 452 Short-term borrowings 90 70 233 201 Long-term debt 196 196 585 567 Total interest expense 579 427 1,548 1,220 Net interest income 3,135 2,893 9,097 8,573 Provision for credit losses 360 325 1,055 982 Net interest income after provision for credit losses 2,775 2,568 8,042 7,591 Noninterest Income Credit and debit card revenue 308 299 919 861 Corporate payment products revenue 201 190 564 541 Merchant processing services 405 412 1,190 1,188 ATM processing services 92 87 267 251 Trust and investment management fees 380 362 1,128 1,059 Deposit service charges 192 192 553 539 Treasury management fees 153 147 466 436 Commercial products revenue 221 219 638 654 Mortgage banking revenue 213 314 632 739 Investment products fees 39 41 120 120 Securities gains (losses), net 9 10 47 16 Other 209 172 646 742 Total noninterest income 2,422 2,445 7,170 7,146 Noninterest Expense Compensation 1,440 1,329 4,247 3,855 Employee benefits 281 280 882 858 Net occupancy and equipment 258 250 760 741 Professional services 104 127 305 346 Marketing and business development 92 102 291 328 Technology and communications 246 243 723 717 Postage, printing and supplies 82 80 244 236 Other intangibles 44 45 131 134 Other 492 475 1,423 1,457 Total noninterest expense 3,039 2,931 9,006 8,672 Income before income taxes 2,158 2,082 6,206 6,065 Applicable income taxes 589 566 1,639 1,612 Net income 1,569 1,516 4,567 4,453 Net (income) loss attributable to noncontrolling interests (6 ) (14 ) (31 ) (43 ) Net income attributable to U.S. Bancorp $1,563 $1,502 $4,536 $4,410 Net income applicable to U.S. Bancorp common shareholders $1,485 $1,434 $4,302 $4,198 Earnings per common share $.89 $.84 $2.56 $2.44 Diluted earnings per common share $.88 $.84 $2.55 $2.43 Dividends declared per common share $.300 $.280 $.860 $.790 Average common shares outstanding 1,672 1,710 1,683 1,724 Average diluted common shares outstanding 1,678 1,716 1,689 1,730 U.S. Bancorp Consolidated Ending Balance Sheet September 30, December 31, September 30, (Dollars in Millions) 2017 2016 2016 Assets (Unaudited) (Unaudited) Cash and due from banks $20,540 $15,705 $23,664 Investment securities Held-to-maturity 44,018 42,991 42,873 Available-for-sale 67,772 66,284 67,155 Loans held for sale 3,757 4,826 5,575 Loans Commercial 96,928 93,386 93,201 Commercial real estate 41,430 43,098 43,468 Residential mortgages 59,317 57,274 56,229 Credit card 20,923 21,749 20,706 Other retail 56,859 53,864 53,664 Total loans, excluding covered loans 275,457 269,371 267,268 Covered loans 3,262 3,836 4,021 Total loans 278,719 273,207 271,289 Less allowance for loan losses (3,908 ) (3,813 ) (3,797 ) Net loans 274,811 269,394 267,492 Premises and equipment 2,402 2,443 2,449 Goodwill 9,370 9,344 9,357 Other intangible assets 3,193 3,303 2,887 Other assets 33,364 31,674 32,682 Total assets $459,227 $445,964 $454,134 Liabilities and Shareholders' Equity Deposits Noninterest-bearing $82,152 $86,097 $89,101 Interest-bearing 260,437 248,493 245,494 Total deposits 342,589 334,590 334,595 Short-term borrowings 15,856 13,963 15,695 Long-term debt 34,515 33,323 37,978 Other liabilities 16,916 16,155 17,467 Total liabilities 409,876 398,031 405,735 Shareholders' equity Preferred stock 5,419 5,501 5,501 Common stock 21 21 21 Capital surplus 8,457 8,440 8,429 Retained earnings 53,023 50,151 49,231 Less treasury stock (16,978 ) (15,280 ) (14,844 ) Accumulated other comprehensive income (loss) (1,219 ) (1,535 ) (579 ) Total U.S. Bancorp shareholders' equity 48,723 47,298 47,759 Noncontrolling interests 628 635 640 Total equity 49,351 47,933 48,399 Total liabilities and equity $459,227 $445,964 $454,134 U.S. Bancorp Non-GAAP Financial Measures September 30, June 30, March 31, December 31, September 30, (Dollars in Millions, Unaudited) 2017 2017 2016 2016 2016 Total equity $49,351 $48,949 $48,433 $47,933 $48,399 Preferred stock (5,419 ) (5,419 ) (5,419 ) (5,501 ) (5,501 ) Noncontrolling interests (628 ) (629 ) (635 ) (635 ) (640 ) Goodwill (net of deferred tax liability) (1) (8,141 ) (8,181 ) (8,186 ) (8,203 ) (8,239 ) Intangible assets, other than mortgage servicing rights (595 ) (634 ) (671 ) (712 ) (756 ) Tangible common equity (a) 34,568 34,086 33,522 32,882 33,263 Tangible common equity (as calculated above) 34,568 34,086 33,522 32,882 33,263 Adjustments (2) (52 ) (51 ) (136 ) (55 ) 97

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

34,516 34,035 33,386 32,827 33,360 Total assets 459,227 463,844 449,522 445,964 454,134 Goodwill (net of deferred tax liability) (1) (8,141 ) (8,181 ) (8,186 ) (8,203 ) (8,239 ) Intangible assets, other than mortgage servicing rights (595 ) (634 ) (671 ) (712 ) (756 ) Tangible assets (c) 450,491 455,029 440,665 437,049 445,139

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

363,957

361,164 356,373 358,237 356,733 Adjustments (3)

3,907

3,967 4,731 4,027 3,165

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

367,864

365,131 361,104 362,264 359,898

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

287,800

287,124 285,963 277,141 272,832 Adjustments (4)

4,164

4,231 5,046 4,295 3,372

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

291,964

291,355 291,009 281,436 276,204 Ratios * Tangible common equity to tangible assets (a)/(c) 7.7 % 7.5 % 7.6 % 7.5 % 7.5 % Tangible common equity to risk-weighted assets (a)/(d) 9.5 9.4 9.4 9.2 9.3

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

9.4 9.3 9.2 9.1 9.3

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

11.8 11.7 11.5 11.7 12.1 Three Months Ended September 30, June 30, March 31, December 31, September 30, 2017 2017 2017 2016 2016 Net interest income $3,135 $3,017 $2,945 $2,955 $2,893 Taxable-equivalent adjustment (5) 51 51 50 49 50 Net interest income, on a taxable-equivalent basis 3,186 3,068 2,995 3,004 2,943 Net interest income, on a taxable-equivalent basis (as calculated above) 3,186 3,068 2,995 3,004 2,943 Noninterest income 2,422 2,419 2,329 2,431 2,445 Less: Securities gains (losses), net 9 9 29 6 10 Total net revenue, excluding net securities gains (losses) (g) 5,599 5,478 5,295 5,429 5,378 Noninterest expense (h) 3,039 3,023 2,944 3,004 2,931 Less: Intangible amortization 44 43 44 45 45

Noninterest expense, excluding intangible amortization (i)

2,995 2,980 2,900 2,959 2,886 Efficiency ratio (h)/(g) 54.3 % 55.2 % 55.6 % 55.3 % 54.5 % Tangible efficiency ratio (i)/(g) 53.5 54.4 54.8 54.5 53.7

* 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 (loss) and other adjustments. (3) Includes higher risk-weighting for unfunded loan commitments, investment securities, residential mortgages, mortgage servicing rights and other adjustments.

(4) Primarily reflects higher risk-weighting for mortgage servicing rights.

(5) Utilizes a tax rate of 35 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.

View source version on businesswire.com: http://www.businesswire.com/news/home/20171018005135/en/

U.S. BancorpMedia:Dana Ripley, 612-303-3167orInvestors/Analysts:Jennifer Thompson, 612-303-0778

Market Data

News

Trading Tools

Markets

Discover

Hot Features

Follow Feed

Options Flow

Monitor

USB US Bancorp