Record Net Income and Earnings Per Share for
the Full Year 2016
Full year return on average assets of 1.36
percent and average common equity of 13.4 percent
Returned 79 percent of full year earnings to
shareholders
U.S. Bancorp (NYSE: USB) today reported net income of $1,478
million for the fourth quarter of 2016, or $0.82 per diluted common
share, compared with $1,476 million, or $0.80 per diluted common
share, in the fourth quarter of 2015.
Highlights for the full year of 2016 included:
- Record diluted earnings per common
share of $3.24, which was 2.5 percent higher than 2015
- Industry-leading return on average
assets of 1.36 percent and average common equity of 13.4
percent
- Returned 79 percent of 2016 earnings to
shareholders through dividends and share buybacks
Highlights for the fourth quarter of 2016 included:
- Average total loans grew 1.1 percent on
a linked quarter basis and 6.2 percent over the fourth quarter of
2015
- Average total deposits grew 3.3 percent
on a linked quarter basis and 11.8 percent over the fourth quarter
of 2015
- Net interest income (taxable-equivalent
basis) grew 2.1 percent on a linked quarter basis and 4.6 percent
year-over-year
- Average earning assets grew 2.1 percent
on a linked quarter basis and 7.7 percent year-over-year
- Net interest margin of 2.98 percent for
the fourth quarter of 2016 was unchanged from the third
quarter of 2016, and down 8 basis points from the fourth quarter of
2015, primarily due to changes in the loan and investment portfolio
mix and higher average cash balances
- Noninterest income increased 3.9
percent on a year-over-year basis
- Payment services revenue increased 4.0
percent (5.6 percent excluding the impact of foreign currency rate
changes)
- Trust and investment management fees
increased 9.5 percent
- Mortgage banking revenue increased 13.7
percent
- Credit quality was stable relative to
the third quarter and year-over-year
- Strong capital position. At December
31, 2016, the estimated common equity tier 1 capital to
risk-weighted assets ratio was 9.1 percent using the Basel III
fully implemented standardized approach and was 11.7 percent using
the Basel III fully implemented advanced approaches method.
EARNINGS SUMMARY Table
1 ($ in millions, except per-share data)
Percent Percent
Change Change 4Q 3Q 4Q
4Q16 vs 4Q16 vs Full Year Full Year
Percent 2016 2016 2015
3Q16 4Q15 2016
2015 Change Net income attributable to
U.S. Bancorp $1,478 $1,502 $1,476 (1.6 ) .1 $5,888 $5,879 .2
Diluted earnings per common share $.82 $.84 $.80 (2.4 ) 2.5 $3.24
$3.16 2.5 Return on average assets (%) 1.32 1.36 1.41 1.36
1.44 Return on average common equity (%) 13.1 13.5 13.7 13.4 14.0
Net interest margin (%) 2.98 2.98 3.06 3.01 3.05 Efficiency ratio
(%) (a) 55.3 54.5 53.9 54.9 53.8 Tangible efficiency ratio (%) (a)
54.5 53.7 53.0 54.0 53.0 Dividends declared per common share
$.280 $.280 $.255 -- 9.8 $1.070 $1.010 5.9 Book value per common
share (period end) $24.63 $24.78 $23.28 (.6 ) 5.8 (a) See
Non-GAAP Financial Measures reconciliation on page 21
Net income attributable to U.S. Bancorp was $1,478 million for
the fourth quarter of 2016, 0.1 percent higher than the $1,476
million for the fourth quarter of 2015, and 1.6 percent lower than
the $1,502 million for the third quarter of 2016. Diluted earnings
per common share of $0.82 in the fourth quarter of 2016 were $0.02
higher than the fourth quarter of 2015 and $0.02 lower than the
third quarter of 2016. The increase in net income year-over-year
was principally due to total net revenue growth, including an
increase in net interest income of 4.6 percent on a
taxable-equivalent basis (4.8 percent as reported on a GAAP basis),
mainly a result of loan growth, and an increase in noninterest
income of 3.9 percent, driven by higher payment services revenue,
trust and investment management fees and mortgage banking revenue.
This increase was partially offset by higher noninterest expense
related to increased compensation expense due to hiring to support
business growth and compliance programs as well as merit increases
and higher variable compensation expense. The decrease in net
income on a linked quarter basis was principally due to a seasonal
increase in noninterest expense of 2.5 percent driven by
investments in tax-advantaged projects and professional services
expense, along with an increase in the provision for credit losses
due to loan growth. These increases were partially offset by an
increase in total net revenue of 0.9 percent, reflecting an
increase in net interest income of 2.1 percent on a
taxable-equivalent basis and as reported on a GAAP basis, partially
offset by a decrease in noninterest income of 0.6 percent driven by
lower mortgage banking revenue.
U.S. Bancorp Chairman and Chief Executive Officer Richard K.
Davis said, “U.S. Bancorp delivered an outstanding performance in
2016 with record net income, EPS, and revenue. In a challenging
year where the economic environment was often unpredictable, we
delivered industry-leading returns, we made important investments
in our long-term growth strategy, and we returned 79 percent of our
earnings to shareholders through dividends and share buybacks.
“As importantly, the fundamental elements of our core businesses
are solid and we are well positioned for growth as we enter 2017.
With an intense focus on our customers and providing them with
innovative products and services, we are optimistic we will
continue to create outstanding value for our shareholders,
customers, and communities.
“Our success in 2016 was a result of the tremendous efforts of
our 70,000 employees working hard as One U.S. Bank to help our
customers build financially secure futures – and they did it with
ethics and integrity. For the second year, the Ethisphere Institute
named U.S. Bank to its World’s Most Ethical Companies list. For the
tenth year, the Ponemon Institute named U.S. Bank the Most Trusted
Bank. For the sixth year, FORTUNE magazine named U.S. Bank the
number one superregional bank. And for the first time, MONEY
magazine named U.S. Bank the Best Big Bank. We are proud of these
achievements because they are a reflection of our people and our
culture. As usual, you can expect U.S. Bank to deliver consistent,
predictable, and repeatable results.”
INCOME STATEMENT HIGHLIGHTS
Table 2 ($ in millions, except per-share data)
Percent Percent
Change Change 4Q 3Q
4Q 4Q16 vs 4Q16 vs Full Year Full
Year Percent 2016 2016
2015 3Q16 4Q15
2016 2015 Change Net
interest income $2,955 $2,893 $2,819 2.1 4.8 $11,528 $11,001 4.8
Taxable-equivalent adjustment 49 50 52
(2.0 ) (5.8 ) 203 213 (4.7 ) Net
interest income (taxable-equivalent basis) 3,004 2,943 2,871 2.1
4.6 11,731 11,214 4.6 Noninterest income 2,431 2,445
2,340 (.6 ) 3.9 9,577 9,092
5.3 Total net revenue 5,435 5,388 5,211 .9 4.3 21,308 20,306
4.9 Noninterest expense 3,004 2,931
2,809 2.5 6.9 11,676 10,931 6.8 Income
before provision and income taxes 2,431 2,457 2,402 (1.1 ) 1.2
9,632 9,375 2.7 Provision for credit losses 342 325
305 5.2
12.1
1,324 1,132 17.0 Income before taxes 2,089
2,132 2,097 (2.0 ) (.4 ) 8,308 8,243 .8
Income taxes and taxable-equivalent
adjustment
598 616 608 (2.9 ) (1.6 ) 2,364
2,310 2.3 Net income 1,491 1,516 1,489 (1.6 )
.1 5,944 5,933 .2
Net (income) loss attributable
to noncontrolling interests
(13 ) (14 ) (13 ) 7.1 -- (56 ) (54 ) (3.7 )
Net income attributable to U.S. Bancorp $1,478 $1,502
$1,476 (1.6 ) .1 $5,888 $5,879
.2
Net income applicable to U.S.
Bancorp common shareholders
$1,391 $1,434 $1,404 (3.0 ) (.9
) $5,589 $5,608 (.3 ) Diluted earnings per
common share $.82 $.84 $.80 (2.4
) 2.5 $3.24 $3.16 2.5
NET INTEREST INCOME Table 3
(Taxable-equivalent basis; $ in millions)
Change
Change 4Q 3Q 4Q 4Q16 vs 4Q16
vs Full Year Full Year 2016
2016 2015 3Q16
4Q15 2016 2015
Change Components of net interest income Income on earning
assets $3,424 $3,371 $3,209 $53 $215 $13,375 $12,619 $756 Expense
on interest-bearing liabilities 420 428
338 (8 ) 82 1,644
1,405 239 Net interest income $3,004
$2,943 $2,871 $61
$133 $11,731 $11,214 $517
Average yields and rates paid Earning assets yield
3.40 % 3.41 % 3.42 % (.01 )% (.02 )% 3.43 % 3.43 % .00 % Rate paid
on interest-bearing liabilities .57 .59
.50 (.02 ) .07 .57
.52 .05 Gross interest margin 2.83 %
2.82 % 2.92 % .01 % (.09 )% 2.86 %
2.91 % (.05 )% Net interest margin 2.98 % 2.98
% 3.06 % -- % (.08 )% 3.01 %
3.05 % (.04 )% Average balances Investment securities
(a) $110,386 $108,109 $105,536 $2,277 $4,850 $107,922 $103,161
$4,761 Loans 272,671 269,637 256,692 3,034 15,979 267,811 250,459
17,352 Earning assets 401,971 393,783 373,091 8,188 28,880 389,877
367,445 22,432 Interest-bearing liabilities 295,288 290,331 269,940
4,957 25,348 287,760 269,474 18,286 (a) Excludes unrealized
gain (loss)
Net Interest Income
Net interest income on a taxable-equivalent basis in the fourth
quarter of 2016 was $3,004 million, an increase of $133 million
(4.6 percent) over the fourth quarter of 2015. The increase was
principally driven by loan growth partially offset by a lower net
interest margin. Average earning assets were $28.9 billion (7.7
percent) higher than the fourth quarter of 2015, driven by
increases of $16.0 billion (6.2 percent) in average total loans,
$4.9 billion (4.6 percent) in average investment securities and
higher average cash balances. Net interest income on a
taxable-equivalent basis increased $61 million (2.1 percent) linked
quarter, primarily due to growth in average earning assets. Average
earning assets were $8.2 billion (2.1 percent) higher on a linked
quarter basis, reflecting growth in average total loans of $3.0
billion (1.1 percent), average investment securities of $2.3
billion (2.1 percent) and higher average cash balances.
The net interest margin in the fourth quarter of 2016 was 2.98
percent, compared with 3.06 percent in the fourth quarter of 2015,
and 2.98 percent in the third quarter of 2016. The decrease in the
net interest margin of 8 basis points on a year-over-year basis was
principally due to lower yields on securities purchases, lower
reinvestment rates on maturing securities and maintaining higher
cash balances. On a linked quarter basis, net interest margin was
impacted by higher average cash balances as well as lower average
rates on new securities purchases and lower reinvestment rates on
maturing securities, offset by the favorable impact of interest
rates on loans.
Investment Securities
Average investment securities in the fourth quarter of 2016 were
$4.9 billion (4.6 percent) higher year-over-year and $2.3 billion
(2.1 percent) higher than the prior quarter. These increases were
primarily due to purchases of U.S. Treasury and U.S. government
agency-backed securities, net of prepayments and maturities, to
support liquidity.
AVERAGE LOANS Table 4
($ in millions)
Percent
Percent Change
Change 4Q 3Q 4Q 4Q16 vs 4Q16
vs Full Year Full Year Percent 2016
2016 2015 3Q16
4Q15 2016 2015
Change Commercial $88,448 $87,067 $81,592 1.6 8.4
$86,754 $78,815 10.1 Lease financing 5,359 5,302
5,211 1.1 2.8 5,289 5,268 .4 Total commercial 93,807 92,369
86,803 1.6 8.1 92,043 84,083 9.5 Commercial mortgages 31,767
31,888 31,830 (.4 ) (.2 ) 31,860 32,378 (1.6 ) Construction and
development 11,624 11,486 10,401 1.2 11.8 11,180
10,037 11.4 Total commercial real estate 43,391 43,374
42,231 -- 2.7 43,040 42,415 1.5 Residential mortgages 56,718
56,284 52,970 .8 7.1 55,682 51,840 7.4 Credit card 20,942
20,628 18,838 1.5 11.2 20,490 18,057 13.5 Retail leasing
6,191 5,773 5,265 7.2 17.6 5,619 5,563 1.0 Home equity and second
mortgages 16,444 16,470 16,241 (.2 ) 1.2 16,419 16,046 2.3 Other
31,245 30,608 29,556 2.1 5.7 30,292 27,470
10.3 Total other retail 53,880 52,851 51,062 1.9 5.5
52,330 49,079 6.6 Total loans, excluding covered
loans 268,738 265,506 251,904 1.2 6.7 263,585
245,474 7.4 Covered loans 3,933 4,131 4,788
(4.8 ) (17.9 ) 4,226 4,985 (15.2 ) Total loans
$272,671 $269,637 $256,692 1.1 6.2 $267,811
$250,459 6.9
Loans
Average total loans were $16.0 billion (6.2 percent) higher in
the fourth quarter of 2016 than the fourth quarter of 2015 (5.6
percent excluding the credit card portfolio acquisition at the end
of the fourth quarter of 2015). The increase was due to growth in
total commercial loans (8.1 percent), residential mortgages (7.1
percent), total other retail loans (5.5 percent), total commercial
real estate (2.7 percent) and credit card loans (11.2 percent).
Excluding the credit card portfolio acquisition, credit card loans
were 2.6 percent higher than the fourth quarter of 2015. These
increases were partially offset by a decrease in the run-off
covered loans portfolio (17.9 percent). Average total loans were
$3.0 billion (1.1 percent) higher in the fourth quarter of 2016
than the third quarter of 2016. This increase was driven by linked
quarter growth in total commercial loans (1.6 percent), total other
retail loans (1.9 percent), residential mortgages (0.8 percent),
and credit card loans (1.5 percent).
AVERAGE DEPOSITS Table 5
($ in millions)
Percent
Percent Change
Change 4Q 3Q 4Q 4Q16 vs 4Q16
vs Full Year Full Year Percent 2016
2016 2015 3Q16
4Q15 2016 2015
Change Noninterest-bearing deposits $84,892 $82,021
$83,894 3.5 1.2 $81,176 $79,203 2.5 Interest-bearing savings
deposits Interest checking 64,647 63,456 57,109 1.9 13.2 61,726
55,974 10.3 Money market savings 106,637 99,921 82,828 6.7 28.7
96,518 79,266 21.8 Savings accounts 41,310 40,695
37,991 1.5 8.7 40,382 37,150 8.7 Total of savings deposits
212,594 204,072 177,928 4.2 19.5 198,626 172,390 15.2 Time deposits
31,697 32,455 32,683 (2.3 ) (3.0 ) 33,008
35,558 (7.2 ) Total interest-bearing deposits 244,291
236,527 210,611 3.3 16.0 231,634 207,948 11.4 Total
deposits $329,183 $318,548 $294,505 3.3 11.8 $312,810
$287,151 8.9
Deposits
Average total deposits for the fourth quarter of 2016 were $34.7
billion (11.8 percent) higher than the fourth quarter of 2015.
Average noninterest-bearing deposits increased $1.0 billion (1.2
percent) year-over-year mainly in Consumer and Small Business
Banking, partially offset by a decline in deposits within Wealth
Management and Securities Services. Average total savings deposits
were $34.7 billion (19.5 percent) higher year-over-year, the result
of growth across all business lines. Average time deposits were
$1.0 billion (3.0 percent) lower 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 $10.6 billion (3.3 percent)
over the third quarter of 2016. On a linked quarter basis, average
noninterest-bearing deposits grew $2.9 billion (3.5 percent) and
average total savings deposits grew $8.5 billion (4.2 percent)
reflecting increases across all business lines. Average time
deposits, which are managed based on funding needs, relative
pricing, and liquidity characteristics, decreased $758 million (2.3
percent) on a linked quarter basis.
NONINTEREST INCOME Table
6 ($ in millions)
Percent Percent
Change Change 4Q 3Q 4Q 4Q16
vs 4Q16 vs Full Year Full Year
Percent 2016 2016 2015
3Q16 4Q15 2016
2015 Change Credit and debit card
revenue $316 $299 $294 5.7 7.5 $1,177 $1,070 10.0 Corporate payment
products revenue 171 190 170 (10.0 ) .6 712 708 .6 Merchant
processing services 404 412 393 (1.9 ) 2.8 1,592 1,547 2.9 ATM
processing services 87 87 79 -- 10.1 338 318 6.3 Trust and
investment management fees 368 362 336 1.7 9.5 1,427 1,321 8.0
Deposit service charges 186 192 182 (3.1 ) 2.2 725 702 3.3 Treasury
management fees 147 147 139 -- 5.8 583 561 3.9 Commercial products
revenue 217 219 222 (.9 ) (2.3 ) 871 867 .5 Mortgage banking
revenue 240 314 211 (23.6 ) 13.7 979 906 8.1 Investment products
fees 38 41 44 (7.3 ) (13.6 ) 158 185 (14.6 ) Securities gains
(losses), net 6 10 1 (40.0 )
nm
22 --
nm
Other 251 172 269 45.9 (6.7 ) 993 907 9.5
Total noninterest income $2,431 $2,445 $2,340
(.6 ) 3.9 $9,577 $9,092 5.3
Noninterest Income
Fourth quarter noninterest income was $2,431 million, which was
$91 million (3.9 percent) higher than the fourth quarter of 2015,
reflecting increases in payment services revenue, trust and
investment management fees, and mortgage banking revenue, partially
offset by a decline in other noninterest income. Credit and debit
card revenue increased $22 million (7.5 percent) reflecting higher
transaction volumes including the impact of acquired portfolios.
Merchant processing services revenue increased $11 million (2.8
percent) as a result of an increase in product fees and higher
volumes. Adjusted for the approximate $11 million impact of foreign
currency rate changes, year-over-year merchant processing services
revenue increased approximately 5.6 percent. Trust and investment
management fees increased $32 million (9.5 percent) reflecting
lower money market fee waivers along with account growth, an
increase in assets under management, and improved market
conditions. Mortgage banking revenue increased $29 million (13.7
percent) over a year ago driven by higher origination and sales
volumes. Other income decreased $18 million (6.7 percent) compared
with the prior year quarter, primarily reflecting lower income from
leasing residuals and the impact of a gain on the sale of a deposit
portfolio in the fourth quarter of 2015 partially offset by
stronger trading income and higher fourth quarter 2016 equity
investment income.
Noninterest income was $14 million (0.6 percent) lower in the
fourth quarter of 2016 than the third quarter of 2016 principally
driven by lower mortgage banking revenue and seasonally lower
corporate payment products revenue, partially offset by seasonally
higher credit and debit card revenue and an increase in other
noninterest income. Mortgage banking revenue decreased $74 million
(23.6 percent) reflecting lower origination and sales volume, while
corporate payment products revenue was $19 million (10.0 percent)
lower, reflecting seasonally lower government-related transaction
volumes. Credit and debit card revenue increased $17 million (5.7
percent), driven by seasonally higher sales volumes. The increase
in other income of $79 million (45.9 percent) was primarily driven
by changes in equity investment income.
NONINTEREST EXPENSE Table
7 ($ in millions)
Percent Percent
Change Change 4Q 3Q 4Q 4Q16
vs 4Q16 vs Full Year Full Year
Percent 2016 2016 2015
3Q16 4Q15 2016
2015 Change Compensation $1,357 $1,329
$1,212 2.1 12.0 $5,212 $4,812 8.3 Employee benefits 261 280 272
(6.8 ) (4.0 ) 1,119 1,167 (4.1 ) Net occupancy and equipment 247
250 246 (1.2 ) .4 988 991 (.3 ) Professional services 156 127 125
22.8 24.8 502 423 18.7 Marketing and business development 107 102
96 4.9 11.5 435 361 20.5 Technology and communications 238 243 230
(2.1 ) 3.5 955 887 7.7 Postage, printing and supplies 75 80 74 (6.3
) 1.4 311 297 4.7 Other intangibles 45 45 46 -- (2.2 ) 179 174 2.9
Other 518 475 508 9.1 2.0 1,975 1,819 8.6
Total noninterest expense $3,004 $2,931 $2,809
2.5 6.9 $11,676 $10,931 6.8
Noninterest Expense
Fourth quarter noninterest expense was $3,004 million, $195
million (6.9 percent) higher than the fourth quarter of 2015,
primarily due to higher compensation, professional services and
marketing expenses. Compensation expense increased $145 million
(12.0 percent) principally due to the impact of hiring to support
business growth and compliance programs, merit increases, and
higher variable compensation. Professional services increased $31
million (24.8 percent) primarily due to compliance programs and
implementation costs of capital investments to support business
growth. Marketing increased $11 million (11.5 percent) to support
new business development. Partially offsetting these increases was
an $11 million (4.0 percent) decrease in employee benefits expense
mainly due to lower pension and healthcare costs.
Noninterest expense increased $73 million (2.5 percent) on a
linked quarter basis driven by higher other noninterest expense,
professional services expense and compensation expense. Other
noninterest expense increased $43 million (9.1 percent) primarily
due to seasonally higher costs related to investments in
tax-advantaged projects. Professional services expense was $29
million (22.8 percent) higher due to seasonally higher costs across
a majority of the lines of business including capital investments,
and risk and compliance activities. Compensation expense increased
$28 million (2.1 percent) primarily due to increased staffing to
support business investment and compliance programs. Partially
offsetting these increases was a $19 million (6.8 percent) decrease
in employee benefits expense driven by lower healthcare costs.
Provision for Income Taxes
The provision for income taxes for the fourth quarter of 2016
resulted in a tax rate on a taxable-equivalent basis of 28.6
percent (effective tax rate of 26.9 percent), compared with 29.0
percent (effective tax rate of 27.2 percent) in the fourth quarter
of 2015, and 28.9 percent (effective tax rate of 27.2 percent) in
the third quarter of 2016.
ALLOWANCE FOR CREDIT LOSSES
Table 8 ($ in millions)
4Q 3Q 2Q
1Q 4Q 2016
% (b) 2016 % (b)
2016 % (b) 2016 %
(b) 2015 % (b) Balance,
beginning of period $4,338 $4,329 $4,320 $4,306 $4,306 Net
charge-offs Commercial 71 .32 84 .38 74 .34 78 .37 58 .28 Lease
financing 5 .37 3 .23 5 .38 5 .38 5
.38 Total commercial 76 .32 87 .37 79 .34 83 .37 63 .29
Commercial mortgages (3 ) (.04 ) 5 .06 (4 ) (.05 ) (2 ) (.03 ) 2
.02 Construction and development (6 ) (.21 ) (4 ) (.14 ) 4
.15 (3 ) (.11 ) (2 ) (.08 ) Total commercial real estate (9 ) (.08
) 1 .01 -- -- (5 ) (.05 ) -- -- Residential mortgages 12 .08
12 .08 17 .12 19 .14 16 .12 Credit card 181 3.44 161 3.11
170 3.39 164 3.26 166 3.50 Retail leasing 1 .06 1 .07 2 .15
1 .08 1 .08 Home equity and second mortgages (1 ) (.02 ) 1 .02 (1 )
(.02 ) 2 .05 6 .15 Other 62 .79 52 .68 50 .68
51 .69 53 .71 Total other retail 62 .46 54 .41 51 .40
54 .43 60 .47 Total net charge-offs,
excluding covered loans 322 .48 315 .47 317 .49 315 .49 305
.48 Covered loans -- -- -- -- -- -- --
-- -- -- Total net charge-offs 322 .47 315 .46 317 .48 315
.48 305 .47 Provision for credit losses 342 325 327 330 305 Other
changes (a) (1 ) (1 ) (1 ) (1 ) -- Balance, end of period
$4,357 $4,338 $4,329 $4,320 $4,306
Components Allowance for loan losses $3,813 $3,797
$3,806 $3,853 $3,863
Liability for unfunded credit
commitments
544 541 523 467 443 Total
allowance for credit losses $4,357 $4,338 $4,329
$4,320 $4,306 Gross charge-offs $405
$398 $407 $405 $381 Gross recoveries $83 $83 $90 $90 $76
Allowance for credit losses as a percentage of
Period-end loans, excluding covered
loans
1.60 1.61 1.62 1.65 1.67
Nonperforming loans, excluding
covered loans
317 309 311 302 360
Nonperforming assets, excluding
covered assets
275 264 263 255 288 Period-end loans 1.59 1.60 1.61 1.63
1.65 Nonperforming loans 318 310 312 303 361 Nonperforming assets
272 261 259 251 283
(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 fourth quarter
of 2016 was $342 million, which was $17 million (5.2 percent)
higher than the prior quarter and $37 million (12.1 percent) higher
than the fourth quarter of 2015. Credit quality was relatively
stable compared with the third quarter of 2016.
The provision for credit losses was $20 million higher than net
charge-offs in the fourth quarter of 2016, $10 million higher than
net charge-offs in the third quarter of 2016, and equal to net
charge-offs in the fourth quarter of 2015. The reserve build for
the fourth quarter of 2016 was driven by portfolio growth,
partially offset by improvement in residential mortgage and home
equity credit quality. Total net charge-offs in the fourth quarter
of 2016 were $322 million, compared with $315 million in the third
quarter of 2016, and $305 million in the fourth quarter of 2015.
Net charge-offs increased $7 million (2.2 percent) compared with
the third quarter of 2016 reflecting a seasonal increase in credit
card loan net charge-offs, offset by declines in commercial and
commercial real estate loan net charge-offs. Net charge-offs
increased $17 million (5.6 percent) compared with the fourth
quarter of 2015 primarily due to higher commercial and credit card
loan net charge-offs, partially offset by lower charge-offs related
to commercial real estate and residential mortgages. The net
charge-off ratio was 0.47 percent in the fourth quarter of 2016,
compared with 0.46 percent in the third quarter of 2016 and 0.47
percent in the fourth quarter of 2015.
The allowance for credit losses was $4,357 million at December
31, 2016, compared with $4,338 million at September 30, 2016, and
$4,306 million at December 31, 2015. The ratio of the allowance for
credit losses to period-end loans was 1.59 percent at December 31,
2016, compared with 1.60 percent at September 30, 2016, and 1.65
percent at December 31, 2015. The ratio of the allowance for credit
losses to nonperforming loans was 318 percent at December 31, 2016,
compared with 310 percent at September 30, 2016, and 361 percent at
December 31, 2015.
Nonperforming assets were $1,603 million at December 31, 2016,
compared with $1,664 million at September 30, 2016, and $1,523
million at December 31, 2015. The ratio of nonperforming assets to
loans and other real estate was 0.59 percent at December 31, 2016,
compared with 0.61 percent at September 30, 2016, and 0.58 percent
at December 31, 2015. The $61 million (3.7 percent) decrease in
nonperforming assets on a linked quarter basis was driven by
improvements in commercial loans, residential mortgages and other
real estate. The $80 million (5.3 percent) increase in
nonperforming assets on a year-over-year basis was driven by
commercial loans within the energy portfolio, partially offset by
improvements in the Company’s residential portfolio. Accruing loans
90 days or more past due were $764 million ($552 million excluding
covered loans) at December 31, 2016, compared with $748 million
($518 million excluding covered loans) at September 30, 2016, and
$831 million ($541 million excluding covered loans) at December 31,
2015.
DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN
BALANCES Table 9 (Percent)
Dec 31 Sep 30 Jun 30 Mar
31 Dec 31 2016 2016
2016 2016 2015 Delinquent
loan ratios - 90 days or more past due
excluding
nonperforming loans Commercial .06 .05 .05 .05 .05 Commercial real
estate .02 .02 .03 .04 .03 Residential mortgages .27 .28 .27 .31
.33 Credit card 1.16 1.11 .98 1.10 1.09 Other retail .15 .14 .13
.15 .15 Total loans, excluding covered loans .20 .19 .18 .20 .21
Covered loans 5.53 5.72 5.81 6.23 6.31 Total loans .28 .28 .27 .30
.32 Delinquent loan ratios - 90 days or more past due
including nonperforming loans Commercial .57 .61 .58 .57 .25
Commercial real estate .31 .26 .27 .28 .33 Residential mortgages
1.31 1.37 1.39 1.54 1.66 Credit card 1.18 1.13 1.00 1.14 1.13 Other
retail .45 .42 .43 .45 .46 Total loans, excluding covered loans .71
.72 .70 .75 .67 Covered loans 5.68 5.89 5.98 6.39 6.48 Total loans
.78 .79 .79 .84 .78
ASSET QUALITY
Table 10 ($ in millions)
Dec 31 Sep 30 Jun 30 Mar
31 Dec 31 2016 2016
2016 2016 2015 Nonperforming
loans Commercial $443 $477 $450 $457 $160 Lease financing 40
40 39 16 14 Total commercial 483 517 489 473
174 Commercial mortgages 87 98 91 94 92 Construction and
development 37 7 12 10 35 Total
commercial real estate 124 105 103 104 127 Residential
mortgages 595 614 628 677 712 Credit card 3 4 5 7 9 Other retail
157 153 157 157 162 Total nonperforming
loans, excluding covered loans 1,362 1,393 1,382 1,418 1,184
Covered loans 6 7 7 7 8 Total
nonperforming loans 1,368 1,400 1,389 1,425 1,192 Other real
estate (a) 186 213 229 242 280 Covered other real estate (a) 26 28
34 33 32 Other nonperforming assets 23 23 20
19 19 Total nonperforming assets (b) $1,603
$1,664 $1,672 $1,719 $1,523 Total
nonperforming assets, excluding covered assets $1,571 $1,629
$1,631 $1,679 $1,483
Accruing loans 90 days or more past
due, excluding covered loans
$552 $518 $478 $528 $541
Accruing loans 90 days or more past due $764 $748
$724 $804 $831
Performing restructured loans, excluding
GNMA and covered loans
$2,557 $2,672 $2,676 $2,735 $2,766
Performing restructured GNMA and covered loans $1,604
$1,375 $1,602 $1,851 $1,944
Nonperforming assets to loans plus
ORE, excluding covered assets (%)
.58 .61 .62 .64 .58 Nonperforming assets to loans plus ORE
(%) .59 .61 .62 .65 .58 (a) Includes equity investments in
entities whose principal assets are other real estate owned. (b)
Does not include accruing loans 90 days or more past due.
COMMON SHARES
Table 11
(Millions)
4Q 3Q 2Q
1Q 4Q 2016 2016
2016 2016 2015
Beginning shares outstanding 1,705 1,719 1,732 1,745 1,754
Shares issued for stock incentive
plans, acquisitions and other corporate purposes
6 2 2 3 1 Shares repurchased (14 ) (16 ) (15 )
(16 ) (10 ) Ending shares outstanding 1,697
1,705 1,719 1,732 1,745
CAPITAL POSITION Table
12 ($ in millions)
Dec 31 Sep
30 Jun 30 Mar 31 Dec
31 2016 2016
2016 2016 2015
Total U.S. Bancorp shareholders' equity $47,298 $47,759
$47,390 $46,755 $46,131
Standardized Approach
Basel III transitional standardized approach Common equity tier 1
capital $33,720 $33,827 $33,444 $32,827 $32,612 Tier 1 capital
39,421 39,531 39,148 38,532 38,431 Total risk-based capital 47,355
47,452 47,049 45,412 45,313 Common equity tier 1 capital
ratio 9.4 % 9.5 % 9.5 % 9.5 % 9.6 % Tier 1 capital ratio 11.0 11.1
11.1 11.1 11.3 Total risk-based capital ratio 13.2 13.3 13.4 13.1
13.3 Leverage ratio 9.0 9.2 9.3 9.3 9.5
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully
implemented standardized approach (a)
9.1 9.3 9.3 9.2 9.1
Advanced Approaches
Common equity tier 1 capital to
risk-weighted assets for the Basel III transitional advanced
approaches
12.2 12.4 12.3 12.3 12.5
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully
implemented advanced approaches (a)
11.7 12.1 12.0 11.9 11.9
Tangible common equity to
tangible assets (a) 7.5 7.5 7.6 7.7 7.6
Tangible common
equity to risk-weighted assets (a) 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 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 $47.3 billion at
December 31, 2016, compared with $47.8 billion at September 30,
2016, and $46.1 billion at December 31, 2015. During the fourth
quarter, the Company returned 81 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 9.1 percent at December 31,
2016, compared with 9.3 percent at September 30, 2016, and 9.1
percent at December 31, 2015. The decline from the third quarter of
2016 in the common equity tier 1 ratio was principally due to the
impact of rising interest rates on unrealized gains (losses) of
securities available-for-sale. The estimated common equity tier 1
capital to risk-weighted assets ratio using the Basel III fully
implemented advanced approaches method was 11.7 percent at December
31, 2016, compared with 12.1 percent at September 30, 2016, and
11.9 percent at December 31, 2015.
On Wednesday, January 18, 2017, at 8:00 a.m. CST, Richard K.
Davis, chairman 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 17948161. For those
unable to participate during the live call, a recording will be
available at approximately 11:00 a.m. CST on Wednesday, January 18
and be accessible through Wednesday, January 25 at 11:00 p.m. CST.
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 17948161.
Minneapolis-based U.S. Bancorp (NYSE: USB), with $446 billion in
assets as of December 31, 2016, is the parent company of U.S. Bank
National Association, the fifth largest commercial bank in the
United States. The Company operates 3,106 banking offices in 25
states and 4,842 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, U.S. Bancorp’s
business and financial performance is likely to be negatively
impacted by recently enacted and future legislation and regulation.
U.S. Bancorp’s results could also be adversely affected by
deterioration in general business and economic conditions (which
could result, in part, from the United Kingdom's withdrawal from
the European Union); 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, 2015, 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 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 Year Ended (Dollars and Shares in
Millions, Except Per Share Data) December 31, December 31,
(Unaudited) 2016 2015 2016
2015
Interest Income
Loans $2,771 $2,583 $10,810 $10,059 Loans held for sale 44 40 154
206 Investment securities 523 499 2,078 2,001 Other interest income
36 34 125 136
Total interest income 3,374 3,156 13,167 12,402
Interest
Expense Deposits 170 113 622 457 Short-term borrowings 62 56
263 245 Long-term debt 187 168 754
699 Total interest expense 419
337 1,639 1,401 Net interest
income 2,955 2,819 11,528 11,001 Provision for credit losses 342
305 1,324 1,132
Net interest income after provision for credit losses 2,613 2,514
10,204 9,869
Noninterest Income Credit and debit card
revenue 316 294 1,177 1,070 Corporate payment products revenue 171
170 712 708 Merchant processing services 404 393 1,592 1,547 ATM
processing services 87 79 338 318 Trust and investment management
fees 368 336 1,427 1,321 Deposit service charges 186 182 725 702
Treasury management fees 147 139 583 561 Commercial products
revenue 217 222 871 867 Mortgage banking revenue 240 211 979 906
Investment products fees 38 44 158 185 Securities gains (losses),
net 6 1 22 -- Other 251 269 993
907 Total noninterest income 2,431 2,340 9,577 9,092
Noninterest Expense Compensation 1,357 1,212 5,212 4,812
Employee benefits 261 272 1,119 1,167 Net occupancy and equipment
247 246 988 991 Professional services 156 125 502 423 Marketing and
business development 107 96 435 361 Technology and communications
238 230 955 887 Postage, printing and supplies 75 74 311 297 Other
intangibles 45 46 179 174 Other 518 508
1,975 1,819 Total noninterest expense 3,004
2,809 11,676 10,931
Income before income taxes 2,040 2,045 8,105 8,030
Applicable income taxes 549 556 2,161
2,097 Net income 1,491 1,489 5,944 5,933 Net
(income) loss attributable to noncontrolling interests (13 )
(13 ) (56 ) (54 ) Net income attributable to U.S.
Bancorp $1,478 $1,476 $5,888
$5,879 Net income applicable to U.S. Bancorp common
shareholders $1,391 $1,404 $5,589
$5,608 Earnings per common share $.82
$.80 $3.25 $3.18 Diluted earnings per common share $.82 $.80 $3.24
$3.16 Dividends declared per common share $.280 $.255 $1.070 $1.010
Average common shares outstanding 1,700 1,747 1,718 1,764 Average
diluted common shares outstanding 1,705 1,754
1,724 1,772 U.S.
Bancorp
Consolidated Ending Balance Sheet
December 31, December 31, (Dollars in Millions) 2016
2015
Assets Cash and due from banks $15,705
$11,147 Investment securities Held-to-maturity 42,991 43,590
Available-for-sale 66,284 61,997 Loans held for sale 4,826 3,184
Loans Commercial 93,386 88,402 Commercial real estate 43,098 42,137
Residential mortgages 57,274 53,496 Credit card 21,749 21,012 Other
retail 53,864 51,206 Total loans, excluding
covered loans 269,371 256,253 Covered loans 3,836
4,596 Total loans 273,207 260,849 Less allowance for loan
losses (3,813 ) (3,863 ) Net loans 269,394 256,986 Premises
and equipment 2,443 2,513 Goodwill 9,344 9,361 Other intangible
assets 3,303 3,350 Other assets 31,674 29,725
Total assets $445,964 $421,853
Liabilities and Shareholders' Equity Deposits
Noninterest-bearing $86,097 $83,766 Interest-bearing 248,493
216,634 Total deposits 334,590 300,400 Short-term
borrowings 13,963 27,877 Long-term debt 33,323 32,078 Other
liabilities 16,155 14,681 Total liabilities
398,031 375,036 Shareholders' equity Preferred stock 5,501 5,501
Common stock 21 21 Capital surplus 8,440 8,376 Retained earnings
50,151 46,377 Less treasury stock (15,280 ) (13,125 ) Accumulated
other comprehensive income (loss) (1,535 ) (1,019 ) Total
U.S. Bancorp shareholders' equity 47,298 46,131 Noncontrolling
interests 635 686 Total equity 47,933
46,817 Total liabilities and equity $445,964
$421,853
U.S. Bancorp
Non-GAAP Financial Measures
December 31, September 30, June 30, March 31, December 31, (Dollars
in Millions, Unaudited) 2016 2016
2016 2016 2015 Total equity $47,933
$48,399 $48,029 $47,393 $46,817 Preferred stock (5,501 ) (5,501 )
(5,501 ) (5,501 ) (5,501 ) Noncontrolling interests (635 ) (640 )
(639 ) (638 ) (686 ) Goodwill (net of deferred tax liability) (1)
(8,203 ) (8,239 ) (8,246 ) (8,270 ) (8,295 ) Intangible assets,
other than mortgage servicing rights (712 ) (756 )
(796 ) (820 ) (838 ) Tangible
common equity (a) 32,882 33,263 32,847 32,164 31,497
Tangible common equity (as calculated above) 32,882 33,263 32,847
32,164 31,497 Adjustments (2) (55 ) 97
133 99 67
Common equity tier 1 capital estimated for
the Basel III fully implemented standardized and advanced
approaches (b)
32,827 33,360 32,980 32,263 31,564 Total assets 445,964
454,134 438,463 428,638 421,853 Goodwill (net of deferred tax
liability) (1) (8,203 ) (8,239 ) (8,246 ) (8,270 ) (8,295 )
Intangible assets, other than mortgage servicing rights (712 )
(756 ) (796 ) (820 ) (838
) Tangible assets (c) 437,049 445,139 429,421 419,548
412,720
Risk-weighted assets, determined in
accordance with prescribed transitional standardized approach
regulatory requirements (d)
358,237 * 356,733 351,462 346,227 341,360 Adjustments (3) 4,027
* 3,165 3,079
3,485 3,892
Risk-weighted assets estimated for the
Basel III fully implemented standardized approach (e)
362,264 * 359,898 354,541 349,712 345,252
Risk-weighted assets, determined in
accordance with prescribed transitional advanced approaches
regulatory requirements
277,141 * 272,832 271,495 267,309 261,668 Adjustments (4) 4,295
* 3,372 3,283
3,707 4,099
Risk-weighted assets estimated for the
Basel III fully implemented advanced approaches (f)
281,436 * 276,204 274,778 271,016 265,767
Ratios *
Tangible common equity to tangible assets (a)/(c) 7.5 % 7.5 % 7.6 %
7.7 % 7.6 % 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)
9.1 9.3 9.3 9.2 9.1
Common equity tier 1 capital to
risk-weighted assets estimated for the Basel III fully
implemented advanced approaches (b)/(f)
11.7 12.1 12.0 11.9 11.9 Three Months Ended
Year Ended December 31, September 30, June 30, March 31, December
31, December 31, December 31, 2016 2016
2016 2016 2015 2016 2015
Net interest income $2,955 $2,893 $2,845 $2,835 $2,819
$11,528 $11,001 Taxable-equivalent adjustment (5) 49
50 51 53
52 203 213
Net interest income, on a taxable-equivalent basis 3,004 2,943
2,896 2,888 2,871 11,731 11,214 Net interest income, on a
taxable-equivalent basis (as calculated above) 3,004 2,943 2,896
2,888 2,871 11,731 11,214 Noninterest income 2,431 2,445 2,552
2,149 2,340 9,577 9,092 Less: Securities gains (losses), net 6
10 3
3 1 22 --
Total net revenue, excluding net securities gains (losses) (g)
5,429 5,378 5,445 5,034 5,210 21,286 20,306 Noninterest
expense (h) 3,004 2,931 2,992 2,749 2,809 11,676 10,931 Less:
Intangible amortization 45 45
44 45 46
179 174 Noninterest expense, excluding
intangible amortization (i) 2,959 2,886 2,948 2,704 2,763 11,497
10,757 Efficiency ratio (h)/(g) 55.3 % 54.5 % 54.9 % 54.6 %
53.9 % 54.9 % 53.8 % Tangible efficiency ratio (i)/(g) 54.5
53.7 54.1
53.7 53.0 54.0
53.0
* 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.
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version on businesswire.com: http://www.businesswire.com/news/home/20170118005083/en/
U.S. BancorpMediaDana Ripley,
612-303-3167orInvestors/AnalystsJennifer Thompson, 612-303-0778
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