U.S. Bancorp (USB) 8-K U.s. Bancorp Reports Record Earnings for the Second Quarter of 2014

Richard K. Davis

Chairman, President and CEO

Andy Cecere

Vice Chairman and CFO

U.S. Bancorp

2Q14 Earnings

Conference Call

U.S. Bancorp

2Q14 Earnings

Conference Call

July 16, 2014

Exhibit 99.2

Forward-looking Statements and Additional Information

The

following

information

appears

in

accordance

with

the

Private

Securities

Litigation

Reform

Act

of

1995:

This

presentation

contains

forward-looking

statements

about

U.S.

Bancorp.

Statements

that

are

not

historical

or

current

facts,

including

statements

about

beliefs

and

expectations,

are

forward-looking

statements

and

are

based

on

the

information

available

to,

and

assumptions

and

estimates

made

by,

management

as

of

the

date

made.

These

forward-looking

statements

cover,

among

other

things,

anticipated

future

revenue

and

expenses

and

the

future

plans

and

prospects

of

U.S.

Bancorp.

Forward-looking

statements

involve

inherent

risks

and

uncertainties,

and

important

factors

could

cause

actual

results

to

differ

materially

from

those

anticipated.

A

reversal

or

slowing

of

the

current

moderate

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.

Continued

stress

in

the

commercial

real

estate

markets,

as

well

as

a

delay

or

failure

of

recovery

in

the

residential

real

estate

markets,

could

cause

additional

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;

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;

increased

competition

from

both

banks

and

non-banks;

changes

in

customer

behavior

and

preferences;

effects

of

mergers

and

acquisitions

and

related

integration;

effects

of

critical

accounting

policies

and

judgments;

and

management’s

ability

to

effectively

manage

credit

risk,

residual

value

risk,

market

risk,

operational

risk,

interest

rate

risk

and

liquidity

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,

2013,

on

file

with

the

Securities

and

Exchange

Commission,

including

the

sections

entitled

“Risk

Factors”

and

“Corporate

Risk

Profile”

contained

in

Exhibit

13,

and

all

subsequent

filings

with

the

Securities

and

Exchange

Commission

under

Sections

13(a),

13(c),

14

or

15(d)

of

the

Securities

Exchange

Act

of

1934.

Forward-looking

statements

speak

only

as

of

the

date

they

are

made,

and

U.S.

Bancorp

undertakes

no

obligation

to

update

them

in

light

of

new

information

or

future

events.

This

presentation

includes

non-GAAP

financial

measures

to

describe

U.S.

Bancorp’s

performance.

The

reconciliations

of

those

measures

to

GAAP

measures

are

provided

within

or

in

the

appendix

of

the

presentation.

These

disclosures

should

not

be

viewed

as

a

substitute

for

operating

results

determined

in

accordance

with

GAAP,

nor

are

they

necessarily

comparable

to

non-GAAP

performance

measures

that

may

be

presented

by

other

companies.

3

2Q14 Earnings

Conference Call

2Q14 Highlights

Record net income of $1.5 billion; $0.78 per diluted common share

2Q14 results included a $214 million gain on the sale of Visa Inc. Class B

common stock and a $200 million FHA DOJ settlement (no impact to

EPS)

Average loan growth of 6.8% vs. 2Q13 (6.7% excluding Charter One

acquisition)

and 2.0% vs. 1Q14 (1.9% excluding Charter One acquisition)

Average deposit growth of 6.0% vs. 2Q13 (5.8% excluding Charter One

acquisition) and 1.9% vs. 1Q14 (1.7% excluding Charter One acquisition)

Net charge-offs declined 11.0% vs. 2Q13

Nonperforming assets decreased 1.6% vs. 1Q14 and 8.1% vs. 2Q13 (excluding

covered assets)

Capital generation continues to reinforce capital position

•

Common equity tier 1 capital ratio of 8.9% estimated for the Basel III fully implemented

standardized approach

•

Common

equity

tier

1

capital

ratio

of

9.6%;

Tier

1

capital

ratio

of

11.3%

Returned 75% of earnings to shareholders in 2Q14

•

Repurchased 15 million shares of common stock during the quarter

4

2Q14 Earnings

Conference Call

Performance Ratios

Return on Average Common Equity

and Return on Average Assets

Efficiency Ratio and

Net Interest Margin

Return on Avg Common Equity

Return on Avg Assets

Efficiency Ratio

Net Interest Margin

* Excluding $214 million gain on Visa Inc. Class B common stock sale and $200 million DOJ settlement

Efficiency ratio computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent

basis

and

noninterest

income

excluding

securities

gains

(losses)

net

5

2Q14 Earnings

Conference Call

* Gain on Visa Inc. Class B common stock sale

Taxable-equivalent basis

Revenue Growth

Year-Over-Year Change

(2.4%)

(5.6%)

(4.4%)

(1.2%)

4.9%

$ in millions

6

2Q14 Earnings

Conference Call

Loan and Deposit Growth

Year-Over-Year Growth

Average Balances

$ in billions

6.0%

$235.9

6.8%

$240.5

5.2%

$225.2

5.7%

$229.4

5.7%

$232.8

5.1%

$257.5

6.0%

$262.4

7.0%

$247.4

5.5%

$252.4

5.4%

$256.9

7

2Q14 Earnings

Conference Call

Credit Quality

* Excluding Covered Assets (assets subject to loss sharing agreements with FDIC)

Net Charge-offs

Nonperforming Assets*

$ in millions

Net Charge-offs (Left Scale)

NCOs to Avg Loans (Right Scale)

Nonperforming Assets (Left Scale)

NPAs to Loans plus ORE (Right Scale)

8

2Q14 Earnings

Conference Call

Earnings Summary

$ in millions, except per-share data

Taxable-equivalent basis

YTD

YTD

2Q14

1Q14

2Q13

vs 1Q14

vs 2Q13

2014

2013

% B/(W)

Net Interest Income

2,744

$    

2,706

$    

2,672

$    

1.4

2.7

5,450

$    

5,381

$    

1.3

Noninterest Income

2,444

2,108

2,276

15.9

7.4

4,552

4,441

2.5

Total Revenue

5,188

4,814

4,948

7.8

4.9

10,002

9,822

1.8

Noninterest Expense

2,753

2,544

2,557

(8.2)

(7.7)

5,297

5,027

(5.4)

Operating Income

2,435

2,270

2,391

7.3

1.8

4,705

4,795

(1.9)

Net Charge-offs

349

341

392

(2.3)

11.0

690

825

16.4

Excess Provision

(25)

(35)

(30)

(28.6)

(16.7)

(60)

(60)

-

Income before Taxes

2,111

1,964

2,029

7.5

4.0

4,075

4,030

1.1

Applicable Income Taxes

602

552

585

(9.1)

(2.9)

1,154

1,199

3.8

Noncontrolling Interests

(14)

(15)

40

6.7

nm

(29)

81

nm

Net Income

1,495

1,397

1,484

7.0

0.7

2,892

2,912

(0.7)

Preferred Dividends/Other

68

66

79

(3.0)

13.9

134

149

10.1

NI to Common

1,427

$    

1,331

$    

1,405

$    

7.2

1.6

2,758

$    

2,763

$    

(0.2)

Diluted EPS

0.78

$      

0.73

$      

0.76

$      

6.8

2.6

1.51

$      

1.49

$      

1.3

Average Diluted Shares

1,821

1,828

1,853

0.4

1.7

1,825

1,860

1.9

% B/(W)

9

2Q14 Earnings

Conference Call

2Q14 Results -

Key Drivers

vs. 2Q13

Net Revenue increase of 4.9% (0.5% excluding notable items)

•

Net interest income increase of 2.7%; net interest margin

of 3.27% vs. 3.43% in 2Q13

•

Noninterest income increase of 7.4% (2.0% decrease

excluding notable items)

Noninterest expense increase of 7.7% (0.2% decrease

excluding notable items)

Provision for credit losses lower by $38 million

•

Net charge-offs lower by $43 million, or 11.0%

•

Provision lower than NCOs by $25 million vs. $30 million in 2Q13

vs. 1Q14

Net Revenue increase of 7.8% (3.3% excluding notable items)

•

Net interest income increase of 1.4%; net interest margin of 3.27% vs. 3.35% in 1Q14

•

Noninterest income increase of 15.9% (5.8% excluding notable items)

Noninterest expense increase of 8.2% (0.4% excluding notable items)

Provision for credit losses higher by $18 million

•

Net charge-offs increased by $8 million

•

Provision lower than NCOs by $25 million vs. $35 million in 1Q14

10

2Q14 Earnings

Conference Call

Capital Position

$ in billions; RWA = risk-weighted assets

(a) 2014 amounts and ratios calculated under the Basel III transitional standardized approach; all prior periods under Basel I

2Q14

1Q14

4Q13

3Q13

2Q13

Total U.S. Bancorp shareholders' equity

42.7

$    

42.1

$    

41.1

$    

40.1

$    

39.7

$    

Standardized Approach

Basel III transitional standardized approach/Basel I (a)

Common equity tier 1 capital

29.8

29.5

27.9

27.3

26.8

Tier 1 capital

34.9

34.6

33.4

32.7

32.2

Total risk-based capital

41.0

40.7

39.3

38.9

38.4

Common equity tier 1 capital ratio

9.6%

9.7%

9.4%

9.3%

9.2%

Tier 1 capital ratio

11.3%

11.4%

11.2%

11.2%

11.1%

Total risk-based capital ratio

13.2%

13.5%

13.2%

13.3%

13.3%

Leverage ratio

9.6%

9.7%

9.6%

9.6%

9.5%

Common equity tier 1 capital to RWA estimated for the

Basel III fully implemented standardized approach

8.9%

9.0%

8.8%

8.6%

8.6%

Advanced Approaches

Common equity tier 1 capital to RWA for the Basel III

transitional advanced approaches

12.3%

Common equity tier 1 capital to RWA estimated for the 

Basel III fully implemented advanced approaches

11.7%

Tangible common equity ratio

7.5%

7.8%

7.7%

7.4%

7.5%

Tangible common equity as a % of RWA

9.2%

9.3%

9.1%

8.9%

8.9%

11

2Q14 Earnings

Conference Call

Capital Actions

Dividend increase announced June 17

th

•

Annual dividend increased from $0.92 to $0.98, a 6.5% increase

•

One year authorization to repurchase up to $2.3 billion of outstanding stock effective April 1, 2014

Returned 75% of earnings to shareholders during 2Q14

Reinvest and

Acquisitions

Dividends

Share

Repurchases

20 -

40%

Targets:

30 -

40%

30 -

40%

25%

2Q14

Actual:

44%

31%

Earnings Distribution

12

2Q14 Earnings

Conference Call

13

2Q14 Earnings

Conference Call

Appendix

14

2Q14 Earnings

Conference Call

Covered

Commercial

CRE

Res Mtg

Credit

Card

Retail

Average Loans

Average Loans

Key Points

$ in billions

vs. 2Q13

Average total loans grew by $15.3 billion, or 6.8%

(6.7% excluding Charter One acquisition)

Average total loans, excluding covered loans,

were higher by 8.3%

Average total commercial loans increased $8.3

billion, or 12.4%; average commercial real estate

loans increased $2.6 billion, or 6.9%; average

residential mortgage loans increased $4.9 billion,

or 10.5%

vs. 1Q14

Average total loans grew by $4.6 billion, or 2.0%

(1.9% excluding Charter One acquisition)

Average total loans, excluding covered loans,

were higher by 2.2%

Average total commercial loans increased $4.2

billion, or 5.9%; average commercial real estate

loans increased $0.4 billion, or 1.1%; average

residential mortgage loans increased $0.2 billion,

or 0.4%

Year-Over-Year Growth

5.2%

5.7%

5.7%

6.0%

6.8%

Covered

Commercial

CRE

Res Mtg

Retail

Credit Card

$225.2

$229.4

$232.8

$235.9

$240.5

2Q14 Earnings

Conference Call

Time

Money

Market

Checking

& Savings

Noninterest

-bearing

Average Deposits

Average Deposits

Key Points

$ in billions

vs. 2Q13

Average total deposits increased by $15.0

billion, or 6.0% (5.8% excluding Charter One

acquisition)

Average low cost deposits (NIB, interest

checking, money market and savings) 

increased by $17.6 billion, or 8.7%

vs. 1Q14

Average total deposits increased by $4.9

billion, or 1.9% (1.7% excluding Charter One

acquisition)

Average low cost deposits increased by $5.6

billion, or 2.6%

Year-Over-Year Growth

7.0%

5.5%

5.4%

5.1%

6.0%

Time

Money Market

Checking and Savings

Noninterest-bearing

$247.4

$252.4

$256.9

$257.5

$262.4

15

2Q14 Earnings

Conference Call

Net Interest Income

Net Interest Income

Key Points

$ in millions

Taxable-equivalent basis

vs. 2Q13

Average earning assets grew by $24.1 billion,

or 7.7%

Net interest margin lower by 16 bps (3.27%

vs. 3.43%) driven by:

•

Lower reinvestment rates on investment securities

and growth in the investment portfolio at lower

rates and lower rates on new loans

•

Partially offset by lower rates on deposits and

short-term borrowings and a reduction in higher

cost long-term debt

vs. 1Q14

Average earning assets grew by $9.8 billion,

or 3.0%

Net interest margin lower by 8 bps (3.27% vs.

3.35%) driven by:

•

Growth in lower rate investment securities

•

Lower rates on new loans, principally due to higher

growth in wholesale as compared to retail loans

Year-Over-Year Change

(1.5%)

(2.5%)

(1.8%)

(0.1%)

2.7%

16

2Q14 Earnings

Conference Call

Noninterest Income

Noninterest Income

Key Points

$ in millions

Payments = credit and debit card revenue, corporate payment products revenue and merchant processing;

Service charges = deposit  service charges, treasury management fees and ATM processing services

vs. 2Q13

Noninterest income increased by $168 million, or

7.4%, driven by:

•

Higher credit and debit card revenue (6.1% increase) and

corporate payments (3.4% increase) due to higher transaction

volumes; higher merchant processing revenue (2.9% increase)

due to an increase in product fees and higher volumes, partially

offset by lower rates

•

Higher trust and investment management revenue (9.5%

increase) due to account growth and improved market conditions

•

Higher deposit service charges (6.9% increase) due to account

growth and pricing changes

•

Higher commercial products revenue (5.7% increase) due to an

increase in bond underwriting fees and a higher volume of tax-

advantaged project fees

•

Higher other income, primarily due to the Visa gain

•

Mortgage banking revenue decline of $118 million

vs. 1Q14

Noninterest income increased by $336 million, or

15.9%, driven by:

•

Higher credit and debit card revenue (8.4% increase), corporate

payments (5.2% increase), and merchant processing revenue

(7.9% increase) due to seasonally higher transaction volumes

•

Higher trust and investment management revenues (2.3%

increase) due to improved market conditions and account growth

•

Higher deposit service charges (8.9% increase) due to seasonally

higher transaction volumes

•

Higher commercial products revenue (7.8% increase) due to

higher wholesale transaction activity

•

Mortgage banking revenue increase of $42 million

•

Higher other income, primarily due to the Visa gain

Year-Over-Year Change

(3.4%)

(9.1%)

(7.4%)

(2.6%)

7.4%

$2,276

$2,177

$2,156

$2,108

$2,444

Trust and

Inv Mgmt

Service

Charges

All Other

Mortgage

Payments

All Other

Mortgage

Service Charges

Trust and Inv Mgmt

Payments

2Q13

3Q13

4Q13

1Q14

2Q14

Visa Gain

-

$        

-

$        

-

$        

-

$        

214

$    

Total

-

$        

-

$        

-

$        

-

$        

214

$    

Notable Noninterest Income Items

17

2Q14 Earnings

Conference Call

Noninterest Expense

Noninterest Expense

Key Points

$ in millions

vs. 2Q13

Noninterest expense was higher by $196 million, or

7.7%, driven by:

•

Higher other expense due primarily to the FHA DOJ settlement

partially offset by lower costs related to investments in tax-

advantaged projects

•

Higher compensation expense (2.5% increase) due to the

impact of merit increases and higher staffing for risk and

compliance activities

•

Higher net occupancy and equipment expense (3.0% increase)

due to business initiatives and higher rent expense and

maintenance costs

•

Higher professional services expense (6.6% increase) due

mainly to mortgage servicing-related project costs

•

Lower employee benefits expense (7.2% decrease) driven by

lower pension costs

vs. 1Q14

Noninterest expense was higher by $209 million, or

8.2%, driven by:

•

Higher other expense due to the FHA DOJ settlement

•

Higher compensation expense (0.9% increase) due to merit

increases and seasonal contract labor

•

Higher professional services expense (16.9% increase) due to

higher mortgage servicing-related project costs

•

Higher marketing and business development expense (21.5%

increase) due to a charitable foundation contribution and the

timing of various marketing programs

•

Lower employee benefits expense (11.1% decrease) due to

seasonally lower payroll tax expense

Year-Over-Year Change

(1.7%)

(1.7%)

(0.1%)

3.0%

7.7%

$2,557

$2,565

$2,682

$2,544

$2,753

Occupancy

and Equipment

Prof Services,

Marketing

and PPS

All Other

Tech and Comm

Compensation

and Benefits

All Other

Tech and Communications

Prof Svcs, Marketing and PPS

Occupancy and Equipment

Compensation and Benefits

2Q13

3Q13

4Q13

1Q14

2Q14

FHA DOJ settlement

-

$        

-

$        

-

$        

-

$        

200

$    

Total

-

$        

-

$        

-

$        

-

$        

200

$    

Notable Noninterest Expense Items

18

2Q14 Earnings

Conference Call

Credit Quality

-

Commercial Loans

Average Loans and Net Charge-offs Ratios

Key Statistics

Comments

Continued new client growth led to 6.5% linked quarter loan growth and 13.7% year-over-year

growth; utilization rates improved modestly

Net

charge-offs

below

historic

norms

but

increased

due

to

both

higher

gross

charge-offs

and

slightly lower recoveries

Nonperforming loans and delinquencies were largely unchanged

2Q13

1Q14

2Q14

Average Loans

$61,507

$65,645

$69,920

30-89 Delinquencies

0.23%

0.25%

0.23%

90+ Delinquencies

0.10%

0.07%

0.06%

Nonperforming Loans

0.14%

0.25%

0.24%

$ in millions

19

2Q14 Earnings

Conference Call

Credit Quality

-

Commercial Leases

Average Loans and Net Charge-offs Ratios

Key Statistics

Comments

Commercial lease balances were down slightly

Net charge-offs remained at low levels

Nonperforming loans and delinquencies continued at modest levels

2Q13

1Q14

2Q14

Average Loans

$5,255

$5,189

$5,100

30-89 Delinquencies

0.74%

0.74%

0.75%

90+ Delinquencies

0.00%

0.00%

0.00%

Nonperforming Loans

0.27%

0.27%

0.31%

$ in millions

20

2Q14 Earnings

Conference Call

Credit Quality

-

Commercial Real Estate

Average Loans and Net Charge-offs Ratios

Key Statistics

Comments

Average loans increased 1.1% on a linked quarter basis and 6.9% year-over-year

Credit quality is stable at low levels; net recovery ratio of 0.04% marked the fifth consecutive quarter of

net recoveries

Nonperforming loans of 0.55% continued a downward trend

2Q13

1Q14

2Q14

Average Loans

$37,884

$40,050

$40,497

30-89 Delinquencies

0.23%

0.14%

0.14%

90+ Delinquencies

0.03%

0.06%

0.06%

Nonperforming Loans

1.11%

0.67%

0.55%

Performing TDRs*

$494

$359

$330

$ in millions

Investor

$20,687

Owner

Occupied

$11,314

Multi-family

$2,800

Retail

$553

Residential

Construction

$1,759

A&D

Construction

$592

Office

$866

Other

$1,926

* TDR = troubled debt  restructuring

21

2Q14 Earnings

Conference Call

Credit Quality

-

Residential Mortgage

Average Loans and Net Charge-offs Ratios

Key Statistics

Comments

Modest growth in high quality originations (weighted average FICO 759, weighted average LTV

72%), as average loans increased 0.4% over 1Q14

80% of the balances have been originated since the beginning of 2009, the origination quality

metrics and performance to date have significantly outperformed prior vintages with similar

seasoning

2Q13

1Q14

2Q14

Average Loans

$46,873

$51,584

$51,815

30-89 Delinquencies

0.78%

0.59%

0.48%

90+ Delinquencies

0.53%

0.64%

0.49%

Nonperforming Loans

1.43%

1.50%

1.57%

$ in millions

** Excludes GNMA loans, whose repayments are insured by the FHA or guaranteed by the Department of VA ($2,816 million 2Q14)

22

2Q14 Earnings

Conference Call

2Q13

1Q14

2Q14

Average Loans

$16,416

$17,407

$17,384

30-89 Delinquencies

1.17%

1.19%

1.13%

90+ Delinquencies

1.10%

1.21%

1.06%

Nonperforming Loans

0.65%

0.38%

0.29%

Credit Quality -

Credit Card

Average Loans and Net Charge-offs Ratios

Key Statistics

Comments

Average loans flat on a linked quarter basis; up 5.9% year-over-year

Delinquencies have stabilized near historically low levels

Nonperforming loans continued to decline

$ in millions

23

2Q14 Earnings

Conference Call

Credit Quality -

Home Equity

Average Loans and Net Charge-offs Ratios

Key Statistics

Comments

High-quality originations (weighted average FICO on commitments was 767, weighted average

CLTV

71%)

originated

primarily

through

the

retail

branch

network

to

existing

bank

customers

on

their primary residence

Net charge-offs ratio continued to decline on a linked quarter basis

2Q13

1Q14

2Q14

Average Loans

$15,989

$15,366

$15,327

30-89 Delinquencies

0.74%

0.57%

0.50%

90+ Delinquencies

0.25%

0.33%

0.26%

Nonperforming Loans

1.23%

1.09%

1.11%

Subprime: 2%

Wtd Avg LTV**: 90%

NCO: 6.01%

$ in millions

Prime: 95%

Wtd Avg LTV**: 72%

NCO: 0.50%

** LTV at origination

Other: 3%

Wtd Avg LTV**: 72%

NCO: 0.81%

24

2Q14 Earnings

Conference Call

Credit Quality -

Retail Leasing

Average Loans and Net Charge-offs Ratios

Key Statistics

Comments

Strong year-over-year growth (6.4%), driven by high-quality originations (weighted average FICO 771)

Delinquencies remained relatively stable at very low levels

Strong used auto values continued to contribute to historically low net charge-offs

2Q13

1Q14

2Q14

Average Loans

$5,653

$5,979

$6,014

30-89 Delinquencies

0.14%

0.16%

0.16%

90+ Delinquencies

0.00%

0.02%

0.00%

Nonperforming Loans

0.02%

0.02%

0.02%

$ in millions

* Manheim Used Vehicle Value Index source: www.manheimconsulting.com, January 1995 = 100, quarter value = average monthly ending

value

25

2Q14 Earnings

Conference Call

Credit Quality -

Other Retail

Average Loans and Net Charge-offs Ratios

Key Statistics

Comments

Auto

loan

growth

continued

to

offset

declines

in

student

lending

loan

balances

Net charge-offs and delinquencies remained low on a linked quarter and year-over-year

basis

2Q13

1Q14

2Q14

Average Loans

$25,224

$26,312

$26,587

30-89 Delinquencies

0.46%

0.40%

0.47%

90+ Delinquencies

0.14%

0.13%

0.11%

Nonperforming Loans

0.11%

0.08%

0.06%

Installment

$5,846

Auto Loans

$14,108

Revolving

Credit

$3,224

Student

Lending

$3,409

$ in millions

26

2Q14 Earnings

Conference Call

Credit Quality -

Auto Loans

Average Loans and Net Charge-offs Ratios

Key Statistics

Comments

Continued growth in auto loans driven by high-quality originations in the Indirect Channel

(weighted average FICO 763)

Net charge-offs and delinquencies remained at historically low levels

2Q13

1Q14

2Q14

Average Loans

$12,575

$13,815

$14,108

30-89 Delinquencies

0.30%

0.26%

0.38%

90+ Delinquencies

0.02%

0.03%

0.03%

Nonperforming Loans

0.02%

0.02%

0.01%

$ in millions

Auto Loans are included in Other Retail category

Direct: 7%

Wtd Avg FICO: 748

NCO: (.02%)

Indirect: 93%

Wtd Avg FICO: 758

NCO: 0.12%

27

2Q14 Earnings

Conference Call

Mortgage Repurchase

Mortgages Repurchased and Make-whole Payments

Mortgage Representation and Warranties Reserve

$ in millions

2Q14

1Q14

4Q13

3Q13

2Q13

Beginning Reserve

$75

$83

$176

$190

$233

Net Realized Losses

(2)

(10)

(63)

(13)

(16)

Change in Reserve

(4)

2

(30)

(1)

(27)

Ending Reserve

$69

$75

$83

$176

$190

Mortgages

repurchased

and make-whole

payments

$30

$36

$32

$42

$41

Repurchase activity lower than

peers due to:

•

Conservative credit and

underwriting culture

•

Disciplined origination process -

primarily conforming loans            

(

95%

sold

to

GSEs)

Do not participate in private

placement securitization market

Outstanding repurchase and

make-whole requests balance      

= $35 million

28

2Q14 Earnings

Conference Call

Non-GAAP Financial Measures

$ in millions

2Q14

1Q14

4Q13

3Q13

2Q13

Total equity

43,386

$   

42,743

$   

41,807

$   

41,552

$   

41,050

$   

Preferred stock

(4,756)

(4,756)

(4,756)

(4,756)

(4,756)

Noncontrolling interests

(686)

(689)

(694)

(1,420)

(1,367)

Goodwill (net of deferred tax liability) (1)

(8,548)

(8,352)

(8,343)

(8,319)

(8,317)

Intangible assets, other than mortgage servicing rights

(925)

(804)

(849)

(878)

(910)

Tangible common equity (a)

28,471

28,142

27,165

26,179

25,700

Tangible common equity (as calculated above)

28,471

28,142

27,165

26,179

25,700

Adjustments (2)

224

239

224

258

195

Common equity tier 1 capital estimated for the Basel III fully

implemented standardized and advanced approaches (b)

28,695

28,381

27,389

26,437

25,895

Tier 1 capital, determined in accordance with prescribed

regulatory requirements using Basel I definition

33,386

32,707

32,219

Preferred stock

(4,756)

(4,756)

(4,756)

Noncontrolling interests, less preferred stock not eligible for Tier 1 capital

(688)

(686)

(685)

Tier 1 common equity using Basel I definition (c)

27,942

27,265

26,778

*

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 beginning March 31, 2014.

(2) Includes net losses on cash flow hedges included in accumulated other comprehensive income and other adjustments.

(3)

Beginning March 31, 2014, calculated under the Basel III transitional standardized approach; all other periods calculated under Basel I.

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

(5)

Primarily reflects higher risk-weighting for mortgage servicing rights.

29

2Q14 Earnings

Conference Call

Non-GAAP Financial Measures

$ in millions

2Q14

1Q14

4Q13

3Q13

2Q13

Total assets

389,065

$ 

371,289

$ 

364,021

$ 

360,681

$ 

353,415

$ 

Goodwill (net of deferred tax liability) (1)

(8,548)

(8,352)

(8,343)

(8,319)

(8,317)

Intangible assets, other than mortgage servicing rights

(925)

(804)

(849)

(878)

(910)

Tangible assets (d)

379,592

362,133

354,829

351,484

344,188

Risk-weighted assets, determined in accordance with prescribed

regulatory requirements (3)(e)

309,929

*

302,841

297,919

293,155

289,613

Adjustments (4)

12,753

*

13,238

13,712

13,473

12,476

Risk-weighted assets estimated for the Basel III fully implemented

standardized approach (f)

322,682

*

316,079

311,631

306,628

302,089

Risk-weighted assets, determined in accordance with prescribed

transitional advanced approaches regulatory requirements

241,929

*

Adjustments (5)

3,383

*

Risk-weighted assets estimated for the Basel III fully implemented

245,312

*

advanced approaches (g)

Ratios *

Tangible common equity to tangible assets (a)/(d)

7.5

%

7.8

%

7.7

%

7.4

%

7.5

%

Tangible common equity to risk-weighted assets (a)/(e)

9.2

9.3

9.1

8.9

8.9

Tier 1 common equity to risk-weighted assets using Basel I definition (c)/(e)

--

--

9.4

9.3

9.2

Common equity tier 1 capital to risk-weighted assets estimated for the

Basel III fully implemented standardized approach (b)/(f)

8.9

9.0

8.8

8.6

8.6

Common equity tier 1 capital to risk-weighted assets estimated for the

Basel III fully implemented advanced approaches (b)/(g)

11.7

*

Preliminary data.  Subject to change prior to filings with applicable regulatory agencies. 

(1) Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements beginning March 31, 2014.

(2) Includes net losses on cash flow hedges included in accumulated other comprehensive income and other adjustments.

(3)

Beginning March 31, 2014, calculated under the Basel III transitional standardized approach; all other periods calculated under Basel I.

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

(5)

Primarily reflects higher risk-weighting for mortgage servicing rights.

30

U.S. Bancorp

2Q14 Earnings

Conference Call

U.S. Bancorp

2Q14 Earnings

Conference Call

July 16, 2014