Exhibit 99.1
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U.S. Bancorp Reports Fourth Quarter and Full Year 2019 Results • Full year net revenue of $22,986 million and diluted earnings per share of $4.16 • Returned $2,947 million of earnings in 4Q19 to shareholders through dividends and share buybacks
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4Q19 and Full Year Key Financial Data
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4Q19 and Full Year Highlights
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PROFITABILITY METRICS | 4Q19 | 3Q19 | 4Q18 | Full Year 2019 | Full Year 2018 |
• Net income of $1,486 million and diluted earnings
• Returned $2,947 million of earnings in 4Q19 to
• Average total loans grew 0.8% on a linked
• Average total deposits grew 1.9% on a linked quarter
• Nonperforming assets decreased 15.3% on a linked
• Full year record net revenue of $22,986 million and diluted
• Full year average total loan growth was 3.6%, 4.2%
• Full year average total deposits grew 4.0%
• Positive operating leverage for full year 2019, excluding
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Return on average | 1.21 | 1.57 | 1.59 | 1.45 | 1.55 | |||||||||||||||||||
Return on average common equity (%) | 11.8 | 15.3 | 15.8 | 14.1 | 15.4 | |||||||||||||||||||
Return on tangible common | 15.2 | 19.4 | 20.2 | 18.0 | 19.8 | |||||||||||||||||||
Net interest | 2.92 | 3.02 | 3.15 | 3.06 | 3.14 | |||||||||||||||||||
Efficiency ratio (%) (a) | 60.3 | 53.3 | 56.3 | 55.8 | 55.1 | |||||||||||||||||||
INCOME STATEMENT (b) | 4Q19 | 3Q19 | 4Q18 | | Full Year 2019 |
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Net interest income (taxable-equivalent basis) | $3,231 | $3,306 | $3,331 | $13,155 | $13,035 | |||||||||||||||||||
Noninterest income | $2,436 | $2,614 | $2,498 | $9,831 | $9,602 | |||||||||||||||||||
Net income attributable to U.S. Bancorp | $1,486 | $1,908 | $1,856 | $6,914 | $7,096 | |||||||||||||||||||
Diluted earnings per common share | $.90 | $1.15 | $1.10 | $4.16 | $4.14 | |||||||||||||||||||
Dividends declared per common share | $.42 | $.42 | $.37 |
| $1.58 |
| $1.34 | |||||||||||||||||
BALANCE SHEET (b) | 4Q19 | 3Q19 | 4Q18 | | Full Year 2019 |
| | Full Year 2018 |
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Average total loans | $294,865 | $292,436 | $283,677 | $290,686 | $280,701 | |||||||||||||||||||
Average total deposits | $356,452 | $349,933 | $334,365 | $346,812 | $333,462 | |||||||||||||||||||
Netcharge-off ratio | .52% | .48% | .49% | .50% | .48% | |||||||||||||||||||
Book value per common share (period end) | $29.90 | $30.26 | $28.01 | |||||||||||||||||||||
Basel III standardized CET1 (c)
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| 9.1%
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| 9.6%
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| 9.1%
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(a) SeeNon-GAAP Financial Measures reconciliation on pages16-17 |
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(b) Dollars in millions, except per share data |
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(c) CET1 = Common equity tier 1 capital ratio
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CEO Commentary
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“As our fourth quarter financial results indicate we ended 2019 on a good note and we enter a new year, and a new decade, in a strong position. Our focus on value creation supported continued customer acquisition and deepening of existing relationships across our franchise, which in turn drove strong account and volume growth in our fee businesses and strong loan and deposit growth in our banking businesses. During the quarter, we returned $2.9 billion of earnings to shareholders through dividends and an expanded share buyback program. We remain committed to deliveringbest-in-class products and services and this coming year we will continue to enhance our digital capabilities aimed at improving the customer experience and making it simpler and more productive to do business with us. I want to thank our employees for all their hard work in building the solid foundation from which we will grow in 2020 and beyond.”
— Andy Cecere, Chairman, President and CEO, U.S. Bancorp
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In the Spotlight
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Incremental Share Repurchase Plan
U.S. Bancorp began repurchasing additional outstanding shares of its common stock, incremental to the authorization approved earlier this year, reflecting the Company’s ability to prudently manage capital as it responds to changes in the regulatory landscape, while continuing to invest in the future.
Investing to Advance Affordable Home Ownership
U.S. Bank recently announced $4.8 million in home grant and corporate contributions focused on advancing affordable home ownership. U.S. Bank Community Development Corporation has provided more than $125 million in new market tax credit investments to Habitat for Humanity to date that have helped build 3,000 homes in 75 cities across the country.
New eBill Servicing Offering
U.S. Bank recently launched a newsimple-to-use electronic bill presentment and payment solution designed for both billers and payers. U.S. Bank eBill Service helps customers get paid faster by giving clients simple and secure ways to make payments how, when and where they want.
European Expansion
Elavon, global merchant acquirer and subsidiary of U.S. Bancorp, has recently agreed to acquire Sage Pay, a well-known and established payments gateway business in the United Kingdom and Ireland. The acquisition is part of Elavon’s strategy to help its business customers grow as the global economy becomes more digital, and as businesses look to streamline their operations with software that includes payments capabilities.
Investor contact: Jennifer Thompson, 612.303.0778 | Media contact: Rebekah Fawcett, 612.303.9986
U.S. Bancorp Fourth Quarter 2019 Results | ||
INCOME STATEMENT HIGHLIGHTS | ||||||||||||||||||||||||||||||||
($ in millions, except per-share data) | Percent Change | |||||||||||||||||||||||||||||||
4Q 2019 | 3Q 2019 | 4Q 2018 | 4Q19 vs 3Q19 | 4Q19 vs 4Q18 | Full Year 2019 | Full Year 2018 | Percent Change | |||||||||||||||||||||||||
Net interest income | $3,207 | $3,281 | $3,303 | (2.3) | (2.9) | $13,052 | $12,919 | 1.0 | ||||||||||||||||||||||||
Taxable-equivalent adjustment | 24 | 25 | 28 | (4.0) | (14.3) | 103 | 116 | (11.2) | ||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) | 3,231 | 3,306 | 3,331 | (2.3) | (3.0) | 13,155 | 13,035 | .9 | ||||||||||||||||||||||||
Noninterest income | 2,436 | 2,614 | 2,498 | (6.8) | (2.5) | 9,831 | 9,602 | 2.4 | ||||||||||||||||||||||||
Total net revenue | 5,667 | 5,920 | 5,829 | (4.3) | (2.8) | 22,986 | 22,637 | 1.5 | ||||||||||||||||||||||||
Noninterest expense | 3,401 | 3,144 | 3,280 | 8.2 | 3.7 | 12,785 | 12,464 | 2.6 | ||||||||||||||||||||||||
Income before provision and income taxes | 2,266 | 2,776 | 2,549 | (18.4) | (11.1) | 10,201 | 10,173 | .3 | ||||||||||||||||||||||||
Provision for credit losses | 395 | 367 | 368 | 7.6 | 7.3 | 1,504 | 1,379 | 9.1 | ||||||||||||||||||||||||
Income before taxes | 1,871 | 2,409 | 2,181 | (22.3) | (14.2) | 8,697 | 8,794 | (1.1) | ||||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment | 378 | 492 | 319 | (23.2) | 18.5 | 1,751 | 1,670 | 4.9 | ||||||||||||||||||||||||
Net income | 1,493 | 1,917 | 1,862 | (22.1) | (19.8) | 6,946 | 7,124 | (2.5) | ||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests | (7) | (9) | (6) | 22.2 | (16.7) | (32) | (28) | (14.3) | ||||||||||||||||||||||||
Net income attributable to U.S. Bancorp | $1,486 | $1,908 | $1,856 | (22.1) | (19.9) | $6,914 | $7,096 | (2.6) | ||||||||||||||||||||||||
Net income applicable to U.S. Bancorp common shareholders | $1,408 | $1,821 | $1,777 | (22.7) | (20.8) | $6,583 | $6,784 | (3.0) | ||||||||||||||||||||||||
Diluted earnings per common share | $.90 | $1.15 | $1.10 | (21.7) | (18.2) | $4.16 | $4.14 | .5 | ||||||||||||||||||||||||
Net income attributable to U.S. Bancorp was $1,486 million for the fourth quarter of 2019, which was 19.9 percent lower than the $1,856 million for the fourth quarter of 2018, and 22.1 percent lower than the $1,908 million for the third quarter of 2019. Diluted earnings per common share were $0.90 in the fourth quarter of 2019, compared with $1.10 in the fourth quarter of 2018 and $1.15 in the third quarter of 2019. The fourth quarter of 2019 included $(0.18) per diluted common share of notable items related to restructuring charges including severance and certain asset impairments, and increased derivative liability related to Visa shares, from their initial public offering, previously sold by the Company. By comparison, the fourth quarter of 2018 included $0.03 per diluted common share of notable items related to the gain from the sale of the Company’s ATM servicing business and the sale of a majority of the Company’s FDIC covered loans, charges related to severance, certain asset impairments, an accrual for legal matters, and the favorable impact to deferred tax assets and liabilities related to changes in estimates from tax reform.
The decrease in net income year-over-year was due to lower total net revenue of 2.8 percent and an increase in noninterest expense of 3.7 percent. Net interest income decreased 2.9 percent (3.0 percent on a taxable-equivalent basis), mainly a result of the impact of the yield curve and deposit and funding mix, partially offset by higher yields on reinvestment of securities in addition to loan growth. Excluding notable items in both the fourth quarter of 2019 and the fourth quarter of 2018, noninterest income increased 6.4 percent compared with a year ago, driven by growth in payment services revenue, trust and investment management fees, mortgage banking revenue, and higher other noninterest income, partially offset by a decrease in deposit service charges. Excluding notable items in both the fourth quarter of 2019 and the fourth quarter of 2018, noninterest expense increased 3.1 percent primarily due to personnel expense driven by stronger fee revenue production in mortgage activities, technology and communications expense in support of business growth, and net occupancy and equipment expense due to capital expenditures in support of business growth.
Net income decreased on a linked quarter basis primarily due to lower total net revenue of 4.3 percent and an increase in noninterest expense of 8.2 percent. Net interest income decreased 2.3 percent primarily due to earning asset growth being more than offset by the impact of declining short-term interest rates, higher premium amortization in the investment portfolio, and earning asset mix. Excluding the notable item in the fourth quarter of 2019, noninterest income decreased 1.5 percent compared with the third quarter of 2019 driven by seasonally lower payment services revenue, commercial products revenue, and mortgage banking revenue, partially offset by higher trust and investment management fees due to core business growth and favorable market conditions. Excluding the notable items in the fourth quarter of 2019, noninterest expense increased 1.8 percent primarily driven by seasonally higher professional services expense, technology and communications expense in support of business growth, and tax credit amortization included in other noninterest expense, partially offset by a decrease in employee benefits expense due to seasonally lower payroll taxes.
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U.S. Bancorp Fourth Quarter 2019 Results | ||
NET INTEREST INCOME | ||||||||||||||||||||||||||||||||
(Taxable-equivalent basis; $ in millions) | Change | |||||||||||||||||||||||||||||||
4Q 2019 | 3Q 2019 | 4Q 2018 | 4Q19 vs 3Q19 | 4Q19 vs 4Q18 | Full Year 2019 | Full Year 2018 | Change | |||||||||||||||||||||||||
Components of net interest income | $4,281 | $4,465 | $4,341 | $(184) | $(60) | $17,607 | $16,298 | $1,309 | ||||||||||||||||||||||||
Expense on interest-bearing liabilities | 1,050 | 1,159 | 1,010 | (109) | 40 | 4,452 | 3,263 | 1,189 | ||||||||||||||||||||||||
Net interest income | $3,231 | $3,306 | $3,331 | $(75) | $(100) | $13,155 | $13,035 | $120 | ||||||||||||||||||||||||
Average yields and rates paid | ||||||||||||||||||||||||||||||||
Earning assets yield | 3.87% | 4.08% | 4.11% | (.21)% | (.24)% | 4.09% | 3.93% | .16% | ||||||||||||||||||||||||
Rate paid on interest-bearing liabilities | 1.22 | 1.37 | 1.26 | (.15) | (.04) | 1.34 | 1.04 | .30 | ||||||||||||||||||||||||
Gross interest margin | 2.65% | 2.71% | 2.85% | (.06)% | (.20)% | 2.75% | 2.89% | (.14)% | ||||||||||||||||||||||||
Net interest margin | 2.92% | 3.02% | 3.15% | (.10)% | (.23)% | 3.06% | 3.14% | (.08)% | ||||||||||||||||||||||||
Average balances | ||||||||||||||||||||||||||||||||
Investment securities (a) | $121,668 | $117,213 | $114,138 | $4,455 | $7,530 | $117,150 | $113,940 | $3,210 | ||||||||||||||||||||||||
Loans | 294,865 | 292,436 | 283,677 | 2,429 | 11,188 | 290,686 | 280,701 | 9,985 | ||||||||||||||||||||||||
Earning assets | 439,770 | 435,673 | 420,472 | 4,097 | 19,298 | 430,537 | 415,067 | 15,470 | ||||||||||||||||||||||||
Interest-bearing liabilities | 341,848 | 336,627 | 319,289 | 5,221 | 22,559 | 332,658 | 314,506 | 18,152 |
(a) Excludes unrealized gain (loss)
Net interest income on a taxable-equivalent basis in the fourth quarter of 2019 was $3,231 million, a decrease of $100 million (3.0 percent) compared with the fourth quarter of 2018. The decrease was principally driven by the impact of lower interest rates and a flatter yield curve in addition to deposit and funding mix, partially offset by higher yields on reinvestment of securities and loan growth. Average earning assets were $19.3 billion (4.6 percent) higher than the fourth quarter of 2018, reflecting increases of $11.2 billion (3.9 percent) in average total loans and $7.5 billion (6.6 percent) in average investment securities. Average other earning assets decreased $1.6 billion (7.9 percent).
Net interest income on a taxable-equivalent basis decreased $75 million (2.3 percent) on a linked quarter basis primarily driven by declining short-term interest rates, higher premium amortization in the investment securities portfolio, and the mix of earning assets. Average earning assets were $4.1 billion (0.9 percent) higher on a linked quarter basis, reflecting increases of $2.4 billion (0.8 percent) in average total loans and $4.5 billion (3.8 percent) in average investment securities. Average other earning assets decreased $3.6 billion (16.6 percent).
The net interest margin in the fourth quarter of 2019 was 2.92 percent, compared with 3.15 percent in the fourth quarter of 2018 and 3.02 percent in the third quarter of 2019. The decrease in the net interest margin year-over-year was primarily due to the impact of declining interest rates on the yield curve in addition to deposit and funding mix. The decrease in net interest margin on a linked quarter basis reflects continued yield curve compression, premium amortization in the investment securities portfolio, and earning asset mix.
The increase in average investment securities in the fourth quarter of 2019 compared with the fourth quarter of 2018 and the third quarter of 2019 was primarily due to purchases of mortgage-backed securities, net of prepayments and maturities. At December 31, 2019, the Company transferred allheld-to-maturity investment securities to itsavailable-for-sale investment securities portfolio, as a result of changes in regulatory capital requirements.
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U.S. Bancorp Fourth Quarter 2019 Results | ||
AVERAGE LOANS | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
4Q 2019 | 3Q 2019 | 4Q 2018 | 4Q19 vs 3Q19 | 4Q19 vs 4Q18 | Full Year 2019 | Full Year 2018 | Percent Change | |||||||||||||||||||||||||
Commercial | $98,362 | $98,175 | $95,025 | .2 | 3.5 | $97,697 | $93,342 | 4.7 | ||||||||||||||||||||||||
Lease financing | 5,549 | 5,485 | 5,490 | 1.2 | 1.1 | 5,501 | 5,512 | (.2 | ) | |||||||||||||||||||||||
Total commercial | 103,911 | 103,660 | 100,515 | .2 | 3.4 | 103,198 | 98,854 | 4.4 | ||||||||||||||||||||||||
Commercial mortgages | 29,133 | 28,319 | 28,930 | 2.9 | .7 | 28,595 | 28,793 | (.7 | ) | |||||||||||||||||||||||
Construction and development | 10,589 | 10,671 | 11,219 | (.8 | ) | (5.6 | ) | 10,791 | 11,184 | (3.5 | ) | |||||||||||||||||||||
Total commercial real estate | 39,722 | 38,990 | 40,149 | 1.9 | (1.1 | ) | 39,386 | 39,977 | (1.5 | ) | ||||||||||||||||||||||
Residential mortgages | 69,909 | 68,608 | 64,476 | 1.9 | 8.4 | 67,747 | 61,893 | 9.5 | ||||||||||||||||||||||||
Credit card | 24,107 | 23,681 | 22,396 | 1.8 | 7.6 | 23,309 | 21,672 | 7.6 | ||||||||||||||||||||||||
Retail leasing | 8,486 | 8,442 | 8,489 | .5 | -- | 8,515 | 8,253 | 3.2 | ||||||||||||||||||||||||
Home equity and second mortgages | 15,221 | 15,601 | 16,065 | (2.4 | ) | (5.3 | ) | 15,659 | 16,076 | (2.6 | ) | |||||||||||||||||||||
Other | 33,509 | 33,454 | 31,587 | .2 | 6.1 | 32,872 | 31,807 | 3.3 | ||||||||||||||||||||||||
Total other retail | 57,216 | 57,497 | 56,141 | (.5 | ) | 1.9 | 57,046 | 56,136 | 1.6 | |||||||||||||||||||||||
Covered loans (a) | -- | -- | -- | -- | -- | -- | 2,169 | nm | ||||||||||||||||||||||||
Total loans | $294,865 | $292,436 | $283,677 | .8 | 3.9 | $290,686 | $280,701 | 3.6 | ||||||||||||||||||||||||
(a) During the fourth quarter of 2018, the majority of the Company’s covered loans were sold or the loss share coverage expired, with any remaining loan balances reclassified to be included in their respective portfolio category.
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Average total loans for the fourth quarter of 2019 were $11.2 billion (3.9 percent) higher than the fourth quarter of 2018. The increase was due to growth in residential mortgages (8.4 percent), total commercial loans (3.4 percent), credit card loans (7.6 percent), and other retail loans (6.1 percent). These increases were partially offset by a decrease in total commercial real estate loans (1.1 percent) given the later stage of the business cycle.
Average total loans were $2.4 billion (0.8 percent) higher than the third quarter of 2019 primarily driven by growth in residential mortgages (1.9 percent), total commercial real estate loans (1.9 percent), and credit card loans (1.8 percent).
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U.S. Bancorp Fourth Quarter 2019 Results | ||
AVERAGE DEPOSITS | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
4Q 2019 | 3Q 2019 | 4Q 2018 | 4Q19 vs 3Q19 | 4Q19 vs 4Q18 | Full Year 2019 | Full Year 2018 | Percent Change | |||||||||||||||||||||||||
Noninterest-bearing deposits | $74,313 | $74,594 | $77,160 | (.4) | (3.7 | ) | $73,863 | $78,196 | (5.5 | ) | ||||||||||||||||||||||
Interest-bearing savings deposits | ||||||||||||||||||||||||||||||||
Interest checking | 75,563 | 72,007 | 71,013 | 4.9 | 6.4 | 72,553 | 70,154 | 3.4 | ||||||||||||||||||||||||
Money market savings | 116,619 | 114,475 | 99,594 | 1.9 | 17.1 | 109,849 | 101,732 | 8.0 | ||||||||||||||||||||||||
Savings accounts | 46,945 | 46,348 | 44,544 | 1.3 | 5.4 | 46,130 | 44,713 | 3.2 | ||||||||||||||||||||||||
Total savings deposits | 239,127 | 232,830 | 215,151 | 2.7 | 11.1 | 228,532 | 216,599 | 5.5 | ||||||||||||||||||||||||
Time deposits | 43,012 | 42,509 | 42,054 | 1.2 | 2.3 | 44,417 | 38,667 | 14.9 | ||||||||||||||||||||||||
Total interest-bearing deposits | 282,139 | 275,339 | 257,205 | 2.5 | 9.7 | 272,949 | 255,266 | 6.9 | ||||||||||||||||||||||||
Total deposits | $356,452 | $349,933 | $334,365 | 1.9 | 6.6 | $346,812 | $333,462 | 4.0 | ||||||||||||||||||||||||
Average total deposits for the fourth quarter of 2019 were $22.1 billion (6.6 percent) higher than the fourth quarter of 2018. Average noninterest-bearing deposits decreased $2.8 billion (3.7 percent) year-over-year primarily due to the migration of balances to interest-bearing deposits and the continued deployment by customers of business deposits within Corporate and Commercial Banking. Average total savings deposits were $24.0 billion (11.1 percent) higher year-over-year driven by Wealth Management and Investment Services, Corporate and Commercial Banking and Consumer and Business Banking. Average time deposits were $958 million (2.3 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, based largely on relative pricing and liquidity characteristics. In addition, there was growth in consumer time deposits related to the migration of balances to higher yielding products.
Average total deposits increased $6.5 billion (1.9 percent) from the third quarter of 2019. On a linked quarter basis, average noninterest-bearing deposits decreased $281 million (0.4 percent). Average total savings deposits increased $6.3 billion (2.7 percent) on a linked quarter basis primarily due to increases in Wealth Management and Investment Services, Corporate and Commercial Banking, and Consumer and Business Banking. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, increased $503 million (1.2 percent) on a linked quarter basis.
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U.S. Bancorp Fourth Quarter 2019 Results | ||
NONINTEREST INCOME | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
4Q | 3Q | 4Q | 4Q19 vs | 4Q19 vs | Full Year | Full Year | Percent | |||||||||||||||||||||||||
2019 | 2019 | 2018 | 3Q19 | 4Q18 | 2019 | 2018 | Change | |||||||||||||||||||||||||
Credit and debit card revenue | $378 | $366 | $382 | 3.3 | (1.0) | $1,413 | $1,401 | .9 | ||||||||||||||||||||||||
Corporate payment products revenue | 158 | 177 | 163 | (10.7) | (3.1) | 664 | 644 | 3.1 | ||||||||||||||||||||||||
Merchant processing services | 409 | 410 | 389 | (.2) | 5.1 | 1,601 | 1,531 | 4.6 | ||||||||||||||||||||||||
Trust and investment management fees | 438 | 421 | 409 | 4.0 | 7.1 | 1,673 | 1,619 | 3.3 | ||||||||||||||||||||||||
Deposit service charges | 231 | 234 | 253 | (1.3) | (8.7) | 909 | 1,070 | (15.0) | ||||||||||||||||||||||||
Treasury management fees | 140 | 139 | 143 | .7 | (2.1) | 578 | 594 | (2.7) | ||||||||||||||||||||||||
Commercial products revenue | 226 | 240 | 225 | (5.8) | .4 | 934 | 895 | 4.4 | ||||||||||||||||||||||||
Mortgage banking revenue | 244 | 272 | 171 | (10.3) | 42.7 | 874 | 720 | 21.4 | ||||||||||||||||||||||||
Investment products fees | 48 | 46 | 48 | 4.3 | -- | 186 | 188 | (1.1) | ||||||||||||||||||||||||
Securities gains (losses), net | 26 | 25 | 5 | 4.0 | nm | 73 | 30 | nm | ||||||||||||||||||||||||
Other | 138 | 284 | 310 | (51.4) | (55.5) | 926 | 910 | 1.8 | ||||||||||||||||||||||||
Total noninterest income | $2,436 | $2,614 | $2,498 | (6.8) | (2.5) | $9,831 | $9,602 | 2.4 | ||||||||||||||||||||||||
Fourth quarter noninterest income of $2,436 million was $62 million (2.5 percent) lower than the fourth quarter of 2018. Excluding notable items in both the fourth quarter of 2019 and the fourth quarter of 2018, noninterest income increased $154 million (6.4 percent) led by growth in payment services revenue, trust and investment management fees, mortgage banking revenue, and other noninterest income. Payment services revenue increased $11 million (1.2 percent) due to higher merchant processing services of $20 million (5.1 percent) driven by higher sales volumes and merchant fees, partially offset by slightly lower credit and debit card revenue of $4 million (1.0 percent) and corporate payment products revenue of $5 million (3.1 percent). The decline in corporate payment products revenue was driven by lower commercial business sales volumes. Trust and investment management fees increased $29 million (7.1 percent) due to business growth and favorable market conditions. Mortgage banking revenue increased $73 million (42.7 percent) driven by higher mortgage production and gain on sale margins. Other noninterest income in the fourth quarter of 2019 included a charge of $140 million for increased derivative liability related to Visa shares previously sold by the Company. Other noninterest income in the fourth quarter of 2018 included the impacts of notable items related to a gain from the sale of the Company’s ATM servicing business of $340 million and charges for asset impairments related to the sale of a majority of the Company’s covered loans and other certain assets of $264 million. Excluding these notable items, other noninterest income increased by $44 million year-over-year primarily due to a gain on the sale of a loan portfolio. Partially offsetting these increases was a decline in deposit service charges of $22 million (8.7 percent) primarily due to the sale of the Company’s ATM servicing business in the fourth quarter of 2018.
Noninterest income was $178 million (6.8 percent) lower in the fourth quarter of 2019 compared with the third quarter of 2019. Excluding the fourth quarter notable item, noninterest income was $38 million (1.5 percent) lower than the third quarter of 2019, reflecting lower payment services revenue, commercial products revenue, and mortgage banking revenue, partially offset by higher trust and investment management fees. Payment services revenue decreased slightly compared with the third quarter of 2019 driven by lower corporate payment products revenue of $19 million (10.7 percent) due to seasonally lower sales volumes, partially offset by higher credit and debit card revenue of $12 million (3.3 percent) due to seasonally higher sales volumes and higher fees. Commercial products revenue was $14 million (5.8 percent) lower on a linked quarter basis driven by a seasonal reduction in corporate bond fees and trading income. Mortgage banking revenue decreased $28 million (10.3 percent) due to seasonally lower application volumes and an unfavorable change in the valuation of mortgage servicing rights, net of hedging activities. Partially offsetting these decreases was an increase in trust and investment management fees of $17 million (4.0 percent) driven by business growth, billing cycle timing, and favorable market conditions.
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U.S. Bancorp Fourth Quarter 2019 Results | ||
NONINTEREST EXPENSE | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
4Q | 3Q | 4Q | 4Q19 vs | 4Q19 vs | Full Year | Full Year | Percent | |||||||||||||||||||||||||
2019 | 2019 | 2018 | 3Q19 | 4Q18 | 2019 | 2018 | Change | |||||||||||||||||||||||||
Compensation | $1,597 | $1,595 | $1,568 | .1 | 1.8 | $6,325 | $6,162 | 2.6 | ||||||||||||||||||||||||
Employee benefits | 315 | 324 | 308 | (2.8) | 2.3 | 1,286 | 1,231 | 4.5 | ||||||||||||||||||||||||
Net occupancy and equipment | 286 | 279 | 266 | 2.5 | 7.5 | 1,123 | 1,063 | 5.6 | ||||||||||||||||||||||||
Professional services | 139 | 114 | 133 | 21.9 | 4.5 | 454 | 407 | 11.5 | ||||||||||||||||||||||||
Marketing and business development | 117 | 109 | 115 | 7.3 | 1.7 | 426 | 429 | (.7) | ||||||||||||||||||||||||
Technology and communications | 291 | 277 | 254 | 5.1 | 14.6 | 1,095 | 978 | 12.0 | ||||||||||||||||||||||||
Postage, printing and supplies | 71 | 74 | 80 | (4.1) | (11.3) | 290 | 324 | (10.5) | ||||||||||||||||||||||||
Other intangibles | 44 | 42 | 41 | 4.8 | 7.3 | 168 | 161 | 4.3 | ||||||||||||||||||||||||
Other | 541 | 330 | 515 | 63.9 | 5.0 | 1,618 | 1,709 | (5.3) | ||||||||||||||||||||||||
Total noninterest expense | $3,401 | $3,144 | $3,280 | 8.2 | 3.7 | $12,785 | $12,464 | 2.6 | ||||||||||||||||||||||||
Fourth quarter noninterest expense of $3,401 million was $121 million (3.7 percent) higher than the fourth quarter of 2018. Included in the fourth quarter were notable items related to severance charges and other accruals of $200 million in 2019 and severance charges and accruals of legal matters of $174 million in 2018. Excluding notable items from both periods, fourth quarter noninterest expense increased $95 million (3.1 percent) compared with the fourth quarter of 2018 primarily due to increased personnel expense, higher technology and communications expense, and higher net occupancy and equipment expense. Compensation expense increased $29 million (1.8 percent) compared with the fourth quarter of 2018 driven by the impact of hiring to support business growth, merit increases, and higher variable compensation related to business production in mortgage banking. Employee benefits expense increased $7 million (2.3 percent) primarily due to higher medical costs compared with a year ago. Technology and communications expense increased $37 million (14.6 percent) and net occupancy and equipment expense increased $20 million (7.5 percent) primarily to support business growth.
Noninterest expense increased $257 million (8.2 percent) on a linked quarter basis. Excluding the impact of the current quarter notable items, fourth quarter noninterest expense increased $57 million (1.8 percent) primarily due to seasonally higher professional services expense of $25 million (21.9 percent) and an increase of $14 million (5.1 percent) in technology and communications expense driven by capital expenditures to support business growth. Partially offsetting these increases, employee benefits expense decreased $9 million (2.8 percent) driven by seasonally lower payroll taxes.
Provision for Income Taxes
The provision for income taxes for the fourth quarter of 2019 resulted in a tax rate of 20.2 percent on a taxable-equivalent basis (effective tax rate of 19.2 percent), compared with 14.6 percent on a taxable-equivalent basis (effective tax rate of 13.5 percent) in the fourth quarter of 2018, and a tax rate of 20.4 percent on a taxable-equivalent basis (effective tax rate of 19.6 percent) in the third quarter of 2019. The fourth quarter of 2018 tax rates reflected the favorable impact of deferred tax assets and liabilities adjustments related to tax reform estimates. Excluding the changes in estimates related to deferred tax assets and liabilities in the fourth quarter of 2018, the taxable-equivalent rate was 20.1 percent.
7
U.S. Bancorp Fourth Quarter 2019 Results | ||
ALLOWANCE FOR CREDIT LOSSES | ||||||||||||||||||||||||||||||||||||||||
($ in millions) | 4Q | 3Q | 2Q | 1Q | 4Q | |||||||||||||||||||||||||||||||||||
2019 | % (a) | 2019 | % (a) | 2019 | % (a) | 2019 | % (a) | 2018 | % (a) | |||||||||||||||||||||||||||||||
Balance, beginning of period | $4,481 | $4,466 | $4,451 | $4,441 | $4,426 | |||||||||||||||||||||||||||||||||||
Net charge-offs | ||||||||||||||||||||||||||||||||||||||||
Commercial | 74 | .30 | 72 | .29 | 56 | .23 | 71 | .30 | 64 | .27 | ||||||||||||||||||||||||||||||
Lease financing | 4 | .29 | 3 | .22 | 3 | .22 | 2 | .15 | 3 | .22 | ||||||||||||||||||||||||||||||
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Total commercial | 78 | .30 | 75 | .29 | 59 | .23 | 73 | .29 | 67 | .26 | ||||||||||||||||||||||||||||||
Commercial mortgages | 7 | .10 | 3 | .04 | 2 | .03 | -- | -- | (8 | ) | (.11 | ) | ||||||||||||||||||||||||||||
Construction and development | -- | -- | 3 | .11 | (1 | ) | (.04 | ) | -- | -- | 1 | .04 | ||||||||||||||||||||||||||||
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Total commercial real estate | 7 | .07 | 6 | .06 | 1 | .01 | -- | -- | (7 | ) | (.07 | ) | ||||||||||||||||||||||||||||
Residential mortgages | (1 | ) | (.01 | ) | (3 | ) | (.02 | ) | 4 | .02 | 3 | .02 | 2 | .01 | ||||||||||||||||||||||||||
Credit card | 230 | 3.79 | 211 | 3.53 | 227 | 3.99 | 225 | 4.04 | 219 | 3.88 | ||||||||||||||||||||||||||||||
Retail leasing | 4 | .19 | 3 | .14 | 2 | .09 | 4 | .19 | 3 | .14 | ||||||||||||||||||||||||||||||
Home equity and second mortgages | -- | -- | (1 | ) | (.03 | ) | (1 | ) | (.03 | ) | (1 | ) | (.03 | ) | 1 | .02 | ||||||||||||||||||||||||
Other | 67 | .79 | 61 | .72 | 58 | .71 | 63 | .80 | 68 | .85 | ||||||||||||||||||||||||||||||
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Total other retail | 71 | .49 | 63 | .43 | 59 | .42 | 66 | .47 | 72 | .51 | ||||||||||||||||||||||||||||||
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Total net charge-offs | 385 | .52 | 352 | .48 | 350 | .49 | 367 | .52 | 353 | .49 | ||||||||||||||||||||||||||||||
Provision for credit losses | 395 | 367 | 365 | 377 | 368 | |||||||||||||||||||||||||||||||||||
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Balance, end of period | $4,491 | $4,481 | $4,466 | $4,451 | $4,441 | |||||||||||||||||||||||||||||||||||
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Components | ||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses | $4,020 | $4,007 | $4,019 | $3,990 | $3,973 | |||||||||||||||||||||||||||||||||||
Liability for unfunded credit commitments | 471 | 474 | 447 | 461 | 468 | |||||||||||||||||||||||||||||||||||
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Total allowance for credit losses | $4,491 | $4,481 | $4,466 | $4,451 | $4,441 | |||||||||||||||||||||||||||||||||||
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Gross charge-offs | $479 | $451 | $464 | $473 | $442 | |||||||||||||||||||||||||||||||||||
Gross recoveries | $94 | $99 | $114 | $106 | $89 | |||||||||||||||||||||||||||||||||||
Allowance for credit losses as a percentage of | ||||||||||||||||||||||||||||||||||||||||
Period-end loans | 1.52 | 1.52 | 1.53 | 1.55 | 1.55 | |||||||||||||||||||||||||||||||||||
Nonperforming loans | 649 | 541 | 556 | 519 | 544 | |||||||||||||||||||||||||||||||||||
Nonperforming assets | 542 | 458 | 469 | 443 | 449 | |||||||||||||||||||||||||||||||||||
(a) Annualized and calculated on average loan balances |
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8
U.S. Bancorp Fourth Quarter 2019 Results | ||
Credit quality was relatively stable on both a linked quarter and year-over-year basis. The Company’s provision for credit losses for the fourth quarter of 2019 was $395 million, which was $28 million (7.6 percent) higher than the prior quarter and $27 million (7.3 percent) higher than the fourth quarter of 2018, primarily reflecting loan growth.
Total net charge-offs in the fourth quarter of 2019 were $385 million, compared with $352 million in the third quarter of 2019, and $353 million in the fourth quarter of 2018. Net charge-offs increased $33 million (9.4 percent) compared with the third quarter of 2019 mainly due to seasonally lower credit card net charge-offs in the third quarter and higher total other retail net charge-offs in the fourth quarter. Net charge-offs increased $32 million (9.1 percent) compared with the fourth quarter of 2018 primarily due to higher total commercial, total commercial real estate, and credit card net charge-offs, in line with loan growth. The netcharge-off ratio was 0.52 percent in the fourth quarter of 2019, compared with 0.48 percent in in the third quarter of 2019 and 0.49 percent in the fourth quarter of 2018.
The allowance for credit losses was $4,491 million at December 31, 2019, compared with $4,481 million at September 30, 2019, and $4,441 million at December 31, 2018. The ratio of the allowance for credit losses toperiod-end loans was 1.52 percent at December 31, 2019, and at September 30, 2019, compared with 1.55 percent at December 31, 2018. The ratio of the allowance for credit losses to nonperforming loans was 649 percent at December 31, 2019, compared with 541 percent at September 30, 2019, and 544 percent at December 31, 2018.
Nonperforming assets were $829 million at December 31, 2019, compared with $979 million at September 30, 2019, and $989 million at December 31, 2018. The ratio of nonperforming assets to loans and other real estate was 0.28 percent at December 31, 2019, compared with 0.33 percent at September 30, 2019, and 0.34 percent at December 31, 2018. The year-over-year decrease in nonperforming assets was driven by improvements in nonperforming residential mortgages, total commercial real estate loans, other retail loans, and other real estate owned. Accruing loans 90 days or more past due were $605 million at December 31, 2019, compared with $600 million at September 30, 2019, and $584 million at December 31, 2018.
DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES | ||||||||||||||||||||
(Percent) | Dec 31 | Sep 30 | Jun 30 | Mar 31 | Dec 31 | |||||||||||||||
2019 | 2019 | 2019 | 2019 | 2018 | ||||||||||||||||
Delinquent loan ratios - 90 days or more past dueexcluding nonperforming loans |
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Commercial | .08 | .10 | .26 | .07 | .07 | |||||||||||||||
Commercial real estate | .01 | .01 | -- | .01 | -- | |||||||||||||||
Residential mortgages | .17 | .17 | .17 | .18 | .18 | |||||||||||||||
Credit card | 1.23 | 1.16 | 1.14 | 1.29 | 1.25 | |||||||||||||||
Other retail | .17 | .18 | .17 | .19 | .19 | |||||||||||||||
Total loans | .20 | .20 | .26 | .21 | .20 | |||||||||||||||
Delinquent loan ratios - 90 days or more past dueincluding nonperforming loans |
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Commercial | .27 | .40 | .53 | .34 | .27 | |||||||||||||||
Commercial real estate | .21 | .23 | .24 | .33 | .29 | |||||||||||||||
Residential mortgages | .51 | .53 | .55 | .62 | .63 | |||||||||||||||
Credit card | 1.23 | 1.16 | 1.14 | 1.29 | 1.25 | |||||||||||||||
Other retail | .46 | .47 | .47 | .49 | .54 | |||||||||||||||
Total loans | .44 | .49 | .53 | .51 | .49 | |||||||||||||||
9
U.S. Bancorp Fourth Quarter 2019 Results | ||
ASSET QUALITY (a) | ||||||||||||||||||||
($ in millions) | ||||||||||||||||||||
Dec 31 | Sep 30 | Jun 30 | Mar 31 | Dec 31 | ||||||||||||||||
2019 | 2019 | 2019 | 2019 | 2018 | ||||||||||||||||
Nonperforming loans | ||||||||||||||||||||
Commercial | $172 | $290 | $254 | $247 | $186 | |||||||||||||||
Lease financing | 32 | 29 | 25 | 24 | 23 | |||||||||||||||
Total commercial | 204 | 319 | 279 | 271 | 209 | |||||||||||||||
Commercial mortgages | 74 | 82 | 81 | 79 | 76 | |||||||||||||||
Construction and development | 8 | 7 | 11 | 48 | 39 | |||||||||||||||
Total commercial real estate | 82 | 89 | 92 | 127 | 115 | |||||||||||||||
Residential mortgages | 241 | 251 | 263 | 287 | 296 | |||||||||||||||
Credit card | -- | -- | -- | -- | -- | |||||||||||||||
Other retail | 165 | 170 | 169 | 173 | 197 | |||||||||||||||
Total nonperforming loans | 692 | 829 | 803 | 858 | 817 | |||||||||||||||
Other real estate | 78 | 84 | 88 | 93 | 111 | |||||||||||||||
Other nonperforming assets | 59 | 66 | 62 | 54 | 61 | |||||||||||||||
Total nonperforming assets | $829 | $979 | $953 | $1,005 | $989 | |||||||||||||||
Accruing loans 90 days or more past due |
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$605 |
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$600 |
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$752 |
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$595 |
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$584 |
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Performing restructured loans, excluding GNMA | $2,129 | $2,145 | $2,142 | $2,173 | $2,218 | |||||||||||||||
Performing restructured GNMA | $1,622 | $1,690 | $1,598 | $1,578 | $1,639 | |||||||||||||||
Nonperforming assets to loans plus ORE (%) | .28 | .33 | .33 | .35 | .34 | |||||||||||||||
(a) Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due
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10
U.S. Bancorp Fourth Quarter 2019 Results | ||
COMMON SHARES | ||||||||||||||||||||
(Millions) | 4Q 2019 | 3Q 2019 | 2Q 2019 | 1Q 2019 | 4Q 2018 | |||||||||||||||
Beginning shares outstanding | 1,571 | 1,584 | 1,599 | 1,608 | 1,623 | |||||||||||||||
Shares issued for stock incentive plans, acquisitions and other corporate purposes | 3 | 1 | -- | 3 | 1 | |||||||||||||||
Shares repurchased | (40) | (14) | (15) | (12) | (16) | |||||||||||||||
Ending shares outstanding | 1,534 | 1,571 | 1,584 | 1,599 | 1,608 | |||||||||||||||
CAPITAL POSITION | ||||||||||||||||||||
($ in millions) | Dec 31 2019 | Sep 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | |||||||||||||||
Total U.S. Bancorp shareholders’ equity | $ | 51,853 | $ | 53,517 | $ | 52,913 | $ | 52,057 | $ | 51,029 | ||||||||||
Basel III Standardized Approach | ||||||||||||||||||||
Common equity tier 1 capital | $ | 35,713 | $ | 37,653 | $ | 36,909 | $ | 35,732 | $ | 34,724 | ||||||||||
Tier 1 capital | 41,721 | 43,667 | 42,923 | 41,748 | 40,741 | |||||||||||||||
Total risk-based capital | 49,744 | 51,684 | 50,370 | 49,194 | 48,178 | |||||||||||||||
Common equity tier 1 capital ratio | 9.1 | % | 9.6 | % | 9.5 | % | 9.3 | % | 9.1 | % | ||||||||||
Tier 1 capital ratio | 10.7 | 11.2 | 11.0 | 10.9 | 10.7 | |||||||||||||||
Total risk-based capital ratio | 12.7 | 13.2 | 13.0 | 12.8 | 12.6 | |||||||||||||||
Leverage ratio | 8.8 | 9.3 | 9.3 | 9.2 | 9.0 | |||||||||||||||
Basel III Advanced Approaches | ||||||||||||||||||||
Common equity tier 1 capital ratio | 11.9 | 12.6 | 12.3 | 12.0 | 11.8 | |||||||||||||||
Tangible common equity to tangible assets (a) | 7.5 | 8.0 | 7.9 | 7.9 | 7.8 | |||||||||||||||
Tangible common equity to risk-weighted assets (a) | 9.3 | 9.7 | 9.7 | 9.5 | 9.4 | |||||||||||||||
(a) SeeNon-GAAP Financial Measures reconciliation on page 16
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Total U.S. Bancorp shareholders’ equity was $51.9 billion at December 31, 2019, compared with $53.5 billion at September 30, 2019, and $51.0 billion at December 31, 2018. During the fourth quarter, the Company returned $2,947 million of earnings to shareholders through dividends and share buybacks.
All regulatory ratios continue to be in excess of “well-capitalized” requirements. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III standardized approach was 9.1 percent at December 31, 2019, compared with 9.6 percent at September 30, 2019, and 9.1 percent at December 31, 2018. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III advanced approaches method was 11.9 percent at December 31, 2019, compared with 12.6 percent at September 30, 2019, and 11.8 percent at December 31, 2018.
11
U.S. Bancorp Fourth Quarter 2019 Results | ||
Investor Conference Call
|
On Wednesday, Jan. 15, 2020, at 8 a.m. CT, Chairman, President and Chief Executive Officer Andy Cecere and Vice Chairman and Chief Financial Officer Terry Dolan will host a conference call to review the financial results. The conference call will be available online or by telephone. To access the webcast and presentation, visit U.S. Bancorp’s website at usbank.com and click on “About Us”, “Investor Relations” and “Webcasts & Presentations.” To access the conference call from locations within the United States and Canada, please dial866-316-1409. Participants calling from outside the United States and Canada, please dial706-634-9086. The conference ID number for all participants is 5218746. For those unable to participate during the live call, a recording will be available at approximately 11:00 a.m. CT on Wednesday, Jan. 15 and will be accessible until Wednesday, Jan. 22 at 11:59 p.m. CT. To access the recorded message within the United States and Canada, please dial855-859-2056. If calling from outside the United States and Canada, please dial404-537-3406 to access the recording. The conference ID is 5218746.
About U.S. Bancorp
|
U.S. Bancorp, with 74,000 employees and $495 billion in assets as of December 31, 2019, is the parent company of U.S. Bank National Association, the fifth-largest commercial bank in the United States. The Minneapolis-based bank blends its relationship teams, branches and ATM network with mobile and online tools that allow customers to bank how, when and where they prefer. U.S. Bank is committed to serving its millions of retail, business, wealth management, payment, commercial and corporate, and investment services customers across the country and around the world as a trusted financial partner, a commitment recognized by the Ethisphere Institute naming the bank a 2019 World’s Most Ethical Company. Visit U.S. Bank at www.usbank.com or follow on social media to stay up to date with company news.
Forward-looking Statements
|
“Safe Harbor” Statement under 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. Deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price 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 changes in interest rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks andnon-banks; changes in the level of tariffs and other trade policies of the United States and its global trading partners; changes in customer behavior and preferences; breaches in data security; failures to safeguard personal information; 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 Form10-K for the year ended December 31, 2018, on file with the Securities and Exchange Commission, including the sections entitled “Corporate Risk Profile” and “Risk Factors” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. In addition, factors other than these risks also could adversely affect U.S. Bancorp’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.
12
U.S. Bancorp Fourth Quarter 2019 Results | ||
Non-GAAP Financial Measures
|
In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:
• | Tangible common equity to tangible assets |
• | Tangible common equity to risk-weighted assets |
• | Return on tangible common equity |
These capital measures are viewed by management as useful additional methods of evaluating the Company’s utilization of its capital held and the level of capital available to withstand unexpected negative market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Company’s capital position relative to other financial services companies. These capital measures are not defined in generally accepted accounting principles (“GAAP”), or are not defined in banking regulations. As a result, these capital measures disclosed by the Company may be considerednon-GAAP financial measures. The effective capital ratios defined by banking regulations for these periods were subject to certain transitional provisions. Management believes this information helps investors assess trends in the Company’s capital adequacy.
The Company also discloses net interest income and related ratios and analysis on a taxable-equivalent basis, which may also be considerednon-GAAP financial measures. The Company believes this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable andtax-exempt sources. In addition, certain performance measures, including the efficiency ratio and net interest margin utilize net interest income on a taxable-equivalent basis.
There may be limits in the usefulness of these measures to investors. As a result, the Company encourages readers to consider the consolidated financial statements and other financial information contained in this press release in their entirety, and not to rely on any single financial measure. A table follows that shows the Company’s calculation of thesenon-GAAP financial measures.
13
CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||
(Dollars and Shares in Millions, Except Per Share Data) (Unaudited) | Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Interest Income | ||||||||||||||||
Loans | $3,422 | $3,475 | $14,099 | $13,120 | ||||||||||||
Loans held for sale | 55 | 57 | 162 | 165 | ||||||||||||
Investment securities | 709 | 689 | 2,893 | 2,616 | ||||||||||||
Other interest income | 69 | 90 | 340 | 272 | ||||||||||||
Total interest income | 4,255 | 4,311 | 17,494 | 16,173 | ||||||||||||
Interest Expense | ||||||||||||||||
Deposits | 654 | 606 | 2,855 | 1,869 | ||||||||||||
Short-term borrowings | 79 | 113 | 360 | 378 | ||||||||||||
Long-term debt | 315 | 289 | 1,227 | 1,007 | ||||||||||||
Total interest expense | 1,048 | 1,008 | 4,442 | 3,254 | ||||||||||||
Net interest income | 3,207 | 3,303 | 13,052 | 12,919 | ||||||||||||
Provision for credit losses | 395 | 368 | 1,504 | 1,379 | ||||||||||||
Net interest income after provision for credit losses | 2,812 | 2,935 | 11,548 | 11,540 | ||||||||||||
Noninterest Income | ||||||||||||||||
Credit and debit card revenue | 378 | 382 | 1,413 | 1,401 | ||||||||||||
Corporate payment products revenue | 158 | 163 | 664 | 644 | ||||||||||||
Merchant processing services | 409 | 389 | 1,601 | 1,531 | ||||||||||||
Trust and investment management fees | 438 | 409 | 1,673 | 1,619 | ||||||||||||
Deposit service charges | 231 | 253 | 909 | 1,070 | ||||||||||||
Treasury management fees | 140 | 143 | 578 | 594 | ||||||||||||
Commercial products revenue | 226 | 225 | 934 | 895 | ||||||||||||
Mortgage banking revenue | 244 | 171 | 874 | 720 | ||||||||||||
Investment products fees | 48 | 48 | 186 | 188 | ||||||||||||
Securities gains (losses), net | 26 | 5 | 73 | 30 | ||||||||||||
Other | 138 | 310 | 926 | 910 | ||||||||||||
Total noninterest income | 2,436 | 2,498 | 9,831 | 9,602 | ||||||||||||
Noninterest Expense | ||||||||||||||||
Compensation | 1,597 | 1,568 | 6,325 | 6,162 | ||||||||||||
Employee benefits | 315 | 308 | 1,286 | 1,231 | ||||||||||||
Net occupancy and equipment | 286 | 266 | 1,123 | 1,063 | ||||||||||||
Professional services | 139 | 133 | 454 | 407 | ||||||||||||
Marketing and business development | 117 | 115 | 426 | 429 | ||||||||||||
Technology and communications | 291 | 254 | 1,095 | 978 | ||||||||||||
Postage, printing and supplies | 71 | 80 | 290 | 324 | ||||||||||||
Other intangibles | 44 | 41 | 168 | 161 | ||||||||||||
Other | 541 | 515 | 1,618 | 1,709 | ||||||||||||
Total noninterest expense | 3,401 | 3,280 | 12,785 | 12,464 | ||||||||||||
Income before income taxes | 1,847 | 2,153 | 8,594 | 8,678 | ||||||||||||
Applicable income taxes | 354 | 291 | 1,648 | 1,554 | ||||||||||||
Net income | 1,493 | 1,862 | 6,946 | 7,124 | ||||||||||||
Net (income) loss attributable to noncontrolling interests | (7 | ) | (6 | ) | (32 | ) | (28 | ) | ||||||||
Net income attributable to U.S. Bancorp | $1,486 | $1,856 | $6,914 | $7,096 | ||||||||||||
Net income applicable to U.S. Bancorp common shareholders | $1,408 | $1,777 | $6,583 | $6,784 | ||||||||||||
Earnings per common share | $.91 | $1.10 | $4.16 | $4.15 | ||||||||||||
Diluted earnings per common share | $.90 | $1.10 | $4.16 | $4.14 | ||||||||||||
Dividends declared per common share | $.42 | $.37 | $1.58 | $1.34 | ||||||||||||
Average common shares outstanding | 1,556 | 1,615 | 1,581 | 1,634 | ||||||||||||
Average diluted common shares outstanding | 1,558 | 1,618 | 1,583 | 1,638 |
14
CONSOLIDATED ENDING BALANCE SHEET | ||||||||
(Dollars in Millions) | December 31, 2019 | December 31, 2018 | ||||||
Assets | ||||||||
Cash and due from banks | $22,405 | $21,453 | ||||||
Investment securities | ||||||||
Held-to-maturity | -- | 46,050 | ||||||
Available-for-sale | 122,613 | 66,115 | ||||||
Loans held for sale | 5,578 | 2,056 | ||||||
Loans | ||||||||
Commercial | 103,863 | 102,444 | ||||||
Commercial real estate | 39,746 | 39,539 | ||||||
Residential mortgages | 70,586 | 65,034 | ||||||
Credit card | 24,789 | 23,363 | ||||||
Other retail | 57,118 | 56,430 | ||||||
Total loans | 296,102 | 286,810 | ||||||
Less allowance for loan losses | (4,020 | ) | (3,973 | ) | ||||
Net loans | 292,082 | 282,837 | ||||||
Premises and equipment | 3,702 | 2,457 | ||||||
Goodwill | 9,655 | 9,369 | ||||||
Other intangible assets | 3,223 | 3,392 | ||||||
Other assets | 36,168 | 33,645 | ||||||
Total assets | $495,426 | $467,374 | ||||||
Liabilities and Shareholders’ Equity | ||||||||
Deposits | ||||||||
Noninterest-bearing | $75,590 | $81,811 | ||||||
Interest-bearing | 286,326 | 263,664 | ||||||
Total deposits | 361,916 | 345,475 | ||||||
Short-term borrowings | 23,723 | 14,139 | ||||||
Long-term debt | 40,167 | 41,340 | ||||||
Other liabilities | 17,137 | 14,763 | ||||||
Total liabilities | 442,943 | 415,717 | ||||||
Shareholders’ equity | ||||||||
Preferred stock | 5,984 | 5,984 | ||||||
Common stock | 21 | 21 | ||||||
Capital surplus | 8,475 | 8,469 | ||||||
Retained earnings | 63,186 | 59,065 | ||||||
Less treasury stock | (24,440 | ) | (20,188 | ) | ||||
Accumulated other comprehensive income (loss) | (1,373 | ) | (2,322 | ) | ||||
Total U.S. Bancorp shareholders’ equity | 51,853 | 51,029 | ||||||
Noncontrolling interests | 630 | 628 | ||||||
Total equity | 52,483 | 51,657 | ||||||
Total liabilities and equity | $495,426 | $467,374 |
15
NON-GAAP FINANCIAL MEASURES | ||||||||||||||||||||
(Dollars in Millions, Unaudited) | December 31, 2019 | September 30, 2019 | June 30, 2019 | March 31, 2019 | December 31, 2018 | |||||||||||||||
Total equity | $52,483 | $54,147 | $53,540 | $52,686 | $51,657 | |||||||||||||||
Preferred stock | (5,984 | ) | (5,984 | ) | (5,984 | ) | (5,984 | ) | (5,984 | ) | ||||||||||
Noncontrolling interests | (630 | ) | (630 | ) | (627 | ) | (629 | ) | (628 | ) | ||||||||||
Goodwill (net of deferred tax liability) (1) | (8,788 | ) | (8,781 | ) | (8,708 | ) | (8,716 | ) | (8,549 | ) | ||||||||||
Intangible assets, other than mortgage servicing rights | (677 | ) | (687 | ) | (703 | ) | (685 | ) | (601 | ) | ||||||||||
Tangible common equity (a) | 36,404 | 38,065 | 37,518 | 36,672 | 35,895 | |||||||||||||||
Total assets | 495,426 | 487,671 | 481,719 | 475,775 | 467,374 | |||||||||||||||
Goodwill (net of deferred tax liability) (1) | (8,788 | ) | (8,781 | ) | (8,708 | ) | (8,716 | ) | (8,549 | ) | ||||||||||
Intangible assets, other than mortgage servicing rights | (677 | ) | (687 | ) | (703 | ) | (685 | ) | (601 | ) | ||||||||||
Tangible assets (b) | 485,961 | 478,203 | 472,308 | 466,374 | 458,224 | |||||||||||||||
Risk-weighted assets, determined in accordance with the Basel III | 391,269 | * | 390,622 | 388,709 | 384,394 | 381,661 | ||||||||||||||
Ratios* | ||||||||||||||||||||
Tangible common equity to tangible assets (a)/(b) | 7.5 | % | 8.0 | % | 7.9 | % | 7.9 | % | 7.8 | % | ||||||||||
Tangible common equity to risk-weighted assets (a)/(c) | 9.3 | 9.7 | 9.7 | 9.5 | 9.4 | |||||||||||||||
Three Months Ended | ||||||||||||||||||||
December 31, 2019 | September 30, 2019 | June 30, 2019 | March 31, 2019 | December 31, 2018 | ||||||||||||||||
Net income applicable to U.S. Bancorp common shareholders | $1,408 | $1,821 | $1,741 | $1,613 | $1,777 | |||||||||||||||
Intangibles amortization(net-of-tax) | 35 | 33 | 33 | 32 | 32 | |||||||||||||||
Net income applicable to U.S. Bancorp common shareholders, | 1,443 | 1,854 | 1,774 | 1,645 | 1,809 | |||||||||||||||
Annualized net income applicable to U.S. Bancorp common | 5,725 | 7,356 | 7,115 | 6,671 | 7,177 | |||||||||||||||
Average total equity | 53,777 | 53,921 | 53,066 | 52,218 | 51,370 | |||||||||||||||
Average preferred stock | (5,984 | ) | (5,984 | ) | (5,984 | ) | (5,984 | ) | (5,984 | ) | ||||||||||
Average noncontrolling interests | (630 | ) | (629 | ) | (628 | ) | (629 | ) | (630 | ) | ||||||||||
Average goodwill (net of deferred tax liability) (1) | (8,796 | ) | (8,725 | ) | (8,715 | ) | (8,732 | ) | (8,574 | ) | ||||||||||
Average intangible assets, other than mortgage servicing rights | (683 | ) | (689 | ) | (681 | ) | (671 | ) | (605 | ) | ||||||||||
Average tangible common equity (e) | 37,684 | 37,894 | 37,058 | 36,202 | 35,577 | |||||||||||||||
Return on tangible common equity (d)/(e) | 15.2 | % | 19.4 | % | 19.2 | % | 18.4 | % | 20.2 | % | ||||||||||
Net interest income | $3,207 | $3,281 | $3,305 | $3,259 | $3,303 | |||||||||||||||
Taxable-equivalent adjustment (2) | 24 | 25 | 27 | 27 | 28 | |||||||||||||||
Net interest income, on a taxable-equivalent basis | 3,231 | 3,306 | 3,332 | 3,286 | 3,331 | |||||||||||||||
Net interest income, on a taxable-equivalent basis (as calculated | 3,231 | 3,306 | 3,332 | 3,286 | 3,331 | |||||||||||||||
Noninterest income | 2,436 | 2,614 | 2,490 | 2,291 | 2,498 | |||||||||||||||
Less: Securities gains (losses), net | 26 | 25 | 17 | 5 | 5 | |||||||||||||||
Total net revenue, excluding net securities gains (losses) (f) | 5,641 | 5,895 | 5,805 | 5,572 | 5,824 | |||||||||||||||
Noninterest expense (g) | 3,401 | 3,144 | 3,153 | 3,087 | 3,280 | |||||||||||||||
Less: Intangible amortization | 44 | 42 | 42 | 40 | 41 | |||||||||||||||
Noninterest expense, excluding intangible amortization (h) | 3,357 | 3,102 | 3,111 | 3,047 | 3,239 | |||||||||||||||
Efficiency ratio (g)/(f) | 60.3 | % | 53.3 | % | 54.3 | % | 55.4 | % | 56.3 | % | ||||||||||
Tangible efficiency ratio (h)/(f) | 59.5 | 52.6 | 53.6 | 54.7 | 55.6 |
* | 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) | Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes. |
16
NON-GAAP FINANCIAL MEASURES | ||||||||
Year Ended | ||||||||
(Dollars in Millions, Unaudited) | December 31, 2019 | December 31, 2018 | ||||||
Net income applicable to U.S. Bancorp common shareholders | $6,583 | $6,784 | ||||||
Intangibles amortization(net-of-tax) | 133 | 127 | ||||||
Net income applicable to U.S. Bancorp common shareholders, | 6,716 | 6,911 | ||||||
Average total equity | 53,252 | 50,391 | ||||||
Average preferred stock | (5,984 | ) | (5,636 | ) | ||||
Average noncontrolling interests | (629 | ) | (628 | ) | ||||
Average goodwill (net of deferred tax liability) (1) | (8,742 | ) | (8,606 | ) | ||||
Average intangible assets, other than mortgage servicing rights | (681 | ) | (595 | ) | ||||
Average tangible common equity (b) | 37,216 | 34,926 | ||||||
Return on tangible common equity (a)/(b) | 18.0 | % | 19.8 | % | ||||
Net interest income | $13,052 | $12,919 | ||||||
Taxable-equivalent adjustment (2) | 103 | 116 | ||||||
Net interest income, on a taxable-equivalent basis | 13,155 | 13,035 | ||||||
Net interest income, on a taxable-equivalent basis (as calculated | 13,155 | 13,035 | ||||||
Noninterest income | 9,831 | 9,602 | ||||||
Less: Securities gains (losses), net | 73 | 30 | ||||||
Total net revenue, excluding net securities gains (losses) (c) | 22,913 | 22,607 | ||||||
Noninterest expense (d) | 12,785 | 12,464 | ||||||
Less: Intangible amortization | 168 | 161 | ||||||
Noninterest expense, excluding intangible amortization (e) | 12,617 | 12,303 | ||||||
Efficiency ratio (d)/(c) | 55.8 | % | 55.1 | % | ||||
Tangible efficiency ratio (e)/(c) | 55.1 | 54.4 |
(1) | Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements. |
(2) | Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes. |
17
LINE OF BUSINESS FINANCIAL PERFORMANCE (a) | ||||||||||||||||||||||||||||||||||||||||
($ in millions) | Net Income Attributable to U.S. Bancorp | Percent Change | Net Income Attributable to U.S. Bancorp | 4Q 2019 | ||||||||||||||||||||||||||||||||||||
Business Line | 4Q 2019 | 3Q 2019 | 4Q 2018 | 4Q19 vs 3Q19 | 4Q19 vs 4Q18 | Full Year 2019 | Full Year 2018 | Percent Change | Earnings Composition | |||||||||||||||||||||||||||||||
Corporate and Commercial Banking | $355 | $366 | $397 | (3.0 | ) | (10.6 | ) | $1,536 | $1,588 | (3.3 | ) | 24 | % | |||||||||||||||||||||||||||
Consumer and Business Banking | 526 | 642 | 571 | (18.1 | ) | (7.9 | ) | 2,274 | 2,236 | 1.7 | 36 | |||||||||||||||||||||||||||||
Wealth Management and Investment Services | 211 | 235 | 190 | (10.2 | ) | 11.1 | 895 | 814 | 10.0 | 14 | ||||||||||||||||||||||||||||||
Payment Services | 405 | 418 | 397 | (3.1 | ) | 2.0 | 1,516 | 1,491 | 1.7 | 27 | ||||||||||||||||||||||||||||||
Treasury and Corporate Support | (11 | ) | 247 | 301 | nm | nm | 693 | 967 | (28.3 | ) | (1 | ) | ||||||||||||||||||||||||||||
Consolidated Company | $1,486 | $1,908 | $1,856 | (22.1 | ) | (19.9 | ) | $6,914 | $7,096 | (2.6 | ) | 100 | % | |||||||||||||||||||||||||||
(a) preliminary data
|
Lines of Business
The Company’s major lines of business are Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate resources and assess performance. Noninterest expenses incurred by centrally managed operations or business lines that directly support another business line’s operations are charged to the applicable business line based on its utilization of those services, primarily measured by the volume of customer activities, number of employees or other relevant factors. These allocated expenses are reported as net shared services expense within noninterest expense. Income taxes are assessed to each line of business at a managerial tax rate of 25.0 percent with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in Treasury and Corporate Support. Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Company’s diverse customer base. During 2019, certain organization and methodology changes were made and, accordingly, prior period results were restated and presented on a comparable basis.
2
CORPORATE AND COMMERCIAL BANKING (a) | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
4Q 2019 | 3Q 2019 | 4Q 2018 | 4Q19 vs 3Q19 | 4Q19 vs 4Q18 | Full Year 2019 | Full Year 2018 | Percent Change | |||||||||||||||||||||||||
Condensed Income Statement | ||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) | $718 | $709 | $747 | 1.3 | (3.9 | ) | $2,871 | $2,936 | (2.2 | ) | ||||||||||||||||||||||
Noninterest income | 200 | 213 | 213 | (6.1 | ) | (6.1 | ) | 867 | 843 | 2.8 | ||||||||||||||||||||||
Securities gains (losses), net | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Total net revenue | 918 | 922 | 960 | (.4 | ) | (4.4 | ) | 3,738 | 3,779 | (1.1 | ) | |||||||||||||||||||||
Noninterest expense | 393 | 393 | 401 | -- | (2.0 | ) | 1,607 | 1,591 | 1.0 | |||||||||||||||||||||||
Other intangibles | 1 | 1 | 1 | -- | -- | 4 | 4 | -- | ||||||||||||||||||||||||
Total noninterest expense | 394 | 394 | 402 | -- | (2.0 | ) | 1,611 | 1,595 | 1.0 | |||||||||||||||||||||||
Income before provision and taxes | 524 | 528 | 558 | (.8 | ) | (6.1 | ) | 2,127 | 2,184 | (2.6 | ) | |||||||||||||||||||||
Provision for credit losses | 51 | 40 | 28 | 27.5 | 82.1 | 78 | 65 | 20.0 | ||||||||||||||||||||||||
Income before income taxes | 473 | 488 | 530 | (3.1 | ) | (10.8 | ) | 2,049 | 2,119 | (3.3 | ) | |||||||||||||||||||||
Income taxes and taxable-equivalent adjustment | 118 | 122 | 133 | (3.3 | ) | (11.3 | ) | 513 | 531 | (3.4 | ) | |||||||||||||||||||||
Net income | 355 | 366 | 397 | (3.0 | ) | (10.6 | ) | 1,536 | 1,588 | (3.3 | ) | |||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Net income attributable to U.S. Bancorp | $355 | $366 | $397 | (3.0 | ) | (10.6 | ) | $1,536 | $1,588 | (3.3 | ) | |||||||||||||||||||||
Average Balance Sheet Data | ||||||||||||||||||||||||||||||||
Loans | $97,258 | $96,232 | $94,792 | 1.1 | 2.6 | $96,608 | $93,854 | 2.9 | ||||||||||||||||||||||||
Other earning assets | 3,926 | 4,016 | 3,292 | (2.2 | ) | 19.3 | 3,751 | 3,072 | 22.1 | |||||||||||||||||||||||
Goodwill | 1,647 | 1,647 | 1,647 | -- | -- | 1,647 | 1,647 | -- | ||||||||||||||||||||||||
Other intangible assets | 7 | 8 | 10 | (12.5 | ) | (30.0 | ) | 8 | 11 | (27.3 | ) | |||||||||||||||||||||
Assets | 107,942 | 107,128 | 104,039 | .8 | 3.8 | 106,716 | 102,801 | 3.8 | ||||||||||||||||||||||||
Noninterest-bearing deposits | 28,893 | 28,861 | 31,859 | .1 | (9.3 | ) | 29,152 | 32,938 | (11.5 | ) | ||||||||||||||||||||||
Interest-bearing deposits | 77,190 | 72,061 | 70,780 | 7.1 | 9.1 | 72,780 | 69,913 | 4.1 | ||||||||||||||||||||||||
Total deposits | 106,083 | 100,922 | 102,639 | 5.1 | 3.4 | 101,932 | 102,851 | (.9 | ) | |||||||||||||||||||||||
Total U.S. Bancorp shareholders’ equity | 10,429 | 10,379 | 10,519 | .5 | (.9 | ) | 10,399 | 10,463 | (.6 | ) | ||||||||||||||||||||||
(a) preliminary data
|
Corporate and Commercial Bankingoffers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets services, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution,non-profit and public sector clients.
Corporate and Commercial Banking contributed $355 million of the Company’s net income in the fourth quarter of 2019, compared with $397 million in the fourth quarter of 2018. Total net revenue decreased $42 million (4.4 percent) due to a decrease of $29 million (3.9 percent) in net interest income and a decrease of $13 million (6.1 percent) in total noninterest income. Net interest income decreased primarily due to lower noninterest bearing deposit balances compared with the prior year, loan mix, and lower spreads on loans, reflecting a competitive marketplace, partially offset by loan and interest-bearing deposit growth. Noninterest bearing deposits are declining as customers deploy balances to support business growth. Total noninterest income decreased year-over-year primarily due to lower capital markets revenue, partially offset by higher trading revenue and corporate bond underwriting fees. Total noninterest expense was $8 million (2.0 percent) lower compared with a year ago primarily due to lower FDIC assessment costs and lower legal and professional expense, partially offset by higher loan costs. The provision for credit losses increased $23 million (82.1 percent) primarily due to higher net charge-offs.
3
CONSUMER AND BUSINESS BANKING (a) | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
4Q 2019 | 3Q 2019 | 4Q 2018 | 4Q19 vs 3Q19 | 4Q19 vs 4Q18 | Full Year 2019 | Full Year 2018 | Percent Change | |||||||||||||||||||||||||
Condensed Income Statement | ||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) | $1,541 | $1,580 | $1,575 | (2.5) | (2.2) | $6,261 | $6,156 | 1.7 | ||||||||||||||||||||||||
Noninterest income | 617 | 668 | 562 | (7.6) | 9.8 | 2,387 | 2,316 | 3.1 | ||||||||||||||||||||||||
Securities gains (losses), net | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
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Total net revenue | 2,158 | 2,248 | 2,137 | (4.0) | 1.0 | 8,648 | 8,472 | 2.1 | ||||||||||||||||||||||||
Noninterest expense | 1,359 | 1,318 | 1,302 | 3.1 | 4.4 | 5,285 | 5,232 | 1.0 | ||||||||||||||||||||||||
Other intangibles | 5 | 5 | 6 | -- | (16.7) | 20 | 27 | (25.9) | ||||||||||||||||||||||||
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Total noninterest expense | 1,364 | 1,323 | 1,308 | 3.1 | 4.3 | 5,305 | 5,259 | .9 | ||||||||||||||||||||||||
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|
| |||||||||||||||||||||||||||||
Income before provision and taxes | 794 | 925 | 829 | (14.2) | (4.2) | 3,343 | 3,213 | 4.0 | ||||||||||||||||||||||||
Provision for credit losses | 92 | 69 | 68 | 33.3 | 35.3 | 310 | 232 | 33.6 | ||||||||||||||||||||||||
|
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Income before income taxes | 702 | 856 | 761 | (18.0) | (7.8) | 3,033 | 2,981 | 1.7 | ||||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment | 176 | 214 | 190 | (17.8) | (7.4) | 759 | 745 | 1.9 | ||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||
Net income | 526 | 642 | 571 | (18.1) | (7.9) | 2,274 | 2,236 | 1.7 | ||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
|
|
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| |||||||||||||||||||||||||||||
Net income attributable to U.S. Bancorp | $526 | $642 | $571 | (18.1) | (7.9) | $2,274 | $2,236 | 1.7 | ||||||||||||||||||||||||
|
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| |||||||||||||||||||||||||||||
Average Balance Sheet Data | ||||||||||||||||||||||||||||||||
Loans | $146,843 | $145,921 | $141,041 | .6 | 4.1 | $144,595 | $140,875 | 2.6 | ||||||||||||||||||||||||
Other earning assets | 5,480 | 4,711 | 3,400 | 16.3 | 61.2 | 3,989 | 3,501 | 13.9 | ||||||||||||||||||||||||
Goodwill | 3,475 | 3,475 | 3,526 | -- | (1.4) | 3,475 | 3,604 | (3.6) | ||||||||||||||||||||||||
Other intangible assets | 2,435 | 2,442 | 3,034 | (.3) | (19.7) | 2,617 | 2,953 | (11.4) | ||||||||||||||||||||||||
Assets | 162,448 | 160,842 | 155,426 | 1.0 | 4.5 | 158,884 | 155,267 | 2.3 | ||||||||||||||||||||||||
Noninterest-bearing deposits | 29,186 | 28,632 | 27,935 | 1.9 | 4.5 | 27,876 | 27,691 | .7 | ||||||||||||||||||||||||
Interest-bearing deposits | 131,236 | 129,668 | 125,726 | 1.2 | 4.4 | 129,289 | 124,934 | 3.5 | ||||||||||||||||||||||||
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Total deposits | 160,422 | 158,300 | 153,661 | 1.3 | 4.4 | 157,165 | 152,625 | 3.0 | ||||||||||||||||||||||||
Total U.S. Bancorp shareholders’ equity | 11,704 | 11,668 | 11,713 | .3 | (.1) | 11,713 | 11,812 | (.8) | ||||||||||||||||||||||||
(a) preliminary data |
Consumer and Business Banking delivers products and services through banking offices, telephone servicing and sales,on-line services, direct mail, ATM processing and mobile devices. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking.
Consumer and Business Banking contributed $526 million of the Company’s net income in the fourth quarter of 2019, compared with $571 million in the fourth quarter of 2018. Total net revenue increased $21 million (1.0 percent) reflecting a decrease in net interest income of $34 million (2.2 percent) and an increase of $55 million (9.8 percent) in total noninterest income. Net interest income decreased primarily due to lower spreads on loans driven by the decline in interest rates, partially offset by growth in noninterest-bearing and interest-bearing deposit balances as well as higher loan volumes. Total noninterest income increased primarily due to higher mortgage banking revenue driven by higher production and gain on sale margins, partially offset by the reduction in ATM processing services revenue due to the sale of the Company’s ATM third-party servicing business in 2018. Total noninterest expense in the fourth quarter of 2019 increased $56 million (4.3 percent) primarily due to higher net shared services expense, reflecting the impact of technology development and investment in infrastructure supporting business growth, as well as costs to manage the business and higher production incentives in support of business growth. Partially offsetting these increases were lower FDIC assessment costs. The provision for credit losses increased $24 million (35.3 percent) primarily due to an unfavorable change in the reserve allocation, partially offset by lower net charge-offs.
4
WEALTH MANAGEMENT AND INVESTMENT SERVICES (a) |
| |||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
4Q 2019 | 3Q 2019 | 4Q 2018 | 4Q19 vs 3Q19 | 4Q19 vs 4Q18 | Full Year 2019 | Full Year 2018 | Percent Change | |||||||||||||||||||||||||
Condensed Income Statement | ||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) | $269 | $294 | $287 | (8.5 | ) | (6.3 | ) | $1,157 | $1,131 | 2.3 | ||||||||||||||||||||||
Noninterest income | 472 | 452 | 443 | 4.4 | 6.5 | 1,799 | 1,748 | 2.9 | ||||||||||||||||||||||||
Securities gains (losses), net | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Total net revenue | 741 | 746 | 730 | (.7 | ) | 1.5 | 2,956 | 2,879 | 2.7 | |||||||||||||||||||||||
Noninterest expense | 458 | 429 | 472 | 6.8 | (3.0 | ) | 1,752 | 1,778 | (1.5 | ) | ||||||||||||||||||||||
Other intangibles | 4 | 3 | 4 | 33.3 | -- | 13 | 16 | (18.8 | ) | |||||||||||||||||||||||
Total noninterest expense | 462 | 432 | 476 | 6.9 | (2.9 | ) | 1,765 | 1,794 | (1.6 | ) | ||||||||||||||||||||||
Income before provision and taxes | 279 | 314 | 254 | (11.1 | ) | 9.8 | 1,191 | 1,085 | 9.8 | |||||||||||||||||||||||
Provision for credit losses | (3 | ) | 1 | -- | nm | nm | (3 | ) | (2 | ) | (50.0 | ) | ||||||||||||||||||||
Income before income taxes | 282 | 313 | 254 | (9.9 | ) | 11.0 | 1,194 | 1,087 | 9.8 | |||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment | 71 | 78 | 64 | (9.0 | ) | 10.9 | 299 | 273 | 9.5 | |||||||||||||||||||||||
Net income | 211 | 235 | 190 | (10.2 | ) | 11.1 | 895 | 814 | 10.0 | |||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Net income attributable to U.S. Bancorp | $211 | $235 | $190 | (10.2 | ) | 11.1 | $895 | $814 | 10.0 | |||||||||||||||||||||||
Average Balance Sheet Data | ||||||||||||||||||||||||||||||||
Loans | $10,335 | $10,260 | $9,777 | .7 | 5.7 | $10,080 | $9,364 | 7.6 | ||||||||||||||||||||||||
Other earning assets | 277 | 265 | 232 | 4.5 | 19.4 | 282 | 184 | 53.3 | ||||||||||||||||||||||||
Goodwill | 1,617 | 1,617 | 1,618 | -- | (.1 | ) | 1,617 | 1,618 | (.1 | ) | ||||||||||||||||||||||
Other intangible assets | 46 | 47 | 57 | (2.1 | ) | (19.3 | ) | 49 | 63 | (22.2 | ) | |||||||||||||||||||||
Assets | 13,409 | 13,543 | 12,822 | (1.0 | ) | 4.6 | 13,330 | 12,437 | 7.2 | |||||||||||||||||||||||
Noninterest-bearing deposits | 12,354 | 13,575 | 13,723 | (9.0 | ) | (10.0 | ) | 13,195 | 14,006 | (5.8 | ) | |||||||||||||||||||||
Interest-bearing deposits | 66,553 | 65,858 | 54,329 | 1.1 | 22.5 | 62,031 | 56,000 | 10.8 | ||||||||||||||||||||||||
Total deposits | 78,907 | 79,433 | 68,052 | (.7 | ) | 16.0 | 75,226 | 70,006 | 7.5 | |||||||||||||||||||||||
Total U.S. Bancorp shareholders’ equity | 2,526 | 2,530 | 2,488 | (.2 | ) | 1.5 | 2,525 | 2,476 | 2.0 | |||||||||||||||||||||||
(a) preliminary data
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Wealth Management and Investment Services provides private banking, financial advisory services, investment management, retail brokerage services, insurance, trust, custody and fund servicing through four businesses: Wealth Management, Global Corporate Trust & Custody, U.S. Bancorp Asset Management and Fund Services.
Wealth Management and Investment Services contributed $211 million of the Company’s net income in the fourth quarter of 2019, compared with $190 million in the fourth quarter of 2018. Total net revenue increased $11 million (1.5 percent) year-over-year reflecting a decrease in net interest income of $18 million (6.3 percent) and an increase of $29 million (6.5 percent) in noninterest income. Net interest income decreased year-over-year primarily due to funding mix, partially offset by the impact of higher deposit balances. Total noninterest income increased primarily due to favorable market conditions and business growth. Total noninterest expense decreased $14 million (2.9 percent) compared with the fourth quarter of 2018 reflecting lower costs related to FDIC assessment and litigation settlements, partially offset by increased net shared services expense due to technology development and higher compensation expense, reflecting the impact of merit increases, increased staffing, and an increase in medical costs. The provision for credit losses decreased $3 million reflecting a favorable change in the reserve allocation and lower net charge-offs.
5
PAYMENT SERVICES (a) | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
4Q 2019 | 3Q 2019 | 4Q 2018 | 4Q19 vs 3Q19 | 4Q19 vs 4Q18 | Full Year 2019 | Full Year 2018 | Percent Change | |||||||||||||||||||||||||
Condensed Income Statement | ||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) | $645 | $634 | $622 | 1.7 | 3.7 | $2,493 | $2,443 | 2.0 | ||||||||||||||||||||||||
Noninterest income | 949 | 957 | 939 | (.8 | ) | 1.1 | 3,707 | 3,599 | 3.0 | |||||||||||||||||||||||
Securities gains (losses), net | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
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Total net revenue | 1,594 | 1,591 | 1,561 | .2 | 2.1 | 6,200 | 6,042 | 2.6 | ||||||||||||||||||||||||
Noninterest expense | 753 | 741 | 737 | 1.6 | 2.2 | 2,940 | 2,859 | 2.8 | ||||||||||||||||||||||||
Other intangibles | 34 | 33 | 30 | 3.0 | 13.3 | 131 | 114 | 14.9 | ||||||||||||||||||||||||
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Total noninterest expense | 787 | 774 | 767 | 1.7 | 2.6 | 3,071 | 2,973 | 3.3 | ||||||||||||||||||||||||
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Income before provision and taxes | 807 | 817 | 794 | (1.2 | ) | 1.6 | 3,129 | 3,069 | 2.0 | |||||||||||||||||||||||
Provision for credit losses | 267 | 260 | 264 | 2.7 | 1.1 | 1,108 | 1,081 | 2.5 | ||||||||||||||||||||||||
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Income before income taxes | 540 | 557 | 530 | (3.1 | ) | 1.9 | 2,021 | 1,988 | 1.7 | |||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment | 135 | 139 | 133 | (2.9 | ) | 1.5 | 505 | 497 | 1.6 | |||||||||||||||||||||||
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Net income | 405 | 418 | 397 | (3.1 | ) | 2.0 | 1,516 | 1,491 | 1.7 | |||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
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Net income attributable to U.S. Bancorp | $405 | $418 | $397 | (3.1 | ) | 2.0 | $1,516 | $1,491 | 1.7 | |||||||||||||||||||||||
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Average Balance Sheet Data | ||||||||||||||||||||||||||||||||
Loans | $34,500 | $34,044 | $32,285 | 1.3 | 6.9 | $33,566 | $31,102 | 7.9 | ||||||||||||||||||||||||
Other earning assets | 276 | 343 | 320 | (19.5 | ) | (13.8 | ) | 348 | 291 | 19.6 | ||||||||||||||||||||||
Goodwill | 2,909 | 2,825 | 2,631 | 3.0 | 10.6 | 2,839 | 2,570 | 10.5 | ||||||||||||||||||||||||
Other intangible assets | 552 | 550 | 435 | .4 | 26.9 | 538 | 406 | 32.5 | ||||||||||||||||||||||||
Assets | 40,682 | 40,171 | 37,807 | 1.3 | 7.6 | 39,743 | 36,912 | 7.7 | ||||||||||||||||||||||||
Noninterest-bearing deposits | 1,312 | 1,200 | 1,121 | 9.3 | 17.0 | 1,205 | 1,099 | 9.6 | ||||||||||||||||||||||||
Interest-bearing deposits | 115 | 117 | 111 | (1.7 | ) | 3.6 | 115 | 110 | 4.5 | |||||||||||||||||||||||
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Total deposits | 1,427 | 1,317 | 1,232 | 8.4 | 15.8 | 1,320 | 1,209 | 9.2 | ||||||||||||||||||||||||
Total U.S. Bancorp shareholders’ equity | 7,198 | 7,058 | 6,710 | 2.0 | 7.3 | 7,084 | 6,629 | 6.9 | ||||||||||||||||||||||||
(a) preliminary data
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Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services, consumer lines of credit and merchant processing.
Payment Services contributed $405 million of the Company’s net income in the fourth quarter of 2019, compared with $397 million in the fourth quarter of 2018. Total net revenue increased $33 million (2.1 percent) due to increases of $23 million (3.7 percent) in net interest income and $10 million (1.1 percent) in total noninterest income. Net interest income increased primarily due to growth in loans and loan fees, partially offset by compression on loan rates. Total noninterest income increased year-over-year mainly due to higher merchant processing services driven by higher sales volumes and merchant fees, partially offset by slightly lower credit and debit card and corporate payment products revenue. Total noninterest expense increased $20 million (2.6 percent) over the fourth quarter of 2018 principally due to higher net shared services expense to support business growth, technology development and investment in infrastructure. The provision for credit losses increased $3 million (1.1 percent) reflecting higher net charge-offs, partially offset by a favorable change in the reserve allocation.
6
TREASURY AND CORPORATE SUPPORT (a) | ||||||||||||||||||||||||||||||||
($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
4Q 2019 | 3Q 2019 | 4Q 2018 | 4Q19 vs 3Q19 | 4Q19 vs 4Q18 | Full Year 2019 | Full Year 2018 | Percent Change | |||||||||||||||||||||||||
Condensed Income Statement | ||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) | $58 | $89 | $100 | (34.8) | (42.0) | $373 | $369 | 1.1 | ||||||||||||||||||||||||
Noninterest income | 172 | 299 | 336 | (42.5) | (48.8) | 998 | 1,066 | (6.4) | ||||||||||||||||||||||||
Securities gains (losses), net | 26 | 25 | 5 | 4.0 | nm | 73 | 30 | nm | ||||||||||||||||||||||||
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Total net revenue | 256 | 413 | 441 | (38.0) | (42.0) | 1,444 | 1,465 | (1.4) | ||||||||||||||||||||||||
Noninterest expense | 394 | 221 | 327 | 78.3 | 20.5 | 1,033 | 843 | 22.5 | ||||||||||||||||||||||||
Other intangibles | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
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Total noninterest expense | 394 | 221 | 327 | 78.3 | 20.5 | 1,033 | 843 | 22.5 | ||||||||||||||||||||||||
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Income before provision and taxes | (138 | ) | 192 | 114 | nm | nm | 411 | 622 | (33.9) | |||||||||||||||||||||||
Provision for credit losses | (12 | ) | (3 | ) | 8 | nm | nm | 11 | 3 | nm | ||||||||||||||||||||||
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Income before income taxes | (126 | ) | 195 | 106 | nm | nm | 400 | 619 | (35.4) | |||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment | (122 | ) | (61 | ) | (201) | nm | 39.3 | (325) | (376) | 13.6 | ||||||||||||||||||||||
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Net income | (4 | ) | 256 | 307 | nm | nm | 725 | 995 | (27.1) | |||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests | (7 | ) | (9 | ) | (6) | 22.2 | (16.7) | (32) | (28) | (14.3) | ||||||||||||||||||||||
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Net income attributable to U.S. Bancorp | $(11 | ) | $247 | $301 | nm | nm | $693 | $967 | (28.3) | |||||||||||||||||||||||
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Average Balance Sheet Data | ||||||||||||||||||||||||||||||||
Loans | $5,929 | $5,979 | $5,782 | (.8) | 2.5 | $5,837 | $5,506 | 6.0 | ||||||||||||||||||||||||
Other earning assets | 134,946 | 133,902 | 129,551 | .8 | 4.2 | 131,481 | 127,318 | 3.3 | ||||||||||||||||||||||||
Goodwill | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Other intangible assets | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Assets | 161,372 | 159,770 | 152,182 | 1.0 | 6.0 | 156,980 | 149,597 | 4.9 | ||||||||||||||||||||||||
Noninterest-bearing deposits | 2,568 | 2,326 | 2,522 | 10.4 | 1.8 | 2,435 | 2,462 | (1.1) | ||||||||||||||||||||||||
Interest-bearing deposits | 7,045 | 7,635 | 6,259 | (7.7) | 12.6 | 8,734 | 4,309 | nm | ||||||||||||||||||||||||
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Total deposits | 9,613 | 9,961 | 8,781 | (3.5) | 9.5 | 11,169 | 6,771 | 65.0 | ||||||||||||||||||||||||
Total U.S. Bancorp shareholders’ equity | 21,290 | 21,657 | 19,310 | (1.7) | 10.3 | 20,902 | 18,383 | 13.7 | ||||||||||||||||||||||||
(a) preliminary data
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Treasury and Corporate Supportincludes the Company’s investment portfolios, funding, capital management, interest rate risk management, income taxes not allocated to the business lines, including most investments intax-advantaged projects, and the residual aggregate of those expenses associated with corporate activities that are managed on a consolidated basis.
Treasury and Corporate Support recorded a net loss of $(11) million in the fourth quarter of 2019, compared with net income of $301 million in the fourth quarter of 2018. Total net revenue decreased $185 million (42.0 percent) year-over-year driven by decreases in net interest income of $42 million (42.0 percent) and $143 million (41.9 percent) in total noninterest income. Net interest income decreased primarily due to funding mix, partially offset by growth in the investment portfolio. Total noninterest income decreased year-over-year primarily due to notable items in both quarters. The fourth quarter of 2019 notable item was for an increased derivative liability related to Visa shares previously sold by the Company, while fourth quarter of 2018 notable items related to the gain on sale of the Company’s ATM servicing business, offset by certain asset impairments. The impact of the notable items is partially offset by a gain on the sale of a loan portfolio and an increase in gains on the sale of securities. Total noninterest expense increased $67 million (20.5 percent) year-over-year primarily due to notable items booked in both quarters. Included in the fourth quarter are notable items related to severance charges and other accruals in 2019 and severance charges and accruals of legal matters in 2018. In addition to the notable items, noninterest expense increased due to higher compensation expense, reflecting the impact of increased staffing and merit increases, and higher implementation costs of capital investments to support business growth. These increases were partially offset by lower net shared services expense and lower costs related totax-advantaged projects. The provision for credit losses decreased $20 million reflecting a favorable change in the reserve allocation and lower net charge-offs.
7