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1996 SUPPLEMENTAL FINANCIAL STATEMENTS
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RESTATED 1996 FINANCIAL STATEMENTS REFLECTING THE
MERGER OF U. S. BANCORP INTO FIRST BANK SYSTEM, INC.
[Logo]U.S. BANCORP
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U.S. BANCORP
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CONTENTS
CONSOLIDATED
FINANCIAL STATEMENTS 2
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS 6
REPORT OF
INDEPENDENT AUDITORS 28
FIVE-YEAR CONSOLIDATED
FINANCIAL STATEMENTS 31
QUARTERLY CONSOLIDATED
FINANCIAL DATA 33
SUPPLEMENTAL FINANCIAL
DATA AND TABLES 36
EXHIBITS 11 AND 12 48
SHAREHOLDER
INQUIRIES BACK COVER
[Map]
/ / BANKING REGION
- CORPORATE TRUST OFFICES
- -TRIANGLE- LEASING OFFICES
ABOUT THE COMPANY
The new U.S. Bancorp is a multistate bank holding company headquartered in
Minneapolis, Minnesota. Through our bank and other subsidiaries, we offer a wide
array of financial products and services to individuals, businesses and
institutions.
On August 1, 1997, First Bank System, Inc. ("FBS") of Minneapolis acquired
U. S. Bancorp of Portland, Oregon, and adopted the U.S. Bancorp name. Until the
two companies are fully integrated in 1998, customers will continue to recognize
our banking offices by the names First Bank, Colorado National Bank or U.S.
Bank. First Trust and many of our other affiliates also will keep their existing
names in the near term. All of our banking locations eventually will conduct
business as U.S. Bank.
As of the merger date, the new U.S. Bancorp was the 14th largest U.S.
commercial bank holding company, with assets of approximately $70 billion. Our
market capitalization of more than $20 billion placed us among the top 10 bank
holding companies.
U.S. Bancorp, through its bank and other subsidiaries, is a market leader
serving millions of customers in 17 contiguous states from the Midwest to the
Rocky Mountains to the Pacific Northwest. Our banking customers have choices
of convenient, multiple distribution channels, including nearly 1,000
branches, more than 4,500 automated teller machines, 24-hour telephone
service centers, and PC banking. Nationally, we're a leader in specialty
businesses such as corporate trust, electronic card payment systems, and
leasing. And we offer investment products that have ranked among the best
available.*
U.S. Bancorp is listed on the New York Stock Exchange under the ticker
symbol USB. Our home page on the World Wide Web is located at
http://www.fbs.com, and additional information for U.S. Bank customers is
available at http://www.usbank.com.
* Not FDIC insured, no guarantee, may lose value.
Note: This report provides restated 1996 supplemental financial statements
reflecting the August 1, 1997, merger of U. S. Bancorp into FBS. The transaction
was accounted for as a pooling-of-interests. Accordingly, the accompanying
supplemental consolidated financial information reflects the results of
operations of the two companies on a combined basis for all periods presented.
For copies of the 1996 annual reports for U. S. Bancorp and FBS, please call
Investor and Corporate Relations, (612) 973-2434.
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FINANCIAL SUMMARY
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Percent Change
(Dollars in Millions, Except Per Share Data) 1996 1995 1995-1996
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Income before nonrecurring items . . . . . . . . . . . . . . . . $1,142.1 $ 953.5 19.8%
Nonrecurring items . . . . . . . . . . . . . . . . . . . . . . . 76.6 (56.4) *
-----------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,218.7 $ 897.1 35.8
-----------------------
-----------------------
PER COMMON SHARE
Primary net income . . . . . . . . . . . . . . . . . . . . . . . $ 4.74 $ 3.51 35.0
Fully diluted net income . . . . . . . . . . . . . . . . . . . . 4.69 3.46 35.5
Earnings on a cash basis (fully diluted)** . . . . . . . . . . . 5.20 3.76 38.3
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . 1.65 1.45 13.8
Common shareholders' equity. . . . . . . . . . . . . . . . . . . 22.82 21.11 8.1
PER COMMON SHARE BEFORE NONRECURRING ITEMS
Primary income . . . . . . . . . . . . . . . . . . . . . . . . . 4.44 3.74 18.7
Fully diluted income . . . . . . . . . . . . . . . . . . . . . . 4.39 3.68 19.3
Earnings on a cash basis (fully diluted)** . . . . . . . . . . . 4.90 3.98 23.1
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FINANCIAL RATIOS
Return on average assets . . . . . . . . . . . . . . . . . . . . 1.81% 1.42% *
Return on average common equity. . . . . . . . . . . . . . . . . 21.1 17.2 *
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . . 53.0 59.0 *
Net interest margin (taxable-equivalent basis) . . . . . . . . . 5.05 5.10 *
SELECTED FINANCIAL RATIOS BEFORE NONRECURRING ITEMS
Return on average assets . . . . . . . . . . . . . . . . . . . . 1.69 1.51 *
Return on average common equity. . . . . . . . . . . . . . . . . 19.8 18.3 *
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . . 52.3 56.3 *
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-----------------------
AT YEAR END
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,355 $ 49,345 6.1%
Allowance for credit losses. . . . . . . . . . . . . . . . . . . 993 908 9.4
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,749 65,668 6.2
Total shareholders' equity . . . . . . . . . . . . . . . . . . . 5,763 5,342 7.9
Tangible common equity to total assets***. . . . . . . . . . . . 6.7% 6.9% *
Tier 1 capital ratio . . . . . . . . . . . . . . . . . . . . . . 7.6 7.4 *
Total risk-based capital ratio . . . . . . . . . . . . . . . . . 11.9 11.4 *
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . 7.5 7.0 *
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* NOT MEANINGFUL.
** CALCULATED BY ADDING AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS TO
NET INCOME.
*** DEFINED AS COMMON EQUITY LESS GOODWILL AS A PERCENTAGE OF TOTAL ASSETS LESS
GOODWILL.
U.S. Bancorp 1
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CONSOLIDATED BALANCE SHEET
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At December 31 (In Millions, Except Shares) 1996 1995
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ASSETS
Cash and due from banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,813 $ 4,253
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 255
Securities purchased under agreements to resell. . . . . . . . . . . . . . . . . . . . . 803 516
Trading account securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231 366
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,473 6,423
Held-to-maturity securities (fair value: 1996 - $811; 1995 - $886) . . . . . . . . . . . 797 865
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,355 49,345
Less allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 993 908
----------------------
Net loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,362 48,437
Bank premises and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,018 1,047
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 391
Customers' liability on acceptances. . . . . . . . . . . . . . . . . . . . . . . . . . . 497 530
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,283 2,585
----------------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $69,749 $65,668
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LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,344 $12,367
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,012 33,412
----------------------
Total deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,356 45,779
Federal funds purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,672 2,718
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . 1,729 1,196
Other short-term funds borrowed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,191 4,070
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,369 4,583
Company-obligated mandatorily redeemable preferred securities of subsidiary trusts
holding solely the junior subordinated debentures of the parent company. . . . . . . . 600 --
Acceptances outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497 530
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,572 1,450
----------------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,986 60,326
Shareholders' equity:
Preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 253
Common stock, par value $1.25 a share - authorized 500,000,000 shares;
issued: 1996 - 252,883,487 shares; 1995 - 249,329,637 shares . . . . . . . . . . . . 316 312
Capital surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,929 1,868
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,809 3,275
Unrealized gain on securities, net of tax. . . . . . . . . . . . . . . . . . . . . . . 5 32
Less cost of common stock in treasury: 1996 - 6,877,497 shares;
1995 - 8,297,756 shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (446) (398)
----------------------
Total shareholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . . . 5,763 5,342
----------------------
Total liabilities and shareholders' equity. . . . . . . . . . . . . . . . . . . $69,749 $65,668
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2 U.S. Bancorp
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CONSOLIDATED STATEMENT OF INCOME
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Year Ended December 31 (In Millions, Except Per-Share Data) 1996 1995 1994
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INTEREST INCOME
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,537.7 $ 4,373.4 $ 3,686.6
Securities:
Taxable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420.5 420.3 535.1
Exempt from federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 71.0 59.8 62.8
Other interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85.2 67.3 63.5
------------------------------------------
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,114.4 4,920.8 4,348.0
INTEREST EXPENSE
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,441.3 1,416.7 1,121.1
Federal funds purchased and repurchase agreements. . . . . . . . . . . . . . . . . . . 197.9 218.2 190.8
Other short-term funds borrowed. . . . . . . . . . . . . . . . . . . . . . . . . . . . 192.3 189.8 68.3
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303.8 273.4 227.2
Company-obligated mandatorily redeemable preferred securities of subsidiary trusts
holding solely the junior subordinated debentures of the parent company. . . . . . . 2.8 -- --
------------------------------------------
Total interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,138.1 2,098.1 1,607.4
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Net interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,976.3 2,822.7 2,740.6
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271.2 239.1 243.7
------------------------------------------
Net interest income after provision for credit losses. . . . . . . . . . . . . . . . . 2,705.1 2,583.6 2,496.9
NONINTEREST INCOME
Service charges on deposit accounts. . . . . . . . . . . . . . . . . . . . . . . . . . 377.2 345.0 346.7
Credit card fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354.1 303.9 248.9
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302.3 241.1 224.5
Investment products fees and commissions . . . . . . . . . . . . . . . . . . . . . . . 59.7 49.8 56.4
Securities gains (losses). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.8 3.0 (124.2)
Termination fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190.0 -- --
State income tax refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65.0 -- --
Gain on sale of mortgage banking operations, branches and other assets . . . . . . . . 71.4 39.9 62.9
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345.2 330.6 299.7
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Total noninterest income. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,785.7 1,313.3 1,114.9
NONINTEREST EXPENSE
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 964.5 927.5 974.9
Employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218.2 209.9 224.4
Net occupancy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179.4 183.4 190.7
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175.2 184.5 184.4
Goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . 130.1 76.0 72.5
Other personnel costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.4 62.4 60.8
Advertising and marketing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.2 59.2 65.1
Telephone. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.2 58.4 61.1
Professional services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58.0 59.2 65.9
FDIC insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.9 64.5 105.7
SAIF special assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.3 -- --
Merger, integration, and resizing. . . . . . . . . . . . . . . . . . . . . . . . . . . 88.1 98.9 166.2
Merger-related severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 56.5
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454.9 492.0 503.9
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Total noninterest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 2,546.4 2,475.9 2,732.1
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Income from continuing operations before income taxes. . . . . . . . . . . . . . . . . 1,944.4 1,421.0 879.7
Applicable income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 725.7 523.9 311.5
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Income from continuing operations. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,218.7 897.1 568.2
Loss from discontinued operations. . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- (8.5)
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Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,218.7 $ 897.1 $ 559.7
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Net income applicable to common equity . . . . . . . . . . . . . . . . . . . . . . . . $ 1,200.3 $ 877.4 $ 534.9
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EARNINGS PER COMMON SHARE
Average common and common equivalent shares. . . . . . . . . . . . . . . . . . . . . . 253,240,035 249,621,299 251,634,478
Income from continuing operations. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.74 $ 3.51 $ 2.16
Loss from discontinued operations. . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- (.03)
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Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.74 $ 3.51 $ 2.13
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
U.S. Bancorp 3
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CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
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Unrealized
Gains/
Common (Losses) on
Shares Preferred Common Capital Retained Securities, Treasury
(In Millions, Except Shares) Outstanding* Stock Stock Surplus Earnings Net of Tax Stock** Total
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BALANCE DECEMBER 31, 1993. . . . . . . . . . 244,023,773 $ 428.1 $ 311.8 $1,932.3 $2,617.8 $ 65.2 $(169.4) $5,185.8
Net income . . . . . . . . . . . . . . . . . 559.7 559.7
Dividends declared:
Preferred. . . . . . . . . . . . . . . . . (24.8) (24.8)
Common . . . . . . . . . . . . . . . . . . (276.5) (276.5)
Purchase and retirement of treasury stock. . (8,813,879) (6.7) (103.0) (70.1) (120.8) (300.6)
Repurchase of stock warrants . . . . . . . . (2.3) (2.3)
Issuance of common stock:
Acquisition of Boulevard Bancorp, Inc. . 6,227,649 1.9 54.9 149.4 206.2
Acquisition of Far West Federal
Savings Bank . . . . . . . . . . . . . . 1,819,807 2.3 13.9 12.6 (1.0) 27.8
Other acquisitions . . . . . . . . . . . . 1,385,806 (13.9) 48.1 34.2
Dividend reinvestment. . . . . . . . . . . 597,937 .5 11.4 (1.2) 6.3 17.0
Stock option and stock purchase plans. . . 2,751,619 1.9 19.7 (17.6) 42.7 46.7
Stock warrants exercised . . . . . . . . . 687,175 .2 1.1 (10.4) 17.0 7.9
Redemption of preferred stock. . . . . . . . (160.0) (7.0) (167.0)
Common stock issued to redeem
subordinated debt. . . . . . . . . . . . . 6,560 .1 .1
Change in unrealized gains/(losses). . . . . (209.3) (209.3)
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BALANCE DECEMBER 31, 1994. . . . . . . . . . 248,686,447 268.1 311.9 1,928.1 2,768.6 (145.1) (26.7) 5,104.9
Net income . . . . . . . . . . . . . . . . . 897.1 897.1
Dividends declared:
Preferred. . . . . . . . . . . . . . . . . (19.7) (19.7)
Common . . . . . . . . . . . . . . . . . . (327.4) (327.4)
Purchase and retirement of treasury stock. . (16,888,542) (6.2) (169.6) (545.2) (721.0)
Issuance of common stock:
Acquisitions . . . . . . . . . . . . . . . 2,788,619 .3 4.3 (3.7) 104.7 105.6
Dividend reinvestment. . . . . . . . . . . 505,138 .3 8.0 9.3 17.6
Stock option and stock purchase plans. . . 2,845,176 1.6 51.1 (36.3) 54.6 71.0
Stock warrants exercised . . . . . . . . . 42,039 (1.3) 1.6 .3
Redemption/conversion of preferred stock . . 92,479 (14.9) (2.2) 3.9 (13.2)
Common stock issued to redeem
subordinated debt. . . . . . . . . . . . . 2,960,525 3.7 46.0 49.7
Change in unrealized gains/(losses). . . . . 177.0 177.0
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BALANCE DECEMBER 31, 1995. . . . . . . . . . 241,031,881 253.2 311.6 1,867.9 3,275.1 31.9 (397.8) 5,341.9
Net income . . . . . . . . . . . . . . . . . 1,218.7 1,218.7
Dividends declared:
Preferred. . . . . . . . . . . . . . . . . (18.4) (18.4)
Common . . . . . . . . . . . . . . . . . . (406.9) (406.9)
Purchase and retirement of treasury stock. . (26,146,456) (17.0) (688.2) (784.9) (1,490.1)
Issuance of common stock:
Acquisitions . . . . . . . . . . . . . . . 23,751,183 19.8 677.2 (44.4) 384.2 1,036.8
Dividend reinvestment. . . . . . . . . . . 312,878 .2 6.1 11.5 17.8
Stock option and stock purchase plans. . . 3,494,810 1.5 66.1 (96.5) 119.7 90.8
Redemption/conversion of preferred stock . . 3,561,694 (103.2) (118.2) 221.4 --
Change in unrealized gains/(losses). . . . . (27.2) (27.2)
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BALANCE DECEMBER 31, 1996. . . . . . . . . . 246,005,990 $ 150.0 $316.1 $1,929.1 $3,809.4 $ 4.7 $ (445.9) $5,763.4
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* DEFINED AS TOTAL COMMON SHARES LESS COMMON STOCK HELD IN TREASURY.
** ENDING TREASURY SHARES WERE 6,877,497 AT DECEMBER 31, 1996, 8,297,756 AT
DECEMBER 31, 1995, AND 767,000 AT DECEMBER 31, 1994.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4 U.S. Bancorp
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CONSOLIDATED STATEMENT OF CASH FLOWS
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Year Ended December 31 (In Millions) 1996 1995 1994
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OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,218.7 $ 897.1 $ 559.7
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271.2 239.1 243.7
(Gains) losses on available-for-sale securities. . . . . . . . . . . . . . . . . . . . (20.8) (3.0) 120.4
Depreciation and amortization of bank premises and equipment . . . . . . . . . . . . . 150.2 158.9 156.1
Provision for deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 51.0 23.5 (48.8)
Amortization of goodwill and other intangible assets . . . . . . . . . . . . . . . . . 130.1 75.9 72.5
Merger, integration, and resizing. . . . . . . . . . . . . . . . . . . . . . . . . . . 88.1 98.9 222.7
Gains on sales of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (71.4) (39.9) (62.9)
Changes in operating assets and liabilities, excluding the effects of purchase
acquisitions:
Decrease (increase) in trading account securities. . . . . . . . . . . . . . . . . . 135.0 (129.7) 48.4
Decrease in loans held for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . 87.9 129.2 1,133.5
(Increase) decrease in accrued receivables . . . . . . . . . . . . . . . . . . . . . (157.9) (28.3) (70.0)
Increase (decrease) in accrued liabilities . . . . . . . . . . . . . . . . . . . . . 126.7 106.7 (24.9)
Other - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (163.5) (77.7) 13.5
---------------------------------------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . 1,845.3 1,450.7 2,363.9
---------------------------------------
INVESTING ACTIVITIES
Net cash (used) provided by:
Interest-bearing deposits with banks . . . . . . . . . . . . . . . . . . . . . . . . . (4.1) 30.2 78.7
Loans outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,019.1) (3,376.9) (3,300.2)
Securities purchased under agreements to resell. . . . . . . . . . . . . . . . . . . . (247.5) 226.6 (218.3)
Available-for-sale securities:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,694.8 3,052.8 2,217.2
Maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,120.9 1,138.3 1,518.7
Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,419.1) (1,842.8) (1,990.5)
Investment securities:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 3.9 --
Maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114.2 367.2 1,034.4
Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (53.2) (709.5)
Proceeds from sales of other real estate . . . . . . . . . . . . . . . . . . . . . . . . 127.9 120.2 156.5
Proceeds from sales of bank premises and equipment . . . . . . . . . . . . . . . . . . . 44.5 90.3 23.3
Purchases of bank premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . (165.4) (137.5) (193.8)
Sales of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147.9 507.1 124.2
Purchases of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19.5) (4.6) (572.8)
Cash and cash equivalents of acquired subsidiaries . . . . . . . . . . . . . . . . . . . 245.8 55.4 98.5
Acquisitions, net of cash received . . . . . . . . . . . . . . . . . . . . . . . . . . . (38.3) (113.2) 52.6
Sales of subsidiary operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70.3) 23.1 152.7
Other - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40.3) (26.6) 10.4
---------------------------------------
Net cash provided (used) by investing activities . . . . . . . . . . . . . . . . . . 472.4 60.3 (1,517.9)
---------------------------------------
FINANCING ACTIVITIES
Net cash provided (used) by:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78.4 (118.7) (4,102.8)
Federal funds purchased and securities sold under agreements to repurchase . . . . . . (697.6) (1,791.9) 2,438.4
Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (868.3) 2,115.9 96.9
Sales of deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (858.0) --
Purchases of deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 11.1
Long-term debt transactions:
Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,004.0 1,726.6 2,509.7
Principal payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,238.1) (1,184.6) (1,582.8)
Issuance of Company-obligated mandatorily redeemable preferred securities of subsidiary
trusts holding solely the junior subordinated debentures of the parent company . . . . 600.0 -- --
Redemption of preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (13.2) (167.0)
Proceeds from dividend reinvestment, stock option, and stock purchase plans. . . . . . . 108.6 88.6 63.7
Repurchase of common stock and stock warrants. . . . . . . . . . . . . . . . . . . . . . (1,490.1) (721.0) (302.9)
Stock warrants exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- .3 7.9
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (414.8) (344.5) (296.8)
---------------------------------------
Net cash used by financing activities. . . . . . . . . . . . . . . . . . . . . . . . (1,917.9) (1,100.5) (1,324.6)
---------------------------------------
Change in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . 399.8 410.5 (478.6)
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . 4,508.3 4,097.8 4,576.4
---------------------------------------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . $ 4,908.1 $ 4,508.3 $ 4,097.8
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
U.S. Bancorp 5
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A SIGNIFICANT ACCOUNTING POLICIES
U.S. Bancorp, formerly known as First Bank System, Inc., (the "Company") or
("USB") is the organization created by the merger of First Bank System, Inc.
and U.S. Bancorp. The Company is a regional multibank holding company that
provides banking and other financial services principally to domestic
markets. See Note C for information regarding the merger. The Company has
five primary businesses that operate principally in the 17 states of
Minnesota, Oregon, Washington, Colorado, California, Idaho, Nebraska, North
Dakota, Nevada, South Dakota, Montana, Iowa, Illinois, Utah, Wisconsin,
Kansas, and Wyoming. Retail Banking delivers products and services to the
broad consumer market and small-businesses through branch offices,
telemarketing, direct mail, and automated teller machines ("ATMs"). Payment
Systems includes consumer and business credit cards, corporate and purchasing
card services, card-accessed secured and unsecured lines of credit, ATM
processing and merchant processing. Business Banking and Private Financial
Services includes middle-market banking services, private banking and
personal trust. Commercial Banking provides lending, treasury management, and
other financial services to middle-market, large corporate, and mortgage
banking companies. Corporate Trust and Institutional Financial Services
includes institutional and corporate trust services, investment management
services, and a full-service brokerage company.
BASIS OF PRESENTATION The consolidated financial statements include the accounts
of the Company and its subsidiaries. The consolidation eliminates all
significant intercompany accounts and transactions. Certain items in prior
periods have been reclassified to conform to the current presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual experience could differ from those estimates.
SECURITIES
TRADING ACCOUNT SECURITIES Debt and equity securities held for resale in
anticipation of short-term market movements are classified as trading account
securities and reported at fair value. Realized and unrealized gains or losses
are recorded in noninterest income.
AVAILABLE-FOR-SALE SECURITIES These securities are not trading account
securities but may be sold before maturity in response to changes in interest
rates, prepayment risk, and funding sources or terms, or to meet liquidity
needs. They are carried at fair value with unrealized net gains or losses
reported in shareholders' equity. When sold, the amortized cost of the specific
securities is used to compute the gain or loss.
HELD-TO-MATURITY SECURITIES Included in held-to-maturity securities are those
securities which management has the positive intent and ability to hold to
maturity. These securities are stated at cost, as adjusted for accretion of
discounts or amortization of premiums, computed by the interest method. The
adjusted cost of the specific security sold is used to compute the gains or
losses on the sale.
LOANS
Loans are reported net of unearned income. Interest income is accrued on the
unpaid principal balances. Loan and commitment fees are deferred and recognized
over the loan and/or commitment period as yield adjustments.
ALLOWANCE FOR CREDIT LOSSES Management determines the adequacy of the allowance
based on evaluations of the loan portfolio and related off-balance sheet
commitments, recent loss experience, and other pertinent factors, including
economic conditions. This evaluation is inherently subjective as it requires
estimates, including amounts of future cash collections expected on nonaccrual
loans that may be susceptible to significant change. The allowance for credit
losses relating to impaired loans is based on the loans' observable market
price, the collateral for certain collateral-dependent loans, or the discounted
cash flows using the loans' effective interest rate. The allowance is increased
through provisions charged to operating earnings and reduced by net charge-offs.
NONACCRUAL LOANS Generally loans (including impaired loans) are placed on
nonaccrual status when the collection of interest or principal has become 90
days past due or is otherwise considered doubtful. When a loan is placed on
nonaccrual status, unpaid interest is reversed. Future interest payments are
generally applied against principal.
LEASES Certain subsidiaries engage in both direct and leveraged lease financing.
The net investment in direct financing leases is the sum of all minimum lease
payments and estimated residual values, less unearned income and investment tax
credits. Unearned income is added to interest income over the terms of the
leases to produce a level yield.
The investment in leveraged leases is the sum of all lease payments (less
nonrecourse debt payments) plus estimated residual values, less unearned income.
Unearned income is added to loan interest income over the positive years of the
net investment.
6 U.S. Bancorp
LOANS AND MORTGAGES HELD FOR SALE These loans are carried at the lower of cost
or market value as determined on an aggregate basis by type of loan.
OTHER REAL ESTATE Other real estate ("ORE"), which is included in other assets,
is property acquired through foreclosure or other proceedings. ORE is initially
recorded at fair value and carried at the lower of cost or fair value, less
estimated selling costs. The property is evaluated regularly and any decreases
in the carrying amount are included in noninterest expense.
DERIVATIVE FINANCIAL INSTRUMENTS
INTEREST RATE SWAPS AND CONTRACTS The Company uses interest rate swaps and
contracts (forwards, options, caps and floors) to manage its interest rate risk,
as a financial intermediary, and in its trading operations. The Company does not
enter into these contracts for speculative purposes. Income or expense on swaps
and contracts designated as hedges of assets, liabilities or commitments is
recorded as an adjustment to interest income or expense. If the swap or contract
is terminated, the gain or loss is deferred and amortized over the remaining
life of the underlying asset or liability. If the hedged instrument is disposed
of, the swap or contract agreement is marked to market with any resulting gain
or loss included with the gain or loss from the disposition. The initial
bid/offer spread on intermediated swaps is deferred and recognized in trading
account profits and commissions over the life of the agreement. Intermediated
swaps and all other interest rate contracts are marked to market and resulting
gains or losses are recorded in trading account profits and commissions.
OTHER SIGNIFICANT POLICIES
BANK PREMISES AND EQUIPMENT Bank premises and equipment are stated at cost less
accumulated depreciation and amortized primarily on a straight-line method
basis.
Capital leases, less accumulated amortization, are included in bank
premises and equipment. The lease obligations are included in long-term debt.
Capitalized leases are amortized on a straight-line basis over the lease term
and the amortization is included in depreciation expense.
INTANGIBLE ASSETS Goodwill, the price paid over the book value of acquired
businesses, is included in other assets and is amortized over periods ranging up
to 25 years. Other intangible assets are amortized over their estimated useful
lives, which range from seven to fifteen years, using straight-line and
accelerated methods, as appropriate.
INCOME TAXES Deferred taxes are recorded to reflect the tax consequences on
future years of differences between the tax bases of assets and liabilities and
the financial reporting amounts at each year-end.
STATEMENT OF CASH FLOWS For the purposes of reporting cash flows, cash
equivalents include cash and due from banks and federal funds sold.
STOCK-BASED COMPENSATION The Company grants stock options for a fixed number of
shares to employees with an exercise price equal to the fair value of the shares
at the date of grant. The Company accounts for stock option grants in accordance
with APB Opinion No. 25, "Accounting for Stock Issued to Employees," and
accordingly recognizes no compensation expense for the stock option grants.
PER SHARE CALCULATIONS Primary earnings per share is computed by dividing net
income (less preferred stock dividends) by the average number of common shares
and dilutive common stock equivalents outstanding during the year. To compute
the dilutive effect of restricted common shares, the treasury stock method is
applied to the unvested portion of the shares granted and the related
unamortized expense. Fully diluted earnings per share computations assume the
conversion of the Series 1991A preferred stock during the period that the stock
was outstanding.
NOTE B ACCOUNTING CHANGES
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset is not recoverable. During 1996, the Company
recorded a $24.1 million adjustment to the carrying value of certain bank
premises following a decision to sell several buildings in connection with the
streamlining of the branch distribution network. See Note L for further
discussion.
The Company also performed an evaluation of those intangible assets not
covered by SFAS 121 and recorded a charge of $29.5 million to reduce the
carrying value of credit card holder and core deposit intangibles to their fair
value. The Company performed this analysis of the fair value following its
reassessment of business alternatives for a segment of its credit card portfolio
and a change in the mix of deposits at certain acquired entities, respectively.
ACCOUNTING FOR STOCK-BASED COMPENSATION SFAS 123, "Accounting for Stock-Based
Compensation," establishes a new fair value based accounting method for
stock-based compensation plans. As permitted by the Statement, the Company
continues to apply the accounting provisions of APB 25, "Accounting for Stock
Issued to Employees," in determining net income. Refer to Note M for the
required pro forma disclosures had SFAS 123 been applied.
U.S. Bancorp 7
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES SFAS 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," addresses whether the transfer of
financial assets should be accounted for as a sale and removed from the balance
sheet, or as a financing recognized as a borrowing. The Statement uses a
"financial components" approach which focuses on control to determine whether
assets have been sold. If the entity has surrendered control over the
transferred assets, the transaction is considered a sale. Control is considered
surrendered only if the seller has no legal right to the assets, even in
bankruptcy; the buyer has the right to pledge or exchange the assets; and the
seller does not maintain effective control over the assets through an agreement
to repurchase or redeem them. SFAS 125 is effective for transactions occurring
after December 31, 1996, and is to be applied prospectively, with earlier or
retroactive application not permitted. The adoption of SFAS 125 is not expected
to have a material effect on the Company.
NOTE C BUSINESS COMBINATIONS AND DIVESTITURES
U.S. BANCORP On August 1, 1997, First Bank System, Inc. ("FBS") issued 109.9
million common shares to acquire U.S. Bancorp ("USBC") and amended its
Certificate of Incorporation to increase the number of common shares which it
has authority to issue from 200 million shares to 500 million shares. As of the
acquisition date, the combined institution, now known as U.S. Bancorp, had
approximately $70 billion in assets, $49 billion in deposits and served nearly
four million households and 475,000 businesses in 17 contiguous states from
Illinois to Washington. The Company exchanged .755 shares of its common stock
for each share of USBC common stock. USBC's outstanding stock options also were
converted into stock options for the Company's common stock. In addition, each
outstanding share of USBC cumulative preferred stock was converted into one
share of preferred stock of the combined company having substantially identical
terms. The transaction was accounted for as a pooling-of-interests. Accordingly,
the Company's financial statements have been restated for all periods prior to
the acquisition to include the accounts and operations of USBC. These
supplemental financial statements, giving retroactive effect to the merger of
USBC, will become the Company's historical financial statements upon issuance of
its quarterly financial statements for the period ending September 30, 1997.
Operating results of FBS and USBC individually, as previously reported,
and the combined company, reflecting certain reclassifications to conform to
the current presentation, for the three years ended December 31, 1996, were:
Year ended December 31
-----------------------------
(In Millions) 1996 1995 1994
- --------------------------------------------------------------------------------
FBS
Net interest income . . . . . . . . . . . . . . .$1,533.0 $1,440.2 $1,419.4
Loss from discontinued operations . . . . . . . . -- -- 8.5
Net income. . . . . . . . . . . . . . . . . . . . 739.8 568.1 305.0
UBC
Net interest income . . . . . . . . . . . . . . . 1,466.6 1,399.4 1,335.7
Net income. . . . . . . . . . . . . . . . . . . . 478.9 329.0 254.7
Combined Company
Net interest income . . . . . . . . . . . . . . . 2,976.3 2,822.7 2,740.6
Loss from discontinued operations . . . . . . . . -- -- 8.5
Net income. . . . . . . . . . . . . . . . . . . . 1,218.7 897.1 559.7
- --------------------------------------------------------------------------------
CALIFORNIA BANCSHARES, INC. On June 6, 1996, the Company acquired California
Bancshares, Inc. ("CBI"), a holding company for a multi-bank commercial banking
operation serving the East San Francisco Bay Area and the Central Valley of
Northern California. CBI had $1.6 billion in assets and $1.4 billion in
deposits. The total value of the transaction, accounted for as a purchase, was
approximately $325 million. Pro forma results of operations have not been
presented as the effects of the acquisition were not significant to the
Company's 1996 results of operations.
FIRSTIER FINANCIAL, INC. On February 16, 1996, the Company issued 16.5 million
shares to complete its acquisition of Omaha-based FirsTier Financial, Inc.
("FirsTier"). FirsTier had $3.7 billion in assets, $2.9 billion in deposits, and
63 offices in Nebraska and Iowa. Under terms of the purchase agreement, the
Company exchanged .8829 shares of its common stock for each common share of
FirsTier. In addition, FirsTier's outstanding stock options were converted into
stock options for the Company's common stock.
The acquisition of FirsTier was accounted for under the purchase method
of accounting, and accordingly, the purchase price of $717 million was
allocated to assets acquired and liabilities assumed based on their fair
market values at the date of acquisition. The excess of the purchase price
over the fair market values of net assets acquired was recorded as goodwill.
Goodwill of $286 million will be amortized over an average of 24 years and
core deposit intangibles of $63 million will be amortized over the estimated
lives of the deposits of approximately 10 years. The results of operations of
FirsTier have been included in the Company's Consolidated Statement of Income
since the date of acquisition. Pro forma results of operations have not been
presented as the effects of the acquisition were not significant to the
Company's 1996 results of operations.
8 U.S. Bancorp
CORPORATE TRUST BUSINESSES During the fourth quarter of 1995 and the first
quarter of 1996 the Company acquired the corporate trust business of BankAmerica
Corporation. After the acquisition, the Company became one of the nation's
leading providers of domestic corporate trust services. On January 31, 1997, the
Company completed its acquisition of the bond indenture services and paying
agency business of Comerica Incorporated. This business serves approximately 860
municipal and corporate clients with about 2,400 bond issues.
WEST ONE BANCORP In December 1995, the Company acquired West One Bancorp ("West
One"), a regional financial services company headquartered in Boise, Idaho. West
One had $9.2 billion in assets, $7.0 billion in deposits and 227 branches in
Oregon, Washington, Idaho and Utah. The transaction was accounted for as a
pooling-of-interests. Accordingly, the Company's financial statements have been
restated for all periods prior to the acquisition to include the accounts and
operations of West One.
SALE OF MORTGAGE BANKING OPERATIONS, BRANCHES AND OTHER ASSETS During 1996,
the Company sold its servicing and mortgage loan production business to three
parties. Bank of America, fsb, a subsidiary of BankAmerica Corporation,
purchased approximately $14 billion in mortgage servicing rights. Columbia
National, Inc., of Maryland, and Knutson Mortgage Co., of Minnesota, agreed
to purchase the Company's loan production business. The Company now delivers
mortgage loan products through bank branches and telemarketing. These
transactions resulted in a net gain of $45.8 million. In addition, the
Company recognized $3.0 million of net losses on credit card portfolio sales
during 1996.
In addition, gains in 1995 included: a $31.0 million gain on the sale of
63 branches; a $5.5 million gain on the sale of affinity card portfolios;
and, a $3.0 million gain on sales of adjustable-rate mortgage loans and
student loans.
As part of the regulatory approval process for the West One acquisition,
the Company divested 31 branches during 1996, primarily in Oregon, with deposits
of approximately $700 million and loans of approximately $400 million. The
Company recognized a pre-tax gain of $28.8 million related to this transaction.
FIRST INTERSTATE BANCORP On November 6, 1995, the Company and First Interstate
Bancorp ("First Interstate") announced that they had entered into a definitive
agreement whereby the Company would exchange 2.6 shares of its common stock for
each share of First Interstate common stock. On January 24, 1996, First
Interstate announced that it had terminated the merger agreement with the
Company and had entered into a definitive agreement with Wells Fargo & Company
("Wells Fargo"). Under the terms of a settlement agreement, the Company received
$125 million on January 24, 1996. The Company received an additional $75 million
on April 1, 1996, upon consummation of the merger of First Interstate and Wells
Fargo. In addition, all litigation among the parties related to the acquisition
of First Interstate has been settled. The Company incurred transaction costs of
approximately $10 million in connection with the proposed merger.
METROPOLITAN FINANCIAL CORPORATION On January 24, 1995, the Company issued 21.7
million shares to complete its merger with Metropolitan Financial Corporation
("MFC"). The regional financial services holding company, headquartered in
Minneapolis, Minnesota, had approximately $7.9 billion in assets and $5.5
billion in deposits. MFC's 211 offices were principally located in North Dakota,
Minnesota, Nebraska, Iowa, Kansas, South Dakota, Wisconsin, and Wyoming. The
Company used the pooling-of-interests method to account for the transaction.
Accordingly, the Company's financial statements for all periods have been
restated to include MFC's accounts and operations.
OTHER ACQUISITIONS Effective January 1, 1997, the Company completed its
acquisition of the $70 million Sun Capital Bancorp of St. George, Utah.
Effective April 30, 1997, the Company completed its acquisition of the $214
million Business and Professional Bank of Sacramento, California. These
transactions were accounted for as purchase acquisitions.
During 1995, the Company acquired several smaller financial institutions in
its existing markets, all of which further strengthen the Company's retail
banking franchise. These acquisitions, accounted for as purchases, were not
material to the financial condition or operating results of the Company. These
acquisitions include the November 1, 1995, acquisition of two commercial bank
holding companies - Midwestern Services, Inc. and Southwest Holdings, Inc. -
both of Omaha, Nebraska. Together, the two companies had total assets of $424
million, total deposits of $380 million, and 12 branches in Omaha. In addition,
on March 16, 1995, the Company acquired First Western Corporation, parent
company of Western Bank, with $317 million in assets, $267 million in deposits,
and nine branches in and around Sioux Falls, South Dakota.
SALE OF EDINA REALTY, INC. On December 8, 1995, the Company sold Edina Realty,
Inc., its real estate brokerage subsidiary, to a local investor group. The
subsidiary was accounted for as discontinued operations. Edina's assets,
liabilities and cash flows were not material to the Company's financial
statements and were not segregated.
NOTE D RESTRICTIONS ON CASH AND
DUE FROM BANKS
Bank subsidiaries are required to maintain minimum average reserve balances with
the Federal Reserve Bank. The amount of those reserve balances was approximately
$458 million at December 31, 1996.
U.S. Bancorp 9
NOTE E SECURITIES PURCHASED AND SOLD UNDER RESALE AND REPURCHASE AGREEMENTS
The daily average outstanding amount of securities purchased under resale
agreements was $727 million in 1996 and $428 million in 1995. The maximum 1996
month-end outstanding amount was $913 million and $562 million in 1995. The
daily average outstanding amount of securities sold under repurchase agreements
was $1,300 million in 1996 and $1,152 million in 1995. The maximum 1996
month-end outstanding amount was $1,729 million and $1,255 million in 1995. The
Company maintains control of all securities underlying these agreements.
NOTE F SECURITIES
The detail of the amortized cost, gross unrealized holding gains and losses, and
fair value of available-for-sale securities at December 31 was as follows:
1996 1995
------------------------------------------------ -------------------------------------------------
Gross Gross Gross Gross
Unrealized Unrealized Unrealized Unrealized
Amortized Holding Holding Fair Amortized Holding Holding Fair
(In Millions) Cost Gains Losses Value Cost Gains Losses Value
- ----------------------------------------------------------------------- -------------------------------------------------
U.S. Treasury. . . . $1,035 $ 2 $ (9) $1,028 $1,681 $ 10 $ (5) $1,686
Mortgage-backed. . . 4,097 41 (34) 4,104 3,221 26 (29) 3,218
Other U.S. agencies. 589 9 (3) 595 756 7 (2) 761
State and political. 574 4 (5) 573 264 7 -- 271
Other. . . . . . . . 167 7 (1) 173 447 43 (3) 487
------------------------------------------------ -------------------------------------------------
Total . . . . . $6,462 $ 63 $ (52) $6,473 $6,369 $ 93 $ (39) $6,423
- ----------------------------------------------------------------------- -------------------------------------------------
- ----------------------------------------------------------------------- -------------------------------------------------
The detail of the amortized cost, gross unrealized holding gains and losses, and
fair value of held-to-maturity securities at December 31 was as follows:
1996 1995
------------------------------------------------ -------------------------------------------------
Gross Gross Gross Gross
Unrealized Unrealized Unrealized Unrealized
Amortized Holding Holding Fair Amortized Holding Holding Fair
(In Millions) Cost Gains Losses Value Cost Gains Losses Value
- ----------------------------------------------------------------------- -------------------------------------------------
State and political. $ 787 $ 17 $ (3) $ 801 $ 813 $ 23 $ (2) $ 834
Other. . . . . . . . 10 -- -- 10 52 -- -- 52
------------------------------------------------ -------------------------------------------------
Total . . . . . $ 797 $ 17 $ (3) $ 811 $ 865 $ 23 $ (2) $ 886
- ----------------------------------------------------------------------- -------------------------------------------------
- ----------------------------------------------------------------------- -------------------------------------------------
Securities carried at $4.5 billion at December 31, 1996, and $4.1 billion
at December 31, 1995, were pledged to secure public, private and trust deposits
and for other purposes required by law. Securities carried at $197.5 million at
December 31, 1996, were pledged to secure Federal Home Loan Bank advances.
Securities sold under agreements to repurchase were collateralized by securities
and securities purchased under agreements to resell with an amortized cost of
$1.7 billion and $.7 billion at December 31, 1996, and 1995, respectively.
Gross realized gains and losses on available-for-sale securities are shown
in the table below. Included in the 1994 gross realized losses is $111.2 million
related to the sale of $1.6 billion of securities as a result of MFC's actions
to reduce interest rate risk consistent with prior regulatory requests and to
align more closely the interest rate risk profile of MFC with that of the
Company.
(In Millions) 1996 1995 1994
- -------------------------------------------------------------------------------------
Gross realized gains . . . . . . . . . . . . . . . . . $ 39.7 $ 8.0 $ 4.4
Gross realized losses. . . . . . . . . . . . . . . . . (18.9) (5.0) (128.6)
--------------------------
Net realized gains (losses). . . . . . . . . . . . . $ 20.8 $ 3.0 $(124.2)
--------------------------
--------------------------
Income taxes (credit) on realized gains or losses. . . $ 8.0 $ 1.2 $ (47.2)
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
For amortized cost, fair value and yield by maturity date of
available-for-sale and held-to-maturity securities outstanding as
of December 31, 1996, see Table 7 on page 41 from which such information is
incorporated by reference into these Notes to Consolidated Financial Statements.
10 U.S. Bancorp
NOTE G LOANS AND ALLOWANCE FOR CREDIT LOSSES
The composition of the loan portfolio at December 31 was as follows:
(In Millions) 1996 1995
- ---------------------------------------------------------------------------
COMMERCIAL:
Commercial and financial institutions . . . . . . . $18,366 $17,177
Lease financing . . . . . . . . . . . . . . . . . . 1,848 1,549
Agricultural. . . . . . . . . . . . . . . . . . . . 1,310 1,095
Real estate:
Commercial mortgage . . . . . . . . . . . . . . . 8,036 6,864
Construction. . . . . . . . . . . . . . . . . . . 2,121 1,516
-----------------
Total commercial. . . . . . . . . . . . . . . . 31,681 28,201
-----------------
CONSUMER:
Residential mortgage. . . . . . . . . . . . . . . . 4,953 6,722
Residential mortgage held for sale. . . . . . . . . 148 343
Home equity and second mortgage . . . . . . . . . . 4,917 4,011
Credit card . . . . . . . . . . . . . . . . . . . . 3,632 3,391
Automobile. . . . . . . . . . . . . . . . . . . . . 3,515 3,453
Revolving credit. . . . . . . . . . . . . . . . . . 1,521 1,517
Installment . . . . . . . . . . . . . . . . . . . . 1,408 1,239
Student*. . . . . . . . . . . . . . . . . . . . . . 580 468
-----------------
Total consumer. . . . . . . . . . . . . . . . . 20,674 21,144
-----------------
Total loans . . . . . . . . . . . . . . . . . . $52,355 $49,345
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
*ALL OR PART OF THE STUDENT LOAN PORTFOLIO MAY BE SOLD WHEN THE REPAYMENT PERIOD
BEGINS.
Certain directors and executive officers of the Company, including their
immediate families, companies in which they are principal owners, and trusts in
which they are involved, are loan customers of the Company and its subsidiaries.
These loans were made in the ordinary course of business at the subsidiaries'
normal credit terms, including interest rate and collateralization, and were all
current as to their terms at December 31, 1996, and 1995. The aggregate dollar
amounts of these loans were $34.1 million and $33.1 million at December 31,
1996, and 1995, respectively. During 1996, additions totaled $67.3 million and
repayments totaled $66.3 million.
Nonaccrual and renegotiated loans totaled $269 million, $248 million,
and $370 million at December 31, 1996, 1995, and 1994, respectively. At
December 31, 1996, and 1995, the Company had $201 million and $173 million,
respectively, in loans considered impaired under SFAS 114 included in its
nonaccrual loans. The carrying value of the impaired loans was less than or
equal to the present value of expected future cash flows and, accordingly, no
allowance for credit losses was specifically allocated to impaired loans. For
the years ended December 31, 1996, and 1995, the average recorded investment
in impaired loans was approximately $176 million and $220 million,
respectively. The effect of nonaccrual and renegotiated loans on interest
income was as follows:
Year Ended December 31
--------------------------
(In Millions) 1996 1995 1994
- -------------------------------------------------------------------------------------
Interest income that would have been accrued
at original contractual rates. . . . . . . . . . . . $ 32.3 $ 29.5 $ 34.5
Amount recognized as interest income . . . . . . . . . 7.5 6.3 9.7
--------------------------
Forgone revenue. . . . . . . . . . . . . . . . . . . . $ 24.8 $ 23.2 $ 24.8
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Commitments to lend additional funds to customers whose loans were
classified as nonaccrual or renegotiated at December 31, 1996, totaled $45.0
million. During 1996, there were no loans that were restructured at market
interest rates and returned to a fully performing status.
U.S. Bancorp 11
Activity in the allowance for credit losses was as follows:
(In Millions) 1996 1995 1994
- -------------------------------------------------------------------------------------
Balance at beginning of year . . . . . . . . . . . . . $908.0 $862.3 $811.3
Add:
Provision charged to operating expense. . . . . . . 271.2 239.1 243.7
Deduct:
Loans charged off . . . . . . . . . . . . . . . . . 397.2 326.0 351.8
Less recoveries of loans charged off. . . . . . . . 135.7 130.9 131.2
--------------------------
Net loans charged off . . . . . . . . . . . . . . . 261.5 195.1 220.6
Additions from acquisitions and other. . . . . . . . . 74.8 1.7 27.9
--------------------------
Balance at end of year . . . . . . . . . . . . . . . . $992.5 $908.0 $862.3
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
NOTE H BANK PREMISES AND EQUIPMENT
Bank premises and equipment at December 31 consisted of the following:
(In Millions) 1996 1995
- ---------------------------------------------------------------------------
Land . . . . . . . . . . . . . . . . . . . . . . . . . $ 158 $ 161
Buildings and improvements . . . . . . . . . . . . . . 977 952
Furniture, fixtures and equipment. . . . . . . . . . . 957 879
Capitalized building and equipment leases. . . . . . . 97 90
----------------
2,189 2,082
Less accumulated depreciation and amortization . . . . 1,171 1,035
----------------
Total . . . . . . . . . . . . . . . . . . . . . . . $1,018 $1,047
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
NOTE I LONG-TERM DEBT
Long-term debt (debt with original maturities of more than one year) at December
31 consisted of the following:
(In Millions) 1996 1995
- ---------------------------------------------------------------------------
U.S. BANCORP (Parent Company):
Fixed-rate subordinated notes:
8.125% due May 15, 2002 . . . . . . . . . . . . . . $ 149 $ 149
7.00% due March 15, 2003. . . . . . . . . . . . . . 150 150
6.625% due May 15, 2003 . . . . . . . . . . . . . . 100 100
8.00% due July 2, 2004. . . . . . . . . . . . . . . 125 125
7.625% due May 1, 2005. . . . . . . . . . . . . . . 150 150
6.75% due October 15, 2005. . . . . . . . . . . . . 297 297
6.875% due September 15, 2007 . . . . . . . . . . . 250 250
7.50% due June 1, 2026. . . . . . . . . . . . . . . 199 --
Floating-rate subordinated notes - due
November 15, 1999 . . . . . . . . . . . . . . . . . . 200 --
Floating-rate subordinated notes -
due November 30, 2010 . . . . . . . . . . . . . . . . 107 107
Medium-term notes. . . . . . . . . . . . . . . . . . . 671 826
Capitalized lease obligations, mortgage
indebtedness and other. . . . . . . . . . . . . . . . 32 14
----------------
2,430 2,168
SUBSIDIARIES:
Fixed-rate subordinated notes:
6.00% due October 15, 2003. . . . . . . . . . . . . 100 100
7.55% due June 15, 2004 . . . . . . . . . . . . . . 100 100
8.35% due November 1, 2004. . . . . . . . . . . . . 100 100
6.875% due April 1, 2006. . . . . . . . . . . . . . 125 --
Step-up subordinated notes - due August 15, 2005 . . . 100 100
Federal Home Loan Bank advances. . . . . . . . . . . . 1,543 1,634
Bank notes . . . . . . . . . . . . . . . . . . . . . . 814 300
Capitalized lease obligations, mortgage
indebtedness and other. . . . . . . . . . . . . . . . 57 81
----------------
Total . . . . . . . . . . . . . . . . . . . . . . . $5,369 $4,583
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
12 U.S. Bancorp
The floating-rate subordinated notes due November 15, 1999, are the only
asset of the U.S. Bancorp Putable Asset Trust 1996-1 (Trust). The Trust entered
into a call option, pursuant to which the call holder has the right to purchase
the notes from the Trust at par on November 15, 1999. If the call is exercised,
the notes would become fixed rate obligations due in 2006. If the call holder
does not exercise the call options, the Company is required to redeem the notes
immediately thereafter. The interest rate adjusts quarterly at .15 percent over
the London Interbank Offered Rate ("LIBOR") for three month United States dollar
deposits. At December 31, 1996, the interest rate was 5.71 percent.
The floating-rate subordinated notes due November 30, 2010, may be redeemed
at par at the Company's option. The annual interest rate for each quarterly
period is one-eighth of 1 percent above LIBOR for three-month Eurodollar
deposits, subject to a minimum of 5.25 percent. At December 31, 1996, the
interest rate was 5.69 percent.
The step-up subordinated notes due August 15, 2005, are issued by the
Company's subsidiary bank, First Bank National Association, now known as U.S.
Bank National Association, (the "Bank"). The interest rate on these notes is
6.25 percent through August 14, 2000, and 7.30 percent thereafter. The notes
have a one-time call feature at the option of the Bank on August 15, 2000.
The medium-term notes outstanding at December 31, 1996, mature from March
1997 through April 2001. The notes bear floating interest rates ranging from
5.53 percent to 7.44 percent. The weighted average interest rate at December 31,
1996, was 6.09 percent.
The Federal Home Loan Bank advances outstanding at December 31, 1996,
mature from January 1997 through October 2026. The advances bear fixed or
floating interest rates ranging from 4.93 percent to 9.11 percent. The
weighted average interest rate at December 31, 1996, was 5.73 percent.
The bank notes outstanding at December 31, 1996, mature from July 1997
through March 2001. The notes bear fixed or floating interest rates ranging from
5.53 percent to 6.38 percent. The weighted average interest rate at December 31,
1996, was 5.72 percent.
Maturities of long-term debt outstanding at December 31, 1996 were:
Parent
(In Millions) Consolidated Company
- ---------------------------------------------------------------------------
1997 . . . . . . . . . . . . . . . . . . . . . . . . . $1,455 $ 322
1998 . . . . . . . . . . . . . . . . . . . . . . . . . 671 164
1999 . . . . . . . . . . . . . . . . . . . . . . . . . 532 325
2000 . . . . . . . . . . . . . . . . . . . . . . . . . 94 51
2001 . . . . . . . . . . . . . . . . . . . . . . . . . 223 17
Thereafter . . . . . . . . . . . . . . . . . . . . . . 2,394 1,551
----------------
Total . . . . . . . . . . . . . . . . . . . . . . $5,369 $2,430
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
NOTE J COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUSTS HOLDING SOLELY THE JUNIOR SUBORDINATED DEBENTURES OF
THE PARENT COMPANY
During 1996, the Company issued a total of $600 million of preferred securities
(the "Preferred Securities") through two separate issuances by two wholly-owned
subsidiary grantor trusts. The Trusts used the net proceeds from the offerings
to purchase a like amount of Junior Subordinated Deferrable Interest Debentures
(the "Debentures") of the Company. The Debentures are the sole assets of the
Trusts and are eliminated, along with the related income statement effects, in
the consolidated financial statements. The Company used the proceeds from the
sales of the Debentures for general corporate purposes.
The Preferred Securities accrue and pay distributions periodically at a
specified annual rate (8.18 percent average rate) as provided in the
Indentures. The Company's obligations under the Debentures and related
documents, taken together, constitute a full and unconditional guarantee by
the Company of the obligations of the Trusts. The guarantee covers the
distributions and payments on liquidation or redemption of the Preferred
Securities, but only to the extent of funds held by the Trusts.
The Preferred Securities are mandatorily redeemable upon the maturity of
the Debentures, or upon earlier redemption as provided in the Indentures. The
Company has the right to redeem the Debentures, in whole (but not in part), on
or after specific dates, at a redemption price specified in the Indentures plus
any accrued but unpaid interest to the redemption date. The terms of the
Debentures at December 31, 1996 were as follows:
(Dollars in Millions)
- ---------------------------------------------------------------
Aggregate Annual Early Redemption
Principal of Interest Rate Maturity Date Date of
Debentures of Debentures of Debentures Debentures
- ---------------------------------------------------------------
$309 8.09% 11/15/26 11/15/06
309 8.27 12/15/26 12/15/06
- ---------------------------------------------------------------
- ---------------------------------------------------------------
U.S. Bancorp 13
NOTE K SHAREHOLDERS' EQUITY
COMMON STOCK At December 31, 1996, the Company had 15,114,661 shares of
common stock reserved for future issuances under the Dividend Reinvestment Plan,
Employee Stock Purchase Plan, and the Stock Option Plans (see Note M).
In connection with the acquisition of USBC, the number of authorized common
shares for the Company was increased from 200 million shares to 500 million
shares. The Company completed several acquisitions since 1994 with common shares
issued in exchange for the stock of the acquired banks. (See Note C).
Approximately 26.1 million shares have been repurchased under 1996 Board
authorizations of which 13.6 million shares were retired. The Board of Directors
rescinded these authorizations on March 19, 1997, due to the announcement of the
USBC acquisition. Under previous authorizations, the Company repurchased 16.9
million shares in 1995.
Approximately 5.8 million common shares sold through private placements in
July 1990 remain outstanding. Periodic stock purchase rights ("PSPRs") and risk
event warrants were also issued in such private placements. The PSPRs become
exercisable if the Company fails to pay quarterly dividends equal to at least
$.205 per share of common stock in any twelve-month period between July 1990 and
July 2000. Upon exercise, PSPR holders will receive cash or the Company's common
or preferred shares equal to the dividend shortfall. The risk event warrants
become exercisable when a change in control occurs and the value received by
common shareholders is less than $13.875 per share. If exercised, the Company
has the option to pay warrant holders the shortfall in cash, common or preferred
stock.
The Company's Dividend Reinvestment Plan provides for automatic
reinvestment of dividends and optional cash purchases of up to $5,000 worth of
additional shares per calendar quarter at market price.
PREFERRED STOCK The Company has seven classes of cumulative preferred stock,
with 10 million shares authorized. Since 1992, the Company has redeemed or
called the four classes of $1.00 par value cumulative preferred stock and
redeemed both classes of $.01 par value cumulative preferred stock.
On November 29, 1996, the Company called the remaining 1,543,025 shares of
its Series 1991A Cumulative Convertible Preferred Stock. As a result, at
December 31, 1996 (the redemption date), all remaining shares had been redeemed
or converted into common stock. Prior to conversion, dividends on the Series
1991A shares, which had a $1.00 par value, were 7.125 percent per year.
In January 1995, the Company redeemed for $27.00 per share in cash, plus
accumulated and unpaid dividends, 488,750 shares of Series B, $2.875 Cumulative
Perpetual Preferred Stock. Dividends on the Series B shares, which had a $.01
par value, were $2.875 per share prior to redemption.
The 8 1/8% Cumulative Preferred Stock, Series A was not redeemable
prior to July 23, 1997. On or after such date, the Series A Preferred Stock
will be redeemable, in whole or part, at the option of the Company at a
liquidating preference of $25 per share plus accrued and unpaid dividends.
Under current regulations, the Company may not exercise its option to redeem
Series A Preferred Stock without prior approval of the Federal Reserve Board.
The preferred dividend requirement used in the calculation of earnings per
common share was $12.2 million for the years 1996, 1995 and 1994.
NOTE L MERGER, INTEGRATION AND RESIZING CHARGES
The Company recorded merger, integration and resizing charges of $88.1
million, $98.9 million and $166.2 million in 1996, 1995 and 1994,
respectively. Merger and integration charges of $49.5 million recorded in
1996 were associated with the acquisitions of FirsTier, the BankAmerica
corporate trust business, and West One Bancorp. Resizing charges of $38.6
million were associated with the Company's streamlining of the branch
distribution network and trust operations as the Company expands its
alternative distribution channels, including telemarketing, automated teller
machines and in-store branches. Merger and integration charges recorded in
1995 were associated with the acquisition of West One Bancorp. Merger and
integration charges of $66.2 million recorded in 1994 were associated with
the acquisition of MFC. Also, in 1994, charges of $100 million were recorded
in connection with the consolidation and integration of certain operations
and facilities. The components of the charges are shown below:
Year Ended December 31
--------------------------
(In Millions) 1996 1995 1994
- ------------------------------------------------------------------
Systems conversions and
related expenses . . . . . . . . $ 33.3 $ 47.2 $ 96.5
Premises writedowns . . . . . . . . 27.4 22.3 37.0
Severance . . . . . . . . . . . . . 27.4 29.4 32.7
--------------------------
Total merger, integration
and resizing charges $ 88.1 $ 98.9 $166.2
- ------------------------------------------------------------------
- ------------------------------------------------------------------
14 U.S. Bancorp
Systems conversions and related expenses were associated with the
preparation and mailing of numerous customer communications for the acquisitions
and conversion of customer accounts, printing and distribution of training
materials and policy and procedure manuals, outside consulting fees, and similar
expenses related to the conversions and integration of acquired branches and
operations. Premises writedowns represent write-offs for redundant office space,
equipment and branches. The writedowns recorded in 1996 include valuation
adjustments associated with the planned sale of bank-owned properties as the
Company consolidates and reduces the space requirements of the branch
facilities. Severance charges included the cost of terminations, other benefits,
and outplacement costs associated with the elimination of employees primarily in
branch offices and in centralized corporate support and data processing
functions. The following table presents a summary of activity with respect to
the Company's merger, integration and resizing accrual:
Year Ended
December 31
(In Millions) 1996
- ---------------------------------------------------------
Balance at December 31, 1995. . . . . . . . . $ 100.2
Provision charged to operating expense. . . . 88.1
Cash outlays. . . . . . . . . . . . . . . . . (114.4)
Noncash writedowns. . . . . . . . . . . . . . (40.3)
-------
Balance at December 31, 1996. . . . . . . . . $ 33.6
- ---------------------------------------------------------
- ---------------------------------------------------------
In December 1994, the Company recorded a $111.2 million loss on the sale of
$1.6 billion of securities in January 1995 as a result of MFC's actions to
reduce interest rate risk consistent with prior regulatory requests and to align
more closely the interest rate risk profile of MFC with that of the Company. The
Company also recorded an additional provision for credit losses of $16.5 million
and a $56.5 million severance-related charge related to MFC's pre-existing
change in control plan. A provision for other real estate reserves of $2.6
million was also recorded to provide for the Company's strategy of accelerated
disposition of problem assets.
In connection with the acquisition of USBC, the Company expects to incur
pre-tax merger-related costs of $625 million ($450 million after tax). The costs
include severance and retention, conversion costs (primarily system development
and production costs, and customer forms and communication costs), occupancy
expenses (primarily lease exit costs), writedowns of duplicate facilities and
other capitalized assets, and other merger costs (principally legal and
investment banking fees).
NOTE M EMPLOYEE BENEFITS
PENSION PLAN Pension benefits are provided to substantially all employees based
on years of service and employees' compensation while employed with the Company.
Employees are fully vested after five years of service. The Company's funding
policy is to contribute amounts to its plans sufficient to meet the minimum
funding requirements of the Employee Retirement Income Security Act of 1974,
plus such additional amounts as the Company determines to be appropriate. The
actuarial cost method used to compute the pension contribution is the projected
unit credit method.
Prior to their acquisition dates, employees of acquired companies were
covered by separate, noncontributory pension plans that provided benefits
based on years of service and compensation. As of December 31, 1996, the
Company has merged the acquired companies' plans into its own plan with the
exception of the MFC and FirsTier plans, which are expected to be merged in
1997, and the USBC and West One plans, which are expected to be merged in
1999. The funded status and income statement effects of the MFC, USBC and
West One plans have been combined with the Company's plan for all years in
the table below and FirsTier in 1996 only.
(In Millions) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $651.1 million in 1996, $630.2 million in 1995, and
$535.9 million in 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . $(681.7) $(662.8) $(559.3)
---------------------------
---------------------------
Projected benefit obligation for service rendered to date. . . . . . . . . . . $(775.9) $(756.4) $(640.4)
Plan assets at fair value, primarily listed stocks, U.S.
bonds and mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 935.3 780.4 662.9
---------------------------
Excess of plan assets over projected benefit obligation. . . . . . . . . . . . 159.4 24.0 22.5
Unrecognized net (gain) loss from past experience different from
that assumed and effects of changes in assumptions . . . . . . . . . . . . . (73.0) 27.1 38.5
Unrecognized net asset obligation at end of year (amortized over 15 years) . . (13.7) (19.3) (36.2)
---------------------------
Prepaid pension cost included in other assets. . . . . . . . . . . . . . . . . $ 72.7 $ 31.8 $ 24.8
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
U.S. Bancorp 15
The Company also maintains several unfunded, nonqualified, supplemental
executive retirement programs that provide additional defined pension benefits
for certain officers. The following table summarizes the status of these
supplemental plans.
(In Millions) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $36.3 million in 1996, $30.9 million in 1995, and
$20.7 million in 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (37.9) $ (31.8) $ (22.4)
---------------------------
---------------------------
Projected benefit obligation for service rendered to date. . . . . . . . . . . . $ (52.6) $ (43.9) $ (28.7)
Plan assets at fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- --
---------------------------
Deficiency of plan assets over projected benefit obligation. . . . . . . . . . . (52.6) (43.9) (28.7)
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions . . . . . . . . . . . . . . 9.4 12.5 1.1
Unrecognized net asset at end of year (amortized over 15 years). . . . . . . . . .4 .4 3.9
---------------------------
Accrued pension cost included in other liabilities . . . . . . . . . . . . . . . $ (42.8) $ (31.0) $ (23.7)
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Net pension cost for all funded and unfunded plans is as follows:
Year Ended December 31 (In Millions) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
Service cost-benefits earned during the period. . . . . . . . . . . . . . . . $ 40.8 $ 33.6 $ 39.5
Interest cost on projected benefit obligation . . . . . . . . . . . . . . . . 60.7 58.1 50.5
Actual return on plan assets. . . . . . . . . . . . . . . . . . . . . . . . . (134.1) (157.2) (10.7)
Net amortization and deferral . . . . . . . . . . . . . . . . . . . . . . . . 61.6 87.8 (53.3)
---------------------------
Net periodic pension benefit cost. . . . . . . . . . . . . . . . . . . . . . . . $ 29.0 $ 22.3 $ 26.0
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
The aggregate disclosures reflect the following weighted average
assumptions as each company's plans were valued separately for the years prior
to acquisition and each plan independently determined its assumptions:
USB USBC West One
--------------------- -------------- --------------
1996 1995 1994 1996 1995 1994 1994
- -------------------------------------------------------------------------------- -------------- --------------
Weighted average discount rate in determining expense 7.0% 8.0% 7.0% 7.8% 7.3% 8.5% 8.8%
Weighted average discount rate in determining
benefit obligations at year-end 7.5 7.0 8.0 7.8 7.3 8.5 8.8
Expected long-term rate of return 9.5 9.5 9.5 9.0 9.0 9.0 10.0
Rate of increase in future compensation 5.6 5.6 5.6 5.5 4.8 6.0 4.0
- -------------------------------------------------------------------------------- -------------- --------------
OTHER POSTRETIREMENT PLANS In addition to providing pension benefits, the
Company provides certain health care and death benefits to retired employees.
Nearly all employees may become eligible for health care benefits at or after
age 55 if they have completed at least five years of service and their age plus
years of service is equal to or exceeds 65 while working for the Company.
The Company subsidizes the cost of coverage for employees who retire
before age 65 with at least 10 years of service. The amount of the subsidy is
based on the employee's age and service at the time of retirement and remains
frozen until the retiree reaches age 65. After age 65 the retiree assumes
responsibility for the full cost of the coverage.
The plan also contains other cost-sharing features such as deductibles
and coinsurance. The Company continues to subsidize the coverage for
employees over age 65 who retired before a plan change eliminated such
subsidy.
The Company accrues the estimated cost of retiree benefit payments, other
than pensions, during the employees' active service and in prior years funded
the postretirement benefit costs as they were incurred. In 1996, the Company
funded the tax deductible portion of its outstanding liability. USBC also had a
post-retirement health care plan. The funded status and statement effects of the
plan have been aggregated with the Company's plan as of December 31, in the
following table:
16 U.S. Bancorp
Year Ended December 31 (In Millions) 1996 1995 1994
- ------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees . . . . . . . . . . . . . . . . . . . . . . . . $(136.0) $(141.3) $(146.8)
Fully eligible active plan participants. . . . . . . . . (3.7) (3.3) (3.7)
Other active plan participants . . . . . . . . . . . . . (20.6) (20.6) (18.7)
-----------------------------
Total accumulated postretirement benefit obligation. . (160.3) (165.2) (169.2)
Plan assets. . . . . . . . . . . . . . . . . . . . . . . . 7.1 -- --
-----------------------------
Total unfunded accumulated postretirement
benefit obligation . . . . . . . . . . . . . . . . . (153.2) (165.2) (169.2)
Unrecognized net (gain) loss from past experience
different from that assumed and from
changes in assumptions . . . . . . . . . . . . . . . . . (5.8) 4.2 10.2
Unrecognized implementation asset. . . . . . . . . . . . . (1.4) (1.7) (1.9)
-----------------------------
Accrued postretirement benefit cost. . . . . . . . . . . . $(160.4) $(162.7) $(160.9)
-----------------------------
-----------------------------
Net periodic postretirement benefit cost includes
the following components:
Service cost-benefits attributed to service during
the period . . . . . . . . . . . . . . . . . . . . . . $ 2.2 $ 1.9 $ 3.0
Interest cost on accumulated postretirement benefit
obligation . . . . . . . . . . . . . . . . . . . . . . 11.6 12.0 12.6
Net amortization and deferral. . . . . . . . . . . . . . (.2) (.6) 1.2
-----------------------------
Total postretirement benefit cost. . . . . . . . . . . . . $ 13.6 $ 13.3 $ 16.8
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
In 1996 the assumed annual rates of increase in the cost of health care benefits
for participants under 65 and 65 and older, were 9.1 percent and 6.0 percent,
respectively for USB and 8.0 percent and 7.0 percent, respectively for USBC. For
1997 the annual rate of increase assumptions are 8.1 percent and 5.5 percent,
respectively. Both rates were assumed to decrease gradually to 5.5 percent by
2004 and remain at that level thereafter. Trends in health care costs have a
significant effect on the amounts reported. For example, increasing the health
care cost trend rate assumptions by 1 percent each year increases the
accumulated postretirement benefit obligation as of December 31, 1996, by $12.7
million. In addition, the aggregate of the service and interest cost components
of net periodic postretirement benefit cost for the year then ended would
increase by $1.2 million.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5 percent for USB and 7.8 percent for
USBC as of December 31, 1996, and 7.0 percent for USB and 7.3 percent for USBC
at December 31, 1995.
STOCK INCENTIVE AND PURCHASE PLANS The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25") in accounting for its employee stock incentive and purchase plans.
Under APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of the grant, no
compensation expense is recognized. On the date exercised, the option proceeds
equal to the par value of the shares are credited to common stock and additional
proceeds are credited to capital surplus.
The 1984 Employee Stock Purchase Plan ("ESPP"), as amended in 1989, 1991
and 1996, permits all eligible employees with at least one year of service and
directors to purchase common stock. Plan participants can purchase stock for 85
percent to 100 percent of the fair market value, which is based on the price at
the beginning or the end of the purchase period, whichever is lower. Any
discount is determined by a committee of the Board of Directors. In 1996, the
purchase price was 85 percent of fair market value. The plan results in no
compensation expense to the Company.
On July 31, 1997, the shareholders approved the 1997 Stock Incentive Plan
("1997 Plan") whereby all former stock incentive plans of FBS and USBC were
incorporated into the 1997 Plan. All outstanding options, restricted stock
and other awards subject to the terms of the former FBS and USBC stock
incentive plans will remain outstanding and subject to the terms and
conditions of those plans but are counted as part of the total number of
common shares awarded under the 1997 Plan, subject, in the case of the former
USBC plans, to adjustments reflecting the conversion of USBC common stock
into common stock of the Company. An additional 6 million shares were
authorized for issuance by the Board of Directors under the 1997 Plan to meet
the needs of the Company over approximately the next two years. The 1997
Plan allows for the granting of nonqualified stock options, incentive stock
options, stock appreciation rights ("SARs"), restricted stock or stock units
("RSUs"), performance awards, and other stock-based awards at or above 100
percent of the market price at the date of grant. The 1997 Plan also provides
automatic grants of stock options to nonemployee directors. The rights of
restricted stock and RSU holders to transfer shares are generally limited
during the restriction period. At July 31, 1997, and December 31, 1996, there
were approximately 9 million shares and 7 million shares (subject to
adjustment for forfeitures), available for grant under the Plans.
Options granted are generally exercisable up to 10 years from the date of
grant and vest over three to five years. Restricted shares vest over three to
seven years. The vesting of certain options and restricted shares are subject to
acceleration based on the performance of the Company in comparison to the
performance of a predetermined group of regional banks. Compensation expense for
restricted stock is based on the market price
U.S. Bancorp 17
of the Company stock at the time of the grant and amortized on a
straight-line basis over the vesting period. For the performance-based
restricted shares, compensation expense is amortized using the estimated
vesting period. Compensation expense related to the restricted stock was $4.9
million, $3.4 million and $1.5 million in 1996, 1995, and 1994. The stock
incentive plans of acquired companies were terminated at the respective
closing dates. Option holders under such plans received the Company's common
stock, or options to buy the Company's common stock, based on the conversion
terms of the various merger agreements. The historical option information
presented below has been restated to reflect the options originally granted
under the acquired companies' plans.
Weighted Restricted
Options Average Price Shares
Outstanding Per Share Outstanding
- ------------------------------------------------------------------------------
DECEMBER 31, 1993. . . . . . . . . 7,735,406 $19.00 261,296
Granted:
Stock options. . . . . . . . . . 7,519,437 29.69 --
Restricted stock . . . . . . . . -- 192,732
Exercised. . . . . . . . . . . . . (2,806,644) 18.38 --
Canceled/vested. . . . . . . . . . (401,582) 28.14 (26,084)
--------------------------------------
DECEMBER 31, 1994. . . . . . . . . 12,046,617 $25.35 427,944
Granted:
Stock options. . . . . . . . . . 2,852,748 41.52 --
Restricted stock . . . . . . . . -- 149,806
Exercised. . . . . . . . . . . . . (4,161,443) 25.80 --
Canceled/vested. . . . . . . . . . (1,129,138) 17.69 (22,882)
--------------------------------------
DECEMBER 31, 1995. . . . . . . . . 9,608,784 $30.70 554,868
Granted:
Stock options. . . . . . . . . . 9,481,251 65.37 --
Restricted stock . . . . . . . . -- 176,408
USBC acquisitions. . . . . . . . . 409,525 19.97
FirsTier options converted . . . . 270,164 29.42 --
Exercised. . . . . . . . . . . . . (5,416,229) 33.20 --
Canceled/vested. . . . . . . . . . (179,070) 47.37 (246,917)
--------------------------------------
DECEMBER 31, 1996. . . . . . . . . 14,174,425 $52.47 484,359
- ------------------------------------------------------------------------------
At December 31, 1996, 5.4 million options were exercisable and had a
weighted average price of $33.71. For options outstanding at December 31,
1996, the exercise prices ranged from $7.29 to $73.00, with a weighted
average remaining contractual life of 7.9 years.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, "Accounting and Disclosure of Stock-Based Compensation"
and has been determined as if the Company had accounted for its employee
stock option and stock purchase plans ("options") under the fair value method
of that Statement. The fair value of the options was estimated at the grant
date using a Black-Scholes option pricing model. Option valuation models
require the input of highly subjective assumptions. Because the Company's
employee stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
The following weighted average assumptions were used in the valuation
model: risk-free interest rates of 6.2 percent and 6.1 percent in 1996 and
1995; dividend yield of 3.2 percent in both 1996 and 1995; stock price
volatility factors of .20 and .18 in 1996 and 1995; and, expected life of
options of 4.3 years and 3.2 years in 1996 and 1995, respectively.
The pro forma disclosures include options granted in 1996 and 1995 and are
not likely to be representative of the pro forma disclosures for future
years. The estimated fair value of the options is amortized to expense over
the options' vesting period.
Year Ended December 31
-----------------------
(In Millions, Except Per-Share Data) 1996 1995
- ------------------------------------------------------------------------------
Pro forma net income (primary) . . . . . . $1,183.5 $870.1
Pro forma net income (fully diluted) . . . 1,201.8 889.7
Pro forma earnings per share:
Primary. . . . . . . . . . . . . . . . . $4.67 $3.49
Fully diluted. . . . . . . . . . . . . . 4.67 3.48
- ------------------------------------------------------------------------------
18 U.S. Bancorp
- ------
NOTE N INCOME TAXES
- ------
The components of income tax expense were:
(Dollars in Millions) 1996 1995 1994
- ------------------------------------------------------------------------------
FEDERAL:
Current tax. . . . . . . . . . . . $586.5 $436.6 $293.3
Deferred tax provision (credit). . 47.9 23.6 (35.5)
--------------------------------------
Federal income tax . . . . . . . 634.4 460.2 257.8
--------------------------------------
STATE:
Current tax. . . . . . . . . . . . 88.2 63.8 67.0
Deferred tax provision (credit). . 3.1 (.1) (13.3)
--------------------------------------
State income tax . . . . . . . . 91.3 63.7 53.7
--------------------------------------
Total income tax provision . . . $725.7 $523.9 $311.5
- ------------------------------------------------------------------------------
The reconciliation between income tax expense and the amount computed by
applying the statutory federal income tax rate was as follows:
(Dollars in Millions) 1996 1995 1994
- ------------------------------------------------------------------------------
Tax at statutory rate (35%). . . . $680.5 $497.3 $308.0
State income tax, at statutory rates,
net of federal tax benefit . . . 59.4 41.5 34.9
Tax effect of:
Tax-exempt interest:
Loans . . . . . . . . . . . . (4.5) (5.1) (6.0)
Securities . . . . . . . . . . (33.5) (33.3) (34.6)
Amortization of goodwill . . . . 39.9 26.7 15.7
Tax credits and other items . . (16.1) (3.2) (6.5)
--------------------------------------
Applicable income taxes. . . . . . $725.7 $523.9 $311.5
- ------------------------------------------------------------------------------
During 1996, the Company received a tax refund of $65 million, including
interest, from the State of Minnesota relating to the exemption of interest
income received on investments in U.S. government securities for the period
1979 to 1983.
At December 31, 1996, for income tax purposes, the Company had federal net
operating loss carryforwards of $29.5 million available, which expire in year
2009. In addition, the Company had state net operating loss carryforwards of
$43.7 million available, primarily in one taxing jurisdiction. These
carryforwards expire in years 2006 through 2008.
Deferred income tax assets and liabilities reflect the tax effect of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for the same items for income
tax reporting purposes. Significant components of the Company's deferred tax
assets and liabilities as of December 31 were as follows:
(Dollars in Millions) 1996 1995
- ------------------------------------------------------------------------------
DEFERRED TAX ASSETS:
Loan loss reserves . . . . . . . . . . . . . . . $ 356.3 $ 316.0
Real estate and other asset basis differences. . 87.5 72.5
Postretirement liability . . . . . . . . . . . . 69.3 63.3
Deferred loan fees . . . . . . . . . . . . . . . 36.1 18.7
Alternative minimum tax credit carryforward. . . 11.4 10.5
Federal operating loss carryforward. . . . . . . 10.3 31.0
Contingent liabilities and other miscellaneous
accruals . . . . . . . . . . . . . . . . . . . 109.9 144.4
--------------------
Gross deferred tax assets. . . . . . . . . . . 680.8 656.4
DEFERRED TAX LIABILITIES:
Leasing activities . . . . . . . . . . . . . . . (344.1) (313.3)
Other investment basis differences . . . . . . . (26.9) (38.2)
Accelerated depreciation . . . . . . . . . . . . (39.3) (21.2)
Accrued severance, pension and retirement
benefits . . . . . . . . . . . . . . . . . . . (12.5) 12.4
Adjustment of available-for-sale securities
to market value. . . . . . . . . . . . . . . . (3.9) (20.0)
Other deferred liabilities and reserves. . . . . (77.9) (68.7)
--------------------
Gross deferred tax liabilities . . . . . . . . (504.6) (449.0)
Deferred tax assets valuation reserve. . . . . . (2.2) (5.5)
--------------------
NET DEFERRED TAX ASSETS. . . . . . . . . . . . . $ 174.0 $ 201.9
- ------------------------------------------------------------------------------
U.S. Bancorp 19
Realization of the deferred tax asset over time is dependent upon the
Company generating sufficient taxable earnings in future periods. In determining
that realization of the deferred tax asset was more likely than not, the Company
gave consideration to a number of factors, including its recent earnings
history, its expectations for earnings in the future and, where applicable, the
expiration dates associated with tax carryforwards. The Company's valuation
allowance decreased $3.3 million from December 31, 1995, to December 31, 1996,
due to utilization of net operating losses.
- ------
NOTE O FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CREDIT
- ------ CONCENTRATIONS
In the normal course of business, the Company uses various off-balance sheet
financial instruments to meet the financing needs of its customers and to manage
its interest rate risk. These instruments carry varying degrees of credit,
interest rate or liquidity risk. The contract or notional amounts of these
financial instruments at December 31, 1996, and 1995, were as follows:
(In Millions) 1996 1995
- ------------------------------------------------------------------------------
Commitments to extend credit . . . . . . . . . . $57,107 $40,876
Letters of credit:
Standby. . . . . . . . . . . . . . . . . . . . 2,634 2,486
Commercial . . . . . . . . . . . . . . . . . . 355 308
Interest rate swap contracts:
Hedges . . . . . . . . . . . . . . . . . . . . 3,651 4,307
Intermediated. . . . . . . . . . . . . . . . . 590 406
Options contracts:
Hedge interest rate floors purchased . . . . . 1,250 1,250
Hedge interest rate caps purchased . . . . . . 100 200
Intermediated interest rate and foreign
exchange caps and floors purchased . . . . . 134 178
Intermediated interest rate and foreign
exchange caps and floors written . . . . . . 169 236
Liquidity support guarantees . . . . . . . . . . 81 142
Forward contracts. . . . . . . . . . . . . . . . 197 449
Commitments to sell loans. . . . . . . . . . . . 3 223
Mortgages sold with recourse . . . . . . . . . . 114 242
Foreign currency commitments:
Commitments to purchase. . . . . . . . . . . . 952 867
Commitments to sell. . . . . . . . . . . . . . 953 853
- ------------------------------------------------------------------------------
COMMITMENTS TO EXTEND CREDIT Commitments to extend credit are legally binding
and generally have fixed expiration dates or other termination clauses. The
contractual amount represents the Company's exposure to credit loss, in the
event of default by the borrower. The Company manages this credit risk by using
the same credit policies it applies to loans. Collateral is obtained to secure
commitments based on management's credit assessment of the borrower. The
collateral may include marketable securities, receivables, inventory, equipment,
and real estate. Since the Company expects many of the commitments to expire
without being drawn, total commitment amounts do not necessarily represent the
Company's future liquidity requirements. In addition, the commitments include
consumer credit lines that are cancelable upon notification to the consumer.
LETTERS OF CREDIT Standby letters of credit are conditional commitments the
Company issues to guarantee the performance of a customer to a third party. The
guarantees frequently support public and private borrowing arrangements,
including commercial paper issuances, bond financings, and other similar
transactions. The Company issues commercial letters of credit on behalf of
customers to ensure payment or collection in connection with trade transactions.
In the event of a customer's nonperformance, the Company's credit loss exposure
is the same as in any extension of credit, up to the letter's contractual
amount. Management assesses the borrower's credit to determine the necessary
collateral, which may include marketable securities, real estate, accounts
receivable, and inventory. Since the conditions requiring the Company to fund
letters of credit may not occur, the Company expects its liquidity requirements
to be less than the total outstanding commitments.
INTEREST RATE OPTIONS AND SWAPS The Company's policy is to maintain a low
interest rate risk position. The Company limits the exposure of net interest
income to risks associated with interest rate movements through asset/liability
management strategies. The Company's Asset and Liability Management Committee
("ALCO") uses three methods for measuring and managing interest rate risk. Taken
together, these methods represent a comprehensive view of the magnitude of the
Company's interest rate risk over various time intervals. The Company mitigates
its interest rate risk by entering into off-balance sheet transactions
(primarily interest rate swaps), investing in fixed rate assets or increasing
variable rate liabilities. To a lesser degree, the Company also uses interest
rate caps and floors to hedge this risk. The Company does not enter into
derivative contracts for speculative purposes.
20 U.S. Bancorp
Interest rate swaps are contracts to exchange fixed and floating rate interest
payment obligations based on a notional principal amount. The Company enters
into swaps to hedge its balance sheet against fluctuations in interest rates and
as an intermediary for customers. At December 31, 1996, and 1995, interest rate
swaps totaling $3.7 billion and $4.3 billion, respectively, hedged commercial
loans, medium-term notes, subordinated debt, notes, wholesale certificates of
deposit, deposit accounts, and savings certificates. The remaining maturity of
these agreements ranges from 1 month to 10.7 years with an average remaining
maturity of 3.4 years. Swaps increased net interest income for the years ended
December 31, 1996, 1995, and 1994 by $32.2 million, $16.8 million, and $64.6
million, respectively.
Activity with respect to interest rate swap hedges was as follows:
(In Millions) 1996 1995 1994
- ------------------------------------------------------------------------------
Notional amount outstanding at
beginning of year. . . . . . . . . . . . . $4,306.3 $3,894.3 $3,835.6
Additions. . . . . . . . . . . . . . . . . . 890.1 1,209.3 1,862.0
Maturities . . . . . . . . . . . . . . . . . (1,208.3) (797.3) (905.4)
Amortizations. . . . . . . . . . . . . . . . (1.0) -- --
Terminations . . . . . . . . . . . . . . . . (336.0) -- (897.9)
--------------------------------
Notional amount outstanding
at end of year . . . . . . . . . . . . . $3,651.1 $4,306.3 $3,894.3
- ------------------------------------------------------------------------------
Weighted average interest
rates paid . . . . . . . . . . . . . . . . 5.58% 5.73% 5.96%
Weighted average interest
rates received . . . . . . . . . . . . . . 6.35 6.51 6.45
- ------------------------------------------------------------------------------
For the hedging portfolio's notional balances and yields by maturity
date as of year-end 1996, see Table 15 on page 45.
Interest rate caps are also used to minimize the impact of fluctuating
interest rates on earnings. Counterparties of these agreements pay the
Company when certain short-term rates rise above a specified point or strike
level. The payment is based on the difference in current rates and strike
rates and the contract's notional amount. The total notional amount of cap
agreements purchased at December 31, 1996, was $100 million with a 3-month
LIBOR strike rate of 6.00 percent. The total notional amount of cap
agreements purchased at December 31, 1995, was $200 million with a 3-month
LIBOR strike rate of 6.00 percent. The premium on caps is amortized over the
life of the contract. The impact of the caps on net interest income was not
material for the years ended December 31, 1996, 1995 and 1994.
To hedge against falling interest rates, the Company uses interest rate
floors. Floor counterparties pay the Company when specified rates fall below the
strike level. Like caps, the payment is based on the difference in current rates
and strike rates and the notional amount. At December 31, 1996, and 1995, LIBOR
based interest rate floors totaling $950 million with an average remaining
maturity of 1.0 years and 2.0 years, respectively, hedged floating rate
commercial loans. The strike rate on these LIBOR based floors ranged from 3.25
percent to 4.00 percent at December 31, 1996 and December 31, 1995. At December
31, 1996, and 1995, Constant Maturity Treasury (CMT) interest rate floors
totaling $300 million with an average remaining maturity of 18 months and 9
months, respectively, hedged the repayment risk of fixed rate residential
mortgage loans. The strike rate on these CMT floors ranged from 5.60 percent to
5.70 percent at December 31, 1996, and from 6.25 percent to 6.36 percent
at December 31, 1995. The impact of the floors on net interest income was not
material for the years ended December 31, 1996, 1995, and 1994.
In addition to utilizing swaps and options as part of its
asset/liability management strategy, the Company acts as an intermediary for
swap and option agreements on behalf of its customers. To reduce its market
risk exposure, the Company enters into generally matching or offsetting
positions. The total notional amount of customer swap agreements, including
the offsetting positions, was $590 million and $406 million at December 31,
1996, and 1995, respectively. The total dollar amount of futures used to
offset customer swap agreements was $98.4 million and $693.0 million at
December 31, 1996, and 1995, respectively. Open futures contracts at December
31, 1996, had maturities ranging from 1997 to 2005. Market value changes on
futures contracts that are designated as trading hedges are recognized in
income in the period of change. Realized losses on futures used for hedging
trading swaps and options were not material for the years ended December 31,
1996, 1995, and 1994. The total notional amount of customer option
agreements, including the offsetting positions, was $303 million and $414
million at December 31, 1996, and 1995, respectively.
Interest rate swap and option contracts will result in gains and losses
subsequent to the date of the contract, due to interest rate movements. For
customer intermediated swaps and options, the Company records these gains and
losses as they occur in trading income. For swaps and options used as hedges,
the Company recognizes gains or losses by adjusting interest income or
expense over the terms of the hedge. The gain or loss on a terminated hedge
is amortized over the life of the original swap or the life of the hedged
item, whichever is shorter. The amortization of deferred gains and losses
increased net interest income by $.3 million and $6.1 million during 1996,
and 1995, respectively. Net unamortized deferred gains were $3.3 million at
December 31, 1996. The Company will amortize these net gains through the year
2006.
The credit risk related to interest rate swap and option agreements is
that counterparties may be unable to meet the contractual terms. The Company
estimates this risk by calculating the present value of the cost to replace
all outstanding contracts in a gain position at current market rates,
reported on a net basis by counterparty. At December 31, 1996, and
U.S. Bancorp 21
1995, the gain position of these contracts, in the aggregate, was approximately
$51 million and $132 million, respectively.
The Company manages the credit risk of its interest rate swap and option
contracts through credit approvals, limits, bilateral collateral agreements, and
monitoring procedures. Commercial lending officers perform credit analyses to
establish counterparty limits. Senior management approves counterparty limits
and periodically reviews the limits to monitor compliance. In addition, the
Company reduces the assumed counterparty credit risk through master netting
agreements that permit the Company to settle interest rate contracts with the
same counterparty on a net basis.
LIQUIDITY SUPPORT GUARANTEES Through liquidity support guarantees, the Company
agrees to provide market support for its customers' commercial paper or
tax-exempt bonds. These contracts are secured by notes receivable, bonds or
private insurance, guaranteeing payment of principal and interest on any
unreimbursed funds advanced. Since the conditions that require the Company to
fund the guarantees may not occur, total guarantee amounts do not necessarily
represent the Company's future funding obligation.
FORWARD CONTRACTS AND COMMITMENTS TO SELL MORTGAGE LOANS Forward contracts are
agreements for the delayed delivery of securities or cash settlement money
market instruments. The Company enters into these contracts to hedge the
interest rate risk of its mortgage loans held for sale. At December 31, 1996,
and 1995, forward contracts outstanding were $197 million and $449 million,
respectively. At December 31, 1996, net unamortized deferred gains on the
forward agreements were not material. The Company manages its credit risk on
forward contracts, which arises from nonperformance by counterparties, through
credit approval and limit procedures.The Company is committed under agreements
to sell mortgage loans pursuant to master delivery commitments. The remaining
balance on those commitments was $3 million at December 31, 1996, and $223
million at December 31, 1995.
MORTGAGES SOLD WITH RECOURSE The Company is obligated under recourse provisions
related to the sale of certain residential mortgages. The contract amount of
these mortgages, excluding the Government National Mortgage Association ("GNMA")
agreements, was $114 million at December 31, 1996, and $172 million at December
31, 1995. Mortgages sold with recourse under sale/servicing agreements with GNMA
totaled $6 million at December 31, 1996, and $700 million at December 31, 1995.
The Company has secondary recourse obligations under these agreements, but the
liability is not material.
FOREIGN CURRENCY COMMITMENTS The Company uses foreign currency commitments to
help customers reduce the risks associated with changes in foreign currency
exchange rates. Through these contracts, the Company exchanges currencies at
specified rates on specified dates with various counterparties. The Company
minimizes the market and liquidity risks by taking offsetting positions. In
addition, the Company controls the market risks by limiting the net exposure
through policies, procedures, and monitoring. The Company manages its credit
risk, or potential risk of loss from default by a counterparty, through credit
limit approval and monitoring procedures. The aggregate replacement cost of
contracts in a gain position at December 31, 1996, was not significant.
CREDIT CONCENTRATIONS The Company primarily lends to borrowers in the 17 states
where it has banking offices. Approximately 90 percent of the Company's
commercial loans were made to borrowers in this operating region representing a
diverse range of industries. Collateral may include marketable securities,
accounts receivable, inventory, and equipment.
For detail of the Company's real estate portfolio by property type and
geography as of December 31, 1996, and 1995, see Table 9 on page 42. This
information is incorporated by reference into these Notes to Consolidated
Financial Statements. Such loans are collateralized by the related property.
Approximately 90 percent of the total consumer portfolio consists of
loans to customers in the Company's operating region. Residential mortgages,
home equity, and auto loans are secured, but other consumer loans are
generally not secured. For detail of the Company's consumer loan portfolio
referenced here, see Table 8 on page 42 under the category "Consumer" as of
December 31, 1996, and 1995, which is incorporated by reference into these
Notes to Consolidated Financial Statements.
- ------
NOTE P FAIR VALUES OF FINANCIAL INSTRUMENTS
- ------
SFAS 107, "Disclosures about Fair Value of Financial Instruments," requires the
disclosure of the fair value, where practically estimable, of all financial
instruments, both on and off balance sheet. Financial instruments are generally
defined as cash, equity instruments or investments, and contractual obligations
to pay or receive cash or another financial instrument. The Statement indicates
that quoted market prices are the preferred means of estimating value. When
market quotes are unavailable, valuation techniques including discounted cash
flow calculations and pricing models or services should be used.
Due to the nature of its business and its customers' needs, the Company
offers a large number of financial instruments, most of which are not actively
traded. Accordingly, the Company uses several valuation techniques and
aggregation methods for valuing various products. The Company also uses various
assumptions, such as the discount rate and cash flow timing and amounts. As a
result, the fair value estimates can neither be substantiated by independent
market comparisons, nor realized by the immediate sale or settlement of the
financial instrument. Also, the estimates reflect a point in time and
22 U.S. Bancorp
could change significantly based on changes in economic factors, such as
interest rates. Furthermore, the required disclosures exclude the estimated
values of certain financial instruments and all nonfinancial instrument cash
flows. Finally, the fair value disclosure is not intended to estimate a market
value of the Company as a whole. A summary of the Company's valuation techniques
and assumptions follows.
CASH AND CASH EQUIVALENTS: The carrying value of cash, federal funds sold, and
securities under resale agreements was assumed to approximate fair value.
SECURITIES: Generally, trading securities, held-to-maturity securities and
available-for-sale securities were valued using available market quotes. In some
instances, for securities that are not widely traded, market quotes for
comparable securities were used.
LOANS: The loan portfolio consists of both variable and fixed rate loans, the
fair value of which was estimated using discounted cash flow analyses and
other valuation techniques. To calculate discounted cash flows, the loans
were aggregated into pools of similar types and expected repayment terms. The
expected cash flows were reduced for estimated historical prepayment
experience. Projected cash flows on nonaccrual loans were further reduced by
the amount of the estimated losses on the portfolio and discounted over an
assumed average remaining life of one to two years.
CORE DEPOSIT INTANGIBLE: Core deposits provide a stable, low-cost source of
funds that can be invested to earn a return that exceeds their cost. The fair
value of the Company's core deposit intangible was calculated using a discounted
cash flow model that estimates the present value of the difference between the
ongoing cost of the core deposits and alternative funds at current market rates.
This is the same method that the Company uses in calculating the value of the
core deposit intangible of an acquired bank.
DEPOSIT LIABILITIES: The fair value of demand deposits, savings accounts, and
certain money market deposits is equal to the amount payable on demand at
year-end. Fair values for fixed rate certificates of deposit were estimated
using a discounted cash flow analysis based on the discount rates
of the high-grade corporate bond yield curve.
SHORT-TERM BORROWINGS: Federal funds purchased, borrowings under repurchase
agreements, and other short-term borrowings are at variable rates or have
short-term maturities. Their carrying value is assumed to approximate their fair
value.
LONG-TERM DEBT: Medium-term notes, Bank Notes, Federal Home Loan Bank Advances,
capital lease obligations, and mortgage note obligations totaled $3,094 million
in 1996 and $2,853 million in 1995. Their estimated fair value was determined
using a discounted cash flow analysis based on current market rates of similar
maturity debt securities to discount cash flows. Other long-term debt
instruments were valued using available market quotes.
LOAN COMMITMENTS, LETTERS OF CREDIT AND GUARANTEES: The Company's commitments
have variable rates and do not expose the Company to interest rate risk. No
premium or discount was ascribed to the loan commitments because virtually all
funding would be at current market rates.
INTEREST RATE SWAPS, OPTIONS, FLOORS, AND CAPS: The interest rate options and
swap cash flows were estimated using a third party pricing model and discounted
based on appropriate LIBOR, Eurodollar future, and Treasury Note yield curves.
U.S. Bancorp 23
The estimated fair values of the Company's financial instruments are shown in
the table below.
1996 1995
-----------------------------------------------
Carrying Fair Carrying Fair
(In Millions) Amount Value Amount Value
- ---------------------------------------------------------------------------------------------
FINANCIAL ASSETS:
Cash and due from banks. . . . . . . . . . $ 4,813 $ 4,813 $ 4,253 $ 4,253
Federal funds sold and resale
agreements . . . . . . . . . . . . . . . 898 898 771 771
Trading account securities . . . . . . . . 231 231 366 366
Held to maturity securities. . . . . . . . 797 811 865 886
Available-for-sale securities. . . . . . . 6,473 6,473 6,423 6,423
Loans:
Commercial:
Commercial. . . . . . . . . . . . . . 19,676 20,046 18,272 18,717
Leasing . . . . . . . . . . . . . . . 1,848 1,849 1,549 1,550
Commercial real estate and
construction. . . . . . . . . . . . 10,157 10,851 8,380 9,066
Consumer:
Residential mortgage. . . . . . . . . 4,953 4,964 6,722 6,801
Residential mortgage held for sale. . 148 148 343 343
Home equity and second mortgage . . . 4,917 5,166 4,011 4,202
Credit card and revolving lines . . . 5,153 5,433 4,908 5,283
Other consumer installment. . . . . . 5,503 5,586 5,160 5,243
Allowance for credit losses. . . . . . . (993) -- (908) --
-----------------------------------------------
Total loans . . . . . . . . . . . . . 51,362 54,043 48,437 51,205
-----------------------------------------------
Total financial assets. . . . . . . . 64,574 67,269 61,115 63,904
NONFINANCIAL ASSETS:
Core deposit intangible. . . . . . . . . . 165 1,406 114 1,026
Mortgage servicing portfolio . . . . . . . 23 28 64 177
-----------------------------------------------
Total . . . . . . . . . . . . . . . . 64,762 $68,703 61,293 $65,107
------- -------
------- -------
Other assets . . . . . . . . . . . . . . . . 4,987 4,375
------- -------
Total Assets. . . . . . . . . . . . . $69,749 $65,668
------- -------
------- -------
FINANCIAL LIABILITIES:
Deposits:
Noninterest-bearing. . . . . . . . . . . $14,344 $14,344 $12,367 $12,367
Interest-bearing checking and
other savings. . . . . . . . . . . . . 19,163 19,163 18,236 18,236
Savings certificates and
certificates > $100,000 . . . . . . . . 15,849 15,802 15,176 15,210
-----------------------------------------------
Total deposits. . . . . . . . . . . . 49,356 49,309 45,779 45,813
Federal funds purchased. . . . . . . . . . 1,672 1,672 2,718 2,718
Securities sold under agreements
to repurchase. . . . . . . . . . . . . . 1,729 1,729 1,196 1,201
Other short-term funds borrowed. . . . . . 3,191 3,191 4,070 4,070
Long-term debt . . . . . . . . . . . . . . 5,369 5,454 4,583 4,681
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trusts holding solely the
junior subordinated debentures of the
parent company . . . . . . . . . . . . . 600 636 -- --
-----------------------------------------------
Total financial liabilities . . . . . 61,917 $61,991 58,346 $58,483
------- -------
------- -------
NONFINANCIAL LIABILITIES . . . . . . . . . . 2,069 1,980
SHAREHOLDERS' EQUITY . . . . . . . . . . . . 5,763 5,342
------- -------
Total Liabilities and Shareholders'
Equity. . . . . . . . . . . . . . . $69,749 $65,668
------- -------
------- -------
Off-Balance Sheet Financial Instruments:
Unrecognized gain on interest rate swaps
and options. . . . . . . . . . . . . . . N/A $ 25 N/A $ 109
Unrecognized loss on interest rate swaps
and options. . . . . . . . . . . . . . . N/A 3 N/A 7
Loan commitments . . . . . . . . . . . . . N/A -- N/A --
Letters of credit. . . . . . . . . . . . . N/A -- N/A --
- ---------------------------------------------------------------------------------------------
24 U.S. Bancorp
- ------
NOTE Q COMMITMENTS AND CONTINGENT LIABILITIES
- ------
Rental expense for operating leases amounted to $116.1 million in 1996, $112.5
million in 1995, and $133.7 million in 1994. Future minimum payments, net of
sublease rentals, under capitalized leases and noncancelable operating leases
with initial or remaining terms of one year or more, consisted of the following
at December 31, 1996:
Capitalized Operating
(In Millions) Leases Leases
- ------------------------------------------------------------------------------
1997 . . . . . . . . . . . . . . . . . . . . $ 14.2 $107.4
1998 . . . . . . . . . . . . . . . . . . . . 7.2 92.7
1999 . . . . . . . . . . . . . . . . . . . . 7.1 80.2
2000 . . . . . . . . . . . . . . . . . . . . 7.1 68.8
2001 . . . . . . . . . . . . . . . . . . . . 7.0 66.9
Thereafter . . . . . . . . . . . . . . . . . 68.0 439.6
-------------------
Total minimum lease payments . . . . . . . . 110.6 $855.6
------
Less amount representing interest. . . . . . 53.6
------
Present value of net minimum lease payments. $ 57.0
- ------------------------------------------------------------------------------
Various legal proceedings are currently pending against the Company. Due
to their complex nature, it may be years before some matters are resolved. In
the opinion of management, the aggregate liability, if any, will not have a
material adverse effect on the Company's financial position, liquidity or
results of operations.
- ------
NOTE R SUPPLEMENTAL DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ------
CONSOLIDATED BALANCE SHEET - Time certificates of deposit in denominations of
$100,000 or more totaled $3,402 million and $2,632 million at December 31,
1996, and 1995, respectively.
CONSOLIDATED STATEMENT OF CASH FLOWS - Listed below are supplemental disclosures
to the Consolidated Statement of Cash Flows.
Year Ended December 31 (In Millions) 1996 1995 1994
- ------------------------------------------------------------------------------
Income taxes paid. . . . . . . . . . . . . .$ 508.6 $ 444.3 $ 306.8
Interest paid. . . . . . . . . . . . . . . . 2,137.0 2,039.1 1,565.7
Net noncash transfers to foreclosed
property . . . . . . . . . . . . . . . . . 97.0 97.7 80.1
Change in unrealized gain (loss) on
available-for-sale securities, net of
taxes of $14.8 in 1996, $112.1 in
1995 and $132.0 in 1994. . . . . . . . . . (28.8) 177.0 (210.3)
--------------------------------
Cash acquisitions of businesses:
Fair value of noncash assets acquired. . .$ 38.3 $ 120.6 $ 819.4
Liabilities assumed. . . . . . . . . . . . -- (7.4) (872.0)
--------------------------------
Net. . . . . . . . . . . . . . . . . . .$ 38.3 $ 113.2 $ (52.6)
--------------------------------
Stock acquisitions of businesses:
Fair value of noncash assets acquired. . .$ 5,284.9 $ 746.9 $ 2,025.0
Net cash acquired. . . . . . . . . . . . . 245.8 55.4 98.5
Liabilities assumed. . . . . . . . . . . . (4,493.9) (696.7) (1,863.5)
--------------------------------
Net value of common stock issued . . . .$ 1,036.8 $ 105.6 $ 260.0
- ------------------------------------------------------------------------------
REGULATORY CAPITAL - The measures used to assess capital include the capital
ratios established by bank regulatory agencies, including the specific ratios
for the "well capitalized" designation. For a description of the regulatory
capital requirements and the actual ratios as of December 31, 1996, for the
Company and its bank and thrift subsidiaries, see Tables 17 and 18 from which
such information is incorporated by reference into these Notes to Consolidated
Financial Statements.
U.S. Bancorp 25
- ------
NOTE S U.S. BANCORP (PARENT COMPANY)
- ------
CONDENSED BALANCE SHEET
December 31 (In Millions) 1996 1995
- ------------------------------------------------------------------------------
ASSETS
Deposits with subsidiary banks,
principally interest-bearing . . . . . . . $ 348 $ 248
Available-for-sale securities. . . . . . . . 179 315
Investments in:
Bank and thrift affiliates . . . . . . . . 6,232 5,745
Nonbank affiliates . . . . . . . . . . . . 136 163
Advances to:
Bank and thrift affiliates . . . . . . . . 1,757 853
Nonbank affiliates . . . . . . . . . . . . 122 113
Other assets . . . . . . . . . . . . . . . . 758 815
------ ------
Total assets. . . . . . . . . . . . . . $9,532 $8,252
------ ------
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term funds borrowed. . . . . . . . . . $ 161 $ 237
Advances from subsidiaries . . . . . . . . . 25 40
Long-term debt . . . . . . . . . . . . . . . 2,430 2,168
Junior subordinated debentures issued to
subsidiary trusts. . . . . . . . . . . . . 618 --
Other liabilities. . . . . . . . . . . . . . 535 465
Shareholders' equity . . . . . . . . . . . . 5,763 5,342
------ ------
Total liabilities and shareholders'
equity. . . . . . . . . . . . . . . . $9,532 $8,252
- ------------------------------------------------------------------------------
CONDENSED STATEMENT OF INCOME
Year Ended December 31 (In Millions) 1996 1995 1994
- ------------------------------------------------------------------------------
INCOME
Dividends from subsidiaries (including
$1,269.4, $927.7 and $693.6 from
bank and thrift subsidiaries). . . . . . . $1,334.0 $ 950.0 $ 730.0
Interest from subsidiaries . . . . . . . . . 97.6 71.7 51.4
Service and management fees from
subsidiaries . . . . . . . . . . . . . . . 204.9 232.7 254.5
Other income . . . . . . . . . . . . . . . . 299.0 30.5 26.7
--------------------------------
Total income. . . . . . . . . . . . . . 1,935.5 1,284.9 1,062.6
EXPENSES
Interest on short-term funds borrowed. . . . 17.4 20.0 15.7
Interest on long-term debt . . . . . . . . . 154.7 132.8 114.0
Interest on junior subordinated debentures
issued to subsidiary trusts. . . . . . . . 2.8 -- --
Operating expenses paid to subsidiaries. . . 19.2 70.0 48.3
Other expenses . . . . . . . . . . . . . . . 259.0 310.6 408.5
--------------------------------
Total expenses. . . . . . . . . . . . . 453.1 533.4 586.5
--------------------------------
Income before income taxes and equity in
undistributed income of subsidiaries . . . 1,482.4 751.5 476.1
Income tax expense (credit). . . . . . . . . 68.3 (58.5) (88.2)
--------------------------------
Income of parent company . . . . . . . . . . 1,414.1 810.0 564.3
Equity (deficiency) in undistributed
income of subsidiaries:
Bank and thrift affiliates . . . . . . . . (161.4) 75.0 30.8
Nonbank affiliates . . . . . . . . . . . . (34.0) 12.1 (35.4)
--------------------------------
(195.4) 87.1 (4.6)
--------------------------------
Net income. . . . . . . . . . . . . . . $1,218.7 $ 897.1 $ 559.7
- ------------------------------------------------------------------------------
26 U.S. Bancorp
CONDENSED STATEMENT OF CASH FLOWS
Year Ended December 31 (In Millions) 1996 1995 1994
- ------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . .$ 1,218.7 $ 897.1 $ 559.7
Adjustments to reconcile net income
to net cash provided by operating
activities:
Deficiency (equity) in undistributed
income of subsidiaries . . . . . . . . . 195.4 (87.1) 4.6
Depreciation . . . . . . . . . . . . . . . 19.2 19.1 28.2
(Gains) losses on available-for-sale
securities . . . . . . . . . . . . . . . (37.5) (.5) .3
Decrease (increase) in accrued
receivables, net . . . . . . . . . . . . 166.4 (81.3) 77.4
Increase (decrease) in accrued
liabilities, net . . . . . . . . . . . . 18.4 (89.0) (45.9)
Amortization of goodwill and other
intangibles. . . . . . . . . . . . . . . 20.1 16.3 14.9
Deferred tax (credit) provision. . . . . . (5.2) 28.5 (7.7)
Provision for merger and integration . . . 10.7 35.6 94.7
Other - net. . . . . . . . . . . . . . . . 31.6 9.7 9.6
--------------------------------
Net cash provided by operating
activities. . . . . . . . . . . . . . . 1,637.8 748.4 735.8
INVESTING ACTIVITIES
Securities transactions:
Sales and maturities . . . . . . . . . . . 230.8 224.4 93.5
Purchases . . . . . . . . . . . . . . . . (73.9) (282.9) (142.4)
Investments in subsidiaries. . . . . . . . . (27.9) (142.6) (108.5)
Equity distributions from subsidiaries . . . 304.6 111.5 234.5
Net (increase) decrease in short-term
advances to affiliates . . . . . . . . . . (91.9) (65.6) 159.1
Long-term advances made to affiliates. . . . (868.5) (259.7) --
Principal collected on long-term advances
made to affiliates . . . . . . . . . . . . 33.5 25.2 .3
Other - net. . . . . . . . . . . . . . . . . (22.3) 10.1 (79.3)
--------------------------------
Net cash (used) provided by investing
activities . . . . . . . . . . . . . . (515.6) (379.6) 157.2
FINANCING ACTIVITIES
Net decrease in short-term advances from
subsidiaries . . . . . . . . . . . . . . . (17.1) (27.7) (27.2)
Net (decrease) increase in short-term
funds borrowed . . . . . . . . . . . . . . (67.0) 17.7 7.6
Proceeds from long-term debt . . . . . . . . 552.5 1,050.5 405.1
Principal payments on long-term debt . . . . (299.9) (631.5) (312.3)
Proceeds from issuances of junior
subordinated debentures to subsidiary
trusts . . . . . . . . . . . . . . . . . . 618.6 -- --
Redemption of preferred stock. . . . . . . . -- (13.2) (167.0)
Proceeds from dividend reinvestment,
stock option, and stock purchase
plans. . . . . . . . . . . . . . . . . . . 96.0 84.1 60.8
Repurchase of common stock and
stock warrants . . . . . . . . . . . . . . (1,490.1) (721.0) (302.9)
Stock warrants exercised . . . . . . . . . . -- .3 7.9
Cash dividends . . . . . . . . . . . . . . . (414.8) (344.5) (296.8)
--------------------------------
Net cash used by financing activities. . (1,021.8) (585.3) (624.8)
--------------------------------
Change in cash and cash equivalents. . . 100.4 (216.5) 268.2
Cash and cash equivalents at beginning
of year. . . . . . . . . . . . . . . . . . 247.8 464.3 196.1
--------------------------------
Cash and cash equivalents at end
of year. . . . . . . . . . . . . . . . $ 348.2 $ 247.8 $ 464.3
- ------------------------------------------------------------------------------
Transfer of funds -- dividends, loans or advances -- from bank and thrift
subsidiaries to the Company is restricted. Federal law prohibits loans unless
they are secured and generally limits any loan to the Company or individual
affiliate to 10 percent of the bank's or thrift's equity. In aggregate, loans to
the Company and all affiliates cannot exceed 20 percent of the bank's or
thrift's equity.
Dividend payments to the Company by its subsidiary banks and thrift are
subject to regulatory review and statutory limitations and, in some instances,
regulatory approval. The approval of the Comptroller of the Currency is required
if total dividends by a national bank in any calendar year exceed the bank's net
profits (as defined) for that year combined with its retained net profits for
the preceding two calendar years or if the bank's retained earnings are less
than zero. Furthermore, dividends are restricted by the Comptroller of the
Currency's minimum capital constraints for all national banks. Within these
guidelines, all bank subsidiaries have the ability to pay dividends without
prior regulatory approval except one bank, which bank represented one percent of
total assets at December 31, 1996.
First Bank, fsb (the "Thrift") is required to give the Office of Thrift
Supervision ("OTS") 30-day notice prior to declaration of a cash dividend to the
parent company. The Thrift's dividends to the parent company are generally
limited to earnings in the calendar year plus 50 percent of the surplus capital
(the percentage by which the Thrift's regulatory capital ratios exceed the
minimum capital ratios required by the OTS) at the beginning of the year. In
addition, dividends are restricted by the OTS's minimum capital constraints for
all thrifts.
U.S. Bancorp 27
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
U.S. Bancorp
Minneapolis, Minnesota
We have audited the supplemental consolidated balance sheets of U.S. Bancorp
(formed as a result of the consolidation of First Bank System, Inc. and the
former U.S. Bancorp) as of December 31, 1996 and 1995 and the related
supplemental consolidated statements of income, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1996.
The supplemental consolidated financial statements give retroactive effect to
the merger of First Bank System, Inc. and the former U.S. Bancorp on August
1, 1997, which has been accounted for using the pooling-of-interests method
as described in Note C of the supplemental consolidated financial statements.
These supplemental financial statements are the responsibility of the
management of U.S. Bancorp. Our responsibility is to express an opinion on
these supplemental financial statements based on our audits. We did not audit
the financial statements of the former U.S. Bancorp which statements reflect
total assets constituting 48% for 1996 and 48% for 1995 of the related
supplemental consolidated financial statement totals, and which reflect net
income constituting approximately 40% of the related supplemental
consolidated financial statement totals for the three year period ended
December 31, 1996. Those statements were audited by other auditors whose
reports have been furnished to us, and our opinion, insofar as it relates to
data included for the former U.S. Bancorp, is based solely on the reports of
the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
supplemental financial statements referred to above present fairly, in all
material respects, the consolidated financial position of U.S. Bancorp at
December 31, 1996 and 1995, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December
31, 1996, after giving retroactive effect to the merger of First Bank System,
Inc. and the former U.S. Bancorp, as described in Note C to the supplemental
consolidated financial statements, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
January 9, 1997 (except for the consolidation of First Bank System, Inc. and the
former U.S. Bancorp, as to which the date is August 1, 1997)
28 U.S. Bancorp
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of U.S. Bancorp:
We have audited the consolidated balance sheet of U.S. Bancorp ("USBC") as of
December 31, 1996 and 1995, and the related consolidated statements of
income, changes in shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1996 (not presently separately
herein). These financial statements are the responsibility of management.
Our responsibility is to express an opinion on the financial statements based
on our audits. The consolidated financial statements of USBC give retroactive
effect to the merger of USBC and West One Bancorp and subsidiaries, which has
been accounted for as a pooling-of-interests as described in Note 2 to the
consolidated financial statements of USBC. We did not audit the consolidated
statements of income, changes in shareholders' equity, and cash flows of West
One Bancorp and subsidiaries for the year ended December 31, 1994, which
statements reflect net interest income and noninterest revenues of
$471,214,000 for the year ended December 31, 1994. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for West One Bancorp
and subsidiaries for 1994, is based solely on the report of such other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of the
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above (not presented separately
herein) present fairly, in all material respects, the financial position of
USBC at December 31, 1996 and 1995, and the results of their operations and
their cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Portland, Oregon
January 31, 1997
29 U.S. Bancorp
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors of West One Bancorp
We have audited the consolidated statements of income, shareholders' equity,
and cash flows of West One Bancorp and subsidiaries for the year ended
December 31, 1994 (not presented separately herein). These financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above (not presented
separately herein) present fairly, in all material respects, the consolidated
results of operations and cash flows of West One Bancorp and subsidiaries for
the year ended December 31, 1994, in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand L.L.P.
Boise, Idaho
January 19, 1995
30 U.S. Bancorp
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET -- FIVE-YEAR SUMMARY
- --------------------------------------------------------------------------------
% Change
December 31 (Dollars In Millions) 1996 1995 1994 1993 1992 1995-1996
- -------------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks. . . . . . . . . . . . . . . . . . $ 4,813 $ 4,253 $ 3,828 $ 3,468 $ 3,782 13.2%
Federal funds sold and resale agreements . . . . . . . . . 898 771 1,012 1,634 2,486 16.5
Interest-bearing deposits with banks . . . . . . . . . . . 1 1 30 91 660 *
Trading account securities . . . . . . . . . . . . . . . . 231 366 215 264 250 (36.9)
Held-to-maturity securities. . . . . . . . . . . . . . . . 797 865 1,986 2,288 4,759 (7.9)
Available-for-sale securities:
U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . 1,028 1,686 2,106 2,776 1,845 (39.0)
Mortgage-backed . . . . . . . . . . . . . . . . . . . . . 4,104 3,218 4,051 3,717 3,265 27.5
State and political . . . . . . . . . . . . . . . . . . . 573 271 181 196 188 111.4
U.S. agencies and other . . . . . . . . . . . . . . . . . 768 1,248 1,267 1,057 660 (38.5)
-------------------------------------------------
Total securities. . . . . . . . . . . . . . . . . . . . 6,473 6,423 7,605 7,746 5,958 .8
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 52,355 49,345 46,375 43,870 39,520 6.1
Less allowance for credit losses. . . . . . . . . . . . . 993 908 863 811 811 9.4
-------------------------------------------------
Net loans . . . . . . . . . . . . . . . . . . . . . . . 51,362 48,437 45,512 43,059 38,709 6.0
Other assets . . . . . . . . . . . . . . . . . . . . . . . 5,174 4,552 4,549 3,907 4,029 13.7
-------------------------------------------------
Total assets. . . . . . . . . . . . . . . . . . . . . $69,749 $65,668 $64,737 $62,457 $60,633 6.2%
-------------------------------------------------
-------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing . . . . . . . . . . . . . . . . . . . $14,344 $12,367 $11,353 $12,913 $10,858 16.0%
Interest-bearing. . . . . . . . . . . . . . . . . . . . . 35,012 33,412 34,762 34,921 36,599 4.8
-------------------------------------------------
Total deposits. . . . . . . . . . . . . . . . . . . . . 49,356 45,779 46,115 47,834 47,457 7.8
Short-term borrowings. . . . . . . . . . . . . . . . . . . 6,592 7,984 7,501 4,638 4,119 (17.4)
Long-term debt . . . . . . . . . . . . . . . . . . . . . . 5,369 4,583 4,225 3,231 2,588 17.2
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the
junior subordinated debentures of the parent company. . . 600 -- -- -- -- *
Other liabilities. . . . . . . . . . . . . . . . . . . . . 2,069 1,980 1,791 1,568 1,603 4.5
-------------------------------------------------------------
Total liabilities . . . . . . . . . . . . . . . . . . 63,986 60,326 59,632 57,271 55,767 6.1
Shareholders' equity . . . . . . . . . . . . . . . . . . . 5,763 5,342 5,105 5,186 4,866 7.9
--------------------------------------------------------------
Total liabilities and shareholders' equity. . . . . . $69,749 $65,668 $64,737 $62,457 $60,633 6.2%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
* NOT MEANINGFUL
U.S. Bancorp 31
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME -- FIVE-YEAR SUMMARY
- --------------------------------------------------------------------------------
% Change
Year Ended December 31 (In Millions) 1996 1995 1994 1993 1992 1995-1996
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,537.7 $4,373.4 $3,686.6 $3,361.7 $3,336.5 3.8%
Securities:
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420.5 420.3 535.1 596.3 545.8 *
Exempt from federal income taxes. . . . . . . . . . . . . . . . 71.0 59.8 62.8 59.7 49.0 18.7
Other interest income. . . . . . . . . . . . . . . . . . . . . . 85.2 67.3 63.5 63.9 109.0 26.6
-------------------------------------------------
Total interest income . . . . . . . . . . . . . . . . . . . . . 5,114.4 4,920.8 4,348.0 4,081.6 4,040.3 3.9
INTEREST EXPENSE
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,441.3 1,416.7 1,121.1 1,174.1 1,406.1 1.7
Federal funds purchased and repurchase agreements. . . . . . . . 197.9 218.2 190.8 83.1 104.0 (9.3)
Other short-term funds borrowed. . . . . . . . . . . . . . . . . 192.3 189.8 68.3 53.0 64.6 1.3
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . 303.8 273.4 227.2 184.3 203.6 11.1
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the
junior subordinated debentures of the parent company. . . . . . 2.8 -- -- -- -- *
-------------------------------------------------
Total interest expense. . . . . . . . . . . . . . . . . . . . . 2,138.1 2,098.1 1,607.4 1,494.5 1,778.3 1.9
-------------------------------------------------
Net interest income. . . . . . . . . . . . . . . . . . . . . . . 2,976.3 2,822.7 2,740.6 2,587.1 2,262.0 5.4
Provision for credit losses. . . . . . . . . . . . . . . . . . . 271.2 239.1 243.7 239.3 340.5 13.4
-------------------------------------------------
Net interest income after provision for credit losses. . . . . . 2,705.1 2,583.6 2,496.9 2,347.8 1,921.5 4.7
NONINTEREST INCOME
Service charges on deposit accounts. . . . . . . . . . . . . . . 377.2 345.0 346.7 320.7 280.0 9.3
Credit card fees . . . . . . . . . . . . . . . . . . . . . . . . 354.1 303.9 248.9 204.7 176.7 16.5
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 302.3 241.1 224.5 208.4 185.4 25.4
Investment products fees and commissions . . . . . . . . . . . . 59.7 49.8 56.4 49.5 40.7 19.9
Securities gains (losses). . . . . . . . . . . . . . . . . . . . 20.8 3.0 (124.2) .8 48.4 593.3
Termination fee. . . . . . . . . . . . . . . . . . . . . . . . . 190.0 -- -- -- -- *
State income tax refund. . . . . . . . . . . . . . . . . . . . . 65.0 -- -- -- -- *
Gain on sale of mortgage banking operations, branches
and other assets . . . . . . . . . . . . . . . . . . . . . . . 71.4 39.9 62.9 9.3 5.0 78.9
Gain on sale of mortgage servicing rights. . . . . . . . . . . . -- -- -- 55.8 7.5 *
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345.2 330.6 299.7 394.6 391.1 4.4
-------------------------------------------------
Total noninterest income. . . . . . . . . . . . . . . . . . . . 1,785.7 1,313.3 1,114.9 1,243.8 1,134.8 36.0
NONINTEREST EXPENSE
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 964.5 927.5 974.9 971.9 889.1 4.0
Employee benefits. . . . . . . . . . . . . . . . . . . . . . . . 218.2 209.9 224.4 216.2 188.4 4.0
Net occupancy. . . . . . . . . . . . . . . . . . . . . . . . . . 179.4 183.4 190.7 194.3 167.9 (2.2)
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . 175.2 184.5 184.4 171.2 148.0 (5.0)
Goodwill and other intangible assets . . . . . . . . . . . . . . 130.1 76.0 72.5 68.4 51.5 71.2
Other personnel costs. . . . . . . . . . . . . . . . . . . . . . 83.4 62.4 60.8 57.2 39.7 33.7
Advertising and marketing. . . . . . . . . . . . . . . . . . . . 61.2 59.2 65.1 59.5 54.2 3.4
Telephone. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.2 58.4 61.1 56.1 47.8 3.1
Professional services. . . . . . . . . . . . . . . . . . . . . . 58.0 59.2 65.9 70.1 65.9 (2.0)
FDIC insurance . . . . . . . . . . . . . . . . . . . . . . . . . 11.9 64.5 105.7 105.5 92.9 (81.6)
SAIF special assessment. . . . . . . . . . . . . . . . . . . . . 61.3 -- -- -- -- *
Merger, integration, and resizing. . . . . . . . . . . . . . . . 88.1 98.9 166.2 72.2 84.0 (10.9)
Merger-related severance . . . . . . . . . . . . . . . . . . . . -- -- 56.5 -- -- *
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454.9 492.0 503.9 472.3 496.5 (7.5)
-------------------------------------------------
Total noninterest expense . . . . . . . . . . . . . . . . . . . 2,546.4 2,475.9 2,732.1 2,514.9 2,325.9 2.8
-------------------------------------------------
Income from continuing operations before income taxes
and cumulative effect of changes in accounting principles . . . 1,944.4 1,421.0 879.7 1,076.7 730.4 36.8
Applicable income taxes. . . . . . . . . . . . . . . . . . . . . 725.7 523.9 311.5 374.9 245.9 38.5
-------------------------------------------------
Income from continuing operations before cumulative
effect of changes in accounting principles. . . . . . . . . . . 1,218.7 897.1 568.2 701.8 484.5 35.8
Income (loss) from discontinued operations . . . . . . . . . . . -- -- (8.5) 2.5 2.7 *
-------------------------------------------------
Income before cumulative effect of changes in
accounting principles . . . . . . . . . . . . . . . . . . . . . 1,218.7 897.1 559.7 704.3 487.2 35.8
Cumulative effect of changes in accounting principles. . . . . . -- -- -- -- 173.3 *
-------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,218.7 $ 897.1 $ 559.7 $ 704.3 $ 660.5 35.8%
-------------------------------------------------
-------------------------------------------------
Net income applicable to common equity . . . . . . . . . . . . . $1,200.3 $ 877.4 $ 534.9 $ 662.9 $ 623.6 36.8%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
* NOT MEANINGFUL
32 U.S. Bancorp
- --------------------------------------------------------------------------------
QUARTERLY CONSOLIDATED FINANCIAL DATA
- --------------------------------------------------------------------------------
1996
-----------------------------------------------------
Fourth Third Second First
(In Millions, Except Per Share Data) Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,167.4 $ 1,149.3 $ 1,120.7 $ 1,100.3
Securities:
Taxable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.1 104.5 105.8 109.1
Exempt from federal income taxes . . . . . . . . . . . . . . . . . 17.5 18.0 19.0 16.5
Other interest income. . . . . . . . . . . . . . . . . . . . . . . . 17.2 22.6 22.3 23.1
-----------------------------------------------------
Total interest income. . . . . . . . . . . . . . . . . . . . . . . 1,303.2 1,294.41 1,267.8 1,249.0
INTEREST EXPENSE
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362.6 363.6 358.3 356.8
Federal funds purchased and repurchase agreements. . . . . . . . . . 47.7 51.2 47.0 52.0
Other short-term funds borrowed. . . . . . . . . . . . . . . . . . . 47.6 46.9 48.0 49.8
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 79.1 77.5 74.0 73.2
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely the junior subordinated debentures of the
parent company . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 -- -- --
-----------------------------------------------------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . 539.8 539.2 527.3 531.8
-----------------------------------------------------
Net interest income. . . . . . . . . . . . . . . . . . . . . . . . . 763.4 755.2 740.5 717.2
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . 75.5 73.1 61.5 61.1
-----------------------------------------------------
Net interest income after provision for credit losses. . . . . . . . 687.9 682.1 679.0 656.1
NONINTEREST INCOME
Service charges on deposit accounts. . . . . . . . . . . . . . . . . 97.4 96.4 92.9 90.5
Credit card fees . . . . . . . . . . . . . . . . . . . . . . . . . . 92.0 92.0 88.7 81.4
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77.3 74.2 77.4 73.4
Investment products fees and commissions . . . . . . . . . . . . . . 14.8 13.1 17.0 14.8
Securities gains . . . . . . . . . . . . . . . . . . . . . . . . . . .5 .9 1.4 18.0
Termination fee. . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 75.0 115.0
State income tax refund. . . . . . . . . . . . . . . . . . . . . . . -- -- 65.0 --
Gain on sale of mortgage banking operations,
branches and other assets. . . . . . . . . . . . . . . . . . . . . -- -- 25.7 45.7
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79.5 86.4 86.8 92.5
-----------------------------------------------------
Total noninterest income . . . . . . . . . . . . . . . . . . . . . 361.5 363.0 529.9 531.3
NONINTEREST EXPENSE
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240.0 238.1 243.7 242.7
Employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . 51.5 51.7 55.5 59.5
Net occupancy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45.5 44.6 43.0 46.3
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . 43.8 42.1 44.5 44.8
Goodwill and other intangible assets . . . . . . . . . . . . . . . . 27.4 27.1 24.6 51.0
Other personnel costs. . . . . . . . . . . . . . . . . . . . . . . . 22.3 23.8 21.1 16.2
Advertising and marketing. . . . . . . . . . . . . . . . . . . . . . 14.9 15.7 16.8 13.8
Telephone. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.5 15.9 15.2 13.6
Professional services. . . . . . . . . . . . . . . . . . . . . . . . 17.4 13.5 14.9 12.2
FDIC insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 2.5 4.5 4.4
SAIF special assessment. . . . . . . . . . . . . . . . . . . . . . . -- 61.3 -- --
Merger, integration, and resizing. . . . . . . . . . . . . . . . . . -- -- 9.8 78.3
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110.0 109.2 111.3 124.4
-----------------------------------------------------
Total noninterest expense. . . . . . . . . . . . . . . . . . . . . 588.8 645.5 604.9 707.2
-----------------------------------------------------
Income before income taxes . . . . . . . . . . . . . . . . . . . . . 460.6 399.6 604.0 480.2
Applicable income taxes. . . . . . . . . . . . . . . . . . . . . . . 168.5 143.9 222.8 190.5
-----------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 292.1 $ 255.7 $ 381.2 $ 289.7
-----------------------------------------------------
-----------------------------------------------------
Net income applicable to common equity . . . . . . . . . . . . . . . $ 287.7 $ 251.1 $ 376.5 $ 285.0
-----------------------------------------------------
-----------------------------------------------------
Primary net income per common share. . . . . . . . . . . . . . . . . $ 1.15 $ .98 $ 1.47 $ 1.13
Fully diluted net income per common share. . . . . . . . . . . . . . $ 1.14 $ .98 $ 1.46 $ 1.12
SELECTED AVERAGE BALANCES
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $52,108 $51,240 $50,605 $49,450
Earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,859 60,636 60,149 59,147
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,132 67,872 67,420 66,168
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,785 47,573 47,443 46,197
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,119 5,022 4,847 4,629
Common equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,687 5,790 5,705 5,533
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
1995
-------------------------------------------------------
Fourth Third Second First
(In Millions, Except Per Share Data) Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,113.2 $ 1,109.7 $ 1,095.8 $ 1,054.7
Securities:
Taxable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98.4 101.2 104.7 116.0
Exempt from federal income taxes . . . . . . . . . . . . . . . . . 14.9 15.0 15.0 14.9
Other interest income. . . . . . . . . . . . . . . . . . . . . . . . 17.4 16.2 16.2 17.5
-------------------------------------------------------
Total interest income. . . . . . . . . . . . . . . . . . . . . . . 1,243.9 1,242.1 1,231.7 1,203.1
INTEREST EXPENSE
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357.0 354.8 363.3 341.6
Federal funds purchased and repurchase agreements. . . . . . . . . . 53.7 49.1 54.9 60.5
Other short-term funds borrowed. . . . . . . . . . . . . . . . . . . 53.2 60.8 45.3 30.5
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.8 67.7 66.6 66.3
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely the junior subordinated debentures of the
parent company . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- --
-------------------------------------------------------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . 536.7 532.4 530.1 498.9
-------------------------------------------------------
Net interest income. . . . . . . . . . . . . . . . . . . . . . . . . 707.2 709.7 701.6 704.2
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . 82.4 55.0 52.1 49.6
-------------------------------------------------------
Net interest income after provision for credit losses. . . . . . . . 624.8 654.7 649.5 654.6
NONINTEREST INCOME
Service charges on deposit accounts. . . . . . . . . . . . . . . . . 84.7 86.3 86.4 87.6
Credit card fees . . . . . . . . . . . . . . . . . . . . . . . . . . 78.7 82.3 74.5 68.4
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.9 58.8 60.8 57.6
Investment products fees and commissions . . . . . . . . . . . . . . 13.9 13.5 12.5 9.9
Securities gains . . . . . . . . . . . . . . . . . . . . . . . . . . .7 .7 1.6 --
Termination fee. . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- --
State income tax refund. . . . . . . . . . . . . . . . . . . . . . . -- -- -- --
Gain on sale of mortgage banking operations,
branches and other assets. . . . . . . . . . . . . . . . . . . . . .8 34.0 4.6 .5
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82.0 78.7 89.8 80.1
-------------------------------------------------------
Total noninterest income . . . . . . . . . . . . . . . . . . . . . 324.7 354.3 330.2 304.1
NONINTEREST EXPENSE
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236.2 230.3 228.6 232.4
Employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . 46.4 50.6 52.4 60.5
Net occupancy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45.6 45.6 45.4 46.8
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . 43.3 46.8 48.4 46.0
Goodwill and other intangible assets . . . . . . . . . . . . . . . . 17.0 19.0 20.3 19.7
Other personnel costs. . . . . . . . . . . . . . . . . . . . . . . . 20.2 16.2 14.5 11.5
Advertising and marketing. . . . . . . . . . . . . . . . . . . . . . 14.7 14.0 16.9 13.6
Telephone. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.0 14.6 14.9 13.9
Professional services. . . . . . . . . . . . . . . . . . . . . . . . 17.1 13.0 16.4 12.7
FDIC insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.7 4.5 25.7 25.6
SAIF special assessment. . . . . . . . . . . . . . . . . . . . . . . -- -- -- --
Merger, integration, and resizing. . . . . . . . . . . . . . . . . . 90.3 4.8 3.8 --
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114.0 137.7 119.9 120.4
-------------------------------------------------------
Total noninterest expense. . . . . . . . . . . . . . . . . . . . . 668.5 597.1 607.2 603.1
-------------------------------------------------------
Income before income taxes . . . . . . . . . . . . . . . . . . . . . 281.0 411.9 372.5 355.6
Applicable income taxes. . . . . . . . . . . . . . . . . . . . . . . 108.9 152.1 135.9 127.0
-------------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 172.1 $ 259.8 $ 236.6 $228.6
-------------------------------------------------------
-------------------------------------------------------
Net income applicable to common equity . . . . . . . . . . . . . . . $ 167.1 $ 254.9 $ 231.7 $ 223.7
-------------------------------------------------------
-------------------------------------------------------
Primary net income per common share. . . . . . . . . . . . . . . . . $ .68 $ 1.02 $ .92 $ .89
Fully diluted net income per common share. . . . . . . . . . . . . . $ .67 $ 1.01 $ .91 $ .87
SELECTED AVERAGE BALANCES
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,740 $48,046 $47,487 $46,509
Earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,228 56,517 56,213 56,158
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,937 63,031 62,763 62,587
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,699 44,189 44,880 45,152
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,505 4,033 4,055 4,050
Common equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,181 5,175 5,093 4,907
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Bancorp 33
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND RELATED YIELDS AND RATES
Year ended December 31 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Interest
Yields Yields
(Dollars In Millions) Balance Interest and Rates Balance Interest and Rates
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Available-for-sale securities:
U.S. Treasury. . . . . . . . . . . . . . . . . . . . $ 1,255 $ 74.3 5.92% $ 1,864 $ 109.0 5.85%
Mortgage-backed. . . . . . . . . . . . . . . . . . . 4,158 279.7 6.73 2,711 171.0 6.31
State and political subdivisions . . . . . . . . . . 555 47.0 8.47 177 18.9 10.68
U.S. agencies and other. . . . . . . . . . . . . . . 978 65.7 6.72 1,125 82.5 7.33
-------------------- --------------------
Total available-for-sale securities. . . . . . . . 6,946 466.7 6.72 5,877 381.4 6.49
Unrealized loss on available-for-sale securities . . . (21) (69)
------- -------
Net available-for-sale securities. . . . . . . . . 6,925 5,808
Held-to-maturity securities. . . . . . . . . . . . . . 834 64.0 7.67 1,833 131.7 7.18
Trading account securities . . . . . . . . . . . . . . 233 13.2 5.67 266 15.8 5.94
Federal funds sold and resale agreements . . . . . . . 872 46.5 5.33 531 30.8 5.80
Loans:
Commercial . . . . . . . . . . . . . . . . . . . . . 30,472 2,585.1 8.48 27,048 2,415.2 8.93
Consumer . . . . . . . . . . . . . . . . . . . . . . 20,383 1,977.5 9.70 20,655 1,989.2 9.63
-------------------- --------------------
Total loans. . . . . . . . . . . . . . . . . . . . 50,855 4,562.6 8.97 47,703 4,404.4 9.23
Allowance for credit losses. . . . . . . . . . . . . 973 869
------- -------
Net loans. . . . . . . . . . . . . . . . . . . . . 49,882 46,834
Other earning assets . . . . . . . . . . . . . . . . . 461 25.5 5.53 346 20.6 5.95
-------------------- --------------------
Total earning assets*. . . . . . . . . . . . . . 60,201 5,178.5 8.60 56,556 4,984.7 8.81
Cash and due from banks. . . . . . . . . . . . . . . . 3,729 3,516
Other assets . . . . . . . . . . . . . . . . . . . . . 4,466 3,950
------- -------
Total assets . . . . . . . . . . . . . . . . . . $67,402 $63,084
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits . . . . . . . . . . . . . $11,970 $10,646
Interest-bearing deposits:
Interest checking. . . . . . . . . . . . . . . . . 5,678 90.1 1.59 5,473 88.2 1.61
Money market accounts. . . . . . . . . . . . . . . 10,068 379.4 3.77 8,952 357.5 3.99
Other savings accounts . . . . . . . . . . . . . . 3,157 70.7 2.24 3,566 87.8 2.46
Savings certificates . . . . . . . . . . . . . . . 12,985 703.2 5.42 13,223 704.2 5.33
Certificates over $100,000 . . . . . . . . . . . . 3,394 197.9 5.83 2,866 179.0 6.25
-------------------- --------------------
Total interest-bearing deposits. . . . . . . . . 35,282 1,441.3 4.09 34,080 1,416.7 4.16
Short-term borrowings. . . . . . . . . . . . . . . . . 7,187 390.2 5.43 6,969 408.0 5.85
Long-term debt . . . . . . . . . . . . . . . . . . . . 4,908 303.8 6.19 4,162 273.4 6.57
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trusts holding solely the
junior subordinated debentures
of the parent company. . . . . . . . . . . . . . . . 36 2.8 8.18 -- -- --
-------------------- --------------------
Total interest-bearing liabilities . . . . . . . 47,413 2,138.1 4.51 45,211 2,098.1 4.64
Other liabilities. . . . . . . . . . . . . . . . . . . 2,100 1,882
Preferred equity . . . . . . . . . . . . . . . . . . . 240 255
Common equity. . . . . . . . . . . . . . . . . . . . . 5,693 5,134
Unrealized loss on
available-for-sale securities, net of tax. . . . . . (14) (44)
------- -------
Total liabilities and shareholders' equity . . . $67,402 $63,084
------- -------
------- -------
Net interest income. . . . . . . . . . . . . . . . . . $ 3,040.4 $ 2,886.6
--------- ---------
--------- ---------
Gross interest margin. . . . . . . . . . . . . . . . . 4.09% 4.17%
----- -----
Gross interest margin without
taxable-equivalent increments. . . . . . . . . . . . 3.99% 4.06%
----- -----
PERCENT OF EARNING ASSETS
Interest income. . . . . . . . . . . . . . . . . . . . 8.60% 8.81%
Interest expense . . . . . . . . . . . . . . . . . . . 3.55 3.71
----- -----
Net interest margin. . . . . . . . . . . . . . . . . 5.05 5.10
----- -----
Net interest margin without
taxable-equivalent increments. . . . . . . . . . . . 4.94% 4.99%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
INTEREST AND RATES ARE PRESENTED ON A FULLY TAXABLE-EQUIVALENT BASIS UNDER
A TAX RATE OF 35 PERCENT FOR 1996, 1995, 1994 AND 1993 AND 34 PERCENT FOR
1992.
INTEREST INCOME AND RATES ON LOANS INCLUDE LOAN FEES. NONACCRUAL LOANS ARE
INCLUDED IN AVERAGE LOAN BALANCES.
* BEFORE DEDUCTING THE ALLOWANCE FOR CREDIT LOSSES AND EXCLUDING THE
UNREALIZED LOSS ON AVAILABLE-FOR-SALE SECURITIES.
** NOT MEANINGFUL
34 U.S. Bancorp
Year ended December 31 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Interest
Yields Yields
(Dollars In Millions) Balance Interest and Rates Balance Interest and Rates
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Available-for-sale securities:
U.S. Treasury. . . . . . . . . . . . . . . . . . . . $2,704 $142.6 5.27% $1,866 $104.8 5.62%
Mortgage-backed. . . . . . . . . . . . . . . . . . . 4,085 253.8 6.21 3,323 207.8 6.25
State and political subdivisions . . . . . . . . . . 188 20.0 10.64 202 22.4 11.09
U.S. agencies and other. . . . . . . . . . . . . . . 1,179 65.0 5.51 865 52.2 6.03
--------------------- -------------------
Total available-for-sale securities. . . . . . . . 8,156 481.4 5.90 6,256 387.2 6.19
Unrealized loss on available-for-sale securities . . . (97) --
-------- ------
Net available-for-sale securities. . . . . . . . . 8,059 6,256
Held-to-maturity securities. . . . . . . . . . . . . . 2,162 151.1 6.99 4,603 299.8 6.51
Trading account securities . . . . . . . . . . . . . . 247 13.3 5.38 313 14.7 4.70
Federal funds sold and resale agreements . . . . . . . 715 30.7 4.29 1,081 32.7 3.02
Loans:
Commercial . . . . . . . . . . . . . . . . . . . . . 24,630 1,934.6 7.85 22,652 1,690.9 7.46
Consumer . . . . . . . . . . . . . . . . . . . . . . 19,954 1,785.9 8.95 18,440 1,707.4 9.26
--------------------- --------------------
Total loans. . . . . . . . . . . . . . . . . . . . 44,584 3,720.5 8.34 41,092 3,398.3 8.27
Allowance for credit losses. . . . . . . . . . . . . 847 823
-------- -------
Net loans. . . . . . . . . . . . . . . . . . . . . 43,737 40,269
Other earning assets . . . . . . . . . . . . . . . . . 369 20.0 5.42 381 20.0 5.25
--------------------- --------------------
Total earning assets*. . . . . . . . . . . . . . 56,233 4,417.0 7.85 53,726 4,152.7 7.73
Cash and due from banks. . . . . . . . . . . . . . . . 3,573 3,484
Other assets . . . . . . . . . . . . . . . . . . . . . 3,846 3,800
-------- -------
Total assets . . . . . . . . . . . . . . . . . . $62,708 $60,187
-------- -------
-------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits . . . . . . . . . . . . . $11,299 $11,295
Interest-bearing deposits:
Interest checking. . . . . . . . . . . . . . . . . 5,826 85.4 1.47 5,605 93.4 1.67
Money market accounts. . . . . . . . . . . . . . . 8,600 247.1 2.87 8,362 220.9 2.64
Other savings accounts . . . . . . . . . . . . . . 4,540 100.8 2.22 4,323 102.9 2.38
Savings certificates . . . . . . . . . . . . . . . 13,200 551.4 4.18 14,300 621.6 4.35
Certificates over $100,000 . . . . . . . . . . . . 2,681 136.4 5.09 2,731 135.3 4.95
--------------------- --------------------
Total interest-bearing deposits. . . . . . . . . 34,847 1,121.1 3.22 35,321 1,174.1 3.32
Short-term borrowings. . . . . . . . . . . . . . . . . 6,011 259.1 4.31 4,110 136.1 3.31
Long-term debt . . . . . . . . . . . . . . . . . . . . 3,796 227.2 5.99 2,916 184.3 6.32
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts
holding solely the junior subordinated
debentures of the parent company . . . . . . . . . . -- -- -- -- -- --
--------------------- --------------------
Total interest-bearing liabilities . . . . . . . 44,654 1,607.4 3.60 42,347 1,494.5 3.53
Other liabilities. . . . . . . . . . . . . . . . . . . 1,575 1,533
Preferred equity . . . . . . . . . . . . . . . . . . . 293 510
Common equity. . . . . . . . . . . . . . . . . . . . . 4,948 4,502
Unrealized loss on available-for-sale securities,
net of tax . . . . . . . . . . . . . . . . . . . . . (61) --
-------- --------
Total liabilities and shareholders' equity . . . . $62,708 $60,187
-------- --------
-------- --------
Net interest income. . . . . . . . . . . . . . . . . . $2,809.6 $2,658.2
-------- ---------
-------- ---------
Gross interest margin. . . . . . . . . . . . . . . . . 4.25% 4.20%
----- -----
----- -----
Gross interest margin without
taxable-equivalent increments. . . . . . . . . . . . 4.13% 4.07%
----- -----
----- -----
PERCENT OF EARNING ASSETS
Interest income. . . . . . . . . . . . . . . . . . . . 7.85% 7.73%
Interest expense . . . . . . . . . . . . . . . . . . . 2.86 2.78
----- -----
Net interest margin. . . . . . . . . . . . . . . . . 4.99 4.95
----- -----
----- -----
Net interest margin without
taxable-equivalent increments. . . . . . . . . . . . 4.87% 4.82%
----- -----
----- -----
Year ended December 31 1992 1995-1996
- ---------------------------------------------------------------------------------------------------------
Interest % Change
Yields Average
(Dollars In Millions) Balance Interest and Rates Balance
- ---------------------------------------------------------------------------------------------------------
ASSETS
Available-for-sale securities:
U.S. Treasury. . . . . . . . . . . . . . . . . . . . $1,557 $98.2 6.31% (32.7)%
Mortgage-backed. . . . . . . . . . . . . . . . . . . 2,673 207.3 7.76 53.4
State and political subdivisions . . . . . . . . . . 153 18.1 11.83 **
U.S. agencies and other. . . . . . . . . . . . . . . 444 26.2 5.90 (13.1)
--------------------
Total available-for-sale securities. . . . . . . . 4,827 349.8 7.25 18.2
Unrealized loss on available-for-sale securities . . . -- 69.6
-------
Net available-for-sale securities. . . . . . . . . 4,827 19.2
Held-to-maturity securities. . . . . . . . . . . . . . 3,617 270.4 7.48 (54.5)
Trading account securities . . . . . . . . . . . . . . 331 17.3 5.23 (12.4)
Federal funds sold and resale agreements . . . . . . . 1,742 60.6 3.48 64.2
Loans:
Commercial . . . . . . . . . . . . . . . . . . . . . 21,335 1,722.1 8.07 12.7
Consumer . . . . . . . . . . . . . . . . . . . . . . 15,874 1,657.0 10.44 (1.3)
--------------------
Total loans. . . . . . . . . . . . . . . . . . . . 37,209 3,379.1 9.08 6.6
Allowance for credit losses. . . . . . . . . . . . . 802 12.0
-------
Net loans. . . . . . . . . . . . . . . . . . . . . 36,407 6.5
Other earning assets . . . . . . . . . . . . . . . . . 777 35.6 4.58 33.2
--------------------
Total earning assets*. . . . . . . . . . . . . . 48,503 4,112.8 8.48 6.4
Cash and due from banks. . . . . . . . . . . . . . . . 2,968 6.1
Other assets . . . . . . . . . . . . . . . . . . . . . 3,503 13.1
-------
Total assets . . . . . . . . . . . . . . . . . . $54,172 6.8%
-------
-------
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits . . . . . . . . . . . . . $8,616 12.4%
Interest-bearing deposits:
Interest checking. . . . . . . . . . . . . . . . . 4,927 118.3 2.40 3.7
Money market accounts. . . . . . . . . . . . . . . 7,592 250.8 3.30 12.5
Other savings accounts . . . . . . . . . . . . . . 3,300 113.4 3.44 (11.5)
Savings certificates . . . . . . . . . . . . . . . 13,650 732.2 5.36 (1.8)
Certificates over $100,000 . . . . . . . . . . . . 3,292 191.4 5.81 18.4
--------------------
Total interest-bearing deposits. . . . . . . . . 32,761 1,406.1 4.29 3.5
Short-term borrowings. . . . . . . . . . . . . . . . . 4,200 169.1 4.03 3.1
Long-term debt . . . . . . . . . . . . . . . . . . . . 2,800 203.6 7.27 17.9
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts
holding solely the junior subordinated
debentures of the parent company . . . . . . . . . . -- -- -- **
--------------------
Total interest-bearing liabilities . . . . . . . 39,761 1,778.8 4.47 4.9
Other liabilities. . . . . . . . . . . . . . . . . . . 1,400 11.6
Preferred equity . . . . . . . . . . . . . . . . . . . 471 (5.9)
Common equity. . . . . . . . . . . . . . . . . . . . . 3,924 10.9
Unrealized loss on available-for-sale
securities, net of tax . . . . . . . . . . . . . . . -- 68.2
-------
Total liabilities and shareholders' equity . . . . $54,172 6.8
-------
-------
Net interest income. . . . . . . . . . . . . . . . . . $2,334.0
---------
---------
Gross interest margin. . . . . . . . . . . . . . . . . 4.01%
-----
-----
Gross interest margin without
taxable-equivalent increments. . . . . . . . . . . . 3.86%
-----
-----
PERCENT OF EARNING ASSETS
Interest income. . . . . . . . . . . . . . . . . . . . 8.48%
Interest expense . . . . . . . . . . . . . . . . . . . 3.67
-----
Net interest margin. . . . . . . . . . . . . . . . . 4.81
-----
-----
Net interest margin without
taxable-equivalent increments. . . . . . . . . . . . 4.66%
-----
-----
U.S. Bancorp 35
SUPPLEMENTAL FINANCIAL DATA AND TABLES
EARNINGS PER SHARE SUMMARY
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
Primary income from continuing
operations before cumulative effect
of changes in accounting principles. . . . $4.74 $3.51 $2.16 $2.67 $1.92
Income (loss) from discontinued operations . -- -- (.03) .01 .01
Cumulative effect of changes in
accounting principles. . . . . . . . . . . -- -- -- -- .74
-------------------------------------------------------------------
Primary net income . . . . . . . . . . . . . $4.74 $3.51 $2.13 $2.68 $2.67
-------------------------------------------------------------------
-------------------------------------------------------------------
Fully diluted income from continuing
operations before cumulative effect
of changes in accounting principles. . . . $4.69 $3.46 $2.14 $2.64 $1.89
Income (loss) from discontinued operations . -- -- (.03) .01 .01
Cumulative effect of changes in
accounting principles. . . . . . . . . . . -- -- -- -- .71
-------------------------------------------------------------------
Fully diluted net income . . . . . . . . . . $4.69 $3.46 $2.11 $2.65 $2.61
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
RATIOS
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
Return on average assets . . . . . . . . . . 1.81% 1.42% .89% 1.17% 1.22%
Return on average common equity. . . . . . . 21.1 17.2 10.9 14.7 15.9
Average total equity to average assets . . . 8.8 8.5 8.3 8.3 8.1
Dividends per share to net income per share. 34.8 41.3 54.5 37.3 33.0
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
OTHER STATISTICS
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
Common shares outstanding - year end*. . . . 246,005,990 241,031,881 248,686,447 244,023,773 242,248,041
Average common shares outstanding and
common stock equivalents:
Primary. . . . . . . . . . . . . . . . . . 253,240,035 249,621,300 251,634,478 247,343,104 233,668,964
Fully diluted. . . . . . . . . . . . . . . 257,130,160 255,952,853 258,467,906 254,083,809 242,690,973
Number of shareholders - year-end**. . . . . 43,353 41,701 47,911 48,585 48,904
Average number of employees
(full-time equivalents). . . . . . . . . . 27,157 27,795 31,185 31,674 30,106
Common dividends paid (millions) . . . . . . $406.9 $327.4 $276.5 $222.7 $176.8
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
*DEFINED AS TOTAL COMMON SHARES LESS COMMON STOCK HELD IN TREASURY.
**BASED ON NUMBER OF COMMON STOCK SHAREHOLDERS OF RECORD.
STOCK PRICE RANGE AND DIVIDENDS
1996 1995
------------------------------------------------------------
Sales Price Sales Price
---------------- Dividends ----------------- Dividends
High Low Paid High Low Paid
- --------------------------------------------------------------------------------
First quarter. . . .$59.88 $46.00 $.4125 $40.50 $32.63 $.3625
Second quarter . . . 63.75 56.25 .4125 44.63 38.88 .3625
Third quarter. . . . 68.00 55.38 .4125 48.25 39.50 .3625
Fourth quarter . . . 74.00 63.75 .4125 53.75 47.63 .3625
Closing price -
December 31. . . . 68.25 49.63
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE COMMON STOCK OF U.S. BANCORP IS TRADED ON THE NEW YORK STOCK EXCHANGE, UNDER
THE TICKER SYMBOL, "USB."
36 U.S. Bancorp
COMMERCIAL LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
December 31, 1996
--------------------------------
After
1 Year
In 1 Year Through After 5
(In Millions) or Less 5 Years Years
- --------------------------------------------------------------------------------
Commercial, lease financing and agricultural . $16,266 $4,169 $1,089
Real estate:
Commercial mortgage. . . . . . . . . . . . . 4,323 2,347 1,366
Construction . . . . . . . . . . . . . . . . 2,011 86 24
-------------------------------
Total . . . . . . . . . . . . . . . . . . $22,600 $6,602 $2,479
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Due in Due After
One Year One Year Total
------------------------------
Loans at fixed interest rates. . . . . . . . . $ 1,971 $6,811 $ 8,782
Loans at variable interest rates . . . . . . . 20,629 2,270 22,899
------------------------------
Total . . . . . . . . . . . . . . . . . . $22,600 $9,081 $31,681
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TIME CERTIFICATES OF DEPOSIT AND OTHER TIME DEPOSITS IN DENOMINATIONS OF
$100,000 OR MORE AT DECEMBER 31
Maturing
------------------------------------------------
Under Three Six to Over
Three to Six Twelve Twelve
(In Millions) Months Months Months Months Total
- ------------------------------------------------------------------------
1996. . . . . . . . . . $1,749 $573 $483 $597 $3,402
1995. . . . . . . . . . 1,226 377 432 597 2,632
1994. . . . . . . . . . 1,183 345 470 793 2,791
- ------------------------------------------------------------------------
SHORT-TERM FUNDS BORROWED
Average Maximum Average Weighted
Daily Outstanding Interest Rate Average
Outstanding Amount Month-End Paid During Interest Rate
(In Millions) at Year-End Outstanding Balance the Year at Year-End
- -------------------------------------------------------------------------------------------------------------------------
1996
Federal funds purchased and securities sold
under agreements to repurchase . . . . . . . . $3,401 $3,719 $4,114 5.32% 5.34%
Other. . . . . . . . . . . . . . . . . . . . . . 3,191 3,468 4,330 5.54 5.53
------------------------
Total. . . . . . . . . . . . . . . . . . . . . $6,592 $7,187 7,797 5.43 5.43
------------------------
------------------------
1995
Federal funds purchased and securities sold
under agreements to repurchase . . . . . . . . $3,914 $3,795 $4,649 5.75% 5.25%
Other. . . . . . . . . . . . . . . . . . . . . . 4,070 3,174 4,658 5.98 5.61
------------------------
Total. . . . . . . . . . . . . . . . . . . . . $7,984 $6,969 8,037 5.85 5.43
------------------------
------------------------
1994
Federal funds purchased and securities sold
under agreements to repurchase . . . . . . . . $5,707 $4,413 $5,707 4.32% 5.52%
Other. . . . . . . . . . . . . . . . . . . . . . 1,794 1,598 2,519 4.27 5.59
------------------------
Total. . . . . . . . . . . . . . . . . . . . . $7,501 $6,011 7,501 4.31 5.54
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
U.S. Bancorp 37
TABLE 1 SELECTED FINANCIAL DATA
(Dollars in Millions, Except Per Share Data) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
CONDENSED INCOME STATEMENT:
Net interest income (taxable-equivalent basis) . $3,040.4 $2,886.6 $2,809.6 $2,658.2 $2,334.0
Provision for credit losses. . . . . . . . . . . 271.2 239.1 243.7 239.3 340.5
----------------------------------------------------------------------
Net interest income after provision for
credit losses . . . . . . . . . . . . . . . 2,769.2 2,647.5 2,565.9 2,418.9 1,993.5
Securities gains (losses). . . . . . . . . . . . 20.8 3.0 (124.2) .8 48.4
Other nonrecurring gains . . . . . . . . . . . . 330.6 44.8 52.6 65.1 12.5
Other noninterest income . . . . . . . . . . . . 1,434.3 1,265.5 1,186.5 1,177.9 1,073.9
Restructuring and merger-related charges*. . . . 88.1 98.9 225.3 72.2 110.4
Other nonrecurring charges . . . . . . . . . . . 118.2 38.2 27.2 -- --
Other noninterest expense. . . . . . . . . . . . 2,340.1 2,338.8 2,479.6 2,442.7 2,215.5
----------------------------------------------------------------------
Income from continuing operations before
income taxes and cumulative effect of
changes in accounting principles. . . . . . 2,008.5 1,484.9 948.7 1,147.8 802.4
Taxable-equivalent adjustment. . . . . . . . . . 64.1 63.9 69.0 71.1 72.0
Income taxes . . . . . . . . . . . . . . . . . . 725.7 523.9 311.5 374.9 245.9
----------------------------------------------------------------------
Income from continuing operations before
cumulative effect of changes in
accounting principles . . . . . . . . . . . 1,218.7 897.1 568.2 701.8 484.5
Income (loss) from discontinued operations . . . -- -- (8.5) 2.5 2.7
----------------------------------------------------------------------
Income before cumulative effect of changes
in accounting principles. . . . . . . . . . 1,218.7 897.1 559.7 704.3 487.2
Cumulative effect of changes in accounting
principles . . . . . . . . . . . . . . . . . . -- -- -- -- 173.3
----------------------------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . $1,218.7 $ 897.1 $ 559.7 $ 704.3 $ 660.5
----------------------------------------------------------------------
----------------------------------------------------------------------
FINANCIAL RATIOS:
Return on average assets . . . . . . . . . . . . 1.81% 1.42% .89% 1.17% 1.22%
Return on average common equity. . . . . . . . . 21.1 17.2 10.9 14.7 15.9
Efficiency ratio . . . . . . . . . . . . . . . . 53.0 59.0 67.5 64.5 68.0
Net interest margin. . . . . . . . . . . . . . . 5.05 5.10 4.99 4.95 4.81
SELECTED FINANCIAL RATIOS BEFORE
RESTRUCTURING AND MERGER-RELATED CHARGES,
NONRECURRING ITEMS AND CUMULATIVE EFFECT
OF CHANGES IN ACCOUNTING PRINCIPLES:
Return on average assets . . . . . . . . . . . . 1.69 1.51 1.23 1.18 .98
Return on average common equity. . . . . . . . . 19.8 18.3 15.3 14.9 12.5
Efficiency ratio . . . . . . . . . . . . . . . . 52.3 56.3 62.1 63.7 65.0
PER COMMON SHARE:
Primary income from continuing operations
before cumulative effect of changes in
accounting principles . . . . . . . . . . . $ 4.74 $ 3.51 $ 2.16 $ 2.67 $ 1.92
Income (loss) from discontinued operations . . -- -- (.03) .01 .01
Cumulative effect of changes in
accounting principles . . . . . . . . . . . -- -- -- -- .74
----------------------------------------------------------------------
Primary net income . . . . . . . . . . . . . . . $ 4.74 $ 3.51 $ 2.13 $ 2.68 $ 2.67
----------------------------------------------------------------------
----------------------------------------------------------------------
Fully diluted income from continuing operations
before cumulative effect of changes in
accounting principles . . . . . . . . . . . $ 4.69 $ 3.46 $ 2.14 $ 2.64 $ 1.89
Income (loss) from discontinued operations . . -- -- (.03) .01 .01
Cumulative effect of changes in
accounting principles . . . . . . . . . . . -- -- -- -- .71
----------------------------------------------------------------------
Fully diluted net income . . . . . . . . . . . . $ 4.69 $ 3.46 $ 2.11 $ 2.65 $ 2.61
----------------------------------------------------------------------
----------------------------------------------------------------------
Dividends paid** . . . . . . . . . . . . . . . . $ 1.65 $ 1.45 $ 1.16 $ 1.00 $ .88
AVERAGE BALANCE SHEET DATA:
Loans . . . . . . . . . . . . . . . . . . . . . $ 50,855 $ 47,703 $ 44,584 $ 41,092 $ 37,209
Earning assets . . . . . . . . . . . . . . . . . 60,201 56,556 56,233 53,726 48,503
Assets . . . . . . . . . . . . . . . . . . . . . 67,402 63,084 62,708 60,187 54,172
Deposits . . . . . . . . . . . . . . . . . . . . 47,252 44,726 46,146 46,616 41,377
Long-term debt . . . . . . . . . . . . . . . . . 4,908 4,162 3,796 2,916 2,800
Common equity. . . . . . . . . . . . . . . . . . 5,679 5,090 4,887 4,502 3,924
Total shareholders' equity . . . . . . . . . . . 5,919 5,345 5,180 5,012 4,395
YEAR-END BALANCE SHEET DATA:
Loans . . . . . . . . . . . . . . . . . . . . . $ 52,355 $ 49,345 $ 46,375 $ 43,870 $ 39,520
Assets . . . . . . . . . . . . . . . . . . . . . 69,749 65,668 64,737 62,457 60,633
Deposits . . . . . . . . . . . . . . . . . . . . 49,356 45,779 46,115 47,834 47,457
Long-term debt . . . . . . . . . . . . . . . . . 5,369 4,583 4,225 3,231 2,588
Common equity. . . . . . . . . . . . . . . . . . 5,613 5,089 4,837 4,758 4,325
Total shareholders' equity . . . . . . . . . . . 5,763 5,342 5,105 5,186 4,866
- ------------------------------------------------------------------------------------------------------------------------
* INCLUDES $26.4 RELATING TO ORE IN 1992, AND $56.5 RELATING TO SEVERANCE IN
1994.
** DIVIDENDS PER SHARE HAVE NOT BEEN RESTATED FOR THE U.S. BANCORP ("USBC"),
METROPOLITAN FINANCIAL CORPORATION ("MFC") OR COLORADO NATIONAL BANKSHARES,
INC. ("CNB") MERGERS. USBC PAID COMMON DIVIDENDS OF $168.7 MILLION IN 1996
($1.18 PER SHARE), $133.1 MILLION IN 1995 ($1.06 PER SHARE), $116.0 MILLION
IN 1994 ($.94 PER SHARE), $100.8 MILLION IN 1993 ($.85 PER SHARE) AND $88.5
MILLION IN 1992 ($.76 PER SHARE). MFC PAID COMMON DIVIDENDS OF $25.1 MILLION
IN 1994 ($.80 PER SHARE), $12.1 MILLION IN 1993 ($.39 PER SHARE) AND $7.7
MILLION IN 1992 ($.27 PER SHARE). CNB PAID COMMON DIVIDENDS OF $3.2 MILLION
IN 1992 ($.28 PER SHARE).
38 U.S. Bancorp
TABLE 2 ANALYSIS OF NET INTEREST INCOME
(Dollars in Millions) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
Net interest income (taxable-equivalent basis) . . . . . . . . . . . $3,040.4 $2,886.6 $2,809.6
---------------------------------------
---------------------------------------
Average balances of earning assets supported by:
Interest-bearing liabilities . . . . . . . . . . . . . . . . . . . $47,413 $45,211 $44,654
Noninterest-bearing liabilities. . . . . . . . . . . . . . . . . . 12,788 11,345 11,579
---------------------------------------
Total earning assets. . . . . . . . . . . . . . . . . . . . . . $60,201 $56,556 $56,233
---------------------------------------
---------------------------------------
Average yields and weighted average rates (taxable-equivalent basis):
Earning assets yield . . . . . . . . . . . . . . . . . . . . . . . 8.60% 8.81% 7.85%
Rate paid on interest-bearing liabilities. . . . . . . . . . . . . 4.51 4.64 3.60
---------------------------------------
Gross interest margin. . . . . . . . . . . . . . . . . . . . . . . . 4.09% 4.17% 4.25%
---------------------------------------
---------------------------------------
Net interest margin. . . . . . . . . . . . . . . . . . . . . . . . . 5.05% 5.10% 4.99%
---------------------------------------
---------------------------------------
Net interest margin without taxable-equivalent increments. . . . . . 4.94% 4.99% 4.87%
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
TABLE 3 CHANGES IN RATE AND VOLUME
1996 Compared with 1995 1995 Compared with 1994
-------------------------------------------------------------------
(In Millions) Volume Yield/Rate Total Volume Yield/Rate Total
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in:
Interest income:
Loans . . . . . . . . . . . . . . . . . . . $285.3 $(127.1) $ 158.2 $ 271.3 $412.6 $ 683.9
Taxable securities. . . . . . . . . . . . . (12.4) 11.2 (1.2) (168.0) 51.9 (116.1)
Nontaxable securities . . . . . . . . . . . 16.1 2.7 18.8 (3.2) (.1) (3.3)
Federal funds sold and
resale agreements . . . . . . . . . . . . 18.4 (2.7) 15.7 (9.1) 9.2 .1
Other . . . . . . . . . . . . . . . . . . . 4.7 (2.4) 2.3 (.2) 3.3 3.1
-------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . 312.1 (118.3) 193.8 90.8 476.9 567.7
Interest expense:
Savings deposits and time
deposits less than $100,000 . . . . . . . 26.5 (20.8) 5.7 (29.9) 282.9 253.0
Time deposits over $100,000 . . . . . . . . 31.4 (12.5) 18.9 9.9 32.7 42.6
Short-term borrowings . . . . . . . . . . . 12.5 (30.3) (17.8) 45.8 103.1 148.9
Long-term debt. . . . . . . . . . . . . . . 46.9 (16.5) 30.4 23.0 23.2 46.2
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trusts holding solely the
junior subordinated debentures
of the parent company . . . . . . . . . . 2.8 -- 2.8 -- -- --
-------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . 120.1 (80.1) 40.0 48.8 441.9 490.7
-------------------------------------------------------------------
Increase (decrease) in net
interest income . . . . . . . . . . . . . $192.0 $ (38.2) $153.8 $ 42.0 $ 35.0 $ 77.0
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
THIS TABLE SHOWS THE COMPONENTS OF THE CHANGE IN NET INTEREST INCOME BY VOLUME
AND RATE ON A TAXABLE-EQUIVALENT BASIS. THE EFFECT OF CHANGES IN RATES ON VOLUME
CHANGES IS ALLOCATED BASED ON THE PERCENTAGE RELATIONSHIP OF CHANGES IN VOLUME
AND CHANGES IN RATE. THIS TABLE DOES NOT TAKE INTO ACCOUNT THE LEVEL OF
NONINTEREST-BEARING FUNDING, NOR DOES IT FULLY REFLECT CHANGES IN THE MIX OF
ASSETS AND LIABILITIES.
U.S. Bancorp 39
TABLE 4 NONINTEREST INCOME
(Dollars in Millions) 1996 1995 1994
- ------------------------------------------------------------------------------
Services charges on deposit accounts . . . . . $ 377.2 $ 345.0 $ 346.7
Credit card fees . . . . . . . . . . . . . . . 354.1 303.9 248.9
Trust fees . . . . . . . . . . . . . . . . . . 302.3 241.1 224.5
Investment products fees and commissions . . . 59.7 49.8 56.4
Trading account profits and commissions. . . . 29.0 28.5 24.7
Other. . . . . . . . . . . . . . . . . . . . . 312.0 297.2 285.3
----------------------------
Subtotal . . . . . . . . . . . . . . . . . . 1,434.3 1,265.5 1,186.5
Termination fee, net . . . . . . . . . . . . . 190.0 -- --
State income tax refund. . . . . . . . . . . . 65.0 -- --
Gain on sale of mortgage banking operations,
branches and other assets. . . . . . . . . . 71.4 39.9 62.9
Securities gains (losses) . . . . . . . . . . 20.8 3.0 (124.2)
Other . . . . . . . . . . . . . . . . . . . . 4.2 4.9 (10.3)
----------------------------
Nonrecurring gains (losses). . . . . . . . . 351.4 47.8 (71.6)
----------------------------
Total noninterest income. . . . . . . . . $1,785.7 $1,313.3 $1,114.9
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TABLE 5 NONINTEREST EXPENSE
(Dollars in Millions, Except Per Employee Data) 1996 1995 1994
- ------------------------------------------------------------------------------
Salaries** . . . . . . . . . . . . . . . . . . $ 955.3 $ 927.5 $ 972.7
Employee benefits**. . . . . . . . . . . . . . 217.3 209.9 224.4
----------------------------
Total personnel expense. . . . . . . . . . . 1,172.6 1,137.4 1,197.1
Net occupancy. . . . . . . . . . . . . . . . . 179.4 183.4 189.6
Furniture and equipment. . . . . . . . . . . . 175.2 184.5 174.5
Goodwill and other intangible assets** . . . . 100.6 76.0 72.5
Other personnel costs. . . . . . . . . . . . . 83.4 62.4 60.8
Advertising and marketing. . . . . . . . . . . 61.2 59.2 65.1
Telephone. . . . . . . . . . . . . . . . . . . 60.2 58.4 61.1
Professional services**. . . . . . . . . . . . 58.0 59.2 65.9
Printing, stationery and supplies. . . . . . . 44.3 43.5 43.1
Postage. . . . . . . . . . . . . . . . . . . . 42.8 45.5 44.7
Third party data processing. . . . . . . . . . 35.6 38.4 39.7
FDIC insurance . . . . . . . . . . . . . . . . 11.9 64.5 105.7
Other**. . . . . . . . . . . . . . . . . . . . 314.9 326.4 359.8
----------------------------
Subtotal . . . . . . . . . . . . . . . . . . 2,340.1 2,338.8 2,479.6
SAIF special assessment. . . . . . . . . . . . 61.3 -- --
Merger-related . . . . . . . . . . . . . . . . 49.5 98.9 125.3
Restructuring charge . . . . . . . . . . . . . -- -- 100.0
Branch distribution resizing . . . . . . . . . 38.6 -- --
Goodwill and other intangible assets
valuation adjustment . . . . . . . . . . . . 29.5 -- --
Special employee bonus . . . . . . . . . . . . 10.1 -- --
Other . . . . . . . . . . . . . . . . . . . . 17.3 38.2 27.2
----------------------------
Nonrecurring charges . . . . . . . . . . . . 206.3 137.1 252.5
----------------------------
Total noninterest expense . . . . . . . . $2,546.4 $2,475.9 $2,732.1
----------------------------
----------------------------
Efficiency ratio* . . . . . . . . . . . . . . 53.0% 59.0% 67.5%
Efficiency ratio before merger-related items
and nonrecurring items . . . . . . . . . . . 52.3 56.3 62.1
Average number of full-time equivalent
employees. . . . . . . . . . . . . . . . . . 27,157 27,795 31,185
Personnel expense per employee** . . . . . . . $ 43,179 $ 40,921 $ 38,387
- ------------------------------------------------------------------------------
* COMPUTED AS NONINTEREST EXPENSE DIVIDED BY THE SUM OF NET INTEREST INCOME
ON A TAXABLE-EQUIVALENT BASIS AND NONINTEREST INCOME NET OF SECURITIES
GAINS AND LOSSES.
** BEFORE EFFECT OF NONRECURRING ITEMS.
40 U.S. Bancorp
TABLE 6 SECURITIES PORTFOLIO AVERAGE MATURITY
Available-for-sale
At December 31, 1996 Average Contractual Maturity
- --------------------------------------------------------------------------------
U.S. Treasury. . . . . . . . . . . . . . . . . . 2 years, 2 months
Other U.S. agencies. . . . . . . . . . . . . . . 5 years, 7 months
State and political. . . . . . . . . . . . . . . 10 years, 8 months
Other* . . . . . . . . . . . . . . . . . . . . . 4 years, 5 months
Total. . . . . . . . . . . . . . . . . . . . . 5 years, 3 months
- --------------------------------------------------------------------------------
HELD-TO-MATURITY
At December 31, 1996 Average Contractual Maturity
- --------------------------------------------------------------------------------
State and political. . . . . . . . . . . . . . . 4 years, 5 months
Other* . . . . . . . . . . . . . . . . . . . . . 1 month
Total. . . . . . . . . . . . . . . . . . . . . 4 years, 4 months
- --------------------------------------------------------------------------------
* EXCLUDES EQUITY SECURITIES THAT HAVE NO STATED MATURITY.
THE AVERAGE EFFECTIVE LIFE OF THE HOLDINGS IS EXPECTED TO BE LESS THAN THE
AVERAGE CONTRACTUAL MATURITIES SHOWN IN THE TABLE BECAUSE BORROWERS MAY
HAVE THE RIGHT TO CALL OR PREPAY OBLIGATIONS WITH OR WITHOUT CALL OR
PREPAYMENT PENALTIES. THE TABLE ABOVE DOES NOT INCLUDE MORTGAGE-BACKED OR
OTHER ASSET-BACKED SECURITIES.
TABLE 7 SECURITIES PORTFOLIO AMORTIZED COST, FAIR VALUE AND YIELD BY
MATURITY DATE
AVAILABLE-FOR-SALE
Maturing: Within 1 Year 1-5 Years 5-10 Years Over 10 Years
- --------------------------------------------------------------------------------------------------------------------------
Amor- Amor- Amor- Amor-
At December 31, 1996 tized Fair tized Fair tized Fair tized Fair
(Dollars in Millions) Cost Value Yield Cost Value Yield Cost Value Yield Cost Value Yield
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury. . . . . . $503.8 $503.9 5.96% $309.3 $310.0 5.75% $222.2 $213.6 5.55% $ -- $ -- -- %
Mortgage-backed* . . . . -- -- -- -- -- -- -- -- -- -- -- --
Other U.S. agencies. . . 84.2 84.6 5.60 219.0 221.3 6.89 216.1 218.6 7.20 69.6 70.5 7.39
State and political**. . 15.0 15.0 8.23 75.7 76.3 7.52 116.0 115.8 7.64 367.1 366.1 8.05
Other . . . . . . . . . 4.5 4.6 7.10 11.4 12.9 7.98 2.5 2.5 6.65 109.8 114.1 5.17***
-----------------------------------------------------------------------------------------------
$607.5 $608.1 5.97% $615.4 $620.5 6.41% $556.8 $550.5 6.63% $546.5 $550.7 7.39%***
- --------------------------------------------------------------------------------------------------------------------------
Mortgage-Backed and
Asset-Backed Securities Total
- -------------------------------------------------------------------------------------
Amor- Amor-
tized Fair tized Fair
Cost Value Yield Cost Value Yield
- -------------------------------------------------------------------------------------
U.S. Treasury. . . . . . $ -- $ -- --% $1,035.3 $1,027.5 5.81%
Mortgage-backed* . . . . 4,096.6 4,104.4 6.99 4,096.6 4,104.4 6.99
Other U.S. agencies. . . -- -- -- 588.9 595.0 6.88
State and political**. . -- -- -- 573.8 573.2 7.91
Other . . . . . . . . . 39.2 39.2 6.80 167.4 173.3 5.83***
----------------------------------------------------------
$4,135.8 $4,143.6 6.99% $6,462.0 $6,473.4 6.84%***
- -------------------------------------------------------------------------------------
HELD-TO-MATURITY
Maturing: Within 1 Year 1-5 Years 5-10 Years Over 10 Years
- --------------------------------------------------------------------------------------------------------------------------
Amor- Amor- Amor- Amor-
At December 31, 1996 tized Fair tized Fair tized Fair tized Fair
(Dollars in Millions) Cost Value Yield Cost Value Yield Cost Value Yield Cost Value Yield
- --------------------------------------------------------------------------------------------------------------------------
State and political**. . $78.9 $79.9 9.08% $407.1 $415.7 7.91% $299.4 $304.0 7.81% $ .9 $ .9 10.21%
Other. . . . . . . . . . -- -- -- -- -- -- -- -- -- -- --
------------------------------------------------------------------------------------------------
$78.9 $79.9 9.08% $407.1 $415.7 7.91% $299.4 $304.0 7.81% $ .9 $ .9 10.21%
Mortgage-Backed and
Asset-Backed Securities Total
- ---------------------------------------------------------------------------------------
Amor- Amor-
tized Fair tized Fair
Cost Value Yield Cost Value Yield
- ---------------------------------------------------------------------------------------
State and political**. . $ -- $ -- -- % $786.3 $800.5 7.99%
Other . . . . . . . . . 10.4 10.4 4.67 10.4 10.4 4.67
-------------------------------------------------------------
$10.4 $10.4 4.67% $796.7 $810.9 7.95%
* VARIABLE RATE MORTGAGE-BACKED SECURITIES REPRESENTED 20% OF THE BALANCE OF
MORTGAGE-BACKED SECURITIES.
** YIELDS ON STATE AND POLITICAL OBLIGATIONS THAT ARE NOT SUBJECT TO FEDERAL
INCOME TAX HAVE BEEN ADJUSTED TO TAXABLE-EQUIVALENT USING A 35% TAX RATE.
*** AVERAGE YIELD CALCULATIONS EXCLUDE EQUITY SECURITIES THAT HAVE NO STATED
YIELD
U.S. Bancorp 41
TABLE 8 LOAN PORTFOLIO DISTRIBUTION
1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
Percent Percent Percent Percent Percent
At December 31 (Dollars in Millions) Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
- -----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL:
Commercial and financial
institutions . . . . . . . . . . $18,366 35.1% $17,177 34.8% $15,400 33.2% $15,014 34.2% $13,112 33.2%
Lease financing. . . . . . . . . . 1,848 3.5 1,549 3.1 1,257 2.7 1,131 2.6 1,116 2.8
Agriculture. . . . . . . . . . . . 1,310 2.5 1,095 2.2 1,079 2.3 1,031 2.3 913 2.3
Real estate:
Commercial mortgage . . . . . . 8,036 15.3 6,864 13.9 6,189 13.4 5,550 12.7 5,201 13.2
Construction. . . . . . . . . . 2,121 4.1 1,516 3.2 1,314 2.8 1,191 2.7 1,279 3.2
------------------------------------------------------------------------------------------
Total commercial . . . . . . 31,681 60.5 28,201 57.2 25,239 54.4 23,917 54.5 21,621 54.7
CONSUMER:
Residential mortgage . . . . . . . 4,953 9.5 6,722 13.6 7,177 15.5 6,775 15.4 6,296 15.9
Residential mortgage held for sale 148 .3 343 .7 257 .6 1,929 4.4 1,644 4.2
Home equity and second mortgage. . 4,917 9.4 4,011 8.1 3,500 7.5 2,790 6.4 2,374 6.0
Credit card. . . . . . . . . . . . 3,632 6.9 3,391 6.9 3,465 7.5 2,795 6.4 2,678 6.8
Automobile . . . . . . . . . . . . 3,515 6.7 3,453 7.0 3,481 7.5 2,662 6.1 1,956 4.9
Revolving credit . . . . . . . . . 1,521 2.9 1,517 3.1 1,406 3.0 1,280 2.9 1,136 2.9
Installment. . . . . . . . . . . . 1,408 2.7 1,239 2.5 1,400 3.0 1,314 3.0 1,569 4.0
Student* . . . . . . . . . . . . . 580 1.1 468 .9 450 1.0 408 .9 246 .6
------------------------------------------------------------------------------------------
Total consumer . . . . . . . 20,674 39.5 21,144 42.8 21,136 45.6 19,953 45.5 17,899 45.3
------------------------------------------------------------------------------------------
Total loans. . . . . . . . . $52,355 100.0% $49,345 100.0% $46,375 100.0% $43,870 100.0% $39,520 100.0%
- -----------------------------------------------------------------------------------------------------------------------------------
* ALL OR PART OF THE STUDENT LOAN PORTFOLIO MAY BE SOLD WHEN THE REPAYMENT
PERIOD BEGINS.
TABLE 9 COMMERCIAL REAL ESTATE EXPOSURE BY PROPERTY TYPE AND GEOGRAPHY
Percentage of Total
at December 31
-------------------
PROPERTY TYPE 1996 1995
- --------------------------------------------------------------------------------
Retail . . . . . . . . . . . . . . . . . . . . . 15.9% 14.3%
Mixed-use office . . . . . . . . . . . . . . . . 12.6 11.0
Office building. . . . . . . . . . . . . . . . . 12.5 12.6
Multi-family . . . . . . . . . . . . . . . . . . 10.6 11.6
Hotel/motel. . . . . . . . . . . . . . . . . . . 9.8 11.2
Land . . . . . . . . . . . . . . . . . . . . . . 8.1 9.6
Single-family residential. . . . . . . . . . . . 6.2 4.8
Other, primarily owner-occupied. . . . . . . . . 24.3 24.9
---------------------
100.0% 100.0%
- --------------------------------------------------------------------------------
GEOGRAPHY
- --------------------------------------------------------------------------------
Washington . . . . . . . . . . . . . . . . . . . 24.8% 26.9%
Oregon . . . . . . . . . . . . . . . . . . . . . 16.9 19.1
California . . . . . . . . . . . . . . . . . . . 12.0 7.5
Minnesota. . . . . . . . . . . . . . . . . . . . 10.4 11.1
Other. . . . . . . . . . . . . . . . . . . . . . 30.3 30.0
-----------------------
Total USB region. . . . . . . . . . . . . . . 94.4 94.6
Southeast. . . . . . . . . . . . . . . . . . . . 2.6 2.6
Other Southwest. . . . . . . . . . . . . . . . . .9 1.0
Other West . . . . . . . . . . . . . . . . . . . .8 .8
Mid-Atlantic . . . . . . . . . . . . . . . . . . .8 .3
Other Midwest. . . . . . . . . . . . . . . . . . .5 .7
-----------------------
100.0% 100.0%
- --------------------------------------------------------------------------------
42 U.S. Bancorp
TABLE 10 SUMMARY OF ALLOWANCE FOR CREDIT LOSSES
(Dollars in Millions) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
Balance at beginning of year . . . . . . . . $908.0 $862.3 $811.3 $811.2 $736.3
CHARGE-OFFS:
Commercial:
Commercial and financial institutions. 77.2 49.1 80.0 85.1 148.4
Lease financing. . . . . . . . . . . . 2.3 1.3 2.3 11.3 12.1
Agricultural . . . . . . . . . . . . . 6.9 .9 4.4 4.3 3.3
Real estate:
Commercial mortgage . . . . . . . . 17.0 22.1 49.8 73.6 73.1
Construction. . . . . . . . . . . . 2.3 .4 12.2 6.2 9.1
------------------------------------------------------------------
Total commercial. . . . . . . . . . 105.7 73.8 148.7 180.5 246.0
Consumer:
Residential mortgage . . . . . . . . . 6.8 6.9 5.9 5.1 8.6
Credit card. . . . . . . . . . . . . . 150.4 123.7 115.0 109.2 112.7
Other. . . . . . . . . . . . . . . . . 134.3 121.6 82.2 75.4 81.5
------------------------------------------------------------------
Total consumer. . . . . . . . . . . 291.5 252.2 203.1 189.7 202.8
------------------------------------------------------------------
Total . . . . . . . . . . . . . . . 397.2 326.0 351.8 370.2 448.8
RECOVERIES:
Commercial:
Commercial and financial institutions. 52.7 51.6 56.8 52.8 54.7
Lease financing. . . . . . . . . . . . .6 1.3 2.2 1.4 3.1
Agricultural . . . . . . . . . . . . . 2.7 3.7 2.6 2.4 2.7
Real estate:
Commercial mortgage . . . . . . . . 25.7 18.7 22.6 17.4 10.0
Construction. . . . . . . . . . . . 1.0 2.5 2.9 3.4 2.9
------------------------------------------------------------------
Total commercial. . . . . . . . . . 82.7 77.8 87.1 77.4 73.4
Consumer:
Residential mortgage . . . . . . . . . 2.4 1.8 1.9 2.7 3.4
Credit card. . . . . . . . . . . . . . 16.6 17.1 15.7 14.6 10.5
Other. . . . . . . . . . . . . . . . . 34.0 34.2 26.5 24.0 25.1
------------------------------------------------------------------
Total consumer. . . . . . . . . . . 53.0 53.1 44.1 41.3 39.0
------------------------------------------------------------------
Total . . . . . . . . . . . . . . . 135.7 130.9 131.2 118.7 112.4
NET CHARGE-OFFS:
Commercial:
Commercial and financial institutions. 24.5 (2.5) 23.2 32.3 93.7
Lease financing. . . . . . . . . . . . 1.7 -- .1 9.9 9.0
Agricultural . . . . . . . . . . . . . 4.2 (2.8) 1.8 1.9 .6
Real estate:
Commercial mortgage . . . . . . . . (8.7) 3.4 27.2 56.2 63.1
Construction. . . . . . . . . . . . 1.3 (2.1) 9.3 2.8 6.2
------------------------------------------------------------------
Total commercial. . . . . . . . . . 23.0 (4.0) 61.6 103.1 172.6
Consumer:
Residential mortgage . . . . . . . . . 4.4 5.1 4.0 2.4 5.2
Credit card. . . . . . . . . . . . . . 133.8 106.6 99.3 94.6 102.2
Other. . . . . . . . . . . . . . . . . 100.3 87.4 55.7 51.4 56.4
------------------------------------------------------------------
Total consumer. . . . . . . . . . . 238.5 199.1 159.0 148.4 163.8
------------------------------------------------------------------
Total . . . . . . . . . . . . . . . 261.5 195.1 220.6 251.5 336.4
Provision charged to operating expense . . . 271.2 239.1 243.7 239.3 340.5
Additions related to acquisitions and other. 74.8 1.7 27.9 12.3 70.8
------------------------------------------------------------------
Balance at end of year . . . . . . . . . . . $992.5 $908.0 $862.3 $811.3 $811.2
------------------------------------------------------------------
------------------------------------------------------------------
Allowance as a percentage of period-end
loans . . . . . . . . . . . . . . . . . . 1.90% 1.84% 1.86% 1.85% 2.05%
Allowance as a percentage of
nonperforming loans . . . . . . . . . . . 369 367 233 175 134
Allowance as a percentage of nonperforming
assets. . . . . . . . . . . . . . . . . . 310 283 186 130 98
- ------------------------------------------------------------------------------------------------------------------------
U.S. Bancorp 43
TABLE 11 ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES
Allocation as a
Allocation Amount at December 31 Percent of Loans Outstanding
- -------------------------------------------------------------------------------------------------------------------------
(Dollars in Millions) 1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------
COMMERCIAL:
Commercial and financial institutions. . . $193.9 $160.5 $152.0 $192.9 $241.4 1.06% .93% .99% 1.28% 1.84%
Lease financing. . . . . . . . . . . . . . 11.7 9.4 13.2 15.3 14.2 .63 .61 1.05 1.35 1.27
Agricultural . . . . . . . . . . . . . . . 12.9 9.4 4.6 4.0 4.7 .98 .86 .43 .39 .51
Real estate:
Commercial mortgage . . . . . . . . . . 41.2 38.4 59.2 91.0 100.0 .51 .56 .96 1.64 1.92
Construction. . . . . . . . . . . . . . 12.6 7.2 8.9 9.9 17.8 .59 .47 .68 .83 1.39
--------------------------------------------------------------------------
Total commercial. . . . . . . . . . . . 272.3 224.9 237.9 313.1 378.1 .86 .80 .94 1.31 1.75
CONSUMER:
Residential mortgage . . . . . . . . . . . 8.3 8.8 11.6 14.9 16.0 .16 .12 .16 .17 .20
Credit card. . . . . . . . . . . . . . . . 62.3 43.8 45.1 37.0 50.6 1.72 1.29 1.30 1.32 1.89
Other. . . . . . . . . . . . . . . . . . . 59.5 56.7 51.0 39.7 44.2 .50 .53 .50 .47 .61
--------------------------------------------------------------------------
Total consumer. . . . . . . . . . . . . 130.1 109.3 107.7 91.6 110.8 .63 .52 .51 .46 .62
--------------------------------------------------------------------------
Total allocated. . . . . . . . . . . . . . 402.4 334.2 345.6 404.7 488.9 .77 .68 .75 .92 1.24
Unallocated portion. . . . . . . . . . . . 590.1 573.8 516.7 406.6 322.3 1.13 1.16 1.11 .93 .82
--------------------------------------------------------------------------
Total allowance . . . . . . . . . . . . $992.5 $908.0 $862.3 $811.3 $811.2 1.90% 1.84% 1.86% 1.85% 2.05%
- -------------------------------------------------------------------------------------------------------------------------
TABLE 12 NET CHARGE-OFFS AS A PERCENTAGE OF AVERAGE LOANS OUTSTANDING
1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------
Commercial . . . . . . . . . . . . .07% (.02)% .26% .43% .81%
Lease Financing. . . . . . . . . . .10 -- .01 .91 .78
Credit Card. . . . . . . . . . . . 3.87 3.32 3.27 3.59 4.07
Other Consumer . . . . . . . . . . .62 .53 .35 .34 .46
------------------------------------
Total. . . . . . . . . . . . . . .51% .41% .49% .61% .90%
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TABLE 13 DELINQUENT LOAN RATIOS*
At December 31
-------------------------------------
90 days or more past due 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------
COMMERCIAL:
Commercial and financial
institutions . . . . . . . . . .74% .48% .49% .63% 1.71%
Lease financing. . . . . . . . . .33 .68 .95 1.95 2.74
Agricultural . . . . . . . . . . .53 .30 .78 3.55 1.92
Real estate:
Commercial mortgage. . . . . . .55 1.17 2.52 2.98 4.04
Construction . . . . . . . . . .91 .92 3.52 5.18 4.42
-------------------------------------
Total commercial . . . . . . . .67 .68 1.18 1.59 2.50
CONSUMER:
Residential mortgage . . . . . . 1.46 1.04 1.01 1.25 1.12
Other. . . . . . . . . . . . . . .47 .38 .29 .36 .39
-------------------------------------
Total consumer . . . . . . . . .71 .59 .53 .66 .65
-------------------------------------
Total. . . . . . . . . . . . . .69% .64% .88% 1.17% 1.66%
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
* RATIOS INCLUDE NONPERFORMING LOANS AND ARE EXPRESSED AS A PERCENT OF ENDING
LOAN BALANCES.
44 U.S. Bancorp
TABLE 14 NONPERFORMING ASSETS*
At December 31
-------------------------------------
(Dollars in Millions) 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------
COMMERCIAL:
Commercial . . . . . . . . . . . $132.7 $ 78.4 $ 72.6 $ 92.5 $216.6
Lease financing. . . . . . . . . 5.3 10.5 11.5 21.4 28.7
Agricultural . . . . . . . . . . 5.7 2.7 8.3 34.6 17.0
Real estate:
Commercial mortgage . . . . . 44.4 76.5 154.0 163.7 208.6
Construction. . . . . . . . . 18.8 13.3 46.0 61.3 55.0
--------------------------------------
Total commercial. . . . . . . 206.9 181.4 292.4 373.5 525.9
CONSUMER:
Residential mortgage . . . . . . 57.6 54.2 60.9 75.3 61.3
Credit card. . . . . . . . . . . -- 5.7 7.5 7.6 8.1
Other. . . . . . . . . . . . . . 4.8 6.3 9.0 8.4 9.5
--------------------------------------
Total consumer. . . . . . . . 62.4 66.2 77.4 91.3 78.9
--------------------------------------
Total nonperforming loans . . 269.3 247.6 369.8 464.8 604.8
OTHER REAL ESTATE. . . . . . . . . 43.2 66.5 87.5 151.5 217.0
OTHER NONPERFORMING ASSETS . . . . 7.5 6.2 5.6 5.6 9.2
--------------------------------------
Total nonperforming assets. . $320.0 $320.3 $462.9 $621.9 $831.0
--------------------------------------
--------------------------------------
Accruing loans 90 days or more
past due . . . . . . . . . . . . $ 90.6 $ 68.8 $ 40.2 $ 47.0 $ 51.0
Nonperforming loans to
total loans. . . . . . . . . . . .51% .50% .80% 1.06% 1.53%
Nonperforming assets to total
loans plus other real estate . . .61 .65 1.00 1.41 2.09
Net interest lost on
nonperforming loans. . . . . . . $ 24.8 $ 23.2 $ 24.8 $ 29.2 $ 36.4
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
* THROUGHOUT THIS DOCUMENT, NONPERFORMING ASSETS AND RELATED RATIOS DO NOT
INCLUDE LOANS MORE THAN 90 DAYS PAST DUE AND STILL ACCRUING.
TABLE 15 INTEREST RATE SWAP HEDGING PORTFOLIO NOTIONAL BALANCES AND
YIELDS BY MATURITY DATE
At December 31, 1996 (Dollars in Millions)
- ------------------------------------------------------------------------------------------------------------------------
Pay Fixed Pay and Receive Variable
- ------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Variable Fixed Variable Variable
Interest Interest Interest Interest
Notional Rate Rate Notional Rate Rate
Amount Received Paid Amount Received Paid
- ------------------------------------------------------------------------------------------------------------------------
1997 . . . . . . . . . . . . $ -- --% --% $ -- --% --%
1998 . . . . . . . . . . . . 100 5.50 5.90 -- -- --
1999 . . . . . . . . . . . . -- -- -- 500 5.72 5.50
2000 . . . . . . . . . . . . -- -- -- -- -- --
2001 . . . . . . . . . . . . -- -- -- -- -- --
After 2001*. . . . . . . . . 8 5.66 8.34 -- -- --
-----------------------------------------------------------------------------------
$108 5.51% 6.08% $500 5.72% 5.50%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Receive Fixed Total
- ------------------------------------------------------------------------------------------------------------------------
Average Average
Fixed Variable Average Average
Interest Interest Interest Interest
Notional Rate Rate Notional Rate Rate
Amount Received Paid Amount Received Paid
- ------------------------------------------------------------------------------------------------------------------------
1997 . . . . . . . . . . . . $436 6.27% 5.52% $436 6.27% 5.52%
1998 . . . . . . . . . . . . 904 6.10 5.56 1,004 6.04 5.60
1999 . . . . . . . . . . . . 450 6.40 5.61 950 6.04 5.55
2000 . . . . . . . . . . . . 153 6.58 5.55 153 6.59 5.55
2001 . . . . . . . . . . . . 175 6.54 5.62 175 6.54 5.62
After 2001*. . . . . . . . . 925 6.96 5.60 933 6.95 5.62
-----------------------------------------------------------------------------------
$3,043 6.49% 5.57% $3,651 6.35% 5.58%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
* AMOUNTS MATURING AFTER THE YEAR 2001 HEDGE FIXED RATE SUBORDINATED NOTES
AND COMMERCIAL LOANS.
U.S. Bancorp 45
TABLE 16 INTEREST RATE SENSITIVITY GAP ANALYSIS
Repricing Maturities
----------------------------------------------------------------------
Less Than 3-6 6-12 1-5 More Than Non-Rate
At December 31, 1996 (In Millions) 3 Months Months Months Years 5 Years Sensitive Total
- ----------------------------------------------------------------------------------------------------------
Assets:
Loans. . . . . . . . . . . . . . $29,629 $2,719 $3,677 $11,918 $ 4,412 $ -- $52,355
Available-for-sale securities. . 1,399 380 741 2,049 1,890 14 6,473
Held-to-maturity securities. . . 14 14 45 533 191 -- 797
Other earning assets . . . . . . 1,332 12 21 192 57 -- 1,614
Nonearning assets. . . . . . . . 1,198 10 266 811 3,427 2,798 8,510
----------------------------------------------------------------------
Total assets. . . . . . . . . $33,572 $3,135 $4,750 $15,503 $ 9,977 $ 2,812 $69,749
----------------------------------------------------------------------
----------------------------------------------------------------------
Liabilities and Equity:
Deposits . . . . . . . . . . . . $20,098 $2,956 $3,273 $13,965 $ 9,056 $ 8 $49,356
Other purchased funds. . . . . . 6,469 -- 99 11 13 -- 6,592
Long-term debt . . . . . . . . . 1,925 249 265 1,011 1,919 -- 5,369
Company-obligated mandatorily
redeemable preferred
securities of subsidiary
trusts holding solely the
junior subordinated debentures
of the parent company . . . . -- -- -- -- 600 -- 600
Other liabilities. . . . . . . . 14 -- 170 81 -- 1,804 2,069
Equity . . . . . . . . . . . . . -- -- -- -- 150 5,613 5,763
----------------------------------------------------------------------
Total liabilities and equity. $28,506 $3,205 $3,807 $15,068 $11,738 $ 7,425 $69,749
----------------------------------------------------------------------
Effect of off-balance sheet
hedging instruments:
Receiving fixed. . . . . . . . . $ 175 $ 68 $ 226 $ 1,582 $ 925 $ -- $ 2,976
Paying floating. . . . . . . . . (2,968) -- -- -- (8) -- (2,976)
----------------------------------------------------------------------
Total effect of
off-balance sheet
hedging instruments . . . . $(2,793) $ 68 $ 226 $ 1,582 $ 917 $ -- $ --
----------------------------------------------------------------------
Repricing gap. . . . . . . . . . . $ 2,273 $ (2) $1,169 $ 2,017 $ (844) $(4,613) $ --
Cumulative repricing gap . . . . . 2,273 2,271 3,440 5,457 4,613 --
- ----------------------------------------------------------------------------------------------------------
THIS TABLE ESTIMATES THE REPRICING MATURITIES OF THE COMPANY'S ASSETS,
LIABILITIES, AND HEDGING INSTRUMENTS BASED UPON THE COMPANY'S ASSESSMENT OF THE
REPRICING CHARACTERISTICS OF CONTRACTUAL AND NON-CONTRACTUAL INSTRUMENTS.
NON-CONTRACTUAL DEPOSIT LIABILITIES ARE ALLOCATED AMONG THE VARIOUS MATURITY
CATEGORIES AS FOLLOWS: APPROXIMATELY 40 PERCENT OF REGULAR SAVINGS, 30 PERCENT
OF INTEREST-BEARING CHECKING, 50 PERCENT OF MONEY MARKET CHECKING, AND 60
PERCENT OF MONEY MARKET SAVINGS BALANCES ARE REFLECTED IN THE LESS THAN 3 MONTHS
CATEGORY, WITH THE REMAINDER PLACED IN THE 1-5 YEARS CATEGORY. APPROXIMATELY 69
PERCENT OF DEMAND DEPOSITS AND RELATED NONEARNING ASSET ACCOUNTS IS ALLOCATED IN
THE MORE THAN 5 YEARS CATEGORY, 14 PERCENT IS ALLOCATED IN THE 1-5 YEARS
CATEGORY WITH THE REMAINING ALLOCATED IN THE LESS THAN 3 MONTHS CATEGORY.
TABLE 17 CAPITAL RATIOS
At December 31 (Dollars in Millions) 1996 1995 1994
- --------------------------------------------------------------------------------
Tangible common equity*. . . . . . . . . . . $ 4,625 $ 4,498 $ 4,249
As a percent of assets . . . . . . . . . . 6.7% 6.9% 6.6%
Tier 1 capital** . . . . . . . . . . . . . . $ 4,983 $ 4,408 $ 4,365
As a percent of risk-adjusted assets . . . 7.6% 7.4% 8.0%
Total risk-based capital** . . . . . . . . . $ 7,777 $ 6,745 $ 6,244
As a percent of risk-adjusted assets . . . 11.9% 11.4% 11.4%
Leverage ratio** . . . . . . . . . . . . . . 7.5 7.0 6.9
- --------------------------------------------------------------------------------
* DEFINED AS COMMON EQUITY LESS GOODWILL.
** IN ACCORDANCE WITH REGULATORY GUIDELINES, UNREALIZED SECURITIES GAINS AND
LOSSES ARE EXCLUDED AND COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF SUBSIDIARY TRUSTS HOLDING SOLELY THE JUNIOR SUBORDINATED
DEBENTURES OF THE PARENT COMPANY ARE INCLUDED IN THESE CALCULATIONS. IN
ADDITION, EQUITY CAPITAL RELATED TO DEFERRED TAX ASSETS IS LIMITED.
46 U.S. Bancorp
TABLE 18 SUBSIDIARY CAPITAL RATIOS
At December 31, 1996
-----------------------------------------------------
Total
Tier 1 Risk-based Total
(Dollars in Millions) Capital Capital Leverage Assets
- -------------------------------------------------------------------------------------------------------------------
REGULATORY CAPITAL REQUIREMENTS:
Minimum. . . . . . . . . . . . . . . . . . . . . . . . 4.0% 8.0% 3.0%
Well-capitalized . . . . . . . . . . . . . . . . . . . 6.0 10.0 5.0
BANK AND THRIFT SUBSIDIARIES:
First Bank National Association (Minnesota)**. . . . . 7.0 11.4 7.3 $17,055
United States National Bank of Oregon**. . . . . . . . 7.2 10.9 7.7 14,290
U.S. Bank of Washington, National Association**. . . . 6.9 10.5 7.4 9,704
Colorado National Bank** . . . . . . . . . . . . . . . 7.2 11.5 6.2 6,894
First Bank, fsb**. . . . . . . . . . . . . . . . . . . * 15.5 7.7 4,937
U.S. Bank of Idaho** . . . . . . . . . . . . . . . . . 7.0 10.4 6.0 3,824
First Bank National Association (Nebraska)** . . . . . 9.6 12.7 6.9 3,511
U.S. Bank of California**. . . . . . . . . . . . . . . 10.1 12.3 7.9 2,063
First Bank of South Dakota (National Association)**. . 8.3 12.6 7.9 1,940
First Bank Montana, National Association . . . . . . . 7.7 12.0 8.7 1,181
First Bank (N.A.) (Wisconsin)**. . . . . . . . . . . . 7.7 12.1 8.4 1,156
U.S. Bank of Nevada**. . . . . . . . . . . . . . . . . 8.2 10.6 6.3 1,145
First Bank National Association (Illinois)** . . . . . 10.6 13.7 7.0 928
U.S. Bank Utah** . . . . . . . . . . . . . . . . . . . 9.2 10.5 7.9 812
U.S. Savings Bank of Washington**. . . . . . . . . . . 24.2 25.4 14.5 670
Colorado National Bank Aspen** . . . . . . . . . . . . 31.1 32.4 16.9 52
First National Bank of East Grand Forks**. . . . . . . 23.4 26.5 14.2 38
First State Bank of Oregon . . . . . . . . . . . . . . 353.1 353.1 74.1 4
- -------------------------------------------------------------------------------------------------------------------
NOTE: THESE BALANCES AND RATIOS WERE PREPARED IN ACCORDANCE WITH REGULATORY
ACCOUNTING PRINCIPLES AS DISCLOSED IN THE SUBSIDIARIES' REGULATORY REPORTS.
* AT DECEMBER 31, 1996, FIRST BANK, FSB, A THRIFT SUBSIDIARY OF THE COMPANY,
HAD TANGIBLE CAPITAL OF 7.7 PERCENT, CORE CAPITAL OF 11.2 PERCENT AND
RISK-BASED CAPITAL OF 15.5 PERCENT AS COMPARED WITH THRIFT REGULATORY
MINIMUMS OF 1.5 PERCENT, 3.0 PERCENT AND 8.0 PERCENT, RESPECTIVELY.
** MERGED INTO U.S. BANK NATIONAL ASSOCIATION UNDER THE RIEGLE-NEAL
INTERSTATE BANKING AND BRANCHING EFFICIENCY ACT OF 1994 IN 1997.
TABLE 19 FOURTH QUARTER SUMMARY
Three Months Ended
December 31
---------------------
(Dollars in Millions, Except Per Share Data) 1996 1995
- --------------------------------------------------------------------------------
CONDENSED INCOME STATEMENT:
Net interest income (taxable-equivalent basis) . $779.4 $722.6
Provision for credit losses . . . . . . . . . . 75.5 82.4
-----------------------
Net interest income after provision for
credit losses. . . . . . . . . . . . . . . . 703.9 640.2
Securities gains . . . . . . . . . . . . . . . . .5 .7
Gain on sale of mortgage banking operations,
branches and other assets. . . . . . . . . . . . -- .8
Other noninterest income . . . . . . . . . . . . 361.0 323.2
Merger, integration, and resizing. . . . . . . . -- 90.3
Other noninterest expense. . . . . . . . . . . . 588.8 578.2
-----------------------
Income before income taxes . . . . . . . . . . 476.6 296.4
Taxable-equivalent adjustment. . . . . . . . . . 16.0 15.4
Income taxes . . . . . . . . . . . . . . . . . . 168.5 108.9
-----------------------
Net income . . . . . . . . . . . . . . . . . . $292.1 $172.1
-----------------------
-----------------------
Return on average assets . . . . . . . . . . . . 1.71% 1.07%
Return on average common equity. . . . . . . . . 20.1 12.8
Net interest margin (taxable-equivalent basis) . 5.09 5.01
Efficiency ratio . . . . . . . . . . . . . . . . 51.6 63.9
PER SHARE DATA:
Net income (primary) . . . . . . . . . . . . . . $ 1.15 $ .68
Net income (fully diluted) . . . . . . . . . . . 1.14 .67
Common dividends paid. . . . . . . . . . . . . . .4125 .3625
- --------------------------------------------------------------------------------
U.S. Bancorp 47
[LOGO]
P.O. Box 522
Minneapolis, Minnesota 55480
http://www.fbs.com
SHAREHOLDER INQUIRIES
COMMON STOCK TRANSFER AGENT AND REGISTRAR
First Chicago Trust Company of New York acts as transfer agent and registrar,
dividend paying agent, and dividend reinvestment plan agent for U.S. Bancorp,
and maintains all shareholder records for the corporation. For information about
U.S. Bancorp stock, or if you have questions regarding your stock certificates
(including transfers), address or name changes, lost dividend checks, lost stock
certificates, or Form 1099s, please call First Chicago's Shareholder Services
Center at (800) 446-2617, weekdays, 8:00 a.m. to 10:00 p.m. EST, and Saturdays,
8:00 a.m. to 3:30 p.m. EST. The TDD telephone number for the hearing impaired is
(201) 222-4955.
First Chicago Trust Company of New York
P.O. Box 2500
Jersey City, New Jersey 07303-2500
Telephone: (201) 324-0498
Fax: (201) 222-4892
Internet address: http://www.fctc.com
E-mail address: fctc@fcnbd.com
COMMON STOCK LISTING AND TRADING
U.S. Bancorp Common Stock is listed and traded on the New York Stock Exchange
under the ticker symbol USB.
DIVIDENDS
U.S. Bancorp currently pays quarterly dividends on its Common Stock on or about
the 15th of March, June, September and December, subject to prior Board
approval. Shareholders may choose to have dividends electronically deposited
directly into their bank accounts. For enrollment information, please call First
Chicago at (800) 446-2617.
DIVIDEND REINVESTMENT PLAN
U.S. Bancorp shareholders can take advantage of a plan that provides automatic
reinvestment of dividends and/or optional cash purchases of additional shares of
U.S. Bancorp Common Stock up to $60,000 per calendar year. If you would like
more information, please contact First Chicago Trust Company of New York, P.O.
Box 2598, Jersey City, New Jersey 07303-2598, (800) 446-2617.
INVESTMENT COMMUNITY CONTACTS
John R. Danielson
Senior Vice President, Investor and Corporate Relations
(612) 973-2261
Judith T. Murphy
Vice President, Investor Relations
(612) 973-2264
General Information, Investor and Corporate Relations
(612) 973-2263
U.S. Bancorp
P.O. Box 522
Minneapolis, MN 55480
FINANCIAL INFORMATION
U.S. Bancorp news and financial results are available by fax, mail and the
company's web site.
FAX. To access our fax-on-demand service, call (800) 758-5804. When asked, enter
U.S. Bancorp's extension number, "312402." Enter "1" for the most current news
release or "2" for a menu of news releases. Enter your fax and telephone numbers
as directed. The information will be faxed to you promptly.
MAIL. At your request, we will mail to you our quarterly earnings news releases.
To be added to U.S. Bancorp's mailing list, please contact Investor and
Corporate Relations, U.S. Bancorp, 601 Second Avenue South, Minneapolis,
Minnesota 55402-4302, (612) 973-2434.
WEB SITE. For information about U.S. Bancorp, including news and financial
results, product information, and service locations, access our home page on the
World Wide Web. The address is http://www.fbs.com. Additional information for
customers of our U.S. Bank affiliates is available at http://www.usbank.com.