Actionable news
0
All posts from Actionable news
Actionable news in USB: U.S. BANCORP,

Net interest income (taxable-equivalent basis) grew 5.9 percent year-over-year and 2.4 percent on a linked quarter basis

Exhibit 99.1

News Release
Contacts:
Dana Ripley Jennifer Thompson
Media Investors/Analysts
(612) 303-3167 (612) 303-0778

U.S. BANCORP REPORTS SECOND QUARTER 2017 EARNINGS

Record Earnings Per Diluted Common Share of $0.85

Return on average assets of 1.35 percent and average common equity of 13.4 percent

Returned 81 percent of earnings to shareholders

MINNEAPOLIS, July 19, 2017 — U.S. Bancorp (NYSE: USB) today reported net income of $1,500 million for the second quarter of 2017, or $0.85 per diluted common share, compared with $1,522 million, or $0.83 per diluted common share, in the second quarter of 2016.

Highlights for the second quarter of 2017 included:

Industry-leading return on average assets of 1.35 percent and return on average common equity of 13.4 percent and efficiency ratio of 55.2 percent
Record revenue of $5,487 million and diluted earnings per common share of $0.85
Net interest income (taxable-equivalent basis) grew 5.9 percent year-over-year and 2.4 percent on a linked quarter basis
Net interest margin of 3.04 percent for the second quarter of 2017 was 2 basis points higher than the second quarter of 2016 and 1 basis point higher than the first quarter of 2017, benefiting from rising interest rates partially offset by increasing average cash balances
Average total loans grew 3.4 percent over the second quarter of 2016 and 0.9 percent on a linked quarter basis
Credit and debit card revenue grew 7.8 percent on a year-over-year basis
Trust and investment management fees increased 6.1 percent on a year-over-year basis
Nonperforming assets decreased 19.3 percent on a year-over-year basis and 9.8 percent on a linked quarter basis
Strong capital position. At June 30, 2017, the estimated common equity tier 1 capital to risk-weighted assets ratio was 9.3 percent using the Basel III fully implemented standardized approach and was 11.7 percent using the Basel III fully implemented advanced approaches method.

(MORE)

U.S. Bancorp Reports Second Quarter 2017 Results

July 19, 2017

Page 2

EARNINGS SUMMARY Table 1
($ in millions, except per-share data) Percent Percent
Change Change
2Q 1Q 2Q 2Q17 vs 2Q17 vs YTD YTD Percent
2017 2017 2016 1Q17 2Q16 2017 2016 Change

Net income attributable to U.S. Bancorp

$ 1,500 $ 1,473 $ 1,522 1.8 (1.4 ) $ 2,973 $ 2,908 2.2

Diluted earnings per common share

$ .85 $ .82 $ .83 3.7 2.4 $ 1.66 $ 1.59 4.4

Return on average assets (%)

1.35 1.35 1.43 1.35 1.38

Return on average common equity (%)

13.4 13.3 13.8 13.4 13.4

Net interest margin (%)

3.04 3.03 3.02 3.04 3.04

Efficiency ratio (%) (a)

55.2 55.6 54.9 55.4 54.8

Tangible efficiency ratio (%) (a)

54.4 54.8 54.1 54.6 53.9

Dividends declared per common share

$ .280 $ .280 $ .255 9.8 $ .560 $ .510 9.8

Book value per common share (period end)

$ 25.55 $ 25.05 $ 24.37 2.0 4.8

Net income attributable to U.S. Bancorp was $1,500 million for the second quarter of 2017, 1.4 percent lower than the $1,522 million for the second quarter of 2016, and 1.8 percent higher than the $1,473 million for the first quarter of 2017. Diluted earnings per common share of $0.85 in the second quarter of 2017 were $0.02 higher than the second quarter of 2016 and $0.03 higher than the first quarter of 2017. The decrease in net income year-over-year included a 5.2 percent decrease in noninterest income and a 1.0 percent increase in noninterest expense, both of which were impacted by notable items in the second quarter of 2016. Notable items included a $180 million Visa gain in noninterest income and $150 million in noninterest expense related to litigation accruals and a charitable contribution. Excluding the prior year notable items, net income increased slightly year-over-year. Net interest income increased 5.9 percent on a taxable-equivalent basis (6.0 percent as reported on a GAAP basis), mainly a result of loan growth and the impact of higher interest rates. Noninterest income, excluding the impact of the prior year notable item, increased 2.0 percent driven by higher payment services revenue, trust and investment management fees and treasury management fees. Revenue increases were partially offset by higher noninterest expense, excluding the prior year notable items, due to increased compensation expense related to hiring to support business growth and compliance programs, merit increases, and higher variable compensation. In addition, other expense was higher due to an FDIC surcharge beginning in late 2016. The increase in net income on a linked quarter basis was principally due to an increase in total net revenue of 3.1 percent, reflecting higher net interest income of 2.4 percent,

(MORE)

U.S. Bancorp Reports Second Quarter 2017 Results

July 19, 2017

Page 3

driven by loan growth, the impact of higher interest rates and an additional day in the current quarter, along with an increase in noninterest income of 3.9 percent primarily due to seasonally higher fee-based revenue. These increases were partially offset by an increase in noninterest expense of 2.7 percent.

U.S. Bancorp President and Chief Executive Officer Andy Cecere said, “I’m proud of our solid second quarter performance and our ability to deliver industry-leading results. As an enterprise we extended our momentum from the first quarter to produce best-in-class performance metrics, including return on average assets of 1.35 percent, return on average common equity of 13.4 percent and an efficiency ratio of 55.2 percent.

“Because of the overall strength and consistency of our financial results, we continued to create value for our shareholders. In the second quarter, we returned 81 percent of our earnings to shareholders through dividends and share repurchases. The results of the Federal Reserve’s annual Stress Test demonstrated our ability to withstand—and remain profitable—in periods of economic stress. As part of the CCAR process we announced a dividend increase of 7.1 percent and a new share repurchase program for the year, maintaining our commitment to shareholders.

“Our balance sheet is strong and our core businesses are well positioned for an economic and regulatory backdrop that has the promise to be more conducive to growth. Our strong revenue base and our dedication to managing expenses positions us well as we head into the second half of the year. I couldn’t be more proud of our dedicated employees who work hard to be our customers’ and communities’ trusted financial partner and to bring this commitment to life every day.”

(MORE)

U.S. Bancorp Reports Second Quarter 2017 Results

July 19, 2017

Page 4

INCOME STATEMENT HIGHLIGHTS Table 2
($ in millions, except per-share data) Percent Percent
Change Change
2Q 1Q 2Q 2Q17 vs 2Q17 vs YTD YTD Percent
2017 2017 2016 1Q17 2Q16 2017 2016 Change

Net interest income

$ 3,017 $ 2,945 $ 2,845 2.4 6.0 $ 5,962 $ 5,680 5.0

Taxable-equivalent adjustment

51 50 51 2.0 101 104 (2.9 )

Net interest income (taxable-equivalent basis)

3,068 2,995 2,896 2.4 5.9 6,063 5,784 4.8

Noninterest income

2,419 2,329 2,552 3.9 (5.2 ) 4,748 4,701 1.0

Total net revenue

5,487 5,324 5,448 3.1 .7 10,811 10,485 3.1

Noninterest expense

3,023 2,944 2,992 2.7 1.0 5,967 5,741 3.9

Income before provision and income taxes

2,464 2,380 2,456 3.5 .3 4,844 4,744 2.1

Provision for credit losses

350 345 327 1.4 7.0 695 657 5.8

Income before taxes

2,114 2,035 2,129 3.9 (.7 ) 4,149 4,087 1.5

Income taxes and taxable-equivalent adjustment

602 549 593 9.7 1.5 1,151 1,150 .1

Net income

1,512 1,486 1,536 1.7 (1.6 ) 2,998 2,937 2.1

Net (income) loss attributable to noncontrolling interests

(12 ) (13 ) (14 ) 7.7 14.3 (25 ) (29 ) 13.8

Net income attributable to U.S. Bancorp

$ 1,500 $ 1,473 $ 1,522 1.8 (1.4 ) $ 2,973 $ 2,908 2.2

Net income applicable to U.S. Bancorp common shareholders

$ 1,430 $ 1,387 $ 1,435 3.1 (.3 ) $ 2,817 $ 2,764 1.9

Diluted earnings per common share

$ .85 $ .82 $ .83 3.7 2.4 $ 1.66 $ 1.59 4.4

(MORE)

U.S. Bancorp Reports Second Quarter 2017 Results

July 19, 2017

Page 5

NET INTEREST INCOME Table 3
(Taxable-equivalent basis; $ in millions)
Change Change
2Q 1Q 2Q 2Q17 vs 2Q17 vs YTD YTD
2017 2017 2016 1Q17 2Q16 2017 2016 Change

Components of net interest income

Income on earning assets

$ 3,584 $ 3,451 $ 3,305 $ 133 $ 279 $ 7,035 $ 6,580 $ 455

Expense on interest-bearing liabilities

516 456 409 60 107 972 796 176

Net interest income

$ 3,068 $ 2,995 $ 2,896 $ 73 $ 172 $ 6,063 $ 5,784 $ 279

Average yields and rates paid

Earning assets yield

3.56 % 3.49 % 3.44 % .07 % .12 % 3.52 % 3.46 % .06 %

Rate paid on interest-bearing liabilities

.69 .62 .58 .07 .11 .66 .57 .09

Gross interest margin

2.87 % 2.87 % 2.86 % % .01 % 2.86 % 2.89 % (.03 )%

Net interest margin

3.04 % 3.03 % 3.02 % .01 % .02 % 3.04 % 3.04 % %

Average balances

Investment securities (a)

$ 111,368 $ 110,764 $ 107,132 $ 604 $ 4,236 $ 111,067 $ 106,581 $ 4,486

Loans

275,528 273,158 266,582 2,370 8,946 274,350 264,432 9,918

Earning assets

403,883 399,281 385,368 4,602 18,515 401,595 381,788 19,807

Interest-bearing liabilities

299,271 296,170 285,796 3,101 13,475 297,729 282,656 15,073
(a) Excludes unrealized gain (loss)

Net Interest Income

Net interest income on a taxable-equivalent basis in the second quarter of 2017 was $3,068 million, an increase of $172 million (5.9 percent) over the second quarter of 2016. The increase was principally driven by loan growth and the impact of higher interest rates. Average earning assets were $18.5 billion (4.8 percent) higher than the second quarter of 2016, reflecting increases of $8.9 billion (3.4 percent) in average total loans, $4.2 billion (4.0 percent) in average investment securities and higher average cash balances to meet certain regulatory liquidity expectations. Net interest income on a taxable-equivalent basis increased $73 million (2.4 percent) linked quarter driven by loan growth, the impact of higher interest rates and an additional day in the second quarter. In addition, average earning assets were $4.6 billion higher on a linked quarter basis, mainly from higher average loans and average cash balances.

The net interest margin in the second quarter of 2017 was 3.04 percent, compared with 3.02 percent in the second quarter of 2016, and 3.03 percent in the first quarter of 2017. The increase in the net interest margin on a year-over-year basis was due to rising interest rates partially offset by loan portfolio mix, lower

(MORE)

U.S. Bancorp Reports Second Quarter 2017 Results

Page 6

reinvestment rates on maturing securities through the first quarter of 2017 and higher cash balances. The increase on a linked quarter basis was primarily driven by the recent Federal Reserve rate increases, partially offset by the impact of a flatter yield curve and higher cash balances.

Investment Securities

Average investment securities in the second quarter of 2017 were $4.2 billion (4.0 percent) higher year-over-year and $604 million (0.5 percent) higher than the prior quarter. These increases were primarily due to purchases of U.S. Treasury and U.S. government agency-backed securities, net of prepayments and maturities, in support of liquidity management.

AVERAGE LOANS Table 4
($ in millions) Percent Percent
Change Change
2Q 1Q 2Q 2Q17 vs 2Q17 vs YTD YTD Percent
2017 2017 2016 1Q17 2Q16 2017 2016 Change

Commercial

$ 90,061 $ 88,284 $ 86,899 2.0 3.6 $ 89,177 $ 85,741 4.0

Lease financing

5,577 5,455 5,255 2.2 6.1 5,517 5,246 5.2

Total commercial

95,638 93,739 92,154 2.0 3.8 94,694 90,987 4.1

Commercial mortgages

30,627 31,461 31,950 (2.7 ) (4.1 ) 31,042 31,893 (2.7 )

Construction and development

11,922 11,697 11,038 1.9 8.0 11,810 10,801 9.3

Total commercial real estate

42,549 43,158 42,988 (1.4 ) (1.0 ) 42,852 42,694 .4

Residential mortgages

58,544 57,900 55,501 1.1 5.5 58,224 54,854 6.1

Credit card

20,631 20,845 20,140 (1.0 ) 2.4 20,737 20,192 2.7

Retail leasing

7,181 6,469 5,326 11.0 34.8 6,827 5,253 30.0

Home equity and second mortgages

16,252 16,259 16,394 (.9 ) 16,256 16,381 (.8 )

Other

31,194 31,056 29,748 .4 4.9 31,125 29,649 5.0

Total other retail

54,627 53,784 51,468 1.6 6.1 54,208 51,283 5.7

Total loans, excluding covered loans

271,989 269,426 262,251 1.0 3.7 270,715 260,010 4.1

Covered loans

3,539 3,732 4,331 (5.2 ) (18.3 ) 3,635 4,422 (17.8 )

Total loans

$ 275,528 $ 273,158 $ 266,582 .9 3.4 $ 274,350 $ 264,432 3.8

(MORE)

U.S. Bancorp Reports Second Quarter 2017 Results

Page 7

Loans

Average total loans were $8.9 billion (3.4 percent) higher in the second quarter of 2017 than the second quarter of 2016. The increase was due to growth in total commercial loans (3.8 percent), total other retail loans (6.1 percent), residential mortgages (5.5 percent), and credit card loans (2.4 percent). These increases were partially offset by a decrease in total commercial real estate loans (1.0 percent) due to payoffs given recent capital market financing by customers and run-off in the covered loans portfolio (18.3 percent). Average total loans were $2.4 billion (0.9 percent) higher in the second quarter of 2017 than the first quarter of 2017. This increase was primarily driven by linked quarter growth in total commercial loans (2.0 percent), total other retail loans (1.6 percent) and residential mortgages (1.1 percent), partially offset by decreases in total commercial real estate loans (1.4 percent), credit card loans (1.0 percent) and covered loans (5.2 percent).

AVERAGE DEPOSITS Table 5
($ in millions) Percent Percent
Change Change
2Q 1Q 2Q 2Q17 vs 2Q17 vs YTD YTD Percent
2017 2017 2016 1Q17 2Q16 2017 2016 Change

Noninterest-bearing deposits

$ 82,710 $ 80,738 $ 79,171 2.4 4.5 $ 81,729 $ 78,870 3.6

Interest-bearing savings deposits

Interest checking

67,290 65,681 60,842 2.4 10.6 66,490 59,376 12.0

Money market savings

106,777 108,759 92,904 (1.8 ) 14.9 107,763 89,683 20.2

Savings accounts

43,524 42,609 40,258 2.1 8.1 43,069 39,754 8.3

Total savings deposits

217,591 217,049 194,004 .2 12.2 217,322 188,813 15.1

Time deposits

30,871 30,646 34,211 .7 (9.8 ) 30,759 33,949 (9.4 )

Total interest-bearing deposits

248,462 247,695 228,215 .3 8.9 248,081 222,762 11.4

Total deposits

$ 331,172 $ 328,433 $ 307,386 .8 7.7 $ 329,810 $ 301,632 9.3

Deposits

Average total deposits for the second quarter of 2017 were $23.8 billion (7.7 percent) higher than the second quarter of 2016. Average noninterest-bearing deposits increased $3.5 billion (4.5 percent) year-over-year driven by growth across all business lines. Average total savings deposits were $23.6 billion (12.2 percent) higher year-over-year, the result of growth across all business lines. Average time deposits were $3.3 billion (9.8 percent) lower than the prior year quarter. Changes in time deposits are largely related to

(MORE)

U.S. Bancorp Reports Second Quarter 2017 Results

Page 8

those deposits managed as an alternative to other funding sources such as wholesale borrowing, based largely on relative pricing and liquidity characteristics.

Average total deposits increased $2.7 billion (0.8 percent) over the first quarter of 2017. On a linked quarter basis, average noninterest-bearing deposits increased $2.0 billion (2.4 percent) mainly in Wealth Management and Securities Services and Consumer and Small Business Banking. Average total savings deposits grew $542 million (0.2 percent) primarily driven by Consumer and Small Business Banking and Wealth Management and Securities Services, partially offset by decreases in Wholesale Banking and Commercial Real Estate. Average time deposits, which are managed based on funding needs, relative pricing, and liquidity characteristics, increased $225 million (0.7 percent) on a linked quarter basis.

NONINTEREST INCOME Table 6
($ in millions) Percent Percent
Change Change
2Q 1Q 2Q 2Q17 vs 2Q17 vs YTD YTD Percent
2017 2017 2016 1Q17 2Q16 2017 2016 Change

Credit and debit card revenue

$ 319 $ 292 $ 296 9.2 7.8 $ 611 $ 562 8.7

Corporate payment products revenue

184 179 181 2.8 1.7 363 351 3.4

Merchant processing services

407 378 403 7.7 1.0 785 776 1.2

ATM processing services

90 85 84 5.9 7.1 175 164 6.7

Trust and investment management fees

380 368 358 3.3 6.1 748 697 7.3

Deposit service charges

184 177 179 4.0 2.8 361 347 4.0

Treasury management fees

160 153 147 4.6 8.8 313 289 8.3

Commercial products revenue

210 207 238 1.4 (11.8 ) 417 435 (4.1 )

Mortgage banking revenue

212 207 238 2.4 (10.9 ) 419 425 (1.4 )

Investment products fees

41 40 39 2.5 5.1 81 79 2.5

Securities gains (losses), net

9 29 3 (69.0 ) nm 38 6 nm

Other

223 214 386 4.2 (42.2 ) 437 570 (23.3 )

Total noninterest income

$ 2,419 $ 2,329 $ 2,552 3.9 (5.2 ) $ 4,748 $ 4,701 1.0

Noninterest Income

Second quarter noninterest income of $2,419 million was $133 million (5.2 percent) lower than the second quarter of 2016. Excluding the impact of the second quarter 2016 notable item ($180 million of equity investment income, primarily the result of selling our membership in Visa Europe Limited to Visa, Inc.), noninterest income increased $47 million (2.0 percent), driven by increases in payment services revenue, trust and investment management fees, and treasury management fees, partially offset by decreases

(MORE)

U.S. Bancorp Reports Second Quarter 2017 Results

in commercial products revenue and mortgage banking revenue. Payment services revenue was higher principally due to an increase in credit and debit card revenue of $23 million (7.8 percent), driven by higher sales volumes. Merchant processing services revenue increased $4 million (1.0 percent). Adjusted for the impact of foreign currency rate changes, year-over-year merchant processing services revenue increased approximately 2.7 percent. Trust and investment management fees increased $22 million (6.1 percent) primarily due to favorable market conditions and account growth. Treasury management fees increased $13 million (8.8 percent) due to higher transaction volume. Commercial products revenue decreased $28 million (11.8 percent) primarily due to significant market activity in the second quarter of 2016. Mortgage banking revenue decreased $26 million (10.9 percent) due to lower origination and sales volume from home refinancing. Refinancing activities were significantly higher in the second quarter of 2016 due to lower long term interest rates.

Noninterest income was $90 million (3.9 percent) higher in the second quarter of 2017 than the first quarter of 2017 reflecting seasonally higher fee-based revenue driven by payment services revenue. Payment services revenue growth included increases in credit and debit card revenue of $27 million (9.2 percent), corporate payment product revenue of $5 million (2.8 percent) and merchant processing services revenue of $29 million (7.7 percent) primarily due to higher sales volumes. Trust and investment management fees increased $12 million (3.3 percent) principally due to account growth.

NONINTEREST EXPENSE Table 7
($ in millions) Percent Percent
Change Change
2Q 1Q 2Q 2Q17 vs 2Q17 vs YTD YTD Percent
2017 2017 2016 1Q17 2Q16 2017 2016 Change

Compensation

$ 1,416 $ 1,391 $ 1,277 1.8 10.9 $ 2,807 $ 2,526 11.1

Employee benefits

287 314 278 (8.6 ) 3.2 601 578 4.0

Net occupancy and equipment

255 247 243 3.2 4.9 502 491 2.2

Professional services

105 96 121 9.4 (13.2 ) 201 219 (8.2 )

Marketing and business development

109 90 149 21.1 (26.8 ) 199 226 (11.9 )

Technology and communications

242 235 241 3.0 .4 477 474 .6

Postage, printing and supplies

81 81 77 5.2 162 156 3.8

Other intangibles

43 44 44 (2.3 ) (2.3 ) 87 89 (2.2 )

Other

485 446 562 8.7 (13.7 ) 931 982 (5.2 )

Total noninterest expense

$ 3,023 $ 2,944 $ 2,992 2.7 1.0 $ 5,967 $ 5,741 3.9

(MORE)

U.S. Bancorp Reports Second Quarter 2017 Results

Noninterest Expense

Second quarter noninterest expense of $3,023 million was $31 million (1.0 percent) higher than the second quarter of 2016. Excluding the second quarter 2016 notable items, noninterest expense increased $181 million (6.4 percent) primarily due to higher compensation and other noninterest expense. Second quarter 2016 notable items included $110 million in accruals related to legal and regulatory matters, along with $40 million for charitable contributions. Compensation expense increased $139 million (10.9 percent) principally due to the impact of hiring to support business growth and compliance programs, merit increases, and higher variable compensation. Other expense increased $33 million (7.3 percent) primarily due to the impact of the FDIC insurance surcharge which began in the third quarter of 2016.

Noninterest expense increased $79 million (2.7 percent) on a linked quarter basis driven by higher compensation expense, marketing and business development expense, and other expense, partially offset by lower employee benefits expense. Compensation expense increased $25 million (1.8 percent) principally due to the impact of hiring to support business growth and compliance programs, merit increases, and higher...


More