Exhibit 99.1

 

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U.S. Bancorp Reports Third Quarter 2018 Results

  Record net revenue of $5,699 million, record net income of $1,815 million and record diluted earnings per share of $1.06

  Industry leading return on average assets of 1.58% and return on average common equity of 15.5%

 

 

    3Q18 Key Financial Data

 

           3Q18 Highlights
          

PROFITABILITY METRICS

    3Q18        2Q18        3Q17         

 Net income of $1,815 million and diluted earnings per common share of $1.06

 

 Industry leading return on average assets of 1.58% and return on average common equity of 15.5%

 

 Return on tangible common equity of 19.9%

 

 Returned 78% of 3Q earnings to shareholders through dividends and share buybacks

 

 Year-over-year positive operating leverage with net revenue increase of 2.4% and noninterest expense increase of 1.5%

 

 Net interest income grew 2.4% year-over-year (1.7% on a taxable-equivalent basis) and 1.7% linked quarter on both a reported and tax-equivalent basis

 

 Total noninterest income grew 3.3% year-over year

 

o  Payment services revenue grew 7.1%

 

o  Trust and investment management fees increased 8.2%

 

 Nonperforming assets decreased 19.7% on a year-over- year basis and 8.0% on a linked quarter basis

 

 Return on average assets (%)

    1.58        1.54        1.38      

 

 Return on average common equity (%)

    15.5        15.3        13.6      

 

 Return on tangible common equity (%) (a)

    19.9        19.8        17.3      

 

 Net interest margin (%)

    3.15        3.13        3.14      

 

 Efficiency ratio (%) (a)

 

   

 

53.5 

 

 

 

   

 

54.8 

 

 

 

   

 

53.9 

 

 

 

  
 INCOME STATEMENT (b)   3Q18      2Q18      3Q17           

 

 Net interest income (taxable-equivalent basis)

    $3,281        $3,226        $3,227      

 

 Noninterest income

    $2,418        $2,414        $2,340      

 

 Net income attributable to U.S. Bancorp

    $1,815        $1,750        $1,563      

 

 Diluted earnings per common share

    $1.06        $1.02        $.88      

 

 Dividends declared per common share

 

   

 

$.37 

 

 

 

   

 

$.30 

 

 

 

   

 

$.30 

 

 

 

  
 BALANCE SHEET (b)   3Q18      2Q18      3Q17           

 

 Average total loans

    $281,065        $278,624        $277,626      

 

 Average total deposits

    $330,121        $334,822        $335,151      

 

 Net charge-off ratio

    .46%       .48%       .47%     

 

 Book value per common share (period end)

    $27.35        $27.02        $25.98      

 

 Basel III standardized CET1 (c)

    9.0%       9.1%       9.4%     
                            

 

 (a) See Non-GAAP Financial Measures reconciliation on pages 16-17

 

 

 (b) Dollars in millions, except per share data

 

 

 
 (c) CET1 = Common equity tier 1 capital ratio, 3Q17 as if fully implemented

 

 

 

 

CEO Commentary

 

“Strong underlying momentum in each of our business lines drove record revenue, net income and EPS this quarter. We remain vigilant in our expense discipline while continuing to prudently invest in our core businesses as well as in our digital and payments capabilities. In the third quarter, we expanded our commercial banking presence, launched a new digital platform to serve our small business customers and acquired new capabilities in our payments business. At the same time, our focus on optimization allowed us to deliver positive operating leverage and a best-in-class efficiency ratio, while growing our industry leading return on tangible common equity ratio to 19.9%. I am thankful for our U.S. Bank team members who work every day to put the customer in the center with the goal of delivering outstanding results for each of our stakeholders.”

— Andy Cecere, Chairman, President and CEO, U.S. Bancorp

 

 

In the Spotlight

 

 

Most Powerful Women in Banking and Finance

Three of our Vice Chairmen, Leslie Godridge, Corporate & Commercial Banking, Gunjan Kedia, Wealth Management and Investment Services and Kate Quinn, chief administrative officer at U.S. Bank, were honored by American Banker magazine among the “Most Powerful Women in Banking and Finance” for 2018.

Launch of Digital Small Business Lending

U.S. Bank has created a new, fully digital option for small businesses to apply for and receive a loan or line of credit. The entire process, from application to funding, can be completed same day, often within an hour or less, dramatically improving the experience for busy entrepreneurs.

Expansion of Commercial Banking Team

U.S. Bank has built a strong presence in the greater New York metropolitan area over the past 10 years, and has recently announced the expansion of its Commercial Banking team into this market, focusing on serving middle market clients in New York, New Jersey and Connecticut.

Meeting Customers’ Short-Term Cash Needs

U.S. Bank recently launched a new small-dollar loan product called Simple Loan, designed to help customers deal with unexpected or short-term cash needs with a transparent, easy-to-understand installment loan. U.S. Bank worked closely with its regulators when developing this product and is the first national bank to offer this type of short-term loan solution.

 

 

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    Investor contact: Jennifer Thompson, 612.303.0778  |  Media contact: Stacey Wempen, 612.303.7620


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   U.S. Bancorp Third Quarter 2018 Results
      

 

 INCOME STATEMENT HIGHLIGHTS                          
 ($ in millions, except per-share data)             Percent Change                       
     3Q      2Q      3Q      3Q18 vs      3Q18 vs      YTD      YTD      Percent  
      2018      2018      2017      2Q18      3Q17      2018      2017      Change  

Net interest income

     $3,251         $3,197         $3,176         1.7         2.4         $9,616         $9,205         4.5   

Taxable-equivalent adjustment

     30         29         51         3.4         (41.2)        88         152         (42.1)  

Net interest income (taxable-equivalent basis)

     3,281         3,226         3,227         1.7         1.7         9,704         9,357         3.7   

Noninterest income

     2,418         2,414         2,340         .2         3.3         7,104         6,947         2.3   

Total net revenue

     5,699         5,640         5,567         1.0         2.4         16,808         16,304         3.1   

Noninterest expense

     3,044         3,085         2,998         (1.3)        1.5         9,184         8,891         3.3   

Income before provision and income taxes

     2,655         2,555         2,569         3.9         3.3         7,624         7,413         2.8   

Provision for credit losses

     343         327         360         4.9         (4.7)        1,011         1,055         (4.2)  

Income before taxes

     2,312         2,228         2,209         3.8         4.7         6,613         6,358         4.0   

Income taxes and taxable-equivalent adjustment

     490         470         640         4.3         (23.4)        1,351         1,791         (24.6)  

Net income

     1,822         1,758         1,569         3.6         16.1         5,262         4,567         15.2   

Net (income) loss attributable to noncontrolling interests

     (7)        (8)        (6)        12.5         (16.7)        (22)        (31)        29.0   

Net income attributable to U.S. Bancorp

     $1,815         $1,750         $1,563         3.7         16.1         $5,240         $4,536         15.5   

Net income applicable to U.S. Bancorp common shareholders

     $1,732         $1,678         $1,485         3.2         16.6         $5,007         $4,302         16.4   

Diluted earnings per common share

     $1.06         $1.02         $.88         3.9         20.5         $3.04         $2.55         19.2   
                                                                         

Net income attributable to U.S. Bancorp was $1,815 million for the third quarter of 2018, which was 16.1 percent higher than the $1,563 million for the third quarter of 2017, and 3.7 percent higher than the $1,750 million for the second quarter of 2018. Diluted earnings per common share were $1.06 in the third quarter of 2018, compared with $0.88 in the third quarter of 2017 and $1.02 in the second quarter of 2018.

The increase in net income year-over-year was largely due to total net revenue growth of 2.4 percent partially offset by noninterest expense growth of 1.5 percent. Net interest income increased 2.4 percent (1.7 percent on a taxable-equivalent basis), mainly a result of the impact of rising interest rates, earning assets growth, and higher yields on reinvestment of securities, partially offset by higher rates on deposits and funding mix. Noninterest income increased 3.3 percent compared with a year ago, driven by strong growth in payment services revenue, trust and investment management fees, and other noninterest revenue, partially offset by decreases in mortgage banking revenue and commercial products revenue. Noninterest expense increased 1.5 percent primarily due to increased compensation expense related to supporting business growth and compliance programs, merit increases, and variable compensation related to revenue growth, higher employee benefits expense, and higher technology and communications expense in support of business growth. Partially offsetting these increases was lower other noninterest expense driven by lower costs related to tax-advantaged projects, lower FDIC insurance expense, a reduction in mortgage servicing costs, and lower pension related costs.

Net income increased on a linked quarter basis primarily due to total net revenue growth of 1.0 percent and a decrease in noninterest expense of 1.3 percent. The increase in total net revenue reflected an increase in net interest income of 1.7 percent due to the impact of rising interest rates, earning assets growth, and an additional day in the third quarter, partially offset by higher rates on deposits and funding mix. Noninterest income increased 0.2 percent driven by seasonally higher payment services revenue and deposit services charges, along with higher trust and investment management fees and other noninterest income. These increases were partially offset by decreases in commercial products revenue and mortgage banking revenue. The decrease in noninterest expense of 1.3 percent was primarily driven by lower other noninterest expense due to lower costs related to tax-advantaged projects driven by syndicating tax credits following tax reform and the change in accruals related to legal and insurance matters, as well as a reduction in compensation expense due to lower incentives and seasonally lower contract labor costs.

 

 

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   U.S. Bancorp Third Quarter 2018 Results
      

 

 NET INTEREST INCOME                       
 (Taxable-equivalent basis; $ in millions)     Change        
    3Q     2Q     3Q     3Q18 vs     3Q18 vs     YTD     YTD        
     2018     2018     2017     2Q18     3Q17     2018     2017     Change  

Components of net interest income

               

Income on earning assets

    $4,155        $3,980        $3,758        $175        $397        $11,957        $10,774        $1,183   

Expense on interest-bearing liabilities

    874        754        531        120        343        2,253        1,417        836   

Net interest income

    $3,281        $3,226        $3,227        $55        $54        $9,704        $9,357        $347   

Average yields and rates paid

               

Earning assets yield

    3.98%       3.86%       3.66%       .12%       .32%       3.86%       3.56%       .30%  

Rate paid on interest-bearing liabilities

    1.10          .97          .69          .13          .41          .96          .63          .33     

Gross interest margin

    2.88%       2.89%       2.97%       (.01)%       (.09)%       2.90%       2.93%       (.03)%  

Net interest margin

    3.15%       3.13%       3.14%       .02%       .01%       3.14%       3.09%       .05%  

Average balances

               

Investment securities (a)

    $113,547        $114,578        $111,832        $(1,031)       $1,715        $113,873        $111,325        $2,548   

Loans

    281,065        278,624        277,626        2,441        3,439        279,699        275,454        4,245   

Earning assets

    415,177        412,676        408,825        2,501        6,352        413,246        404,031        9,215   

Interest-bearing liabilities

    314,816        312,217        304,236        2,599        10,580        312,894        299,922        12,972   
(a) Excludes unrealized gain (loss)                
                                                                 

Net interest income on a taxable-equivalent basis in the third quarter of 2018 was $3,281 million, an increase of $54 million (1.7 percent) over the third quarter of 2017. The increase was principally driven by the impact of rising interest rates, earning assets growth, and higher yields on securities, partially offset by lower spread due to loan mix, higher rates on deposits and funding mix shift as well as the impact of tax reform which reduced the taxable-equivalent adjustment benefit related to tax exempt assets and higher interest recoveries in the prior year quarter. Average earning assets were $6.4 billion (1.6 percent) higher than the third quarter of 2017, reflecting increases of $3.4 billion (1.2 percent) in average total loans, $1.7 billion (1.5 percent) in average investment securities, and $2.0 billion (13.1 percent) in average other earning assets.

Net interest income on a taxable-equivalent basis increased $55 million (1.7 percent) on a linked quarter basis primarily driven by the impact of higher interest rates on assets, earning asset growth, and an additional day in the third quarter, partially offset by deposits and funding mix shift. Average earning assets were $2.5 billion (0.6 percent) higher on a linked quarter basis, reflecting increases of $2.4 billion (0.9 percent) in average total loans and $1.5 billion (9.6 percent) in average other earning assets. Average investment securities decreased $1.0 billion (0.9 percent).

The net interest margin in the third quarter of 2018 was 3.15 percent, compared with 3.14 percent in the third quarter of 2017 and 3.13 percent in the second quarter of 2018. The increase in the net interest margin year-over-year was primarily due to higher interest rates, partially offset by deposit and funding mix, lower loan spreads due to mix, and the impact of tax reform. The increase in net interest margin on a linked quarter basis was primarily due to the impact of higher rates on assets, partially offset by deposit and funding mix, as well as higher cash balances.

Average investment securities in the third quarter of 2018 increased $1.7 billion (1.5 percent) from the third quarter of 2017, due to purchases of U.S. Treasury, mortgage-backed and state and political securities, net of prepayments and maturities. Average investment securities decreased $1.0 billion (0.9 percent) from the second quarter of 2018 as a portion of the proceeds received on maturities of securities in the current quarter were not reinvested.

 

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   U.S. Bancorp Third Quarter 2018 Results
      

 

 AVERAGE LOANS                        
 ($ in millions)            Percent Change                     
    3Q     2Q     3Q      3Q18 vs      3Q18 vs     YTD     YTD      Percent  
     2018     2018     2017      2Q18      3Q17     2018     2017      Change  

Commercial

    $93,541        $92,835        $91,077         .8         2.7        $92,776        $89,817         3.3   

Lease financing

    5,507        5,518        5,556         (.2)        (.9)       5,519        5,530         (.2)  

Total commercial

    99,048        98,353        96,633         .7         2.5        98,295        95,347         3.1   

Commercial mortgages

    28,362        28,710        30,114         (1.2)        (5.8)       28,746        30,729         (6.5)  

Construction and development

    11,180        11,147        11,507         .3         (2.8)       11,172        11,708         (4.6)  

Total commercial real estate

    39,542        39,857        41,621         (.8)        (5.0)       39,918        42,437         (5.9)  

Residential mortgages

    62,042        60,834        59,030         2.0         5.1        61,023        58,496         4.3   

Credit card

    21,774        21,220        20,926         2.6         4.1        21,428        20,801         3.0   

Retail leasing

    8,383        8,150        7,762         2.9         8.0        8,173        7,142         14.4   

Home equity and second mortgages

    16,000        16,048        16,299         (.3)        (1.8)       16,080        16,270         (1.2)  

Other

    31,520        31,265        32,008         .8         (1.5)       31,882        31,423         1.5   

Total other retail

    55,903        55,463        56,069         .8         (.3)       56,135        54,835         2.4   

Total loans, excluding covered loans

    278,309        275,727        274,279         .9         1.5        276,799        271,916         1.8   

Covered loans

    2,756        2,897        3,347         (4.9)        (17.7)       2,900        3,538         (18.0)  

Total loans

    $281,065        $278,624        $277,626         .9         1.2        $279,699        $275,454         1.5   
                                                                    

Average total loans were $3.4 billion (1.2 percent) higher than the third quarter of 2017 (1.8 percent excluding the impact of the second quarter of 2018 student loan portfolio sale). The increase was due to growth in residential mortgages (5.1 percent), total commercial loans (2.5 percent), credit card loans (4.1 percent), and retail leasing (8.0 percent). These increases were partially offset by a decrease in total commercial real estate loans (5.0 percent) due to disciplined underwriting and customers paying down balances over the past year. Loan growth was also impacted by continued run-off of the covered loans portfolio (17.7 percent) and the sale of the student loan portfolio in the second quarter of 2018. Average total loans were $2.4 billion (0.9 percent) higher than the second quarter of 2018 driven by growth in residential mortgages (2.0 percent), total commercial loans (0.7 percent), credit card loans (2.6 percent) and retail leasing (2.9 percent), partially offset by continued pay-offs of commercial real estate loans (0.8 percent) and run-off of covered loans (4.9 percent). At the end of the third quarter, approximately $1.3 billion of covered loans were transferred from the loan portfolio to loans held for sale.

 

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   U.S. Bancorp Third Quarter 2018 Results
      

 

 AVERAGE DEPOSITS                       
 ($ in millions)           Percent Change                    
    3Q     2Q     3Q     3Q18 vs     3Q18 vs     YTD     YTD     Percent  
     2018     2018     2017     2Q18     3Q17     2018     2017     Change  

Noninterest-bearing deposits

    $77,192        $78,987        $81,964        (2.3)       (5.8)       $78,546        $81,808        (4.0)  

Interest-bearing savings deposits

               

Interest checking

    69,330        69,918        68,066        (.8)       1.9        69,865        67,021        4.2   

Money market savings

    100,688        103,333        105,072        (2.6)       (4.2)       102,453        106,856        (4.1)  

Savings accounts

    44,848        45,069        43,649        (.5)       2.7        44,770        43,265        3.5   

Total savings deposits

    214,866        218,320        216,787        (1.6)       (.9)       217,088        217,142        --   

Time deposits

    38,063        37,515        36,400        1.5        4.6        37,525        32,660        14.9   

Total interest-bearing deposits

    252,929        255,835        253,187        (1.1)       (.1)       254,613        249,802        1.9   

 

Total deposits

 

 

 

 

$330,121 

 

 

 

 

 

 

$334,822 

 

 

 

 

 

 

$335,151 

 

 

 

 

 

 

(1.4)

 

 

 

 

 

 

(1.5)

 

 

 

 

 

 

$333,159 

 

 

 

 

 

 

$331,610 

 

 

 

 

 

 

.5 

 

 

                                                                 

Average total deposits for the third quarter of 2018 were $5.0 billion (1.5 percent) lower than the third quarter of 2017. Average noninterest-bearing deposits decreased $4.8 billion (5.8 percent) year-over-year primarily due to decreases in business deposits within Corporate and Commercial Banking and corporate trust balances within Wealth Management and Investment Services. Average total savings deposits were $1.9 billion (0.9 percent) lower year-over-year driven by decreases in Wealth Management and Investment Services and Corporate and Commercial Banking, partially offset by an increase in Consumer and Business Banking. Average time deposits were $1.7 billion (4.6 percent) higher than the prior year quarter. Changes in time deposits are largely related to those deposits managed as an alternative to other funding sources such as wholesale borrowing, based largely on relative pricing and liquidity characteristics.

Average total deposits decreased $4.7 billion (1.4 percent) from the second quarter of 2018. On a linked quarter basis, average noninterest-bearing deposits decreased $1.8 billion (2.3 percent) primarily due to decreases in Wealth Management and Investment Services and Corporate and Commercial Banking, partially offset by an increase in consumer balances within Consumer and Business Banking. Noninterest bearing deposit declines were primarily a result of business customers deploying deposit balances to support business growth, the migration of balances to alternative investment vehicles, and the change in deposit balances associated with the timing of receipt and distribution of funds in the corporate trust business.

Average total savings deposits decreased $3.5 billion (1.6 percent) on a linked quarter basis primarily due to decreases in Corporate and Commercial Banking as well as Wealth Management and Investment Services. The decline in Corporate and Commercial Banking savings balances reflects expected run-off related to the business merger of a large financial customer. The decline is expected to moderate in future quarters. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, increased $548 million (1.5 percent). Time deposits are experiencing some growth as customers search for higher yield.

 

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   U.S. Bancorp Third Quarter 2018 Results
      

 

 NONINTEREST INCOME                       
 ($ in millions)           Percent Change                    
    3Q     2Q     3Q     3Q18 vs     3Q18 vs     YTD     YTD     Percent  
     2018     2018     2017     2Q18     3Q17     2018     2017     Change  

Credit and debit card revenue

    $344        $351        $318        (2.0)       8.2        $1,019        $947        7.6   

Corporate payment products revenue

    169        158        150        7.0        12.7        481        427        12.6   

Merchant processing services

    392        387        377        1.3        4.0        1,142        1,112        2.7   

ATM processing services

    85        90        77        (5.6)       10.4        254        223        13.9   

Trust and investment management fees

    411        401        380        2.5        8.2        1,210        1,128        7.3   

Deposit service charges

    198        183        187        8.2        5.9        563        538        4.6   

Treasury management fees

    146        155        153        (5.8)       (4.6)       451        466        (3.2)  

Commercial products revenue

    216        234        240        (7.7)       (10.0)       670        730        (8.2)  

Mortgage banking revenue

    174        191        213        (8.9)       (18.3)       549        632        (13.1)  

Investment products fees

    47        47        42        --         11.9        140        128        9.4   

Securities gains (losses), net

    10        10              --         11.1        25        47        (46.8)  

Other

    226        207        194        9.2        16.5        600        569        5.4   
                                             

 

Total noninterest income

 

 

 

 

$2,418 

 

 

 

 

 

 

$2,414 

 

 

 

 

 

 

$2,340 

 

 

 

 

 

 

.2 

 

 

 

 

 

 

3.3 

 

 

 

 

 

 

$7,104 

 

 

 

 

 

 

$6,947 

 

 

 

 

 

 

2.3 

 

 

                                             
                                                                 

Third quarter noninterest income of $2,418 million was $78 million (3.3 percent) higher than the third quarter of 2017 led by strong growth in payment services revenue and trust and investment management fees. Other noninterest income also increased year-over-year primarily due to higher equity investment income and tax-advantaged syndication revenue. These increases were partially offset by lower mortgage banking revenue and commercial products revenue, which were impacted by industry trends in these revenue categories. Payment services revenue increased $60 million (7.1 percent) due to higher credit and debit card revenue of $26 million (8.2 percent), an increase in corporate payment products revenue of $19 million (12.7 percent), and higher merchant processing services of $15 million (4.0 percent) all driven by higher sales volumes. Trust and investment management fees increased $31 million (8.2 percent) due to business growth and favorable market conditions. The decrease in mortgage banking revenue of $39 million (18.3 percent) was primarily due to lower mortgage production and the adverse impact on gain on sale margins due to excess capacity in the industry in the near term. Commercial products revenue decreased $24 million (10.0 percent) primarily due to lower corporate bond underwriting fees and loan syndication fees.

Noninterest income was $4 million (0.2 percent) higher in the third quarter of 2018 compared with the second quarter of 2018 reflecting higher payment services revenue as corporate payment products revenue grew $11 million (7.0 percent) due to seasonally higher sales volumes and merchant processing services increased $5 million (1.3 percent) primarily due to seasonally higher fee revenue, partially offset by a seasonal decrease of $7 million (2.0 percent) in credit and debit card revenue. Deposit service charges increased $15 million (8.2 percent) as a result of seasonally higher incidence rates and other noninterest income increased $19 million (9.2 percent) primarily due to higher equity investment income and tax-advantaged syndication revenue. Partially offsetting these increases were a decrease in commercial products revenue of $18 million (7.7 percent) due mainly to lower corporate bond underwriting fees and a decrease in mortgage banking revenue of $17 million (8.9 percent) driven by an unfavorable change in the valuation of mortgage servicing rights, net of hedging activities.

 

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   U.S. Bancorp Third Quarter 2018 Results
      

 

 NONINTEREST EXPENSE                                                        
 ($ in millions)                     Percent Change                    
     3Q
2018
    2Q
2018
    3Q
2017
    3Q18 vs
2Q18
    3Q18 vs
3Q17
    YTD
2018
    YTD
2017
    Percent
Change
 

Compensation

    $1,529       $1,542       $1,440       (.8)       6.2        $4,594       $4,247       8.2   

Employee benefits

    294       299       268       (1.7)       9.7        923       843       9.5   

Net occupancy and equipment

    270       262       258       3.1        4.7        797       760       4.9   

Professional services

    96       95       104       1.1        (7.7)       274       305       (10.2)  

Marketing and business development

    106       111       92       (4.5)       15.2        314       291       7.9   

Technology and communications

    247       242       227       2.1        8.8        724       667       8.5   

Postage, printing and supplies

    84       80       82       5.0        2.4        244       244       --   

Other intangibles

    41       40       44       2.5        (6.8)       120       131       (8.4)  

Other

    377       414       483       (8.9)       (21.9)       1,194       1,403       (14.9)  
                                             

Total noninterest expense

 

 

 

 

$3,044

 

 

 

 

 

 

$3,085

 

 

 

 

 

 

$2,998

 

 

 

 

 

 

(1.3)

 

 

 

 

 

 

1.5 

 

 

 

 

 

 

$9,184

 

 

 

 

 

 

$8,891

 

 

 

 

 

 

3.3 

 

 

                                             
                                                                 

Third quarter noninterest expense of $3,044 million was $46 million (1.5 percent) higher than the third quarter of 2017 primarily due to higher personnel costs and technology investment, partially offset by lower other noninterest expense. Compensation expense increased $89 million (6.2 percent) principally due to the impact of hiring to support business growth and compliance programs, merit increases, and higher variable compensation related to business production. Employee benefits expense increased $26 million (9.7 percent) primarily driven by increased medical costs and staffing. Other noninterest expense decreased $106 million (21.9 percent) due to lower costs related to tax-advantaged projects, lower FDIC insurance expense, a reduction in mortgage servicing costs, and lower pension related costs.

Noninterest expense decreased $41 million (1.3 percent) on a linked quarter basis primarily due to a reduction in compensation expense including lower incentives and a seasonal decline in contract labor costs as well as lower other noninterest expense as a result of lower costs related to tax-advantaged projects driven by syndicating tax credits following tax reform and the change in accruals related to legal and insurance matters.

Provision for Income Taxes

The provision for income taxes for the third quarter of 2018 resulted in a tax rate of 21.2 percent on a taxable-equivalent basis (effective tax rate of 20.2 percent), compared with 29.0 percent (effective tax rate of 27.3 percent) in the third quarter of 2017, and 21.1 percent on a taxable-equivalent basis (effective tax rate of 20.1 percent) in the second quarter of 2018. The lower 2018 tax rates reflect the tax reform legislation enacted during the fourth quarter of 2017.

 

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   U.S. Bancorp Third Quarter 2018 Results
      

 

 ALLOWANCE FOR CREDIT LOSSES  
 ($ in millions)    3Q         2Q         1Q         4Q         3Q     
      2018    % (b)     2018    % (b)    2018    % (b)    2017    % (b)    2017    % (b) 

Balance, beginning of period

     $4,411           $4,417           $4,417           $4,407           $4,377     

Net charge-offs

                             

Commercial

     63        .27        54        .23        56        .25        22        .09        79        .34  

Lease financing

     3        .22        4        .29        4        .29        6        .44        4        .29  
  

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

  

Total commercial

     66        .26        58        .24        60        .25        28        .11        83        .34  

Commercial mortgages

     (5      (.07      --        --        (4      (.06      18        .24        (2      (.03

Construction and development

     (4      (.14      --        --        1        .04        --        --        (5      (.17
  

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

  

Total commercial real estate

     (9      (.09      --        --        (3      (.03      18        .17        (7      (.07

Residential mortgages

     4        .03        4        .03        7        .05        10        .07        7        .05  

Credit card

     206        3.75        210        3.97        211        4.02        205        3.83        187        3.55  

Retail leasing

     3        .14        3        .15        3        .15        3        .15        2        .10  

Home equity and second mortgages

     (1      (.02      (2      (.05      (1      (.03      (2      (.05      (1      (.02

Other

     59        .74        59        .76        64        .79        63        .76        59        .73  
  

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

  

Total other retail

     61        .43        60        .43        66        .47        64        .44        60        .42  

Total net charge-offs,

     --                             
  

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

  

excluding covered loans

     328        .47        332        .48        341        .50        325        .47        330        .48  

Covered loans

     --        --        --        --        --        --        --        --        --        --  
  

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

  

Total net charge-offs

     328        .46        332        .48        341        .49        325        .46        330        .47  

Provision for credit losses

     343           327           341           335           360     

Other changes (a)

     --           (1         --           --           --     
  

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

  

Balance, end of period

     $4,426           $4,411           $4,417           $4,417           $4,407     
  

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

  

Components

                             

Allowance for loan losses

     $3,954           $3,920           $3,918           $3,925           $3,908     

Liability for unfunded credit commitments

     472           491           499           492           499     
  

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

  

Total allowance for credit losses

     $4,426           $4,411           $4,417           $4,417           $4,407     
  

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

     

 

 

 

  

Gross charge-offs

     $428           $437           $453           $464           $433     

Gross recoveries

     $100           $105           $112           $139           $103     

Allowance for credit losses as a percentage of

 

                    

Period-end loans

     1.57           1.57           1.59           1.58           1.58     

Nonperforming loans

     544           484           431           438           426     

Nonperforming assets

     441           404           367           368           352     

(a)  Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the indemnification asset, and the impact of any loan sales.

   

(b)  Annualized and calculated on average loan balances

 

   

 

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   U.S. Bancorp Third Quarter 2018 Results
      

 

Credit quality was relatively stable on a linked quarter and year-over-year basis. The Company’s provision for credit losses for the third quarter of 2018 was $343 million, which was $16 million (4.9 percent) higher than the prior quarter and $17 million (4.7 percent) lower than the third quarter of 2017.

Total net charge-offs in the third quarter of 2018 were $328 million, compared with $332 million in the second quarter of 2018, and $330 million in the third quarter of 2017. Net charge-offs decreased $4 million (1.2 percent) compared with the second quarter of 2018 mainly due to lower total commercial real estate net charge-offs, partially offset by higher total commercial net charge-offs. Net charge-offs decreased $2 million (0.6 percent) compared with the third quarter of 2017 primarily due to lower total commercial net charge-offs and lower residential mortgage net charge-offs mostly offset by higher credit card net charge-offs. The net charge-off ratio was 0.46 percent in the third quarter of 2018, compared with 0.48 percent in the second quarter of 2018 and 0.47 percent in the third quarter of 2017.

The allowance for credit losses was $4,426 million at September 30, 2018, compared with $4,411 million at June 30, 2018, and $4,407 million at September 30, 2017. The ratio of the allowance for credit losses to period-end loans was 1.57 percent at September 30, 2018, and at June 30, 2018, compared with 1.58 percent at September 30, 2017. The ratio of the allowance for credit losses to nonperforming loans was 544 percent at September 30, 2018, compared with 484 percent at June 30, 2018, and 426 percent at September 30, 2017.

Nonperforming assets were $1,004 million at September 30, 2018, compared with $1,091 million at June 30, 2018, and $1,251 million at September 30, 2017. The ratio of nonperforming assets to loans and other real estate was 0.36 percent at September 30, 2018, compared with 0.39 percent at June 30, 2018, and 0.45 percent at September 30, 2017. The year-over-year decrease in nonperforming assets was driven by improvements in nonperforming residential mortgages, total commercial loans, and other real estate owned, partially offset by increases in nonperforming other retail loans and other nonperforming assets. Accruing loans 90 days or more past due were $551 million at September 30, 2018, compared with $640 million at June 30, 2018, and $649 million at September 30, 2017.

 

 DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES  
 (Percent)    Sep 30
2018
   Jun 30
2018
   Mar 31
2018
   Dec 31
2017
  

Sep 30 

2017 

Delinquent loan ratios - 90 days or more past due excluding nonperforming loans

 

  

Commercial

     .06        .06        .06        .06        .05   

Commercial real estate

     .01        .01        .01        .01        .01   

Residential mortgages

     .19        .18        .22        .22        .18   

Credit card

     1.18        1.15        1.29        1.28        1.20   

Other retail

     .17        .16        .18        .17        .15   

Total loans, excluding covered loans

     .19        .19        .21        .21        .18   

Covered loans (a)

     .86        4.46        4.57        4.74        4.66   

Total loans

     .20        .23        .25        .26        .23   

Delinquent loan ratios - 90 days or more past due including nonperforming loans

 

  

Commercial

     .28        .28        .37        .31        .33   

Commercial real estate

     .27        .27        .31        .37        .30   

Residential mortgages

     .69        .84        .93        .96        .98   

Credit card

     1.18        1.15        1.29        1.28        1.20   

Other retail

     .49        .48        .48        .46        .43   

Total loans, excluding covered loans

     .48        .51        .58        .57        .55   

Covered loans (a)

     .86        4.68        4.77        4.93        4.84   

Total loans

     .48        .55        .62        .62        .60   

(a)  Effective September 30, 2018, the Company transferred $1.3 billion of covered loans to loans held for sale. Included in the amount transferred were $108 million of loans 90 days or more past due and $6 million that were nonperforming.

   

                                              

 

 

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   U.S. Bancorp Third Quarter 2018 Results
      

 

 

 ASSET QUALITY (a)                              
 ($ in millions)                         
      Sep 30
2018
   Jun 30
2018
   Mar 31
2018
   Dec 31
2017
  

Sep 30 

2017 

Nonperforming loans

              

Commercial

     $193        $199        $274        $225        $231   

Lease financing

     23        25        27        24        38   
                                            

Total commercial

     216        224        301        249        269   

Commercial mortgages

     77        72        86        108        89   

Construction and development

     28        32        33        34        33   
                                            

Total commercial real estate

     105        104        119        142        122   

Residential mortgages

     317        400        430        442        474   

Credit card

     --        --        --        1         

Other retail

     175        178        168        168        163   
                                            

Total nonperforming loans, excluding covered loans

     813        906        1,018        1,002        1,029   

Covered loans

     --        6        6        6         
                                            

Total nonperforming loans

     813        912        1,024        1,008        1,035   

Other real estate

     100        108        124        141        164   

Covered other real estate

     19        20        20        21        26   

Other nonperforming assets

     72        51        36        30        26   
                                            

Total nonperforming assets

     $1,004        $1,091        $1,204        $1,200        $1,251   
                                            

Accruing loans 90 days or more past due

     $551        $640        $702        $720        $649   
                                            

Performing restructured loans, excluding GNMA and covered loans

     $2,262        $2,164        $2,190        $2,306        $2,419   
                                            

Performing restructured GNMA and covered loans

     $1,678        $1,695        $1,598        $1,713        $1,600   
                                            

Nonperforming assets to loans plus ORE (%)

     .36        .39        .43        .43        .45   

 

(a) Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due

 

 

 

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   U.S. Bancorp Third Quarter 2018 Results
      

 

 COMMON SHARES  
 (Millions)   

3Q

2018

   2Q
2018
   1Q
2018
   4Q
2017
   3Q 
2017 

 Beginning shares outstanding

     1,636         1,649         1,656         1,667         1,679   

 Shares issued for stock incentive plans, acquisitions and other corporate purposes

            --                       --   

 Shares repurchased

     (14)        (13)        (11)        (12)        (12)  
  

 

 

 

 Ending shares outstanding

          1,623           1,636           1,649           1,656           1,667   
  

 

 

 

   

 

 CAPITAL POSITION  
 ($ in millions)   Sep 30
2018
    Jun 30
2018
    Mar 31
2018
    Dec 31
2017
    Sep 30
2017
 

Total U.S. Bancorp shareholders’ equity

  $ 50,375      $ 49,628      $ 49,187      $ 49,040      $ 48,723   

Basel III Standardized Approach (a)

         

Common equity tier 1 capital

  $ 34,097      $ 34,161      $ 33,539      $ 34,369      $ 34,876   

Tier 1 capital

    40,114        39,611        38,991        39,806        40,411   

Total risk-based capital

    47,531        47,258        46,640        47,503        48,104   

Fully implemented common equity tier 1 capital ratio (a)

    9.0      9.1      9.0      9.1  % (b)      9.4  % (b) 

Tier 1 capital ratio

    10.6        10.5        10.4        10.8        11.1   

Total risk-based capital ratio

    12.6        12.6        12.5        12.9        13.2   

Leverage ratio

    9.0        8.9        8.8        8.9        9.1   

Basel III Advanced Approaches (a)

         

Fully implemented common equity tier 1 capital ratio (a)

    11.8        11.6        11.5        11.6  (b)      11.8  (b) 

Tangible common equity to tangible assets (b)

    7.7        7.8        7.7        7.6        7.7   

Tangible common equity to risk-weighted assets (b)

    9.3        9.3        9.3        9.4        9.5   

Common equity tier 1 capital ratio calculated under the transitional standardized approach (a)

    --         --         --         9.3        9.6   

Common equity tier 1 capital ratio calculated under the transitional advanced approaches (a)

    --         --         --         12.0        12.1   

 

(a) Beginning January 1, 2018, the regulatory capital requirements fully reflect implementation of Basel III. Prior to 2018, the Company’s capital ratios reflected certain transitional adjustments. Basel III includes two comprehensive methodologies for calculating risk-weighted assets: a general standardized approach and more risk-sensitive advanced approaches, with the Company’s capital adequacy being evaluated against the methodology that is most restrictive.

 

(b) See Non-GAAP Financial Measures reconciliation on page 16

 

 

 

Total U.S. Bancorp shareholders’ equity was $50.4 billion at September 30, 2018, compared with $49.6 billion at June 30, 2018, and $48.7 billion at September 30, 2017. During the third quarter, the Company returned 78 percent of earnings to shareholders through dividends and share buybacks.

All regulatory ratios continue to be in excess of “well-capitalized” requirements. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III standardized approach was 9.0 percent at September 30, 2018, compared with 9.1 percent at June 30, 2018, and 9.6 percent at September 30, 2017. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III advanced approaches method was 11.8 percent at September 30, 2018, compared with 11.6 percent at June 30, 2018, and 12.1 percent at September 30, 2017.

 

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   U.S. Bancorp Third Quarter 2018 Results
      

 

  Investor Conference Call

 

On Wednesday, October 17, 2018, at 8:00 a.m. CDT, Andy Cecere, chairman, president and chief executive officer, and Terry Dolan, vice chairman and chief financial officer, will host a conference call to review the financial results. The conference call will be available online or by telephone. To access the webcast and presentation, visit U.S. Bancorp’s website at usbank.com and click on “About US”, “Investor Relations” and “Webcasts & Presentations.” To access the conference call from locations within the United States and Canada, please dial 866-316-1409. Participants calling from outside the United States and Canada, please dial 706-634-9086. The conference ID number for all participants is 7338239. For those unable to participate during the live call, a recording will be available at approximately 11:00 a.m. CDT on Wednesday, October 17 and will be accessible until Wednesday, October 24 at 11:00 p.m. CDT. To access the recorded message within the United States and Canada, please dial 855-859-2056. If calling from outside the United States and Canada, please dial 404-537-3406 to access the recording. The conference ID is 7338239.

 

  About U.S. Bancorp

 

U.S. Bancorp, with 74,000 employees and $465 billion in assets as of September 30, 2018, is the parent company of U.S. Bank, the fifth-largest commercial bank in the United States. The Minneapolis-based bank blends its relationship teams, branches and ATM network with mobile and online tools that allow customers to bank how, when and where they prefer. U.S. Bank is committed to serving its millions of retail, business, wealth management, payment, commercial and corporate, and investment services customers across the country and around the world as a trusted financial partner, a commitment recognized by the Ethisphere Institute naming the bank a 2018 World’s Most Ethical Company. Visit U.S. Bank at www.usbank.com or follow on social media to stay up to date with company news.

 

  Forward-looking Statements

 

The following information appears in accordance with the Private Securities Litigation Reform Act of 1995:

This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. Deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. Stress in the commercial real estate markets, as well as a downturn in the residential real estate markets, could cause credit losses and deterioration in asset values. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; changes in customer behavior and preferences; breaches in data security; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputational risk.

For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2017, on file with the Securities and Exchange Commission, including the sections entitled “Corporate Risk Profile” and “Risk Factors” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. However, factors other than these also could adversely affect U.S. Bancorp’s results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.

 

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   U.S. Bancorp Third Quarter 2018 Results
      

 

  Non-GAAP Financial Measures

 

In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:

 

   

Tangible common equity to tangible assets

 
   

Tangible common equity to risk-weighted assets

 
   

Return on tangible common equity

 

These capital measures are viewed by management as useful additional methods of evaluating the Company’s utilization of its capital held and the level of capital available to withstand unexpected negative market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Company’s capital position relative to other financial services companies. These capital measures are not defined in generally accepted accounting principles (“GAAP”), or are not defined in banking regulations. As a result, these capital measures disclosed by the Company may be considered non-GAAP financial measures. In addition, certain capital measures related to prior periods are presented on the same basis as those capital measures in the current period. The effective capital ratios defined by banking regulations for these periods were subject to certain transitional provisions. Management believes this information helps investors assess trends in the Company’s capital adequacy.

The Company also discloses net interest income and related ratios and analysis on a taxable-equivalent basis, which may also be considered non-GAAP financial measures. The Company believes this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable and tax-exempt sources. In addition, certain performance measures, including the efficiency ratio and net interest margin utilize net interest income on a taxable-equivalent basis.

There may be limits in the usefulness of these measures to investors. As a result, the Company encourages readers to consider the consolidated financial statements and other financial information contained in this press release in their entirety, and not to rely on any single financial measure. A table follows that shows the Company’s calculation of these non-GAAP financial measures.

 

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 CONSOLIDATED STATEMENT OF INCOME

 

      
     Three Months Ended    Nine Months Ended    
(Dollars and Shares in Millions, Except Per Share Data)    September 30,    September 30,    
(Unaudited)    2018     2017     2018     2017 

Interest Income

             

Loans

     $3,353         $3,049         $9,645         $8,728   

Loans held for sale

     36         40         108         104   

Investment securities

     661         568         1,927         1,653   

Other interest income

     73         47         182         131   

Total interest income

     4,123         3,704         11,862         10,616   

Interest Expense

             

Deposits

     491         293         1,263         730   

Short-term borrowings

     104         39         265         96   

Long-term debt

     277         196         718         585   

Total interest expense

     872         528         2,246         1,411   

Net interest income

     3,251         3,176         9,616         9,205   

Provision for credit losses

     343         360         1,011         1,055   

Net interest income after provision for credit losses

     2,908         2,816         8,605         8,150   

Noninterest Income

             

Credit and debit card revenue

     344         318         1,019         947   

Corporate payment products revenue

     169         150         481         427   

Merchant processing services

     392         377         1,142         1,112   

ATM processing services

     85         77         254         223   

Trust and investment management fees

     411         380         1,210         1,128   

Deposit service charges

     198         187         563         538   

Treasury management fees

     146         153         451         466   

Commercial products revenue

     216         240         670         730   

Mortgage banking revenue

     174         213         549         632   

Investment products fees

     47         42         140         128   

Securities gains (losses), net

     10                25         47   

Other

     226         194         600         569   

Total noninterest income

     2,418         2,340         7,104         6,947   

Noninterest Expense

             

Compensation

     1,529         1,440         4,594         4,247   

Employee benefits

     294         268         923         843   

Net occupancy and equipment

     270         258         797         760   

Professional services

     96         104         274         305   

Marketing and business development

     106         92         314         291   

Technology and communications

     247         227         724         667   

Postage, printing and supplies

     84         82         244         244   

Other intangibles

     41         44         120         131   

Other

     377         483         1,194         1,403   

Total noninterest expense

     3,044         2,998         9,184         8,891   

Income before income taxes

     2,282         2,158         6,525         6,206   

Applicable income taxes

     460         589         1,263         1,639   

Net income

     1,822         1,569         5,262         4,567   

Net (income) loss attributable to noncontrolling interests

     (7)        (6)        (22)        (31)  

Net income attributable to U.S. Bancorp

     $1,815         $1,563         $5,240         $4,536   

Net income applicable to U.S. Bancorp common shareholders

     $1,732         $1,485         $5,007         $4,302   

Earnings per common share

     $1.06         $.89         $3.05         $2.56   

Diluted earnings per common share

     $1.06         $.88         $3.04         $2.55   

Dividends declared per common share

     $.37         $.30         $.97         $.86   

Average common shares outstanding

     1,629         1,672         1,641         1,683   

Average diluted common shares outstanding

     1,633         1,678         1,645         1,689   

 

 

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 CONSOLIDATED ENDING BALANCE SHEET

 

                 
    September 30,         December 31,         September 30,  
(Dollars in Millions)   2018     2017     2017  

Assets

    (Unaudited       (Unaudited

Cash and due from banks

    $20,082       $19,505       $20,540  

Investment securities

     

Held-to-maturity

    46,046       44,362       44,018  

Available-for-sale

    64,912       68,137       67,772  

Loans held for sale

    4,533       3,554       3,757  

Loans

     

Commercial

    99,273       97,561       96,928  

Commercial real estate

    39,966       40,463       41,430  

Residential mortgages

    62,904       59,783       59,317  

Credit card

    21,869       22,180       20,923  

Other retail

    56,049       57,324       56,859  

Total loans, excluding covered loans

    280,061       277,311       275,457  

Covered loans

    1,400       3,121       3,262  

Total loans

    281,461       280,432       278,719  

Less allowance for loan losses

    (3,954     (3,925     (3,908

Net loans

    277,507       276,507       274,811  

Premises and equipment

    2,438       2,432       2,402  

Goodwill

    9,530       9,434       9,370  

Other intangible assets

    3,544       3,228       3,193  

Other assets

    36,015       34,881       33,364  

Total assets

    $464,607       $462,040       $459,227  

Liabilities and Shareholders’ Equity

     

Deposits

     

Noninterest-bearing

    $77,146       $87,557       $82,152  

Interest-bearing

    254,032       259,658       260,437  

Total deposits

    331,178       347,215       342,589  

Short-term borrowings

    23,868       16,651       15,856  

Long-term debt

    40,894       32,259       34,515  

Other liabilities

    17,660       16,249       16,916  

Total liabilities

    413,600       412,374       409,876  

Shareholders’ equity

     

Preferred stock

    5,984       5,419       5,419  

Common stock

    21       21       21  

Capital surplus

    8,479       8,464       8,457  

Retained earnings

    57,878       54,142       53,023  

Less treasury stock

    (19,414     (17,602     (16,978

Accumulated other comprehensive income (loss)

    (2,573     (1,404     (1,219

Total U.S. Bancorp shareholders’ equity

    50,375       49,040       48,723  

Noncontrolling interests

    632       626       628  

Total equity

    51,007       49,666       49,351  

Total liabilities and equity

    $464,607       $462,040       $459,227  

 

 

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 NON-GAAP FINANCIAL MEASURES  
     September 30,       June 30,       March 31,       December 31,       September 30,    
(Dollars in Millions, Unaudited)    2018       2018       2018       2017       2017    

Total equity

     $51,007         $50,257         $49,812         $49,666         $49,351    

Preferred stock

     (5,984)        (5,419)        (5,419)        (5,419)        (5,419)   

Noncontrolling interests

     (632)        (629)        (625)        (626)        (628)   

Goodwill (net of deferred tax liability) (1)

     (8,682)        (8,585)        (8,609)        (8,613)        (8,141)   

Intangible assets, other than mortgage servicing rights

     (627)        (571)        (608)        (583)        (595)   

Tangible common equity (a)

     35,082         35,053         34,551         34,425         34,568    

Total assets

     464,607         461,329         460,119         462,040         459,227    

Goodwill (net of deferred tax liability) (1)

     (8,682)        (8,585)        (8,609)        (8,613)        (8,141)   

Intangible assets, other than mortgage servicing rights

     (627)        (571)        (608)        (583)        (595)   

Tangible assets (b)

     455,298         452,173         450,902         452,844         450,491    

Risk-weighted assets, determined in accordance with the Basel III standardized approach (c)

     377,713       375,466         373,141         367,771         363,957    

Tangible common equity (as calculated above)

           34,425         34,568    

Adjustments (2)

           (550)        (52)   

Common equity tier 1 capital estimated for the Basel III fully implemented standardized and advanced approaches (d)

           33,875         34,516    

Risk-weighted assets, determined in accordance with prescribed transitional standardized approach regulatory requirements

           367,771         363,957    

Adjustments (3)

           4,473         3,907    

Risk-weighted assets estimated for the Basel III fully implemented standardized approach (e)

           372,244         367,864    

Risk-weighted assets, determined in accordance with prescribed transitional advanced approaches regulatory requirements

           287,211         287,800    

Adjustments (4)

           4,769         4,164    

Risk-weighted assets estimated for the Basel III fully implemented advanced approaches (f)

           291,980         291,964    

Ratios*

          

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

     7.7       7.8       7.7       7.6       7.7  

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

     9.3         9.3         9.3         9.4         9.5    

Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach (d)/(e)

           9.1         9.4    

Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches (d)/(f)

           11.6         11.8    
          
     Three Months Ended  
     September 30,       June 30,       March 31,       December 31,       September 30,    
     2018       2018       2018       2017       2017    

Net income applicable to U.S. Bancorp common shareholders

     $1,732         $1,678         $1,597         $1,611         $1,485    

Intangibles amortization (net-of-tax)

     32         32         31         28         29    

Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization

     1,764         1,710         1,628         1,639         1,514    

Annualized net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization (g)

     6,998         6,859         6,602         6,503         6,007    

Average total equity

     50,768         49,950         49,450         49,461         49,447    

Less: Average preferred stock

     5,714         5,419         5,419         5,419         5,419    

Less: Average noncontrolling interests

     630         628         625         627         628    

Less: Average goodwill (net of deferred tax liability) (1)

     8,620         8,602         8,627         8,154         8,153    

Less: Average intangible assets, other than mortgage servicing rights

     584         588         603         591         615    

Average U.S. Bancorp common shareholders’ equity, excluding intangible assets (h)

     35,220         34,713         34,176         34,670         34,632    

Return on tangible common equity (g)/(h)

     19.9       19.8       19.3       18.8       17.3  

 

  * 

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

(1)

Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.

(2)

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

(3)

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

(4)

Primarily reflects higher risk-weighting for mortgage servicing rights.

 

 

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 NON-GAAP FINANCIAL MEASURES

 

             
    Three Months Ended     Nine Months Ended  

(Dollars in Millions, Unaudited)

   
September 30,  
2018  
 
 
   
June 30,  
2018  
 
 
   
March 31,  
2018  
 
 
   
December 31,  
2017  
 
 
   
September 30,  
2017  
 
 
   
September 30,  
2018  
 
 
   
September 30,  
2017  
 
 

Net interest income

    $3,251         $3,197         $3,168         $3,175         $3,176         $9,616         $9,205    

Taxable-equivalent adjustment (1)

    30         29         29         53         51         88         152    

Net interest income, on a taxable-equivalent basis

    3,281         3,226         3,197         3,228         3,227         9,704         9,357    
 

Net interest income, on a taxable-equivalent basis (as calculated above)

    3,281         3,226         3,197         3,228         3,227         9,704         9,357    

Noninterest income

    2,418         2,414         2,272         2,370         2,340         7,104         6,947    

Less: Securities gains (losses), net

    10         10         5         10         9         25         47    

Total net revenue, excluding net securities gains (losses) (a)

    5,689         5,630         5,464         5,588         5,558         16,783         16,257    
 

Noninterest expense (b)

    3,044         3,085         3,055         3,899         2,998         9,184         8,891    

Less: Intangible amortization

    41         40         39         44         44         120         131    

Noninterest expense, excluding intangible amortization (c)

    3,003         3,045         3,016         3,855         2,954         9,064         8,760    
 

Efficiency ratio (b)/(a)

    53.5       54.8       55.9       69.8       53.9       54.7       54.7  

Tangible efficiency ratio (c)/(a)

    52.8         54.1         55.2         69.0         53.1         54.0         53.9    

(1) Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent for 2018 and 35 percent for 2017.

 

 

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LINE OF BUSINESS FINANCIAL PERFORMANCE (a)  
($ in millions)   Net Income Attributable                 Net Income Attributable              
     to U.S. Bancorp     Percent Change     to U.S. Bancorp           3Q 2018  
Business Line  

3Q

2018

    2Q
2018
   

3Q  

2017  

    3Q18 vs
2Q18 
    3Q18 vs
3Q17 
    YTD
2018
    YTD 
2017 
    Percent
Change
    Earnings
Composition
 

Corporate and Commercial Banking

    $394       $419       $364         (6.0)       8.2        $1,202       $1,079         11.4       22  

Consumer and Business Banking

    596       557       482         7.0        23.7        1,709       1,357         25.9       33    

Wealth Management and Investment Services

    221       193       162         14.5        36.4        623       478         30.3       12    

Payment Services

    393       363       311         8.3        26.4        1,099       892         23.2       22    

Treasury and Corporate Support

    211       218       244         (3.2)       (13.5)       607       730         (16.8     11    
   

 

 

       

 

 

     

 

 

 
   

Consolidated Company

      $1,815       $1,750       $1,563         3.7        16.1        $5,240       $4,536         15.5               100  
   

 

 

       

 

 

     

 

 

 
   

(a) preliminary data

 

 

                                                               

Lines of Business

The Company’s major lines of business are Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate resources and assess performance. Noninterest expenses incurred by centrally managed operations or business lines that directly support another business line’s operations are charged to the applicable business line based on its utilization of those services, primarily measured by the volume of customer activities, number of employees or other relevant factors. These allocated expenses are reported as net shared services expense within noninterest expense. Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Company’s diverse customer base. During 2018, certain organization and methodology changes were made and, accordingly, prior period results were restated and presented on a comparable basis.

 

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CORPORATE AND COMMERCIAL BANKING (a)                       
($ in millions)                     Percent Change                    
     3Q     2Q      3Q        3Q18 vs     3Q18 vs     YTD     YTD      

Percent

Change

 
     2018     2018      2017        2Q18     3Q17     2018     2017    

Condensed Income Statement

                 

Net interest income (taxable-equivalent basis)

    $739       $726        $735          1.8        .5            $2,186       $2,170         .7   

Noninterest income

    201       224        219          (10.3)       (8.2)       632       709         (10.9)  

Securities gains (losses), net

    --       --        --          --         --         --       (3)        nm   
   

 

 

       

 

 

     

Total net revenue

    940       950        954          (1.1)       (1.5)       2,818       2,876         (2.0)  

Noninterest expense

    379       402        389          (5.7)       (2.6)       1,175       1,167         .7   

Other intangibles

    1             1          --         --         3       3         --     
   

 

 

       

 

 

     

Total noninterest expense

    380       403        390          (5.7)       (2.6)       1,178       1,170         .7   
   

 

 

       

 

 

     

Income before provision and taxes

    560       547        564          2.4        (.7)       1,640       1,706         (3.9)  

Provision for credit losses

    35       (12)       (9)         nm        nm        37       9         nm   
   

 

 

       

 

 

     

Income before income taxes

    525       559        573          (6.1)       (8.4)       1,603       1,697         (5.5)  

Income taxes and taxable-equivalent adjustment

    131       140        209          (6.4)       (37.3)       401       618         (35.1)  
   

 

 

       

 

 

     

Net income

    394       419        364          (6.0)       8.2        1,202       1,079         11.4   

Net (income) loss attributable to noncontrolling interests

    --       --        --          --         --         --       --         --     
   

 

 

       

 

 

     

Net income attributable to U.S. Bancorp

    $394       $419        $364          (6.0)       8.2        $1,202       $1,079         11.4   
   

 

 

       

 

 

     
   

Average Balance Sheet Data

                 

Loans

        $93,364       $93,456        $93,942          (.1)       (.6)       $93,570       $93,925         (.4)  

Other earning assets

    3,042       3,092        2,855          (1.6)       6.5        2,998       2,948         1.7   

Goodwill

    1,647       1,647        1,647          --         --         1,647       1,647         --     

Other intangible assets

    10       11        13          (9.1)       (23.1)       11       14         (21.4)  

Assets

    102,146       102,524        102,267          (.4)       (.1)       102,417       102,520         (.1)  
   

Noninterest-bearing deposits

    32,539       33,383        35,401          (2.5)       (8.1)       33,438       36,256         (7.8)  

Interest-bearing deposits

    68,554       70,353        74,461          (2.6)       (7.9)       69,612       71,300         (2.4)  
   

 

 

       

 

 

     

Total deposits

    101,093       103,736        109,862          (2.5)       (8.0)       103,050       107,556         (4.2)  
   

Total U.S. Bancorp shareholders’ equity

    10,426       10,498        9,951          (.7)       4.8        10,447       9,850         6.1   
   

(a) preliminary data

 

                                                               

Corporate and Commercial Banking offers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets services, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution, non-profit and public sector clients.

Corporate and Commercial Banking contributed $394 million of the Company’s net income in the third quarter of 2018, compared with $364 million in the third quarter of 2017. Total net revenue decreased $14 million (1.5 percent) due to a $4 million (0.5 percent) increase in net interest income offset by an $18 million (8.2 percent) decrease in total noninterest income. Net interest income increased slightly primarily due to the impact of rising rates on the margin benefit from deposits, offset by lower spreads on loans, reflecting a competitive marketplace, loan mix and lower deposits. Noninterest bearing deposits are declining as customers deploy balances to support business growth. Interest-bearing deposits reflect expected balance run-off related to the business merger of a larger financial services customer. Total noninterest income decreased year-over-year primarily due to lower corporate bond underwriting fees and syndication fees. Total noninterest expense was $10 million (2.6 percent) lower compared with a year ago primarily due to lower FDIC insurance expense and lower variable compensation expense related to capital markets activities, partially offset by an increase in net shared services expense driven by technology development and investment in infrastructure. The provision for credit losses increased $44 million reflecting an unfavorable change in the reserve allocation partially offset by lower net charge-offs.

 

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CONSUMER AND BUSINESS BANKING (a)

($ in millions)                    Percent Change                 
      3Q       2Q       3Q          3Q18 vs       3Q18 vs       YTD       YTD       Percent 
      2018       2018       2017          2Q18       3Q17       2018       2017       Change 

Condensed Income Statement

                  

Net interest income (taxable-equivalent basis)

    $1,557       $1,519       $1,475          2.5        5.6        $4,587       $4,337       5.8 

Noninterest income

    582       588       616          (1.0)       (5.5)       1,741       1,792       (2.8)

Securities gains (losses), net

    --       --       --          --         --         --       --       --  
   

 

 

        

 

 

     

Total net revenue

    2,139       2,107       2,091          1.5        2.3        6,328       6,129       3.2 

Noninterest expense

    1,283       1,302       1,232          (1.5)       4.1        3,863       3,731       3.5 

Other intangibles

    7       7       8          --         (12.5)       21       22       (4.5)
   

 

 

        

 

 

     

Total noninterest expense

    1,290       1,309       1,240          (1.5)       4.0        3,884       3,753       3.5 
   

 

 

        

 

 

     

Income before provision and taxes

    849       798       851          6.4        (.2)       2,444       2,376       2.9 

Provision for credit losses

    54       55       93          (1.8)       (41.9)       164       242       (32.2)
   

 

 

        

 

 

     

Income before income taxes

    795       743       758          7.0        4.9        2,280       2,134       6.8 

Income taxes and taxable-equivalent adjustment

    199       186       276          7.0        (27.9)       571       777       (26.5)
   

 

 

        

 

 

     

Net income

    596       557       482          7.0        23.7        1,709       1,357       25.9 

Net (income) loss attributable to noncontrolling interests

    --       --       --          --         --         --       --       --  
   

 

 

        

 

 

     

Net income attributable to U.S. Bancorp

    $596       $557       $482          7.0        23.7        $1,709       $1,357       25.9 
   

 

 

        

 

 

     
   

Average Balance Sheet Data

              

Loans

        $141,339       $139,904       $140,075          1.0        .9    *      $140,779       $138,566       1.6 

Other earning assets

    3,385       3,810       4,304          (11.2)       (21.4)       3,535       3,844       (8.0)

Goodwill

    3,631       3,632       3,632          --         --         3,632       3,632       --  

Other intangible assets

    2,974       2,932       2,702          1.4        10.1        2,926       2,733       7.1 

Assets

    155,586       154,641       154,748          .6        .5        155,239       152,879       1.5 
   

Noninterest-bearing deposits

    28,005       27,262       28,389          2.7        (1.4)       27,443       27,387       .2 

Interest-bearing deposits

    125,553       125,259       120,862          .2        3.9        124,669       120,222       3.7 
   

 

 

        

 

 

     

Total deposits

    153,558       152,521       149,251          .7        2.9        152,112       147,609       3.1 
   

Total U.S. Bancorp shareholders’ equity

    11,847       11,861       11,147          (.1)       6.3        11,850       11,154       6.2 
   

(a) preliminary data

                  
 

*  Average total loan growth was 2.1% year-over-year, excluding the impact of the student loan portfolio sale

Consumer and Business Banking delivers products and services through banking offices, telephone servicing and sales, on-line services, direct mail, ATM processing and mobile devices. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking.

Consumer and Business Banking contributed $596 million of the Company’s net income in the third quarter of 2018, compared with $482 million in the third quarter of 2017. Total net revenue increased $48 million (2.3 percent) due to an $82 million (5.6 percent) increase in net interest income, partially offset by a $34 million (5.5 percent) decrease in total noninterest income. Net interest income increased primarily due to the impact of rising rates on the margin benefit from deposits along with growth in average loan and core deposit balances, partially offset by lower spreads on loans. Total noninterest income decreased principally driven by lower mortgage banking revenue, in line with industry trends, primarily due to lower mortgage production and gain on sale margins, and a reduction in other noninterest income driven by lower end of term gains in retail leasing due to lower vehicle sales and the related average gain on sale. These decreases were partially offset by higher deposit service charges and ATM processing services fees reflecting higher transaction volumes. Total noninterest expense in the third quarter of 2018 increased $50 million (4.0 percent) primarily due to higher net shared services expense and higher personnel expense, reflecting the impact of investments supporting business growth and development as well as higher production related incentives. The provision for credit losses decreased $39 million (41.9 percent) primarily reflecting a favorable change in the reserve allocation.

 

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WEALTH MANAGEMENT AND INVESTMENT SERVICES (a)

 

($ in millions)                        Percent Change                      
      3Q     2Q      3Q        3Q18 vs      3Q18 vs      YTD     YTD      Percent  
       2018       2018        2017          2Q18        3Q17        2018       2017        Change  

Condensed Income Statement

                       

Net interest income (taxable-equivalent basis)

     $281       $283        $252          (.7)        11.5         $840       $743          13.1  

Noninterest income

     444       430        411          3.3         8.0         1,305       1,221          6.9  

Securities gains (losses), net

     --       --        --          --          --          --       --          --   
    

 

 

          

 

 

      

Total net revenue

     725       713        663          1.7         9.4         2,145       1,964          9.2  

Noninterest expense

     429       452        403          (5.1)        6.5         1,304       1,197          8.9  

Other intangibles

     4       4        5          --          (20.0)        12       15          (20.0
    

 

 

          

 

 

      

Total noninterest expense

     433       456        408          (5.0)        6.1         1,316       1,212          8.6  
    

 

 

          

 

 

      

Income before provision and taxes

     292       257        255          13.6         14.5         829       752          10.2  

Provision for credit losses

     (3     --        1          nm         nm         (2     1          nm  
    

 

 

          

 

 

      

Income before income taxes

     295       257        254          14.8         16.1         831       751          10.7  

Income taxes and taxable-equivalent adjustment

     74       64        92          15.6         (19.6)        208       273          (23.8
    

 

 

          

 

 

      

Net income

     221       193        162          14.5         36.4        623       478          30.3  

Net (income) loss attributable to noncontrolling interests

     --       --        --          --          --          --       --          --   
    

 

 

          

 

 

      

Net income attributable to U.S. Bancorp

     $221       $193        $162          14.5         36.4         $623       $478          30.3  
    

 

 

          

 

 

      
   

Average Balance Sheet Data

                       

Loans

         $9,483       $9,223        $8,708          2.8         8.9             $9,231       $8,406          9.8  

Other earning assets

     172       166        158          3.6         8.9         167       153          9.2  

Goodwill

     1,618       1,619        1,618          (.1)        --          1,619       1,617          .1  

Other intangible assets

     61       66        79          (7.6)        (22.8)        66       83          (20.5

Assets

     12,663       12,246        11,657          3.4         8.6         12,313       11,620          6.0  
   

Noninterest-bearing deposits

     13,190       14,780        14,742          (10.8)        (10.5)        14,106       14,860          (5.1

Interest-bearing deposits

     55,937       56,841        56,830          (1.6)        (1.6)        56,576       57,351          (1.4
    

 

 

          

 

 

      

Total deposits

     69,127       71,621        71,572          (3.5)        (3.4)        70,682       72,211          (2.1
   

Total U.S. Bancorp shareholders’ equity

     2,486       2,476        2,434          .4         2.1         2,471       2,428          1.8  
   

(a) preliminary data

 

                                                                     

Wealth Management and Investment Services provides private banking, financial advisory services, investment management, retail brokerage services, insurance, trust, custody and fund servicing through five businesses: Wealth Management, Corporate Trust Services, U.S. Bancorp Asset Management, Institutional Trust & Custody and Fund Services.

Wealth Management and Investment Services contributed $221 million of the Company’s net income in the third quarter of 2018, compared with $162 million in the third quarter of 2017. Total net revenue increased $62 million (9.4 percent) year-over-year driven by increases in net interest income of $29 million (11.5 percent) and total noninterest income of $33 million (8.0 percent). Net interest income increased year-over-year primarily due to the impact of rising rates on the margin benefit from deposits. Total noninterest income increased year-over-year principally due to favorable market conditions, business growth, and net asset inflows. Total noninterest expense increased $25 million (6.1 percent) primarily due to increased net shared services expense and higher personnel expense driven by investments to support business growth, higher production related incentives and increased staffing to support business development. The provision for credit losses decreased $4 million reflecting a favorable change in the reserve allocation.

 

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PAYMENT SERVICES (a)  
($ in millions)                         Percent Change                       
     

3Q

2018

    

2Q

2018

    

3Q  

2017  

    

3Q18 vs 

2Q18  

    

3Q18 vs 

3Q17 

     YTD
2018
     YTD  
2017  
     Percent
Change
 

Condensed Income Statement

                         

Net interest income (taxable-equivalent basis)

     $619        $592        $614          4.6         .8         $1,822        $1,792          1.7  

Noninterest income

     911        903        851          .9         7.1         2,662        2,499          6.5  

Securities gains (losses), net

     --        --        --          --          --          --        --          --   
    

 

 

          

 

 

      

Total net revenue

     1,530        1,495        1,465          2.3         4.4         4,484        4,291          4.5  

Noninterest expense

     713        702        676          1.6         5.5         2,117        1,983          6.8  

Other intangibles

     29        28        30          3.6         (3.3)        84        91          (7.7
    

 

 

          

 

 

      

Total noninterest expense

     742        730        706          1.6         5.1         2,201        2,074          6.1  
    

 

 

          

 

 

      

Income before provision and taxes

     788        765        759          3.0         3.8         2,283        2,217          3.0  

Provision for credit losses

     264        281        270          (6.0)        (2.2)        817        794          2.9  
    

 

 

          

 

 

      

Income before income taxes

     524        484        489          8.3         7.2         1,466        1,423          3.0  

Income taxes and taxable-equivalent adjustment

     131        121        178          8.3         (26.4)        367        518          (29.2
    

 

 

          

 

 

      

Net income

     393        363        311          8.3         26.4         1,099        905          21.4  

Net (income) loss attributable to noncontrolling interests

     --        --        --          --          --          --        (13)         nm  
    

 

 

          

 

 

      

Net income attributable to U.S. Bancorp

     $393        $363        $311          8.3         26.4         $1,099        $892          23.2  
    

 

 

          

 

 

      
   

Average Balance Sheet Data

                         

Loans

         $31,443        $30,591        $29,612          2.8         6.2         $30,704        $29,209          5.1  

Other earning assets

     266        302        241          (11.9)        10.4         281        246          14.2  

Goodwill

     2,563        2,535        2,468          1.1         3.8         2,546        2,459          3.5  

Other intangible assets

     400        392        384          2.0         4.2         396        409          (3.2

Assets

     37,128        36,538        35,019          1.6         6.0         36,614        34,781          5.3  
   

Noninterest-bearing deposits

     1,064        1,085        1,029          (1.9)        3.4         1,092        1,023          6.7  

Interest-bearing deposits

     111        109        104          1.8         6.7         109        102          6.9  
    

 

 

          

 

 

      

Total deposits

     1,175        1,194        1,133          (1.6)        3.7         1,201        1,125          6.8  
   

Total U.S. Bancorp shareholders’ equity

     6,584        6,601        6,205          (.3)        6.1         6,602        6,279          5.1  
   

(a) preliminary data

 

                                                                       

Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services, consumer lines of credit and merchant processing.

Payment Services contributed $393 million of the Company’s net income in the third quarter of 2018, compared with $311 million in the third quarter of 2017. Total net revenue increased $65 million (4.4 percent) due to increases in net interest income of $5 million (0.8 percent) and total noninterest income of $60 million (7.1 percent). Net interest income increased year-over-year primarily due to higher loan volumes offset by compression on loan rates in a rising rate environment. Total noninterest income increased year-over-year mainly due to higher credit and debit card revenue, higher corporate payment products revenue and higher merchant processing services driven by sales volumes. Total noninterest expense increased $36 million (5.1 percent) over the third quarter of 2017 principally due to higher net shared services expense and personnel expense driven by implementation costs of capital investments, higher production related incentives and increased staffing to support business development. The provision for credit losses decreased $6 million (2.2 percent) reflecting a favorable change in the reserve allocation, mostly offset by higher net charge-offs.

 

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TREASURY AND CORPORATE SUPPORT (a)                       
($ in millions)                     Percent Change                    
     3Q      2Q      3Q        3Q18 vs     3Q18 vs     YTD      YTD      Percent     
     2018      2018      2017        2Q18       3Q17       2018      2017      Change     

Condensed Income Statement

                 

Net interest income (taxable-equivalent basis)

    $85        $106        $151          (19.8)       (43.7)       $269       $315         (14.6)    

Noninterest income

    270        259        234          4.2         15.4        739       679         8.8     

Securities gains (losses), net

    10        10        9          --         11.1        25       50         (50.0)    
   

 

 

       

 

 

     

Total net revenue

    365        375        394          (2.7)       (7.4)       1,033       1,044         (1.1)    

Noninterest expense

    199        187        254          6.4        (21.7)       605       682         (11.3)    

Other intangibles

    --        --        --          --         --         --       --         --      
   

 

 

       

 

 

     

Total noninterest expense

    199        187        254          6.4        (21.7)       605       682         (11.3)    
   

 

 

       

 

 

     

Income before provision and taxes

    166        188        140          (11.7)       18.6        428       362         18.2     

Provision for credit losses

    (7)             5          nm        nm        (5     9         nm     
   

 

 

       

 

 

     

Income before income taxes

    173        185        135          (6.5)       28.1        433       353         22.7     

Income taxes and taxable-equivalent adjustment

    (45)       (41)       (115)         (9.8)       60.9        (196     (395)        50.4     
   

 

 

       

 

 

     

Net income

    218        226        250          (3.5)       (12.8)       629       748         (15.9)    

Net (income) loss attributable to noncontrolling interests

    (7)       (8)       (6)         12.5        (16.7)       (22     (18)        (22.2)    
   

 

 

       

 

 

     

Net income attributable to U.S. Bancorp

    $211        $218        $244          (3.2)       (13.5)       $607       $730         (16.8)    
   

 

 

       

 

 

     
   

Average Balance Sheet Data

                 

Loans

    $5,436        $5,450        $5,289          (.3)       2.8        $5,415       $5,348         1.3     

Other earning assets

        127,247        126,682        123,641          .4        2.9        126,566       121,386         4.3     

Goodwill

    --        --        --          --         --         --       --         --      

Other intangible assets

    --        --        --          --         --         --       --         --      

Assets

    149,393        148,540        146,939          .6        1.7        148,658       144,249         3.1     
   

Noninterest-bearing deposits

    2,394        2,477        2,403          (3.4)       (.4)       2,467       2,282         8.1     

Interest-bearing deposits

    2,774        3,273        930          (15.2)       nm        3,647       827         nm     
   

 

 

       

 

 

     

Total deposits

    5,168        5,750        3,333          (10.1)       55.1        6,114       3,109         96.7     
   

Total U.S. Bancorp shareholders’ equity

    18,795        17,886        19,082          5.1        (1.5)       18,063       18,631         (3.0)    
   

(a) preliminary data

 

                                                               

Treasury and Corporate Support includes the Company’s investment portfolios, funding, capital management, interest rate risk management, income taxes not allocated to the business lines, including most investments in tax-advantaged projects, and the residual aggregate of those expenses associated with corporate activities that are managed on a consolidated basis.

Treasury and Corporate Support recorded net income of $211 million in the third quarter of 2018, compared with $244 million in the third quarter of 2017. Total net revenue decreased $29 million (7.4 percent) year-over-year driven by a decrease in net interest income of $66 million (43.7 percent) and an increase of $37 million (15.2 percent) in total noninterest income. Net interest income decreased year-over-year primarily due to higher funding costs, partially offset by growth in the investment portfolio. Total noninterest income increased year-over-year reflecting changes in equity investment income and tax-advantaged syndication revenue. Total noninterest expense decreased $55 million (21.7 percent) year-over-year primarily due to a favorable change in net shared services expense allocated to manage the business, lower costs related to tax-advantaged projects, and higher accruals for legal and regulatory matters in the prior year quarter. These decreases were partially offset by higher personnel expense driven by increased staffing, higher variable compensation, and technology development related to business development efforts. The provision for credit losses was $12 million lower year-over-year due to a favorable change in the reserve allocation.

Income taxes are assessed to each line of business at a managerial rate of 25.0 percent starting in the first quarter of 2018 due to tax reform, compared with 36.4 percent in 2017. The residual tax expense or benefit to arrive at the consolidated effective tax rate is included in Treasury and Corporate Support.

 

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