Exhibit 99.1

 

    

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U.S. Bancorp Reports Second Quarter 2020 Results

 

 Net revenue of $5,838 million and net income of $689 million

 Provision for credit losses included $1,300 million increase in the allowance for credit losses

 

 

    2Q20 Key Financial Data

 

         

 

2Q20 Highlights

 

         

 PROFITABILITY

 METRICS

  2Q20      1Q20      2Q19         

 

 

 Net income of $689 million and diluted earnings per
   common share of $0.41

 

 Return on average assets of 0.51% and return on average
   common equity of 5.3%

 

 Net revenue of $5,838 million, including $3,224 million
   of net interest income and $2,614 million of noninterest
   income

 

 Noninterest income growth of 5.0% year-over-year

 

 Average total loans grew 6.9% on a linked quarter basis
   and 10.0% year-over-year

 

 Average total deposits grew 11.2% on a linked quarter
   basis and 16.8% year-over-year

 

 Nonperforming assets increased 24.0% on a linked
   quarter basis and 23.1% year-over-year

 

 Provision for credit losses of $1,737 million increasing
   allowance for credit losses by $1,300 million reflecting the
   current economic environment

 

 Return on average assets (%)

    .51        .95        1.55     

 Return on average common equity (%)

    5.3        9.7        15.0     

 Return on tangible common equity (%) (a)

    7.1        12.6        19.2     

 Net interest margin (%)

    2.62        2.91        3.13     

 Efficiency ratio (%) (a)

    57.6        58.0        54.3     
 INCOME STATEMENT (b)     2Q20        1Q20        2Q19     

 Net interest income (taxable-equivalent basis)

    $3,224        $3,247        $3,332     

 Noninterest income

    $2,614        $2,525        $2,490     

 Net income attributable to U.S. Bancorp

    $689        $1,171        $1,821    

 Diluted earnings per common share

    $.41        $.72        $1.09     

 Dividends declared per common share

    $.42        $.42        $.37     
 BALANCE SHEET (b)     2Q20        1Q20        2Q19     

 Average total loans

    $318,107        $297,657        $289,218     

 Average total deposits

    $403,303        $362,804        $345,232     

 Net charge-off ratio

    .55%        .53%        .49%     

 Book value per common share (period end)

    $30.46        $30.24        $29.63     

 Basel III standardized CET1 (c)

 

   

 

9.0% 

 

 

 

   

 

9.0% 

 

 

 

   

 

9.5% 

 

 

 

 

 

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

 

 

 

 (b) Dollars in millions, except per share data

 

 

 
 (c) CET1 = Common equity tier 1 capital ratio

 

 

CEO Commentary

 

 

“Our second quarter earnings results were reflective of a more challenging economic environment than we have seen in some time. However, our diversified business mix generated healthy fee revenue growth, expenses were essentially flat, and capital and liquidity positions ended the quarter in a strong position. We are operating in challenging times and I am proud of how our team came together this quarter to help customers and communities weather the COVID-19 pandemic by ensuring small businesses secured loans through the Paycheck Protection Program, developing digital tools that allow customers to bank virtually, and modifying loans for those impacted by the economic slowdown. Sadly, recent tragic events and related civil unrest hit close to home here in Minneapolis and this tragedy has galvanized our entire company and prompted us to double down on our efforts to address social injustice and create opportunities that bridge gaps in our communities and help people achieve their potential. While there is a long way to go, I am confident in our ability to drive change, make a difference and create value for all our constituents. I want to thank our employees for the hard work they do every day and the resiliency they have shown, in particular over these past few months.”

 

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

 

 

In the Spotlight

 

 

Supporting Customers

U.S. Bank has been engaging with customers across all lines of business as the world continues to battle COVID-19. To date, nearly 130,000 accounts and over $17.2 billion in loans have been modified through forbearance programs in support of our customers in these extreme economic times. U.S. Bank has also loaned $7.3 billion to over 101,000 customers participating in the Paycheck Protection Program stemming from the CARES Act passed by Congress as a stimulus response to the potential economic impacts of COVID-19. Approximately 87 percent of these loans were for less than $100,000.

Keeping America’s Supply Chain Moving

U.S. Bank recently introduced two new innovative features for freight carriers using its proprietary freight payment platform. Cash Manager provides carriers with actionable insights to make better-informed decisions and forecast their cash flow more accurately, improving overall cash cycle management, while Quick Pay gives carriers new flexibility to accelerate cash flow when needed.

2020 Annual Stress Test

The Company’s results for the recent 2020 stress test reflect U.S. Bancorp’s strong credit risk profile and ability to sustain capital through challenging economic conditions. Based on the stress test results, the Company will be subject to the minimum stress capital buffer of 2.5 percent, the minimum threshold, for the period beginning October 1, 2020 and ending on September 30, 2021. The Company also expects to maintain its current quarterly common dividend of $0.42 per common share; but, given the unprecedented economic environment, will adjust its capital distributions as circumstances warrant.

Addressing Social and Economic Inequities

U.S. Bank announced several initiatives to bridge social and economic gaps and enhance opportunity for people of color, including providing $100 million annually in additional capital to African-American owned and led businesses or organizations, as well as establishing a $15 million fund to award community grants dedicated to addressing systemic economic and racial inequities in small business, affordable housing and workplace development for people of color.

 

 

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        Investor contact: Jennifer Thompson, 612.303.0778 | Media contact: Jeff Shelman, 612.422.1423


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   U.S. Bancorp Second Quarter 2020 Results
      

 

  INCOME STATEMENT HIGHLIGHTS                        
  ($ in millions, except per-share data)                         Percent Change                         
      2Q 
2020 
     1Q 
2020 
     2Q 
2019 
     2Q20 vs
1Q20
     2Q20 vs
2Q19
    

YTD

2020

    

YTD

2019

     Percent
Change
 

Net interest income

     $3,200         $3,223         $3,305         (.7)        (3.2)        $6,423         $6,564         (2.1)  

Taxable-equivalent adjustment

     24         24         27         --         (11.1)        48         54         (11.1)  

Net interest income (taxable-equivalent basis)

     3,224         3,247         3,332         (.7)        (3.2)        6,471         6,618         (2.2)  

Noninterest income

     2,614         2,525         2,490         3.5         5.0         5,139         4,781         7.5   

Total net revenue

     5,838         5,772         5,822         1.1         .3         11,610         11,399         1.9   

Noninterest expense

     3,318         3,316         3,153         .1         5.2         6,634         6,240         6.3   

Income before provision and income taxes

     2,520         2,456         2,669         2.6         (5.6)        4,976         5,159         (3.5)  

Provision for credit losses

     1,737         993         365         74.9         nm         2,730         742         nm   

Income before taxes

     783         1,463         2,304         (46.5)        (66.0)        2,246         4,417         (49.2)  

Income taxes and taxable-equivalent adjustment

     88         284         476         (69.0)        (81.5)        372         881         (57.8)  

Net income

     695         1,179         1,828         (41.1)        (62.0)        1,874         3,536         (47.0)  

Net (income) loss attributable to noncontrolling interests

     (6)        (8)        (7)        25.0         14.3         (14)        (16)        12.5   

Net income attributable to U.S. Bancorp

     $689         $1,171         $1,821         (41.2)        (62.2)        $1,860         $3,520         (47.2)  

Net income applicable to U.S. Bancorp common shareholders

     $614         $1,088         $1,741         (43.6)        (64.7)        $1,702         $3,354         (49.3)  

Diluted earnings per common share

     $.41         $.72         $1.09         (43.1)        (62.4)        $1.12         $2.10         (46.7)  
                                                                         

 

Net income attributable to U.S. Bancorp was $689 million for the second quarter of 2020, which was 62.2 percent lower than the $1,821 million for the second quarter of 2019, and 41.2 percent lower than the $1,171 million for the first quarter of 2020. Diluted earnings per common share were $0.41 in the second quarter of 2020, compared with $1.09 in the second quarter of 2019 and $0.72 in the first quarter of 2020. During a challenging period adversely impacted by the COVID-19 pandemic, the Company’s diversified business mitigated the potential loss of revenue and supported a provision for credit losses of $1,737 million resulting in a $1,300 million increase in the allowance for credit losses in the second quarter of 2020 compared with a $993 million provision for credit losses in the first quarter of 2020.

The decrease in net income year-over-year was primarily due to an increase in the provision for credit losses driven by deteriorating economic conditions caused by the impact of COVID-19 on the U.S. and global economies. Net interest income decreased 3.2 percent, on a year-over-year basis, primarily due to the impact of declining interest rates, partially offset by deposit and funding mix and loan growth. The net interest margin declined 51 basis points to 2.62 percent in the second quarter of 2020. The decline was primarily due to a declining yield curve (23 basis points), the Company’s decision to increase liquidity near the end of the first quarter of 2020 (21 basis points) given the economic environment, and loan mix, partially offset by changes in deposit and funding composition. Noninterest income increased 5.0 percent compared with a year ago, driven by significant growth in mortgage banking revenue due to refinancing activities, strong growth in commercial products revenue, and an increase in gains on the sale of securities. Growth in these fee categories was partially offset by a decline in payment services revenue and deposit service charges related to lower consumer and commercial spending as well as higher fee waivers related to customers impacted by COVID-19. Additionally, other noninterest income declined on a year-over-year basis due to lower equity investment income, tax credit syndication revenues and asset impairments as a result of property damage from civil unrest occurring during the quarter. Noninterest expense increased 5.2 percent reflecting approximately $66 million of costs related to the COVID-19 environment and an increase in revenue-related production expenses of approximately $84 million in the second quarter of 2020. Additionally, noninterest expense reflected an increase in personnel and technology and communications expense related to developing digital capabilities and related business investment, partially offset by lower marketing and business development expense.

 

 

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   U.S. Bancorp Second Quarter 2020 Results
      

 

Net income decreased on a linked quarter basis primarily due to an increase in the provision for credit losses as a result of the current economic environment. The Company’s pre-provision income increased 2.6 percent, on a linked quarter basis, driven by higher total net revenue of 1.1 percent, partially offset by a slight increase in noninterest expense of 0.1 percent on a linked quarter basis. Net interest income decreased 0.7 percent primarily due to the adverse impact of lower interest rates, partially offset by loan growth and the benefit of deposit pricing changes and funding mix. The net interest margin declined by 29 basis points, on a linked quarter basis, primarily reflecting the lower yield curve and approximately 16 basis points of decline related to maintaining a higher liquidity position. Noninterest income increased 3.5 percent compared with the first quarter of 2020 driven by higher commercial products revenue, mortgage banking revenue, and an increase in gains on the sale of securities, partially offset by lower payment services revenue, deposit service charges, and other noninterest income. Noninterest expense was relatively flat, on a linked quarter basis, reflecting higher personnel costs and technology and communications expense related to developing digital capabilities and related business investment, partially offset by lower other noninterest expense and marketing and business development expense.

 

 

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   U.S. Bancorp Second Quarter 2020 Results
      

 

 NET INTEREST INCOME                        
 (Taxable-equivalent basis; $ in millions)                         Change                       
     

2Q

2020

    

1Q

2020

    

2Q

2019

     2Q20 vs
1Q20
     2Q20 vs
2Q19
    

YTD

2020

    

YTD

2019

     Change  

Components of net interest income

                       

Income on earning assets

     $3,697         $4,142         $4,480         $(445)         $(783)         $7,839         $8,861         $(1,022)   

Expense on interest-bearing liabilities

     473         895         1,148         (422)         (675)         1,368         2,243         (875)   

Net interest income

     $3,224         $3,247         $3,332         $(23)         $(108)         $6,471         $6,618         $(147)   

Average yields and rates paid

                       

Earning assets yield

     3.00%         3.71%         4.21%         (.71)%         (1.21)%         3.34%         4.21%         (.87)%   

Rate paid on interest-bearing liabilities

     .50            1.02            1.40            (.52)            (.90)            .75            1.39            (.64)      

Gross interest margin

     2.50%         2.69%         2.81%         (.19)%         (.31)%         2.59%         2.82%         (.23)%   

Net interest margin

     2.62%         2.91%         3.13%         (.29)%         (.51)%         2.76%         3.14%         (.38)%   

Average balances

                       

Investment securities (a)

     $120,867         $120,843         $115,460         $24         $5,407         $120,856         $114,823         $6,033   

Loans

     318,107         297,657         289,218         20,450         28,889         307,882         287,672         20,210   

Earning assets

     494,119         447,722         426,933         46,397         67,186         470,921         423,234         47,687   

Interest-bearing liabilities

     380,320         352,761         329,743         27,559         50,577         366,540         325,971         40,569   

(a) Excludes unrealized gain (loss)

 

 

 

Net interest income on a taxable-equivalent basis in the second quarter of 2020 was $3,224 million, a decrease of $108 million (3.2 percent) compared with the second quarter of 2019. The decrease was principally driven by the impact of declining interest rates, partially offset by deposit and funding mix and loan growth. Average earning assets were $67.2 billion (15.7 percent) higher than the second quarter of 2019, reflecting increases of $28.9 billion (10.0 percent) in average total loans, $5.4 billion (4.7 percent) in average investment securities, and $29.7 billion in average other earning assets.

Net interest income on a taxable-equivalent basis decreased $23 million (0.7 percent) on a linked quarter basis primarily driven by the impact of lower interest rates, partially offset by loan growth and the benefit of deposit pricing and funding mix. Average earning assets were $46.4 billion (10.4 percent) higher on a linked quarter basis, reflecting an increase of $20.5 billion (6.9 percent) in average total loans and $24.4 billion (99.6 percent) in average other earning assets. The growth in average loans reflects significant line utilization of $22 billion by corporate customers during late first quarter of 2020 and funding business loans of $7.3 billion by June 30, 2020, to qualifying borrowers participating in the SBA’s Paycheck Protection Program (“PPP”) during the second quarter. Many corporate customers were able to access the capital markets during the second quarter and reduced line balances by approximately $10 billion throughout the second quarter. Average investment securities were essentially flat on a linked quarter basis.

The net interest margin in the second quarter of 2020 was 2.62 percent, compared with 3.13 percent in the second quarter of 2019 and 2.91 percent in the first quarter of 2020. The decrease in the net interest margin year-over-year was primarily due to the impact of the lower yield curve and higher cash balances to maintain liquidity given the environment, partially offset by deposit pricing and funding mix. The decrease in net interest margin on a linked quarter basis reflects the impact of the lower yield curve and higher cash balances in support of liquidity, partially offset by the impact of deposit and funding mix.

The increase in average investment securities in the second quarter of 2020 compared with the second quarter of 2019 was primarily due to purchases of mortgage-backed securities, net of prepayments and maturities, partially offset by U.S. Treasury securities sales and maturities, net of purchases.

 

 

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   U.S. Bancorp Second Quarter 2020 Results
      

 

 AVERAGE LOANS                      
 ($ in millions)                         Percent Change                        
     

2Q

2020

    

1Q

2020

    

2Q

2019

     2Q20 vs
1Q20
    2Q20 vs
2Q19
   

YTD

2020

    

YTD

2019

     Percent
Change
 

Commercial

   $ 122,442       $ 100,329       $ 97,776         22.0       25.2     $ 111,385       $ 97,115         14.7  

Lease financing

     5,597         5,658         5,457         (1.1     2.6       5,628         5,485         2.6  

Total commercial

     128,039         105,987         103,233         20.8       24.0       117,013         102,600         14.0  

Commercial mortgages

     30,194         29,523         28,465         2.3       6.1       29,858         28,462         4.9  

Construction and development

     10,894         10,555         10,900         3.2       (.1     10,725         10,955         (2.1

Total commercial real estate

     41,088         40,078         39,365         2.5       4.4       40,583         39,417         3.0  

Residential mortgages

     71,122         70,892         66,834         .3       6.4       71,007         66,212         7.2  

Credit card

     21,510         23,836         22,830         (9.8     (5.8     22,673         22,714         (.2

Retail leasing

     8,412         8,474         8,547         (.7     (1.6     8,443         8,566         (1.4

Home equity and second mortgages

     14,386         14,838         15,831         (3.0     (9.1     14,612         15,912         (8.2

Other

     33,550         33,552         32,578         --       3.0       33,551         32,251         4.0  

Total other retail

     56,348         56,864         56,956         (.9     (1.1     56,606         56,729         (.2

Total loans

   $ 318,107       $ 297,657       $ 289,218         6.9       10.0     $ 307,882       $ 287,672         7.0  

 

 

 

Average total loans for the second quarter of 2020 were $28.9 billion (10.0 percent) higher than the second quarter of 2019. The increase was primarily due to higher total commercial loans (24.0 percent), reflecting the utilization of bank credit facilities by customers to support liquidity requirements as well as the impact of loans made under the SBA’s Paycheck Protection Program, along with growth in residential mortgages (6.4 percent) given the lower interest rate environment. These increases were partially offset by lower credit card loans (5.8 percent) and total other retail loans (1.1 percent).

Average total loans were $20.5 billion (6.9 percent) higher than the first quarter of 2020 primarily driven by growth in total commercial loans (20.8 percent), reflecting the utilization of bank credit facilities by customers to support liquidity requirements as well as the impact of loans made under the SBA’s Paycheck Protection Program, partially offset by lower credit card loans (9.8 percent) driven by lower consumer spending during the second quarter.

 

 

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   U.S. Bancorp Second Quarter 2020 Results
      

 

 AVERAGE DEPOSITS                       
 ($ in millions)                         Percent Change                        
     

2Q

2020

    

1Q

2020

    

2Q

2019

     2Q20 vs
1Q20
     2Q20 vs
2Q19
   

YTD

2020

    

YTD

2019

     Percent
Change
 

Noninterest-bearing deposits

     $95,106         $74,142         $73,096         28.3        30.1       $84,624         $73,263         15.5  

Interest-bearing savings deposits

                                                    

Interest checking

     83,789         77,359         70,433         8.3        19.0       80,573         71,301         13.0  

Money market savings

     129,692         121,946         108,633         6.4        19.4       125,819         104,058         20.9  

Savings accounts

     51,237         48,048         45,988         6.6        11.4       49,643         45,604         8.9  

Total savings deposits

     264,718         247,353         225,054         7.0        17.6       256,035         220,963         15.9  

Time deposits

     43,479         41,309         47,082         5.3        (7.7     42,394         46,100         (8.0

Total interest-bearing deposits

     308,197         288,662         272,136         6.8        13.3       298,429         267,063         11.7  

Total deposits

     $403,303         $362,804         $345,232         11.2        16.8       $383,053         $340,326         12.6  
                                                                        

Average total deposits for the second quarter of 2020 were $58.1 billion (16.8 percent) higher than the second quarter of 2019. Average noninterest-bearing deposits increased $22.0 billion (30.1 percent) driven by Corporate and Commercial Banking, Consumer and Business Banking, and Wealth Management and Investment Services. Average total savings deposits were $39.7 billion (17.6 percent) higher year-over-year driven by Corporate and Commercial Banking, Consumer and Business Banking, and Wealth Management and Investment Services. Average time deposits were $3.6 billion (7.7 percent) lower than the prior year quarter. Changes in time deposits are largely related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.

Average total deposits increased $40.5 billion (11.2 percent) from the first quarter of 2020. On a linked quarter basis, average noninterest-bearing deposits increased $20.9 billion (28.3 percent) driven by Corporate and Commercial Banking, Consumer and Business Banking, and Wealth Management and Investment Services. Average total savings deposits increased $17.4 billion (7.0 percent) over the first quarter of 2020 primarily due to increases in Corporate and Commercial Banking, Consumer and Business Banking, and Wealth Management and Investment Services. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, increased $2.2 billion (5.3 percent) on a linked quarter basis primarily driven by Corporate and Commercial Banking.

The growth in average noninterest-bearing deposits and total average savings deposits is primarily a result of the economic impact of the COVID-19 pandemic on the world economy resulting in actions by the federal government to increase liquidity in the financial system, customers maintaining balance sheet liquidity by utilizing existing credit facilities and government stimulus programs.

 

 

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   U.S. Bancorp Second Quarter 2020 Results
      

 

 NONINTEREST INCOME                        
 ($ in millions)                         Percent Change                         
     

2Q

2020

    

1Q

2020

    

2Q

2019

     2Q20 vs
1Q20
     2Q20 vs
2Q19
     YTD
2020
     YTD
2019
     Percent
Change
 

Credit and debit card revenue

     $284         $304         $365         (6.6)        (22.2)        $588         $669         (12.1)  

Corporate payment products revenue

     101         145         167         (30.3)        (39.5)        246         329         (25.2)  

Merchant processing services

     266         337         404         (21.1)        (34.2)        603         782         (22.9)  

Trust and investment management fees

     434         427         415         1.6         4.6         861         814         5.8   

Deposit service charges

     133         209         227         (36.4)        (41.4)        342         444         (23.0)  

Treasury management fees

     137         143         153         (4.2)        (10.5)        280         299         (6.4)  

Commercial products revenue

     355         246         249         44.3         42.6         601         468         28.4   

Mortgage banking revenue

     648         395         189         64.1         nm         1,043         358         nm   

Investment products fees

     45         49         47         (8.2)        (4.3)        94         92         2.2   

Securities gains (losses), net

     81         50         17         62.0         nm         131         22         nm   

Other

     130         220         257         (40.9)        (49.4)        350         504         (30.6)  

Total noninterest income

     $2,614         $2,525         $2,490         3.5         5.0         $5,139         $4,781         7.5   
                                                                         

Second quarter noninterest income of $2,614 million was $124 million (5.0 percent) higher than the second quarter of 2019 reflecting higher commercial products revenue and mortgage banking revenue, as well as an increase in gains on the sale of securities. Growth in these fee categories was partially offset by lower payment services revenue, deposit service charges, and other noninterest income. Commercial products revenue increased $106 million (42.6 percent) primarily due to higher corporate bond issuance fees and trading revenue. Mortgage banking revenue increased $459 million due to higher mortgage production and stronger gain on sale margins, partially offset by the unfavorable net impact of the change in fair value of mortgage servicing rights and related hedging activities. Partially offsetting these increases, payment services revenue decreased $285 million (30.4 percent) reflecting lower credit and debit card revenue of $81 million (22.2 percent), lower corporate payment products revenue of $66 million (39.5 percent) and lower merchant processing services revenue of $138 million (34.2 percent) driven by lower sales volume due to the worldwide impact of the COVID-19 pandemic on consumer and business spending. Deposit service charges decreased $94 million (41.4 percent) primarily due to lower volume and fee waivers related to customers impacted by COVID-19. Other noninterest income decreased $127 million (49.4 percent) due to lower equity investment income, tax-advantaged investment syndication revenue, and asset impairments as a result of property damage from civil unrest in the second quarter of 2020.

Noninterest income was $89 million (3.5 percent) higher in the second quarter of 2020 compared with the first quarter of 2020, reflecting higher commercial products revenue, mortgage banking revenue, and an increase in gains on the sale of securities, partially offset by lower payment services revenue, deposit service charges, and other noninterest income. Commercial products revenue increased $109 million (44.3 percent) on a linked quarter basis due to higher trading revenue and corporate bond fees. Mortgage banking revenue increased $253 million (64.1 percent) due to higher mortgage production and stronger gain on sale margins, partially offset by the unfavorable net impact of the change in fair value of mortgage servicing rights and related hedging activities. Payment services revenue decreased $135 million (17.2 percent) compared with the first quarter of 2020 driven by lower credit and debit card revenue of $20 million (6.6 percent), lower corporate payment products revenue of $44 million (30.3 percent), and lower merchant processing services revenue of $71 million (21.1 percent) primarily driven by lower sales volume due to the worldwide impact of the COVID-19 pandemic on spending. Deposit service charges decreased $76 million (36.4 percent) primarily due to lower volume and fee waivers related to customers impacted by COVID-19. Other noninterest income decreased $90 million (40.9 percent) primarily due to gains on sales of certain businesses in the first quarter of 2020, asset impairments as a result of property damage from civil unrest in the second quarter of 2020, and lower tax-advantaged investment syndication revenue.

 

 

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   U.S. Bancorp Second Quarter 2020 Results
      

 

 NONINTEREST EXPENSE                        
 ($ in millions)                         Percent Change                         
     

2Q

2020

    

1Q

2020

    

2Q

2019

     2Q20 vs
1Q20
     2Q20 vs
2Q19
     YTD
2020
     YTD
2019
     Percent
Change
 

Compensation

     $1,685         $1,620         $1,574         4.0         7.1         $3,305         $3,133         5.5   

Employee benefits

     314         352         314         (10.8)        --        666         647         2.9   

Net occupancy and equipment

     271         276         281         (1.8)        (3.6)        547         558         (2.0)  

Professional services

     106         99         106         7.1         --        205         201         2.0   

Marketing and business development

     67         74         111         (9.5)        (39.6)        141         200         (29.5)  

Technology and communications

     309         289         270         6.9         14.4        598         527         13.5   

Postage, printing and supplies

     72         72         73         --        (1.4)        144         145         (.7)  

Other intangibles

     43         42         42         2.4         2.4         85         82         3.7   

Other

     451         492         382         (8.3)        18.1         943         747         26.2   

Total noninterest expense

     $3,318         $3,316         $3,153         .1         5.2         $6,634         $6,240         6.3   
                                                                         

Second quarter noninterest expense of $3,318 million was $165 million (5.2 percent) higher than the second quarter of 2019 driven by incremental costs related to COVID-19 and revenue-related expenses due to higher mortgage production and capital markets activities of approximately $150 million in addition to business investments, including increased digital capabilities. The categories of expense impacted included personnel expense, technology and communications expense, and other noninterest expense, partially offset by lower marketing and business development expense. Compensation expense increased $111 million (7.1 percent) compared with the second quarter of 2019 due to merit and variable compensation related to business production in mortgage banking and fixed income capital markets. Technology and communications expense increased $39 million (14.4 percent) primarily due to capital expenditures supporting business growth. Other noninterest expense increased $69 million (18.1 percent) which reflected approximately $79 million of expenses related to COVID-19, including increased liabilities driven by future delivery exposure related to merchant processing for airlines, and higher state franchise taxes, partially offset by lower costs related to tax-advantaged projects in the second quarter of 2020. These increases were partly offset by lower marketing and business development expense of $44 million (39.6 percent) due to the timing of marketing campaigns and reduction in travel as a result of COVID-19.

Noninterest expense was essentially flat on a linked quarter basis reflecting higher compensation expense and technology and communications expense, partially offset by lower employee benefits expense and other noninterest expense. Compensation expense increased $65 million (4.0 percent) primarily due to merit and revenue-related expenses. Technology and communications expense increased $20 million (6.9 percent) primarily due to capital expenditures supporting business growth. These increases were partly offset by lower employee benefits expense of $38 million (10.8 percent) primarily due to higher payroll taxes during the first quarter of the year and lower medical expenses. Other noninterest expense decreased $41 million (8.3 percent) due to lower accruals in the second quarter of 2020 for liabilities related to future delivery exposures related to merchant and airline processing, partially offset by higher state franchise taxes.

Provision for Income Taxes

The provision for income taxes for the second quarter of 2020 resulted in a tax rate of 11.2 percent on a taxable-equivalent basis (effective tax rate of 8.4 percent), compared with 20.7 percent on a taxable-equivalent basis (effective tax rate of 19.7 percent) in the second quarter of 2019, and a tax rate of 19.4 percent on a taxable-equivalent basis (effective tax rate of 18.1 percent) in the first quarter of 2020. The reduced tax rate for the second quarter of 2020 is primarily a result of reduced pretax income being impacted by current economic conditions, including the higher provision for credit losses.

 

 

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   U.S. Bancorp Second Quarter 2020 Results
      

 

 ALLOWANCE FOR CREDIT LOSSES  
 ($ in millions)   2Q           1Q           4Q           3Q           2Q        
     2020     % (a)     2020     % (a)     2019     % (a)     2019     % (a)     2019     % (a)  

 

Balance, beginning of period

  $ 6,590       $ 4,491       $ 4,481       $ 4,466       $ 4,451    

Change in accounting principle (b)

    --          1,499         --          --          --     

Net charge-offs

                   

Commercial

    105       .34       69       .28       74       .30       72       .29       56       .23  

Lease financing

    6       .43       5       .36       4       .29       3       .22       3       .22  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total commercial

    111       .35       74       .28       78       .30       75       .29       59       .23  

Commercial mortgages

    19       .25       (1     (.01     7       .10       3       .04       2       .03  

Construction and development

    3       .11       (1     (.04     --        --        3       .11       (1     (.04
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total commercial real estate

    22       .22       (2     (.02     7       .07       6       .06       1       .01  

Residential mortgages

    (3     (.02     1       .01       (1     (.01     (3     (.02     4       .02  

Credit card

    229       4.28       234       3.95       230       3.79       211       3.53       227       3.99  

Retail leasing (c)

    33       1.58       19       .90       4       .19       3       .14       2       .09  

Home equity and second mortgages

    --        --        1       .03       --        --        (1     (.03     (1     (.03

Other

    45       .54       66       .79       67       .79       61       .72       58       .71  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total other retail

    78       .56       86       .61       71       .49       63       .43       59       .42  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total net charge-offs

    437       .55       393       .53       385       .52       352       .48       350       .49  

Provision for credit losses

    1,737         993         395         367         365    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Balance, end of period

  $ 7,890       $ 6,590       $ 4,491       $ 4,481       $ 4,466    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Components

                   

Allowance for loan losses

  $ 7,383       $ 6,216       $ 4,020       $ 4,007       $ 4,019    

Liability for unfunded credit commitments

    507         374         471         474         447    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total allowance for credit losses

  $ 7,890       $ 6,590       $ 4,491       $ 4,481       $ 4,466    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Gross charge-offs

  $ 522       $ 491       $ 479       $ 451       $ 464    

Gross recoveries

  $ 85       $ 98       $ 94       $ 99       $ 114    

Allowance for credit losses as a percentage of

                   

Period-end loans

    2.54         2.07         1.52         1.52         1.53    

Nonperforming loans

    737         809         649         541         556    

Nonperforming assets

    673         697         542         458         469    

(a)  Annualized and calculated on average loan balances

 

(b)  Effective January 1, 2020, the Company adopted accounting guidance which changed impairment recognition of financial instruments to a model that is based on expected losses rather than incurred losses.

 

(c)   Includes end of term losses on residual lease values as of January 1, 2020

   

   

    

 

 

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   U.S. Bancorp Second Quarter 2020 Results
      

 

During the second quarter of 2020, economic conditions continued to deteriorate due to the impact of the COVID-19 health crisis. As a result, economic projections for the gross domestic product declined dramatically and unemployment levels increased significantly with information related to the evolving impacts of the COVID-19 health crisis. As a result, the Company’s expectations related to delinquencies, credit risk rating, nonperforming assets and related future credit losses continue to reflect deteriorating credit quality. As a result, the Company’s provision for credit losses for the second quarter of 2020 was $1,737 million, which was $744 million higher than the prior quarter and $1,372 million higher than the second quarter of 2019. The Company’s provision for the second quarter of 2020 reflects a $1,300 million increase in the allowance for credit losses to recognize the expected losses from these deteriorating economic conditions. Changes in expected loss estimates consider various factors including the changing economic activity, potential mitigating effects of government stimulus, estimated duration of the health crisis, customer specific information impacting changes in risk ratings, projected delinquencies and the impact of industrywide loan modification efforts designed to limit long term effects of the pandemic event, among other factors.

Total net charge-offs in the second quarter of 2020 were $437 million, compared with $393 million in the first quarter of 2020, and $350 million in the second quarter of 2019. The net charge-off ratio was 0.55 percent in the second quarter of 2020, compared with 0.53 percent in the first quarter of 2020 and 0.49 percent in the second quarter of 2019. Net charge-offs increased $44 million (11.2 percent) compared with the first quarter of 2020 mainly due to higher total commercial, total commercial real estate and retail leasing net charge-offs, partially offset by lower other retail net charge-offs. Net charge-offs increased $87 million (24.9 percent) compared with the second quarter of 2019 primarily due to higher total commercial, total commercial real estate, and retail leasing net charge-offs, partly offset by lower other retail net charge-offs. The year-over-year increase in retail leasing net charge-offs reflects the inclusion of end of term losses on residual lease values as of January 1, 2020.

The allowance for credit losses was $7,890 million at June 30, 2020, compared with $6,590 million at March 31, 2020, and $4,466 million at June 30, 2019. The increase year-over-year was due to the impact of the change in accounting principle on January 1, 2020, which added $1.5 billion to the allowance for credit losses and the reserve build related to the potential economic impact of COVID-19. The increase on a linked quarter basis was also primarily due to the reserve build related to the potential economic impact of COVID-19. The ratio of the allowance for credit losses to period-end loans was 2.54 percent at June 30, 2020, compared with 2.07 percent at March 31, 2020, and 1.53 percent at June 30, 2019. The ratio of the allowance for credit losses to nonperforming loans was 737 percent at June 30, 2020, compared with 809 percent at March 31, 2020, and 556 percent at June 30, 2019.

Nonperforming assets were $1,173 million at June 30, 2020, compared with $946 million at March 31, 2020, and $953 million at June 30, 2019. The ratio of nonperforming assets to loans and other real estate was 0.38 percent at June 30, 2020, compared with 0.30 percent at March 31, 2020, and 0.33 percent at June 30, 2019. The year-over-year increase in nonperforming assets was primarily due to increases in total commercial and total commercial real estate nonperforming loans. Accruing loans 90 days or more past due were $556 million at June 30, 2020, compared with $579 million at March 31, 2020, and $752 million at June 30, 2019. The Company expects credit losses and nonperforming assets to continue to increase given current economic conditions.

 

 

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   U.S. Bancorp Second Quarter 2020 Results
      

 

 DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES                  
 (Percent)    Jun 30      Mar 31      Dec 31      Sep 30      Jun 30  
      2020      2020      2019      2019      2019  

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

 

     

Commercial

     .07        .06        .08        .10        .26   

Commercial real estate

     --         --         .01        .01        --   

Residential mortgages

     .16        .15        .17        .17        .17   

Credit card

     1.22        1.29        1.23        1.16        1.14   

Other retail

     .16        .17        .17        .18        .17   

Total loans

     .18        .18        .20        .20        .26   

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

 

     

Commercial

     .45        .31        .27        .40        .53   

Commercial real estate

     .48        .25        .21        .23        .24   

Residential mortgages

     .50        .49        .51        .53        .55   

Credit card

     1.22        1.29        1.23        1.16        1.14   

Other retail

     .48        .45        .46        .47        .47   

Total loans

     .52        .44        .44        .49        .53   
                                              

 

 ASSET QUALITY (a)                                        
 ($ in millions)                                   
     Jun 30      Mar 31      Dec 31      Sep 30      Jun 30   
      2020      2020      2019      2019      2019   

Nonperforming loans

              

Commercial

   $ 403       $ 276       $ 172       $ 290       $ 254   

Lease financing

     53         33         32         29         25   

Total commercial

     456         309         204         319         279   

Commercial mortgages

     188         89         74         82         81   

Construction and development

            12                       11   

Total commercial real estate

     195         101         82         89         92   

Residential mortgages

     242         243         241         251         263   

Credit card

     --         --         --         --         --   

Other retail

     178         162         165         170         169   

Total nonperforming loans

     1,071         815         692         829         803   

Other real estate

     52         70         78         84         88   

Other nonperforming assets

     50         61         59         66         62   

Total nonperforming assets

   $ 1,173       $ 946       $ 829       $ 979       $ 953   

Accruing loans 90 days or more past due

  

 

$

 

556 

 

 

  

 

$

 

579 

 

 

  

 

$

 

605 

 

 

  

 

$

 

600 

 

 

  

 

$

 

752 

 

 

Performing restructured loans, excluding GNMA

   $ 1,994       $ 2,080       $ 2,129       $ 2,145       $ 2,142   

Performing restructured GNMA

   $ 1,522       $ 1,619       $ 1,622       $ 1,690       $ 1,598   

Nonperforming assets to loans plus ORE (%)

     .38         .30         .28         .33         .33   

(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 Second Quarter 2020 Results
      

 

 COMMON SHARES                                        
 (Millions)    2Q
2020
     1Q
2020
     4Q
2019
     3Q
2019
     2Q
2019
 

Beginning shares outstanding

     1,506         1,534         1,571         1,584         1,599   

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

     --                               --    

Shares repurchased

     --          (31)        (40)        (14)        (15)  

Ending shares outstanding

     1,506         1,506         1,534         1,571         1,584   
                                              

 

 CAPITAL POSITION                                    
 ($ in millions)    Jun 30
2020
    Mar 31
2020
    Dec 31
2019
    Sep 30
2019
    Jun 30
2019
 

Total U.S. Bancorp shareholders’ equity

   $ 51,850      $ 51,532      $ 51,853      $ 53,517      $ 52,913   

Basel III Standardized Approach (a)

                

Common equity tier 1 capital

   $ 36,351      $ 36,224      $ 35,713      $ 37,653      $ 36,909   

Tier 1 capital

     42,781        42,651        41,721        43,667        42,923   

Total risk-based capital

     51,457        51,277        49,744        51,684        50,370   

Common equity tier 1 capital ratio

     9.0    %      9.0    %      9.1    %      9.6    %      9.5    % 

Tier 1 capital ratio

     10.6        10.5        10.7        11.2        11.0   

Total risk-based capital ratio

     12.8        12.7        12.7        13.2        13.0   

Leverage ratio

     8.0        8.8        8.8        9.3        9.3   

Tangible common equity to tangible assets (b)

     6.7        6.7        7.5        8.0        7.9   

Tangible common equity to risk-weighted assets (b)

     9.0        8.9        9.3        9.7        9.7   

Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (b)

     8.7        8.6         

(a) Calculated in accordance with transitional regulatory capital requirements related to the current expected credit losses methodology implementation at March 31, 2020

  

(b) See Non-GAAP Financial Measures reconciliation on page 17

 

                               

Total U.S. Bancorp shareholders’ equity was $51.9 billion at June 30, 2020, compared with $51.5 billion at March 31, 2020, and $52.9 billion at June 30, 2019. The Company announced on March 15, 2020, that it suspended its common stock repurchase program. This action was taken to maintain strong capital levels given the impact and uncertainties of COVID-19 on the economy and global markets.

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 June 30, 2020, and at March 31, 2020, compared with 9.5 percent at June 30, 2019. The Company’s common equity tier 1 capital to risk-weighted assets ratio, reflecting the full implementation of the current expected credit losses methodology was 8.7 percent at June 30, 2020, compared with 8.6 percent at March 31, 2020.

 

 

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   U.S. Bancorp Second Quarter 2020 Results
      

 

 

  Investor Conference Call

 

On Wednesday, July 15, 2020, at 8 a.m. CT, Chairman, President and Chief Executive Officer Andy Cecere and Vice Chair and Chief Financial Officer Terry Dolan will host a conference call to review the financial results. The conference call will be available online or by telephone. To access the webcast and presentation, visit U.S. Bancorp’s website at usbank.com and click on “About Us”, “Investor Relations” and “Webcasts & Presentations.” To access the conference call from locations within the United States and Canada, please 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 4179908. For those unable to participate during the live call, a recording will be available at approximately 11:00 a.m. CT on Wednesday, July 15 and will be accessible until Wednesday, July 22 at 11:59 p.m. CT. 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 4179908.

 

 

  About U.S. Bancorp

 

U.S. Bancorp, with more than 70,000 employees and $547 billion in assets as of June 30, 2020, is the parent company of U.S. Bank National Association, the fifth-largest commercial bank in the United States. The Minneapolis-based bank blends its relationship teams, branches and ATM network with mobile and online tools that allow customers to bank how, when and where they prefer. U.S. Bank is committed to serving its millions of retail, business, wealth management, payment, commercial and corporate, and investment services customers across the country and around the world as a trusted financial partner, a commitment recognized by the Ethisphere Institute naming the bank one of the 2020 World’s Most Ethical Companies. Visit U.S. Bank at www.usbank.com or follow on social media to stay up to date with company news.

 

 

  Forward-looking Statements

 

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:

This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. The COVID-19 pandemic is adversely affecting U.S. Bancorp, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is uncertain. Continued 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. 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; further increases in unemployment 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 the level of tariffs and other trade policies of the United States and its global trading partners; changes in customer behavior and preferences; breaches in data security; failures to safeguard personal information; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation 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, 2019, 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, including the section entitled “Risk Factors” in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. In addition, factors other than these risks also could adversely affect U.S. Bancorp’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.

 

 

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   U.S. Bancorp Second Quarter 2020 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

 
   

Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology, and

 
   

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 currently effective or defined in banking regulations. In addition, certain of these measures differ from currently effective capital ratios defined by banking regulations principally in that the currently effective ratios, which are subject to certain transitional provisions, temporarily exclude the impact of the first quarter of 2020 adoption of accounting guidance related to impairment of financial instruments based on the current expected credit losses methodology. As a result, these capital measures disclosed by the Company may be considered non-GAAP financial measures. 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  
 (Dollars and Shares in Millions, Except Per Share Data)        Three Months Ended    
June 30,
        Six Months Ended    
June 30,
 
 (Unaudited)    2020     2019     2020     2019  

Interest Income

          

Loans

     $2,949       $3,582       $6,260       $7,122  

Loans held for sale

     52       34       96       59  

Investment securities

     630       745       1,322       1,450  

Other interest income

     41       90       110       171  

Total interest income

     3,672       4,451       7,788       8,802  

Interest Expense

          

Deposits

     194       762       719       1,457  

Short-term borrowings

     34       91       105       184  

Long-term debt

     244       293       541       597  

Total interest expense

     472       1,146       1,365       2,238  

Net interest income

     3,200       3,305       6,423       6,564  

Provision for credit losses

     1,737       365       2,730       742  

Net interest income after provision for credit losses

     1,463       2,940       3,693       5,822  

Noninterest Income

          

Credit and debit card revenue

     284       365       588       669  

Corporate payment products revenue

     101       167       246       329  

Merchant processing services

     266       404       603       782  

Trust and investment management fees

     434       415       861       814  

Deposit service charges

     133       227       342       444  

Treasury management fees

     137       153       280       299  

Commercial products revenue

     355       249       601       468  

Mortgage banking revenue

     648       189       1,043       358  

Investment products fees

     45       47       94       92  

Securities gains (losses), net

     81       17       131       22  

Other

     130       257       350       504  

Total noninterest income

     2,614       2,490       5,139       4,781  

Noninterest Expense

          

Compensation

     1,685       1,574       3,305       3,133  

Employee benefits

     314       314       666       647  

Net occupancy and equipment

     271       281       547       558  

Professional services

     106       106       205       201  

Marketing and business development

     67       111       141       200  

Technology and communications

     309       270       598       527  

Postage, printing and supplies

     72       73       144       145  

Other intangibles

     43       42       85       82  

Other

     451       382       943       747  

Total noninterest expense

     3,318       3,153       6,634       6,240  

Income before income taxes

     759       2,277       2,198       4,363  

Applicable income taxes

     64       449       324       827  

Net income

     695       1,828       1,874       3,536  

Net (income) loss attributable to noncontrolling interests

     (6     (7     (14     (16

Net income attributable to U.S. Bancorp

     $689       $1,821       $1,860       $3,520  

Net income applicable to U.S. Bancorp common shareholders

     $614       $1,741       $1,702       $3,354  

Earnings per common share

     $.41       $1.09       $1.13       $2.10  

Diluted earnings per common share

     $.41       $1.09       $1.12       $2.10  

Dividends declared per common share

     $.42       $.37       $.84       $.74  

Average common shares outstanding

     1,506       1,590       1,512       1,596  

Average diluted common shares outstanding

     1,507       1,592       1,513       1,599  

 

 

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 CONSOLIDATED ENDING BALANCE SHEET

 

(Dollars in Millions)    June 30,
2020
     December 31,
2019
     June 30,
2019
 
     (Unaudited)           (Unaudited)  

Assets

        

Cash and due from banks

     $52,392        $22,405        $16,932  

Investment securities

        

Held-to-maturity

     --         --         46,383  

Available-for-sale

     128,120        122,613        69,197  

Loans held for sale

     8,178        5,578        3,819  

Loans

        

Commercial

     120,261        103,863        103,980  

Commercial real estate

     41,076        39,746        39,334  

Residential mortgages

     71,329        70,586        67,913  

Credit card

     21,257        24,789        23,426  

Other retail

     56,412        57,118        57,375  

Total loans

     310,335        296,102        292,028  

Less allowance for loan losses

     (7,383      (4,020      (4,019

Net loans

     302,952        292,082        288,009  

Premises and equipment

     3,616        3,702        3,690  

Goodwill

     9,842        9,655        9,548  

Other intangible assets

     2,518        3,223        3,161  

Other assets

     39,034        36,168        40,980  

Total assets

     $546,652        $495,426        $481,719  

Liabilities and Shareholders’ Equity

        

Deposits

        

Noninterest-bearing

     $109,723        $75,590        $76,170  

Interest-bearing

     303,583        286,326        277,007  

Total deposits

     413,306        361,916        353,177  

Short-term borrowings

     20,595        23,723        15,032  

Long-term debt

     42,579        40,167        41,008  

Other liabilities

     17,692        17,137        18,962  

Total liabilities

     494,172        442,943        428,179  

Shareholders’ equity

        

Preferred stock

     5,984        5,984        5,984  

Common stock

     21        21        21  

Capital surplus

     8,483        8,475        8,465  

Retained earnings

     62,526        63,186        61,252  

Less treasury stock

     (25,962      (24,440      (21,465

Accumulated other comprehensive income (loss)

     798        (1,373      (1,344

Total U.S. Bancorp shareholders’ equity

     51,850        51,853        52,913  

Noncontrolling interests

     630        630        627  

Total equity

     52,480        52,483        53,540  

Total liabilities and equity

     $546,652        $495,426        $481,719  

 

 

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 NON-GAAP FINANCIAL MEASURES

 

(Dollars in Millions, Unaudited)    June 30,
2020
    March 31,
2020
    December 31,
2019
    September 30,
2019
    June 30,
2019
 

Total equity

     $52,480       $52,162       $52,483       $54,147       $53,540  

Preferred stock

     (5,984     (5,984     (5,984     (5,984     (5,984

Noncontrolling interests

     (630     (630     (630     (630     (627

Goodwill (net of deferred tax liability) (1)

     (8,954     (8,958     (8,788     (8,781     (8,708

Intangible assets, other than mortgage servicing rights

     (678     (742     (677     (687     (703

Tangible common equity (a)

     36,234       35,848       36,404       38,065       37,518  

Common equity tier 1 capital, determined in accordance with transitional regulatory capital requirements related to the current expected credit losses methodology implementation

     36,351       36,224        

Adjustments (2)

     (1,702     (1,377      

Common equity tier 1 capital, reflecting the full implementation of the current expected credit losses methodology (b)

     34,649       34,847        

Total assets

     546,652       542,909       495,426       487,671       481,719  

Goodwill (net of deferred tax liability) (1)

     (8,954     (8,958     (8,788     (8,781     (8,708

Intangible assets, other than mortgage servicing rights

     (678     (742     (677     (687     (703

Tangible assets (c)

     537,020       533,209       485,961       478,203       472,308  

Risk-weighted assets, determined in accordance with prescribed regulatory capital requirements effective for the Company (d)

     401,832   *      404,627       391,269       390,622       388,709  

Adjustments (3)

     (1,394 )*      (958      

Risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (e)

     400,438   *      403,669        

Ratios*

          

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

     6.7   %      6.7   %      7.5   %      8.0   %      7.9   % 

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

     9.0       8.9       9.3       9.7       9.7  

Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (b)/(e)

     8.7       8.6        
          
     Three Months Ended  
     June 30,
2020
    March 31,
2020
    December 31,
2019
    September 30,
2019
    June 30,
2019
 

Net income applicable to U.S. Bancorp common shareholders

     $614       $1,088       $1,408       $1,821       $1,741  

Intangibles amortization (net-of-tax)

     34       33       35       33       33  

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

     648       1,121       1,443       1,854       1,774  

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

     2,606       4,509       5,725       7,356       7,115  

Average total equity

     52,871       51,776       53,777       53,921       53,066  

Average preferred stock

     (5,984     (5,984     (5,984     (5,984     (5,984

Average noncontrolling interests

     (630     (630     (630     (629     (628

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

     (8,960     (8,825     (8,796     (8,725     (8,715

Average intangible assets, other than mortgage servicing rights

     (706     (688     (683     (689     (681

Average tangible common equity (g)

     36,591       35,649       37,684       37,894       37,058  

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

     7.1   %      12.6   %      15.2   %      19.4  %      19.2  % 

Net interest income

     $3,200       $3,223       $3,207       $3,281       $3,305  

Taxable-equivalent adjustment (4)

     24       24       24       25       27  

Net interest income, on a taxable-equivalent basis

     3,224       3,247       3,231       3,306       3,332  

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

     3,224       3,247       3,231       3,306       3,332  

Noninterest income

     2,614       2,525       2,436       2,614       2,490  

Less: Securities gains (losses), net

     81       50       26       25       17  

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

     5,757       5,722       5,641       5,895       5,805  

Noninterest expense (i)

     3,318       3,316       3,401       3,144       3,153  

Less: Intangible amortization

     43       42       44       42       42  

Noninterest expense, excluding intangible amortization (j)

     3,275       3,274       3,357       3,102       3,111  

Efficiency ratio (i)/(h)

     57.6  %       58.0   %      60.3   %      53.3   %      54.3   % 

Tangible efficiency ratio (j)/(h)

     56.9       57.2       59.5       52.6       53.6  

 

  *

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

(1)

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

(2)

Includes the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology net of deferred taxes.

(3)

Includes the impact of the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology.

(4)

Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.

 

 

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LINE OF BUSINESS FINANCIAL PERFORMANCE (a)          
($ in millions)    Net Income Attributable
to U.S. Bancorp
     Percent Change     Net Income Attributable
to U.S. Bancorp
        
Business Line    2Q
2020
    1Q
2020
    2Q  
2019  
    

2Q20 vs

1Q20

   

2Q20 vs

2Q19

   

YTD

2020

   

YTD

2019

     Percent
Change
 

Corporate and Commercial Banking

     $598       $169       $465          nm       28.6       $767       $881        (12.9

Consumer and Business Banking

     692       644       581          7.5       19.1       1,336       1,174        13.8  

Wealth Management and Investment Services

     204       216       235          (5.6     (13.2     420       461        (8.9

Payment Services

     400       316       354          26.6       13.0       716       688        4.1  

Treasury and Corporate Support

     (1,205     (174     186          nm       nm       (1,379     316        nm  
   

Consolidated Company

     $689       $1,171       $1,821          (41.2     (62.2     $1,860       $3,520        (47.2
   

(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. Business line results are derived from the Company’s business unit profitability reporting systems by specifically attributing managed balance sheet assets, deposits and other liabilities and their related income or 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 2020, 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                   
     

2Q 

2020 

  

1Q

2020

    

2Q

2019

    2Q20 vs
1Q20
    2Q20 vs
2Q19
    YTD 
2020 
  YTD
2019
     Percent
Change
 

Condensed Income Statement

                     

Net interest income (taxable-equivalent basis)

     $890         $798        $774       11.5       15.0       $1,688       $1,552        8.8  

Noninterest income

     340         273        244       24.5       39.3       613       452        35.6  

Securities gains (losses), net

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

Total net revenue

     1,230         1,071        1,018       14.8       20.8       2,301       2,004        14.8  

Noninterest expense

     411         421        413       (2.4     (.5     832       820        1.5  

Other intangibles

     --          --        1       --         nm       --         2        nm  

Total noninterest expense

     411         421        414       (2.4     (.7     832       822        1.2  

Income before provision and taxes

     819         650        604       26.0       35.6       1,469       1,182        24.3  

Provision for credit losses

     21         425        (16     (95.1     nm       446       7        nm  

Income before income taxes

     798         225        620       nm       28.7       1,023       1,175        (12.9

Income taxes and taxable-equivalent adjustment

     200         56        155       nm       29.0       256       294        (12.9

Net income

     598         169        465       nm       28.6       767       881        (12.9

Net (income) loss attributable to noncontrolling interests

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

Net income attributable to U.S. Bancorp

     $598         $169        $465       nm       28.6       $767       $881        (12.9
   

Average Balance Sheet Data

                     

Loans

     $122,950         $103,373        $98,922       18.9       24.3       $113,161       $98,800        14.5  

Other earning assets

     3,847         4,555        3,883       (15.5     (.9     4,201       3,527        19.1  

Goodwill

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

Other intangible assets

            7        9       (14.3     (33.3     7       9        (22.2

Assets

     135,504         115,314        108,823       17.5       24.5       125,409       108,063        16.1  
   

Noninterest-bearing deposits

     38,658         29,346        29,061       31.7       33.0       34,002       29,623        14.8  

Interest-bearing deposits

     95,373         80,659        70,740       18.2       34.8       88,017       70,959        24.0  

Total deposits

     134,031         110,005        99,801       21.8       34.3       122,019       100,582        21.3  
   

Total U.S. Bancorp shareholders’ equity

     17,295         15,810        15,436       9.4       12.0       16,553        15,389        7.6  
   

(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 $598 million of the Company’s net income in the second quarter of 2020, compared with $465 million in the second quarter of 2019. Total net revenue increased $212 million (20.8 percent) due to an increase of $116 million (15.0 percent) in net interest income and an increase of $96 million (39.3 percent) in total noninterest income. Net interest income increased primarily due to strong loan growth as well as higher noninterest-bearing and interest-bearing deposit balances, partially offset by the impact on net interest margin due to changes in loan mix and lower spreads on loans, reflecting changing interest rates given the economic environment. Total noninterest income increased year-over-year primarily due to higher capital markets and trading revenue as corporate customers access the fixed income capital markets for bond issuances. Total noninterest expense was $3 million (0.7 percent) lower compared with a year ago primarily driven by lower net shared services expense and lower other noninterest expense due to a reduction in travel as a result of COVID-19, partially offset by higher variable compensation related to fixed income capital markets business production. The provision for credit losses increased $37 million primarily due to higher net charge-offs, partially offset by a favorable change in the reserve allocation driven by payoffs of funded exposures net of the impact of credit risk rating downgrades.

 

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CONSUMER AND BUSINESS BANKING (a)                                                          
($ in millions)                        

    Percent Change

                      
     

2Q 

2020 

    

1Q

2020

    

2Q

2019

    

2Q20 vs

1Q20

    

2Q20 vs

2Q19

    

YTD

2020

    

YTD 

2019 

    

Percent

Change

 

Condensed Income Statement

                         

Net interest income (taxable-equivalent basis)

     $1,486         $1,543        $1,597         (3.7)        (7.0)        $3,029        $3,178         (4.7)  

Noninterest income

     921         757        567         21.7         62.4         1,678        1,102         52.3   

Securities gains (losses), net

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

 

 

          

 

 

      

Total net revenue

     2,407         2,300        2,164         4.7         11.2         4,707        4,280         10.0   

Noninterest expense

     1,370         1,314        1,305         4.3         5.0         2,684        2,555         5.0   

Other intangibles

            4               --         (20.0)        8        10         (20.0)  
    

 

 

          

 

 

      

Total noninterest expense

     1,374         1,318        1,310         4.2         4.9         2,692        2,565         5.0   
    

 

 

          

 

 

      

Income before provision and taxes

     1,033         982        854         5.2         21.0         2,015        1,715         17.5   

Provision for credit losses

     110         123        79         (10.6)        39.2         233        149         56.4   
    

 

 

          

 

 

      

Income before income taxes

     923         859        775         7.5         19.1         1,782        1,566         13.8   

Income taxes and taxable-equivalent adjustment

     231         215        194         7.4         19.1         446        392         13.8   
    

 

 

          

 

 

      

Net income

     692         644        581         7.5         19.1         1,336        1,174         13.8   

Net (income) loss attributable to noncontrolling interests

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

 

 

          

 

 

      

Net income attributable to U.S. Bancorp

     $692         $644        $581         7.5         19.1         $1,336        $1,174         13.8   
    

 

 

          

 

 

      
   

Average Balance Sheet Data

                         

Loans

     $150,206         $146,715        $143,777         2.4         4.5         $148,459        $142,804         4.0   

Other earning assets

     6,576         4,967        3,333         32.4         97.3         5,772        2,864         nm   

Goodwill

     3,475         3,475        3,475         --         --         3,475        3,475         --   

Other intangible assets

     1,935         2,405        2,717         (19.5)        (28.8)        2,170        2,799         (22.5)  

Assets

     167,501         161,760        157,445         3.5         6.4         164,630        156,103         5.5   
   

Noninterest-bearing deposits

     34,662         27,869        27,051         24.4         28.1         31,265        26,800         16.7   

Interest-bearing deposits

     144,319         133,766        128,932         7.9         11.9         139,041        128,135         8.5   
    

 

 

          

 

 

      

Total deposits

     178,981         161,635        155,983         10.7         14.7         170,306        154,935         9.9   
   

Total U.S. Bancorp shareholders’ equity

     14,973         14,931        15,119         .3         (1.0)        14,952        15,060         (.7)  
   

(a) preliminary data

 

                                                                       

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

Consumer and Business Banking contributed $692 million of the Company’s net income in the second quarter of 2020, compared with $581 million in the second quarter of 2019. Total net revenue increased $243 million (11.2 percent) reflecting a decrease in net interest income of $111 million (7.0 percent) that was more than offset by an increase of $354 million (62.4 percent) in total noninterest income. Net interest income decreased primarily due to the impact of declining interest rates on deposit spreads, partially offset by growth in noninterest-bearing and interest-bearing deposit balances and loan growth driven in part by loans made under the SBA’s Paycheck Protection Program. Total noninterest income increased primarily due to higher mortgage banking revenue driven by higher mortgage production and related gain on sale margins, partially offset by the unfavorable net impact in the change in fair value of mortgage servicing rights and related hedging activities, partially offset by lower deposit service charges due to lower volume and fee waivers related to customers impacted by COVID-19. Total noninterest expense in the second quarter of 2020 increased $64 million (4.9 percent) primarily due to higher variable compensation, related to strong mortgage banking origination activities, and net shared services expense, reflecting the impact of investment in infrastructure supporting business growth. The provision for credit losses increased $31 million (39.2 percent) due to higher net charge-offs and an unfavorable change in the reserve allocation reflecting deterioration in credit quality given the economic environment.

 

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WEALTH MANAGEMENT AND INVESTMENT SERVICES (a)                                       
($ in millions)                       

     Percent Change

                    
     

2Q

2020

   

1Q

2020

    

2Q

2019

    

2Q20 vs

1Q20

   

2Q20 vs

2Q19

   

YTD

2020

    

YTD

2019

   

Percent

Change

 

Condensed Income Statement

                     

Net interest income (taxable-equivalent basis)

     $256       $283        $305        (9.5     (16.1     $539        $598       (9.9

Noninterest income

     463       464        445        (.2     4.0       927        875       5.9  

Securities gains (losses), net

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

Total net revenue

     719       747        750        (3.7     (4.1     1,466        1,473       (.5

Noninterest expense

     446       433        432        3.0       3.2       879        853       3.0  

Other intangibles

     3       3        3        --       --       6        6       --  

Total noninterest expense

     449       436        435        3.0       3.2       885        859       3.0  

Income before provision and taxes

     270       311        315        (13.2     (14.3     581        614       (5.4

Provision for credit losses

     (2     23        2        nm       nm       21        (1     nm  

Income before income taxes

     272       288        313        (5.6     (13.1     560        615       (8.9

Income taxes and taxable-equivalent adjustment

     68       72        78        (5.6     (12.8     140        154       (9.1

Net income

     204       216        235        (5.6     (13.2     420        461       (8.9

Net (income) loss attributable to noncontrolling interests

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

Net income attributable to U.S. Bancorp

     $204       $216        $235        (5.6     (13.2     $420        $461       (8.9
   

Average Balance Sheet Data

                     

Loans

     $11,194       $10,607        $9,898        5.5       13.1       $10,902        $9,858       10.6  

Other earning assets

     285       281        341        1.4       (16.4     283        293       (3.4

Goodwill

     1,616       1,617        1,617        (.1     (.1     1,616        1,617       (.1

Other intangible assets

     40       44        50        (9.1     (20.0     42        52       (19.2

Assets

     14,308       13,949        13,178        2.6       8.6       14,129        13,180       7.2  
   

Noninterest-bearing deposits

     16,298       13,218        13,612        23.3       19.7       14,758        13,459       9.7  

Interest-bearing deposits

     65,300       68,783        61,417        (5.1     6.3       67,041        57,805       16.0  

Total deposits

     81,598       82,001        75,029        (.5     8.8       81,799        71,264       14.8  
   

Total U.S. Bancorp shareholders’ equity

     2,478       2,465        2,432        .5       1.9       2,472        2,437       1.4  
   

(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 four businesses: Wealth Management, Global Corporate Trust & Custody, U.S. Bancorp Asset Management and Fund Services.

Wealth Management and Investment Services contributed $204 million of the Company’s net income in the second quarter of 2020, compared with $235 million in the second quarter of 2019. Total net revenue decreased $31 million (4.1 percent) year-over-year reflecting a decrease in net interest income of $49 million (16.1 percent), partly offset by an increase of $18 million (4.0 percent) in noninterest income. Net interest income decreased year-over-year primarily due to declining margin benefit of deposits, given lower interest rates, partially offset by higher noninterest-bearing and interest-bearing deposit balances and deposit mix. Total noninterest income increased primarily due to the impact of favorable market conditions and business growth on trust and investment management fees. Total noninterest expense increased $14 million (3.2 percent) compared with the second quarter of 2019 reflecting increased net shared services expense due to technology development and higher compensation expense due to the impact of merit increases, increased staffing, and higher business incentives. The provision for credit losses decreased $4 million reflecting a favorable change in the reserve allocation driven by the strong credit quality of the loan portfolio.

 

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PAYMENT SERVICES (a)                                                           
($ in millions)                       

    Percent Change

                   
     

2Q

2020

   

1Q

2020

    

2Q

2019

     2Q20 vs
1Q20
    2Q20 vs
2Q19
   

YTD

2020

    

YTD

2019

  

Percent

Change

 

Condensed Income Statement

                      

Net interest income (taxable-equivalent basis)

   $ 602     $ 651      $ 585          (7.5     2.9     $ 1,253      $ 1,202          4.2  

Noninterest income

     658       794        952          (17.1     (30.9     1,452        1,806          (19.6

Securities gains (losses), net

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

 

 

        

 

 

      

Total net revenue

     1,260       1,445        1,537          (12.8     (18.0     2,705        3,008          (10.1

Noninterest expense

     722       726        737          (.6     (2.0     1,448        1,445          .2  

Other intangibles

     36       35        33          2.9       9.1       71        64          10.9  
    

 

 

        

 

 

      

Total noninterest expense

     758       761        770          (.4     (1.6     1,519        1,509          .7  
    

 

 

        

 

 

      

Income before provision and taxes

     502       684        767          (26.6     (34.6     1,186        1,499          (20.9

Provision for credit losses

     (31     262        295          nm       nm       231        581          (60.2
    

 

 

        

 

 

      

Income before income taxes

     533       422        472          26.3       12.9       955        918          4.0  

Income taxes and taxable-equivalent adjustment

     133       106        118          25.5       12.7       239        230          3.9  
    

 

 

        

 

 

      

Net income

     400       316        354          26.6       13.0       716        688          4.1  

Net (income) loss attributable to noncontrolling interests

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

 

 

        

 

 

      

Net income attributable to U.S. Bancorp

   $ 400     $ 316      $ 354          26.6       13.0     $ 716      $ 688          4.1  
    

 

 

        

 

 

      
   

Average Balance Sheet Data

                      

Loans

   $ 30,321     $ 33,688      $ 33,277          (10.0     (8.9   $ 32,005      $ 32,848          (2.6

Other earning assets

     447       399        327          12.0       36.7       423        387          9.3  

Goodwill

     3,101       2,955        2,806          4.9       10.5       3,028        2,810          7.8  

Other intangible assets

     590       563        533          4.8       10.7       576        523          10.1  

Assets

     35,473       38,798        39,588          (8.6     (10.4     37,137        39,112          (5.0
   

Noninterest-bearing deposits

     3,165       1,471        1,221          nm       nm       2,318        1,198          93.5  

Interest-bearing deposits

     117       114        115          2.6       1.7       116        113          2.7  
    

 

 

        

 

 

      

Total deposits

     3,282       1,585        1,336          nm       nm       2,434        1,311          85.7  

Total U.S. Bancorp shareholders’ equity

     5,876       6,083        6,043          (3.4     (2.8     5,980        6,009          (.5

(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 $400 million of the Company’s net income in the second quarter of 2020, compared with $354 million in the second quarter of 2019. Total net revenue decreased $277 million (18.0 percent) due to an increase of $17 million (2.9 percent) in net interest income that was more than offset by a decrease of $294 million (30.9 percent) in total noninterest income. Net interest income increased primarily due to favorable loan spreads, mostly offset by lower loan volume and loan fees. Total noninterest income decreased year-over-year mainly due to the impacts of COVID-19 on consumer and business spending volumes in all payment businesses including merchant processing services, corporate payment products, and credit and debit card revenue. Total noninterest expense decreased $12 million (1.6 percent) compared with the second quarter of 2019 reflecting lower marketing and business development expense due to the timing of marketing campaigns and a reduction in costs related to equipment sales driven by lower volumes, partially offset by higher software expense due to capital expenditures and acquisitions. The provision for credit losses decreased $326 million primarily due to a favorable change in the reserve allocation driven by lower outstanding loan balances and lower delinquency rates, partially offset by higher net charge-offs.

 

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TREASURY AND CORPORATE SUPPORT (a)  
($ in millions)                       Percent Change                         
     

2Q

2020

   

1Q

2020

   

2Q  

2019  

     2Q20 vs 
1Q20  
     2Q20 vs 
2Q19  
    

YTD

2020

   

YTD

2019

    

Percent

Change

 

Condensed Income Statement

                      

Net interest income (taxable-equivalent basis)

   $ (10   $ (28     $71          64.3         nm       $ (38     $88          nm   

Noninterest income

     151       187       265          (19.3)        (43.0)        338       524          (35.5)  

Securities gains (losses), net

     81       50       17          62.0         nm         131       22          nm   
    

 

 

          

 

 

      

Total net revenue

     222       209       353          6.2         (37.1)        431       634          (32.0)  

Noninterest expense

     326       380       224          (14.2)        45.5         706       485          45.6   

Other intangibles

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

 

 

          

 

 

      

Total noninterest expense

     326       380       224          (14.2)        45.5         706       485          45.6   
    

 

 

          

 

 

      

Income before provision and taxes

     (104     (171     129          39.2         nm         (275     149          nm   

Provision for credit losses

     1,639       160       5          nm         nm         1,799       6          nm   
    

 

 

          

 

 

      

Income before income taxes

     (1,743     (331     124          nm         nm         (2,074     143          nm   

Income taxes and taxable-equivalent adjustment

     (544     (165     (69)         nm         nm         (709     (189)         nm   
    

 

 

          

 

 

      

Net income

     (1,199     (166     193          nm         nm         (1,365     332          nm   

Net (income) loss attributable to noncontrolling interests

     (6     (8     (7)         25.0         14.3         (14     (16)         12.5   
    

 

 

          

 

 

      

Net income (loss) attributable to U.S. Bancorp

   $ (1,205   $ (174     $186          nm         nm       $ (1,379     $316          nm   
    

 

 

          

 

 

      
   

Average Balance Sheet Data

                      

Loans

   $ 3,436     $ 3,274       $3,344          4.9         2.8       $ 3,355       $3,362          (.2)  

Other earning assets

     164,857       139,863       129,831          17.9         27.0         152,360       128,491          18.6   

Goodwill

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

Other intangible assets

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

Assets

     191,520       164,986       152,564          16.1         25.5         178,251       151,063          18.0   
   

Noninterest-bearing deposits

     2,323       2,238       2,151          3.8         8.0         2,281       2,183          4.5   

Interest-bearing deposits

     3,088       5,340       10,932          (42.2)        (71.8)        4,214       10,051          (58.1)  
    

 

 

          

 

 

      

Total deposits

     5,411       7,578       13,083          (28.6)        (58.6)        6,495       12,234          (46.9)  

Total U.S. Bancorp shareholders’ equity

     11,619       11,857       13,408          (2.0)        (13.3)        11,736       13,121          (10.6)  

(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 a net loss of $1,205 million in the second quarter of 2020, compared with net income of $186 million in the second quarter of 2019 due to a significant increase in the provision for credit losses for the Company. Total net revenue decreased $131 million (37.1 percent) year-over-year driven by decreases in net interest income of $81 million and $50 million (17.7 percent) in total noninterest income. Net interest income decreased primarily due to lower spreads within the investment portfolio compared with a year ago. Total noninterest income decreased primarily due to lower equity investment income, tax-advantaged investment syndication revenue, and asset impairments as a result of property damage from civil unrest in the second quarter of 2020, partially offset by higher securities gains. Total noninterest expense increased $102 million (45.5 percent) year-over-year primarily due to COVID-related expenses, higher state franchise taxes, higher compensation expense reflecting merit increases, and higher implementation costs of capital investments to support business growth. These increases were partially offset by lower net shared services expense, lower costs related to tax-advantaged projects and a reduction in travel expenses as a result of COVID-19. The provision for credit losses increased $1,634 million reflecting an unfavorable change in the reserve allocation due to adverse changes in economic conditions and the expected impact to credit losses in the current environment. Income taxes are assessed to each line of business at a managerial tax rate of 25.0 percent with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in Treasury and Corporate Support.

 

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