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EX-99.2 - EXHIBIT 99.2 - US BANCORP \DE\ | c55611exv99w2.htm |
8-K - FORM 8-K - US BANCORP \DE\ | c55611e8vk.htm |
Exhibit 99.1
News Release | ||||
Contacts: | ||||
Steve Dale | Judith T. Murphy | |||
Media | Investors/Analysts | |||
(612) 303-0784 | (612) 303-0783 |
U.S. BANCORP REPORTS NET INCOME
FOR THE FOURTH QUARTER OF 2009
FOR THE FOURTH QUARTER OF 2009
Achieves Record Total Net Revenue of $4.4 Billion
MINNEAPOLIS, January 20, 2010 U.S. Bancorp (NYSE: USB) today reported net income of
$602 million for the fourth quarter of 2009, or $.30 per diluted common share. Earnings for the
fourth quarter were driven by record total net revenue of $4.4 billion, the result of strong
year-over-year growth in both net interest income and fee revenue. The Companys results were
impacted by two significant items: $278 million of provision for credit losses in excess of net
charge-offs and $158 million of net securities losses. These significant items, in total, reduced
diluted earnings per common share by approximately $.18 in the fourth quarter of 2009. Highlights
for the fourth quarter of 2009 included:
| Average loan growth of 8.2 percent (.4 percent excluding acquisitions) over the fourth quarter of 2008. Strong new lending activity of $33.7 billion during the fourth quarter including: |
| $9.5 billion of new commercial and commercial real estate commitments | ||
| $17.5 billion of commercial and commercial real estate commitment renewals | ||
| $2.2 billion of lines related to new credit card accounts | ||
| $4.5 billion of other retail originations | ||
| $129.3 billion of new lending activity for the full year |
| Strong average deposit growth of 25.2 percent (15.3 percent excluding acquisitions) over the fourth quarter of 2008, including: |
| 29.6 percent growth in average noninterest-bearing deposits |
| 46.8 percent growth in average total savings deposits |
| Strong growth in total net revenue of 20.8 percent over the fourth quarter of 2008 (16.9 percent excluding the impact of net securities losses) |
| Net interest income growth of 9.2 percent over the fourth quarter of 2008, driven by an 8.6 percent increase in average earning assets and growth in lower cost core deposit funding |
U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
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January 20, 2010
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| Net interest margin of 3.83 percent for the fourth quarter of 2009, compared with 3.81 percent in the fourth quarter of 2008 (and 3.67 percent in the third quarter of 2009) |
| The Company acquired the banking subsidiaries of FBOP Corporation of Oak Park, Illinois (FBOP Banks) from the Federal Deposit Insurance Corporation (FDIC) on October 30, 2009. Combined, these subsidiaries: |
| Expanded the branch distribution network by 150 branches in: California (113), Illinois (32), Texas (3) and Arizona (2) |
| Added $13.2 billion of loans to the Companys portfolio at December 31, 2009, and $8.9 billion of average loans for the fourth quarter of 2009. All of the loans are covered under loss sharing agreements with the FDIC, which limit the Companys credit loss exposure |
| Added $14.4 billion of deposits at December 31, 2009, and $10.1 billion of average deposits for the fourth quarter of 2009 |
| Strong year-over-year growth in noninterest income of 26.7 percent (excluding net securities losses), driven by: |
| A $195 million increase in mortgage banking revenue primarily due to robust mortgage loan production volume of $11.1 billion. Full year mortgage loan production volume was $55.6 billion |
| A 41.2 percent increase in commercial products revenue |
| Higher merchant processing services revenue (15.1 percent), corporate payment products revenue (7.8 percent) and credit and debit card revenue (6.6 percent) |
| Lower retail lease residual valuation losses |
| Positive operating leverage year-over-year; industry leading efficiency ratio of 49.1 percent in the fourth quarter of 2009 |
| Provision for credit losses exceeded net charge-offs by $278 million, or approximately 25 percent of net charge-offs for the quarter, resulting in an increase to the allowance for credit losses |
| Lower provision for credit losses on a linked quarter basis for the first period since the first quarter of 2006 |
| Net charge-offs increased but the rate of growth moderated to 6.6 percent on a linked quarter basis |
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U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
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January 20, 2010
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| Nonperforming assets increased but the rate of growth (excluding covered assets) moderated to 4.9 percent on a linked quarter basis | ||
| Early stage loan delinquencies (30-89 days past due) as a percentage of ending loan balances declined in all retail loan categories on a linked quarter basis | ||
| Allowance to period-end loans (excluding covered assets ) was 3.04 percent at December 31, 2009, compared with 2.88 percent at September 30, 2009 | ||
| Allowance to nonperforming assets (excluding covered assets) was 135 percent at December 31, 2009, compared with 134 percent at September 30, 2009 |
| Strong capital ratios at December 31, 2009: |
| Tier 1 capital ratio of 9.6 percent | ||
| Total risk-based capital ratio of 12.9 percent | ||
| Tier 1 common equity ratio of 6.8 percent |
EARNINGS SUMMARY | Table 1 |
($ in millions, except per-share data)
Percent | Percent | |||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||
4Q | 3Q | 4Q | 4Q09 vs | 4Q09 vs | Full Year | Full Year | Percent | |||||||||||||||||||||||||
2009 | 2009 | 2008 | 3Q09 | 4Q08 | 2009 | 2008 | Change | |||||||||||||||||||||||||
Net income attributable to U.S.
Bancorp |
$ | 602 | $ | 603 | $ | 330 | (.2 | ) | 82.4 | $ | 2,205 | $ | 2,946 | (25.2 | ) | |||||||||||||||||
Diluted earnings per common share |
.30 | .30 | .15 | | nm | .97 | 1.61 | (39.8 | ) | |||||||||||||||||||||||
Return on average assets (%) |
.86 | .90 | .51 | .82 | 1.21 | |||||||||||||||||||||||||||
Return on average common equity (%) |
9.6 | 10.0 | 5.3 | 8.2 | 13.9 | |||||||||||||||||||||||||||
Net interest margin (%) |
3.83 | 3.67 | 3.81 | 3.67 | 3.66 | |||||||||||||||||||||||||||
Efficiency ratio (%) |
49.1 | 47.5 | 50.0 | 48.4 | 46.9 | |||||||||||||||||||||||||||
Tangible efficiency ratio (%) (a) |
46.8 | 45.3 | 47.6 | 46.1 | 44.7 | |||||||||||||||||||||||||||
Dividends declared per common share |
$ | .050 | $ | .050 | $ | .425 | | (88.2 | ) | $ | .200 | $ | 1.700 | (88.2 | ) | |||||||||||||||||
Book value per common share
(period-end) |
12.79 | 12.38 | 10.47 | 3.3 | 22.2 |
(a) | Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income, excluding net securities gains (losses) and intangible amortization. |
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U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
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U.S. Bancorp reported net income attributable to shareholders of $602 million for the
fourth quarter of 2009, 82.4 percent higher than the $330 million for the fourth quarter of 2008
and essentially unchanged from the third quarter of 2009. Diluted earnings per common share of
$.30 in both the fourth and third quarters of 2009 were $.15 higher than the fourth quarter of
2008. Return on average assets and return on average common equity were .86 percent and 9.6
percent, respectively, for the fourth quarter of 2009, compared with .51 percent and 5.3 percent,
respectively, for the fourth quarter of 2008. In light of the credit deterioration arising from
the current economic environment, the Company strengthened its allowance for credit losses in the
fourth quarter of 2009 by recording $278 million of provision for credit losses in excess of net
charge-offs. The other significant item in the fourth quarter of 2009 was $158 million of net
securities losses, including $179 million of impairments, partially offset by $21 million of net
gains on sale of securities. The $179 million of impairments was principally due to the anticipated
exchange of a structured investment vehicle for its underlying securities. This structured
investment vehicle was purchased from an affiliate in the fourth quarter of 2007 and represents the
last such investment expected to be restructured through an exchange of securities. These
significant items, in total, reduced fourth quarter of 2009 diluted earnings per common share by
approximately $.18. In the fourth quarter of 2008 significant items, which included provision for
credit losses in excess of net charge-offs of $635 million, net securities losses of $253 million
and a $59 million gain related to the Companys investment in Visa Inc. (NYSE: V), reduced diluted
earnings per common share, on an aggregate basis, by approximately $.34. Significant items in the
third quarter of 2009 included $415 million of provision for credit losses in excess of net
charge-offs, $76 million of net securities losses and a $39 million gain related to the Companys
investment in Visa Inc. In total, these significant items reduced third quarter of 2009 diluted
earnings per common share by approximately $.19.
U.S. Bancorp Chairman, President and Chief Executive Officer Richard K. Davis said, U.S.
Bancorps fourth quarter and full year 2009 earnings fully reflected the strength and quality of
the Company, as we achieved record total net revenue for both the quarter and the year. The strong
growth in net revenue, the result of our expanding balance sheet and fee-based businesses, as well
as recent investments in our branch network and various growth initiatives, was the primary driver
behind the increase in fourth quarter earnings compared with the same period of 2008. For the full
year of 2009 our Company earned $2.2 billion, or $.97 per diluted common share. Although operating
income for the year was higher by 14.4 percent, the very difficult credit environment and ensuing
rise in credit costs, resulted in bottom line earnings
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U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
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January 20, 2010
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that were lower than 2008. Importantly,
despite the stressed economy and uncertain environment, our Company is, and
expects to remain, profitable, owing to our diversified revenue stream, strong balance sheet,
conservative approach to risk management and the momentum of our business lines.
We originated over $33 billion of new loans and commitments for new and existing customers
during the fourth quarter, bringing total originations for the year to $129 billion. Additionally,
the Company had over $11 billion of new mortgage production this quarter and full year production
of over $55 billion. Despite this activity, however, total average loans, excluding acquisitions,
remained fairly flat year-over-year, as customers continued to pay down their lines and right-size
their own balance sheets. Average deposits, excluding acquisitions, continued to grow, increasing
by over 15 percent year-over-year and 10 percent annualized on a linked quarter basis. These low
cost deposits helped improve the net interest margin, which was 3.83 percent in the fourth quarter
versus 3.67 percent in the third quarter of this year. Our fee-based businesses, particularly
mortgage banking, payments and commercial products, also contributed to the year-over-year growth
in total net revenue this quarter, further demonstrating the advantage of having a diversified
revenue stream during a difficult economic cycle.
Credit costs remained elevated and continued to have a significant impact on earnings. As
expected, net charge-offs increased moderately in the fourth quarter, but for the first time in 15
quarters, the provision for credit losses declined on a linked quarter basis, as the reduction in
incremental provision (i.e. provision in excess of net charge-offs) of $137 million more than
offset the $69 million increase in net charge-offs. The incremental provision represented
approximately 25 percent of net charge-offs, compared with 40 percent in the third quarter of 2009
and approximately 100 percent in the fourth quarter of 2008. This incremental provision further
strengthened the balance sheet as the allowance for credit losses as a percent of period-end loans
(excluding covered assets) at December 31, 2009, was 3.04 percent versus 2.88 percent at September
30, 2009. During the fourth quarter, the percentage of loans in early stage delinquency (30-89
days) declined versus the prior quarter in all retail loan categories and, although losses have not
yet peaked for our Company, the upward trends in both net charge-offs and nonperforming assets
continue to moderate and credit costs overall remain very manageable for our Company.
Our capital position remains strong, with a Tier 1 capital ratio of 9.6 percent at December
31, 2009, slightly higher than the 9.5 percent at September 30, 2009, and above the
well-capitalized level as defined by the regulators. Our Tier 1 common equity ratio was 6.8
percent at year-end, unchanged from the prior quarter end. The strength of our capital position
and quality of our franchise continues to be recognized by
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U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
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January 20, 2010
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the market, as we remain one of the
highest rated banks in the industry by the credit rating agencies. This has
translated into both a flight to quality growth in loans and deposits, as well as favorable
funding costs and margin expansion.
On December 8th, our board of directors declared a quarterly dividend of five cents per
common share, payable on January 15th. This dividend was equal to the dividend paid in each of the
last three quarters. We are very much aware of the importance of the dividend to our shareholders
but, as I have previously stated, there are two pre-conditions that must be met before the dividend
can be raised. The first is a clear line of sight regarding future earnings, and the second is
additional clarity regarding regulatory capital guidelines in the context of a recovering economy.
We are profitable, our businesses are performing well, credit costs are moderating and we expect to
continue to generate significant capital. There remains, however, a great deal of uncertainty in
the banking industry due to potential legislative and regulatory changes, as well as the timing and
scope of the economic recovery. This uncertainty, in turn, extends to the level of capital that
will be required going forward. We will continue to work closely with our regulators and will
prudently defer action on the dividend until a sustainable economic recovery is evident and
clear capital guidelines are established.
We continued to expand our franchise and product offerings during the fourth quarter through
both acquisitions and new business line initiatives. On October 13th, we announced an agreement to
purchase the deposits and certain branch locations of BB&Ts Nevada banking operations. This
transaction closed last Friday, January 15th. The branches were converted over the weekend and are
now operating as full-service U.S. Bank locations. On October 30th, we acquired the FBOP Banks in
an FDIC-assisted deal. Together, these two transactions added over 160 branch locations to our
franchise and more than $15 billion in deposits. Further, our Wealth Management and Securities
Services Group completed the purchase of a bond trustee business and a mutual fund accounting and
servicing operation. New business line initiatives included the Consumer Banking Groups launch of
a new savings program called Savings Today and Rewards TomorrowTM, or S.T.A.R.T, which
was piloted in the later half of 2009 and is now beginning a phased rollout. In addition, we
announced the expansion of our operations with plans to open a new Service Center in the Kansas
City area in 2010, bringing more than 1,100 jobs to the area. These acquisitions, initiatives and
expansion activities are all great examples of the type of investments we expect to continue to
make going forward, as they are lower risk, capital efficient and beneficial to our shareholders.
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U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
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January 20, 2010
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Finally, I want to take this opportunity to thank our 60,000 employees. Each employee played
an important and vital role this past year, whether their job entailed producing and delivering
products and
services directly to our customers, providing our customers with positive and rewarding
service, supplying administrative and operational support, or risk management. While many of our
competitors downsized this past year, we were growing our workforce, adding over 4,000 employees
since December of 2008. While others exited businesses, we were expanding our franchise, products
and services. While many in the industry turned their attention internally, we were investing and
focusing on the future. 2009 was one of the most challenging years I have ever experienced, but
the commitment and hard work of our employees have enabled this Company to navigate through this
difficult time and become an even stronger organization. Given the Companys diversified revenue
mix, stable businesses, industry-leading performance, capital generation, and its dedicated
employees, I am confident that we will continue to grow and prosper in the coming year, as we
continue to serve our customers, support our communities, assist the government in their efforts to
stimulate and strengthen the economy, and create long-term value for our shareholders, all of which
will serve to further distinguish U.S. Bancorp as one of the strongest leaders in the financial
services industry today.
The Companys net income attributable to shareholders for the fourth quarter of 2009 was
higher than the same period of 2008 by $272 million (82.4 percent) and essentially unchanged from
the third quarter of 2009. The increase in net income year-over-year was principally the result of
strong growth in total net revenue, driven by both net interest income from higher earning assets
and fee-based revenues, partially offset by increases in noninterest expense due to acquisitions,
FDIC deposit insurance expense and other business initiatives and an increase in the provision for
credit losses. Compared with the prior quarter, a favorable variance in total net revenue,
primarily related to net interest income, and a lower provision for credit losses were offset by an
increase in noninterest expense due to acquisitions and seasonal business costs.
Total net revenue on a taxable-equivalent basis for the fourth quarter of 2009 was $4,376
million; $752 million (20.8 percent) higher than the fourth quarter of 2008, reflecting a 9.2
percent increase in net interest income and a 37.8 percent increase in noninterest income. The
increase in net interest income year-over-year was largely the result of growth in average earning
assets and an increase in lower cost core deposit funding, both of which reflected recent
acquisitions, while noninterest income increased year-over-year, principally due to strong growth
in mortgage banking revenue, a decrease in net securities losses, and lower
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U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
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January 20, 2010
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lease residual
valuation losses relative to the fourth quarter of 2008. Total net revenue was $126 million (3.0
percent) higher than the previous quarter. Net interest income was 9.4 percent higher than the
third quarter of 2009 due to the FBOP Banks acquisition, as well as an increase in the Companys
core deposits and lower funding
rates, while noninterest income declined 3.7 percent from the prior quarter, primarily due to
higher net securities losses and lower mortgage banking revenue.
Total noninterest expense in the fourth quarter of 2009 was $2,228 million; $290 million (15.0
percent) higher than the fourth quarter of 2008 and $175 million (8.5 percent) higher than the
third quarter of 2009. The increase in total noninterest expense year-over-year was primarily due
to the impact of acquisitions, as well as higher FDIC deposit insurance expense and costs related
to affordable housing and other tax-advantaged projects. The increase in total noninterest expense
on a linked quarter basis was primarily due to the impact of acquisitions and seasonally higher
investments in affordable housing and other tax-advantaged projects and the impact of reinstating
certain salary levels previously reduced as part of the Companys cost containment activities.
The increase in the Companys provision for credit losses from a year ago reflected the
adverse impact of current economic conditions. However, on a linked quarter basis, the provision
for credit losses decreased. While net charge-offs continued to increase from the third quarter of
2009, the rate of deterioration in the credit portfolio has declined. The provision for credit
losses for the fourth quarter of 2009 was $1,388 million, a decline of $68 million from the third
quarter of 2009 and an increase of $121 million over the fourth quarter of 2008. The provision for
credit losses exceeded net charge-offs by $278 million in the fourth quarter of 2009, $415 million
in the third quarter of 2009, and $635 million in the fourth quarter of 2008. The increase in the
provision for credit losses from a year ago reflected deterioration in economic conditions during
most of the year and the corresponding impact on the commercial, commercial real estate and
consumer loan portfolios. Net charge-offs in the fourth quarter of 2009 were $1,110 million,
compared with $1,041 million in the third quarter of 2009 and $632 million in the fourth quarter of
2008. Given current economic conditions and the weakness in home prices and the economy in
general, the Company expects net charge-offs will increase during the first quarter of 2010, but
expects the rate of increase will decline.
Nonperforming assets include assets originated by the Company, as well as loans and other real
estate acquired under FDIC loss sharing agreements (covered assets) that substantially reduce the
risk of credit losses to the Company. At December 31, 2009, $22.5 billion of the Companys loans
and other real estate
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January 20, 2010
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January 20, 2010
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were covered by loss sharing agreements. Total nonperforming assets were
$5,907 million at December 31, 2009, compared with $4,392 million at September 30, 2009, and $2,624
million at December 31, 2008. $1.4 billion of the $1.5 billion linked quarter increase and of the
$3.3 billion year-over-year increase in nonperforming assets was related to the FBOP Banks
acquisition. The remaining linked quarter and year-
over-year increase in nonperforming assets (excluding covered assets) was driven by stress in
residential home construction and related industries, deterioration in the residential mortgage
portfolio, as well as an increase in foreclosed properties and the impact of the economic slowdown
on commercial and consumer customers. At December 31, 2009, total nonperforming assets included
$2,003 million of covered assets, compared with $672 million of nonperforming covered assets at
September 30, 2009. The majority of these nonperforming covered assets were considered
credit-impaired at acquisition and recorded at their estimated fair value at the date of
acquisition. The ratio of the allowance for credit losses to period-end loans, excluding covered
assets, was 3.04 percent at December 31, 2009, compared with 2.88 percent at September 30, 2009,
and 2.09 percent at December 31, 2008. The ratio of the allowance for credit losses to period-end
loans, including covered assets, was 2.69 percent at December 31, 2009, compared with 2.72 percent
at September 30, 2009, and 1.96 percent at December 31, 2008. The Company expects nonperforming
assets, including other real estate owned, to continue to increase, however at a decreasing rate as
compared with prior periods, as difficult economic conditions continue to affect more borrowers in
both the commercial and consumer loan portfolios.
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U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
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INCOME STATEMENT HIGHLIGHTS | Table 2 |
(Taxable-equivalent basis, $ in millions, except per-share data)
Percent | Percent | |||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||
4Q | 3Q | 4Q | 4Q09 vs | 4Q09 vs | Full Year | Full Year | Percent | |||||||||||||||||||||||||
2009 | 2009 | 2008 | 3Q09 | 4Q08 | 2009 | 2008 | Change | |||||||||||||||||||||||||
Net interest income |
$ | 2,360 | $ | 2,157 | $ | 2,161 | 9.4 | 9.2 | $ | 8,716 | $ | 7,866 | 10.8 | |||||||||||||||||||
Noninterest income |
2,016 | 2,093 | 1,463 | (3.7 | ) | 37.8 | 7,952 | 6,811 | 16.8 | |||||||||||||||||||||||
Total net revenue |
4,376 | 4,250 | 3,624 | 3.0 | 20.8 | 16,668 | 14,677 | 13.6 | ||||||||||||||||||||||||
Noninterest expense |
2,228 | 2,053 | 1,938 | 8.5 | 15.0 | 8,281 | 7,348 | 12.7 | ||||||||||||||||||||||||
Income before provision and taxes |
2,148 | 2,197 | 1,686 | (2.2 | ) | 27.4 | 8,387 | 7,329 | 14.4 | |||||||||||||||||||||||
Provision for credit losses |
1,388 | 1,456 | 1,267 | (4.7 | ) | 9.6 | 5,557 | 3,096 | 79.5 | |||||||||||||||||||||||
Income before taxes |
760 | 741 | 419 | 2.6 | 81.4 | 2,830 | 4,233 | (33.1 | ) | |||||||||||||||||||||||
Taxable-equivalent adjustment |
50 | 50 | 40 | | 25.0 | 198 | 134 | 47.8 | ||||||||||||||||||||||||
Applicable income taxes |
108 | 86 | 27 | 25.6 | nm | 395 | 1,087 | (63.7 | ) | |||||||||||||||||||||||
Net income |
602 | 605 | 352 | (.5 | ) | 71.0 | 2,237 | 3,012 | (25.7 | ) | ||||||||||||||||||||||
Net income attributable to noncontrolling
interests |
| (2 | ) | (22 | ) | nm | nm | (32 | ) | (66 | ) | 51.5 | ||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 602 | $ | 603 | $ | 330 | (.2 | ) | 82.4 | $ | 2,205 | $ | 2,946 | (25.2 | ) | |||||||||||||||||
Net income applicable to U.S. Bancorp
common shareholders |
$ | 580 | $ | 583 | $ | 259 | (.5 | ) | nm | $ | 1,803 | $ | 2,819 | (36.0 | ) | |||||||||||||||||
Diluted earnings per common share |
$ | .30 | $ | .30 | $ | .15 | | nm | $ | .97 | $ | 1.61 | (39.8 | ) | ||||||||||||||||||
Net Interest Income
Net interest income on a taxable-equivalent basis in the fourth quarter of 2009 was $2,360
million, compared with $2,161 million in the fourths quarter of 2008, an increase of $199 million
(9.2 percent). The increase was primarily the result of growth in average earning assets, which
were higher by $19.4 billion (8.6 percent) than the fourth quarter of 2008, driven by an increase
of $14.4 billion (8.2 percent) in average loans and $2.2 billion (5.2 percent) in average
investment securities. Net interest income grew 9.4 percent on a linked quarter basis, primarily
due to the FBOP Banks acquisition, as well as higher core deposits and favorable funding rates.
During the fourth quarter of 2009, the net interest margin was 3.83 percent compared with 3.81
percent in the fourth quarter of 2008 and 3.67 percent in the third quarter of 2009.
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January 20, 2010
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NET INTEREST INCOME | Table 3 |
(Taxable-equivalent basis; $ in millions)
Change | Change | |||||||||||||||||||||||||||||||
4Q | 3Q | 4Q | 4Q09 vs | 4Q09 vs | Full Year | Full Year | ||||||||||||||||||||||||||
2009 | 2009 | 2008 | 3Q09 | 4Q08 | 2009 | 2008 | Change | |||||||||||||||||||||||||
Components of net interest income |
||||||||||||||||||||||||||||||||
Income on earning assets |
$ | 3,026 | $ | 2,909 | $ | 3,195 | $ | 117 | $ | (169 | ) | $ | 11,748 | $ | 12,630 | $ | (882 | ) | ||||||||||||||
Expense on interest-bearing
liabilities |
666 | 752 | 1,034 | (86 | ) | (368 | ) | 3,032 | 4,764 | (1,732 | ) | |||||||||||||||||||||
Net interest income |
$ | 2,360 | $ | 2,157 | $ | 2,161 | $ | 203 | $ | 199 | $ | 8,716 | $ | 7,866 | $ | 850 | ||||||||||||||||
Average yields and rates paid |
||||||||||||||||||||||||||||||||
Earning assets yield |
4.91 | % | 4.94 | % | 5.63 | % | (.03 | )% | (.72 | )% | 4.95 | % | 5.87 | % | (.92 | )% | ||||||||||||||||
Rate paid on interest-bearing
liabilities |
1.31 | 1.54 | 2.16 | (.23 | ) | (.85 | ) | 1.55 | 2.58 | (1.03 | ) | |||||||||||||||||||||
Gross interest margin |
3.60 | % | 3.40 | % | 3.47 | % | .20 | % | .13 | % | 3.40 | % | 3.29 | % | .11 | % | ||||||||||||||||
Net interest margin |
3.83 | % | 3.67 | % | 3.81 | % | .16 | % | .02 | % | 3.67 | % | 3.66 | % | .01 | % | ||||||||||||||||
Average balances |
||||||||||||||||||||||||||||||||
Investment securities |
$ | 44,149 | $ | 42,558 | $ | 41,974 | $ | 1,591 | $ | 2,175 | $ | 42,809 | $ | 42,850 | $ | (41 | ) | |||||||||||||||
Loans |
191,648 | 181,968 | 177,205 | 9,680 | 14,443 | 185,805 | 165,552 | 20,253 | ||||||||||||||||||||||||
Earning assets |
245,383 | 234,111 | 225,986 | 11,272 | 19,397 | 237,287 | 215,046 | 22,241 | ||||||||||||||||||||||||
Interest-bearing liabilities |
201,447 | 194,202 | 190,856 | 7,245 | 10,591 | 195,614 | 184,932 | 10,682 | ||||||||||||||||||||||||
Net free funds (a) |
43,936 | 39,909 | 35,130 | 4,027 | 8,806 | 41,673 | 30,114 | 11,559 |
(a) | Represents noninterest-bearing deposits, other noninterest-bearing liabilities and equity, allowance for loan losses and unrealized gain (loss) on available-for-sale securities, less non-earning assets. |
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January 20, 2010
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AVERAGE LOANS | Table 4 |
($ in millions)
Percent | Percent | |||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||
4Q | 3Q | 4Q | 4Q09 vs | 4Q09 vs | Full Year | Full Year | Percent | |||||||||||||||||||||||||
2009 | 2009 | 2008 | 3Q09 | 4Q08 | 2009 | 2008 | Change | |||||||||||||||||||||||||
Commercial |
$ | 43,490 | $ | 44,655 | $ | 50,328 | (2.6 | ) | (13.6 | ) | $ | 46,197 | $ | 47,903 | (3.6 | ) | ||||||||||||||||
Lease financing |
6,489 | 6,567 | 6,608 | (1.2 | ) | (1.8 | ) | 6,630 | 6,404 | 3.5 | ||||||||||||||||||||||
Total commercial |
49,979 | 51,222 | 56,936 | (2.4 | ) | (12.2 | ) | 52,827 | 54,307 | (2.7 | ) | |||||||||||||||||||||
Commercial mortgages |
24,895 | 24,296 | 22,967 | 2.5 | 8.4 | 24,159 | 21,705 | 11.3 | ||||||||||||||||||||||||
Construction and development |
9,149 | 9,533 | 9,691 | (4.0 | ) | (5.6 | ) | 9,592 | 9,405 | 2.0 | ||||||||||||||||||||||
Total commercial real estate |
34,044 | 33,829 | 32,658 | .6 | 4.2 | 33,751 | 31,110 | 8.5 | ||||||||||||||||||||||||
Residential mortgages |
25,621 | 24,405 | 23,430 | 5.0 | 9.4 | 24,481 | 23,257 | 5.3 | ||||||||||||||||||||||||
Credit card |
16,399 | 15,387 | 12,976 | 6.6 | 26.4 | 14,937 | 11,954 | 25.0 | ||||||||||||||||||||||||
Retail leasing |
4,620 | 4,822 | 5,062 | (4.2 | ) | (8.7 | ) | 4,895 | 5,395 | (9.3 | ) | |||||||||||||||||||||
Home equity and second mortgages |
19,444 | 19,368 | 18,691 | .4 | 4.0 | 19,335 | 17,550 | 10.2 | ||||||||||||||||||||||||
Other retail |
23,037 | 22,647 | 22,247 | 1.7 | 3.6 | 22,856 | 20,671 | 10.6 | ||||||||||||||||||||||||
Total retail |
63,500 | 62,224 | 58,976 | 2.1 | 7.7 | 62,023 | 55,570 | 11.6 | ||||||||||||||||||||||||
Total loans, excluding covered
assets |
173,144 | 171,680 | 172,000 | .9 | .7 | 173,082 | 164,244 | 5.4 | ||||||||||||||||||||||||
Covered assets |
18,504 | 10,288 | 5,205 | 79.9 | nm | 12,723 | 1,308 | nm | ||||||||||||||||||||||||
Total loans |
$ | 191,648 | $ | 181,968 | $ | 177,205 | 5.3 | 8.2 | $ | 185,805 | $ | 165,552 | 12.2 | |||||||||||||||||||
Total average loans were $14.4 billion (8.2 percent) higher in the fourth quarter of 2009
than the fourth quarter of 2008, primarily driven by growth in covered assets and retail loan
categories. Average total retail loans grew $4.5 billion, residential mortgages grew $2.2 billion
and total commercial real estate loans grew $1.4 billion year-over-year. Growth in these
categories was partially offset by a $7.0 billion decline in total commercial loans, principally
due to lower utilization of existing commitments and reduced demand for new loans. Retail loan
growth, year-over-year, was driven by increases in credit cards, home equity lines and
federally-guaranteed student loans. Included in the growth of average credit card loans outstanding
were portfolio purchases during the third quarter of approximately $1.3 billion. Total average
loans were $9.7 billion (5.3 percent) higher in the fourth quarter of 2009 than the third quarter
of 2009, primarily due to an increase in covered assets resulting from the fourth quarter
acquisition of FBOP Banks. Covered assets for the FBOP Banks were $8.9 billion on average in the
fourth quarter of 2009 and $13.2 billion at December 31, 2009. Total average loans, excluding covered assets, were higher
than the third quarter of 2009 by .9 percent, as increases in credit cards (6.6 percent) and residential mortgages (5.0 percent) were
offset by a
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January 20, 2010
Page 13
January 20, 2010
Page 13
decline in total commercial loans (2.4 percent), primarily due to lower commitment utilization
by corporate borrowers and reduced demand for new loans.
Average investment securities in the fourth quarter of 2009 were $2.2 billion (5.2 percent)
higher year-over-year and $1.6 billion (3.7 percent) higher than the third quarter of 2009. The
increases over the prior year and linked quarter were primarily due to purchases of U.S. government
agency-related securities.
AVERAGE DEPOSITS | Table 5 |
($ in millions)
Percent | Percent | |||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||
4Q | 3Q | 4Q | 4Q09 vs | 4Q09 vs | Full Year | Full Year | Percent | |||||||||||||||||||||||||
2009 | 2009 | 2008 | 3Q09 | 4Q08 | 2009 | 2008 | Change | |||||||||||||||||||||||||
Noninterest-bearing deposits |
$ | 40,990 | $ | 36,982 | $ | 31,639 | 10.8 | 29.6 | $ | 37,856 | $ | 28,739 | 31.7 | |||||||||||||||||||
Interest-bearing savings deposits |
||||||||||||||||||||||||||||||||
Interest checking |
39,714 | 38,218 | 29,467 | 3.9 | 34.8 | 36,866 | 31,137 | 18.4 | ||||||||||||||||||||||||
Money market savings |
38,485 | 33,387 | 27,009 | 15.3 | 42.5 | 31,795 | 26,300 | 20.9 | ||||||||||||||||||||||||
Savings accounts |
15,926 | 13,824 | 7,657 | 15.2 | nm | 13,109 | 5,929 | nm | ||||||||||||||||||||||||
Total of savings deposits |
94,125 | 85,429 | 64,133 | 10.2 | 46.8 | 81,770 | 63,366 | 29.0 | ||||||||||||||||||||||||
Time certificates of deposit less
than $100,000 |
18,438 | 16,985 | 15,414 | 8.6 | 19.6 | 17,879 | 13,583 | 31.6 | ||||||||||||||||||||||||
Time deposits greater than $100,000 |
27,336 | 26,966 | 33,283 | 1.4 | (17.9 | ) | 30,296 | 30,496 | (.7 | ) | ||||||||||||||||||||||
Total interest-bearing deposits |
139,899 | 129,380 | 112,830 | 8.1 | 24.0 | 129,945 | 107,445 | 20.9 | ||||||||||||||||||||||||
Total deposits |
$ | 180,889 | $ | 166,362 | $ | 144,469 | 8.7 | 25.2 | $ | 167,801 | $ | 136,184 | 23.2 | |||||||||||||||||||
Average total deposits for the fourth quarter of 2009 were $36.4 billion (25.2 percent)
higher than the fourth quarter of 2008. Excluding deposits from acquisitions, average total
deposits increased $21.3 billion (15.3 percent) over the fourth quarter of 2008. Noninterest-bearing
deposits increased $9.4 billion (29.6 percent) year-over-year, primarily due to
growth in the Consumer and Wholesale Banking business lines and the
impact of acquisitions. Average total
savings deposits were $30.0 billion (46.8 percent) higher year-over-year, the result
of growth in Consumer Banking, government, broker-dealer and institutional trust customers and the
impact of acquisitions. Contributing to the increase in savings accounts was strong participation
in a new savings product introduced across the franchise by Consumer Banking late in the third
quarter of 2008. Average time certificates of deposit less than $100,000 were $3.0 billion (19.6
percent) higher year-over-year primarily due to acquisitions, while average time deposits greater
than $100,000 decreased $5.9 billion (17.9 percent), reflecting a decrease in overall wholesale
funding requirements.
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January 20, 2010
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January 20, 2010
Page 14
Average total deposits increased $14.5 billion (8.7 percent) over the third quarter of
2009, primarily due to strong growth in total average savings deposits and noninterest-bearing
deposits, which increased $8.7 billion (10.2 percent) and $4.0 billion (10.8 percent),
respectively. The fourth quarter of 2009 FBOP Banks acquisition added $10.1 billion in average
total deposits and $14.4 billion of total deposits at December 31, 2009. Excluding the FBOP Banks
acquisition, total average deposits increased $4.4 billion (2.7 percent) over the third quarter of
2009. Average noninterest-bearing deposits increased due to higher balances in corporate trust,
Consumer Banking and Wholesale Banking. The growth in total average savings deposits was the
result of increases in corporate and institutional trust, Consumer Banking and Wholesale Banking
and the impact of the FBOP Banks acquisition. Average time certificates of deposit less than
$100,000 increased $1.5 billion (8.6 percent) from the prior quarter due primarily to the impact of
the FBOP Banks acquisition, while average time deposits greater than $100,000 increased $370
million (1.4 percent), reflecting the impact of the FBOP Banks acquisition, partially offset by a
reduction in wholesale funding requirements.
NONINTEREST INCOME | Table 6 |
($ in millions)
Percent | Percent | |||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||
4Q | 3Q | 4Q | 4Q09 vs | 4Q09 vs | Full Year | Full Year | Percent | |||||||||||||||||||||||||
2009 | 2009 | 2008 | 3Q09 | 4Q08 | 2009 | 2008 | Change | |||||||||||||||||||||||||
Credit and debit card revenue |
$ | 273 | $ | 267 | $ | 256 | 2.2 | 6.6 | $ | 1,055 | $ | 1,039 | 1.5 | |||||||||||||||||||
Corporate payment products revenue |
166 | 181 | 154 | (8.3 | ) | 7.8 | 669 | 671 | (.3 | ) | ||||||||||||||||||||||
Merchant processing services |
312 | 300 | 271 | 4.0 | 15.1 | 1,148 | 1,151 | (.3 | ) | |||||||||||||||||||||||
ATM processing services |
101 | 103 | 95 | (1.9 | ) | 6.3 | 410 | 366 | 12.0 | |||||||||||||||||||||||
Trust and investment management fees |
277 | 293 | 300 | (5.5 | ) | (7.7 | ) | 1,168 | 1,314 | (11.1 | ) | |||||||||||||||||||||
Deposit service charges |
238 | 256 | 260 | (7.0 | ) | (8.5 | ) | 970 | 1,081 | (10.3 | ) | |||||||||||||||||||||
Treasury management fees |
132 | 141 | 128 | (6.4 | ) | 3.1 | 552 | 517 | 6.8 | |||||||||||||||||||||||
Commercial products revenue |
185 | 157 | 131 | 17.8 | 41.2 | 615 | 492 | 25.0 | ||||||||||||||||||||||||
Mortgage banking revenue |
218 | 276 | 23 | (21.0 | ) | nm | 1,035 | 270 | nm | |||||||||||||||||||||||
Investment products fees and
commissions |
27 | 27 | 37 | | (27.0 | ) | 109 | 147 | (25.9 | ) | ||||||||||||||||||||||
Securities gains (losses), net |
(158 | ) | (76 | ) | (253 | ) | nm | 37.5 | (451 | ) | (978 | ) | 53.9 | |||||||||||||||||||
Other |
245 | 168 | 61 | 45.8 | nm | 672 | 741 | (9.3 | ) | |||||||||||||||||||||||
Total noninterest income |
$ | 2,016 | $ | 2,093 | $ | 1,463 | (3.7 | ) | 37.8 | $ | 7,952 | $ | 6,811 | 16.8 | ||||||||||||||||||
Noninterest Income
Fourth quarter noninterest income was $2,016 million; $553 million (37.8 percent) higher than
the fourth quarter of 2008 and $77 million (3.7 percent) lower than the third quarter of 2009. The
improvement
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January 20, 2010
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January 20, 2010
Page 15
in noninterest income over the fourth quarter of 2008 included a $195 million increase in
mortgage banking revenue, as the lower interest rate environment drove strong mortgage loan
production and related production gains, the net change in the valuation of mortgage services
rights (MSRs) and related economic hedging activities was favorable and servicing income
increased. Other income increased $184 million due to lower retail lease residual valuation
losses, improving equity investment revenue and a payments-related contract termination gain,
partially offset by the fourth quarter of 2008 gain on the Companys investment in Visa Inc. In
addition, net securities losses decreased $95 million from a year ago. Noninterest income also
benefited from higher fee-based payments-related income of $70 million (10.3 percent) and an
increase in commercial products revenue of $54 million (41.2 percent) due to stronger capital
markets, standby letters of credit, and other commercial loan fees. Trust and investment
management fees declined $23 million (7.7 percent) due to lower account-level fees and the impact
of interest rates on money market investment fees. The $10 million (27.0 percent) decline in
investment products fees and commissions was due to lower sales levels from a year ago. Deposit
service charges decreased $22 million (8.5 percent) primarily due to a decrease in the number of
overdraft incidences which more than offset deposit account growth.
Noninterest income was $77 million (3.7 percent) lower in the fourth quarter of 2009 than the
third quarter of 2009. Net securities losses increased $82 million compared with the third quarter
of 2009 principally due to impairment related to the anticipated exchange of a structured
investment vehicle for its underlying securities. Mortgage banking revenue declined $58 million
due to lower mortgage production and the net change in the valuation of MSRs and related economic
hedging activities, partially offset by higher servicing income. Deposit service charges were $18
million (7.0 percent) lower on a linked quarter basis due to lower overdraft incidences and
seasonally lower transaction volume. Trust and investment management fees decreased $16 million
(5.5 percent) due to lower account-level fees and the impact of interest rates on money market
investment fees. Seasonally lower volumes resulted in a $15 million (8.3 percent) and a $9 million
(6.4 percent) decline in corporate payment products revenue and treasury management fees,
respectively. Partially offsetting these variances was a $77 million (45.8 percent) increase in
other income due to lower retail lease residual valuation losses, improving equity investment
revenue and a payments-related gain, partially offset by the third quarter of 2009 gain related to
the Companys investment in Visa Inc. Commercial products revenue was $28 million (17.8 percent) higher than the
third quarter of 2009 due to increases across a majority of products including commercial leasing
revenue, standby letters of credit, capital markets and commercial loan fees. In addition, credit
and debit card revenue
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January 20, 2010
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January 20, 2010
Page 16
increased $6 million (2.2 percent) due to higher volumes and merchant processing services
increased $12 million (4.0 percent) primarily due to higher fee-based activity.
NONINTEREST EXPENSE | Table 7 |
($ in millions)
Percent | Percent | |||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||
4Q | 3Q | 4Q | 4Q09 vs | 4Q09 vs | Full Year | Full Year | Percent | |||||||||||||||||||||||||
2009 | 2009 | 2008 | 3Q09 | 4Q08 | 2009 | 2008 | Change | |||||||||||||||||||||||||
Compensation |
$ | 816 | $ | 769 | $ | 770 | 6.1 | 6.0 | $ | 3,135 | $ | 3,039 | 3.2 | |||||||||||||||||||
Employee benefits |
145 | 134 | 124 | 8.2 | 16.9 | 574 | 515 | 11.5 | ||||||||||||||||||||||||
Net occupancy and equipment |
214 | 203 | 202 | 5.4 | 5.9 | 836 | 781 | 7.0 | ||||||||||||||||||||||||
Professional services |
81 | 63 | 73 | 28.6 | 11.0 | 255 | 240 | 6.3 | ||||||||||||||||||||||||
Marketing and business
development |
105 | 137 | 90 | (23.4 | ) | 16.7 | 378 | 310 | 21.9 | |||||||||||||||||||||||
Technology and communications |
186 | 175 | 156 | 6.3 | 19.2 | 673 | 598 | 12.5 | ||||||||||||||||||||||||
Postage, printing and supplies |
70 | 72 | 77 | (2.8 | ) | (9.1 | ) | 288 | 294 | (2.0 | ) | |||||||||||||||||||||
Other intangibles |
107 | 94 | 93 | 13.8 | 15.1 | 387 | 355 | 9.0 | ||||||||||||||||||||||||
Other |
504 | 406 | 353 | 24.1 | 42.8 | 1,755 | 1,216 | 44.3 | ||||||||||||||||||||||||
Total noninterest expense |
$ | 2,228 | $ | 2,053 | $ | 1,938 | 8.5 | 15.0 | $ | 8,281 | $ | 7,348 | 12.7 | |||||||||||||||||||
Noninterest Expense
Noninterest expense in the fourth quarter of 2009 totaled $2,228 million, an increase of $290
million (15.0 percent) over the fourth quarter of 2008, and $175 million (8.5 percent) over the
third quarter of 2009. The increase in noninterest expense over a year ago was principally due to
the impact of acquisitions, and higher FDIC deposit insurance expense, marketing and business
development expense and costs related to investments in affordable housing and other tax-advantaged
projects. Compensation expense increased $46 million (6.0 percent) and employee benefits expense
increased $21 million (16.9 percent), reflecting acquisitions and higher pension costs. Net
occupancy and equipment expense increased $12 million (5.9 percent) and professional services
expense increased $8 million (11.0 percent) year-over-year due principally to acquisitions and
other business initiatives. Marketing and business development expense was higher by $15 million
(16.7 percent) due to costs related to the introduction of new credit card products, while
technology and communications expense increased $30 million (19.2 percent), primarily due to
payments-related initiatives, including the formation of a new joint venture. Other intangibles
expense increased 15.1
percent due to acquisitions, and other expense increased $151 million (42.8 percent) due to higher
FDIC deposit insurance expense, costs related to investments in affordable housing and other
tax-
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January 20, 2010
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January 20, 2010
Page 17
advantaged projects, higher merchant processing expenses, growth in mortgage servicing expenses
and costs associated with other real estate owned.
Noninterest expense increased $175 million (8.5 percent)
in the fourth quarter of 2009 over
the third quarter of 2009. The increase was primarily due to the FBOP Banks acquisition, the
impact of reinstating certain salary levels previously reduced as part of the Companys cost
containment activities and an increase in other expense of $98 million (24.1 percent) principally
due to seasonally higher costs related to investments in affordable housing and other
tax-advantaged projects, increased FDIC insurance expense and costs associated with other real
estate owned. Compensation and employee benefits expense was $58 million (6.4 percent) higher
principally due to the FBOP Banks acquisition and the impact of reinstating certain salary levels
previously reduced as part of cost containment activities. Net occupancy and equipment expense
increased on a linked quarter basis $11 million (5.4 percent) primarily due to the impact of
acquisitions. Professional services expense was seasonally higher by $18 million (28.6 percent)
across the majority of business lines. Technology and communications and other intangibles expense
both increased over the prior quarter due to the impact of the FBOP Banks acquisition. These
unfavorable variances were partially offset by lower marketing and business development expense of
$32 million (23.4 percent) due to the timing of credit card product initiatives.
Provision for Income Taxes
The provision for income taxes for the fourth quarter of 2009 resulted in a tax rate on a
taxable-equivalent basis of 20.8 percent (effective tax rate of 15.2 percent) compared with 16.0
percent (effective tax rate of 7.1 percent) in the fourth quarter of 2008 and 18.4 percent
(effective tax rate of 12.4 percent) in the third quarter of 2009. The increase in the effective
tax rate as compared with the same quarter of 2008 principally reflects the marginal impact of
higher pretax earnings year-over-year.
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January 20, 2010
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January 20, 2010
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ALLOWANCE FOR CREDIT LOSSES | Table 8 |
($ in millions)
4Q | 3Q | 2Q | 1Q | 4Q | ||||||||||||||||
2009 | 2009 | 2009 | 2009 | 2008 | ||||||||||||||||
Balance, beginning of period |
$ | 4,986 | $ | 4,571 | $ | 4,105 | $ | 3,639 | $ | 2,898 | ||||||||||
Net charge-offs |
||||||||||||||||||||
Commercial |
250 | 200 | 177 | 112 | 108 | |||||||||||||||
Lease financing |
33 | 44 | 55 | 55 | 31 | |||||||||||||||
Total commercial |
283 | 244 | 232 | 167 | 139 | |||||||||||||||
Commercial mortgages |
30 | 30 | 28 | 13 | 14 | |||||||||||||||
Construction and development |
144 | 159 | 93 | 117 | 63 | |||||||||||||||
Total commercial real estate |
174 | 189 | 121 | 130 | 77 | |||||||||||||||
Residential mortgages |
153 | 129 | 116 | 91 | 84 | |||||||||||||||
Credit card |
285 | 271 | 263 | 212 | 169 | |||||||||||||||
Retail leasing |
5 | 8 | 10 | 13 | 11 | |||||||||||||||
Home equity and second mortgages |
96 | 89 | 83 | 70 | 52 | |||||||||||||||
Other retail |
111 | 111 | 102 | 99 | 95 | |||||||||||||||
Total retail |
497 | 479 | 458 | 394 | 327 | |||||||||||||||
Total net charge-offs, excluding covered assets |
1,107 | 1,041 | 927 | 782 | 627 | |||||||||||||||
Covered assets |
3 | | 2 | 6 | 5 | |||||||||||||||
Total net charge-offs |
1,110 | 1,041 | 929 | 788 | 632 | |||||||||||||||
Provision for credit losses |
1,388 | 1,456 | 1,395 | 1,318 | 1,267 | |||||||||||||||
Acquisitions and other changes |
| | | (64 | ) | 106 | ||||||||||||||
Balance, end of period |
$ | 5,264 | $ | 4,986 | $ | 4,571 | $ | 4,105 | $ | 3,639 | ||||||||||
Components |
||||||||||||||||||||
Allowance for loan losses |
$ | 5,079 | $ | 4,825 | $ | 4,377 | $ | 3,947 | $ | 3,514 | ||||||||||
Liability for unfunded credit commitments |
185 | 161 | 194 | 158 | 125 | |||||||||||||||
Total allowance for credit losses |
$ | 5,264 | $ | 4,986 | $ | 4,571 | $ | 4,105 | $ | 3,639 | ||||||||||
Gross charge-offs |
$ | 1,174 | $ | 1,105 | $ | 992 | $ | 840 | $ | 678 | ||||||||||
Gross recoveries |
$ | 64 | $ | 64 | $ | 63 | $ | 52 | $ | 46 | ||||||||||
Allowance for credit losses as a percentage of |
||||||||||||||||||||
Period-end loans, excluding covered assets |
3.04 | 2.88 | 2.66 | 2.37 | 2.09 | |||||||||||||||
Nonperforming loans, excluding covered assets |
153 | 150 | 152 | 169 | 206 | |||||||||||||||
Nonperforming assets, excluding covered assets |
135 | 134 | 137 | 152 | 184 | |||||||||||||||
Period-end loans |
2.69 | 2.72 | 2.51 | 2.23 | 1.96 | |||||||||||||||
Nonperforming loans |
97 | 125 | 124 | 131 | 151 | |||||||||||||||
Nonperforming assets |
89 | 114 | 114 | 120 | 139 |
Credit Quality
Net charge-offs and nonperforming assets continued to trend higher, reflecting the
recessionary economic environment, although excluding covered assets, the rate of increase
continued to moderate during the fourth quarter of 2009. The allowance for credit losses was
$5,264 million at December 31, 2009, compared with $4,986 million at September 30, 2009, and $3,639
million at December 31, 2008. Total net
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U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
Page 19
January 20, 2010
Page 19
charge-offs in the fourth quarter of 2009 were $1,110
million, compared with $1,041 million in the third quarter of 2009, and $632 million in the fourth
quarter of 2008. The increase in total net charge-offs compared with a year ago was driven by
economic factors affecting the residential housing markets, including homebuilding and related
industries, commercial real estate properties and credit costs associated with credit card and
other consumer and commercial loans as the economy weakened. As a result of the stress in these
areas, the Company recorded $278 million of provision for credit losses in excess of net
charge-offs, increasing the allowance for credit losses during the fourth quarter of 2009.
Commercial and commercial real estate loan net charge-offs increased to $457 million in the
fourth quarter of 2009 (2.16 percent of average loans outstanding) compared with $433 million (2.02
percent of average loans outstanding) in the third quarter of 2009 and $216 million (.96 percent of
average loans outstanding) in the fourth quarter of 2008. This increasing trend reflected stress
in commercial real estate, and residential housing, especially homebuilding and related industry
sectors, along with the impact of current economic conditions on the Companys commercial loan
portfolios.
Residential mortgage loan net charge-offs were $153 million in the fourth quarter of 2009
(2.37 percent of average loans outstanding) compared with $129 million (2.10 percent of average
loans outstanding) in the third quarter of 2009 and $84 million (1.43 percent of average loans
outstanding) in the fourth quarter of 2008. Total retail loan net charge-offs were $497 million
(3.11 percent of average loans outstanding) in the fourth quarter of 2009 compared with $479
million (3.05 percent of average loans outstanding) in the third quarter of 2009 and $327 million
(2.21 percent of average loans outstanding) in the fourth quarter of 2008. The increased
residential mortgage and retail loan credit losses reflected the adverse impact of current economic
conditions on consumers, as rising unemployment levels increased losses in prime-based residential
portfolios.
The ratio of the allowance for credit losses to period-end loans was 2.69 percent (3.04
percent excluding covered assets) at December 31, 2009, compared with 2.72 percent (2.88 percent
excluding covered assets) at September 30, 2009, and 1.96 percent (2.09 percent excluding covered
assets) at December 31, 2008. The ratio of the allowance for credit losses to nonperforming loans
was 97 percent (153 percent excluding covered assets) at December 31, 2009, compared with 125
percent (150 percent excluding covered assets) at September 30, 2009, and 151 percent (206 percent
excluding covered assets) at December 31, 2008.
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U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
Page 20
January 20, 2010
Page 20
CREDIT RATIOS | Table 9 |
(Percent)
4Q | 3Q | 2Q | 1Q | 4Q | |||||||||||||||||
2009 | 2009 | 2009 | 2009 | 2008 | |||||||||||||||||
Net charge-offs ratios (a) |
|||||||||||||||||||||
Commercial |
2.28 | 1.78 | 1.50 | .92 | .85 | ||||||||||||||||
Lease financing |
2.02 | 2.66 | 3.29 | 3.29 | 1.87 | ||||||||||||||||
Total commercial |
2.25 | 1.89 | 1.72 | 1.21 | .97 | ||||||||||||||||
Commercial mortgages |
.48 | .49 | .47 | .22 | .24 | ||||||||||||||||
Construction and development |
6.24 | 6.62 | 3.79 | 4.82 | 2.59 | ||||||||||||||||
Total commercial real estate |
2.03 | 2.22 | 1.44 | 1.58 | .94 | ||||||||||||||||
Residential mortgages |
2.37 | 2.10 | 1.94 | 1.54 | 1.43 | ||||||||||||||||
Credit card (b) |
6.89 | 6.99 | 7.36 | 6.32 | 5.18 | ||||||||||||||||
Retail leasing |
.43 | .66 | .80 | 1.03 | .86 | ||||||||||||||||
Home equity and second mortgages |
1.96 | 1.82 | 1.72 | 1.48 | 1.11 | ||||||||||||||||
Other retail |
1.91 | 1.94 | 1.80 | 1.75 | 1.70 | ||||||||||||||||
Total retail |
3.11 | 3.05 | 2.99 | 2.62 | 2.21 | ||||||||||||||||
Total net charge-offs, excluding covered assets |
2.54 | 2.41 | 2.15 | 1.82 | 1.45 | ||||||||||||||||
Covered assets |
.06 | | .07 | .21 | .38 | ||||||||||||||||
Total net charge-offs |
2.30 | 2.27 | 2.03 | 1.72 | 1.42 | ||||||||||||||||
Delinquent loan ratios
90 days or more past due excluding nonperforming loans
(c) |
|||||||||||||||||||||
Commercial |
.22 | .17 | .16 | .19 | .13 | ||||||||||||||||
Commercial real estate |
.02 | .12 | .22 | .07 | .11 | ||||||||||||||||
Residential mortgages |
2.80 | 2.32 | 2.11 | 2.03 | 1.55 | ||||||||||||||||
Retail |
1.07 | 1.00 | .94 | .94 | .82 | ||||||||||||||||
Total loans, excluding covered assets |
.88 | .78 | .72 | .68 | .56 | ||||||||||||||||
Covered assets |
3.48 | 7.92 | 7.60 | 6.76 | 5.13 | ||||||||||||||||
Total loans |
1.18 | 1.16 | 1.12 | 1.05 | .84 | ||||||||||||||||
Delinquent loan ratios
90 days or more past due including nonperforming loans
(c) |
|||||||||||||||||||||
Commercial |
2.25 | 2.19 | 1.89 | 1.59 | .82 | ||||||||||||||||
Commercial real estate |
5.22 | 5.22 | 5.05 | 3.87 | 3.34 | ||||||||||||||||
Residential mortgages |
4.59 | 3.86 | 3.46 | 3.02 | 2.44 | ||||||||||||||||
Retail |
1.39 | 1.28 | 1.19 | 1.16 | .97 | ||||||||||||||||
Total loans, excluding covered assets |
2.87 | 2.69 | 2.48 | 2.08 | 1.57 | ||||||||||||||||
Covered assets |
12.38 | 14.74 | 14.10 | 13.11 | 10.74 | ||||||||||||||||
Total loans |
3.96 | 3.34 | 3.15 | 2.74 | 2.14 |
(a) | Annualized and calculated on average loan balances | |
(b) | Net charge-offs as a percent of average loans outstanding, excluding portfolio purchases where the acquired | |
loans were recorded at fair value at the purchase date, were 7.46 percent for the fourth quarter of 2009 and | ||
7.30 percent for the third quarter of 2009. | ||
(c) | Ratios are expressed as a percent of ending loan balances. |
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January 20, 2010
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ASSET QUALITY | Table 10 |
($ in millions)
Dec 31 | Sep 30 | Jun 30 | Mar 31 | Dec 31 | ||||||||||||||||
2009 | 2009 | 2009 | 2009 | 2008 | ||||||||||||||||
Nonperforming loans |
||||||||||||||||||||
Commercial |
$ | 866 | $ | 908 | $ | 785 | $ | 651 | $ | 290 | ||||||||||
Lease financing |
125 | 119 | 123 | 119 | 102 | |||||||||||||||
Total commercial |
991 | 1,027 | 908 | 770 | 392 | |||||||||||||||
Commercial mortgages |
581 | 502 | 471 | 392 | 294 | |||||||||||||||
Construction and development |
1,192 | 1,230 | 1,156 | 887 | 780 | |||||||||||||||
Total commercial real estate |
1,773 | 1,732 | 1,627 | 1,279 | 1,074 | |||||||||||||||
Residential mortgages |
467 | 383 | 324 | 239 | 210 | |||||||||||||||
Retail |
204 | 174 | 155 | 135 | 92 | |||||||||||||||
Total nonperforming loans, excluding covered assets |
3,435 | 3,316 | 3,014 | 2,423 | 1,768 | |||||||||||||||
Covered assets |
2,003 | 672 | 682 | 702 | 643 | |||||||||||||||
Total nonperforming loans |
5,438 | 3,988 | 3,696 | 3,125 | 2,411 | |||||||||||||||
Other real estate |
437 | 366 | 293 | 257 | 190 | |||||||||||||||
Other nonperforming assets |
32 | 38 | 27 | 28 | 23 | |||||||||||||||
Total nonperforming assets (a) |
$ | 5,907 | $ | 4,392 | $ | 4,016 | $ | 3,410 | $ | 2,624 | ||||||||||
Accruing loans 90 days or more
past due, excluding covered assets |
$ | 1,525 | $ | 1,344 | $ | 1,245 | $ | 1,185 | $ | 967 | ||||||||||
Accruing loans 90 days or more past due |
$ | 2,309 | $ | 2,125 | $ | 2,042 | $ | 1,932 | $ | 1,554 | ||||||||||
Restructured loans that continue to accrue interest |
$ | 2,278 | $ | 2,254 | $ | 2,107 | $ | 1,901 | $ | 1,509 | ||||||||||
Nonperforming assets to loans
plus ORE, excluding covered assets (%) |
2.25 | 2.14 | 1.94 | 1.56 | 1.14 | |||||||||||||||
Nonperforming assets to loans
plus ORE (%) |
3.02 | 2.39 | 2.20 | 1.85 | 1.42 |
(a) | Does not include accruing loans 90 days or more past due or restructured loans that continue to accrue interest. |
Nonperforming assets at December 31, 2009, totaled $5,907 million, compared with $4,392
million at September 30, 2009, and $2,624 million at December 31, 2008. Included in December 31,
2009, nonperforming assets were $2,003 million of assets covered under loss sharing agreements with
the FDIC that substantially reduce the risk of credit losses to the Company. The increase in
nonperforming covered assets was due to $1,442 million of loans and other real estate acquired as
part of the FBOP Banks acquisition. The ratio of nonperforming assets to loans and other real
estate was 3.02 percent (2.25 percent excluding covered assets) at December 31, 2009, compared with
2.39 percent (2.14 percent excluding covered assets) at September 30, 2009, and 1.42 percent (1.14
percent excluding covered assets) at December 31, 2008. The increase in nonperforming assets
(excluding covered assets) compared with a year ago was driven primarily by the residential
construction portfolio and related industries and the residential
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U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
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January 20, 2010
Page 22
mortgage portfolio, as well as an increase in foreclosed residential properties and the impact
of the economic slowdown on other commercial and consumer customers. The Company expects
nonperforming assets, including other real estate owned, to continue to increase, however at a
decreasing rate as compared with prior periods, as difficult economic conditions affect more
borrowers in both the commercial and consumer loan portfolios. Accruing loans 90 days or more past
due increased to $2,309 million ($1,525 million excluding covered assets) at December 31, 2009,
compared with $2,125 million ($1,344 million excluding covered assets) at September 30, 2009, and
$1,554 million ($967 million excluding covered assets) at December 31, 2008. The year-over-year
increase of $558 million (excluding covered assets) reflected stress in residential mortgages,
commercial, construction, credit cards, and home equity loans. Restructured loans that continue to
accrue interest have also increased compared with the fourth quarter of 2008 and the third quarter
of 2009, reflecting the impact of loan modifications for certain residential mortgage and consumer
credit card customers in light of current economic conditions. The Company expects this trend to
continue as the Company actively works with customers to modify loans for borrowers who are having
financial difficulties.
CAPITAL POSITION | Table 11 |
($ in millions)
Dec 31 | Sep 30 | Jun 30 | Mar 31 | Dec 31 | ||||||||||||||||
2009 | 2009 | 2009 | 2009 | 2008 | ||||||||||||||||
Total U.S. Bancorp shareholders equity |
$ | 25,963 | $ | 25,171 | $ | 24,171 | $ | 27,223 | $ | 26,300 | ||||||||||
Tier 1 capital |
22,610 | 21,990 | 21,710 | 25,284 | 24,426 | |||||||||||||||
Total risk-based capital |
30,458 | 30,126 | 30,039 | 33,504 | 32,897 | |||||||||||||||
Tier 1 capital ratio |
9.6 | % | 9.5 | % | 9.4 | % | 10.9 | % | 10.6 | % | ||||||||||
Total risk-based capital ratio |
12.9 | 13.0 | 13.0 | 14.4 | 14.3 | |||||||||||||||
Leverage ratio |
8.5 | 8.6 | 8.4 | 9.8 | 9.8 | |||||||||||||||
Tier 1 common equity ratio |
6.8 | 6.8 | 6.7 | 5.4 | 5.1 | |||||||||||||||
Tangible common equity ratio |
5.3 | 5.4 | 5.1 | 3.8 | 3.3 | |||||||||||||||
Tangible common equity as a percent of
risk-weighted assets |
6.1 | 6.0 | 5.7 | 4.2 | 3.7 |
Total U.S. Bancorp shareholders equity was $26.0 billion at December 31, 2009, compared
with $25.2 billion at September 30, 2009, and $26.3 billion at December 31, 2008. The
year-over-year decrease was a result of the Companys second quarter of 2009 redemption of $6.6
billion of preferred stock previously held by the U.S. Department of the Treasury, partially offset
by earnings and a $2.7 billion (153 million shares) common stock offering in the second quarter of
2009. During the third quarter of 2009, the
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U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
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January 20, 2010
Page 23
Company repurchased the warrant previously issued to the U.S. Department of the Treasury
as part of the Companys participation in the Treasurys Capital Purchase Program for $139 million.
The repurchase price was charged to equity. The Tier 1 capital ratio was 9.6 percent at December
31, 2009, compared with 9.5 percent at September 30, 2009, and 10.6 percent at December 31, 2008.
The Tier 1 common equity ratio was 6.8 percent at both December 31, 2009, and September 30, 2009,
compared with 5.1 percent at December 31, 2008. The tangible common equity ratio was 5.3 percent
at December 31, 2009, compared with 5.4 percent at September 30, 2009, and 3.3 percent at December
31, 2008. All regulatory ratios continue to be in excess of well-capitalized requirements.
COMMON SHARES | Table 12 |
(Millions)
4Q | 3Q | 2Q | 1Q | 4Q | ||||||||||||||||
2009 | 2009 | 2009 | 2009 | 2008 | ||||||||||||||||
Beginning shares outstanding |
1,912 | 1,912 | 1,759 | 1,755 | 1,754 | |||||||||||||||
Shares issued for stock option and stock purchase
plans, acquisitions and other corporate purposes |
1 | | 153 | 4 | 1 | |||||||||||||||
Ending shares outstanding |
1,913 | 1,912 | 1,912 | 1,759 | 1,755 | |||||||||||||||
LINE OF BUSINESS FINANCIAL PERFORMANCE (a) | Table 13 |
($ in millions)
Net Income Attributable | Net Income Attributable | |||||||||||||||||||||||||||||||||||
to U.S. Bancorp | Percent Change | to U.S. Bancorp | 4Q 2009 | |||||||||||||||||||||||||||||||||
4Q | 3Q | 4Q | 4Q09 vs | 4Q09 vs | Full Year | Full Year | Percent | Earnings | ||||||||||||||||||||||||||||
Business Line | 2009 | 2009 | 2008 | 3Q09 | 4Q08 | 2009 | 2008 | Change | Composition | |||||||||||||||||||||||||||
Wholesale Banking |
$ | 85 | $ | 53 | $ | 84 | 60.4 | 1.2 | $ | 240 | $ | 902 | (73.4 | ) | 14 | % | ||||||||||||||||||||
Consumer Banking |
253 | 223 | 142 | 13.5 | 78.2 | 917 | 843 | 8.8 | 42 | |||||||||||||||||||||||||||
Wealth Management &
Securities Services |
85 | 96 | 120 | (11.5 | ) | (29.2 | ) | 373 | 484 | (22.9 | ) | 14 | ||||||||||||||||||||||||
Payment Services |
73 | 72 | 82 | 1.4 | (11.0 | ) | 291 | 748 | (61.1 | ) | 12 | |||||||||||||||||||||||||
Treasury and Corporate Support |
106 | 159 | (98 | ) | (33.3 | ) | nm | 384 | (31 | ) | nm | 18 | ||||||||||||||||||||||||
Consolidated Company |
$ | 602 | $ | 603 | $ | 330 | (.2 | ) | 82.4 | $ | 2,205 | $ | 2,946 | (25.2 | ) | 100 | % | |||||||||||||||||||
(a) | preliminary data |
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U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
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January 20, 2010
Page 24
Lines of Business
The Companys major lines of business are Wholesale Banking, Consumer Banking, Wealth
Management & Securities Services, Payment Services, and Treasury and Corporate Support. These
operating segments are components of the Company about which financial information is prepared and
is evaluated regularly by management in deciding how to allocate resources and assess performance.
Noninterest expenses incurred by centrally managed operations or business lines that directly
support another business lines operations are charged to the applicable business line based on its
utilization of those services primarily measured by the volume of customer activities, number of
employees or other relevant factors. These allocated expenses are reported as net shared services
expense within noninterest expense. Designations, assignments and allocations change from time to
time as management systems are enhanced, methods of evaluating performance or product lines change
or business segments are realigned to better respond to the Companys diverse customer base.
During 2009, business line results were restated and presented on a comparable basis for
organization and methodology changes to more closely align capital allocation with Basel II
requirements and to allocate the provision for credit losses based on net charge-offs and changes
in the risks of specific loan portfolios. Previously, the provision for credit losses in excess of
net charge-offs remained in Treasury and Corporate Support, and the other lines of business
results included only the portion of the provision for credit losses equal to net charge-offs.
Wholesale Banking offers lending, equipment finance and small-ticket leasing, depository,
treasury management, capital markets, foreign exchange, international trade services and other
financial services to middle market, large corporate, commercial real estate, financial institution
and public sector clients. Wholesale Banking recorded net income of $85 million in the fourth
quarter of 2009, compared with $84 million in the fourth quarter of 2008 and $53 million in the
third quarter of 2009. Wholesale Bankings net income was flat year-over-year as a reduction in
the provision for credit losses was offset by lower total net revenue and higher total noninterest
expense. Net interest income decreased $97 million (15.5 percent) year-over-year due principally
to lower average total loans due to lower utilization of existing commitments and reduced demand
for new loans, as well as the impact of declining rates on the margin benefit from deposits,
partially offset by improved spreads on loans and higher average deposit balances. Total
noninterest income increased $69 million (31.2 percent) due to strong growth in capital markets,
letters of credit and commercial loan fees. In addition, treasury management fees and valuations
on equity investments also improved. Total
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January 20, 2010
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January 20, 2010
Page 25
noninterest expense increased $17 million (6.0 percent) over a year ago, primarily due to an
increase in FDIC deposit insurance expense and increased costs related to other real estate owned.
The provision for credit losses was $47 million (10.8 percent) lower year-over-year due to a
slowing of the deterioration in the credit quality of commercial and commercial real estate loans,
partially offset by an increase in net charge-offs.
Wholesale Bankings contribution to net income in the fourth quarter of 2009 was $32 million
(60.4 percent) higher than the third quarter of 2009. This favorable variance was due to an
increase in total net revenue and a decrease in the provision for credit losses, partially offset
by higher total noninterest expense. Total net revenue was higher on a linked quarter basis due to
an increase in total noninterest income (22.4 percent) partially offset by a decrease in net
interest income (2.4 percent). The increase in total noninterest income was principally due to
improved equity investment income and strong growth in commercial products revenue including,
standby letters of credit, commercial leasing and other loan fees. The decrease in net interest
income was due to lower average loan balances, reflecting reduced commitment utilization by
wholesale customers and lower demand for new loans, and a reduction in the margin benefit of
deposits, partially offset by improved spreads on new loan activity and growth in average deposit
balances. Total noninterest expense increased $31 million (11.6 percent) principally due to
increased costs for other real estate owned. The provision for credit losses declined $41 million
(9.6 percent) compared with the third quarter of 2009, as deterioration in the commercial loan
portfolios stabilized somewhat. The favorable change in the business lines provision for credit
losses due to this stabilization was partially offset by an increase in net charge-offs.
Consumer Banking delivers products and services through banking offices, telephone servicing
and sales, on-line services, direct mail and ATM processing. It encompasses community banking,
metropolitan banking, in-store banking, small business banking, consumer lending, mortgage banking,
consumer finance, workplace banking, student banking and 24-hour banking. Consumer Banking
contributed $253 million of the Companys net income in the fourth quarter of 2009, a 78.2 percent
increase over the fourth quarter of 2008, and a 13.5 percent increase over the prior quarter.
Within Consumer Banking, the retail banking division accounted for $125 million of the total
contribution, 17.2 percent below the same quarter of last year, and 64.5 percent higher on a linked
quarter basis. The decrease in the retail banking division from the
same period of 2008 was due to an increase in the provision for credit losses, driven by credit
deterioration, and higher total noninterest expense from business investments, both of which were
partially offset by
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January 20, 2010
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growth in total net revenue. Net interest income for the retail banking division decreased
$61 million (6.2 percent) year-over-year as revenues from higher average loan and deposit balances,
including the impact of the Downey Savings & Loan Association, F.A. and PFF Bank and Trust
acquisitions, and yield-related loan fees were offset by a reduction in the margin benefit from
deposits in a declining interest rate environment. Total noninterest income for the retail banking
division increased $109 million (27.4 percent) over a year ago due to a significant improvement in
retail lease residual valuation losses and higher ATM processing services fees, partially offset by
lower deposit service charges. Total noninterest expense for the division in the fourth quarter of
2009 was $39 million (5.0 percent) higher year-over-year, principally due to higher FDIC deposit
insurance expense and the impact of acquisitions. The provision for credit losses for the retail
banking division increased due to year-over-year growth in net charge-offs and stress in
residential mortgages, home equity and other installment and consumer loan portfolios. In the
fourth quarter of 2009, the mortgage banking divisions contribution was $128 million, a $137
million increase over the fourth quarter of 2008. The divisions total net revenue increased $242
million over a year ago, reflecting robust mortgage loan production, improved loan sale
profitability and an increase in net interest income related to growth in average loans held for
sale. Total noninterest expense for the mortgage banking division increased $38 million (50.0
percent) over the fourth quarter of 2008 primarily due to higher production levels and servicing
costs associated with other real estate owned and foreclosures. In addition, the provision for
credit losses decreased $11 million (37.9 percent) for the mortgage banking division.
Consumer Bankings contribution in the fourth quarter of 2009 was higher by $30 million (13.5
percent) than the third quarter of 2009 primarily due to lower provision for credit losses. Within
Consumer Banking, the retail banking divisions contribution increased $49 million (64.5 percent)
on a linked quarter basis due to favorable variances in total net revenue and the provision for
credit losses, partially offset by higher total noninterest expense. Total net revenue for the
retail banking division increased $38 million (2.7 percent), principally due to higher net interest
income, resulting from an increase in average loan balances and improved loans spreads, in addition
to a significant improvement in retail lease residual valuation losses, partially offset by lower
deposit service charges. Total noninterest expense for the retail banking division increased $21
million (2.6 percent) on a linked quarter basis, primarily due to the reinstatement of certain
salaries previously reduced as part of cost containment activities and higher FDIC deposit
insurance expense and expenses related to other business initiatives. The provision for credit
losses for the division decreased $61 million (12.9 percent), as deterioration in the credit
quality of consumer loan portfolios moderated
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January 20, 2010
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Page 27
compared with the third quarter of 2009. The contribution of the mortgage banking division
decreased $19 million (12.9 percent) from the third quarter of 2009, driven by lower mortgage
production and the net change in the valuation of MSRs and related economic hedging activities,
partially offset by higher servicing income. Total net revenue decreased $72 million (17.8
percent) due to lower mortgage banking revenue and a $15 million (12.2 percent) decrease in net
interest income due to a lower average balance in the mortgages held for sale portfolio. The
mortgage banking divisions provision for credit losses decreased $37 million (67.3 percent) on a
linked quarter basis.
Wealth Management & Securities Services provides trust, private banking, financial advisory,
investment management, retail brokerage services, insurance, custody and mutual fund servicing
through five businesses: Wealth Management, Corporate Trust, FAF Advisors, Institutional Trust &
Custody and Fund Services. Wealth Management & Securities Services contributed $85 million of the
Companys net income in the fourth quarter of 2009, a 29.2 percent decrease from the fourth quarter
of 2008 and an 11.5 percent decrease from the third quarter of 2009. Total net revenue
year-over-year decreased $54 million (12.4 percent). Net interest income was lower by $48 million
(34.0 percent), primarily due to a decline in the margin benefit from average deposit balances,
while total noninterest income decreased $6 million (2.0 percent) reflecting decreases in account
volume and sales levels and the impact of interest rates on money market investment fees. Total
noninterest expense was $3 million (1.2 percent) lower than the same quarter of 2008 due to lower
processing costs and compensation and employee benefits expense, partially offset by higher FDIC
deposit insurance expense.
The decrease in the business lines contribution in the fourth quarter of 2009 compared with
the prior quarter was the result of lower total net revenue (2.1 percent) and higher total
noninterest expense (5.3 percent). Net interest income was 9.4 percent higher, primarily due to
increased deposit volumes. Total noninterest income was lower due to lower trust and investment
management account-level fees and the impact of interest rates on money market investment fees. The
total noninterest expense increase was primarily due to higher FDIC deposit insurance expense and
other intangibles expense.
Payment Services includes consumer and business credit cards, stored-value cards, debit cards,
corporate and purchasing card services, consumer lines of credit and merchant processing. Payment
Services offerings are highly inter-related with banking products and services of the other lines
of business and rely on access to the bank subsidiarys settlement network, lower cost funding
available to the Company, cross-selling opportunities and operating efficiencies. Payment Services
contributed $73 million of the
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January 20, 2010
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January 20, 2010
Page 28
Companys net income in the fourth quarter of 2009, a decrease of 11.0 percent from the same
period of 2008, but a 1.4 percent increase over the prior quarter. The decline year-over-year was
primarily due to a $104 million (23.6 percent) increase in the provision for credit losses driven
by an increase in net charge-offs. Total net revenue increased $143 million (14.4 percent). Net
interest income increased $40 million (13.9 percent) due to strong growth in credit card balances,
partially offset by the cost of rebates on the government card program. Total noninterest income
increased $103 million (14.7 percent) year-over-year due to higher merchant processing services,
higher corporate payment products and credit and debit card revenues primarily due to volume
growth. Other income was higher due to a contract termination fee. Total noninterest expense
increased $57 million (14.0 percent), principally due to higher marketing and business development
expense related to credit card products, an increase in technology and communications expense due
to increased volume and the formation of a joint venture and higher other intangibles expense.
Payment Services contribution in the fourth quarter of 2009 was $73 million, basically flat
compared with the third quarter of 2009. An increase in total net revenue was offset by an
increase in the provision for credit losses. Total net revenue increased $53 million (4.9 percent)
over the third quarter of 2009. Net interest income increased $29 million (9.7 percent) on a
linked quarter basis primarily due to loan growth. Total noninterest income grew $24 million (3.1
percent) due to seasonally higher credit and debit card revenue and higher merchant processing
services income due to fee-based activity. The provision for credit losses increased $51 million
(10.3 percent) due to higher net charge-offs and the impact of credit card portfolio growth and
higher delinquency rates.
Treasury and Corporate Support includes the Companys investment portfolios, funding, the FBOP
Banks acquisition, capital management, asset securitization, interest rate risk management, the net
effect of transfer pricing related to average balances and the residual aggregate of those expenses
associated with corporate activities that are managed on a consolidated basis. Treasury and
Corporate Support recorded net income of $106 million in the fourth quarter of 2009, compared with
a net loss of $98 million in the fourth quarter of 2008 and net income of $159 million in the third
quarter of 2009. Net interest income increased $316 million over the fourth quarter of 2008,
reflecting the impact of the current rate environment, wholesale funding decisions, the FBOP Banks
acquisition and the Companys asset/liability position. Total noninterest
income increased $85 million (45.9 percent) year-over-year, primarily due to lower net securities
losses. Total noninterest expense increased $142 million (91.0 percent), principally due to costs
related to affordable housing and other tax-advantaged projects and the impact of the FBOP Banks
acquisition.
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January 20, 2010
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January 20, 2010
Page 29
Net income in the fourth quarter of 2009 was lower on a linked quarter basis as total
noninterest expense was higher by $115 million (62.8 percent) partially offset by an increase in
total net revenue of $75 million (35.9 percent). The increase in total noninterest expense over
the third quarter of 2009 was due principally to the impact of the FBOP Banks acquisition and costs
related to affordable housing and other tax-advantaged projects. The increase in total net revenue
was driven by an increase in net interest income, partially offset by higher net securities losses.
Additional schedules containing more detailed information about the Companys business line results
are available on the web at usbank.com or by calling Investor Relations at 612-303-0781.
On Wednesday, January 20, 2010, at 7:30 a.m. (CT) Richard K. Davis, chairman,
president and chief executive officer, and Andrew Cecere, vice chairman and chief financial
officer, will host a conference call to discuss the financial results. A webcast of the conference
call and a copy of the presentation will be available on the Companys website. The conference
call will also be available by telephone. 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
48090877. For those unable to participate during the live call, a recording of the call will be
available approximately two hours after the conference call ends on Wednesday, January 20th, and
will run through Wednesday, January 27th, at 11:00 p.m. (CT). To access the recorded message
within the United States and Canada, dial 800-642-1687. If calling from outside the United States
and Canada, please dial 706-645-9291 to access the recording. The conference ID is 48090877. To
access the webcast and presentation go to www.usbank.com and click on About U.S. Bancorp and then
Investor/Shareholder Information. The webcast link and presentation can be found under Webcasts
and Presentations.
Minneapolis-based U.S. Bancorp (USB), with $281 billion in assets, is the parent company of U.S.
Bank National Association. The Company
operates 3,015 banking offices and 5,148 ATMs in 24 states, and provides a comprehensive line of
banking, brokerage, insurance, investment, mortgage, trust and payment services products to
consumers, businesses and institutions. Visit U.S. Bancorp on the web at usbank.com.
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U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
Page 30
January 20, 2010
Page 30
Forward-Looking Statements
The following information appears in accordance with the Private Securities Litigation Reform Act
of 1995:
This press release contains forward-looking statements about U.S. Bancorp. Statements that are not
historical or current facts, including statements about beliefs and expectations, are
forward-looking statements and are based on the information available to, and assumptions and
estimates made by, management as of the date made. 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. Global and
domestic economies could fail to recover from the recent economic downturn or could experience
another severe contraction, which could adversely affect U.S. Bancorps revenues and the values of
its assets and liabilities. Global financial markets could experience a recurrence of significant
turbulence, which could reduce the availability of funding to certain financial institutions and
lead to a tightening of credit, a reduction of business activity, and increased market volatility.
Stress in the commercial real estate markets, as well as a delay or failure of recovery in the
residential real estate markets, could cause additional credit losses and deterioration in asset
values. In addition, U.S. Bancorps business and financial performance could be impacted as the
financial industry restructures in the current environment, by increased regulation of financial
institutions or other effects of recently enacted legislation, and by changes in the competitive
landscape. U.S. Bancorps results could also be adversely affected by continued deterioration in
general business and economic conditions; changes in interest rates; deterioration in the credit
quality of its loan portfolios or in the value of the collateral securing those loans;
deterioration in the value of securities held in its investment securities portfolio; legal and
regulatory developments; increased competition from both banks and non-banks; changes in customer
behavior and preferences; effects of mergers and acquisitions and related integration; effects of
critical accounting policies and judgments; and managements ability to effectively manage credit
risk, market risk, operational risk, legal risk, and regulatory and compliance risk.
For discussion of these and other risks that may cause actual results to differ from expectations,
refer to U.S. Bancorps Annual Report on Form 10-K for the year ended December 31, 2008, on file
with the Securities and Exchange Commission, including the sections entitled Risk Factors and
Corporate Risk Profile 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. Forward-looking statements speak only as of the date they are made, and U.S. Bancorp
undertakes no obligation to update them in light of new information or future events.
Non-Regulatory Capital Ratios
In addition to capital ratios defined by banking regulators, the Company considers various other
ratios when evaluating capital utilization and adequacy, including:
| Tangible common equity to tangible assets, | ||
| Tier 1 common equity to risk-weighted assets, and | ||
| Tangible common equity to risk-weighted assets. |
(MORE)
U.S. Bancorp Reports Fourth Quarter 2009 Results
January 20, 2010
Page 31
January 20, 2010
Page 31
These non-regulatory capital ratios are viewed by management as useful additional methods of
reflecting the level of capital available to withstand unexpected market conditions. Additionally,
presentation of these measures allows readers to compare certain aspects of the Companys
capitalization to other financial services companies. These ratios differ from capital ratios
defined by banking regulators principally in that the numerator excludes shareholders equity
associated with preferred securities, the nature and extent of which varies among different
financial services companies. These ratios are not determined in accordance with generally
accepted accounting principals (GAAP) and are not defined in federal banking regulations. These
non-regulatory capital ratios disclosed by the Company may be considered non-GAAP financial
measures.
Despite the importance of these non-regulatory ratios to the Company, there are no standardized
definitions for them, and, as a result, the Companys calculation methods may differ from those
used by other financial services companies. Also, 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
Companys calculation of the non-regulatory capital ratios.
###
(MORE)
U.S. Bancorp
Consolidated Statement of Income
Consolidated Statement of Income
Three Months Ended | Year Ended | ||||||||||||||||
(Dollars and Shares in Millions, Except Per Share Data) | December 31, | December 31, | |||||||||||||||
(Unaudited) | 2009 | 2008 | 2009 | 2008 | |||||||||||||
Interest Income |
|||||||||||||||||
Loans |
$ | 2,496 | $ | 2,575 | $ | 9,564 | $ | 10,051 | |||||||||
Loans held for sale |
56 | 53 | 277 | 227 | |||||||||||||
Investment securities |
396 | 477 | 1,606 | 1,984 | |||||||||||||
Other interest income |
26 | 36 | 91 | 156 | |||||||||||||
Total interest income |
2,974 | 3,141 | 11,538 | 12,418 | |||||||||||||
Interest Expense |
|||||||||||||||||
Deposits |
265 | 392 | 1,202 | 1,881 | |||||||||||||
Short-term borrowings |
127 | 205 | 539 | 1,066 | |||||||||||||
Long-term debt |
272 | 423 | 1,279 | 1,739 | |||||||||||||
Total interest expense |
664 | 1,020 | 3,020 | 4,686 | |||||||||||||
Net interest income |
2,310 | 2,121 | 8,518 | 7,732 | |||||||||||||
Provision for credit losses |
1,388 | 1,267 | 5,557 | 3,096 | |||||||||||||
Net interest income after provision for credit losses |
922 | 854 | 2,961 | 4,636 | |||||||||||||
Noninterest Income |
|||||||||||||||||
Credit and debit card revenue |
273 | 256 | 1,055 | 1,039 | |||||||||||||
Corporate payment products revenue |
166 | 154 | 669 | 671 | |||||||||||||
Merchant processing services |
312 | 271 | 1,148 | 1,151 | |||||||||||||
ATM processing services |
101 | 95 | 410 | 366 | |||||||||||||
Trust and investment management fees |
277 | 300 | 1,168 | 1,314 | |||||||||||||
Deposit service charges |
238 | 260 | 970 | 1,081 | |||||||||||||
Treasury management fees |
132 | 128 | 552 | 517 | |||||||||||||
Commercial products revenue |
185 | 131 | 615 | 492 | |||||||||||||
Mortgage banking revenue |
218 | 23 | 1,035 | 270 | |||||||||||||
Investment products fees and commissions |
27 | 37 | 109 | 147 | |||||||||||||
Securities gains (losses), net |
(158 | ) | (253 | ) | (451 | ) | (978 | ) | |||||||||
Other |
245 | 61 | 672 | 741 | |||||||||||||
Total noninterest income |
2,016 | 1,463 | 7,952 | 6,811 | |||||||||||||
Noninterest Expense |
|||||||||||||||||
Compensation |
816 | 770 | 3,135 | 3,039 | |||||||||||||
Employee benefits |
145 | 124 | 574 | 515 | |||||||||||||
Net occupancy and equipment |
214 | 202 | 836 | 781 | |||||||||||||
Professional services |
81 | 73 | 255 | 240 | |||||||||||||
Marketing and business development |
105 | 90 | 378 | 310 | |||||||||||||
Technology and communications |
186 | 156 | 673 | 598 | |||||||||||||
Postage, printing and supplies |
70 | 77 | 288 | 294 | |||||||||||||
Other intangibles |
107 | 93 | 387 | 355 | |||||||||||||
Other |
504 | 353 | 1,755 | 1,216 | |||||||||||||
Total noninterest expense |
2,228 | 1,938 | 8,281 | 7,348 | |||||||||||||
Income before income taxes |
710 | 379 | 2,632 | 4,099 | |||||||||||||
Applicable income taxes |
108 | 27 | 395 | 1,087 | |||||||||||||
Net income |
602 | 352 | 2,237 | 3,012 | |||||||||||||
Net income attributable to noncontrolling interests |
| (22 | ) | (32 | ) | (66 | ) | ||||||||||
Net income attributable to U.S. Bancorp |
$ | 602 | $ | 330 | $ | 2,205 | $ | 2,946 | |||||||||
Net income applicable to U.S. Bancorp common
shareholders |
$ | 580 | $ | 259 | $ | 1,803 | $ | 2,819 | |||||||||
Earnings per common share |
$ | .30 | $ | .15 | $ | .97 | $ | 1.62 | |||||||||
Diluted earnings per common share |
$ | .30 | $ | .15 | $ | .97 | $ | 1.61 | |||||||||
Dividends declared per common share |
$ | .050 | $ | .425 | $ | .200 | $ | 1.700 | |||||||||
Average common shares outstanding |
1,908 | 1,754 | 1,851 | 1,742 | |||||||||||||
Average diluted common shares outstanding |
1,917 | 1,763 | 1,859 | 1,756 |
Page 32
U.S. Bancorp
Consolidated Ending Balance Sheet
Consolidated Ending Balance Sheet
December 31, | December 31, | |||||||
(Dollars in Millions) | 2009 | 2008 | ||||||
Assets |
||||||||
Cash and due from banks |
$ | 6,206 | $ | 6,859 | ||||
Investment securities |
||||||||
Held-to-maturity |
47 | 53 | ||||||
Available-for-sale |
44,721 | 39,468 | ||||||
Loans held for sale |
4,772 | 3,210 | ||||||
Loans |
||||||||
Commercial |
48,792 | 56,618 | ||||||
Commercial real estate |
34,093 | 33,213 | ||||||
Residential mortgages |
26,056 | 23,580 | ||||||
Retail |
63,955 | 60,368 | ||||||
Total loans, excluding covered assets |
172,896 | 173,779 | ||||||
Covered assets |
22,512 | 11,450 | ||||||
Total loans |
195,408 | 185,229 | ||||||
Less allowance for loan losses |
(5,079 | ) | (3,514 | ) | ||||
Net loans |
190,329 | 181,715 | ||||||
Premises and equipment |
2,263 | 1,790 | ||||||
Goodwill |
9,011 | 8,571 | ||||||
Other intangible assets |
3,406 | 2,834 | ||||||
Other assets |
20,421 | 21,412 | ||||||
Total assets |
$ | 281,176 | $ | 265,912 | ||||
Liabilities and Shareholders Equity |
||||||||
Deposits |
||||||||
Noninterest-bearing |
$ | 38,186 | $ | 37,494 | ||||
Interest-bearing |
115,135 | 85,886 | ||||||
Time deposits greater than $100,000 |
29,921 | 35,970 | ||||||
Total deposits |
183,242 | 159,350 | ||||||
Short-term borrowings |
31,312 | 33,983 | ||||||
Long-term debt |
32,580 | 38,359 | ||||||
Other liabilities |
7,381 | 7,187 | ||||||
Total liabilities |
254,515 | 238,879 | ||||||
Shareholders equity |
||||||||
Preferred stock |
1,500 | 7,931 | ||||||
Common stock |
21 | 20 | ||||||
Capital surplus |
8,319 | 5,830 | ||||||
Retained earnings |
24,116 | 22,541 | ||||||
Less treasury stock |
(6,509 | ) | (6,659 | ) | ||||
Accumulated other comprehensive income
(loss) |
(1,484 | ) | (3,363 | ) | ||||
Total U.S. Bancorp shareholders equity |
25,963 | 26,300 | ||||||
Noncontrolling interests |
698 | 733 | ||||||
Total equity |
26,661 | 27,033 | ||||||
Total liabilities and equity |
$ | 281,176 | $ | 265,912 | ||||
Page 33
U.S. Bancorp
Non-Regulatory Capital Ratios
Non-Regulatory Capital Ratios
December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
(Dollars in Millions, Unaudited) | 2009* | 2009 | 2009 | 2009 | 2008 | |||||||||||||||
Total equity |
$ | 26,661 | $ | 25,880 | $ | 24,886 | $ | 27,942 | $ | 27,033 | ||||||||||
Preferred stock |
(1,500 | ) | (1,500 | ) | (1,500 | ) | (7,939 | ) | (7,931 | ) | ||||||||||
Noncontrolling interests |
(698 | ) | (709 | ) | (715 | ) | (719 | ) | (733 | ) | ||||||||||
Goodwill (net of deferred tax liability) |
(8,482 | ) | (8,161 | ) | (8,035 | ) | (8,001 | ) | (8,153 | ) | ||||||||||
Intangible assets, other than mortgage servicing rights |
(1,657 | ) | (1,604 | ) | (1,479 | ) | (1,516 | ) | (1,640 | ) | ||||||||||
Tangible common equity (a) |
14,324 | 13,906 | 13,157 | 9,767 | 8,576 | |||||||||||||||
Tier 1 capital, determined in accordance with prescribed
regulatory requirements |
22,610 | 21,990 | 21,710 | 25,284 | 24,426 | |||||||||||||||
Trust preferred securities |
(4,524 | ) | (4,024 | ) | (4,024 | ) | (4,024 | ) | (4,024 | ) | ||||||||||
Preferred stock |
(1,500 | ) | (1,500 | ) | (1,500 | ) | (7,939 | ) | (7,931 | ) | ||||||||||
Noncontrolling interests, less preferred stock not
eligible for Tier 1 capital |
(692 | ) | (692 | ) | (692 | ) | (692 | ) | (693 | ) | ||||||||||
Tier 1 common equity (b) |
15,894 | 15,774 | 15,494 | 12,629 | 11,778 | |||||||||||||||
Total assets |
281,176 | 265,058 | 265,560 | 263,624 | 265,912 | |||||||||||||||
Goodwill (net of deferred tax liability) |
(8,482 | ) | (8,161 | ) | (8,035 | ) | (8,001 | ) | (8,153 | ) | ||||||||||
Intangible assets, other than mortgage servicing rights |
(1,657 | ) | (1,604 | ) | (1,479 | ) | (1,516 | ) | (1,640 | ) | ||||||||||
Tangible assets (c) |
271,037 | 255,293 | 256,046 | 254,107 | 256,119 | |||||||||||||||
Risk-weighted assets, determined in accordance
with prescribed regulatory requirements (d) |
235,202 | 231,993 | 231,821 | 232,043 | 230,628 | |||||||||||||||
Ratios |
||||||||||||||||||||
Tangible common equity to tangible assets (a)/(c) |
5.3 | % | 5.4 | % | 5.1 | % | 3.8 | % | 3.3 | % | ||||||||||
Tier 1 common equity to risk-weighted assets (b)/(d) |
6.8 | 6.8 | 6.7 | 5.4 | 5.1 | |||||||||||||||
Tangible common equity to risk-weighted assets (a)/(d) |
6.1 | 6.0 | 5.7 | 4.2 | 3.7 |
* | Preliminary data. Subject to change prior to filings with applicable regulatory agencies. |
Page 34