US BANCORP \DE\ - FORM 8-K - EX-99.1

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8-K - FORM 8-K - US BANCORP \DE\	d87859d8k.htm

Exhibit 99.1

News Release

Contacts:

Dana Ripley

Media

(612) 303-3167

Jennifer Thompson Investors/Analysts (612) 303-0778

U.S. BANCORP REPORTS THIRD QUARTER 2016 EARNINGS

Record Earnings Per Diluted Common Share of $0.84

Return on average assets of 1.36 percent and average common equity of 13.5 percent

Returned 79 percent of third quarter earnings to shareholders

MINNEAPOLIS, October 19, 2016 — U.S. Bancorp (NYSE: USB) today reported net income of $1,502 million for the third quarter of 2016, or $0.84 per diluted common share, compared with $1,489 million, or $0.81 per diluted common share, in the third quarter of 2015.

Highlights for the third quarter of 2016 included:

Industry-leading return on average assets of 1.36 percent, return on average common equity of 13.5 percent and efficiency ratio of 54.5 percent

Returned 79 percent of third quarter earnings to shareholders through dividends and share buybacks

Average total loans grew 1.1 percent on a linked quarter basis and 7.6 percent over the third quarter of 2015 (6.4 percent year-over-year, excluding the credit card portfolio acquisition at the end of the fourth quarter of 2015 and student loans, which were transferred from held for sale to held for investment in the third quarter of 2015)

Average total deposits grew 3.6 percent on a linked quarter basis and 10.0 percent over the third quarter of 2015

Net interest income (taxable-equivalent basis) grew 1.6 percent on a linked quarter basis and 4.3 percent year-over-year

Average earning assets grew 2.2 percent on a linked quarter basis and 6.6 percent year-over-year

Net interest margin of 2.98 percent for the third quarter of 2016, impacted by higher average cash balances, was down 4 basis points from 3.02 percent in the second quarter of 2016, and down 6 basis points from 3.04 percent in the third quarter of 2015

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Mortgage banking revenue increased 31.9 percent linked quarter and 40.2 percent year-over-year driven by strong refinancing activities due to lower longer-term interest rates during the third quarter of 2016

Credit quality was relatively stable

Nonperforming assets and net charge-offs decreased slightly on a linked quarter basis

Strong capital position. At September 30, 2016, the estimated common equity tier 1 capital to risk-weighted assets ratio was 9.3 percent using the Basel III fully implemented standardized approach and was 12.1 percent using the Basel III fully implemented advanced approaches method


EARNINGS SUMMARY																	Table 1
($ in millions, except per-share data)	3Q 2016		2Q 2016		3Q 2015		Percent Change 3Q16 vs 2Q16			Percent Change 3Q16 vs 3Q15		YTD 2016		YTD 2015		Percent Change


Net income attributable to U.S. Bancorp		$1,502		$1,522		$1,489		(1.3	)		.9		$4,410		$4,403		.2
Diluted earnings per common share		$.84		$.83		$.81		1.2			3.7		$2.43		$2.36		3.0

Return on average assets (%)		1.36		1.43		1.44							1.37		1.45
Return on average common equity (%)		13.5		13.8		14.1							13.4		14.1
Net interest margin (%)		2.98		3.02		3.04							3.02		3.05
Efficiency ratio (%) (a)		54.5		54.9		53.9							54.7		53.8
Tangible efficiency ratio (%) (a)		53.7		54.1		53.1							53.8		53.0

Dividends declared per common share		$.280		$.255		$.255		9.8			9.8		$.790		$.755		4.6
Book value per common share (period end)		$24.78		$24.37		$22.99		1.7			7.8

(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 for tangible efficiency ratio, intangible amortization.

Net income attributable to U.S. Bancorp was $1,502 million for the third quarter of 2016, 0.9 percent higher than the $1,489 million for the third quarter of 2015, and 1.3 percent lower than the $1,522 million for the second quarter of 2016. Diluted earnings per common share were $0.84 in the third quarter of 2016, $0.03 higher than the third quarter of 2015 and $0.01 higher than the second quarter of 2016. The increase in net income year-over-year was principally due to total net revenue growth, including an increase in net interest income of 4.3 percent on a taxable-equivalent basis (4.5 percent as reported on a GAAP basis), mainly a result of loan growth, and noninterest income growth of 5.1 percent, driven by higher mortgage banking revenue, trust and investment management fees, and credit and debit card revenue. This increase

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was partially offset by higher noninterest expense related to increased compensation expense due to merit increases and higher variable compensation expense along with hiring to support business growth and compliance programs, increased technology and communications expense reflecting capital investments, continued brand marketing, and higher other noninterest expense, which includes a special FDIC surcharge that began in the third quarter of 2016. The decrease in net income on a linked quarter basis was primarily driven by a 4.2 percent decrease in noninterest income partially offset by a 2.0 percent decrease in noninterest expense, both of which were impacted by notable items in the prior quarter including a $180 million Visa gain in noninterest income and $150 million in noninterest expense related to litigation accruals and a charitable contribution. Excluding the notable items from the second quarter of 2016, the increase in net income on a linked quarter basis was principally due to total net revenue growth of 2.3 percent reflecting an increase in net interest income of 1.6 percent on a taxable-equivalent basis (1.7 percent as reported on a GAAP basis) and noninterest income of 3.1 percent driven by mortgage banking and payment services revenue, partially offset by higher noninterest expense of 3.1 percent related to increased compensation expense, impacted by an additional business day in the current quarter compared with the previous quarter and increased staffing, and other noninterest expense reflecting seasonally higher costs related to investments in tax-advantaged projects and the FDIC surcharge.

U.S. Bancorp Chairman and Chief Executive Officer Richard K. Davis said, “U.S. Bancorp reported solid, industry-leading financial results in the third quarter. The banking industry continues to face steady headwinds, including persistently low interest rates, a flat yield curve, and a slow economic recovery that caused some commercial customers to pause investments in their businesses during the quarter. Despite the operating environment, we announced record earnings per share and solid revenue growth, particularly within our fee-based businesses. The continuing momentum in consumer lending led to growth in net interest income despite a decline in net interest margin. Fee-based revenues grew year over year across most categories including payments, mortgage banking and wealth management while capital markets continued to have solid performance in the third quarter. We remain confident in our ability to generate consistent, predictable and repeatable industry-leading financial results because of our diversified business model and the execution of our strategy.

“In this challenging operating environment, we remain focused on doing the right thing for our customers, our communities and our shareholders, and investing in our businesses in order to create value over the long-term. For customers who are looking to establish a relationship with a trusted financial institution, we continue to enhance offerings and business processes to provide convenient, accessible and

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affordable products and services to meet their unique objectives. For our communities, we achieved record-breaking results in our annual employee giving campaign. Every year, our employees choose to invest their time, talents and resources generously in the communities where we operate to make them more vibrant and prosperous. I am extremely proud of our 67,000 employees who work hard every day to create value for our customers, communities, and shareholders.

“And for our shareholders, our financial performance has enabled us to return 79 percent of our third quarter earnings to shareholders through dividends and share buybacks. We accomplished all this while strengthening the U.S. Bank brand and positioning the company for long-term growth.”


INCOME STATEMENT HIGHLIGHTS																							Table 2
($ in millions, except per-share data)										Percent Change 3Q16 vs 2Q16			Percent Change 3Q16 vs 3Q15
	3Q 2016			2Q 2016			3Q 2015			Percent Change 3Q16 vs 2Q16			Percent Change 3Q16 vs 3Q15			YTD 2016			YTD 2015			Percent Change


Net interest income		$2,893			$2,845			$2,768			1.7			4.5			$8,573			$8,182			4.8
Taxable-equivalent adjustment		50			51			53			(2.0	)		(5.7	)		154			161			(4.3	)

Net interest income (taxable-equivalent basis)		2,943			2,896			2,821			1.6			4.3			8,727			8,343			4.6
Noninterest income		2,445			2,552			2,326			(4.2	)		5.1			7,146			6,752			5.8

Total net revenue		5,388			5,448			5,147			(1.1	)		4.7			15,873			15,095			5.2
Noninterest expense		2,931			2,992			2,775			(2.0	)		5.6			8,672			8,122			6.8

Income before provision and income taxes		2,457			2,456			2,372			—			3.6			7,201			6,973			3.3
Provision for credit losses		325			327			282			(.6	)		15.2			982			827			18.7

Income before taxes		2,132			2,129			2,090			.1			2.0			6,219			6,146			1.2
Income taxes and taxable-equivalent adjustment		616			593			587			3.9			4.9			1,766			1,702			3.8

Net income		1,516			1,536			1,503			(1.3	)		.9			4,453			4,444			.2
Net (income) loss attributable to noncontrolling interests		(14	)		(14	)		(14	)		—			—			(43	)		(41	)		(4.9	)

Net income attributable to U.S. Bancorp		$1,502			$1,522			$1,489			(1.3	)		.9			$4,410			$4,403			.2

Net income applicable to U.S. Bancorp common shareholders		$1,434			$1,435			$1,422			(.1	)		.8			$4,198			$4,204			(.1	)

Diluted earnings per common share		$.84			$.83			$.81			1.2			3.7			$2.43			$2.36			3.0

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NET INTEREST INCOME																						Table 3
(Taxable-equivalent basis; $ in millions)	3Q 2016			2Q 2016			3Q 2015			Change 3Q16 vs 2Q16			Change 3Q16 vs 3Q15			YTD 2016			YTD 2015		Change


Components of net interest income
Income on earning assets		$3,371			$3,305			$3,171			$66			$200			$9,951			$9,410		$541
Expense on interest-bearing liabilities		428			409			350			19			78			1,224			1,067		157

Net interest income		$2,943			$2,896			$2,821			$47			$122			$8,727			$8,343		$384


Average yields and rates paid
Earning assets yield		3.41	%		3.44	%		3.42	%		(.03	)%		(.01	)%		3.44	%		3.44%		.00%
Rate paid on interest-bearing liabilities		.59			.58			.52			.01			.07			.57			.53		.04

Gross interest margin		2.82	%		2.86	%		2.90	%		(.04	)%		(.08	)%		2.87	%		2.91%		(.04)%

Net interest margin		2.98	%		3.02	%		3.04	%		(.04	)%		(.06	)%		3.02	%		3.05%		(.03)%


Average balances
Investment securities (a)		$108,109			$107,132			$103,943			$977			$4,166			$107,095			$102,361		$4,734
Loans		269,637			266,582			250,536			3,055			19,101			266,179			248,358		17,821
Earning assets		393,783			385,368			369,265			8,415			24,518			385,816			365,543		20,273
Interest-bearing liabilities		290,331			285,796			269,479			4,535			20,852			285,233			269,317		15,916

(a) Excludes unrealized gain (loss)

Net Interest Income

Net interest income on a taxable-equivalent basis in the third quarter of 2016 was $2,943 million, an increase of $122 million (4.3 percent) over the third quarter of 2015. The increase was driven by loan growth and higher interest rates, partially offset by the loan portfolio mix and lower yields in the investment portfolio. Average earning assets were $24.5 billion (6.6 percent) higher than the third quarter of 2015, driven by increases of $19.1 billion (7.6 percent) in average total loans and $4.2 billion (4.0 percent) in average investment securities. Net interest income on a taxable-equivalent basis increased $47 million (1.6 percent) linked quarter, primarily due to growth in average total loans, partially offset by lower reinvestment yields in the investment securities portfolio and higher average cash balances in the third quarter of 2016. Average earning assets were $8.4 billion (2.2 percent) higher on a linked quarter basis, reflecting growth in total loans of $3.1 billion (1.1 percent) and higher average cash balances.

The net interest margin in the third quarter of 2016 was 2.98 percent, compared with 3.04 percent in the third quarter of 2015, and 3.02 percent in the second quarter of 2016. The decrease in the net interest margin on a year-over-year basis was principally due to increased funding costs and higher average cash balances,

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along with securities purchases at lower average rates and lower reinvestment rates on maturing securities, partially offset by higher rates on new loans. On a linked quarter basis, the decrease in net interest margin primarily reflected higher average cash balances as well as lower average rates on new securities purchases and lower reinvestment rates on maturing securities, partially offset by the benefit of somewhat higher LIBOR rates for loans during the quarter.

Investment Securities

Average investment securities in the third quarter of 2016 were $4.2 billion (4.0 percent) higher year-over-year and $1.0 billion (0.9 percent) higher than the prior quarter. These increases were primarily due to purchases of U.S. Treasury and U.S. government agency-backed securities, net of prepayments and maturities, to support regulatory liquidity coverage ratio requirements.


AVERAGE LOANS																		Table 4
($ in millions)	3Q 2016		2Q 2016		3Q 2015		Percent Change 3Q16 vs 2Q16			Percent Change 3Q16 vs 3Q15			YTD 2016		YTD 2015		Percent Change


Commercial		$87,067		$86,899		$79,486		.2			9.5			$86,186		$77,880		10.7
Lease financing		5,302		5,255		5,218		.9			1.6			5,265		5,287		(.4	)

Total commercial		92,369		92,154		84,704		.2			9.0			91,451		83,167		10.0

Commercial mortgages		31,888		31,950		32,083		(.2	)		(.6	)		31,891		32,563		(2.1	)
Construction and development		11,486		11,038		10,233		4.1			12.2			11,031		9,913		11.3

Total commercial real estate		43,374		42,988		42,316		.9			2.5			42,922		42,476		1.1

Residential mortgages		56,284		55,501		51,831		1.4			8.6			55,334		51,458		7.5

Credit card		20,628		20,140		17,944		2.4			15.0			20,339		17,794		14.3

Retail leasing		5,773		5,326		5,480		8.4			5.3			5,427		5,663		(4.2	)
Home equity and second mortgages		16,470		16,394		16,083		.5			2.4			16,411		15,980		2.7
Other		30,608		29,748		27,286		2.9			12.2			29,971		26,768		12.0

Total other retail		52,851		51,468		48,849		2.7			8.2			51,809		48,411		7.0


Total loans, excluding covered loans		265,506		262,251		245,644		1.2			8.1			261,855		243,306		7.6


Covered loans		4,131		4,331		4,892		(4.6	)		(15.6	)		4,324		5,052		(14.4	)


Total loans		$269,637		$266,582		$250,536		1.1			7.6			$266,179		$248,358		7.2

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Loans

Average total loans were $19.1 billion (7.6 percent) higher in the third quarter of 2016 than the third quarter of 2015 (6.4 percent excluding student loans and the credit card portfolio acquisition). The increase was driven by growth in total commercial loans (9.0 percent), residential mortgages (8.6 percent), total other retail loans (8.2 percent, 5.2 percent excluding student loans), and credit card loans (15.0 percent, 5.9 percent excluding the credit card portfolio acquisition). These increases were partially offset by a decline in the run-off covered loans portfolio (15.6 percent). Average total loans were $3.1 billion (1.1 percent) higher in the third quarter of 2016 than the second quarter of 2016. The increase was driven by linked quarter growth in credit card loans (2.4 percent), residential mortgages (1.4 percent), and total other retail loans (2.7 percent).


AVERAGE DEPOSITS																		Table 5
($ in millions)	3Q 2016		2Q 2016		3Q 2015		Percent Change 3Q16 vs 2Q16			Percent Change 3Q16 vs 3Q15			YTD 2016		YTD 2015		Percent Change


Noninterest-bearing deposits		$82,021		$79,171		$80,940		3.6			1.3			$79,928		$77,623		3.0
Interest-bearing savings deposits
Interest checking		63,456		60,842		56,888		4.3			11.5			60,746		55,592		9.3
Money market savings		99,921		92,904		80,338		7.6			24.4			93,121		78,065		19.3
Savings accounts		40,695		40,258		37,480		1.1			8.6			40,070		36,866		8.7

Total of savings deposits		204,072		194,004		174,706		5.2			16.8			193,937		170,523		13.7
Time deposits		32,455		34,211		34,046		(5.1	)		(4.7	)		33,447		36,527		(8.4	)

Total interest-bearing deposits		236,527		228,215		208,752		3.6			13.3			227,384		207,050		9.8

Total deposits		$318,548		$307,386		$289,692		3.6			10.0			$307,312		$284,673		8.0

Deposits

Average total deposits for the third quarter of 2016 were $28.9 billion (10.0 percent) higher than the third quarter of 2015. Average noninterest-bearing deposits increased $1.1 billion (1.3 percent) year-over-year, mainly in Consumer and Small Business Banking, partially offset by a decline in deposits within Wealth Management and Securities Services. Average total savings deposits were $29.4 billion (16.8 percent) higher year-over-year, the result of growth across all business lines. Average time deposits were $1.6 billion (4.7 percent) lower than the prior year quarter. Changes in time deposits are largely related to

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

Average total deposits increased $11.2 billion (3.6 percent) over the second quarter of 2016. On a linked quarter basis, average noninterest-bearing deposits increased $2.9 billion (3.6 percent) and average total savings deposits increased $10.1 billion (5.2 percent) reflecting increases across all business lines. Average time deposits, which are managed based on funding needs, relative pricing, and liquidity characteristics, decreased $1.8 billion (5.1 percent) on a linked quarter basis.


NONINTEREST INCOME																				Table 6
($ in millions)	3Q 2016		2Q 2016		3Q 2015			Percent Change 3Q16 vs 2Q16			Percent Change 3Q16 vs 3Q15			YTD 2016		YTD 2015			Percent Change


Credit and debit card revenue		$299		$296		$269			1.0			11.2			$861		$776			11.0
Corporate payment products revenue		190		181		190			5.0			—			541		538			.6
Merchant processing services		412		403		400			2.2			3.0			1,188		1,154			2.9
ATM processing services		87		84		81			3.6			7.4			251		239			5.0
Trust and investment management fees		362		358		329			1.1			10.0			1,059		985			7.5
Deposit service charges		192		179		185			7.3			3.8			539		520			3.7
Treasury management fees		147		147		143			—			2.8			436		422			3.3
Commercial products revenue		219		238		231			(8.0	)		(5.2	)		654		645			1.4
Mortgage banking revenue		314		238		224			31.9			40.2			739		695			6.3
Investment products fees		41		39		46			5.1			(10.9	)		120		141			(14.9	)
Securities gains (losses), net		10		3		(1	)		nm			nm			16		(1	)		nm
Other		172		386		229			(55.4	)		(24.9	)		742		638			16.3


Total noninterest income		$2,445		$2,552		$2,326			(4.2	)		5.1			$7,146		$6,752			5.8

Noninterest Income

Third quarter noninterest income was $2,445 million, which was $119 million (5.1 percent) higher than the third quarter of 2015, reflecting increases in mortgage banking revenue, trust and investment management fees, credit and debit card revenue, and merchant processing services revenue, partially offset by declines in commercial products revenue and other noninterest income. Mortgage banking revenue increased $90 million (40.2 percent) driven by higher origination and sales volume in part due to refinancing activities in the marketplace. Trust and investment management fees increased $33 million (10.0 percent) reflecting lower money market fee waivers along with account growth, an increase in assets under

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management and improved market conditions. Credit and debit card revenue increased $30 million (11.2 percent) reflecting higher transaction volumes including acquired portfolios. Merchant processing services revenue increased $12 million (3.0 percent) as a result of an increase in product fees and higher volumes. Adjusted for the approximate $9 million impact of foreign currency rate changes, year-over-year merchant processing services revenue increased approximately 5.3 percent. Commercial products revenue decreased $12 million (5.2 percent), primarily driven by a large syndication transaction in the prior year.

Noninterest income was $107 million (4.2 percent) lower in the third quarter of 2016 than the second quarter of 2016. Excluding the impact of the second quarter 2016 notable item ($180 million of equity investment income, primarily the result of our membership in Visa Europe Limited which was sold to Visa, Inc. in the second quarter), noninterest income increased 3.1 percent principally driven by higher mortgage banking revenue, payment services revenue and deposit service charges. Mortgage banking revenue increased $76 million (31.9 percent) reflecting higher origination and sales volumes impacted by stronger refinancing activities along with a favorable change in the valuation of mortgage servicing rights, net of hedging activities. Deposit service charges increased $13 million (7.3 percent), corporate payment products revenue was seasonally higher by $9 million (5.0 percent) and merchant processing services revenue increased $9 million (2.2 percent) due to seasonally higher transaction volumes. Adjusted for the approximate $5 million impact of foreign currency rate changes, linked quarter merchant processing services revenue increased approximately 3.5 percent. Commercial products revenue decreased $19 million (8.0 percent) primarily due to higher capital markets volume in the prior quarter as a result of market volatility in the second quarter of 2016. Excluding the second quarter notable item, other noninterest income decreased $34 million (16.5 percent) primarily due to lower retail leasing revenue reflecting lower end-of-term gains on auto leases.

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NONINTEREST EXPENSE																		Table 7
($ in millions)	3Q 2016		2Q 2016		3Q 2015		Percent Change 3Q16 vs 2Q16			Percent Change 3Q16 vs 3Q15			YTD 2016		YTD 2015		Percent Change


Compensation	$	1,329	$	1,277	$	1,225		4.1			8.5		$	3,855	$	3,600		7.1
Employee benefits		280		278		285		.7			(1.8	)		858		895		(4.1	)
Net occupancy and equipment		250		243		251		2.9			(.4	)		741		745		(.5	)
Professional services		127		121		115		5.0			10.4			346		298		16.1
Marketing and business development		102		149		99		(31.5	)		3.0			328		265		23.8
Technology and communications		243		241		222		.8			9.5			717		657		9.1
Postage, printing and supplies		80		77		77		3.9			3.9			236		223		5.8
Other intangibles		45		44		42		2.3			7.1			134		128		4.7
Other		475		562		459		(15.5	)		3.5			1,457		1,311		11.1


Total noninterest expense	$	2,931	$	2,992	$	2,775		(2.0	)		5.6		$	8,672	$	8,122		6.8

Noninterest Expense

Third quarter noninterest expense was $2,931 million, which was $156 million (5.6 percent) higher than the third quarter of 2015, primarily related to higher compensation expense, technology and communications expense and other noninterest expense. Compensation expense increased $104 million (8.5 percent) principally due to the impact of hiring decisions to support business growth and compliance programs, merit increases, and higher variable compensation. Professional services increased $12 million (10.4 percent) from a year ago primarily due to compliance programs. Technology and communications expense increased $21 million (9.5 percent) including the impact of capital investments and costs related to acquired card portfolios. Other noninterest expense increased $16 million (3.5 percent), reflecting the impact of the FDIC surcharge, which began in the third quarter 2016.

Noninterest expense decreased $61 million (2.0 percent) on a linked quarter basis. Excluding the second quarter 2016 notable items, noninterest expense increased $89 million (3.1 percent), driven by higher compensation and other noninterest expense. Second quarter 2016 notable items included $110 million in accruals related to legal and regulatory matters along with a $40 million charitable contribution. Compensation expense increased $52 million (4.1 percent) due to an additional business day in the current quarter compared with the previous quarter and increased staffing. Excluding the second quarter notable items, other noninterest expense increased $23 million (5.1 percent) due to seasonally higher costs related to investments in tax-advantaged projects and the impact of the FDIC surcharge, which began in the current

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quarter, while marketing and business development decreased $7 million (6.4 percent) due to the timing of various marketing programs.

Provision for Income Taxes

The provision for income taxes for the third quarter of 2016 resulted in a tax rate on a taxable-equivalent basis of 28.9 percent (effective tax rate of 27.2 percent), compared with 28.1 percent (effective tax rate of 26.2 percent) in the third quarter of 2015, and 27.9 percent (effective tax rate of 26.1 percent) in the second quarter of 2016, reflecting the favorable settlement of certain tax examination matters in the prior quarters.

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U.S. Bancorp Reports Third Quarter 2016 Results

October 19, 2016

Page 12


ALLOWANCE FOR CREDIT LOSSES																										Table 8
($ in millions)	3Q						2Q						1Q						4Q						3Q
	2016			% (b)			2016			% (b)			2016			% (b)			2015			% (b)			2015			% (b)

Balance, beginning of period		$4,329						$4,320						$4,306						$4,306						$4,326
Net charge-offs
Commercial		84			.38			74			.34			78			.37			58			.28			68			.34
Lease financing		3			.23			5			.38			5			.38			5			.38			3			.23

Total commercial		87			.37			79			.34			83			.37			63			.29			71			.33
Commercial mortgages		5			.06			(4	)		(.05	)		(2	)		(.03	)		2			.02			—			—
Construction and development		(4	)		(.14	)		4			.15			(3	)		(.11	)		(2	)		(.08	)		(11	)		(.43	)

Total commercial real estate		1			.01			—			—			(5	)		(.05	)		—			—			(11	)		(.10	)
Residential mortgages		12			.08			17			.12			19			.14			16			.12			25			.19
Credit card		161			3.11			170			3.39			164			3.26			166			3.50			153			3.38
Retail leasing		1			.07			2			.15			1			.08			1			.08			2			.14
Home equity and second mortgages		1			.02			(1	)		(.02	)		2			.05			6			.15			7			.17
Other		52			.68			50			.68			51			.69			53			.71			45			.65

Total other retail		54			.41			51			.40			54			.43			60			.47			54			.44

Total net charge-offs, excluding covered loans		315			.47			317			.49			315			.49			305			.48			292			.47
Covered loans		—			—			—			—			—			—			—			—			—			—

Total net charge-offs		315			.46			317			.48			315			.48			305			.47			292			.46
Provision for credit losses		325						327						330						305						282
Other changes (a)		(1	)					(1	)					(1	)					—						(10	)

Balance, end of period		$4,338						$4,329						$4,320						$4,306						$4,306

Components
Allowance for loan losses		$3,797						$3,806						$3,853						$3,863						$3,965
Liability for unfunded credit commitments		541						523						467						443						341

Total allowance for credit losses		$4,338						$4,329						$4,320						$4,306						$4,306

Gross charge-offs		$398						$407						$405						$381						$372
Gross recoveries		$83						$90						$90						$76						$80
Allowance for credit losses as a percentage of
Period-end loans, excluding covered loans		1.61						1.62						1.65						1.67						1.71
Nonperforming loans, excluding covered loans		309						311						302						360						347
Nonperforming assets, excluding covered assets		264						263						255						288						280
Period-end loans		1.60						1.61						1.63						1.65						1.69
Nonperforming loans		310						312						303						361						347
Nonperforming assets		261						259						251						283						275

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

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U.S. Bancorp Reports Third Quarter 2016 Results

October 19, 2016

Page 13

Credit Quality

The Company’s provision for credit losses for the third quarter of 2016 was $325 million, which was relatively flat to the prior quarter and $43 million (15.2 percent) higher than the third quarter of 2015. Credit quality was relatively stable compared with the second quarter of 2016.

The provision for credit losses was $10 million higher than net charge-offs in the third quarter of 2016 and in the second quarter of 2016 and $10 million lower than net charge-offs in the third quarter of 2015. The reserve build for the third quarter of 2016 was driven by portfolio growth, partially offset by residential mortgage credit quality improvement. Total net charge-offs in the third quarter of 2016 were $315 million, compared with $317 million in the second quarter of 2016, and $292 million in the third quarter of 2015. Net charge-offs were relatively flat to the second quarter of 2016 mainly due to a modest increase in commercial loan net charge-offs, offset by seasonal declines in credit card net charge-offs. Net charge-offs increased $23 million (7.9 percent) compared with the third quarter of 2015 primarily due to higher commercial loan net charge-offs, partially offset by lower charge-offs related to residential mortgages. The net charge-off ratio was 0.46 percent in the third quarter of 2016, compared with 0.48 percent in the second quarter of 2016 and 0.46 percent in the third quarter of 2015.

The allowance for credit losses was $4,338 million at September 30, 2016, compared with $4,329 million at June 30, 2016, and $4,306 million at September 30, 2015. The ratio of the allowance for credit losses to period-end loans was 1.60 percent at September 30, 2016, compared with 1.61 percent at June 30, 2016, and 1.69 percent at September 30, 2015. The ratio of the allowance for credit losses to nonperforming loans was 310 percent at September 30, 2016, compared with 312 percent at June 30, 2016, and 347 percent at September 30, 2015.

Nonperforming assets were $1,664 million at September 30, 2016, compared with $1,672 million at June 30, 2016, and $1,567 million at September 30, 2015. The ratio of nonperforming assets to loans and other real estate was 0.61 percent at September 30, 2016, compared with 0.62 percent at June 30, 2016, and 0.61 percent at September 30, 2015. The $97 million (6.2 percent) increase in nonperforming assets on a year-over-year basis was driven by commercial loans within the energy portfolio, partially offset by improvements in the Company’s residential and commercial real estate portfolios. The decrease in nonperforming assets on a linked quarter basis of $8 million was driven by improvements in residential mortgages and other real estate. Accruing loans 90 days or more past due were $748 million ($518 million excluding covered loans) at September 30, 2016, compared with $724 million ($478 million excluding

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U.S. Bancorp Reports Third Quarter 2016 Results

October 19, 2016

Page 14

covered loans) at June 30, 2016, and $825 million ($510 million excluding covered loans) at September 30, 2015.

Commercial loans to customers in the energy sector were approximately $2.7 billion ($11.1 billion of commitments) at September 30, 2016, compared with $3.0 billion ($11.3 billion of commitments) at June 30, 2016. During the third quarter 2016, criticized commitments within the energy portfolio decreased by $427 million while nonperforming loans in the energy portfolio increased $37 million, primarily due to a single account. Energy portfolio loans represented 1.0 percent of the Company’s total loans outstanding at September 30, 2016, compared with 1.1 percent at June 30, 2016. At September 30, 2016, the Company had credit reserves of 8.9 percent of total outstanding energy loan balances, compared with 8.8 percent of total outstanding energy loan balances at June 30, 2016.


DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES										Table 9
(Percent)
	Sep 30 2016		Jun 30 2016		Mar 31 2016		Dec 31 2015		Sep 30 2015


Delinquent loan ratios - 90 days or more past due excluding nonperforming loans
Commercial		.05		.05		.05		.05		.05
Commercial real estate		.02		.03		.04		.03		.05
Residential mortgages		.28		.27		.31		.33		.33
Credit card		1.11		.98		1.10		1.09		1.10
Other retail		.14		.13		.15		.15		.14
Total loans, excluding covered loans		.19		.18		.20		.21		.20
Covered loans		5.72		5.81		6.23		6.31		6.57
Total loans		.28		.27		.30		.32		.32

Delinquent loan ratios - 90 days or more past due including nonperforming loans
Commercial		.61		.58		.57		.25		.25
Commercial real estate		.26		.27		.28		.33		.39
Residential mortgages		1.37		1.39		1.54		1.66		1.73
Credit card		1.13		1.00		1.14		1.13		1.16
Other retail		.42		.43		.45		.46		.47
Total loans, excluding covered loans		.72		.70		.75		.67		.70
Covered loans		5.89		5.98		6.39		6.48		6.80
Total loans		.79		.79		.84		.78		.81

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U.S. Bancorp Reports Third Quarter 2016 Results

October 19, 2016

Page 15


ASSET QUALITY										Table 10
($ in millions)
	Sep 30 2016		Jun 30 2016		Mar 31 2016		Dec 31 2015		Sep 30 2015


Nonperforming loans
Commercial		$477		$450		$457		$160		$157
Lease financing		40		39		16		14		12

Total commercial		517		489		473		174		169

Commercial mortgages		98		91		94		92		105
Construction and development		7		12		10		35		39

Total commercial real estate		105		103		104		127		144

Residential mortgages		614		628		677		712		735
Credit card		4		5		7		9		12
Other retail		153		157		157		162		171

Total nonperforming loans, excluding covered loans		1,393		1,382		1,418		1,184		1,231

Covered loans		7		7		7		8		11

Total nonperforming loans		1,400		1,389		1,425		1,192		1,242

Other real estate (a)		213		229		242		280		276
Covered other real estate (a)		28		34		33		32		31
Other nonperforming assets		23		20		19		19		18

Total nonperforming assets (b)		$1,664		$1,672		$1,719		$1,523		$1,567


Total nonperforming assets, excluding covered assets		$1,629		$1,631		$1,679		$1,483		$1,525


Accruing loans 90 days or more past due, excluding covered loans		$518		$478		$528		$541		$510


Accruing loans 90 days or more past due		$748		$724		$804		$831		$825


Performing restructured loans, excluding GNMA and covered loans		$2,672		$2,676		$2,735		$2,766		$2,746


Performing restructured GNMA and covered loans		$1,375		$1,602		$1,851		$1,944		$2,031


Nonperforming assets to loans plus ORE, excluding covered assets (%)		.61		.62		.64		.58		.61

Nonperforming assets to loans plus ORE (%)		.61		.62		.65		.58		.61

(a) Includes equity investments in entities whose principal assets are other real estate owned.
(b) Does not include accruing loans 90 days or more past due.

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U.S. Bancorp Reports Third Quarter 2016 Results

October 19, 2016

Page 16


COMMON SHARES														Table 11
(Millions)	3Q 2016			2Q 2016			1Q 2016			4Q 2015			3Q 2015


Beginning shares outstanding		1,719			1,732			1,745			1,754			1,767
Shares issued for stock incentive plans, acquisitions and other corporate purposes		2			2			3			1			3
Shares repurchased		(16	)		(15	)		(16	)		(10	)		(16	)

Ending shares outstanding		1,705			1,719			1,732			1,745			1,754


CAPITAL POSITION														Table 12
($ in millions)	Sep 30 2016			Jun 30 2016			Mar 31 2016			Dec 31 2015			Sep 30 2015


Total U.S. Bancorp shareholders’ equity		$47,759			$47,390			$46,755			$46,131			$45,075

Standardized Approach

Basel III transitional standardized approach
Common equity tier 1 capital		$33,827			$33,444			$32,827			$32,612			$32,124
Tier 1 capital		39,531			39,148			38,532			38,431			37,197
Total risk-based capital		47,452			47,049			45,412			45,313			44,015

Common equity tier 1 capital ratio		9.5	%		9.5	%		9.5	%		9.6	%		9.6	%
Tier 1 capital ratio		11.1			11.1			11.1			11.3			11.1
Total risk-based capital ratio		13.3			13.4			13.1			13.3			13.1
Leverage ratio		9.2			9.3			9.3			9.5			9.3

Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach		9.3			9.3			9.2			9.1			9.2

Advanced Approaches

Common equity tier 1 capital to risk-weighted assets for the Basel III transitional advanced approaches		12.4			12.3			12.3			12.5			13.0

Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches		12.1			12.0			11.9			11.9			12.4

Tangible common equity to tangible assets		7.5			7.6			7.7			7.6			7.7
Tangible common equity to risk-weighted assets		9.3			9.3			9.3			9.2			9.3

Beginning January 1, 2014, the regulatory capital requirements effective for the Company follow Basel III, subject to certain transition provisions from Basel I over the following four years to full implementation by January 1, 2018. Basel III includes two comprehensive methodologies for calculating risk-weighted assets: a general standardized approach and more risk-sensitive advanced approaches, with the Company’s capital adequacy being evaluated against the methodology that is most restrictive.

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U.S. Bancorp Reports Third Quarter 2016 Results

October 19, 2016

Page 17

Capital Management

Total U.S. Bancorp shareholders’ equity was $47.8 billion at September 30, 2016, compared with $47.4 billion at June 30, 2016, and $45.1 billion at September 30, 2015. During the third quarter, the Company returned 79 percent of earnings to shareholders through dividends and share buybacks.

All regulatory ratios continue to be in excess of “well-capitalized” requirements. The estimated common equity tier 1 capital to risk-weighted assets ratio using the Basel III fully implemented standardized approach was 9.3 percent at September 30, 2016, compared with 9.3 percent at June 30, 2016, and 9.2 percent at September 30, 2015. The estimated common equity tier 1 capital to risk-weighted assets ratio using the Basel III fully implemented advanced approaches method was 12.1 percent at September 30, 2016, compared with 12.0 percent at June 30, 2016, and 12.4 percent at September 30, 2015.

On Wednesday, October 19, 2016, at 8:00 a.m. CDT, Richard K. Davis, chairman and chief executive officer, and Terry Dolan, vice chairman and chief financial officer, will host a conference call to review the financial results. The conference call will be available online or by telephone. To access the webcast and presentation, go to www.usbank.com and click on “About U.S. Bank.” The “Webcasts & Presentations” link can be found under the Investor/Shareholder information heading, which is at the left side near the bottom of the page. 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 65198440. For those unable to participate during the live call, a recording will be available at approximately 11:00 a.m. CDT on Wednesday, October 19 and be accessible through Wednesday, October 26 at 11:00 p.m. CDT. To access the recorded message within the United States and Canada, dial 855-859-2056. If calling from outside the United States and Canada, please dial 404-537-3406 to access the recording. The conference ID is 65198440.

Minneapolis-based U.S. Bancorp (NYSE: USB), with $454 billion in assets as of September 30, 2016, is the parent company of U.S. Bank National Association, the fifth largest commercial bank in the United States. The Company operates 3,114 banking offices in 25 states and 4,875 ATMs and provides a comprehensive line of banking, investment, mortgage, trust and payment services products to consumers, businesses and institutions. Visit U.S. Bancorp on the web at www.usbank.com.

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U.S. Bancorp Reports Third Quarter 2016 Results

October 19, 2016

Page 18

Forward-Looking Statements

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

This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. A reversal or slowing of the current economic recovery or another severe contraction could adversely affect U.S. Bancorp’s 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 downturn in the residential real estate markets could cause credit losses and deterioration in asset values. In addition, U.S. Bancorp’s business and financial performance is likely to be negatively impacted by recently enacted and future legislation and regulation. U.S. Bancorp’s results could also be adversely affected by deterioration in general business and economic conditions (which could result, in part, from the United Kingdom’s withdrawal from the European Union); 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; litigation; increased competition from both banks and non-banks; changes in customer behavior and preferences; breaches in data security; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputational risk.

For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2015, 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. However, factors other than these also could adversely affect U.S. Bancorp’s results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.

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U.S. Bancorp Reports Third Quarter 2016 Results

October 19, 2016

Page 19

Non-GAAP Financial Measures

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

●

Tangible common equity to tangible assets,

●

Tangible common equity to risk-weighted assets,

●

Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach, and

●

Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches.

These capital measures are viewed by management as useful additional methods of reflecting the level of capital available to withstand unexpected market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Company’s capital position relative to other financial services companies. These measures differ from currently effective capital ratios defined by banking regulations principally in that the numerator includes unrealized gains and losses related to available-for-sale securities and excludes preferred securities, including preferred stock, the nature and extent of which varies among different financial services companies. These capital measures are not defined in generally accepted accounting principles (“GAAP”), or are not currently effective or defined in federal banking regulations. As a result, these capital measures disclosed by the Company may be considered non-GAAP financial measures.

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

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

###

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U.S. Bancorp

Consolidated Statement of Income


(Dollars and Shares in Millions, Except Per Share Data)	Three Months Ended September 30,					Nine Months Ended September 30,
(Unaudited)		2016		2015			2016		2015
Interest Income
Loans		$2,731		$2,520			$8,039		$7,476
Loans held for sale		43		60			110		166
Investment securities		515		502			1,555		1,502
Other interest income		31		35			89		102
Total interest income		3,320		3,117			9,793		9,246
Interest Expense
Deposits		161		113			452		344
Short-term borrowings		70		66			201		189
Long-term debt		196		170			567		531
Total interest expense		427		349			1,220		1,064
Net interest income		2,893		2,768			8,573		8,182
Provision for credit losses		325		282			982		827
Net interest income after provision for credit losses		2,568		2,486			7,591		7,355
Noninterest Income
Credit and debit card revenue		299		269			861		776
Corporate payment products revenue		190		190			541		538
Merchant processing services		412		400			1,188		1,154
ATM processing services		87		81			251		239
Trust and investment management fees		362		329			1,059		985
Deposit service charges		192		185			539		520
Treasury management fees		147		143			436		422
Commercial products revenue		219		231			654		645
Mortgage banking revenue		314		224			739		695
Investment products fees		41		46			120		141
Securities gains (losses), net		10		(1	)		16		(1	)
Other		172		229			742		638
Total noninterest income		2,445		2,326			7,146		6,752
Noninterest Expense
Compensation		1,329		1,225			3,855		3,600
Employee benefits		280		285			858		895
Net occupancy and equipment		250		251			741		745
Professional services		127		115			346		298
Marketing and business development		102		99			328		265
Technology and communications		243		222			717		657
Postage, printing and supplies		80		77			236		223
Other intangibles		45		42			134		128
Other		475		459			1,457		1,311
Total noninterest expense		2,931		2,775			8,672		8,122
Income before income taxes		2,082		2,037			6,065		5,985
Applicable income taxes		566		534			1,612		1,541
Net income		1,516		1,503			4,453		4,444
Net (income) loss attributable to noncontrolling interests		(14	)	(14	)		(43	)	(41	)
Net income attributable to U.S. Bancorp		$1,502		$1,489			$4,410		$4,403
Net income applicable to U.S. Bancorp common shareholders		$1,434		$1,422			$4,198		$4,204
Earnings per common share		$.84		$.81			$2.44		$2.38
Diluted earnings per common share		$.84		$.81			$2.43		$2.36
Dividends declared per common share		$.280		$.255			$.790		$.755
Average common shares outstanding		1,710		1,758			1,724		1,770
Average diluted common shares outstanding		1,716		1,766			1,730		1,778

Page 20

U.S. Bancorp

Consolidated Ending Balance Sheet


(Dollars in Millions)	September 30, 2016			December 31, 2015			September 30, 2015
Assets		(Unaudited	)					(Unaudited	)
Cash and due from banks		$23,664			$11,147			$10,450
Investment securities
Held-to-maturity		42,873			43,590			44,690
Available-for-sale		67,155			61,997			60,396
Loans held for sale		5,575			3,184			4,472
Loans
Commercial		93,201			88,402			85,539
Commercial real estate		43,468			42,137			42,478
Residential mortgages		56,229			53,496			52,349
Credit card		20,706			21,012			18,583
Other retail		53,664			51,206			51,051

Total loans, excluding covered loans		267,268			256,253			250,000
Covered loans		4,021			4,596			4,791

Total loans		271,289			260,849			254,791
Less allowance for loan losses		(3,797	)		(3,863	)		(3,965	)

Net loans		267,492			256,986			250,826
Premises and equipment		2,449			2,513			2,515
Goodwill		9,357			9,361			9,368
Other intangible assets		2,887			3,350			3,176
Other assets		32,682			29,725			30,050

Total assets		$454,134			$421,853			$415,943

Liabilities and Shareholders’ Equity
Deposits
Noninterest-bearing		$89,101			$83,766			$83,549
Interest-bearing		245,494			216,634			211,715

Total deposits		334,595			300,400			295,264
Short-term borrowings		15,695			27,877			26,915
Long-term debt		37,978			32,078			32,504
Other liabilities		17,467			14,681			15,493

Total liabilities		405,735			375,036			370,176
Shareholders’ equity
Preferred stock		5,501			5,501			4,756
Common stock		21			21			21
Capital surplus		8,429			8,376			8,362
Retained earnings		49,231			46,377			45,413
Less treasury stock		(14,844	)		(13,125	)		(12,756	)
Accumulated other comprehensive income (loss)		(579	)		(1,019	)		(721	)

Total U.S. Bancorp shareholders’ equity		47,759			46,131			45,075
Noncontrolling interests		640			686			692

Total equity		48,399			46,817			45,767

Total liabilities and equity		$454,134			$421,853			$415,943

Page 21

U.S. Bancorp

Non-GAAP Financial Measures


(Dollars in Millions, Unaudited)	September 30, 2016			June 30, 2016			March 31, 2016			December 31, 2015			September 30, 2015
Total equity		$48,399			$48,029			$47,393			$46,817			$45,767
Preferred stock		(5,501	)		(5,501	)		(5,501	)		(5,501	)		(4,756	)
Noncontrolling interests		(640	)		(639	)		(638	)		(686	)		(692	)
Goodwill (net of deferred tax liability) (1)		(8,239	)		(8,246	)		(8,270	)		(8,295	)		(8,324	)
Intangible assets, other than mortgage servicing rights		(756	)		(796	)		(820	)		(838	)		(779	)
Tangible common equity (a)		33,263			32,847			32,164			31,497			31,216

Tangible common equity (as calculated above)		33,263			32,847			32,164			31,497			31,216
Adjustments (2)		97			133			99			67			118
Common equity tier 1 capital estimated for the Basel III fully implemented standardized and advanced approaches (b)		33,360			32,980			32,263			31,564			31,334

Total assets		454,134			438,463			428,638			421,853			415,943
Goodwill (net of deferred tax liability) (1)		(8,239	)		(8,246	)		(8,270	)		(8,295	)		(8,324	)
Intangible assets, other than mortgage servicing rights		(756	)		(796	)		(820	)		(838	)		(779	)
Tangible assets (c)		445,139			429,421			419,548			412,720			406,840

Risk-weighted assets, determined in accordance with prescribed transitional standardized approach regulatory requirements (d)		356,733	*		351,462			346,227			341,360			336,227
Adjustments (3)		3,165	*		3,079			3,485			3,892			3,532
Risk-weighted assets estimated for the Basel III fully implemented standardized approach (e)		359,898	*		354,541			349,712			345,252			339,759

Risk-weighted assets, determined in accordance with prescribed transitional advanced approaches regulatory requirements		272,832	*		271,495			267,309			261,668			248,048
Adjustments (4)		3,372	*		3,283			3,707			4,099			3,723
Risk-weighted assets estimated for the Basel III fully implemented advanced approaches (f)		276,204	*		274,778			271,016			265,767			251,771

Ratios *
Tangible common equity to tangible assets (a)/(c)		7.5	%		7.6	%		7.7	%		7.6	%		7.7	%
Tangible common equity to risk-weighted assets (a)/(d)		9.3			9.3			9.3			9.2			9.3
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach (b)/(e)		9.3			9.3			9.2			9.1			9.2
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches (b)/(f)		12.1			12.0			11.9			11.9			12.4
	Three Months Ended									Nine Months Ended
		September 30, 2016			June 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
Net interest income		$2,893			$2,845			$2,768			$8,573			$8,182
Taxable-equivalent adjustment (5)		50			51			53			154			161
Net interest income, on a taxable-equivalent basis		$2,943			$2,896			$2,821			$8,727			$8,343

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

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

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

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

(4) Primarily reflects higher risk-weighting for mortgage servicing rights.

(5) Utilizes a tax rate of 35 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.

Page 22

Supplemental Business Line Schedules

3Q 2016

LOGO

U.S. Bancorp Third Quarter 2016 Business Line Results

October 19, 2016

Page 2


LINE OF BUSINESS FINANCIAL PERFORMANCE (a)
($ in millions)
	Net Income Attributable to U.S. Bancorp						Percent Change						Net Income Attributable to U.S. Bancorp							3Q 2016

Business Line	3Q 2016		2Q 2016		3Q 2015		3Q16 vs 2Q16			3Q16 vs 3Q15			YTD 2016		YTD 2015		Percent Change			Earnings Composition
Wholesale Banking and Commercial Real Estate		$230		$237		$205		(3.0	)		12.2			$587		$665		(11.7	)		15	%
Consumer and Small Business Banking		373		337		312		10.7			19.6			1,069		969		10.3			25
Wealth Management and Securities Services		95		100		60		(5.0	)		58.3			274		175		56.6			6
Payment Services		331		328		322		.9			2.8			951		841		13.1			22
Treasury and Corporate Support		473		520		590		(9.0	)		(19.8	)		1,529		1,753		(12.8	)		32

Consolidated Company		$1,502		$1,522		$1,489		(1.3	)		.9			$4,410		$4,403		.2			100	%


(a) preliminary data

Lines of Business

The Company’s major lines of business are Wholesale Banking and Commercial Real Estate, Consumer and Small Business Banking, Wealth Management and 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 line’s operations are charged to the applicable business line based on its utilization of those services, primarily measured by the volume of customer activities, number of employees or other relevant factors. These allocated expenses are reported as net shared services expense within noninterest expense. Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Company’s diverse customer base. During 2016, certain organization and methodology changes were made and, accordingly, prior period results were restated and presented on a comparable basis.

U.S. Bancorp Third Quarter 2016 Business Line Results

October 19, 2016

Page 3


WHOLESALE BANKING AND COMMERCIAL REAL ESTATE (a)
($ in millions)							Percent Change

	3Q 2016		2Q 2016		3Q 2015		3Q16 vs 2Q16			3Q16 vs 3Q15			YTD 2016		YTD 2015		Percent Change

Condensed Income Statement
Net interest income (taxable-equivalent basis)		$563		$546		$507		3.1			11.0			$1,638		$1,495		9.6
Noninterest income		220		250		225		(12.0	)		(2.2	)		676		670		.9
Securities gains (losses), net		—		—		—		—			—			—		—		—

Total net revenue		783		796		732		(1.6	)		7.0			2,314		2,165		6.9
Noninterest expense		348		355		329		(2.0	)		5.8			1,047		986		6.2
Other intangibles		1		1		1		—			—			3		3		—

Total noninterest expense		349		356		330		(2.0	)		5.8			1,050		989		6.2

Income before provision and taxes		434		440		402		(1.4	)		8.0			1,264		1,176		7.5
Provision for credit losses		73		68		80		7.4			(8.8	)		342		130		nm

Income before income taxes		361		372		322		(3.0	)		12.1			922		1,046		(11.9	)
Income taxes and taxable-equivalent adjustment		131		135		117		(3.0	)		12.0			335		381		(12.1	)

Net income		230		237		205		(3.0	)		12.2			587		665		(11.7	)
Net (income) loss attributable to noncontrolling interests		—		—		—		—			—			—		—		—

Net income attributable to U.S. Bancorp		$230		$237		$205		(3.0	)		12.2			$587		$665		(11.7	)

Average Balance Sheet Data
Loans		$92,299		$92,099		$85,581		.2			7.8			$91,520		$84,358		8.5
Other earning assets		2,500		2,232		2,247		12.0			11.3			2,324		2,316		.3
Goodwill		1,647		1,647		1,647		—			—			1,647		1,647		—
Other intangible assets		16		17		20		(5.9	)		(20.0	)		17		21		(19.0	)
Assets		100,871		100,481		93,681		.4			7.7			99,937		92,805		7.7
Noninterest-bearing deposits		36,624		36,177		36,929		1.2			(.8	)		36,498		35,742		2.1
Interest-bearing deposits		67,406		61,412		50,210		9.8			34.2			61,230		50,224		21.9

Total deposits		104,030		97,589		87,139		6.6			19.4			97,728		85,966		13.7
Total U.S. Bancorp shareholders’ equity		8,997		8,966		8,497		.3			5.9			8,927		8,261		8.1

(a) preliminary data

Wholesale Banking and Commercial Real Estate offers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution, non-profit and public sector clients. Wholesale Banking and Commercial Real Estate contributed $230 million of the Company’s net income in the third quarter of 2016, compared with $205 million in the third quarter of 2015. Wholesale Banking and Commercial Real Estate’s net income increased $25 million (12.2 percent) from the same quarter of 2015 primarily due to an increase in net interest income partially offset by an increase in noninterest expense. Total net revenue increased $51 million (7.0 percent) primarily due to a $56 million (11.0 percent) increase in net interest income, partially offset by a $5 million (2.2 percent) decrease in total

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October 19, 2016

Page 4

noninterest income. Net interest income increased year-over-year primarily due to higher average loan and deposit balances, partially offset by lower rates on loans. The decrease in total noninterest income reflected a large syndication transaction in the prior year and higher loan-related charges, partially offset by higher foreign currency customer activity and capital markets volume. Total noninterest expense was $19 million (5.8 percent) higher compared with a year ago primarily due to an increase in variable costs allocated to manage the business, including the impact of the FDIC surcharge. The provision for credit losses decreased $7 million (8.8 percent) primarily due to a favorable change in the reserve allocation, partially offset by an increase in net charge-offs.

U.S. Bancorp Third Quarter 2016 Business Line Results

October 19, 2016

Page 5


CONSUMER AND SMALL BUSINESS BANKING (a)
($ in millions)							Percent Change

	3Q 2016		2Q 2016		3Q 2015		3Q16 vs 2Q16			3Q16 vs 3Q15			YTD 2016		YTD 2015		Percent Change

Condensed Income Statement
Net interest income (taxable-equivalent basis)		$1,203		$1,170		$1,150		2.8			4.6			$3,532		$3,410		3.6
Noninterest income		712		637		629		11.8			13.2			1,900		1,877		1.2
Securities gains (losses), net		—		—		—		—			—			—		—		—

Total net revenue		1,915		1,807		1,779		6.0			7.6			5,432		5,287		2.7
Noninterest expense		1,275		1,225		1,247		4.1			2.2			3,704		3,616		2.4
Other intangibles		8		8		10		—			(20.0	)		24		30		(20.0	)

Total noninterest expense		1,283		1,233		1,257		4.1			2.1			3,728		3,646		2.2

Income before provision and taxes		632		574		522		10.1			21.1			1,704		1,641		3.8
Provision for credit losses		45		44		31		2.3			45.2			22		118		(81.4	)

Income before income taxes		587		530		491		10.8			19.6			1,682		1,523		10.4
Income taxes and taxable-equivalent adjustment		214		193		179		10.9			19.6			613		554		10.6

Net income		373		337		312		10.7			19.6			1,069		969		10.3
Net (income) loss attributable to noncontrolling interests		—		—		—		—			—			—		—		—

Net income attributable to U.S. Bancorp		$373		$337		$312		10.7			19.6			$1,069		$969		10.3

Average Balance Sheet Data
Loans		$137,671		$135,643		$129,341		1.5			6.4			$135,664		$128,726		5.4
Other earning assets		5,257		4,347		7,625		20.9			(31.1	)		4,444		7,145		(37.8	)
Goodwill		3,681		3,681		3,681		—			—			3,681		3,681		—
Other intangible assets		2,270		2,399		2,661		(5.4	)		(14.7	)		2,393		2,573		(7.0	)
Assets		153,496		150,586		147,273		1.9			4.2			150,704		146,200		3.1
Noninterest-bearing deposits		28,380		26,964		26,514		5.3			7.0			27,111		25,539		6.2
Interest-bearing deposits		115,884		115,054		109,605		.7			5.7			114,624		109,183		5.0

Total deposits		144,264		142,018		136,119		1.6			6.0			141,735		134,722		5.2
Total U.S. Bancorp shareholders’ equity		11,312		11,082		10,629		2.1			6.4			11,138		10,944		1.8

(a) preliminary data

Consumer and Small Business Banking delivers products and services through banking offices, telephone servicing and sales, on-line services, direct mail, ATM processing and mobile devices, such as mobile phones and tablet computers. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking. Consumer and Small Business Banking contributed $373 million of the Company’s net income in the third quarter of 2016, compared with $312 million in the third quarter of 2015. Consumer and Small Business Banking’s net income increased $61 million (19.6 percent) from the same quarter of 2015 due to an increase in total net revenue, partially offset by an increase in noninterest expense and an increase in the provision for credit losses. Total net revenue increased $136 million (7.6 percent) due to higher noninterest income and net interest income. Noninterest income was $83 million (13.2 percent) higher, driven by higher mortgage banking revenue, reflecting the impact of higher origination and

U.S. Bancorp Third Quarter 2016 Business Line Results

October 19, 2016

Page 6

sales revenue in part due to refinancing activities in the marketplace. Net interest income was $53 million (4.6 percent) higher, primarily due to higher average loan and deposit balances, partially offset by lower loan rates. Total noninterest expense in the third quarter of 2016 increased $26 million (2.1 percent) over the same quarter of the prior year, primarily due to higher net shared services expense and higher compensation expense, reflecting the impact of merit increases and increased staffing, partially offset by the impact of a prior year legal matter. The provision for credit losses increased $14 million (45.2 percent) primarily due to an unfavorable change in the reserve allocation, partially offset by lower net charge-offs.

U.S. Bancorp Third Quarter 2016 Business Line Results

October 19, 2016

Page 7


WEALTH MANAGEMENT AND SECURITIES SERVICES (a)
($ in millions)
								Percent Change

	3Q 2016			2Q 2016		3Q 2015		3Q16 vs 2Q16			3Q16 vs 3Q15			YTD 2016			YTD 2015		Percent Change

Condensed Income Statement
Net interest income (taxable-equivalent basis)		$135			$122		$90		10.7			50.0			$374			$252		48.4
Noninterest income		403			401		368		.5			9.5			1,183			1,100		7.5
Securities gains (losses), net		—			—		—		—			—			—			—		—

Total net revenue		538			523		458		2.9			17.5			1,557			1,352		15.2
Noninterest expense		383			359		355		6.7			7.9			1,110			1,056		5.1
Other intangibles		6			6		7		—			(14.3	)		18			21		(14.3	)

Total noninterest expense		389			365		362		6.6			7.5			1,128			1,077		4.7

Income before provision and taxes		149			158		96		(5.7	)		55.2			429			275		56.0
Provision for credit losses		(1	)		1		1		nm			nm			(2	)		—		nm

Income before income taxes		150			157		95		(4.5	)		57.9			431			275		56.7
Income taxes and taxable-equivalent adjustment		55			57		35		(3.5	)		57.1			157			100		57.0

Net income		95			100		60		(5.0	)		58.3			274			175		56.6
Net (income) loss attributable to noncontrolling interests		—			—		—		—			—			—			—		—

Net income attributable to U.S. Bancorp		$95			$100		$60		(5.0	)		58.3			$274			$175		56.6

Average Balance Sheet Data
Loans		$7,297			$7,051		$6,214		3.5			17.4			$7,132			$6,086		17.2
Other earning assets		142			138		203		2.9			(30.0	)		139			210		(33.8	)
Goodwill		1,567			1,568		1,567		(.1	)		—			1,566			1,567		(.1	)
Other intangible assets		99			104		123		(4.8	)		(19.5	)		104			130		(20.0	)
Assets		10,382			10,076		9,117		3.0			13.9			10,249			9,143		12.1
Noninterest-bearing deposits		13,825			13,089		14,922		5.6			(7.4	)		13,270			13,776		(3.7	)
Interest-bearing deposits		51,705			48,439		46,705		6.7			10.7			48,586			44,932		8.1

Total deposits		65,530			61,528		61,627		6.5			6.3			61,856			58,708		5.4
Total U.S. Bancorp shareholders’ equity		2,378			2,385		2,308		(.3	)		3.0			2,379			2,306		3.2

(a) preliminary data

Wealth Management and Securities Services provides private banking, financial advisory services, investment management, retail brokerage services, insurance, trust, custody and fund servicing through five businesses: Wealth Management, Corporate Trust Services, U.S. Bancorp Asset Management, Institutional Trust & Custody and Fund Services. Wealth Management and Securities Services contributed $95 million of the Company’s net income in the third quarter of 2016, compared with $60 million in the third quarter of 2015. The business line’s contribution was $35 million (58.3 percent) higher than the same quarter of 2015, reflecting an increase in total net revenue, partially offset by an increase in total noninterest expense. Total net revenue increased $80 million (17.5 percent) year-over-year driven by an increase in net interest income of $45 million (50.0 percent), principally due to the impact of higher rates on the margin benefit from

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October 19, 2016

Page 8

deposits, along with a $35 million (9.5 percent) increase in total noninterest income, reflecting the impact of lower money market fee waivers, growth in assets under management and improved market conditions. Total noninterest expense increased $27 million (7.5 percent) primarily as a result of higher compensation, reflecting the impact of merit increases and higher staffing. The provision for credit losses was relatively flat compared with the prior year quarter.

U.S. Bancorp Third Quarter 2016 Business Line Results

October 19, 2016

Page 9


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

	3Q 2016			2Q 2016			3Q 2015			3Q16 vs 2Q16			3Q16 vs 3Q15			YTD 2016			YTD 2015			Percent Change

Condensed Income Statement
Net interest income (taxable-equivalent basis)		$538			$513			$484			4.9			11.2			$1,578			$1,410			11.9
Noninterest income		912			923			874			(1.2	)		4.3			2,651			2,501			6.0
Securities gains (losses), net		—			—			—			—			—			—			—			—

Total net revenue		1,450			1,436			1,358			1.0			6.8			4,229			3,911			8.1
Noninterest expense		679			664			635			2.3			6.9			1,991			1,892			5.2
Other intangibles		30			29			24			3.4			25.0			89			74			20.3

Total noninterest expense		709			693			659			2.3			7.6			2,080			1,966			5.8

Income before provision and taxes		741			743			699			(.3	)		6.0			2,149			1,945			10.5
Provision for credit losses		208			215			180			(3.3	)		15.6			615			585			5.1

Income before income taxes		533			528			519			.9			2.7			1,534			1,360			12.8
Income taxes and taxable-equivalent adjustment		194			192			189			1.0			2.6			558			495			12.7

Net income		339			336			330			.9			2.7			976			865			12.8
Net (income) loss attributable to noncontrolling interests		(8	)		(8	)		(8	)		—			—			(25	)		(24	)		(4.2	)

Net income attributable to U.S. Bancorp		$331			$328			$322			.9			2.8			$951			$841			13.1

Average Balance Sheet Data
Loans		$28,909			$28,193			$25,769			2.5			12.2			$28,309			$25,374			11.6
Other earning assets		267			275			402			(2.9	)		(33.6	)		381			353			7.9
Goodwill		2,463			2,472			2,476			(.4	)		(.5	)		2,467			2,477			(.4	)
Other intangible assets		494			506			381			(2.4	)		29.7			503			403			24.8
Assets		34,733			33,997			31,585			2.2			10.0			34,245			31,364			9.2
Noninterest-bearing deposits		954			925			851			3.1			12.1			947			875			8.2
Interest-bearing deposits		98			97			710			1.0			(86.2	)		97			692			(86.0	)

Total deposits		1,052			1,022			1,561			2.9			(32.6	)		1,044			1,567			(33.4	)
Total U.S. Bancorp shareholders’ equity		6,386			6,376			5,829			.2			9.6			6,362			5,809			9.5

(a) preliminary data

Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services, consumer lines of credit and merchant processing. Payment Services contributed $331 million of the Company’s net income in the third quarter of 2016, compared with $322 million in the third quarter of 2015. The $9 million (2.8 percent) increase in the business line’s contribution over the prior year was primarily due to an increase in total net revenue. Total net revenue increased $92 million (6.8 percent) year-over-year. Net interest income increased $54 million (11.2 percent), primarily due to higher average loan balances and fees. Total noninterest income was $38 million (4.3 percent) higher year-over-year due to an increase in credit and debit card revenue on higher transaction volumes and an increase in merchant processing services as a result of an increase in product fees and higher volumes. Total noninterest expense increased $50 million (7.6 percent) over the third quarter of

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2015, reflecting higher compensation expense and net shared services expense, along with increased technology and communications expense, which was impacted by card portfolio acquisitions. The provision for credit losses increased $28 million (15.6 percent) primarily due to an unfavorable change in the reserve allocation and higher net charge-offs.

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

	3Q 2016			2Q 2016			3Q 2015			3Q16 vs 2Q16			3Q16 vs 3Q15			YTD 2016			YTD 2015			Percent Change

Condensed Income Statement
Net interest income (taxable-equivalent basis)		$504			$545			$590			(7.5	)		(14.6	)		$1,605			$1,776			(9.6	)
Noninterest income		188			338			231			(44.4	)		(18.6	)		720			605			19.0
Securities gains (losses), net		10			3			(1	)		nm			nm			16			(1	)		nm

Total net revenue		702			886			820			(20.8	)		(14.4	)		2,341			2,380			(1.6	)
Noninterest expense		201			345			167			(41.7	)		20.4			686			444			54.5
Other intangibles		—			—			—			—			—			—			—			—

Total noninterest expense		201			345			167			(41.7	)		20.4			686			444			54.5

Income before provision and taxes		501			541			653			(7.4	)		(23.3	)		1,655			1,936			(14.5	)
Provision for credit losses		—			(1	)		(10	)		nm			nm			5			(6	)		nm

Income before income taxes		501			542			663			(7.6	)		(24.4	)		1,650			1,942			(15.0	)
Income taxes and taxable-equivalent adjustment		22			16			67			37.5			(67.2	)		103			172			(40.1	)

Net income		479			526			596			(8.9	)		(19.6	)		1,547			1,770			(12.6	)
Net (income) loss attributable to noncontrolling interests		(6	)		(6	)		(6	)		—			—			(18	)		(17	)		(5.9	)

Net income attributable to U.S. Bancorp		$473			$520			$590			(9.0	)		(19.8	)		$1,529			$1,753			(12.8	)

Average Balance Sheet Data
Loans		$3,461			$3,596			$3,631			(3.8	)		(4.7	)		$3,554			$3,814			(6.8	)
Other earning assets		115,980			111,794			108,252			3.7			7.1			112,349			107,161			4.8
Goodwill		—			—			—			—			—			—			—			—
Other intangible assets		—			—			—			—			—			—			—			—
Assets		138,381			133,610			128,783			3.6			7.5			134,286			127,245			5.5
Noninterest-bearing deposits		2,238			2,016			1,724			11.0			29.8			2,102			1,691			24.3
Interest-bearing deposits		1,434			3,213			1,522			(55.4	)		(5.8	)		2,847			2,019			41.0

Total deposits		3,672			5,229			3,246			(29.8	)		13.1			4,949			3,710			33.4
Total U.S. Bancorp shareholders’ equity		18,718			18,375			17,604			1.9			6.3			18,434			17,169			7.4

(a) preliminary data

Treasury and Corporate Support includes the Company’s investment portfolios, funding, capital management, interest rate risk management, income taxes not allocated to the business lines, including most investments in tax-advantaged projects, and the residual aggregate of those expenses associated with corporate activities that are managed on a consolidated basis. Treasury and Corporate Support recorded net income of $473 million in the third quarter of 2016, compared with $590 million in the third quarter of 2015. The decrease in net income of $117 million (19.8 percent) from the prior year was primarily due to a decrease in total net revenue and an increase in total noninterest expense. Net interest income decreased $86 million (14.6 percent) from the third quarter of 2015 principally due to the impact of higher rates credited to the business lines on deposits and the issuance of long-term debt, partially offset by growth in the investment

U.S. Bancorp Third Quarter 2016 Business Line Results

October 19, 2016

Page 12

portfolio. Total noninterest income decreased $32 million (13.9 percent) from the third quarter of last year, mainly due to higher equity investment income in the prior year quarter. Total noninterest expense increased $34 million (20.4 percent) principally due to higher compensation expense, reflecting the impact of merit increases and higher variable compensation along with increased staffing and higher costs related to investments in tax-advantaged projects, partially offset by lower net shared services expenses. The provision for credit losses was $10 million higher year-over-year primarily due to an unfavorable change in the reserve allocation and higher net charge-offs.

US BANCORP \DE\ - FORM 8-K - EX-99.1 - October 19, 2016

Attached files

US BANCORP \DE\ Reports