Exhibit 99.1

 

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

U.S. BANCORP REPORTS RECORD REVENUE AND NET INCOME

FOR THE THIRD QUARTER OF 2017

Record Earnings Per Diluted Common Share of $0.88

Return on average assets of 1.38 percent and average common equity of 13.6 percent

Returned 79 percent of earnings to shareholders

MINNEAPOLIS, October 18, 2017 — U.S. Bancorp (NYSE: USB) today reported net income of $1,563 million for the third quarter of 2017, or $0.88 per diluted common share, compared with $1,502 million, or $0.84 per diluted common share, in the third quarter of 2016.

Highlights for the third quarter of 2017 included:

 

•

Record diluted earnings per share of $0.88, record net revenue of $5,608 million, record net income of $1,563 million and positive operating leverage

 

•

Industry-leading return on average assets of 1.38 percent and return on average common equity of 13.6 percent and efficiency ratio of 54.3 percent

 

•

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

 

•

Net interest income (taxable-equivalent basis) grew 8.3 percent year-over-year and 3.8 percent on a linked quarter basis

 

•

Net interest margin of 3.10 percent for the third quarter of 2017 was 12 basis points higher than the third quarter of 2016 and 6 basis points higher than the second quarter of 2017

 

•

Nonperforming assets decreased 24.8 percent on a year-over-year basis and 7.3 percent on a linked quarter basis

 

•

Average total loans grew 3.0 percent over the third quarter of 2016 and 0.8 percent on a linked quarter basis

 

•

Average total commercial loans grew 4.6 percent over the third quarter of 2016 and 1.0 percent on a linked quarter basis

 

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Average total other retail loans grew 6.1 percent over the third quarter of 2016 and 2.6 percent on a linked quarter basis

 

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U.S. Bancorp Reports Third Quarter 2017 Results

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•

Strong capital position. At September 30, 2017, the estimated common equity tier 1 capital to risk-weighted assets ratio was 9.4 percent using the Basel III fully implemented standardized approach and was 11.8 percent using the Basel III fully implemented advanced approaches method.

 

EARNINGS SUMMARY																															Table 1
($ in millions, except per-share data)														Percent				Percent
														Change				Change
		3Q				2Q				3Q				3Q17 vs				3Q17 vs				YTD				YTD				Percent
		2017				2017				2016				2Q17				3Q16				2017				2016				Change
Net income attributable to U.S. Bancorp		$	1,563			$	1,500			$	1,502				4.2				4.1			$	4,536			$	4,410				2.9
Diluted earnings per common share		$	.88			$	.85			$	.84				3.5				4.8			$	2.55			$	2.43				4.9
Return on average assets (%)			1.38				1.35				1.36												1.36				1.37
Return on average common equity (%)			13.6				13.4				13.5												13.4				13.4
Net interest margin (%)			3.10				3.04				2.98												3.06				3.02
Efficiency ratio (%) (a)			54.3				55.2				54.5												55.0				54.7
Tangible efficiency ratio (%) (a)			53.5				54.4				53.7												54.2				53.8
Dividends declared per common share		$	.30			$	.28			$	.28				7.1				7.1			$	.86			$	.79				8.9
Book value per common share (period end)		$	25.98			$	25.55			$	24.78				1.7				4.8

 

(a)	See Non-GAAP Financial Measures reconciliation on page 21

Net income attributable to U.S. Bancorp was $1,563 million for the third quarter of 2017, 4.1 percent higher than the $1,502 million for the third quarter of 2016, and 4.2 percent higher than the $1,500 million for the second quarter of 2017. Diluted earnings per common share of $0.88 in the third quarter of 2017 were $0.04 higher than the third quarter of 2016 and $0.03 higher than the second quarter of 2017. The increase in net income year-over-year was principally due to a 4.1 percent increase in total net revenue driven by higher net interest income, partially offset by a 3.7 percent increase in noninterest expense. Net interest income increased 8.3 percent on a taxable-equivalent basis (8.4 percent as reported on a GAAP basis), mainly as a result of loan growth and the impact of rising interest rates. Noninterest income decreased 0.9 percent principally due to lower mortgage banking revenue, primarily the result of strong refinancing activities in the third quarter of 2016, partially offset by increases in trust and investment management fees, payment services revenue, and treasury management fees as well as higher equity investment income. The increase in total net revenue was partially offset by higher noninterest expense, primarily due to increased compensation expense related to hiring to support business growth and compliance programs, merit increases, and higher

 

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U.S. Bancorp Reports Third Quarter 2017 Results

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variable compensation. The increase in net income on a linked quarter basis was principally due to an increase in total net revenue of 2.2 percent, reflecting higher net interest income driven by loan growth, the impact of rising interest rates, higher interest recoveries and an additional day in the current quarter. These increases were partially offset by a slight increase in noninterest expense of 0.5 percent.

U.S. Bancorp President and Chief Executive Officer Andy Cecere said, “In the third quarter, U.S. Bancorp delivered industry leading results, supported by record revenue, net income and earnings per diluted share. We produced best-in-class performance metrics, including return on average assets of 1.38 percent, return on average common equity of 13.6 percent and an improving efficiency ratio of 54.3 percent.

“We remain deeply committed to value creation for our shareholders, and in the third quarter, our dividend increased by 7.1 percent. Overall, we returned 79 percent of our earnings to shareholders through dividends and share buybacks. As we move into the fourth quarter, we plan to build on the momentum we have established.

“Our Company is strong and we are well positioned for growth. We continue to be focused on delivering a great customer experience through our One Bank initiatives, optimization of our businesses, data analytics, process improvements and product delivery. We are investing in innovation and technology to drive growth and improve efficiencies in the future. Our strong revenue base and financial discipline positions us for growth heading into the next year. I’m proud of our employees and the effort they make every day to help us deliver consistently strong financial returns and to become our stakeholders’ most trusted choice.”

 

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U.S. Bancorp Reports Third Quarter 2017 Results

October 18, 2017

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INCOME STATEMENT HIGHLIGHTS																															Table 2
($ in millions, except per-share data)														Percent				Percent
														Change				Change
		3Q				2Q				3Q				3Q17 vs				3Q17 vs				YTD				YTD				Percent
		2017				2017				2016				2Q17				3Q16				2017				2016				Change
Net interest income		$	3,135			$	3,017			$	2,893				3.9				8.4			$	9,097			$	8,573				6.1
Taxable-equivalent adjustment			51				51				50				—				2.0				152				154				(1.3	)
Net interest income (taxable-equivalent basis)			3,186				3,068				2,943				3.8				8.3				9,249				8,727				6.0
Noninterest income			2,422				2,419				2,445				.1				(.9	)			7,170				7,146				.3
Total net revenue			5,608				5,487				5,388				2.2				4.1				16,419				15,873				3.4
Noninterest expense			3,039				3,023				2,931				.5				3.7				9,006				8,672				3.9
Income before provision and income taxes			2,569				2,464				2,457				4.3				4.6				7,413				7,201				2.9
Provision for credit losses			360				350				325				2.9				10.8				1,055				982				7.4
Income before taxes			2,209				2,114				2,132				4.5				3.6				6,358				6,219				2.2
Income taxes and taxable-equivalent adjustment			640				602				616				6.3				3.9				1,791				1,766				1.4
Net income			1,569				1,512				1,516				3.8				3.5				4,567				4,453				2.6
Net (income) loss attributable to noncontrolling interests			(6	)			(12	)			(14	)			50.0				57.1				(31	)			(43	)			27.9
Net income attributable to U.S. Bancorp		$	1,563			$	1,500			$	1,502				4.2				4.1			$	4,536			$	4,410				2.9
Net income applicable to U.S. Bancorp common shareholders		$	1,485			$	1,430			$	1,434				3.8				3.6			$	4,302			$	4,198				2.5
Diluted earnings per common share		$	.88			$	.85			$	.84				3.5				4.8			$	2.55			$	2.43				4.9

 

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U.S. Bancorp Reports Third Quarter 2017 Results

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NET INTEREST INCOME																															Table 3
(Taxable-equivalent basis; $ in millions)
														Change				Change
		3Q				2Q				3Q				3Q17 vs				3Q17 vs				YTD				YTD
		2017				2017				2016				2Q17				3Q16				2017				2016				Change
Components of net interest income
Income on earning assets		$	3,768			$	3,584			$	3,371			$	184			$	397			$	10,803			$	9,951			$	852
Expense on interest-bearing liabilities			582				516				428				66				154				1,554				1,224				330
Net interest income		$	3,186			$	3,068			$	2,943			$	118			$	243			$	9,249			$	8,727			$	522
Average yields and rates paid
Earning assets yield			3.67	%			3.56	%			3.41	%			.11	%			.26	%			3.57	%			3.44	%			.13	%
Rate paid on interest-bearing liabilities			.76				.69				.59				.07				.17				.69				.57				.12
Gross interest margin			2.91	%			2.87	%			2.82	%			.04	%			.09	%			2.88	%			2.87	%			.01	%
Net interest margin			3.10	%			3.04	%			2.98	%			.06	%			.12	%			3.06	%			3.02	%			.04	%
Average balances
Investment securities (a)		$	111,832			$	111,368			$	108,109			$	464			$	3,723			$	111,325			$	107,095			$	4,230
Loans			277,626				275,528				269,637				2,098				7,989				275,454				266,179				9,275
Earning assets			408,825				403,883				393,783				4,942				15,042				404,031				385,816				18,215
Interest-bearing liabilities			304,236				299,271				290,331				4,965				13,905				299,922				285,233				14,689

 

(a)	Excludes unrealized gain (loss)

Net Interest Income

Net interest income on a taxable-equivalent basis in the third quarter of 2017 was $3,186 million, an increase of $243 million (8.3 percent) over the third quarter of 2016. The increase was principally driven by loan growth and the impact of rising interest rates. Average earning assets were $15.0 billion (3.8 percent) higher than the third quarter of 2016, reflecting increases of $8.0 billion (3.0 percent) in average total loans, $4.1 billion (36.0 percent) in average other earning assets and $3.7 billion (3.4 percent) in average investment securities. Net interest income on a taxable-equivalent basis increased $118 million (3.8 percent) on a linked quarter basis driven by loan growth, the impact of rising interest rates, higher interest recoveries and an additional day in the third quarter. In addition, average earning assets were $4.9 billion (1.2 percent) higher on a linked quarter basis, mainly from higher average loans, investment securities and other earning assets.

The net interest margin in the third quarter of 2017 was 3.10 percent, compared with 2.98 percent in the third quarter of 2016, and 3.04 percent in the second quarter of 2017. The increase in the net interest margin

 

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year-over-year was due to higher interest rates and loan portfolio mix, partially offset by higher funding costs and higher cash balances. The increase in net interest margin on a linked quarter basis was driven by higher interest rates and a change in loan portfolio mix, partially offset by higher funding costs.

Investment Securities

Average investment securities in the third quarter of 2017 were $3.7 billion (3.4 percent) higher year-over-year and $464 million (0.4 percent) higher than the prior quarter. These increases were primarily due to purchases of U.S. Treasury and U.S. government mortgage-backed securities, net of prepayments and maturities, in support of liquidity management.

 

AVERAGE LOANS																															Table 4
($ in millions)														Percent				Percent
														Change				Change
		3Q				2Q				3Q				3Q17 vs				3Q17 vs				YTD				YTD				Percent
		2017				2017				2016				2Q17				3Q16				2017				2016				Change
Commercial		$	91,077			$	90,061			$	87,067				1.1				4.6			$	89,817			$	86,186				4.2
Lease financing			5,556				5,577				5,302				(.4	)			4.8				5,530				5,265				5.0
Total commercial			96,633				95,638				92,369				1.0				4.6				95,347				91,451				4.3
Commercial mortgages			30,114				30,627				31,888				(1.7	)			(5.6	)			30,729				31,891				(3.6	)
Construction and development			11,507				11,922				11,486				(3.5	)			.2				11,708				11,031				6.1
Total commercial real estate			41,621				42,549				43,374				(2.2	)			(4.0	)			42,437				42,922				(1.1	)
Residential mortgages			59,030				58,544				56,284				.8				4.9				58,496				55,334				5.7
Credit card			20,926				20,631				20,628				1.4				1.4				20,801				20,339				2.3
Retail leasing			7,762				7,181				5,773				8.1				34.5				7,142				5,427				31.6
Home equity and second mortgages			16,299				16,252				16,470				.3				(1.0	)			16,270				16,411				(.9	)
Other			32,008				31,194				30,608				2.6				4.6				31,423				29,971				4.8
Total other retail			56,069				54,627				52,851				2.6				6.1				54,835				51,809				5.8
Total loans, excluding covered loans			274,279				271,989				265,506				.8				3.3				271,916				261,855				3.8
Covered loans			3,347				3,539				4,131				(5.4	)			(19.0	)			3,538				4,324				(18.2	)
Total loans		$	277,626			$	275,528			$	269,637				.8				3.0			$	275,454			$	266,179				3.5

 

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Loans

Average total loans were $8.0 billion (3.0 percent) higher than the third quarter of 2016. The increase was due to growth in total commercial loans (4.6 percent), residential mortgages (4.9 percent), retail leasing (34.5 percent), and other retail loans (4.6 percent). These increases were partially offset by a decrease in total commercial real estate loans (4.0 percent) due to disciplined underwriting of construction and development loans and payoffs of commercial mortgages given recent capital market financing by customers. Loan growth was also muted by run-off in the covered loans portfolio (19.0 percent). Average total loans were $2.1 billion (0.8 percent) higher than the second quarter of 2017. This increase was primarily driven by linked quarter growth in total commercial loans (1.0 percent), other retail loans (2.6 percent), and retail leasing (8.1 percent), partially offset by decreases in total commercial real estate loans (2.2 percent) and covered loans (5.4 percent).

 

AVERAGE DEPOSITS																															Table 5
($ in millions)														Percent				Percent
														Change				Change
		3Q				2Q				3Q				3Q17 vs				3Q17 vs				YTD				YTD				Percent
		2017				2017				2016				2Q17				3Q16				2017				2016				Change
Noninterest-bearing deposits		$	81,964			$	82,710			$	82,021				(.9	)			(.1	)		$	81,808			$	79,928				2.4
Interest-bearing savings deposits
Interest checking			68,066				67,290				63,456				1.2				7.3				67,021				60,746				10.3
Money market savings			105,072				106,777				99,921				(1.6	)			5.2				106,856				93,121				14.7
Savings accounts			43,649				43,524				40,695				.3				7.3				43,265				40,070				8.0
Total savings deposits			216,787				217,591				204,072				(.4	)			6.2				217,142				193,937				12.0
Time deposits			36,400				30,871				32,455				17.9				12.2				32,660				33,447				(2.4	)
Total interest-bearing deposits			253,187				248,462				236,527				1.9				7.0				249,802				227,384				9.9
Total deposits		$	335,151			$	331,172			$	318,548				1.2				5.2			$	331,610			$	307,312				7.9

Deposits

Average total deposits for the third quarter of 2017 were $16.6 billion (5.2 percent) higher than the third quarter of 2016. Average noninterest-bearing deposits were essentially flat year-over-year reflecting a decrease in Wholesale Banking and Commercial Real Estate offset by increases in Wealth Management and Securities Services and Consumer and Small Business Banking. Average total savings deposits were $12.7

 

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billion (6.2 percent) higher year-over-year, a result of growth across all business lines. Average time deposits were $3.9 billion (12.2 percent) higher than the prior year quarter. Changes in time deposits are largely related to those deposits managed as an alternative to other funding sources such as wholesale borrowing, based largely on relative pricing and liquidity characteristics.

Average total deposits increased $4.0 billion (1.2 percent) over the second quarter of 2017. On a linked quarter basis, average noninterest-bearing deposits and average total savings deposits decreased slightly. Average time deposits, which are managed based on funding needs, relative pricing, and liquidity characteristics, increased $5.5 billion (17.9 percent) on a linked quarter basis, primarily driven by Wholesale Banking and Commercial Real Estate.

 

NONINTEREST INCOME																															Table 6
($ in millions)														Percent				Percent
														Change				Change
		3Q				2Q				3Q				3Q17 vs				3Q17 vs				YTD				YTD				Percent
		2017				2017				2016				2Q17				3Q16				2017				2016				Change
Credit and debit card revenue		$	308			$	319			$	299				(3.4	)			3.0			$	919			$	861				6.7
Corporate payment products revenue			201				184				190				9.2				5.8				564				541				4.3
Merchant processing services			405				407				412				(.5	)			(1.7	)			1,190				1,188				.2
ATM processing services			92				90				87				2.2				5.7				267				251				6.4
Trust and investment management fees			380				380				362				—				5.0				1,128				1,059				6.5
Deposit service charges			192				184				192				4.3				—				553				539				2.6
Treasury management fees			153				160				147				(4.4	)			4.1				466				436				6.9
Commercial products revenue			221				210				219				5.2				.9				638				654				(2.4	)
Mortgage banking revenue			213				212				314				.5				(32.2	)			632				739				(14.5	)
Investment products fees			39				41				41				(4.9	)			(4.9	)			120				120				—
Securities gains (losses), net			9				9				10				—				(10.0	)			47				16				nm
Other			209				223				172				(6.3	)			21.5				646				742				(12.9	)
Total noninterest income		$	2,422			$	2,419			$	2,445				.1				(.9	)		$	7,170			$	7,146				.3

Noninterest Income

Third quarter noninterest income of $2,422 million was $23 million (0.9 percent) lower than the third quarter of 2016 principally due to lower mortgage banking revenue, partially offset by increases in trust and investment management fees, payment services revenue and other noninterest income. Mortgage banking revenue decreased $101 million (32.2 percent) due to lower origination and sales volumes from home refinancing, as refinancing activities were significantly higher in the third quarter of 2016 due to a decline in

 

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longer term interest rates during that period. Trust and investment management fees increased $18 million (5.0 percent) due to favorable market conditions, and net asset and account growth. Payment services revenue was higher due to an increase in corporate payment products revenue of $11 million (5.8 percent) and an increase in credit and debit card revenue of $9 million (3.0 percent), both driven by higher sales volumes. These increases were partially offset by a decrease in merchant processing services revenue of $7 million (1.7 percent) due to exiting certain joint ventures in the second quarter of 2017 and the impacts of recent weather events. Other income increased $37 million (21.5 percent) primarily due to equity investment income in the current quarter.

Noninterest income was $3 million (0.1 percent) higher in the third quarter of 2017 than the second quarter of 2017 reflecting growth in fee-based revenue driven by corporate payment products revenue, commercial products revenue and deposit service charges, partially offset by a decrease in credit and debit card revenue. Corporate payment products revenue increased $17 million (9.2 percent) due to seasonally higher volumes. Commercial products revenue increased $11 million (5.2 percent) primarily driven by higher foreign exchange fees, corporate bond fees and syndication revenue. Deposit service charges increased $8 million (4.3 percent) due to seasonally higher transaction volumes. Credit and debit card revenue decreased $11 million (3.4 percent) primarily due to fewer processing cycles in the third quarter and the impact of previously acquired portfolios.

 

NONINTEREST EXPENSE																															Table 7
($ in millions)														Percent				Percent
														Change				Change
		3Q				2Q				3Q				3Q17 vs				3Q17 vs				YTD				YTD				Percent
		2017				2017				2016				2Q17				3Q16				2017				2016				Change
Compensation		$	1,440			$	1,416			$	1,329				1.7				8.4			$	4,247			$	3,855				10.2
Employee benefits			281				287				280				(2.1	)			.4				882				858				2.8
Net occupancy and equipment			258				255				250				1.2				3.2				760				741				2.6
Professional services			104				105				127				(1.0	)			(18.1	)			305				346				(11.8	)
Marketing and business development			92				109				102				(15.6	)			(9.8	)			291				328				(11.3	)
Technology and communications			246				242				243				1.7				1.2				723				717				.8
Postage, printing and supplies			82				81				80				1.2				2.5				244				236				3.4
Other intangibles			44				43				45				2.3				(2.2	)			131				134				(2.2	)
Other			492				485				475				1.4				3.6				1,423				1,457				(2.3	)
Total noninterest expense		$	3,039			$	3,023			$	2,931				.5				3.7			$	9,006			$	8,672				3.9

 

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Noninterest Expense

Third quarter noninterest expense of $3,039 million was $108 million (3.7 percent) higher than the third quarter of 2016 primarily due to higher compensation expense, partially offset by lower professional services expense. Compensation expense increased $111 million (8.4 percent) principally due to the impact of hiring to support business growth and compliance programs, merit increases, and higher variable compensation. Professional services expense decreased $23 million (18.1 percent) primarily due to fewer consulting services as compliance programs near maturity.

Noninterest expense increased $16 million (0.5 percent) on a linked quarter basis driven by higher compensation expense, partially offset by lower marketing and business development expense. Compensation expense increased $24 million (1.7 percent) principally due to corporate incentive plans and the impact of hiring to support business growth. Marketing and business development expense decreased $17 million (15.6 percent) due to seasonal timing of certain revenue-related marketing and brand advertising.

Provision for Income Taxes

The provision for income taxes for the third quarter of 2017 resulted in a tax rate on a taxable-equivalent basis of 29.0 percent (effective tax rate of 27.3 percent), compared with 28.9 percent (effective tax rate of 27.2 percent) in the third quarter of 2016, and 28.5 percent (effective tax rate of 26.7 percent) in the second quarter of 2017.

 

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ALLOWANCE FOR CREDIT LOSSES																																			Table 8
($ in millions)		3Q 2017				% (b)				2Q 2017				% (b)				1Q 2017				% (b)				4Q 2016				% (b)				3Q 2016				% (b)
Balance, beginning of period		$	4,377							$	4,366							$	4,357							$	4,338							$	4,329
Net charge-offs
Commercial			79				.34				75				.33				71				.33				71				.32				84				.38
Lease financing			4				.29				3				.22				4				.30				5				.37				3				.23
Total commercial			83				.34				78				.33				75				.32				76				.32				87				.37
Commercial mortgages			(2	)			(.03	)			(7	)			(.09	)			(1	)			(.01	)			(3	)			(.04	)			5				.06
Construction and development			(5	)			(.17	)			(2	)			(.07	)			(1	)			(.03	)			(6	)			(.21	)			(4	)			(.14	)
Total commercial real estate			(7	)			(.07	)			(9	)			(.08	)			(2	)			(.02	)			(9	)			(.08	)			1				.01
Residential mortgages			7				.05				8				.05				12				.08				12				.08				12				.08
Credit card			187				3.55				204				3.97				190				3.70				181				3.44				161				3.11
Retail leasing			2				.10				2				.11				3				.19				1				.06				1				.07
Home equity and second mortgages			(1	)			(.02	)			(1	)			(.02	)			(1	)			(.02	)			(1	)			(.02	)			1				.02
Other			59				.73				58				.75				58				.76				62				.79				52				.68
Total other retail			60				.42				59				.43				60				.45				62				.46				54				.41
Total net charge-offs, excluding covered loans			330				.48				340				.50				335				.50				322				.48				315				.47
Covered loans			—				—				—				—				—				—				—				—				—				—
Total net charge-offs			330				.47				340				.49				335				.50				322				.47				315				.46
Provision for credit losses			360								350								345								342								325
Other changes (a)			—								1								(1	)							(1	)							(1	)
Balance, end of period		$	4,407							$	4,377							$	4,366							$	4,357							$	4,338
Components
Allowance for loan losses		$	3,908							$	3,856							$	3,816							$	3,813							$	3,797
Liability for unfunded credit commitments			499								521								550								544								541
Total allowance for credit losses		$	4,407							$	4,377							$	4,366							$	4,357							$	4,338
Gross charge-offs		$	433							$	437							$	417							$	405							$	398
Gross recoveries		$	103							$	97							$	82							$	83							$	83
Allowance for credit losses as a percentage of
Period-end loans, excluding covered loans			1.59								1.59								1.61								1.60								1.61
Nonperforming loans, excluding covered loans			425								385								338								317								309
Nonperforming assets, excluding covered assets			359								331								296								275								264
Period-end loans			1.58								1.58								1.60								1.59								1.60
Nonperforming loans			426								383								338								318								310
Nonperforming assets			352								324								292								272								261

 

(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 2017 Results

October 18, 2017

Page 12

 

Credit Quality

The Company’s provision for credit losses for the third quarter of 2017 was $360 million, which was $10 million (2.9 percent) higher than the prior quarter and $35 million (10.8 percent) higher than the third quarter of 2016. Credit quality was relatively stable compared with the second quarter of 2017.

Total net charge-offs in the third quarter of 2017 were $330 million, compared with $340 million in the second quarter of 2017, and $315 million in the third quarter of 2016. Net charge-offs decreased $10 million (2.9 percent) compared with the second quarter of 2017 mainly due to seasonally lower credit card loan net charge-offs. Net charge-offs increased $15 million (4.8 percent) compared with the third quarter of 2016 primarily due to higher credit card loan net charge-offs related to maturity of vintages within the portfolio, partially offset by lower net charge-offs in residential mortgages and higher recoveries in total commercial. The net charge-off ratio was 0.47 percent in the third quarter of 2017, compared with 0.49 percent in the second quarter of 2017 and 0.46 percent in the third quarter of 2016.

The allowance for credit losses was $4,407 million at September 30, 2017, compared with $4,377 million at June 30, 2017, and $4,338 million at September 30, 2016. The ratio of the allowance for credit losses to period-end loans was 1.58 percent at September 30, 2017 and at June 30, 2017, compared with 1.60 percent at September 30, 2016. The ratio of the allowance for credit losses to nonperforming loans was 426 percent at September 30, 2017, compared with 383 percent at June 30, 2017, and 310 percent at September 30, 2016.

Nonperforming assets were $1,251 million at September 30, 2017, compared with $1,349 million at June 30, 2017, and $1,664 million at September 30, 2016. The ratio of nonperforming assets to loans and other real estate was 0.45 percent at September 30, 2017, compared with 0.49 percent at June 30, 2017, and 0.61 percent at September 30, 2016. The $98 million (7.3 percent) decrease in nonperforming assets on a linked quarter basis was driven by improvements in commercial loans and residential mortgages. The $413 million (24.8 percent) decrease in nonperforming assets on a year-over-year basis was driven by improvements in commercial loans, residential mortgages and other real estate. Accruing loans 90 days or more past due were $649 million ($497 million excluding covered loans) at September 30, 2017, compared with $639 million ($477 million excluding covered loans) at June 30, 2017, and $748 million ($518 million excluding covered loans) at September 30, 2016.

 

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U.S. Bancorp Reports Third Quarter 2017 Results

October 18, 2017

Page 13

 

DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES																			Table 9
(Percent)
		Sep 30 2017				Jun 30 2017				Mar 31 2017				Dec 31 2016				Sep 30 2016
Delinquent loan ratios - 90 days or more past due excluding nonperforming loans
Commercial			.05				.05				.06				.06				.05
Commercial real estate			.01				—				.01				.02				.02
Residential mortgages			.18				.20				.24				.27				.28
Credit card			1.20				1.10				1.23				1.16				1.11
Other retail			.15				.14				.14				.15				.14
Total loans, excluding covered loans			.18				.17				.19				.20				.19
Covered loans			4.66				4.71				5.34				5.53				5.72
Total loans			.23				.23				.26				.28				.28
Delinquent loan ratios - 90 days or more past due including nonperforming loans
Commercial			.33				.39				.52				.57				.61
Commercial real estate			.30				.29				.27				.31				.26
Residential mortgages			.98				1.10				1.23				1.31				1.37
Credit card			1.20				1.10				1.24				1.18				1.13
Other retail			.43				.42				.43				.45				.42
Total loans, excluding covered loans			.55				.59				.67				.71				.72
Covered loans			4.84				5.06				5.53				5.68				5.89
Total loans			.60				.64				.73				.78				.79

 

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U.S. Bancorp Reports Third Quarter 2017 Results

October 18, 2017

Page 14

 

ASSET QUALITY																			Table 10
($ in millions)
		Sep 30 2017				Jun 30 2017				Mar 31 2017				Dec 31 2016				Sep 30 2016
Nonperforming loans
Commercial		$	231			$	283			$	397			$	443			$	477
Lease financing			38				39				42				40				40
Total commercial			269				322				439				483				517
Commercial mortgages			89				84				74				87				98
Construction and development			33				35				36				37				7
Total commercial real estate			122				119				110				124				105
Residential mortgages			474				530				575				595				614
Credit card			1				1				2				3				4
Other retail			163				158				157				157				153
Total nonperforming loans, excluding covered loans			1,029				1,130				1,283				1,362				1,393
Covered loans			6				12				7				6				7
Total nonperforming loans			1,035				1,142				1,290				1,368				1,400
Other real estate (a)			164				157				155				186				213
Covered other real estate (a)			26				25				22				26				28
Other nonperforming assets			26				25				28				23				23
Total nonperforming assets (b)		$	1,251			$	1,349			$	1,495			$	1,603			$	1,664
Total nonperforming assets, excluding covered assets		$	1,219			$	1,312			$	1,466			$	1,571			$	1,629
Accruing loans 90 days or more past due, excluding covered loans		$	497			$	477			$	524			$	552			$	518
Accruing loans 90 days or more past due		$	649			$	639			$	718			$	764			$	748
Performing restructured loans, excluding GNMA and covered loans		$	2,419			$	2,473			$	2,478			$	2,557			$	2,672
Performing restructured GNMA and covered loans		$	1,600			$	1,803			$	1,746			$	1,604			$	1,375
Nonperforming assets to loans plus ORE, excluding covered assets (%)			.44				.48				.54				.58				.61
Nonperforming assets to loans plus ORE (%)			.45				.49				.55				.59				.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 2017 Results

October 18, 2017

Page 15

 

COMMON SHARES																			Table 11
(Millions)		3Q 2017				2Q 2017				1Q 2017				4Q 2016				3Q 2016
Beginning shares outstanding			1,679				1,692				1,697				1,705				1,719
Shares issued for stock incentive plans, acquisitions and other corporate purposes			—				1				6				6				2
Shares repurchased			(12	)			(14	)			(11	)			(14	)			(16	)
Ending shares outstanding			1,667				1,679				1,692				1,697				1,705

 

CAPITAL POSITION																			Table 12
($ in millions)		Sep 30 2017				Jun 30 2017				Mar 31 2017				Dec 31 2016				Sep 30 2016
Total U.S. Bancorp shareholders’ equity		$	48,723			$	48,320			$	47,798			$	47,298			$	47,759
Standardized Approach
Basel III transitional standardized approach
Common equity tier 1 capital		$	34,876			$	34,408			$	33,847			$	33,720			$	33,827
Tier 1 capital			40,411				39,943				39,374				39,421				39,531
Total risk-based capital			48,104				47,824				47,279				47,355				47,452
Common equity tier 1 capital ratio			9.6	%			9.5	%			9.5	%			9.4	%			9.5	%
Tier 1 capital ratio			11.1				11.1				11.0				11.0				11.1
Total risk-based capital ratio			13.2				13.2				13.3				13.2				13.3
Leverage ratio			9.1				9.1				9.1				9.0				9.2
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach (a)			9.4				9.3				9.2				9.1				9.3
Advanced Approaches
Common equity tier 1 capital to risk-weighted assets for the Basel III transitional advanced approaches			12.1				12.0				11.8				12.2				12.4
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches (a)			11.8				11.7				11.5				11.7				12.1
Tangible common equity to tangible assets (a)			7.7				7.5				7.6				7.5				7.5
Tangible common equity to risk-weighted assets (a)			9.5				9.4				9.4				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.

 

(a)	See Non-GAAP Financial Measures reconciliation on page 21

 

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U.S. Bancorp Reports Third Quarter 2017 Results

October 18, 2017

Page 16

 

Capital Management

Total U.S. Bancorp shareholders’ equity was $48.7 billion at September 30, 2017, compared with $48.3 billion at June 30, 2017, and $47.8 billion at September 30, 2016. 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 9.4 percent at September 30, 2017, compared with 9.3 percent at June 30, 2017, and at September 30, 2016. The estimated common equity tier 1 capital to risk-weighted assets ratio using the Basel III fully implemented advanced approaches method was 11.8 percent at September 30, 2017, compared with 11.7 percent at June 30, 2017, and 12.1 percent at September 30, 2016.

On Wednesday, October 18, 2017, at 8:00 a.m. CDT, Andy Cecere, president and chief executive officer, and Terry Dolan, vice chairman and chief financial officer, will host a conference call to review the financial results. The conference call will be available online or by telephone. To access the webcast and presentation, 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 75774124. For those unable to participate during the live call, a recording will be available at approximately 11:00 a.m. CDT on Wednesday, October 18 and will be accessible through Wednesday, October 25 at 11:00 p.m. CDT. To access the recorded message within the United States and Canada, please dial 855-859-2056. If calling from outside the United States and Canada, please dial 404-537-3406 to access the recording. The conference ID is 75774124.

Minneapolis-based U.S. Bancorp (NYSE: USB), with $459 billion in assets as of September 30, 2017, is the parent company of U.S. Bank National Association, the fifth largest commercial bank in the United States. The Company operates 3,072 banking offices in 25 states and 4,801 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 2017 Results

October 18, 2017

Page 17

 

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, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by 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; 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, 2016, 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 2017 Results

October 18, 2017

Page 18

 

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 negative market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Company’s capital position relative to other financial services companies. These measures differ from currently effective capital ratios defined by banking regulations principally in that the numerator of the currently effective ratios, which are subject to certain transitional provisions, temporarily excludes a portion of unrealized gains and losses related to available-for-sale securities and retirement plan obligations, and includes a portion of capital related to intangible assets, other than mortgage servicing rights. 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)		2017				2016				2017				2016
Interest Income
Loans		$	3,059			$	2,731			$	8,757			$	8,039
Loans held for sale			40				43				104				110
Investment securities			568				515				1,653				1,555
Other interest income			47				31				131				89
Total interest income			3,714				3,320				10,645				9,793
Interest Expense
Deposits			293				161				730				452
Short-term borrowings			90				70				233				201
Long-term debt			196				196				585				567
Total interest expense			579				427				1,548				1,220
Net interest income			3,135				2,893				9,097				8,573
Provision for credit losses			360				325				1,055				982
Net interest income after provision for credit losses			2,775				2,568				8,042				7,591
Noninterest Income
Credit and debit card revenue			308				299				919				861
Corporate payment products revenue			201				190				564				541
Merchant processing services			405				412				1,190				1,188
ATM processing services			92				87				267				251
Trust and investment management fees			380				362				1,128				1,059
Deposit service charges			192				192				553				539
Treasury management fees			153				147				466				436
Commercial products revenue			221				219				638				654
Mortgage banking revenue			213				314				632				739
Investment products fees			39				41				120				120
Securities gains (losses), net			9				10				47				16
Other			209				172				646				742
Total noninterest income			2,422				2,445				7,170				7,146
Noninterest Expense
Compensation			1,440				1,329				4,247				3,855
Employee benefits			281				280				882				858
Net occupancy and equipment			258				250				760				741
Professional services			104				127				305				346
Marketing and business development			92				102				291				328
Technology and communications			246				243				723				717
Postage, printing and supplies			82				80				244				236
Other intangibles			44				45				131				134
Other			492				475				1,423				1,457
Total noninterest expense			3,039				2,931				9,006				8,672
Income before income taxes			2,158				2,082				6,206				6,065
Applicable income taxes			589				566				1,639				1,612
Net income			1,569				1,516				4,567				4,453
Net (income) loss attributable to noncontrolling interests			(6	)			(14	)			(31	)			(43	)
Net income attributable to U.S. Bancorp		$	1,563			$	1,502			$	4,536			$	4,410
Net income applicable to U.S. Bancorp common shareholders		$	1,485			$	1,434			$	4,302			$	4,198
Earnings per common share		$	.89			$	.84			$	2.56			$	2.44
Diluted earnings per common share		$	.88			$	.84			$	2.55			$	2.43
Dividends declared per common share		$	.300			$	.280			$	.860			$	.790
Average common shares outstanding			1,672				1,710				1,683				1,724
Average diluted common shares outstanding			1,678				1,716				1,689				1,730

 

Page 19

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U.S. Bancorp

Consolidated Ending Balance Sheet

 

(Dollars in Millions)		September 30, 2017				December 31, 2016				September 30, 2016
		(Unaudited)								(Unaudited)
Assets
Cash and due from banks		$	20,540			$	15,705			$	23,664
Investment securities
Held-to-maturity			44,018				42,991				42,873
Available-for-sale			67,772				66,284				67,155
Loans held for sale			3,757				4,826				5,575
Loans
Commercial			96,928				93,386				93,201
Commercial real estate			41,430				43,098				43,468
Residential mortgages			59,317				57,274				56,229
Credit card			20,923				21,749				20,706
Other retail			56,859				53,864				53,664
Total loans, excluding covered loans			275,457				269,371				267,268
Covered loans			3,262				3,836				4,021
Total loans			278,719				273,207				271,289
Less allowance for loan losses			(3,908	)			(3,813	)			(3,797	)
Net loans			274,811				269,394				267,492
Premises and equipment			2,402				2,443				2,449
Goodwill			9,370				9,344				9,357
Other intangible assets			3,193				3,303				2,887
Other assets			33,364				31,674				32,682
Total assets		$	459,227			$	445,964			$	454,134
Liabilities and Shareholders’ Equity
Deposits
Noninterest-bearing		$	82,152			$	86,097			$	89,101
Interest-bearing			260,437				248,493				245,494
Total deposits			342,589				334,590				334,595
Short-term borrowings			15,856				13,963				15,695
Long-term debt			34,515				33,323				37,978
Other liabilities			16,916				16,155				17,467
Total liabilities			409,876				398,031				405,735
Shareholders’ equity
Preferred stock			5,419				5,501				5,501
Common stock			21				21				21
Capital surplus			8,457				8,440				8,429
Retained earnings			53,023				50,151				49,231
Less treasury stock			(16,978	)			(15,280	)			(14,844	)
Accumulated other comprehensive income (loss)			(1,219	)			(1,535	)			(579	)
Total U.S. Bancorp shareholders’ equity			48,723				47,298				47,759
Noncontrolling interests			628				635				640
Total equity			49,351				47,933				48,399
Total liabilities and equity		$	459,227			$	445,964			$	454,134

 

Page 20

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U.S. Bancorp

Non-GAAP Financial Measures

 

(Dollars in Millions, Unaudited)		September 30, 2017				June 30, 2017				March 31, 2016				December 31, 2016				September 30, 2016
Total equity		$	49,351			$	48,949			$	48,433			$	47,933			$	48,399
Preferred stock			(5,419	)			(5,419	)			(5,419	)			(5,501	)			(5,501	)
Noncontrolling interests			(628	)			(629	)			(635	)			(635	)			(640	)
Goodwill (net of deferred tax liability) (1)			(8,141	)			(8,181	)			(8,186	)			(8,203	)			(8,239	)
Intangible assets, other than mortgage servicing rights			(595	)			(634	)			(671	)			(712	)			(756	)
Tangible common equity (a)			34,568				34,086				33,522				32,882				33,263
Tangible common equity (as calculated above)			34,568				34,086				33,522				32,882				33,263
Adjustments (2)			(52	)			(51	)			(136	)			(55	)			97
Common equity tier 1 capital estimated for the Basel III fully implemented standardized and advanced approaches (b)			34,516				34,035				33,386				32,827				33,360
Total assets			459,227				463,844				449,522				445,964				454,134
Goodwill (net of deferred tax liability) (1)			(8,141	)			(8,181	)			(8,186	)			(8,203	)			(8,239	)
Intangible assets, other than mortgage servicing rights			(595	)			(634	)			(671	)			(712	)			(756	)
Tangible assets (c)			450,491				455,029				440,665				437,049				445,139
Risk-weighted assets, determined in accordance with prescribed transitional standardized approach regulatory requirements (d)			363,957	*			361,164				356,373				358,237				356,733
Adjustments (3)			3,907	*			3,967				4,731				4,027				3,165
Risk-weighted assets estimated for the Basel III fully implemented standardized approach (e)			367,864	*			365,131				361,104				362,264				359,898
Risk-weighted assets, determined in accordance with prescribed transitional advanced approaches regulatory requirements			287,800	*			287,124				285,963				277,141				272,832
Adjustments (4)			4,164	*			4,231				5,046				4,295				3,372
Risk-weighted assets estimated for the Basel III fully implemented advanced approaches (f)			291,964	*			291,355				291,009				281,436				276,204
Ratios *
Tangible common equity to tangible assets (a)/(c)			7.7	%			7.5	%			7.6	%			7.5	%			7.5	%
Tangible common equity to risk-weighted assets (a)/(d)			9.5				9.4				9.4				9.2				9.3
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach (b)/(e)			9.4				9.3				9.2				9.1				9.3
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches (b)/(f)			11.8				11.7				11.5				11.7				12.1
		Three Months Ended
		September 30, 2017				June 30, 2017				March 31, 2017				December 31, 2016				September 30, 2016
Net interest income		$	3,135			$	3,017			$	2,945			$	2,955			$	2,893
Taxable-equivalent adjustment (5)			51				51				50				49				50
Net interest income, on a taxable-equivalent basis			3,186				3,068				2,995				3,004				2,943
Net interest income, on a taxable-equivalent basis (as calculated above)			3,186				3,068				2,995				3,004				2,943
Noninterest income			2,422				2,419				2,329				2,431				2,445
Less: Securities gains (losses), net			9				9				29				6				10
Total net revenue, excluding net securities gains (losses) (g)			5,599				5,478				5,295				5,429				5,378
Noninterest expense (h)			3,039				3,023				2,944				3,004				2,931
Less: Intangible amortization			44				43				44				45				45
Noninterest expense, excluding intangible amortization (i)			2,995				2,980				2,900				2,959				2,886
Efficiency ratio (h)/(g)			54.3	%			55.2	%			55.6	%			55.3	%			54.5	%
Tangible efficiency ratio (i)/(g)			53.5				54.4				54.8				54.5				53.7

 

*	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.

 

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Supplemental Business Line Schedules

3Q 2017

 

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LINE OF BUSINESS FINANCIAL PERFORMANCE (a)
($ in millions)
		Net Income Attributable to U.S. Bancorp												Percent Change								Net Income Attributable to U.S. Bancorp												3Q 2017
Business Line		3Q 2017				2Q 2017				3Q 2016				3Q17 vs 2Q17				3Q17 vs 3Q16				YTD 2017				YTD 2016				Percent Change				Earnings Composition
Wholesale Banking and Commercial Real Estate		$	282			$	291			$	225				(3.1	)			25.3			$	827			$	574				44.1				18	%
Consumer and Small Business Banking			363				314				359				15.6				1.1				974				1,036				(6.0	)			23
Wealth Management and Securities Services			125				128				95				(2.3	)			31.6				363				273				33.0				8
Payment Services			303				276				342				9.8				(11.4	)			868				983				(11.7	)			19
Treasury and Corporate Support			490				491				481				(.2	)			1.9				1,504				1,544				(2.6	)			32
Consolidated Company		$	1,563			$	1,500			$	1,502				4.2				4.1			$	4,536			$	4,410				2.9				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 2017, certain organization and methodology changes were made and, accordingly, prior period results were restated and presented on a comparable basis.

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WHOLESALE BANKING AND COMMERCIAL REAL ESTATE (a)
($ in millions)
														Percent Change
		3Q 2017				2Q 2017				3Q 2016				3Q17 vs 2Q17				3Q17 vs 3Q16				YTD 2017				YTD 2016				Percent Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)		$	616			$	602			$	563				2.3				9.4			$	1,806			$	1,638				10.3
Noninterest income			215				238				220				(9.7	)			(2.3	)			697				676				3.1
Securities gains (losses), net			—				—				—				—				—				(3	)			—				nm
Total net revenue			831				840				783				(1.1	)			6.1				2,500				2,314				8.0
Noninterest expense			396				400				355				(1.0	)			11.5				1,188				1,066				11.4
Other intangibles			1				1				1				—				—				3				3				—
Total noninterest expense			397				401				356				(1.0	)			11.5				1,191				1,069				11.4
Income before provision and taxes			434				439				427				(1.1	)			1.6				1,309				1,245				5.1
Provision for credit losses			(9	)			(18	)			73				50.0				nm				9				342				(97.4	)
Income before income taxes			443				457				354				(3.1	)			25.1				1,300				903				44.0
Income taxes and taxable-equivalent adjustment			161				166				129				(3.0	)			24.8				473				329				43.8
Net income			282				291				225				(3.1	)			25.3				827				574				44.1
Net (income) loss attributable to noncontrolling interests			—				—				—				—				—				—				—				—
Net income attributable to U.S. Bancorp		$	282			$	291			$	225				(3.1	)			25.3			$	827			$	574				44.1
Average Balance Sheet Data
Loans		$	94,003			$	94,222			$	92,290				(.2	)			1.9			$	93,986			$	91,512				2.7
Other earning assets			2,855				3,107				2,500				(8.1	)			14.2				2,948				2,324				26.9
Goodwill			1,647				1,647				1,647				—				—				1,647				1,647				—
Other intangible assets			13				14				16				(7.1	)			(18.8	)			14				17				(17.6	)
Assets			102,327				103,101				100,864				(.8	)			1.5				102,580				99,932				2.6
Noninterest-bearing deposits			35,353				36,400				36,685				(2.9	)			(3.6	)			36,217				36,543				(.9	)
Interest-bearing deposits			74,464				68,868				67,419				8.1				10.4				71,306				61,244				16.4
Total deposits			109,817				105,268				104,104				4.3				5.5				107,523				97,787				10.0
Total U.S. Bancorp shareholders’ equity			9,952				9,921				8,997				.3				10.6				9,852				8,927				10.4

 

(a)	preliminary data

Wholesale Banking and Commercial Real Estate offers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets services, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution, non-profit and public sector clients. Wholesale Banking and Commercial Real Estate contributed $282 million of the Company’s net income in the third quarter of 2017, compared with $225 million in the third quarter of 2016. Total net revenue increased $48 million (6.1 percent) due to a $53 million (9.4 percent) increase in net interest income, partially offset by a decrease of $5 million (2.3 percent) in total noninterest income. Net interest income grew year-over-year primarily due to the margin benefit of rising rates on deposits and

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growth in average loan and deposit balances, partially offset by lower spread on loans, reflecting a competitive marketplace. Total noninterest income decreased year-over-year primarily due to lower foreign currency customer activity and capital markets volume from a year ago, partially offset by higher treasury management fees. Total noninterest expense was $41 million (11.5 percent) higher compared with a year ago due to an increase in variable costs allocated to manage the business and higher compensation expense, reflecting the impact of increased staffing, merit increases and variable compensation. The provision for credit losses decreased $82 million due to a favorable change in the reserve allocation and continued stabilization in credit quality in the energy sector.

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CONSUMER AND SMALL BUSINESS BANKING (a)
($ in millions)
														Percent Change
		3Q 2017				2Q 2017				3Q 2016				3Q17 vs 2Q17				3Q17 vs 3Q16				YTD 2017				YTD 2016				Percent Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)		$	1,309			$	1,258			$	1,199				4.1				9.2			$	3,789			$	3,523				7.6
Noninterest income			632				620				712				1.9				(11.2	)			1,837				1,899				(3.3	)
Securities gains (losses), net			—				—				—				—				—				—				—				—
Total net revenue			1,941				1,878				1,911				3.4				1.6				5,626				5,422				3.8
Noninterest expense			1,266				1,287				1,293				(1.6	)			(2.1	)			3,821				3,746				2.0
Other intangibles			8				7				8				14.3				—				22				24				(8.3	)
Total noninterest expense			1,274				1,294				1,301				(1.5	)			(2.1	)			3,843				3,770				1.9
Income before provision and taxes			667				584				610				14.2				9.3				1,783				1,652				7.9
Provision for credit losses			97				90				45				7.8				nm				252				22				nm
Income before income taxes			570				494				565				15.4				.9				1,531				1,630				(6.1	)
Income taxes and taxable-equivalent adjustment			207				180				206				15.0				.5				557				594				(6.2	)
Net income			363				314				359				15.6				1.1				974				1,036				(6.0	)
Net (income) loss attributable to noncontrolling interests			—				—				—				—				—				—				—				—
Net income attributable to U.S. Bancorp		$	363			$	314			$	359				15.6				1.1			$	974			$	1,036				(6.0	)
Average Balance Sheet Data
Loans		$	142,080			$	140,544			$	137,679				1.1				3.2			$	140,592			$	135,671				3.6
Other earning assets			4,304				3,205				5,257				34.3				(18.1	)			3,845				4,445				(13.5	)
Goodwill			3,681				3,682				3,681				—				—				3,682				3,681				—
Other intangible assets			2,701				2,730				2,270				(1.1	)			19.0				2,733				2,394				14.2
Assets			156,737				154,247				153,501				1.6				2.1				154,894				150,711				2.8
Noninterest-bearing deposits			28,705				27,303				28,355				5.1				1.2				27,666				27,092				2.1
Interest-bearing deposits			121,121				120,852				115,875				.2				4.5				120,462				114,613				5.1
Total deposits			149,826				148,155				144,230				1.1				3.9				148,128				141,705				4.5
Total U.S. Bancorp shareholders’ equity			11,489				11,435				11,312				.5				1.6				11,482				11,138				3.1

 

(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. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking. Consumer and Small Business Banking contributed $363 million of the Company’s net income in the third quarter of 2017, compared with $359 million in the third quarter of 2016. Total net revenue increased $30 million (1.6 percent) due to a $110 million (9.2 percent) increase in net interest income, partially offset by a decrease of $80 million (11.2 percent) in total noninterest income. Net interest income increased year-over-year primarily due to the impact of the margin benefit of rising rates from deposits along with growth in

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average loan and deposit balances, partially offset by lower spread on loans. Total noninterest income decreased year-over-year principally driven by lower mortgage banking revenue due to lower origination and sales volume related to refinancing activities, as refinancing activities were significantly higher in the third quarter of 2016. Partially offsetting the impact of lower mortgage banking revenue was growth in retail leasing revenue due to stronger end-of-term gains on auto leases and higher ATM processing services fees. Total noninterest expense in the third quarter of 2017 decreased $27 million (2.1 percent) from the same quarter of the prior year primarily due to lower mortgage related costs and lower professional services expense. Partially offsetting these decreases were higher compensation expense, reflecting the impact of increased staffing and merit increases, and higher net shared services expense. The provision for credit losses increased $52 million primarily due to growth in total other retail loans and exposures as a result of recent weather events.

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WEALTH MANAGEMENT AND SECURITIES SERVICES (a)
($ in millions)
														Percent Change
		3Q 2017				2Q 2017				3Q 2016				3Q17 vs 2Q17				3Q17 vs 3Q16				YTD 2017				YTD 2016				Percent Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)		$	192			$	187			$	135				2.7				42.2			$	558			$	374				49.2
Noninterest income			411				413				403				(.5	)			2.0				1,222				1,183				3.3
Securities gains (losses), net			—				—				—				—				—				—				—				—
Total net revenue			603				600				538				.5				12.1				1,780				1,557				14.3
Noninterest expense			401				395				384				1.5				4.4				1,194				1,113				7.3
Other intangibles			5				5				6				—				(16.7	)			15				18				(16.7	)
Total noninterest expense			406				400				390				1.5				4.1				1,209				1,131				6.9
Income before provision and taxes			197				200				148				(1.5	)			33.1				571				426				34.0
Provision for credit losses			1				(1	)			(1	)			nm				nm				1				(2	)			nm
Income before income taxes			196				201				149				(2.5	)			31.5				570				428				33.2
Income taxes and taxable-equivalent adjustment			71				73				54				(2.7	)			31.5				207				155				33.5
Net income			125				128				95				(2.3	)			31.6				363				273				33.0
Net (income) loss attributable to noncontrolling interests			—				—				—				—				—				—				—				—
Net income attributable to U.S. Bancorp		$	125			$	128			$	95				(2.3	)			31.6			$	363			$	273				33.0
Average Balance Sheet Data
Loans		$	8,595			$	8,306			$	7,299				3.5				17.8			$	8,289			$	7,135				16.2
Other earning assets			158				147				142				7.5				11.3				153				139				10.1
Goodwill			1,568				1,567				1,567				.1				.1				1,567				1,567				—
Other intangible assets			79				83				99				(4.8	)			(20.2	)			83				104				(20.2	)
Assets			11,495				11,425				10,383				.6				10.7				11,454				10,251				11.7
Noninterest-bearing deposits			14,715				15,944				13,803				(7.7	)			6.6				14,836				13,249				12.0
Interest-bearing deposits			56,647				57,926				51,700				(2.2	)			9.6				57,179				48,581				17.7
Total deposits			71,362				73,870				65,503				(3.4	)			8.9				72,015				61,830				16.5
Total U.S. Bancorp shareholders’ equity			2,381				2,365				2,378				.7				.1				2,383				2,379				.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 $125 million of the Company’s net income in the third quarter of 2017, compared with $95 million in the third quarter of 2016. Total net revenue increased $65 million (12.1 percent) year-over-year driven by an increase in net interest income of $57 million (42.2 percent) principally due to the impact of rising rates on the margin benefit from deposits along with higher average loan and deposit balances. Total noninterest income

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increased $8 million (2.0 percent) principally due to favorable market conditions and net asset and account growth. Total noninterest expense increased $16 million (4.1 percent) primarily as a result of higher compensation expense, reflecting the impact of higher staffing and merit increases, higher net shared services expense, and a higher FDIC surcharge driven by higher deposit balances compared with the prior year. The provision for credit losses was relatively flat compared with the prior year quarter.

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PAYMENT SERVICES (a)

($ in millions)

														Percent Change
		3Q 2017				2Q 2017				3Q 2016				3Q17 vs 2Q17				3Q17 vs 3Q16				YTD 2017				YTD 2016				Percent Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)		$	563			$	540			$	538				4.3				4.6			$	1,653			$	1,579				4.7
Noninterest income			920				909				912				1.2				.9				2,686				2,651				1.3
Securities gains (losses), net			—				—				—				—				—				—				—				—
Total net revenue			1,483				1,449				1,450				2.3				2.3				4,339				4,230				2.6
Noninterest expense			707				693				662				2.0				6.8				2,069				1,941				6.6
Other intangibles			30				30				30				—				—				91				89				2.2
Total noninterest expense			737				723				692				1.9				6.5				2,160				2,030				6.4
Income before provision and taxes			746				726				758				2.8				(1.6	)			2,179				2,200				(1.0	)
Provision for credit losses			270				283				208				(4.6	)			29.8				794				615				29.1
Income before income taxes			476				443				550				7.4				(13.5	)			1,385				1,585				(12.6	)
Income taxes and taxable-equivalent adjustment			173				161				200				7.5				(13.5	)			504				577				(12.7	)
Net income			303				282				350				7.4				(13.4	)			881				1,008				(12.6	)
Net (income) loss attributable to noncontrolling interests			—				(6	)			(8	)			nm				nm				(13	)			(25	)			48.0
Net income attributable to U.S. Bancorp		$	303			$	276			$	342				9.8				(11.4	)		$	868			$	983				(11.7	)
Average Balance Sheet Data
Loans		$	29,612			$	29,070			$	28,909				1.9				2.4			$	29,209			$	28,309				3.2
Other earning assets			241				241				267				—				(9.7	)			246				380				(35.3	)
Goodwill			2,469				2,457				2,463				.5				.2				2,459				2,466				(.3	)
Other intangible assets			385				408				494				(5.6	)			(22.1	)			409				502				(18.5	)
Assets			35,035				34,778				34,715				.7				.9				34,794				34,226				1.7
Noninterest-bearing deposits			1,029				1,015				954				1.4				7.9				1,023				947				8.0
Interest-bearing deposits			103				102				98				1.0				5.1				101				97				4.1
Total deposits			1,132				1,117				1,052				1.3				7.6				1,124				1,044				7.7
Total U.S. Bancorp shareholders’ equity			6,206				6,228				6,385				(.4	)			(2.8	)			6,280				6,361				(1.3	)

 

(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 $303 million of the Company’s net income in the third quarter of 2017, compared with $342 million in the third quarter of 2016. Total net revenue increased $33 million (2.3 percent) due to a $25 million (4.6 percent) increase in net interest income and an increase of $8 million (0.9 percent) in total noninterest income. Net interest income increased year-over-year primarily due to higher loan volumes and rising interest rates, in addition to growth in loan fees. Total noninterest income increased

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U.S. Bancorp Third Quarter 2017 Business Line Results

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year-over-year primarily due to higher corporate payment products revenue and credit and debit card revenue driven by higher sales, partially offset by lower merchant processing services revenue due to exiting certain joint ventures and the impacts of recent weather events. Total noninterest expense increased $45 million (6.5 percent) over the third quarter of 2016 principally due to higher net shared services expense, driven by implementation costs of capital investments to support business growth, and higher compensation and employee benefits expense, reflecting higher staffing to support business investment and compliance programs and merit increases. The provision for credit losses increased $62 million (29.8 percent) 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 2017				2Q 2017				3Q 2016				3Q17 vs 2Q17				3Q17 vs 3Q16				YTD 2017				YTD 2016				Percent Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)		$	506			$	481			$	508				5.2				(.4	)		$	1,443			$	1,613				(10.5	)
Noninterest income			235				230				188				2.2				25.0				681				721				(5.5	)
Securities gains (losses), net			9				9				10				—				(10.0	)			50				16				nm
Total net revenue			750				720				706				4.2				6.2				2,174				2,350				(7.5	)
Noninterest expense			225				205				192				9.8				17.2				603				672				(10.3	)
Other intangibles			—				—				—				—				—				—				—				—
Total noninterest expense			225				205				192				9.8				17.2				603				672				(10.3	)
Income before provision and taxes			525				515				514				1.9				2.1				1,571				1,678				(6.4	)
Provision for credit losses			1				(4	)			—				nm				nm				(1	)			5				nm
Income before income taxes			524				519				514				1.0				1.9				1,572				1,673				(6.0	)
Income taxes and taxable-equivalent adjustment			28				22				27				27.3				3.7				50				111				(55.0	)
Net income			496				497				487				(.2	)			1.8				1,522				1,562				(2.6	)
Net (income) loss attributable to noncontrolling interests			(6	)			(6	)			(6	)			—				—				(18	)			(18	)			—
Net income attributable to U.S. Bancorp		$	490			$	491			$	481				(.2	)			1.9			$	1,504			$	1,544				(2.6	)
Average Balance Sheet Data
Loans		$	3,336			$	3,386			$	3,460				(1.5	)			(3.6	)		$	3,378			$	3,552				(4.9	)
Other earning assets			123,641				121,655				115,980				1.6				6.6				121,385				112,349				8.0
Goodwill			—				—				—				—				—				—				—				—
Other intangible assets			—				—				—				—				—				—				—				—
Assets			145,036				142,554				138,400				1.7				4.8				142,327				134,301				6.0
Noninterest-bearing deposits			2,162				2,048				2,224				5.6				(2.8	)			2,066				2,097				(1.5	)
Interest-bearing deposits			852				714				1,435				19.3				(40.6	)			754				2,849				(73.5	)
Total deposits			3,014				2,762				3,659				9.1				(17.6	)			2,820				4,946				(43.0	)
Total U.S. Bancorp shareholders’ equity			18,791				18,324				18,719				2.5				.4				18,345				18,435				(.5	)

 

(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 $490 million in the third quarter of 2017, compared with $481 million in the third quarter of 2016. The increase in net income from the prior year quarter was primarily due to an increase in total net revenue, partially offset by an increase in total noninterest expense. Net interest income was essentially flat to the third quarter of 2016. Total noninterest income increased $46 million (23.2 percent) from the third quarter of

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2016 principally due to equity investments. Total noninterest expense increased $33 million (17.2 percent) principally due to higher compensation expense, reflecting the impact of increased staffing and merit increases including variable compensation, and higher accruals for legal and regulatory matters, partially offset by lower net shared services expenses. The provision for credit losses was relatively flat compared with the prior year quarter.