USB 8-K
US Bancorp De (USB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule l2b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section l3(a) of the Exchange Act. ☐
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On January 20, 2021, U.S. Bancorp (the “Company”) issued a press release reporting quarter-ended December 31, 2020 results, and posted on its website its 4Q20 Earnings Conference Call Presentation, which contains certain additional historical and forward-looking information relating to the Company. The press release is included as Exhibit 99.1 hereto and is incorporated herein by reference. The information included in the press release is considered to be “filed” under the Securities Exchange Act of 1934. The 4Q20 Earnings Conference Call Presentation is included as Exhibit 99.2 hereto and is incorporated herein by reference. The information included in the 4Q20 Earnings Conference Call Presentation is considered to be “furnished” under the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference in any filings under the Securities Act of 1933. The press release and 4Q20 Earnings Conference Call Presentation contain forward-looking statements regarding the Company and each includes a cautionary statement identifying important factors that could cause actual results to differ materially from those anticipated.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
| 99.1 |
| 99.2 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| U.S. BANCORP |
| By /s/ Lisa R. Stark |
| Lisa R. Stark |
| Executive Vice President and Controller |
DATE: January 20, 2021
Exhibit 99.1
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U.S. Bancorp Reports Fourth Quarter and Full Year 2020 Results
• Record full year revenue of $23.3 billion • Full year net income of $5.0 billion and diluted earnings per share of $3.06 • Common Equity Tier 1 capital ratio of 9.7% and strong levels of liquidity
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4Q20 and Full Year Key Financial Data |
4Q20 and Full Year Highlights |
| PROFITABILITY METRICS |
4Q20 | 3Q20 | 4Q19 | |
Full Year 2020 |
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Full Year 2019 |
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• Net income of $1,519 million and diluted earnings per common share of $0.95 for 4Q20
• Return on average assets of 1.10% and return on average common equity of 12.1% for 4Q20
• Net revenue of $5,751 million, including $3,201 million of net interest income and $2,550 million of noninterest income in 4Q20
• Net charge-off ratio of .58% in 4Q20 compared with .66% in 3Q20 and .52% in the 4Q19
• Full year net income of $4,959 million and diluted earnings per common share of $3.06
• Full year return on average assets of 0.93% and return on average common equity of 10.0%
• Full year average total loans growth of 5.7%
• Full year average total deposits growth of 14.9%
• CET1 capital ratio increased to 9.7% at December 31, 2020 compared with 9.1% at December 31, 2019
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| Return on average assets (%) |
1.10 | 1.17 | 1.21 | .93 | 1.45 | |||||||||||||||||||
| Return on average common equity (%) |
12.1 | 12.8 | 11.8 | 10.0 | 14.1 | |||||||||||||||||||
| Return on tangible common equity (%) (a) |
15.6 | 16.6 | 15.2 | 13.2 | 18.0 | |||||||||||||||||||
| Net interest margin (%) |
2.57 | 2.67 | 2.92 | 2.68 | 3.06 | |||||||||||||||||||
| Efficiency ratio (%) (a) |
58.8 | 56.6 | 60.3 | 57.8 | 55.8 | |||||||||||||||||||
| INCOME STATEMENT (b) |
4Q20 | 3Q20 | 4Q19 | |
Full Year 2020 |
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Full Year 2019 |
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| Net interest income (taxable-equivalent basis) |
$3,201 | $3,252 | $3,231 | $12,924 | $13,155 | |||||||||||||||||||
| Noninterest income |
$2,550 | $2,712 | $2,436 | $10,401 | $9,831 | |||||||||||||||||||
| Net income attributable to U.S. Bancorp |
$1,519 | $1,580 | $1,486 | $4,959 | $6,914 | |||||||||||||||||||
| Diluted earnings per common share |
$.95 | $.99 | $.90 | $3.06 | $4.16 | |||||||||||||||||||
| Dividends declared per common share |
$.42 | $.42 | $.42 | $1.68 | $1.58 | |||||||||||||||||||
| BALANCE SHEET (b) |
4Q20 | 3Q20 | 4Q19 | |
Full Year 2020 |
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Full Year 2019 |
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| Average total loans |
$302,308 | $311,018 | $294,865 | $307,269 | $290,686 | |||||||||||||||||||
| Average total deposits |
$422,413 | $405,523 | $356,452 | $398,615 | $346,812 | |||||||||||||||||||
| Net charge-off ratio |
.58% | .66% | .52% | .58% | .50% | |||||||||||||||||||
| Book value per common share (period end) |
$31.26 | $30.93 | $29.90 | |||||||||||||||||||||
| Basel III standardized CET1 (c) |
9.7% | 9.4% | 9.1% | |||||||||||||||||||||
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(a) See Non-GAAP Financial Measures reconciliation on page 17 |
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(b) Dollars in millions, except per share data |
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(c) CET1 = Common equity tier 1 capital ratio |
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CEO Commentary
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“Our fourth quarter and full year results highlighted the value of our diversified business model, which allowed us to deliver industry-leading results for our shareholders despite the economic headwinds the entire banking industry faced. This was an extraordinary year that brought both challenges and opportunities. I’m proud of how we came together to support our customers and communities as they faced various individual obstacles brought on by COVID-19 and other global issues. As we look ahead to 2021, I’m confident in our ability to create shareholder value as we continue to invest in our digital capabilities, technology and people to drive revenue growth and efficiency improvement. I want to thank all our employees for being flexible, for being resilient, and for bringing our core values to life for the benefit of our customers every day”
— Andy Cecere, Chairman, President and CEO, U.S. Bancorp |
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In the Spotlight
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Investor contact: Jennifer Thompson, 612.303.0778 | Media contact: Jeff Shelman, 612.422.1423
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U.S. Bancorp Fourth Quarter 2020 Results | |
| INCOME STATEMENT HIGHLIGHTS | ||||||||||||||||||||||||||||||||
| ($ in millions, except per-share data) |
Percent Change | |||||||||||||||||||||||||||||||
| 4Q 2020 |
3Q 2020 |
4Q 2019 |
4Q20 vs 3Q20 |
4Q20 vs 4Q19 |
Full Year 2020 |
Full Year 2019 |
Percent Change |
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| Net interest income |
$3,175 | $3,227 | $3,207 | (1.6) | (1.0) | $12,825 | $13,052 | (1.7) | ||||||||||||||||||||||||
| Taxable-equivalent adjustment |
26 | 25 | 24 | 4.0 | 8.3 | 99 | 103 | (3.9) | ||||||||||||||||||||||||
| Net interest income (taxable-equivalent basis) |
3,201 | 3,252 | 3,231 | (1.6) | (.9) | 12,924 | 13,155 | (1.8) | ||||||||||||||||||||||||
| Noninterest income |
2,550 | 2,712 | 2,436 | (6.0) | 4.7 | 10,401 | 9,831 | 5.8 | ||||||||||||||||||||||||
| Total net revenue |
5,751 | 5,964 | 5,667 | (3.6) | 1.5 | 23,325 | 22,986 | 1.5 | ||||||||||||||||||||||||
| Noninterest expense |
3,364 | 3,371 | 3,401 | (.2) | (1.1) | 13,369 | 12,785 | 4.6 | ||||||||||||||||||||||||
| Income before provision and income taxes |
2,387 | 2,593 | 2,266 | (7.9) | 5.3 | 9,956 | 10,201 | (2.4) | ||||||||||||||||||||||||
| Provision for credit losses |
441 | 635 | 395 | (30.6) | 11.6 | 3,806 | 1,504 | nm | ||||||||||||||||||||||||
| Income before taxes |
1,946 | 1,958 | 1,871 | (.6) | 4.0 | 6,150 | 8,697 | (29.3) | ||||||||||||||||||||||||
| Income taxes and taxable-equivalent adjustment |
421 | 372 | 378 | 13.2 | 11.4 | 1,165 | 1,751 | (33.5) | ||||||||||||||||||||||||
| Net income |
1,525 | 1,586 | 1,493 | (3.8) | 2.1 | 4,985 | 6,946 | (28.2) | ||||||||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests |
(6) | (6) | (7) | -- | 14.3 | (26) | (32) | 18.8 | ||||||||||||||||||||||||
| Net income attributable to U.S. Bancorp |
$1,519 | $1,580 | $1,486 | (3.9) | 2.2 | $4,959 | $6,914 | (28.3) | ||||||||||||||||||||||||
| Net income applicable to U.S. Bancorp common shareholders |
$1,425 | $1,494 | $1,408 | (4.6) | 1.2 | $4,621 | $6,583 | (29.8) | ||||||||||||||||||||||||
| Diluted earnings per common share |
$.95 | $.99 | $.90 | (4.0) | 5.6 | $3.06 | $4.16 | (26.4) | ||||||||||||||||||||||||
Net income attributable to U.S. Bancorp was $1,519 million for the fourth quarter of 2020, which was 2.2 percent higher than the $1,486 million for the fourth quarter of 2019, and 3.9 percent lower than the $1,580 million for the third quarter of 2020. Diluted earnings per common share were $0.95 in the fourth quarter of 2020, compared with $0.90 in the fourth quarter of 2019 and $0.99 in the third quarter of 2020. The fourth quarter of 2019 included $(0.18) per diluted common share of notable items related to restructuring charges including severance and certain asset impairments, and an increased derivative liability related to Visa shares previously sold by the Company.
The increase in net income year-over-year was primarily due to higher noninterest income as well as lower noninterest expense, partially offset by lower net interest income and higher provision for credit losses. The components of net income are being adversely impacted by the COVID-19 environment resulting in significantly lower interest rates and consumer and business spending activities as well as changes in credit quality. The provision for credit losses takes into account expected loss estimates considering various factors including the economic outlook, changing credit quality, ongoing new loan production and acquired loans. Net interest income decreased 0.9 percent on a year-over-year basis, primarily due to the impact of lower rates compared with a year ago, partially offset by the benefit of deposit and funding mix, loan growth and higher loan fees. The net interest margin declined from a year ago to 2.57 percent in the fourth quarter of 2020 primarily due to the impact of a lower yield curve, loan mix, decisions to maintain higher levels of liquidity, and higher premium amortization within the investment portfolio, partially offset by the net benefit of deposit repricing and funding composition. Noninterest income increased 4.7 percent compared with a year ago, driven by significant growth in mortgage banking revenue due to refinancing production and growth in commercial products revenue primarily due to commitment fees on unused lines. Growth in these fee categories was partially offset by a decline in payment services revenue and deposit service charges related to lower consumer and business spending. Excluding a prior year notable item in other noninterest income for a valuation charge of $140 million for an increased derivative liability related to Visa shares previously sold by the Company, total noninterest income decreased 1.0 percent in the fourth quarter of 2020 compared with the fourth quarter of 2019. Noninterest expense decreased 1.1 percent despite approximately $22 million of costs related to the COVID-19 environment and an increase in revenue-related production expenses of approximately $96 million in the fourth quarter of 2020. Excluding prior year notable items in other noninterest expense related to severance charges and other accruals of $200 million, total noninterest expense increased 5.1 percent in the fourth quarter of 2020 compared with the fourth quarter of 2019 reflecting business investments, COVID-19 costs and revenue-related expenses.
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U.S. Bancorp Fourth Quarter 2020 Results | |
Net income decreased on a linked quarter basis primarily due to lower total net revenue, partially offset by a lower provision for credit losses. The Company’s pre-provision income decreased 7.9 percent on a linked quarter basis, driven by lower total net revenue of 3.6 percent, partially offset by a decrease in noninterest expense of 0.2 percent on a linked quarter basis. Net interest income decreased 1.6 percent primarily due to a decline in average loan balances, higher premium amortization expense and lower reinvestment yields in the investment portfolio, partially offset by the benefit of deposit and funding mix as well as higher loan fees. The net interest margin decreased on a linked quarter basis, primarily reflecting the impact of higher cash balances and premium amortization. Noninterest income decreased 6.0 percent compared with the third quarter of 2020 driven by lower payment services revenue, deposit service charges, commercial products revenue and mortgage banking revenue, partially offset by higher other noninterest income driven by tax-advantaged investment syndication revenue in the fourth quarter. Noninterest expense decreased 0.2 percent on a linked quarter basis, reflecting lower personnel expense, mostly offset by continued business investment in digital capabilities and business development expense.
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U.S. Bancorp Fourth Quarter 2020 Results | |
| NET INTEREST INCOME | ||||||||||||||||||||||||||||||||
| (Taxable-equivalent basis; $ in millions) | Change | |||||||||||||||||||||||||||||||
| 4Q 2020 |
3Q 2020 |
4Q 2019 |
4Q20 vs 3Q20 |
4Q20 vs 4Q19 |
Full Year 2020 |
Full Year 2019 |
Change | |||||||||||||||||||||||||
| Components of net interest income |
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| Income on earning assets |
$3,505 | $3,598 | $4,281 | $(93) | $(776) | $14,942 | $17,607 | $(2,665) | ||||||||||||||||||||||||
| Expense on interest-bearing liabilities |
304 | 346 | 1,050 | (42) | (746) | 2,018 | 4,452 | (2,434) | ||||||||||||||||||||||||
| Net interest income |
$3,201 | $3,252 | $3,231 | $(51) | $(30) | $12,924 | $13,155 | $(231) | ||||||||||||||||||||||||
| Average yields and rates paid |
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| Earning assets yield |
2.81% | 2.95% | 3.87% | (.14)% | (1.06)% | 3.10% | 4.09% | (.99)% | ||||||||||||||||||||||||
| Rate paid on interest-bearing liabilities |
.33 | .39 | 1.22 | (.06) | (.89) | .56 | 1.34 | (.78) | ||||||||||||||||||||||||
| Gross interest margin |
2.48% | 2.56% | 2.65% | (.08)% | (.17)% | 2.54% | 2.75% | (.21)% | ||||||||||||||||||||||||
| Net interest margin |
2.57% | 2.67% | 2.92% | (.10)% | (.35)% | 2.68% | 3.06% | (.38)% | ||||||||||||||||||||||||
| Average balances |
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| Investment securities (a) |
$133,430 | $128,565 | $121,668 | $4,865 | $11,762 | $125,954 | $117,150 | $8,804 | ||||||||||||||||||||||||
| Loans |
302,308 | 311,018 | 294,865 | (8,710) | 7,443 | 307,269 | 290,686 | 16,583 | ||||||||||||||||||||||||
| Earning assets |
497,437 | 486,104 | 439,770 | 11,333 | 57,667 | 481,402 | 430,537 | 50,865 | ||||||||||||||||||||||||
| Interest-bearing liabilities |
362,445 | 357,739 | 341,848 | 4,706 | 20,597 | 363,298 | 332,658 | 30,640 | ||||||||||||||||||||||||
(a) Excludes unrealized gain (loss)
Net interest income on a taxable-equivalent basis in the fourth quarter of 2020 was $3,201 million, a decrease of $30 million (0.9 percent) compared with the fourth quarter of 2019. The decrease was primarily due to the impact of lower rates compared with a year ago, partially offset by deposit and funding mix, loan growth and higher loan fees. Average earning assets were $57.7 billion (13.1 percent) higher than the fourth quarter of 2019, reflecting increases of $7.4 billion (2.5 percent) in average total loans, $11.8 billion (9.7 percent) in average investment securities, and $34.9 billion in average other earning assets including cash balances being maintained for liquidity given the current economic environment.
Net interest income on a taxable-equivalent basis decreased $51 million (1.6 percent) on a linked quarter basis primarily due to a decline in average loan balances, higher premium amortization expense and lower reinvestment yields in the investment portfolio, partially offset by the benefit of deposit and funding mix as well as higher loan fees. Average earning assets were $11.3 billion (2.3 percent) higher on a linked quarter basis, reflecting increases of $4.9 billion (3.8 percent) in average investment securities and $14.3 billion (37.1 percent) in average other earning assets, partially offset by a decrease of $8.7 billion (2.8 percent) in average total loans, primarily due to continued paydowns by corporate customers that accessed the capital markets during the year.
The net interest margin in the fourth quarter of 2020 was 2.57 percent, compared with 2.92 percent in the fourth quarter of 2019 and 2.67 percent in the third quarter of 2020. The decrease in the net interest margin from the prior year was primarily due to the impact of a lower yield curve and decisions to maintain higher cash balances for liquidity, partially offset by deposit and funding mix. The decrease in net interest margin on a linked quarter basis reflects the impact of higher cash balances and premium amortization in the investment portfolio, partially offset by favorable loan and deposit mix. The Company’s higher liquidity levels, on a linked quarter basis, were related to the acquisition of approximately $10 billion of deposit balances from State Farm Bank in the fourth quarter of 2020.
The increase in average investment securities on a linked quarter and year-over-year basis was due to purchases of mortgage-backed, U.S. Treasury and state and political securities net of prepayments and maturities.
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U.S. Bancorp Fourth Quarter 2020 Results | |
| AVERAGE LOANS | ||||||||||||||||||||||||||||||||
| ($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
| 4Q 2020 |
3Q 2020 |
4Q 2019 |
4Q20 vs 3Q20 |
4Q20 vs 4Q19 |
Full Year 2020 |
Full Year 2019 |
Percent Change |
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| Commercial |
$100,863 | $109,899 | $98,362 | (8.2 | ) | 2.5 | $108,367 | $97,697 | 10.9 | |||||||||||||||||||||||
| Lease financing |
5,558 | 5,590 | 5,549 | (.6 | ) | .2 | 5,600 | 5,501 | 1.8 | |||||||||||||||||||||||
| Total commercial |
106,421 | 115,489 | 103,911 | (7.9 | ) | 2.4 | 113,967 | 103,198 | 10.4 | |||||||||||||||||||||||
| Commercial mortgages |
29,004 | 29,849 | 29,133 | (2.8 | ) | (.4 | ) | 29,641 | 28,595 | 3.7 | ||||||||||||||||||||||
| Construction and development |
11,094 | 11,080 | 10,589 | .1 | 4.8 | 10,907 | 10,791 | 1.1 | ||||||||||||||||||||||||
| Total commercial real estate |
40,098 | 40,929 | 39,722 | (2.0 | ) | .9 | 40,548 | 39,386 | 3.0 | |||||||||||||||||||||||
| Residential mortgages |
76,809 | 75,786 | 69,909 | 1.3 | 9.9 | 73,667 | 67,747 | 8.7 | ||||||||||||||||||||||||
| Credit card |
21,937 | 22,052 | 24,107 | (.5 | ) | (9.0 | ) | 22,332 | 23,309 | (4.2 | ) | |||||||||||||||||||||
| Retail leasing |
8,299 | 8,438 | 8,486 | (1.6 | ) | (2.2 | ) | 8,405 | 8,515 | (1.3 | ) | |||||||||||||||||||||
| Home equity and second mortgages |
12,816 | 13,551 | 15,221 | (5.4 | ) | (15.8 | ) | 13,894 | 15,659 | (11.3 | ) | |||||||||||||||||||||
| Other |
35,928 | 34,773 | 33,509 | 3.3 | 7.2 | 34,456 | 32,872 | 4.8 | ||||||||||||||||||||||||
| Total other retail |
57,043 | 56,762 | 57,216 | .5 | (.3 | ) | 56,755 | 57,046 | (.5 | ) | ||||||||||||||||||||||
| Total loans |
$302,308 | $311,018 | $294,865 | (2.8 | ) | 2.5 | $307,269 | $290,686 | 5.7 | |||||||||||||||||||||||
Average total loans for the fourth quarter of 2020 were $7.4 billion (2.5 percent) higher than the fourth quarter of 2019. The increase was primarily due to higher total commercial loans (2.4 percent), including the impact of loans made under the SBA’s Paycheck Protection Program, along with growth in residential mortgages (9.9 percent) given the lower interest rate environment and GNMA buybacks, in addition to growth in other retail loans (7.2 percent) driven by growth in installment loans due to the COVID-19 impact on recreational vehicle sales. These increases were partially offset by lower credit card loans (9.0 percent) and home equity and second mortgages (15.8 percent).
Average total loans were $8.7 billion (2.8 percent) lower than the third quarter of 2020 primarily driven by lower total commercial loans (7.9 percent), reflecting continued paydowns by corporate customers, partially offset by higher residential mortgages (1.3 percent) given the lower interest rate environment and GNMA buybacks.
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U.S. Bancorp Fourth Quarter 2020 Results | |
| AVERAGE DEPOSITS |
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| ($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
| 4Q | 3Q | 4Q | 4Q20 vs | 4Q20 vs | Full Year | Full Year | Percent | |||||||||||||||||||||||||
| 2020 | 2020 | 2019 | 3Q20 | 4Q19 | 2020 | 2019 | Change | |||||||||||||||||||||||||
| Noninterest-bearing deposits |
$115,148 | $109,375 | $74,313 | 5.3 | 55.0 | $98,539 | $73,863 | 33.4 | ||||||||||||||||||||||||
| Interest-bearing savings deposits |
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| Interest checking |
91,384 | 84,494 | 75,563 | 8.2 | 20.9 | 84,276 | 72,553 | 16.2 | ||||||||||||||||||||||||
| Money market savings |
127,390 | 124,115 | 116,619 | 2.6 | 9.2 | 125,786 | 109,849 | 14.5 | ||||||||||||||||||||||||
| Savings accounts |
55,730 | 53,499 | 46,945 | 4.2 | 18.7 | 52,142 | 46,130 | 13.0 | ||||||||||||||||||||||||
| Total savings deposits |
274,504 | 262,108 | 239,127 | 4.7 | 14.8 | 262,204 | 228,532 | 14.7 | ||||||||||||||||||||||||
| Time deposits |
32,761 | 34,040 | 43,012 | (3.8 | ) | (23.8) | 37,872 | 44,417 | (14.7 | ) | ||||||||||||||||||||||
| Total interest-bearing deposits |
307,265 | 296,148 | 282,139 | 3.8 | 8.9 | 300,076 | 272,949 | 9.9 | ||||||||||||||||||||||||
| Total deposits |
$422,413 | $405,523 | $356,452 | 4.2 | 18.5 | $398,615 | $346,812 | 14.9 | ||||||||||||||||||||||||
Average total deposits for the fourth quarter of 2020 were $66.0 billion (18.5 percent) higher than the fourth quarter of 2019, including approximately $10 billion related to the acquisition of deposit balances from State Farm Bank in the fourth quarter of 2020. Average noninterest-bearing deposits increased $40.8 billion (55.0 percent) across all business lines. Average total savings deposits were $35.4 billion (14.8. percent) higher year-over-year driven by Consumer and Business Banking, Corporate and Commercial Banking, and Wealth Management and Investment Services. Average time deposits were $10.3 billion (23.8 percent) lower than the prior year quarter. Changes in time deposits are largely related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.
Average total deposits increased $16.9 billion (4.2 percent) from the third quarter of 2020, including the acquired deposit balances. On a linked quarter basis, average noninterest-bearing deposits increased $5.8 billion (5.3 percent) driven by Corporate and Commercial Banking. Average total savings deposits increased $12.4 billion (4.7 percent) compared with the third quarter of 2020 primarily due to increases in Consumer and Business Banking and Wealth Management and Investment Services. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, decreased $1.3 billion (3.8 percent) on a linked quarter basis primarily within Corporate and Commercial Banking, partially offset by increases in Consumer and Business Banking.
The growth in average noninterest-bearing deposits and total average savings deposits year-over-year was primarily a result of the actions by the federal government to increase liquidity in the financial system, customers maintaining balance sheet liquidity by utilizing existing credit facilities and government stimulus programs. The year-over-year increase in average noninterest-bearing deposits in Payment Services was driven by state unemployment distributions on prepaid debit cards.
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U.S. Bancorp Fourth Quarter 2020 Results | |
| NONINTEREST INCOME | ||||||||||||||||||||||||||||||||
| ($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
| 4Q | 3Q | 4Q | 4Q20 vs | 4Q20 vs | Full Year | Full Year | Percent | |||||||||||||||||||||||||
| 2020 | 2020 | 2019 | 3Q20 | 4Q19 | 2020 | 2019 | Change | |||||||||||||||||||||||||
| Credit and debit card revenue |
$362 | $388 | $378 | (6.7 | ) | (4.2 | ) | $1,338 | $1,413 | (5.3 | ) | |||||||||||||||||||||
| Corporate payment products revenue |
126 | 125 | 158 | .8 | (20.3 | ) | 497 | 664 | (25.2 | ) | ||||||||||||||||||||||
| Merchant processing services |
311 | 347 | 409 | (10.4 | ) | (24.0 | ) | 1,261 | 1,601 | (21.2 | ) | |||||||||||||||||||||
| Trust and investment management fees |
441 | 434 | 438 | 1.6 | .7 | 1,736 | 1,673 | 3.8 | ||||||||||||||||||||||||
| Deposit service charges |
165 | 170 | 231 | (2.9 | ) | (28.6 | ) | 677 | 909 | (25.5 | ) | |||||||||||||||||||||
| Treasury management fees |
143 | 145 | 140 | (1.4 | ) | 2.1 | 568 | 578 | (1.7 | ) | ||||||||||||||||||||||
| Commercial products revenue |
239 | 303 | 226 | (21.1 | ) | 5.8 | 1,143 | 934 | 22.4 | |||||||||||||||||||||||
| Mortgage banking revenue |
468 | 553 | 244 | (15.4 | ) | 91.8 | 2,064 | 874 | nm | |||||||||||||||||||||||
| Investment products fees |
50 | 48 | 48 | 4.2 | 4.2 | 192 | 186 | 3.2 | ||||||||||||||||||||||||
| Securities gains (losses), net |
34 | 12 | 26 | nm | 30.8 | 177 | 73 | nm | ||||||||||||||||||||||||
| Other |
211 | 187 | 138 | 12.8 | 52.9 | 748 | 926 | (19.2 | ) | |||||||||||||||||||||||
| Total noninterest income |
$2,550 | $2,712 | $2,436 | (6.0 | ) | 4.7 | $10,401 | $9,831 | 5.8 | |||||||||||||||||||||||
Fourth quarter noninterest income of $2,550 million was $114 million (4.7 percent) higher than the fourth quarter of 2019. In the fourth quarter of 2019, other noninterest income included a valuation charge of $140 million for an increased derivative liability related to Visa shares previously sold by the Company. Excluding this notable item, noninterest income decreased $26 million (1.0 percent) compared with the fourth quarter of 2019 reflecting lower payment services revenue, deposit service charges and other noninterest income, partially offset by strong growth in mortgage banking revenue and higher commercial products revenue. Payment services revenue decreased $146 million (15.4 percent) compared with the fourth quarter of 2019 driven by lower consumer and business spending as a result of the COVID-19 pandemic. Credit and debit card revenue was lower by $16 million (4.2 percent) due to lower net interchange revenue related to sales volumes, partially offset by higher prepaid fees as a result of government stimulus programs in 2020. Also impacting payment services revenue, corporate payment products revenue decreased $32 million (20.3 percent) and merchant processing services revenue deceased $98 million (24.0 percent) primarily due to lower sales volume. Deposit service charges decreased $66 million (28.6 percent) primarily due to lower consumer spending activities. Other noninterest income, excluding the prior year notable item, decreased $67 million (24.1 percent) driven by higher equity investment income in the fourth quarter of 2019, partially offset by higher retail leasing end of term residual gains and tax-advantaged investment syndication revenue in the fourth quarter of 2020. Partially offsetting these decreases, mortgage banking revenue experienced strong growth of $224 million (91.8 percent) compared with the fourth quarter of 2019 due to higher mortgage production driven by refinancing activities and stronger gain on sale margins, partially offset by the unfavorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities. Commercial products revenue increased $13 million (5.8 percent) primarily due to higher commercial loan and commercial leasing fees.
Noninterest income was $162 million (6.0 percent) lower in the fourth quarter of 2020 compared with the third quarter of 2020, reflecting lower payment services revenue, commercial products revenue and mortgage banking revenue, partially offset by higher other noninterest income and gains on the sale of securities. Payment services revenue decreased $61 million (7.1 percent) compared with the third quarter of 2020, in part due to seasonality. The decline was driven by $26 million (6.7 percent) lower credit and debit card revenue, primarily due to the timing of stimulus payments through prepaid card processing in the third quarter of 2020, and lower merchant processing services revenue of $36 million (10.4 percent) due to the impact of economic shutdowns in Europe and certain domestic regions and sales volumes. Commercial products revenue decreased $64 million (21.1 percent) primarily due to lower capital markets activities, partially offset by stronger commercial loan and commercial leasing fees. Mortgage banking revenue decreased $85 million (15.4 percent) due to lower production volume and related gain on sales as well as the unfavorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities. Other noninterest income increased $24 million (12.8 percent) primarily due to higher tax-advantaged investment syndication revenue.
7
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|
U.S. Bancorp Fourth Quarter 2020 Results | |
| NONINTEREST EXPENSE | ||||||||||||||||||||||||||||||||
| ($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
| 4Q | 3Q | 4Q | 4Q20 vs | 4Q20 vs | Full Year | Full Year | Percent | |||||||||||||||||||||||||
| 2020 | 2020 | 2019 | 3Q20 | 4Q19 | 2020 | 2019 | Change | |||||||||||||||||||||||||
| Compensation |
$1,643 | $1,687 | $1,597 | (2.6 | ) | 2.9 | $6,635 | $6,325 | 4.9 | |||||||||||||||||||||||
| Employee benefits |
302 | 335 | 315 | (9.9 | ) | (4.1 | ) | 1,303 | 1,286 | 1.3 | ||||||||||||||||||||||
| Net occupancy and equipment |
269 | 276 | 286 | (2.5 | ) | (5.9 | ) | 1,092 | 1,123 | (2.8 | ) | |||||||||||||||||||||
| Professional services |
123 | 102 | 139 | 20.6 | (11.5 | ) | 430 | 454 | (5.3 | ) | ||||||||||||||||||||||
| Marketing and business development |
105 | 72 | 117 | 45.8 | (10.3 | ) | 318 | 426 | (25.4 | ) | ||||||||||||||||||||||
| Technology and communications |
362 | 334 | 291 | 8.4 | 24.4 | 1,294 | 1,095 | 18.2 | ||||||||||||||||||||||||
| Postage, printing and supplies |
74 | 70 | 71 | 5.7 | 4.2 | 288 | 290 | (.7 | ) | |||||||||||||||||||||||
| Other intangibles |
47 | 44 | 44 | 6.8 | 6.8 | 176 | 168 | 4.8 | ||||||||||||||||||||||||
| Other |
439 | 451 | 541 | (2.7 | ) | (18.9 | ) | 1,833 | 1,618 | 13.3 | ||||||||||||||||||||||
| Total noninterest expense |
$3,364 | $3,371 | $3,401 | (.2 | ) | (1.1 | ) | $13,369 | $12,785 | 4.6 | ||||||||||||||||||||||
Fourth quarter noninterest expense of $3,364 million was $37 million (1.1 percent) lower than the fourth quarter of 2019. In the fourth quarter of 2019, other noninterest expense included notable items related to severance charges and other accruals of $200 million. The current quarter included approximately $118 million of incremental costs related to the prepaid card business ($44 million), expenses related to COVID-19 ($22 million) and revenue-related expenses ($52 million) primarily due to higher mortgage production in addition to business investments, including digital capabilities. Excluding the impact of the prior year notable items, noninterest expense increased $163 million (5.1 percent) compared with the fourth quarter of 2019 reflecting higher compensation expense, technology and communications expense and other noninterest expense, partially offset by lower net occupancy and equipment expense, professional services expense and marketing and business development expense. Compensation expense increased $46 million (2.9 percent) compared with the fourth quarter of 2019 due to merit and variable compensation related to business production in mortgage banking. Technology and communications expense increased $71 million (24.4 percent) primarily due to the impact of increased call center volume related to prepaid cards and capital expenditures supporting business technology investments. Other noninterest expense, excluding the prior year notable items, increased $98 million (28.7 percent) which reflected higher expenses for revenue-related costs and COVID-19, merger-related costs related to acquired deposits and higher state franchise taxes, partially offset by lower costs related to tax-advantaged projects. These increases were partially offset by lower net occupancy and equipment expense of $17 million (5.9 percent) due to branch optimization initiatives, lower professional services expense of $16 million (11.5 percent) primarily due to fewer initiatives in the current year and lower marketing and business development expense of $12 million (10.3 percent) due to a reduction in travel as a result of COVID-19.
Noninterest expense decreased $7 million (0.2 percent) on a linked quarter basis reflecting lower compensation and employee benefits expense, mostly offset by higher professional services expense, marketing and business development expense and technology and communications expense. Compensation expense decreased $44 million (2.6 percent) primarily due to lower business incentives while employee benefits expense decreased $33 million (9.9 percent) primarily due to lower medical claims expense. Partially offsetting these decreases, professional services expense increased $21 million (20.6 percent) primarily due to seasonally higher spending on business investments. Marketing and business development expense increased $33 million (45.8 percent) due to the timing of marketing campaigns supporting business development, and technology and communications expense increased $28 million (8.4 percent) driven by increased call center volume related to prepaid debit cards and software license expense.
Provision for Income Taxes
The provision for income taxes for the fourth quarter of 2020 resulted in a tax rate of 21.6 percent on a taxable-equivalent basis (effective tax rate of 20.6 percent), compared with 20.2 percent on a taxable-equivalent basis (effective tax rate of 19.2 percent) in the fourth quarter of 2019, and a tax rate of 19.0 percent on a taxable-equivalent basis (effective tax rate of 18.0 percent) in the third quarter of 2020.
8
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U.S. Bancorp Fourth Quarter 2020 Results | |
| ALLOWANCE FOR CREDIT LOSSES | ||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | 4Q | 3Q | 2Q | 1Q | 4Q | |||||||||||||||||||||||||||||||||||
| 2020 | % (a) | 2020 | % (a) | 2020 | % (a) | 2020 | % (a) | 2019 | % (a) | |||||||||||||||||||||||||||||||
|
Balance, beginning of period |
$ | 8,010 | $ | 7,890 | $ | 6,590 | $ | 4,491 | $ | 4,481 | ||||||||||||||||||||||||||||||
| Change in accounting principle (b) |
-- | -- | -- | 1,499 | -- | |||||||||||||||||||||||||||||||||||
| Net charge-offs |
||||||||||||||||||||||||||||||||||||||||
| Commercial |
142 | .56 | 167 | .60 | 105 | .34 | 69 | .28 | 74 | .30 | ||||||||||||||||||||||||||||||
| Lease financing |
8 | .57 | 11 | .78 | 6 | .43 | 5 | .36 | 4 | .29 | ||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||
| Total commercial |
150 | .56 | 178 | .61 | 111 | .35 | 74 | .28 | 78 | .30 | ||||||||||||||||||||||||||||||
| Commercial mortgages |
82 | 1.12 | 85 | 1.13 | 19 | .25 | (1 | ) | (.01 | ) | 7 | .10 | ||||||||||||||||||||||||||||
| Construction and development |
2 | .07 | (2 | ) | (.07 | ) | 3 | .11 | (1 | ) | (.04 | ) | -- | -- | ||||||||||||||||||||||||||
|
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|
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|
|||||||||||||||||||||||||||||||
| Total commercial real estate |
84 | .83 | 83 | .81 | 22 | .22 | (2 | ) | (.02 | ) | 7 | .07 | ||||||||||||||||||||||||||||
| Residential mortgages |
(7 | ) | (.04 | ) | (3 | ) | (.02 | ) | (3 | ) | (.02 | ) | 1 | .01 | (1 | ) | (.01 | ) | ||||||||||||||||||||||
| Credit card |
165 | 2.99 | 201 | 3.63 | 229 | 4.28 | 234 | 3.95 | 230 | 3.79 | ||||||||||||||||||||||||||||||
| Retail leasing (c) |
9 | .43 | 20 | .94 | 33 | 1.58 | 19 | .90 | 4 | .19 | ||||||||||||||||||||||||||||||
| Home equity and second mortgages |
(3 | ) | (.09 | ) | (2 | ) | (.06 | ) | -- | -- | 1 | .03 | -- | -- | ||||||||||||||||||||||||||
| Other |
43 | .48 | 38 | .43 | 45 | .54 | 66 | .79 | 67 | .79 | ||||||||||||||||||||||||||||||
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| Total other retail |
49 | .34 | 56 | .39 | 78 | .56 | 86 | .61 | 71 | .49 | ||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||
| Total net charge-offs |
441 | .58 | 515 | .66 | 437 | .55 | 393 | .53 | 385 | .52 | ||||||||||||||||||||||||||||||
| Provision for credit losses |
441 | 635 | 1,737 | 993 | 395 | |||||||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||
| Balance, end of period |
$ | 8,010 | $ | 8,010 | $ | 7,890 | $ | 6,590 | $ | 4,491 | ||||||||||||||||||||||||||||||
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| Components |
||||||||||||||||||||||||||||||||||||||||
| Allowance for loan losses |
$ | 7,314 | $ | 7,407 | $ | 7,383 | $ | 6,216 | $ | 4,020 | ||||||||||||||||||||||||||||||
| Liability for unfunded credit commitments |
696 | 603 | 507 | 374 | 471 | |||||||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||
| Total allowance for credit losses |
$ | 8,010 | $ | 8,010 | $ | 7,890 | $ | 6,590 | $ | 4,491 | ||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||
| Gross charge-offs |
$ | 556 | $ | 611 | $ | 522 | $ | 491 | $ | 479 | ||||||||||||||||||||||||||||||
| Gross recoveries |
$ | 115 | $ | 96 | $ | 85 | $ | 98 | $ | 94 | ||||||||||||||||||||||||||||||
| Allowance for credit losses as a percentage of |
||||||||||||||||||||||||||||||||||||||||
| Period-end loans |
2.69 | 2.61 | 2.54 | 2.07 | 1.52 | |||||||||||||||||||||||||||||||||||
| Nonperforming loans |
654 | 678 | 737 | 809 | 649 | |||||||||||||||||||||||||||||||||||
| Nonperforming assets |
617 | 631 | 673 | 697 | 542 | |||||||||||||||||||||||||||||||||||
| (a) Annualized and calculated on average loan balances
(b) Effective January 1, 2020, the Company adopted accounting guidance which changed impairment recognition of financial instruments to a model that is based on expected losses rather than incurred losses
(c) Includes end of term losses on residual lease values as of January 1, 2020 |
| |||||||||||||||||||||||||||||||||||||||
9
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|
U.S. Bancorp Fourth Quarter 2020 Results | |
The Company’s provision for credit losses for the fourth quarter of 2020 was $441 million, which was $194 million lower than the prior quarter and $46 million higher than the fourth quarter of 2019. During the fourth quarter of 2020, economic conditions continued to moderate in line with management’s expectations. Economic projections for both the gross domestic product and unemployment levels improved from the third quarter. In addition to these factors, expected loss estimates consider various factors including potential mitigating effects of government stimulus, estimated duration and severity of the health crisis, customer specific information impacting changes in risk ratings, projected delinquencies and the impact of industry-wide loan modification efforts designed to limit long term effects of the pandemic, among other factors.
Total net charge-offs in the fourth quarter of 2020 were $441 million, compared with $515 million in the third quarter of 2020, and $385 million in the fourth quarter of 2019. The net charge-off ratio was 0.58 percent in the fourth quarter of 2020, compared with 0.66 percent in the third quarter of 2020 and 0.52 percent in the fourth quarter of 2019. Net charge-offs decreased $74 million (14.4 percent) compared with the third quarter of 2020 mainly due to lower total commercial and credit card net charge-offs. Net charge-offs increased $56 million (14.5 percent) compared with the fourth quarter of 2019 primarily due to higher total commercial and total commercial real estate net charge-offs, partly offset by lower credit card and other retail net charge-offs. The year-over-year increase in retail leasing net charge-offs reflects the inclusion of end of term losses on residual lease values as of January 1, 2020.
The allowance for credit losses was $8,010 million at December 31, 2020, and at September 30, 2020, compared with $4,491 million at December 31, 2019. The increase year-over-year was due to the impact of the change in accounting principle on January 1, 2020, which added $1.5 billion to the allowance for credit losses, along with the reserve build driven by the potential economic impact of COVID-19. The ratio of the allowance for credit losses to period-end loans was 2.69 percent at December 31, 2020, compared with 2.61 percent at September 30, 2020, and 1.52 percent at December 31, 2019. The ratio of the allowance for credit losses to nonperforming loans was 654 percent at December 31, 2020, compared with 678 percent at September 30, 2020, and 649 percent at December 31, 2019.
Nonperforming assets were $1,298 million at December 31, 2020, compared with $1,270 million at September 30, 2020, and $829 million at December 31, 2019. The ratio of nonperforming assets to loans and other real estate was 0.44 percent at December 31, 2020, compared with 0.41 percent at September 30, 2020, and 0.28 percent at December 31, 2019. The year-over-year increase in nonperforming assets was primarily due to increases in total commercial and total commercial real estate nonperforming loans. Accruing loans 90 days or more past due were $506 million at December 31, 2020, compared with $461 million at September 30, 2020, and $605 million at December 31, 2019. The Company expects credit quality metrics, including nonperforming assets, to remain elevated and volatility in net charge-offs given current economic conditions.
10
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|
U.S. Bancorp Fourth Quarter 2020 Results | |
| DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES | ||||||||||||||||||||
| (Percent) | Dec 31 | Sep 30 | Jun 30 | Mar 31 | Dec 31 | |||||||||||||||
| 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||||||||
| Delinquent loan ratios - 90 days or more past due excluding nonperforming loans |
|
|||||||||||||||||||
| Commercial |
.05 | .06 | .07 | .06 | .08 | |||||||||||||||
| Commercial real estate |
.01 | -- | -- | -- | .01 | |||||||||||||||
| Residential mortgages |
.22 | .15 | .16 | .15 | .17 | |||||||||||||||
| Credit card |
.88 | .91 | 1.22 | 1.29 | 1.23 | |||||||||||||||
| Other retail |
.15 | .14 | .16 | .17 | .17 | |||||||||||||||
| Total loans |
.17 | .15 | .18 | .18 | .20 | |||||||||||||||
| Delinquent loan ratios - 90 days or more past due including nonperforming loans |
|
|||||||||||||||||||
| Commercial |
.42 | .48 | .45 | .31 | .27 | |||||||||||||||
| Commercial real estate |
1.15 | .82 | .48 | .25 | .21 | |||||||||||||||
| Residential mortgages |
.54 | .46 | .50 | .49 | .51 | |||||||||||||||
| Credit card |
.88 | .91 | 1.22 | 1.29 | 1.23 | |||||||||||||||
| Other retail |
.42 | .40 | .48 | .45 | .46 | |||||||||||||||
| Total loans |
.58 | .53 | .52 | .44 | .44 | |||||||||||||||
| ASSET QUALITY (a) | ||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||
| Dec 31 | Sep 30 | Jun 30 | Mar 31 | Dec 31 | ||||||||||||||||
| 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||||||||
| Nonperforming loans |
||||||||||||||||||||
| Commercial |
$321 | $403 | $403 | $276 | $172 | |||||||||||||||
| Lease financing |
54 | 56 | 53 | 33 | 32 | |||||||||||||||
| Total commercial |
375 | 459 | 456 | 309 | 204 | |||||||||||||||
| Commercial mortgages |
411 | 323 | 188 | 89 | 74 | |||||||||||||||
| Construction and development |
39 | 7 | 7 | 12 | 8 | |||||||||||||||
| Total commercial real estate |
450 | 330 | 195 | 101 | 82 | |||||||||||||||
| Residential mortgages |
245 | 240 | 242 | 243 | 241 | |||||||||||||||
| Credit card |
-- | -- | -- | -- | -- | |||||||||||||||
| Other retail |
154 | 152 | 178 | 162 | 165 | |||||||||||||||
| Total nonperforming loans |
1,224 | 1,181 | 1,071 | 815 | 692 | |||||||||||||||
| Other real estate |
24 | 35 | 52 | 70 | 78 | |||||||||||||||
| Other nonperforming assets |
50 | 54 | 50 | 61 | 59 | |||||||||||||||
| Total nonperforming assets |
$1,298 | $1,270 | $1,173 | $946 | $829 | |||||||||||||||
|
Accruing loans 90 days or more past due |
$506 | $461 | $556 | $579 | $605 | |||||||||||||||
| Performing restructured loans, excluding GNMA |
$2,177 | $2,004 | $1,994 | $2,080 | $2,129 | |||||||||||||||
| Performing restructured GNMA |
$1,434 | $1,415 | $1,522 | $1,619 | $1,622 | |||||||||||||||
| Nonperforming assets to loans plus ORE (%) |
.44 | .41 | .38 | .30 | .28 | |||||||||||||||
| (a) Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due
|
| |||||||||||||||||||
11
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|
U.S. Bancorp Fourth Quarter 2020 Results | |
| COMMON SHARES | ||||||||||||||||||||
| (Millions) | 4Q | 3Q | 2Q | 1Q | 4Q | |||||||||||||||
| 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||||||||
| Beginning shares outstanding |
1,506 | 1,506 | 1,506 | 1,534 | 1,571 | |||||||||||||||
| Shares issued for stock incentive plans, acquisitions and other corporate purposes |
1 | -- | -- | 3 | 3 | |||||||||||||||
| Shares repurchased |
-- | -- | -- | (31 | ) | (40 | ) | |||||||||||||
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|||||||||||
| Ending shares outstanding |
1,507 | 1,506 | 1,506 | 1,506 | 1,534 | |||||||||||||||
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|||||||||||
| CAPITAL POSITION | ||||||||||||||||||||
| ($ in millions) | Dec 31 | Sep 30 | Jun 30 | Mar 31 | Dec 31 | |||||||||||||||
| 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||||||||
| Total U.S. Bancorp shareholders’ equity |
$ | 53,095 | $ | 52,565 | $ | 51,850 | $ | 51,532 | $ | 51,853 | ||||||||||
| Basel III Standardized Approach (a) |
||||||||||||||||||||
| Common equity tier 1 capital |
$ | 38,045 | $ | 37,485 | $ | 36,351 | $ | 36,224 | $ | 35,713 | ||||||||||
| Tier 1 capital |
44,474 | 43,916 | 42,781 | 42,651 | 41,721 | |||||||||||||||
| Total risk-based capital |
52,602 | 52,086 | 51,457 | 51,277 | 49,744 | |||||||||||||||
| Common equity tier 1 capital ratio |
9.7 | % | 9.4 | % | 9.0 | % | 9.0 | % | 9.1 | % | ||||||||||
| Tier 1 capital ratio |
11.3 | 11.0 | 10.6 | 10.5 | 10.7 | |||||||||||||||
| Total risk-based capital ratio |
13.4 | 13.1 | 12.8 | 12.7 | 12.7 | |||||||||||||||
| Leverage ratio |
8.3 | 8.3 | 8.0 | 8.8 | 8.8 | |||||||||||||||
| Tangible common equity to tangible assets (b) |
6.9 | 7.0 | 6.7 | 6.7 | 7.5 | |||||||||||||||
| Tangible common equity to risk-weighted assets (b) |
9.5 | 9.3 | 9.0 | 8.9 | 9.3 | |||||||||||||||
| Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (b) |
9.3 | 9.0 | 8.7 | 8.6 | ||||||||||||||||
| (a) 2020 amounts and ratios calculated in accordance with transitional regulatory requirements related to the current expected credit losses methodology |
| |||||||||||||||||||
| (b) See Non-GAAP Financial Measures reconciliation on page 17 |
|
|||||||||||||||||||
Total U.S. Bancorp shareholders’ equity was $53.1 billion at December 31, 2020, compared with $52.6 billion at September 30, 2020, and $51.9 billion at December 31, 2019. Beginning in March and continuing through the remainder of 2020, the Company suspended all common stock repurchases except for those done exclusively in connection with its stock-based compensation programs. This action was initially taken to maintain strong capital levels given the impact and uncertainties of COVID-19 on the economy and global markets. Due to continued economic uncertainty, the Federal Reserve Board implemented measures beginning in the third quarter of 2020 and extending through the first quarter of 2021, restricting capital distributions of all large bank holding companies, including U.S. Bancorp. These restrictions include capping common stock dividends at existing rates and limiting the aggregate amount of common stock dividends and share repurchases to an amount not exceeding the average net income of the four preceding calendar quarters. Based on the results of the December 2020 Federal Reserve Stress Test the Company announced its Board of Directors had approved an authorization to repurchase up to $3.0 billion of its common stock beginning January 1, 2021.
All regulatory ratios continue to be in excess of “well-capitalized” requirements. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III standardized approach was 9.7 percent at December 31, 2020, compared with 9.4 percent at September 30, 2020, and 9.1 percent at December 31, 2019. The Company’s common equity tier 1 capital to risk-weighted assets ratio, reflecting the full implementation of the current expected credit losses methodology was 9.3 percent at December 31, 2020, compared with 9.0 percent at September 30, 2020.
12
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|
U.S. Bancorp Fourth Quarter 2020 Results | |
|
Investor Conference Call |
On Wednesday, January 20, 2021, at 8 a.m. CT, Chairman, President and Chief Executive Officer Andy Cecere and Vice Chair and Chief Financial Officer Terry Dolan will host a conference call to review the financial results. The conference call will be available online or by telephone. To access the webcast and presentation, visit U.S. Bancorp’s website at usbank.com and click on “About Us,” “Investor Relations” and “Webcasts & Presentations.” To access the conference call from locations within the United States and Canada, please dial 866.316.1409. Participants calling from outside the United States and Canada, please dial 706.634.9086. The conference ID number for all participants is 9599926. For those unable to participate during the live call, a recording will be available at approximately 11:00 a.m. CT on Wednesday, January 20 and will be accessible until Wednesday, February 3 at 10:59 p.m. CT. To access the recorded message within the United States and Canada, please dial 855.859.2056. If calling from outside the United States and Canada, please dial 404.537.3406 to access the recording. The conference ID is 9599926.
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About U.S. Bancorp |
U.S. Bancorp, with nearly 70,000 employees and $554 billion in assets as of December 31, 2020, is the parent company of U.S. Bank National Association, the fifth-largest commercial bank in the United States. The Minneapolis-based bank blends its relationship teams, branches and ATM network with mobile and online tools that allow customers to bank how, when and where they prefer. U.S. Bank is committed to serving its millions of retail, business, wealth management, payment, commercial and corporate, and investment services customers across the country and around the world as a trusted financial partner, a commitment recognized by the Ethisphere Institute naming the bank one of the 2020 World’s Most Ethical Companies. Visit U.S. Bank at www.usbank.com or follow on social media to stay up to date with company news.
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Forward-looking Statements |
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:
This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. The forward-looking statements contained in this press release include, among other things, anticipated U.S. Bancorp capital distributions by dividends and share repurchases. There can be no assurance that U.S. Bancorp will return this or any amount of capital to its shareholders in the form of dividends or share repurchases in the future.
These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. The COVID-19 pandemic is adversely affecting U.S. Bancorp, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; further increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; civil unrest; changes in customer behavior and preferences; breaches in data security; failures to safeguard personal information; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk.
For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2019, on file with the Securities and Exchange Commission, including the sections entitled “Corporate Risk Profile” and “Risk Factors” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, including the section entitled “Risk Factors” in the Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. In addition, factors other than these risks also could adversely affect U.S. Bancorp’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.
13
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U.S. Bancorp Fourth Quarter 2020 Results | |
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Non-GAAP Financial Measures
|
In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:
| • | Tangible common equity to tangible assets |
| • | Tangible common equity to risk-weighted assets |
| • | Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology, and |
| • | Return on tangible common equity. |
These capital measures are viewed by management as useful additional methods of evaluating the Company’s utilization of its capital held and the level of capital available to withstand unexpected negative market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Company’s capital position relative to other financial services companies. These capital measures are not defined in generally accepted accounting principles (“GAAP”), or are not currently effective or defined in banking regulations. In addition, certain of these measures differ from currently effective capital ratios defined by banking regulations principally in that the currently effective ratios, which are subject to certain transitional provisions, temporarily exclude the impact of 2020 adoption of accounting guidance related to impairment of financial instruments based on the current expected credit losses methodology. As a result, these capital measures disclosed by the Company may be considered non-GAAP financial measures. Management believes this information helps investors assess trends in the Company’s capital adequacy.
The Company also discloses net interest income and related ratios and analysis on a taxable-equivalent basis, which may also be considered non-GAAP financial measures. The Company believes this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable and tax-exempt sources. In addition, certain performance measures, including the efficiency ratio and net interest margin utilize net interest income on a taxable-equivalent basis.
There may be limits in the usefulness of these measures to investors. As a result, the Company encourages readers to consider the consolidated financial statements and other financial information contained in this press release in their entirety, and not to rely on any single financial measure. A table follows that shows the Company’s calculation of these non-GAAP financial measures.
14
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| CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| (Dollars and Shares in Millions, Except Per Share Data) | December 31, | December 31, | ||||||||||||||
| (Unaudited) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Interest Income |
||||||||||||||||
| Loans |
$2,866 | $3,422 | $12,018 | $14,099 | ||||||||||||
| Loans held for sale |
59 | 55 | 216 | 162 | ||||||||||||
| Investment securities |
520 | 709 | 2,428 | 2,893 | ||||||||||||
| Other interest income |
34 | 69 | 178 | 340 | ||||||||||||
| Total interest income |
3,479 | 4,255 | 14,840 | 17,494 | ||||||||||||
| Interest Expense |
||||||||||||||||
| Deposits |
101 | 654 | 950 | 2,855 | ||||||||||||
| Short-term borrowings |
17 | 79 | 141 | 360 | ||||||||||||
| Long-term debt |
186 | 315 | 924 | 1,227 | ||||||||||||
| Total interest expense |
304 | 1,048 | 2,015 | 4,442 | ||||||||||||
| Net interest income |
3,175 | 3,207 | 12,825 | 13,052 | ||||||||||||
| Provision for credit losses |
441 | 395 | 3,806 | 1,504 | ||||||||||||
| Net interest income after provision for credit losses |
2,734 | 2,812 | 9,019 | 11,548 | ||||||||||||
| Noninterest Income |
||||||||||||||||
| Credit and debit card revenue |
362 | 378 | 1,338 | 1,413 | ||||||||||||
| Corporate payment products revenue |
126 | 158 | 497 | 664 | ||||||||||||
| Merchant processing services |
311 | 409 | 1,261 | 1,601 | ||||||||||||
| Trust and investment management fees |
441 | 438 | 1,736 | 1,673 | ||||||||||||
| Deposit service charges |
165 | 231 | 677 | 909 | ||||||||||||
| Treasury management fees |
143 | 140 | 568 | 578 | ||||||||||||
| Commercial products revenue |
239 | 226 | 1,143 | 934 | ||||||||||||
| Mortgage banking revenue |
468 | 244 | 2,064 | 874 | ||||||||||||
| Investment products fees |
50 | 48 | 192 | 186 | ||||||||||||
| Securities gains (losses), net |
34 | 26 | 177 | 73 | ||||||||||||
| Other |
211 | 138 | 748 | 926 | ||||||||||||
| Total noninterest income |
2,550 | 2,436 | 10,401 | 9,831 | ||||||||||||
| Noninterest Expense |
||||||||||||||||
| Compensation |
1,643 | 1,597 | 6,635 | 6,325 | ||||||||||||
| Employee benefits |
302 | 315 | 1,303 | 1,286 | ||||||||||||
| Net occupancy and equipment |
269 | 286 | 1,092 | 1,123 | ||||||||||||
| Professional services |
123 | 139 | 430 | 454 | ||||||||||||
| Marketing and business development |
105 | 117 | 318 | 426 | ||||||||||||
| Technology and communications |
362 | 291 | 1,294 | 1,095 | ||||||||||||
| Postage, printing and supplies |
74 | 71 | 288 | 290 | ||||||||||||
| Other intangibles |
47 | 44 | 176 | 168 | ||||||||||||
| Other |
439 | 541 | 1,833 | 1,618 | ||||||||||||
| Total noninterest expense |
3,364 | 3,401 | 13,369 | 12,785 | ||||||||||||
| Income before income taxes |
1,920 | 1,847 | 6,051 | 8,594 | ||||||||||||
| Applicable income taxes |
395 | 354 | 1,066 | 1,648 | ||||||||||||
| Net income |
1,525 | 1,493 | 4,985 | 6,946 | ||||||||||||
| Net (income) loss attributable to noncontrolling interests |
(6 | ) | (7 | ) | (26 | ) | (32 | ) | ||||||||
| Net income attributable to U.S. Bancorp |
$1,519 | $1,486 | $4,959 | $6,914 | ||||||||||||
| Net income applicable to U.S. Bancorp common shareholders |
$1,425 | $1,408 | $4,621 | $6,583 | ||||||||||||
| Earnings per common share |
$.95 | $.91 | $3.06 | $4.16 | ||||||||||||
| Diluted earnings per common share |
$.95 | $.90 | $3.06 | $4.16 | ||||||||||||
| Dividends declared per common share |
$.42 | $.42 | $1.68 | $1.58 | ||||||||||||
| Average common shares outstanding |
1,507 | 1,556 | 1,509 | 1,581 | ||||||||||||
| Average diluted common shares outstanding |
1,508 | 1,558 | 1,510 | 1,583 | ||||||||||||
15
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| CONSOLIDATED ENDING BALANCE SHEET |
| |||||||
| (Dollars in Millions) | December 31, 2020 |
December 31, 2019 |
||||||
| Assets |
||||||||
| Cash and due from banks |
$62,580 | $22,405 | ||||||
| Available-for-sale investment securities |
136,840 | 122,613 | ||||||
| Loans held for sale |
8,761 | 5,578 | ||||||
| Loans |
||||||||
| Commercial |
102,871 | 103,863 | ||||||
| Commercial real estate |
39,311 | 39,746 | ||||||
| Residential mortgages |
76,155 | 70,586 | ||||||
| Credit card |
22,346 | 24,789 | ||||||
| Other retail |
57,024 | 57,118 | ||||||
| Total loans |
297,707 | 296,102 | ||||||
| Less allowance for loan losses |
(7,314 | ) | (4,020 | ) | ||||
| Net loans |
290,393 | 292,082 | ||||||
| Premises and equipment |
3,468 | 3,702 | ||||||
| Goodwill |
9,918 | 9,655 | ||||||
| Other intangible assets |
2,864 | 3,223 | ||||||
| Other assets |
39,081 | 36,168 | ||||||
| Total assets |
$553,905 | $495,426 | ||||||
| Liabilities and Shareholders’ Equity |
||||||||
| Deposits |
||||||||
| Noninterest-bearing |
$118,089 | $75,590 | ||||||
| Interest-bearing |
311,681 | 286,326 | ||||||
| Total deposits |
429,770 | 361,916 | ||||||
| Short-term borrowings |
11,766 | 23,723 | ||||||
| Long-term debt |
41,297 | 40,167 | ||||||
| Other liabilities |
17,347 | 17,137 | ||||||
| Total liabilities |
500,180 | 442,943 | ||||||
| Shareholders’ equity |
||||||||
| Preferred stock |
5,983 | 5,984 | ||||||
| Common stock |
21 | 21 | ||||||
| Capital surplus |
8,511 | 8,475 | ||||||
| Retained earnings |
64,188 | 63,186 | ||||||
| Less treasury stock |
(25,930 | ) | (24,440 | ) | ||||
| Accumulated other comprehensive income (loss) |
322 | (1,373 | ) | |||||
| Total U.S. Bancorp shareholders’ equity |
53,095 | 51,853 | ||||||
| Noncontrolling interests |
630 | 630 | ||||||
| Total equity |
53,725 | 52,483 | ||||||
| Total liabilities and equity |
$553,905 | $495,426 | ||||||
16
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| NON-GAAP FINANCIAL MEASURES |
| |||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
| (Dollars in Millions, Unaudited) | 2020 | 2020 | 2020 | 2020 | 2019 | |||||||||||||||
| Total equity |
$53,725 | $53,195 | $52,480 | $52,162 | $52,483 | |||||||||||||||
| Preferred stock |
(5,983 | ) | (5,984 | ) | (5,984 | ) | (5,984 | ) | (5,984 | ) | ||||||||||
| Noncontrolling interests |
(630 | ) | (630 | ) | (630 | ) | (630 | ) | (630 | ) | ||||||||||
| Goodwill (net of deferred tax liability) (1) |
(9,014 | ) | (8,992 | ) | (8,954 | ) | (8,958 | ) | (8,788 | ) | ||||||||||
| Intangible assets, other than mortgage servicing rights |
(654 | ) | (676 | ) | (678 | ) | (742 | ) | (677 | ) | ||||||||||
| Tangible common equity (a) |
37,444 | 36,913 | 36,234 | 35,848 | 36,404 | |||||||||||||||
| Common equity tier 1 capital, determined in accordance with transitional regulatory capital requirements related to the current expected credit losses methodology implementation |
38,045 | 37,485 | 36,351 | 36,224 | ||||||||||||||||
| Adjustments (2) |
(1,733 | ) | (1,733 | ) | (1,702 | ) | (1,377 | ) | ||||||||||||
| Common equity tier 1 capital, reflecting the full implementation of the current expected credit losses methodology (b) |
36,312 | 35,752 | 34,649 | 34,847 | ||||||||||||||||
| Total assets |
553,905 | 540,455 | 546,652 | 542,909 | 495,426 | |||||||||||||||
| Goodwill (net of deferred tax liability) (1) |
(9,014 | ) | (8,992 | ) | (8,954 | ) | (8,958 | ) | (8,788 | ) | ||||||||||
| Intangible assets, other than mortgage servicing rights |
(654 | ) | (676 | ) | (678 | ) | (742 | ) | (677 | ) | ||||||||||
| Tangible assets (c) |
544,237 | 530,787 | 537,020 | 533,209 | 485,961 | |||||||||||||||
| Risk-weighted assets, determined in accordance with prescribed regulatory capital requirements effective for the Company (d) |
393,648 | * | 397,657 | 401,832 | 404,627 | 391,269 | ||||||||||||||
| Adjustments (3) |
(1,471 | ) * | (1,449 | ) | (1,394 | ) | (958 | ) | ||||||||||||
| Risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (e) |
392,177 | * | 396,208 | 400,438 | 403,669 | |||||||||||||||
| Ratios* |
||||||||||||||||||||
| Tangible common equity to tangible assets (a)/(c) |
6.9 | % | 7.0 | % | 6.7 | % | 6.7 | % | 7.5 | % | ||||||||||
| Tangible common equity to risk-weighted assets (a)/(d) |
9.5 | 9.3 | 9.0 | 8.9 | 9.3 | |||||||||||||||
| Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (b)/(e) |
9.3 | 9.0 | 8.7 | 8.6 | ||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
| 2020 | 2020 | 2020 | 2020 | 2019 | ||||||||||||||||
| Net income applicable to U.S. Bancorp common shareholders |
$1,425 | $1,494 | $614 | $1,088 | $1,408 | |||||||||||||||
| Intangibles amortization (net-of-tax) |
37 | 35 | 34 | 33 | 35 | |||||||||||||||
| Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization |
1,462 | 1,529 | 648 | 1,121 | 1,443 | |||||||||||||||
| Annualized net income applicable to U.S. Bancorp common shareholders, excluding intangible amortization (f) |
5,816 | 6,083 | 2,606 | 4,509 | 5,725 | |||||||||||||||
| Average total equity |
53,801 | 53,046 | 52,871 | 51,776 | 53,777 | |||||||||||||||
| Average preferred stock |
(6,217) | (5,984) | (5,984) | (5,984) | (5,984) | |||||||||||||||
| Average noncontrolling interests |
(630) | (630) | (630) | (630) | (630) | |||||||||||||||
| Average goodwill (net of deferred tax liability) (1) |
(9,003) | (8,975) | (8,960) | (8,825) | (8,796) | |||||||||||||||
| Average intangible assets, other than mortgage servicing rights |
(673) | (711) | (706) | (688) | (683) | |||||||||||||||
| Average tangible common equity (g) |
37,278 | 36,746 | 36,591 | 35,649 | 37,684 | |||||||||||||||
| Return on tangible common equity (f)/(g) |
15.6 | % | 16.6 | % | 7.1 | % | 12.6 | % | 15.2 | % | ||||||||||
| Net interest income |
$3,175 | $3,227 | $3,200 | $3,223 | $3,207 | |||||||||||||||
| Taxable-equivalent adjustment (4) |
26 | 25 | 24 | 24 | 24 | |||||||||||||||
| Net interest income, on a taxable-equivalent basis |
3,201 | 3,252 | 3,224 | 3,247 | 3,231 | |||||||||||||||
| Net interest income, on a taxable-equivalent basis (as calculated above) |
3,201 | 3,252 | 3,224 | 3,247 | 3,231 | |||||||||||||||
| Noninterest income |
2,550 | 2,712 | 2,614 | 2,525 | 2,436 | |||||||||||||||
| Less: Securities gains (losses), net |
34 | 12 | 81 | 50 | 26 | |||||||||||||||
| Total net revenue, excluding net securities gains (losses) (h) |
5,717 | 5,952 | 5,757 | 5,722 | 5,641 | |||||||||||||||
| Noninterest expense (i) |
3,364 | 3,371 | 3,318 | 3,316 | 3,401 | |||||||||||||||
| Less: Intangible amortization |
47 | 44 | 43 | 42 | 44 | |||||||||||||||
| Noninterest expense, excluding intangible amortization (j) |
3,317 | 3,327 | 3,275 | 3,274 | 3,357 | |||||||||||||||
| Efficiency ratio (i)/(h) |
58.8 | % | 56.6 | % | 57.6 | % | 58.0 | % | 60.3 | % | ||||||||||
| Tangible efficiency ratio (j)/(h) |
58.0 | 55.9 | 56.9 | 57.2 | 59.5 | |||||||||||||||
| * | Preliminary data. Subject to change prior to filings with applicable regulatory agencies. |
| (1) | Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements. |
| (2) | Includes the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology net of deferred taxes. |
| (3) | Includes the impact of the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology. |
| (4) | Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes. |
17
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| NON-GAAP FINANCIAL MEASURES |
| |||||||
| Year Ended | ||||||||
| December 31, | December 31, | |||||||
| (Dollars in Millions, Unaudited) | 2020 | 2019 | ||||||
| Net income applicable to U.S. Bancorp common shareholders |
$4,621 | $6,583 | ||||||
| Intangibles amortization (net-of-tax) |
139 | 133 | ||||||
| Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization (a) |
4,760 | 6,716 | ||||||
| Average total equity |
52,246 | 53,252 | ||||||
| Average preferred stock |
(6,042) | (5,984) | ||||||
| Average noncontrolling interests |
(630) | (629) | ||||||
| Average goodwill (net of deferred tax liability) (1) |
(8,941) | (8,742) | ||||||
| Average intangible assets, other than mortgage servicing rights |
(694) | (681) | ||||||
| Average tangible common equity (b) |
35,939 | 37,216 | ||||||
| Return on tangible common equity (a)/(b) |
13.2 | % | 18.0 | % | ||||
| Net interest income |
$12,825 | $13,052 | ||||||
| Taxable-equivalent adjustment (2) |
99 | 103 | ||||||
| Net interest income, on a taxable-equivalent basis |
12,924 | 13,155 | ||||||
| Net interest income, on a taxable-equivalent basis (as calculated above) |
12,924 | 13,155 | ||||||
| Noninterest income |
10,401 | 9,831 | ||||||
| Less: Securities gains (losses), net |
177 | 73 | ||||||
| Total net revenue, excluding net securities gains (losses) (c) |
23,148 | 22,913 | ||||||
| Noninterest expense (d) |
13,369 | 12,785 | ||||||
| Less: Intangible amortization |
176 | 168 | ||||||
| Noninterest expense, excluding intangible amortization (e) |
13,193 | 12,617 | ||||||
| Efficiency ratio (d)/(c) |
57.8 | % | 55.8 | % | ||||
| Tangible efficiency ratio (e)/(c) |
57.0 | 55.1 | ||||||
| (1) | Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements. |
| (2) | Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes. |
18
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| LINE OF BUSINESS FINANCIAL PERFORMANCE (a) | ||||||||||||||||||||||||||||||||
| ($ in millions) | Net Income Attributable |
Net Income Attributable | ||||||||||||||||||||||||||||||
| to U.S. Bancorp | Percent Change | to U.S. Bancorp | ||||||||||||||||||||||||||||||
| Business Line | 4Q 2020 |
3Q 2020 |
4Q 2019 |
4Q20 vs 3Q20 |
4Q20 vs 4Q19 |
Full Year 2020 |
Full Year 2019 |
Percent Change |
||||||||||||||||||||||||
| Corporate and Commercial Banking |
$394 | $422 | $403 | (6.6 | ) | (2.2 | ) | $1,561 | $1,683 | (7.2 | ) | |||||||||||||||||||||
| Consumer and Business Banking |
737 | 755 | 550 | (2.4 | ) | 34.0 | 2,783 | 2,359 | 18.0 | |||||||||||||||||||||||
| Wealth Management and Investment Services |
150 | 166 | 211 | (9.6 | ) | (28.9 | ) | 714 | 891 | (19.9 | ) | |||||||||||||||||||||
| Payment Services |
276 | 314 | 385 | (12.1 | ) | (28.3 | ) | 1,269 | 1,454 | (12.7 | ) | |||||||||||||||||||||
| Treasury and Corporate Support |
(38 | ) | (77 | ) | (63) | 50.6 | 39.7 | (1,368 | ) | 527 | nm | |||||||||||||||||||||
| Consolidated Company |
$ | 1,519 | $ | 1,580 | $ | 1,486 | (3.9 | ) | 2.2 | $4,959 | $6,914 | (28.3 | ) | |||||||||||||||||||
| (a) preliminary data
|
||||||||||||||||||||||||||||||||
Lines of Business
The Company’s major lines of business are Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate resources and assess performance. Business line results are derived from the Company’s business unit profitability reporting systems by specifically attributing managed balance sheet assets, deposits and other liabilities and their related income or expense. Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Company’s diverse customer base. During 2020, certain organization and methodology changes were made and, accordingly, prior period results were restated and presented on a comparable basis.
2
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|
||
| CORPORATE AND COMMERCIAL BANKING (a) | ||||||||||||||||||||||||||||||||
| ($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
| 4Q 2020 |
3Q 2020 |
4Q 2019 |
4Q20 vs 3Q20 |
4Q20 vs 4Q19 |
Full Year 2020 |
Full Year 2019 |
Percent change |
|||||||||||||||||||||||||
| Condensed Income Statement |
||||||||||||||||||||||||||||||||
| Net interest income (taxable-equivalent basis) |
$747 | $814 | $782 | (8.2 | ) | (4.5 | ) | $3,259 | $3,101 | 5.1 | ||||||||||||||||||||||
| Noninterest income |
208 | 260 | 198 | (20.0 | ) | 5.1 | 1,078 | 861 | 25.2 | |||||||||||||||||||||||
| Securities gains (losses), net |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
| Total net revenue |
955 | 1,074 | 980 | (11.1 | ) | (2.6 | ) | 4,337 | 3,962 | 9.5 | ||||||||||||||||||||||
| Noninterest expense |
391 | 420 | 399 | (6.9 | ) | (2.0 | ) | 1,680 | 1,624 | 3.4 | ||||||||||||||||||||||
| Other intangibles |
-- | -- | 1 | -- | nm | -- | 4 | nm | ||||||||||||||||||||||||
| Total noninterest expense |
391 | 420 | 400 | (6.9 | ) | (2.3 | ) | 1,680 | 1,628 | 3.2 | ||||||||||||||||||||||
| Income before provision and taxes |
564 | 654 | 580 | (13.8 | ) | (2.8 | ) | 2,657 | 2,334 | 13.8 | ||||||||||||||||||||||
| Provision for credit losses |
39 | 91 | 43 | (57.1 | ) | (9.3 | ) | 575 | 89 | nm | ||||||||||||||||||||||
| Income before income taxes |
525 | 563 | 537 | (6.7 | ) | (2.2 | ) | 2,082 | 2,245 | (7.3 | ) | |||||||||||||||||||||
| Income taxes and taxable-equivalent adjustment |
131 | 141 | 134 | (7.1 | ) | (2.2 | ) | 521 | 562 | (7.3 | ) | |||||||||||||||||||||
| Net income |
394 | 422 | 403 | (6.6 | ) | (2.2 | ) | 1,561 | 1,683 | (7.2 | ) | |||||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
| Net income attributable to U.S. Bancorp |
$394 | $422 | $403 | (6.6 | ) | (2.2 | ) | $1,561 | $1,683 | (7.2 | ) | |||||||||||||||||||||
| Average Balance Sheet Data |
||||||||||||||||||||||||||||||||
| Loans |
$98,919 | $108,158 | $99,793 | (8.5 | ) | (.9 | ) | $108,320 | $99,037 | 9.4 | ||||||||||||||||||||||
| Other earning assets |
4,141 | 4,110 | 3,926 | .8 | 5.5 | 4,163 | 3,751 | 11.0 | ||||||||||||||||||||||||
| Goodwill |
1,647 | 1,647 | 1,647 | -- | -- | 1,647 | 1,647 | -- | ||||||||||||||||||||||||
| Other intangible assets |
6 | 6 | 7 | -- | (14.3 | ) | 6 | 8 | (25.0 | ) | ||||||||||||||||||||||
| Assets |
111,599 | 121,014 | 110,308 | (7.8 | ) | 1.2 | 120,829 | 108,983 | 10.9 | |||||||||||||||||||||||
| Noninterest-bearing deposits |
48,889 | 43,330 | 29,211 | 12.8 | 67.4 | 40,109 | 29,400 | 36.4 | ||||||||||||||||||||||||
| Interest-bearing deposits |
76,357 | 82,454 | 77,229 | (7.4 | ) | (1.1 | ) | 83,684 | 72,822 | 14.9 | ||||||||||||||||||||||
| Total deposits |
125,246 | 125,784 | 106,440 | (.4 | ) | 17.7 | 123,793 | 102,222 | 21.1 | |||||||||||||||||||||||
| Total U.S. Bancorp shareholders’ equity |
15,899 | 16,541 | 15,670 | (3.9 | ) | 1.5 | 16,385 | 15,508 | 5.7 | |||||||||||||||||||||||
| (a) preliminary data
|
||||||||||||||||||||||||||||||||
Corporate and Commercial Banking offers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets services, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution, non-profit and public sector clients.
Corporate and Commercial Banking contributed $394 million of the Company’s net income in the fourth quarter of 2020, compared with $403 million in the fourth quarter of 2019. Total net revenue decreased $25 million (2.6 percent) due to a decrease of $35 million (4.5 percent) in net interest income, partially offset by an increase of $10 million (5.1 percent) in total noninterest income. Net interest income decreased primarily due to loan mix and the impact of declining interest rates on the margin benefit from deposits, partially offset by deposit mix with higher noninterest-bearing balances and stronger loan fees. Total noninterest income increased year-over-year primarily due to higher commercial loan and commercial leasing fees. Total noninterest expense declined $9 million (2.3 percent) compared with a year ago primarily driven by lower production incentives, partially offset by higher other noninterest expense driven by legal costs. The provision for credit losses decreased $4 million (9.3 percent) primarily due to a favorable change in the reserve allocation driven by reduced funded exposures, partially offset by credit risk rating downgrades.
3
|
|
||
| CONSUMER AND BUSINESS BANKING (a) | ||||||||||||||||||||||||||||||||
| ($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
| 4Q 2020 |
3Q 2020 |
4Q 2019 |
4Q20 vs 3Q20 |
4Q20 vs 4Q19 |
Full Year 2020 |
Full Year 2019 |
Percent Change |
|||||||||||||||||||||||||
| Condensed Income Statement |
||||||||||||||||||||||||||||||||
| Net interest income (taxable-equivalent basis) |
$1,644 | $1,599 | $1,574 | 2.8 | 4.4 | $6,263 | $6,351 | (1.4 | ) | |||||||||||||||||||||||
| Noninterest income |
791 | 891 | 617 | (11.2 | ) | 28.2 | 3,360 | 2,385 | 40.9 | |||||||||||||||||||||||
| Securities gains (losses), net |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
| Total net revenue |
2,435 | 2,490 | 2,191 | (2.2 | ) | 11.1 | 9,623 | 8,736 | 10.2 | |||||||||||||||||||||||
| Noninterest expense |
1,432 | 1,406 | 1,359 | 1.8 | 5.4 | 5,573 | 5,257 | 6.0 | ||||||||||||||||||||||||
| Other intangibles |
4 | 4 | 5 | -- | (20.0 | ) | 16 | 20 | (20.0 | ) | ||||||||||||||||||||||
| Total noninterest expense |
1,436 | 1,410 | 1,364 | 1.8 | 5.3 | 5,589 | 5,277 | 5.9 | ||||||||||||||||||||||||
| Income before provision and taxes |
999 | 1,080 | 827 | (7.5 | ) | 20.8 | 4,034 | 3,459 | 16.6 | |||||||||||||||||||||||
| Provision for credit losses |
16 | 73 | 93 | (78.1 | ) | (82.8 | ) | 322 | 311 | 3.5 | ||||||||||||||||||||||
| Income before income taxes |
983 | 1,007 | 734 | (2.4 | ) | 33.9 | 3,712 | 3,148 | 17.9 | |||||||||||||||||||||||
| Income taxes and taxable-equivalent adjustment |
246 | 252 | 184 | (2.4 | ) | 33.7 | 929 | 789 | 17.7 | |||||||||||||||||||||||
| Net income |
737 | 755 | 550 | (2.4 | ) | 34.0 | 2,783 | 2,359 | 18.0 | |||||||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
| Net income attributable to U.S. Bancorp |
$737 | $755 | $550 | (2.4 | ) | 34.0 | $2,783 | $2,359 | 18.0 | |||||||||||||||||||||||
| Average Balance Sheet Data |
||||||||||||||||||||||||||||||||
| Loans |
$156,729 | $156,779 | $146,851 | -- | 6.7 | $152,634 | $144,616 | 5.5 | ||||||||||||||||||||||||
| Other earning assets |
8,966 | 8,206 | 5,480 | 9.3 | 63.6 | 7,186 | 3,989 | 80.1 | ||||||||||||||||||||||||
| Goodwill |
3,475 | 3,475 | 3,560 | -- | (2.4 | ) | 3,500 | 3,496 | .1 | |||||||||||||||||||||||
| Other intangible assets |
2,137 | 1,942 | 2,441 | 10.0 | (12.5 | ) | 2,106 | 2,619 | (19.6 | ) | ||||||||||||||||||||||
| Assets |
176,811 | 175,760 | 162,560 | .6 | 8.8 | 170,531 | 158,932 | 7.3 | ||||||||||||||||||||||||
| Noninterest-bearing deposits |
39,623 | 39,942 | 29,107 | (.8 | ) | 36.1 | 35,543 | 27,831 | 27.7 | |||||||||||||||||||||||
| Interest-bearing deposits |
161,298 | 149,882 | 131,146 | 7.6 | 23.0 | 147,336 | 129,235 | 14.0 | ||||||||||||||||||||||||
| Total deposits |
200,921 | 189,824 | 160,253 | 5.8 | 25.4 | 182,879 | 157,066 | 16.4 | ||||||||||||||||||||||||
| Total U.S. Bancorp shareholders’ equity |
15,116 | 15,111 | 15,251 | -- | (.9 | ) | 15,058 | 15,151 | (.6 | ) | ||||||||||||||||||||||
| (a) preliminary data
|
||||||||||||||||||||||||||||||||
Consumer and Business Banking delivers products and services through banking offices, telephone servicing and sales, on-line services, direct mail, ATM processing and mobile devices. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking.
Consumer and Business Banking contributed $737 million of the Company’s net income in the fourth quarter of 2020, compared with $550 million in the fourth quarter of 2019. Total net revenue increased $244 million (11.1 percent) due to an increase in net interest income of $70 million (4.4 percent) and an increase of $174 million (28.2 percent) in total noninterest income. Net interest income reflects strong growth in noninterest-bearing and interest-bearing deposit balances, loan growth, and higher loan fees, driven in part by loans made under the SBA’s Paycheck Protection Program and GNMA buybacks, in addition to favorable loan spreads. These favorable changes are partially offset by the impact of declining interest rates on deposit spreads. Total noninterest income increased primarily due to growth in mortgage banking revenue driven by higher mortgage production and stronger gain on sale margins, partially offset by the unfavorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities. Other noninterest income increased primarily due to higher retail leasing end of term residual gains. These increases in noninterest income were partially offset by lower deposit service charges primarily due to lower volume. Total noninterest expense in the fourth quarter of 2020 increased $72 million (5.3 percent) primarily due to business investments, higher variable compensation related to strong mortgage banking origination activities, and higher other noninterest expense due to higher mortgage loan processing costs. The provision for credit losses decreased $77 million (82.8 percent) due to a favorable change in the reserve allocation primarily reflecting a reduction in end of period outstanding balances in the fourth quarter of 2020 compared with growth in the fourth quarter of 2019 and improved collateral support in consumer portfolios.
4
|
|
||
| WEALTH MANAGEMENT AND INVESTMENT SERVICES (a) | ||||||||||||||||||||||||||||||||
| ($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
| 4Q 2020 |
3Q 2020 |
4Q 2019 |
4Q20 vs 3Q20 |
4Q20 vs 4Q19 |
Full Year 2020 |
Full Year 2019 |
Percent Change |
|||||||||||||||||||||||||
| Condensed Income Statement |
||||||||||||||||||||||||||||||||
| Net interest income (taxable-equivalent basis) |
$222 | $238 | $277 | (6.7 | ) | (19.9 | ) | $996 | $1,172 | (15.0 | ) | |||||||||||||||||||||
| Noninterest income |
478 | 469 | 473 | 1.9 | 1.1 | 1,877 | 1,803 | 4.1 | ||||||||||||||||||||||||
| Securities gains (losses), net |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
| Total net revenue |
700 | 707 | 750 | (1.0 | ) | (6.7 | ) | 2,873 | 2,975 | (3.4 | ) | |||||||||||||||||||||
| Noninterest expense |
492 | 470 | 467 | 4.7 | 5.4 | 1,871 | 1,775 | 5.4 | ||||||||||||||||||||||||
| Other intangibles |
3 | 3 | 4 | -- | (25.0 | ) | 12 | 13 | (7.7 | ) | ||||||||||||||||||||||
| Total noninterest expense |
495 | 473 | 471 | 4.7 | 5.1 | 1,883 | 1,788 | 5.3 | ||||||||||||||||||||||||
| Income before provision and taxes |
205 | 234 | 279 | (12.4 | ) | (26.5 | ) | 990 | 1,187 | (16.6 | ) | |||||||||||||||||||||
| Provision for credit losses |
5 | 12 | (3) | (58.3 | ) | nm | 38 | (3) | nm | |||||||||||||||||||||||
| Income before income taxes |
200 | 222 | 282 | (9.9 | ) | (29.1 | ) | 952 | 1,190 | (20.0 | ) | |||||||||||||||||||||
| Income taxes and taxable-equivalent adjustment |
50 | 56 | 71 | (10.7 | ) | (29.6 | ) | 238 | 299 | (20.4 | ) | |||||||||||||||||||||
| Net income |
150 | 166 | 211 | (9.6 | ) | (28.9 | ) | 714 | 891 | (19.9 | ) | |||||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
| Net income attributable to U.S. Bancorp |
$150 | $166 | $211 | (9.6 | ) | (28.9 | ) | $714 | $891 | (19.9 | ) | |||||||||||||||||||||
| Average Balance Sheet Data |
||||||||||||||||||||||||||||||||
| Loans |
$12,043 | $11,458 | $10,348 | 5.1 | 16.4 | $11,327 | $10,085 | 12.3 | ||||||||||||||||||||||||
| Other earning assets |
292 | 288 | 277 | 1.4 | 5.4 | 287 | 282 | 1.8 | ||||||||||||||||||||||||
| Goodwill |
1,618 | 1,618 | 1,617 | -- | .1 | 1,617 | 1,617 | -- | ||||||||||||||||||||||||
| Other intangible assets |
34 | 37 | 46 | (8.1 | ) | (26.1 | ) | 39 | 49 | (20.4 | ) | |||||||||||||||||||||
| Assets |
14,968 | 14,562 | 13,423 | 2.8 | 11.5 | 14,448 | 13,336 | 8.3 | ||||||||||||||||||||||||
| Noninterest-bearing deposits |
18,699 | 16,797 | 12,393 | 11.3 | 50.9 | 16,275 | 13,231 | 23.0 | ||||||||||||||||||||||||
| Interest-bearing deposits |
68,328 | 62,164 | 66,697 | 9.9 | 2.4 | 66,172 | 62,142 | 6.5 | ||||||||||||||||||||||||
| Total deposits |
87,027 | 78,961 | 79,090 | 10.2 | 10.0 | 82,447 | 75,373 | 9.4 | ||||||||||||||||||||||||
| Total U.S. Bancorp shareholders’ equity |
2,501 | 2,482 | 2,434 | .8 | 2.8 | 2,482 | 2,441 | 1.7 | ||||||||||||||||||||||||
| (a) preliminary data
|
||||||||||||||||||||||||||||||||
Wealth Management and Investment Services provides private banking, financial advisory services, investment management, retail brokerage services, insurance, trust, custody and fund servicing through four businesses: Wealth Management, Global Corporate Trust & Custody, U.S. Bancorp Asset Management and Fund Services.
Wealth Management and Investment Services contributed $150 million of the Company’s net income in the fourth quarter of 2020, compared with $211 million in the fourth quarter of 2019. Total net revenue decreased $50 million (6.7 percent) year-over-year reflecting a decrease in net interest income of $55 million (19.9 percent), partly offset by an increase of $5 million (1.1 percent) in noninterest income. Net interest income decreased year-over-year primarily due to the declining margin benefit of deposits, given lower interest rates, partially offset by higher noninterest-bearing deposits and favorable deposit mix. Total noninterest income increased primarily due to business growth on trust and investment management fees and the impact of favorable market conditions, partially offset by higher fee waivers related to money market funds. Total noninterest expense increased $24 million (5.1 percent) compared with the fourth quarter of 2019 reflecting increased technology development and higher other noninterest expense from litigation settlements partially offset by lower other noninterest expense due to a reduction in travel as a result of COVID-19. The provision for credit losses increased $8 million reflecting an unfavorable change in the reserve allocation primarily driven by stronger growth in outstanding loans in the fourth quarter of 2020 relative to the fourth quarter of 2019.
5
|
|
||
| PAYMENT SERVICES (a) | ||||||||||||||||||||||||||||||||
| ($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
| 4Q 2020 |
3Q 2020 |
4Q 2019 |
4Q20 vs 3Q20 |
4Q20 vs 4Q19 |
Full Year 2020 |
Full Year 2019 |
Percent Change |
|||||||||||||||||||||||||
| Condensed Income Statement |
||||||||||||||||||||||||||||||||
| Net interest income (taxable-equivalent basis) |
$642 | $634 | $639 | 1.3 | .5 | $2,530 | $2,474 | 2.3 | ||||||||||||||||||||||||
| Noninterest income |
805 | 867 | 950 | (7.2 | ) | (15.3 | ) | 3,124 | 3,711 | (15.8 | ) | |||||||||||||||||||||
| Securities gains (losses), net |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
| Total net revenue |
1,447 | 1,501 | 1,589 | (3.6 | ) | (8.9 | ) | 5,654 | 6,185 | (8.6 | ) | |||||||||||||||||||||
| Noninterest expense |
835 | 799 | 773 | 4.5 | 8.0 | 3,133 | 3,005 | 4.3 | ||||||||||||||||||||||||
| Other intangibles |
40 | 37 | 34 | 8.1 | 17.6 | 148 | 131 | 13.0 | ||||||||||||||||||||||||
| Total noninterest expense |
875 | 836 | 807 | 4.7 | 8.4 | 3,281 | 3,136 | 4.6 | ||||||||||||||||||||||||
| Income before provision and taxes |
572 | 665 | 782 | (14.0 | ) | (26.9 | ) | 2,373 | 3,049 | (22.2 | ) | |||||||||||||||||||||
| Provision for credit losses |
204 | 246 | 268 | (17.1 | ) | (23.9 | ) | 681 | 1,109 | (38.6 | ) | |||||||||||||||||||||
| Income before income taxes |
368 | 419 | 514 | (12.2 | ) | (28.4 | ) | 1,692 | 1,940 | (12.8 | ) | |||||||||||||||||||||
| Income taxes and taxable-equivalent adjustment |
92 | 105 | 129 | (12.4 | ) | (28.7 | ) | 423 | 486 | (13.0 | ) | |||||||||||||||||||||
| Net income |
276 | 314 | 385 | (12.1 | ) | (28.3 | ) | 1,269 | 1,454 | (12.7 | ) | |||||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
| Net income attributable to U.S. Bancorp |
$276 | $314 | $385 | (12.1 | ) | (28.3 | ) | $1,269 | $1,454 | (12.7 | ) | |||||||||||||||||||||
| Average Balance Sheet Data |
||||||||||||||||||||||||||||||||
| Loans |
$30,992 | $31,168 | $34,500 | (.6 | ) | (10.2 | ) | $31,539 | $33,566 | (6.0 | ) | |||||||||||||||||||||
| Other earning assets |
5 | 5 | 7 | -- | (28.6 | ) | 5 | 6 | (16.7 | ) | ||||||||||||||||||||||
| Goodwill |
3,160 | 3,123 | 2,824 | 1.2 | 11.9 | 3,060 | 2,818 | 8.6 | ||||||||||||||||||||||||
| Other intangible assets |
572 | 602 | 546 | (5.0 | ) | 4.8 | 580 | 536 | 8.2 | |||||||||||||||||||||||
| Assets |
36,508 | 36,191 | 40,354 | .9 | (9.5 | ) | 36,496 | 39,424 | (7.4 | ) | ||||||||||||||||||||||
| Noninterest-bearing deposits |
5,836 | 6,886 | 1,379 | (15.2 | ) | nm | 4,356 | 1,261 | nm | |||||||||||||||||||||||
| Interest-bearing deposits |
130 | 124 | 115 | 4.8 | 13.0 | 122 | 114 | 7.0 | ||||||||||||||||||||||||
| Total deposits |
5,966 | 7,010 | 1,494 | (14.9 | ) | nm | 4,478 | 1,375 | nm | |||||||||||||||||||||||
| Total U.S. Bancorp shareholders’ equity |
6,213 | 6,219 | 6,164 | (.1 | ) | .8 | 6,095 | 6,069 | .4 | |||||||||||||||||||||||
| (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 $276 million of the Company’s net income in the fourth quarter of 2020, compared with $385 million in the fourth quarter of 2019. Total net revenue decreased $142 million (8.9 percent) primarily due to a decline of $145 million (15.3 percent) in total noninterest income. Net interest income increased primarily due to higher deposit balances as a result of state unemployment programs utilizing prepaid debit cards and funding mix, mostly offset by lower loan volume and loan fees, and the declining margin benefit of deposits. Total noninterest income decreased year-over-year mainly due to the impact of COVID-19 on consumer and business spending volume in merchant processing services and corporate payment products. The decrease in credit and debit card revenue was due to lower net interchange revenue driven by lower credit card sales offset somewhat by stronger debit card spending volumes. This was partially offset by higher prepaid fees as a result of government stimulus programs in 2020. Total noninterest expense increased $68 million (8.4 percent) reflecting incremental costs related to the prepaid card business and higher marketing and business development expense due to the timing of certain marketing campaigns in support of business development. The provision for credit losses decreased $64 million (23.9 percent) due to slower loan growth in the fourth quarter of 2020 relative to the fourth quarter of 2019, partially offset by rising delinquency rates in the fourth quarter of 2020.
6
|
|
||
| TREASURY AND CORPORATE SUPPORT (a) | ||||||||||||||||||||||||||||||||
| ($ in millions) | Percent Change | |||||||||||||||||||||||||||||||
| 4Q 2020 |
3Q 2020 |
4Q 2019 |
4Q20 vs 3Q20 |
4Q20 vs 4Q19 |
Full Year 2020 |
Full Year 2019 |
Percent Change |
|||||||||||||||||||||||||
| Condensed Income Statement |
||||||||||||||||||||||||||||||||
| Net interest income (taxable-equivalent basis) |
$(54 | ) | $(33 | ) | $(41) | (63.6 | ) | (31.7 | ) | $(124 | ) | $57 | nm | |||||||||||||||||||
| Noninterest income |
234 | 213 | 172 | 9.9 | 36.0 | 785 | 998 | (21.3 | ) | |||||||||||||||||||||||
| Securities gains (losses), net |
34 | 12 | 26 | nm | 30.8 | 177 | 73 | nm | ||||||||||||||||||||||||
| Total net revenue |
214 | 192 | 157 | 11.5 | 36.3 | 838 | 1,128 | (25.7 | ) | |||||||||||||||||||||||
| Noninterest expense |
167 | 232 | 359 | (28.0 | ) | (53.5 | ) | 936 | 956 | (2.1 | ) | |||||||||||||||||||||
| Other intangibles |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
| Total noninterest expense |
167 | 232 | 359 | (28.0 | ) | (53.5 | ) | 936 | 956 | (2.1 | ) | |||||||||||||||||||||
| Income (loss) before provision and taxes |
47 | (40 | ) | (202) | nm | nm | (98 | ) | 172 | nm | ||||||||||||||||||||||
| Provision for credit losses |
177 | 213 | (6) | (16.9 | ) | nm | 2,190 | (2) | nm | |||||||||||||||||||||||
| Income (loss) before income taxes |
(130 | ) | (253 | ) | (196) | 48.6 | 33.7 | (2,288 | ) | 174 | nm | |||||||||||||||||||||
| Income taxes and taxable-equivalent adjustment |
(98 | ) | (182 | ) | (140) | 46.2 | 30.0 | (946 | ) | (385) | nm | |||||||||||||||||||||
| Net income (loss) |
(32 | ) | (71 | ) | (56) | 54.9 | 42.9 | (1,342 | ) | 559 | nm | |||||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests |
(6 | ) | (6 | ) | (7) | -- | 14.3 | (26 | ) | (32) | 18.8 | |||||||||||||||||||||
| Net income (loss) attributable to U.S. Bancorp |
$(38 | ) | $(77 | ) | $(63) | 50.6 | 39.7 | $(1,368 | ) | $527 | nm | |||||||||||||||||||||
| Average Balance Sheet Data |
||||||||||||||||||||||||||||||||
| Loans |
$3,625 | $3,455 | $3,373 | 4.9 | 7.5 | $3,449 | $3,382 | 2.0 | ||||||||||||||||||||||||
| Other earning assets |
181,725 | 162,477 | 135,215 | 11.8 | 34.4 | 162,492 | 131,823 | 23.3 | ||||||||||||||||||||||||
| Goodwill |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
| Other intangible assets |
-- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
| Assets |
208,675 | 189,375 | 159,208 | 10.2 | 31.1 | 188,903 | 154,978 | 21.9 | ||||||||||||||||||||||||
| Noninterest-bearing deposits |
2,101 | 2,420 | 2,223 | (13.2 | ) | (5.5 | ) | 2,256 | 2,140 | 5.4 | ||||||||||||||||||||||
| Interest-bearing deposits |
1,152 | 1,524 | 6,952 | (24.4 | ) | (83.4 | ) | 2,762 | 8,636 | (68.0 | ) | |||||||||||||||||||||
| Total deposits |
3,253 | 3,944 | 9,175 | (17.5 | ) | (64.5 | ) | 5,018 | 10,776 | (53.4 | ) | |||||||||||||||||||||
| Total U.S. Bancorp shareholders’ equity |
13,442 | 12,063 | 13,628 | 11.4 | (1.4 | ) | 12,226 | 13,454 | (9.1 | ) | ||||||||||||||||||||||
| (a) preliminary data
|
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Treasury and Corporate Support includes the Company’s investment portfolios, funding, capital management, interest rate risk management, income taxes not allocated to the business lines, including most investments in tax-advantaged projects, and the residual aggregate of those expenses associated with corporate activities that are managed on a consolidated basis.
Treasury and Corporate Support recorded a net loss of $38 million in the fourth quarter of 2020, compared with a net loss of $63 million in the fourth quarter of 2019. Total net revenue increased $57 million (36.3 percent) year-over-year due to an increase of $70 million (35.4 percent) in total noninterest income, partially offset by a decrease in net interest income of $13 million (31.7 percent). Net interest income decreased primarily due to higher prepayment amortization and lower reinvestment yields within the investment portfolio compared with a year ago. Total noninterest income increased primarily due to the $(140) million fourth quarter of 2019 notable item for an increased derivative liability related to Visa shares previously sold by the Company. Excluding this notable item, noninterest income decreased, driven by higher equity investment income in the fourth quarter of 2019, partially offset by tax-advantaged investment syndication revenue in the fourth quarter of 2020. Total noninterest expense decreased $192 million (53.5 percent) primarily due to the $200 million fourth quarter of 2019 notable items related to severance charges and other accruals. Excluding these notable items, noninterest expense increased which reflected higher expenses for COVID-19, increased expense due to the timing of marketing campaigns, higher merger-related costs, and higher state franchise taxes, partially offset by lower net shared services expense and lower costs related to tax-advantaged projects. The provision for credit losses increased $183 million reflecting the residual impact of changes in the allowance for credit losses being impacted by adverse economic conditions and the expected impact to credit losses within the Company’s loan portfolios due to the COVID-19 pandemic. Income taxes are assessed to each line of business at a managerial tax rate of 25.0 percent with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in Treasury and Corporate Support.
7
U.S. Bancorp 4Q20 Earnings Conference Call January 20, 2021 Exhibit 99.2
Forward-looking Statements and Additional Information The following information appears in accordance with the Private Securities Litigation Reform Act of 1995: This presentation contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. The COVID-19 pandemic is adversely affecting U.S. Bancorp, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; further increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; civil unrest; changes in customer behavior and preferences; breaches in data security; failures to safeguard personal information; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk. For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2019, on file with the Securities and Exchange Commission, including the sections entitled “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, including the section entitled “Risk Factors” in the Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. In addition, factors other than these risks also could adversely affect U.S. Bancorp’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events. This presentation includes non-GAAP financial measures to describe U.S. Bancorp’s performance. The calculations of these measures are provided in the Appendix. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
4Q20 Highlights * Taxable-equivalent basis; see slide 29 for calculation ** Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology was 9.3% as of 12/31/20. *** Earnings returned (millions) = total common dividends paid and value of total treasury shares repurchased
Performance Ratios Efficiency Ratio** & Net Interest Margin*** Return on Average Common Equity Return on Tangible Common Equity** Return on Average Assets 1.44%* 14.1%* 18.1%* 60.3% * Excluding notable items; see slides 29 and 30 for calculations ** Non-GAAP; see slides 29 and 30 for calculations *** Net interest margin on a taxable-equivalent basis
Digital Engagement Trends Three months ended Three months ended * Represents core Consumer Banking customers active in at least one channel in the previous 90 days Total Digital includes both online and mobile platforms
Average Loans -2.8% linked quarter +2.5% year-over-year On a linked quarter basis, average total loans were lower primarily driven by a decline in total commercial loans, reflecting continued paydowns by corporate customers, partially offset by higher residential mortgages given the lower interest rate environment and higher GNMA buybacks. On a year-over-year basis, growth in average total loans was primarily driven by higher total commercial loans, reflecting the impact of loans made under the SBA’s Paycheck Protection Program, as well as growth in residential mortgages given the lower interest rate environment and higher GNMA buybacks. These increases were partially offset by lower credit card loans and home equity and second mortgages. $ in billions
Average Deposits +4.2% linked quarter +18.5% year-over-year Interest-bearing Deposits Average noninterest-bearing (NIB) deposits increased on both a linked quarter and year-over-year basis. On a linked quarter basis, the increase was primarily driven by Corporate and Commercial Banking, while increases across all business lines drove year-over-year growth. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, were lower on both a linked quarter and year-over-year basis. On a linked quarter basis the decrease was primarily driven by Corporate and Commercial Banking. The growth in average NIB deposits and total average savings deposits year-over-year was primarily a result of the actions by the federal government to increase liquidity in the financial system, customers maintaining balance sheet liquidity by utilizing existing credit facilities and government stimulus programs. $ in billions
Credit Quality NCO Ratio -8 bps QoQ +6 bps YoY NPAs +2.2% QoQ +56.6% YoY $ in millions
Credit Risk Management – Consistent Underwriting Allowance for Credit Losses by Loan Class, 4Q20 Key Points Prime-based lender for retail portfolios Investment grade equivalent in commercial portfolios with limited leveraged lending Commercial Real Estate lending is relationship-based with consistent underwriting Disciplined Credit Underwriting, 4Q20 Wtd Avg FICO/Bond rating equivalent* Avg LTV* Residential mortgage 774 69% Home equity 795 62% Auto loan 793 96% Auto lease 786 95% Credit card 779 N/A Commercial Baa3/BBB- N/A Commercial real estate Ba1/BB+ 60% Amount ($B) Loans and Leases Outstanding (%) Commercial $2.4 2.4% Commercial Real Estate $1.5 3.9% Residential Mortgage $0.6 0.8% Credit Card $2.4 10.5% Other Retail $1.1 2.0% Total $8.0 2.7% Debt rating agencies: Moody’s and S&P * FICO and LTV at origination
Segments Outstanding Balances ($B) Segment Loans (%) Outstanding Balances ($B) Segment Loans (%) Commercial $0.4 0.4% $0.1 0.1% Commercial Real Estate $0.7 1.6% $0.3 0.8% Residential Mortgages** $4.2 5.5% $2.8 4.2% Credit Cards $0.1 0.4% $0.1 0.4% Other Retail $0.8 1.4% $0.6 1.0% Total $6.2 2.0% $3.8 1.4% Credit Risk Management – COVID-19 Impacted Industries Loans (%) Commitments (%) Loans (%) Commitments (%) Retail 4.1% 5.4% 3.8% 5.2% Malls (Secured & REITs) 0.5% 0.4% 0.4% 0.3% Energy 0.9% 2.2% 0.9% 2.2% Media & Entertainment 2.1% 2.1% 2.0% 2.2% Lodging 1.4% 1.1% 1.3% 1.0% Airline 0.5% 0.6% 0.3% 0.5% Payment Relief* Commitments for impacted industries were generally stable to slightly lower from the prior quarter Volume of new payment relief has reached a steady state since peaking in April 2020 Initial payment performance as borrowers exit payment relief is in line with expectations Commercial/Commercial Real Estate Exposures by Impacted Industries*** Key Points As of 9/30/20 As of 12/31/20 As of 9/30/20 As of 12/31/20 * Payment relief generally includes payment deferrals, forbearances, extensions and re-ages, and excludes loans made under the Small Business Administration’s (“SBA’s”) Paycheck Protection Program, as amounts due under that program are expected to be fully forgiven by the SBA. ** Residential mortgages are on balance sheet only and exclude GNMA Buybacks, which are government guaranteed. As of September 30, 2020, and December 31, 2020, 64.1% and 55.7%, respectively, of the GNMA Buybacks were in payment relief. *** Excludes operating leases and discretionary unfunded commitments
Earnings Summary
Notable Items
Net Interest Income Linked Quarter Net interest income decreased, primarily driven by a decline in average loan balances, higher premium amortization expense and lower yields on reinvestments in the investment portfolio, partially offset by the benefit of deposit and funding mix as well as higher loan fees. The net interest margin decreased, reflecting the impact of higher cash balances and premium amortization in the investment portfolio, partially offset by favorable loan and deposit mix. Year-over-Year Net interest income decreased, principally driven by the impact of lower rates from a year ago, partially offset by higher loan fees, deposit and funding mix as well as loan growth. The net interest margin decreased, primarily due to the impact of a lower yield curve and decisions to maintain higher cash balances for liquidity, partially offset by deposit and funding mix. -1.6% linked quarter -0.9% year-over-year $ in millions Net interest income on a taxable-equivalent basis; see slide 29 for calculation
Noninterest Income -6.0% linked quarter +4.7% year-over-year -1.0% excluding notable items Linked Quarter Payment services revenue decreased, driven by lower credit and debit card revenue and lower merchant processing services revenue due to the timing of stimulus payments through prepaid card processing in the third quarter of 2020 and lower sales volumes. Commercial products revenue decreased, primarily due to lower capital markets activities, partially offset by higher commercial loan and commercial leasing fees. Mortgage banking revenue decreased, due to lower production volume and related gain on sales as well as the unfavorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities. Year-over-Year Payment services revenue decreased, driven by lower credit and debit card revenue due to lower net interchange revenue, partially offset by higher prepaid fees as a result of government stimulus programs in 2020. Deposit service charges decreased, primarily due to lower volume. Mortgage banking revenue increased, due to higher mortgage production and stronger gain on sale margins, partially offset by the unfavorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities. $ in millions Payments = credit and debit card, corporate payment products and merchant processing Service charges = deposit service charges and treasury management All other = commercial products, investment products fees, securities gains (losses) and other
All Other Travel*** (Credit & Debit) Total Payment Services Payment Fees as a % of Net Revenue 2019 4Q20 Merchant Acquiring Retail Payment Solutions Corporate Payment Solutions All Other Revenue Total payments revenue, which includes net interest income and fee revenue, accounted for 27% of FY19 net revenue and 25% of 4Q20 net revenue Dip in 4Q20 Merchant services is driven by lockdowns and restrictions in Europe Payments sales volumes have rebounded since bottoming in April 2020 Travel & hospitality, airline, and travel & entertainment may take longer to recover, but the revenue impact is mitigated by our broad product set Merchant Acquiring Travel & Hospitality* 22% 16% Airline 15% 4% All Other 63% 80% CPS Travel & Entertainment 18% 5% All Other 82% 95% RPS** Travel*** (Credit & Debit) 7% 2% All Other 93% 98% % of Merchant Acquiring Volume 2019 4Q20 % of CPS Volume 2019 4Q20 % of RPS Volume 2019 4Q20 Merchant Sales Volume Growth YoY**** 0% CPS Sales Volume Growth YoY**** 0% RPS** Sales Volume Growth YoY**** 0% Travel & Hospitality* Airline Travel & Entertainment Total All Other All Other Total * Travel & Hospitality includes hotels, restaurants, entertainment & travel ** RPS includes credit, debit, and prepaid *** Travel includes airlines, auto rental, hotel/motel, other transportation, travel agencies **** Data ranging from January 2020 – December 2020
Noninterest Expense -0.2% linked quarter -1.1% year-over-year +5.1% excluding notable items Linked Quarter Compensation expense decreased, primarily due to lower business incentives and employee benefits expense decreased, primarily due to lower medical claims expense. Professional services expense increased, primarily due to seasonally higher spending. Marketing and business development expense increased, due to the timing of marketing campaigns supporting business development. Year-over-Year Compensation expense increased, due to merit and variable compensation related to business production in mortgage banking. Technology and communications expense increased, primarily due to the impact of increased call center volume related to prepaid cards and capital expenditures supporting business growth. Other noninterest expense, excluding the prior year notable items, increased, which reflected higher expenses for revenue-related costs and COVID-19, higher merger related costs and higher state franchise taxes, partially offset by lower costs related to tax-advantaged projects. $ in millions PPS = postage, printing and supplies
Capital Position * 2020 ratios calculated in accordance with transitional regulatory requirements related to the current expected credit losses methodology ** Non-GAAP; see slide 31 for calculations
Appendix
Average Loans vs. 4Q19 Average total loans increased by $7.4 billion, or 2.5% Average residential mortgage loans increased by $6.9 billion, or 9.9% Average commercial loans increased by $2.5 billion, or 2.4% Average credit card loans decreased by $2.2 billion, or 9.0% vs. 3Q20 Average total loans decreased by $8.7 billion, or 2.8% Average commercial loans decreased by $9.1 billion, or 7.9% Average residential mortgage loans increased by $1.0 billion, or 1.3% Key Points Year-over-Year Growth 3.9% 4.0% 10.0% 6.4% 2.5% Commercial CRE Res Mtg Retail Credit Card Average Loans ($bn)
Year-over-Year Growth 6.6% 8.2% 16.8% 15.9% 18.5% Time Money Market Checking and Savings Noninterest-bearing Average Deposits Key Points Average Deposits ($bn) vs. 4Q19 Average total deposits increased by $66.0 billion, or 18.5% Average low-cost deposits (NIB, interest checking, savings and money market) increased by $76.2 billion, or 24.3% vs. 3Q20 Average total deposits increased by $16.9 billion, or 4.2% Average low-cost deposits (NIB, interest checking, savings and money market) increased by $18.2 billion, or 4.9% $422.4
Credit Quality – Commercial Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm4Q19 3Q20 4Q20 Average Loans$103,911 $115,489 $106,421 30-89 Delinquencies0.30% 0.22%0.31% 90+ Delinquencies0.08%0.06%0.05% Nonperforming Loans0.20% 0.41% 0.36% Linked Quarter Growth 0.2% 2.0% 20.8% (9.8%) (7.9%) Linked quarter loan decline of 7.9% was driven by lower revolving line utilization – utilization rates have continued to decline as corporate customers continue to pay down loans Net charge-offs remained elevated due to stress in certain industries impacted by COVID-19
A&D Const $228 Multi-family $4,073 Retail $226 Residential Construction $2,232 Office $975 Other $2,806 Resi Land $554 $mm4Q19 3Q20 4Q20 Average Loans$39,722$40,929$40,098 30-89 Delinquencies0.09% 0.23%0.47% 90+ Delinquencies0.01%0.00%0.01% Nonperforming Loans0.21% 0.82% 1.14% Performing TDRs*$160 $173 $153 Credit Quality – Commercial Real Estate Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points Linked Quarter Growth 1.9% 0.9% 2.5% (0.4%) (2.0%) Average loans decreased by 2.0% on a linked quarter basis Net charge-offs and nonperforming loans increased on a linked quarter basis due to stress in certain property types impacted by COVID-19 * TDR = troubled debt restructuring
Credit Quality – Residential Mortgage Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm4Q193Q204Q20 Average Loans$69,909 $75,786 $76,809 30-89 Delinquencies0.22%0.31%0.49% 90+ Delinquencies0.17% 0.15% 0.22% Nonperforming Loans0.34%0.31%0.32% Linked Quarter Growth 1.9% 1.4% 0.3% 6.6% 1.3% Originations continued to be high credit quality (weighted average FICO of 774, weighted average LTV of 69%) Increase in performing TDRs mainly due to continued assistance provided to customers in need of payment relief related to the pandemic * Excludes GNMA loans, whose repayments are insured by the FHA or guaranteed by the Department of VA ($1,434 million in 4Q20)
Credit Quality – Credit Card Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm4Q193Q204Q20 Average Loans$24,107 $22,052 $21,937 30-89 Delinquencies1.30%0.94%1.04% 90+ Delinquencies1.23%0.91%0.88% Nonperforming Loans0.00%0.00%0.00% Linked Quarter Growth 1.8% (1.1%) (9.8%) 2.5% (0.5%) Decrease in average loans was driven by lower consumer spending and reduced marketing during the pandemic Credit quality of new originations remained strong reflecting pandemic tightened underwriting Late-stage delinquencies and net charge-off rates decreased linked quarter driven by broadly available payment relief options for consumers impacted by the pandemic
Credit Quality – Home Equity Average Loans ($mm) and Net Charge-offs Ratio Key Points Linked Quarter Growth (2.4%) (2.5%) (3.0%) (5.8%) (5.4%) Key Statistics Key Statistics $mm4Q193Q204Q20 Average Loans$15,221 $13,551 $12,816 30-89 Delinquencies0.51%0.35%0.55% 90+ Delinquencies0.32%0.37%0.38% Nonperforming Loans0.77%0.77%0.86% Loans: 9% Wtd Avg LTV*: 75% Wtd Avg FICO*: 751 Lines: 91% Wtd Avg LTV*: 69% Wtd Avg FICO*: 757 *LTV and FICO at origination High-quality originations (weighted average FICO on commitments of 795, weighted average CLTV of 62%) driven primarily through the retail branch network to existing bank customers on their primary residences Net charge-offs continued to decline on a linked quarter basis
Credit Quality – Retail Leasing Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm4Q193Q204Q20 Average Loans$8,486 $8,438 $8,299 30-89 Delinquencies0.53%0.38%0.43% 90+ Delinquencies0.05%0.06%0.05% Nonperforming Loans0.15%0.17%0.16% Linked Quarter Growth 0.5% (0.1%) (0.7%) 0.3% (1.6%) Continued high-quality originations during 4Q20 (weighted average FICO of 786) Delinquencies remained at low levels Credit losses include end of term losses on residual values as of 1/1/2020. Residual losses included in net charge-offs for 4Q20 were $8 million for the quarter compared to $18 million in noninterest income for 4Q19 * Manheim Used Vehicle Value Index source: www.manheimconsulting.com, January 1995 = 100, quarter value = average monthly ending values
Credit Quality – Other Retail Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm4Q193Q204Q20 Average Loans$33,509 $34,773 $35,928 30-89 Delinquencies0.81%0.51%0.60% 90+ Delinquencies0.13%0.07%0.10% Nonperforming Loans0.11%0.10%0.09% Linked Quarter Growth 0.2% 0.1% 0.0% 3.6% 3.3% Average loans increased linked quarter due to strong volume in recreational vehicle and boat loans Delinquency and charge-offs remained at low levels driven by fiscal stimulus and broadly available payment relief options for consumers impacted by the pandemic
Credit Quality – Auto Loans Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm4Q193Q204Q20 Average Loans$19,434 $18,823 $19,390 30-89 Delinquencies1.06%0.68%0.83% 90+ Delinquencies0.10%0.05%0.11% Nonperforming Loans0.15%0.15%0.13% Direct: 4% Wtd Avg FICO: 758 NCO: 0.33% Indirect: 96% Wtd Avg FICO: 783 NCO: 0.31% Linked Quarter Growth 0.0% (0.8%) (2.7%) 0.3% 3.0% Originations remain high quality reflecting pandemic tightened underwriting (weighted average FICO of 793) Delinquency and charge-offs remained at low levels driven by fiscal stimulus and broadly available payment relief options for consumers impacted by the pandemic Auto loans are included in Other Retail category
Non-GAAP Financial Measures (4), (5), (6), (7) – see slide 32 for corresponding notes
Non-GAAP Financial Measures (1), (7) – see slide 32 for corresponding notes
Non-GAAP Financial Measures * Preliminary data. Subject to change prior to filings with applicable regulatory agencies. (1), (2), (3) – see slide 32 for corresponding notes
Notes Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements. Includes the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology net of deferred taxes. Includes the impact of the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology. Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes. Notable items related to noninterest income for the three months ended December 31, 2019 include: $140 million derivative liability charge related to previously sold Visa shares. Notable items related to noninterest expense for the three months ended December 31, 2019 include: $200 million of severance charges and asset impairments. Notable items for the three months ended December 31, 2019 include: $112 million (after-tax) derivative liability charge related to previously sold Visa shares and $160 million (after-tax) of severance charges and asset impairments.
U.S. Bancorp 4Q20 Earnings Conference Call January 20, 2021