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U.S. Bancorp reports record 2Q earnings

MINNEAPOLIS (July 17, 2013) — U.S. Bancorp (NYSE: USB) today reported net income of $1,484 million for the second quarter of 2013, or $.76 per diluted common share. Earnings for the second quarter of 2013 were driven by a year-over-year reduction in noninterest expense and a lower provision for credit losses. Highlights for the second quarter of 2013 included:

  • Industry-leading performance ratios, including:
    • Return on average assets of 1.70 percent
    • Return on average common equity of 16.1 percent
    • Efficiency ratio of 51.7 percent
  • Strong new lending activity of $65.7 billion during the second quarter, including:
    • $37.6 billion of new and renewed commercial and commercial real estate commitments
    • $2.6 billion of lines related to new credit card accounts
    • $25.5 billion of mortgage and other retail loan originations
  • Growth in average total loans of 5.2 percent over the second quarter of 2012 (7.2 percent excluding covered loans) and 1.2 percent on a linked quarter basis (1.6 percent excluding covered loans)
    • Growth in average total commercial loans of 11.2 percent over the second quarter of 2012 and 2.2 percent over the first quarter of 2013
    • Growth in average total commercial real estate loans of 3.7 percent over the second quarter of 2012 and 1.8 percent over the first quarter of 2013
    • Growth in average commercial and commercial real estate commitments of 10.2 percent year-over-year and 2.2 percent over the prior quarter
  • Continued strong growth in average deposits of 7.0 percent over the second quarter of 2012
    • Average noninterest-bearing deposits growth of 3.6 percent and average total savings deposits growth of 13.1 percent year-over-year
    • Growth in average total savings deposits of 2.1 percent over the linked quarter, while noninterest-bearing deposits remained relatively stable with an increase of .7 percent
  • Lower net charge-offs on both a linked quarter and year-over-year basis. Provision for credit losses was $30 million less than net charge-offs
    • Net charge-offs were $41 million lower than the first quarter of 2013
    • Annualized net charge-offs to average total loans ratio declined to .70 percent
    • Allowance to period-end loans of 2.02 percent at June 30, 2013
  • Nonperforming assets declined on both a linked quarter and year-over-year basis
    • Nonperforming assets (excluding covered assets) decreased 5.3 percent from the first quarter of 2013
    • Allowance to nonperforming assets (excluding covered assets) was 231 percent atJune 30, 2013, compared with 221 percent at March 31, 2013, and 210 percent at June 30, 2012
  • Capital generation continues to reinforce capital position. Ratios at June 30, 2013 were:
    • Tier 1 capital ratio of 11.1 percent
    • Total risk based capital ratio of 13.3 percent
    • Tier 1 common equity to risk-weighted assets ratio of 9.2 percent
    • Tier 1 common equity ratio of approximately 8.3 percent using proposed rules for the Basel III standardized approach released June 2012 and 8.6 percent estimated using final rules released July 2013
  • Returned 73 percent of second quarter earnings to shareholders through dividends and share buybacks
    • Repurchased 18 million shares of common stock during the second quarter
    • Annual dividend raised from $.78 to $.92, an 18 percent increase

Net income attributable to U.S. Bancorp was $1,484 million for the second quarter of 2013, 4.9 percent higher than the $1,415 million for the second quarter of 2012, and 3.9 percent higher than the $1,428 million for the first quarter of 2013. Diluted earnings per common share of $.76 in the second quarter of 2013 were $.05 higher than the second quarter of 2012 and $.03 higher than the previous quarter. Return on average assets and return on average common equity were 1.70 percent and 16.1 percent, respectively, for the second quarter of 2013, compared with 1.67 percent and 16.5 percent, respectively, for the second quarter of 2012. The provision for credit losses was lower than net charge-offs by $30 million in the second quarter and first quarter of 2013 and $50 million lower in the second quarter of 2012.

“Our company earned record net income of $1,484 million in the second quarter, or $.76 per diluted common share,” said Richard K. Davis, U.S. Bancorp Chairman, president and CEO. “In addition, we achieved profitability metrics that remain among the very best in our industry, including a return on average assets of 1.70 percent, return on average common equity of 16.1 percent and an efficiency ratio of 51.7 percent. I take great pride in our company’s ability to attain these record results, particularly given the current slow, albeit steady, growth we have seen in the markets we serve.

“The second quarter of each year is one of our company’s strongest from a fee revenue growth perspective, and this year was no exception, as we experienced linked quarter growth in virtually all categories of fee income. We also experienced solid average loan and deposit growth year-over-year of 5.2 percent and 7.0 percent, respectively. Importantly, average total loans grew by 1.2 percent linked quarter, accelerating from the 1.0 percent linked quarter growth we experienced in the first quarter. Given early industry indicators, our linked quarter loan growth shows that we are continuing to gain market share. Average deposits increased by 1.0 percent over the first quarter – a rate fairly comparable to the growth in average loans. Commercial and commercial real estate utilization rates remain, however, fairly flat at approximately 25 percent.

“Credit quality remains strong, as the ratio of net charge-offs to average total loans fell to .70 percent this quarter from .79 percent in the prior quarter. Nonperforming assets declined by over 5 percent and late stage delinquencies also improved. Our provision for credit losses was $30 million less than net charge-offs for the quarter, reflecting the improvement in the credit metrics and overall quality of the Company’s loan portfolio.

“We continue to generate significant capital each quarter. At June 30th, the company’s Tier 1 capital ratio was 11.1 percent, while the Tier 1 common equity ratio was 8.6 percent as estimated under the final Basel III rules released earlier this month. As anticipated, in June we announced an 18 percent increase in the dividend rate on our common stock, raising the rate to $.92 on an annualized basis. This higher dividend, combined with the repurchase of 18 million shares during the quarter, resulted in a 73 percent return of earnings to shareholders – in-line with our goal of returning 60-80 percent of our earnings to shareholders each year. The company’s capital position remains strong and, importantly, has allowed us to return to a normal capital distribution mode.

“Last Friday, I had the privilege of joining a small group of our employees on stage at the NYSE to ring The Closing Bell in celebration of the 150th anniversary of the signing of our national bank charter. I want to thank employees who traveled to New York City to represent their co-workers as we commemorated this milestone, and also want to take this opportunity to thank all of our 66,000 employees whose hard work and dedication have contributed to the success of our Company. We have a rich 150 year heritage upon which we will build a very strong future for the benefit of our customers, our employees, our communities and our shareholders.”

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