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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 16, 2001
1-6880
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(Commission File Number)
U.S. BANCORP
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(Exact name of Registrant as specified in its charter)
DELAWARE 41-0255900
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(State of Incorporation) (IRS Identification Number)
U.S. Bank Place
601 Second Avenue South, Minneapolis, Minnesota 55402-4302
(612) 973 1111
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(Registrant's telephone number)
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ITEM 5 OTHER EVENTS
DOCUMENT INCORPORATED HEREIN:
Press Release by U.S. Bancorp dated October 16, 2001
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on it's behalf by the
undersigned hereunto duly authorized.
U.S. BANCORP
By: /s/ Terrance R. Dolan
-------------------------------------
Name: Terrance R. Dolan
Title: Senior Vice President
Date: October 17, 2001
[USBANCORP LOGO]
News Release
601 Second Ave. South
Minneapolis, MN 55402
Contact:
Steve Dale H.D. McCullough Judith T. Murphy
Media Relations Investor Relations Investor Relations
(612) 973-0898 (612) 973-2261 (612) 973-2264
U.S. BANCORP REPORTS EARNINGS FOR 3RD QUARTER 2001
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EARNINGS SUMMARY TABLE 1
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($ in millions, except per-share data) PERCENT PERCENT
CHANGE CHANGE
3Q 2Q 3Q 3Q01 VS 3Q01 VS YTD YTD PERCENT
2001 2001 2000 2Q01 3Q00 2001 2000 CHANGE
-------------------------------------------------------------------------------
Before merger and restructuring-related items*:
Operating earnings $149.7 $818.6 $788.8 (81.7) (81.0) $1,765.6 $2,282.7 (22.7)
Earnings per common share (diluted) 0.08 0.43 0.41 (81.4) (80.5) 0.91 1.19 (23.5)
Cash earnings per common share 0.15 0.49 0.46 (69.4) (67.4) 1.11 1.34 (17.2)
(diluted)**
Net income 38.7 562.3 710.3 (93.1) (94.6) 1,011.1 2,106.9 (52.0)
Earnings per common share (diluted) 0.02 0.29 0.37 (93.1) (94.6) 0.52 1.10 (52.7)
Cash earnings per common share (diluted)** 0.09 0.35 0.42 (74.3) (78.6) 0.72 1.25 (42.4)
Dividends paid per common share 0.1875 0.1875 0.1625 -- 15.4 0.5625 0.4875 15.4
Book value per common share (period-end) 8.54 8.10 7.58 5.4 12.7
Return on average common equity***(%) 3.5 21.0 21.8 14.7 21.4
Return on average assets*** (%) 0.35 1.99 1.97 1.43 1.94
Net interest margin (%) 4.42 4.37 4.32 4.40 4.38
Efficiency ratio*** (%) 49.5 47.6 48.2 49.2 49.1
Banking efficiency ratio**** 45.7 42.7 42.8 44.7 44.1
* merger and restructuring-related items (net of taxes) totaled $111.0
million in 3Q01, $256.3 million in 2Q01 and $78.5 million in 3Q00 merger
and restructuring-related items (net of taxes) totaled $754.5 million
year-to-date 2001 and $175.8 million year-to-date 2000
** calculated by adding amortization of goodwill and other intangible assets to operating
earnings and net income
*** before merger and restructuring-related items
****before merger and restructuring-related items; without investment banking and
brokerage activity
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MINNEAPOLIS, October 16, 2001 - U.S. Bancorp (NYSE: USB) today reported
operating earnings of $149.7 million for the third quarter of 2001, compared
with $788.8 million for the third quarter of 2000. Operating earnings of $.08
per diluted share in the third quarter of 2001 were lower than the same period
of 2000 by $.33, or 80.5 percent. Operating earnings on a cash basis were $.15
per diluted share in the third quarter of 2001, compared with $.46 in the third
quarter of 2000. Return on
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 2
average common equity and return on average assets, excluding merger and
restructuring-related items, were 3.5 percent and .35 percent, respectively, in
the third quarter of 2001, compared with returns of 21.8 percent and 1.97
percent in the third quarter of 2000.
U.S. Bancorp (the "Company") is the organization created by the merger of
Firstar Corporation ("FSR") of Milwaukee, Wisconsin and the former U.S. Bancorp
("USB") of Minneapolis, Minnesota. The merger was completed on February 27,
2001, as a pooling-of-interests, and prior periods have been restated.
Including after-tax merger and restructuring-related items of $111.0
million in the third quarter of 2001 and $78.5 million in the third quarter of
2000, the Company recorded net income for the third quarter of 2001 of $38.7
million, or $.02 per diluted share, compared with $710.3 million, or $.37 per
diluted share, for the same period of 2000.
As previously announced, the Company's third quarter results included an
incremental provision for credit losses of $1,025 million, or approximately $655
million after-tax. Earnings for the third quarter of 2001 also reflect the
impact of a $36.0 million impairment of commercial and retail leasing residuals,
recognition of $24.7 million of mortgage servicing rights ("MSR") impairment,
and approximately $14.0 million of write-downs of commercial leasing
partnerships and repossessed tractor/trailer property, partially offset by gains
on the sale of securities of $59.8 million. In addition, the level of third
quarter earnings compared with the prior quarter and the same quarter of 2000
was less than expected due to a slowdown in capital markets activity and payment
processing volumes during the last three weeks of September. Although it is
still early in the fourth quarter, given third quarter operating results and the
Company's belief that current economic trends will continue into the fourth
quarter of 2001, full year 2001 operating earnings are expected to be
approximately $1.32 per diluted share.
U.S. Bancorp President and Chief Executive Officer Jerry A. Grundhofer
said, "As the economic slowdown accelerated during the latter part of the
quarter, we promptly recognized the need to address the impact that these sudden
changes could have on our credit portfolio. It also became apparent that capital
markets and payment processing-related revenues would be below expectations in
the quarter.
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 3
We are disappointed with our third quarter results, but believe the actions we
have taken to build balance sheet strength will give us the flexibility
necessary to address the current uncertain economic environment. In the face of
this uncertainty, and critical to achieving the organization's long-term goals,
our Consumer Banking business line demonstrated its growth potential in the
quarter as average retail loans increased an annualized 10.1 percent compared
with the second quarter of 2001 and average noninterest-bearing deposits
increased an annualized 12.4 percent compared with the second quarter of 2001.
Integration activities remained on schedule, including the flawless conversion
of bank-branded consumer credit cards and the successful rollout of the Five
Star Service Guarantee in the former U.S. Bancorp markets. As an organization,
we will continue to do what is right for our customers and prospects, including
the achievement of our goal of providing industry-leading customer service."
Total revenue on a taxable-equivalent basis for the third quarter of 2001
grew by $160.3 million, or 5.8 percent, over the third quarter of 2000,
primarily due to acquisitions, securities gains and core banking growth,
partially offset by a reduction in capital markets-related revenue, credit card
fee revenue and the recognition of lease residual impairment. Excluding
securities gains, total revenue on a taxable-equivalent basis for the third
quarter of 2001 grew by $101.6 million, or 3.7 percent, over the third quarter
of 2000.
Total noninterest expense, before merger and restructuring-related items,
increased over the third quarter of 2000 by $85.0 million, or 6.4 percent,
primarily reflecting acquisitions, the recognition of MSR impairment, and the
write-down of commercial lease assets, partially offset by a reduction in
compensation expense related to capital markets activity and cost savings from
the integration of recent acquisitions. Provision for credit losses, before
merger and restructuring-related items, for the third quarter of 2001 increased
by $1,061.0 million over the third quarter of 2000, reflecting an increase in
charge-offs quarter over quarter and a $712 million addition to the allowance
for credit losses. The increase to the allowance recognizes the increasing
probability that the current economic slowdown will accelerate or be more
prolonged as a result of recent events.
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 4
Net charge-offs in the third quarter of 2001 were $563.3 million, compared
with the second quarter of 2001 net charge-offs of $240.3 million and third
quarter of 2000 net charge-offs of $213.9 million. Approximately $313.2 million
of the increase in charge-offs reflects several factors, including recent
collateral deterioration, further credit deterioration in the manufacturing,
communications and technology sectors, and specific management decisions to
accelerate its workout strategy for certain borrowers. Nonperforming assets
decreased from $1,215.1 million at June 30, 2001, to $1,132.4 million at
September 30, 2001, primarily reflecting management's credit quality
initiatives. The ratio of allowance for credit losses to nonperforming loans was
243 percent at September 30, 2001, compared with 156 percent at June 30, 2001.
On July 24, 2001, the Company acquired NOVA Corporation (NYSE: NIS)
("NOVA") in a stock and cash transaction valued at approximately $2.1 billion.
The transaction was accounted for as a purchase.
On September 7, 2001, the Company acquired 20 branches in Southern
California from Pacific Century Bank in a cash transaction. The acquisition
includes approximately $640 million in deposits, $570 million in assets and 300
employees.
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 5
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INCOME STATEMENT HIGHLIGHTS TABLE 2
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(Taxable-equivalent basis, $ in millions, PERCENT PERCENT
except per-share data) CHANGE CHANGE
3Q 2Q 3Q 3Q01 VS 3Q01 VS YTD YTD PERCENT
2001 2001 2000 2Q01 3Q00 2001 2000 CHANGE
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Net interest income $1,619.8 $1,586.0 $1,534.2 2.1 5.6 $4,779.9 $4,572.8 4.5
Noninterest income* 1,308.3 1,264.4 1,233.6 3.5 6.1 3,973.6 3,618.3 9.8
---------------------------- ------------------
Total revenue 2,928.1 2,850.4 2,767.8 2.7 5.8 8,753.5 8,191.1 6.9
Noninterest expense* 1,418.7 1,341.9 1,333.7 5.7 6.4 4,154.9 4,020.5 3.3
---------------------------- ------------------
Operating income before merger and
restructuring-related items 1,509.4 1,508.5 1,434.1 0.1 5.3 4,598.6 4,170.6 10.3
Provision for credit losses* 1,275.0 240.0 214.0 nm nm 1,880.8 598.5 nm
---------------------------- ------------------
Income before taxes, merger and
restructuring-related items 234.4 1,268.5 1,220.1 (81.5) (80.8) 2,717.8 3,572.1 (23.9)
Taxable-equivalent adjustment 10.7 16.8 21.2 (36.3) (49.5) 46.0 64.7 (28.9)
Income taxes* 74.0 433.1 410.1 (82.9) (82.0) 906.2 1,224.7 (26.0)
---------------------------- ------------------
Income before merger and
restructuring-related items 149.7 818.6 788.8 (81.7) (81.0) 1,765.6 2,282.7 (22.7)
Merger and restructuring-related items
(after-tax) (111.0) (256.3) (78.5) nm nm (754.5) (175.8) nm
---------------------------- ------------------
Net income $38.7 $562.3 $710.3 (93.1) (94.6) $1,011.1 $2,106.9 (52.0)
============================ ==================
Per diluted common share:
Earnings, before merger and
restructuring-related items $0.08 $0.43 $0.41 (81.4) (80.5) $0.91 $1.19 (23.5)
============================ ==================
Earnings on a cash basis, before
merger and restructuring-related
items $0.15 $0.49 $0.46 (69.4) (67.4) $1.11 $1.34 (17.2)
============================ ==================
Net income $0.02 $0.29 $0.37 (93.1) (94.6) $0.52 $1.10 (52.7)
============================ ==================
Earnings on a cash basis** $0.09 $0.35 $0.42 (74.3) (78.6) $0.72 $1.25 (42.4)
============================ ==================
* Before effect of merger and restructuring-related items
** Calculated by adding amortization of goodwill and other intangible assets to operating earnings and
net income
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Net Interest Income
Third quarter net interest income on a taxable-equivalent basis was
$1,619.8 million, compared with $1,534.2 million recorded in the third quarter
of 2000. Average earning assets for the period increased over the third quarter
of 2000 by $4.1 billion, or 2.9 percent, primarily driven by increases in the
investment portfolio, core commercial and retail loan growth, and the impact of
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 6
acquisitions, partially offset by a $2.3 billion decline in lower margin
residential mortgages, a $1.8 billion reduction related to transfers of low
margin, higher quality, commercial loans to Stellar Funding Group, Inc. (the
"loan conduit") and the sale of indirect automobile and high LTV home equity
loans in the first quarter of 2001. The net interest margin in the third quarter
of 2001 was 4.42 percent, compared with 4.37 percent in the second quarter of
2001 and 4.32 percent in the third quarter of 2000. The improvement in the net
interest margin in the third quarter of 2001 over the third quarter of 2000 and
the second quarter of 2001 reflects funding benefits of the declining rate
environment and improving spreads due to product re-pricing dynamics and loan
conduit transfers, partially offset by lower yields on the investment portfolio.
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AVERAGE LOANS TABLE 3
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($ in millions) PERCENT PERCENT
CHANGE CHANGE
3Q 2Q 3Q 3Q01 VS 3Q01 VS YTD YTD PERCENT
2001 2001 2000 2Q01 3Q00 2001 2000 CHANGE
------------------------------------------------------------------------------------
Commercial $43,698 $45,632 $46,720 (4.2) (6.5) $45,382 $45,128 0.6
Lease financing 5,925 5,865 4,417 1.0 34.1 5,853 4,148 41.1
--------------------------------- ----------------------
Total commercial 49,623 51,497 51,137 (3.6) (3.0) 51,235 49,276 4.0
Commercial mortgages 18,918 18,991 19,232 (0.4) (1.6) 19,070 19,036 0.2
Construction and development 7,140 7,360 6,982 (3.0) 2.3 7,217 6,814 5.9
--------------------------------- ----------------------
Total commercial real estate 26,058 26,351 26,214 (1.1) (0.6) 26,287 25,850 1.7
Residential mortgages 6,634 7,189 8,971 (7.7) (26.1) 7,143 9,857 (27.5)
Credit card 5,712 5,652 5,008 1.1 14.1 5,658 4,857 16.5
Retail leasing 4,630 4,465 3,409 3.7 35.8 4,463 2,862 55.9
Other retail 24,757 24,315 24,651 1.8 0.4 24,749 24,290 1.9
--------------------------------- ----------------------
Total retail 35,099 34,432 33,068 1.9 6.1 34,870 32,009 8.9
Total loans $117,414 $119,469 $119,390 (1.7) (1.7) $119,535 $116,992 2.2
================================= ======================
Total loans, excl. residential
mortgages $110,780 $112,280 $110,419 (1.3) 0.3 $112,392 $107,135 4.9
================================= ======================
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U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 7
Average loans for the third quarter of 2001 were $2.0 billion lower, or 1.7
percent, than the third quarter of 2000. Year-over-year loan growth was impacted
by several management actions, including the first quarter of 2001 sale of the
home equity and indirect automobile loan portfolios, the reclassification of a
discontinued unsecured small business product to loans held for sale, branch
divestitures, and transfers of short-term, high quality, commercial loans to the
loan conduit. In addition, the Company continued to reduce its lower margin
residential mortgage portfolio. Excluding residential mortgage loans, average
loans for the third quarter were higher by $361 million, or .3 percent, than the
third quarter of 2000.
Excluding residential mortgage loans, average loans for the third quarter
of 2001 were lower than the second quarter of 2001 by $1.5 billion, or 1.3
percent, primarily reflecting the transfer of commercial loans to the conduit
and the second quarter of 2001 reclassification of a discontinued unsecured
small business product to loans held for sale.
Investment securities at September 30, 2001, were $8.9 billion more than at
September 30, 2000, and $4.5 billion higher than at June 30, 2001, reflecting
net purchases of securities. Average investment securities for the third quarter
of 2001 were $5.9 billion higher, or 35.0 percent, than the same of quarter of
2000.
Average noninterest-bearing deposits in the third quarter of 2001 were
higher than the third quarter of 2000 by $1.5 billion, or 6.3 percent. Average
interest-bearing deposits declined by $303 million, or .4 percent, from the
third quarter of 2000. Growth in average interest checking and money market
deposits was more than offset by reductions in the average balances of higher
cost savings and time deposits.
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 8
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NONINTEREST INCOME TABLE 4
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($ in millions) PERCENT PERCENT
CHANGE CHANGE
3Q 2Q 3Q 3Q01 VS 3Q01 VS YTD YTD PERCENT
2001 2001 2000 2Q01 3Q00 2001 2000 CHANGE
-------------------------------------------------------------------------------
Credit card fee revenue $192.2 $198.7 $208.2 (3.3) (7.7) $588.9 $569.0 3.5
Merchant and ATM processing revenue 138.5 61.9 53.0 123.7 161.3 252.1 158.4 59.2
Trust and investment management fees 226.2 228.0 231.1 (0.8) (2.1) 679.2 692.4 (1.9)
Deposit service charges 168.7 176.7 144.3 (4.5) 16.9 491.9 405.7 21.2
Cash management fees 89.7 84.9 74.7 5.7 20.1 251.4 220.6 14.0
Mortgage banking revenue 60.3 57.0 44.7 5.8 34.9 165.5 135.5 22.1
Trading account profits and commissions 43.6 55.8 50.9 (21.9) (14.3) 171.3 196.0 (12.6)
Investment products fees and commissions 108.0 114.2 107.8 (5.4) 0.2 347.9 357.7 (2.7)
Investment banking revenue 56.9 71.1 100.6 (20.0) (43.4) 188.2 267.5 (29.6)
Commercial product revenue 96.2 93.8 86.0 2.6 11.9 266.1 219.2 21.4
Securities gains, net 59.8 31.3 1.1 nm nm 307.1 1.1 nm
Other 68.2 91.0 131.2 (25.1) (48.0) 264.0 395.2 (33.2)
------------------------------ --------------------
Subtotal 1,308.3 1,264.4 1,233.6 3.5 6.1 3,973.6 3,618.3 9.8
Merger and restructuring-related gains -- 62.2 -- 62.2 --
------------------------------ --------------------
Total noninterest income $1,308.3 $1,326.6 $1,233.6 $4,035.8 $3,618.3
============================== ====================
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Noninterest Income
Third quarter noninterest income, excluding merger and
restructuring-related items, was $1,308.3 million, an increase of $74.7 million,
or 6.1 percent, from the same quarter of 2000, and a $43.9 million, or 3.5
percent, increase from the second quarter of 2001. Excluding the impact of
securities gains and merger and restructuring-related items, noninterest income
in the third quarter of 2001 was $16.0 million, or 1.3 percent, higher than the
third quarter of 2000, and $15.4 million, or 1.2 percent, higher than the second
quarter of 2001. Credit card fee revenue was lower in the third quarter of 2001
over the same period of 2000 by $16.0 million, or 7.7 percent, primarily due to
lower corporate, purchasing and retail card transaction volumes. The decline, in
part, reflects lower charge volumes during the last three weeks of September.
Merchant and ATM processing revenue was higher in the third quarter of 2001 over
the same period of 2000 by $85.5 million, or 161.3 percent, principally due to
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 9
the acquisition of NOVA. Deposit service charges, commercial product revenue,
cash management fees, and mortgage banking revenue also improved in the third
quarter of 2001 over the third quarter of 2000 by $24.4 million (16.9 percent),
$10.2 million (11.9 percent), $15.0 million (20.1 percent), and $15.6 million
(34.9 percent), respectively. The increase in deposit service charges was
primarily due to the alignment and re-design of products and features following
the Firstar/U.S. Bancorp merger. The increase in cash management fees and
commercial product revenue was primarily driven by the growth in core business
and product fee enhancements during 2000. Mortgage banking revenue increased in
the third quarter of 2001 compared with the third quarter of 2000 due to
increases in origination and sales fees and loan servicing revenue, partially
offset by a decrease in gain on the sale of servicing rights. Other income
declined $63.0 million from a year ago, primarily reflecting a $36.0 million
impairment of commercial and retail leasing residuals in the third quarter of
2001 and a decline in the level of gains on equity investments compared with the
third quarter of 2000.
Excluding securities gains and merger and restructuring-related items,
noninterest income increased in the third quarter of 2001 by $15.4 million, or
1.2 percent, over the second quarter of 2001. Merchant and ATM processing
revenue increased by $76.6 million (123.7 percent) over the second quarter of
2001, due to the NOVA acquisition. Positive variances in commercial product
revenue, cash management fees and mortgage banking revenue were more than offset
by reductions in capital market-related revenues, deposit service charges and
other income.
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 10
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NONINTEREST EXPENSE TABLE 5
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($ in millions) PERCENT PERCENT
CHANGE CHANGE
3Q 2Q 3Q 3Q01 VS 3Q01 VS YTD YTD PERCENT
2001 2001 2000 2Q01 3Q00 2001 2000 CHANGE
-------------------------------------------------------------------------------
Salaries $580.3 $570.5 $602.4 1.7 (3.7) $1,741.3 $1,833.4 (5.0)
Employee benefits 85.4 90.7 89.4 (5.8) (4.5) 284.2 301.6 (5.8)
Net occupancy 102.5 101.4 99.8 1.1 2.7 314.0 292.7 7.3
Furniture and equipment 74.9 74.9 79.6 -- (5.9) 226.7 232.0 (2.3)
Communication 49.4 50.3 35.7 (1.8) 38.4 138.4 103.1 34.2
Postage 44.7 43.8 43.1 2.1 3.7 135.4 130.3 3.9
Goodwill 64.9 61.2 60.4 6.0 7.5 196.6 178.6 10.1
Other intangible assets 82.2 51.4 37.3 59.9 120.4 177.5 111.7 58.9
Other 334.4 297.7 286.0 12.3 16.9 940.8 837.1 12.4
------------------------------ --------------------
Subtotal 1,418.7 1,341.9 1,333.7 5.7 6.4 4,154.9 4,020.5 3.3
Merger and restructuring-related charges 148.8 252.8 117.7 805.8 264.6
------------------------------ --------------------
Total noninterest expense $1,567.5 $1,594.7 $1,451.4 $4,960.7 $4,285.1
============================== ====================
----------------------------------------------------------------------------------------------------------------------------------
Noninterest Expense
Third quarter noninterest expense, before merger and restructuring-related
charges, totaled $1,418.7 million, an increase of $85.0 million, or 6.4 percent,
from the third quarter of 2000. The increase in noninterest expense was
primarily the result of core business growth and approximately $85 million
related to recent acquisitions, including NOVA, Scripps Financial, Lyon
Financial and 41 branches in Tennessee, $24.7 million of MSR impairment related
to the declining rate environment, and asset writedowns of $14.0 million of
commercial leasing partnerships and repossessed tractor/trailer property,
partially offset by cost savings related to merger integration and restructuring
activities and a reduction in expense related to capital markets activity. The
Company actively hedges its risk of MSR impairment through principal only and
other investment positions. As such, a portion of the MSR impairment was offset
by securities gains recognized during the quarter.
Third quarter of 2001 noninterest expense, before merger and
restructuring-related charges, was higher than the second quarter of 2001 by
$76.8 million, or 5.7 percent, primarily due to the acquisition of NOVA and the
MSR impairment and asset writedowns.
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 11
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SIGNIFICANT ITEMS - MERGER AND RESTRUCTURING TABLE 6
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($ in millions)
CURRENT ESTIMATED TIMING ACTUAL ACTUAL ACTUAL
------------------------
SUMMARY OF CHARGES ESTIMATE 2001 2002 1Q01 2Q01 3Q01
--------------------------------------------------------------------------
Firstar/U.S. Bancorp
Severance and employee-related costs $237.4 $244.9 ($7.5) $123.6 $98.1 $22.5
Building and equipment 107.0 79.2 27.8 23.6 7.7 4.6
Investment banking and transaction costs 62.9 62.9 -- 60.6 1.0 1.3
Charitable foundation 76.0 76.0 -- 76.0 -- --
Restructurings* 500.1 490.1 10.0 181.6 246.7 51.9
Branch sale (62.2) (62.2) -- -- (62.2) --
Other, net 132.8 81.2 51.6 38.5 28.0 7.7
-----------------------------------------------------------------------
Subtotal 1,054.0 972.1 81.9 503.9 319.3 88.0
Conversion and integration 346.5 197.8 148.7 19.2 53.0 51.9
-----------------------------------------------------------------------
Total Firstar/U.S. Bancorp** 1,400.5 1,169.9 230.6 523.1 372.3 139.9
U.S. Bancorp Piper Jaffray restructuring 45.6 45.6 -- 22.6 5.4 17.6
NOVA 100.0 3.9 96.1 -- -- 3.0
Other acquisitions, net 75.4 65.5 9.9 25.1 14.2 2.6
-----------------------------------------------------------------------
Total merger and restructuring $1,621.5 $1,284.9 $336.6 $570.8 $391.9 $163.1
=======================================================================
*Detail of restructuring charges
Unsecured small business credit line portfolio $201.3
Credit policy and risk management practice alignment 90.0
Sale of high LTV home equity and indirect auto portfolios 76.6
Exit U.S. Bancorp Libra 45.4
Branch consolidation 20.0
Exit other business lines and/or portfolios 51.9
Other 14.9
-------
Total restructurings $500.1
=======
** Originally estimated to be $800 million
-----------------------------------------------------------------------------------------------------------------------------
Earnings in the third quarter of 2001 included pre-tax net merger and
restructuring-related items of $163.1 million. The total merger and
restructuring-related items included $139.9 million of net expense associated
with the Firstar/U.S. Bancorp merger. In addition, $23.2 million of expense was
included in the third quarter of 2001 for the U.S. Bancorp Piper Jaffray
restructuring, NOVA and other recent, smaller acquisitions.
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 12
The $139.9 million of net merger and restructuring-related items associated
with the U.S. Bancorp/Firstar merger included $51.9 million to restructure a
co-branding relationship of the former U.S. Bancorp. The restructuring charge
included a $14.3 million provision for credit losses related to the release of
certain credit quality indemnifications in the original contract and $35.7
million for the impairment of intangibles. Merger and restructuring-related
charges also included $22.5 million of severance and employee-related costs,
$4.6 million of building and equipment costs, $51.9 million of conversion and
integration costs, and $9.0 million of miscellaneous other expense.
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ALLOWANCE FOR CREDIT LOSSES TABLE 7
------------------------------------------------------------------------------------------------------------------------------------
($ in millions) 3Q2001 2Q 1Q2001 4Q 3Q
---------------------------- ----------------------------
"NORMALIZED**" ACTUAL 2001 "NORMALIZED*" ACTUAL 2000 2000
------------------------------------------------------------------------------------------
Balance, beginning of period $1,715.7 $1,715.7 $1,729.1 $1,786.9 $1,786.9 $1,776.6 $1,757.0
Net charge-offs
Commercial 69.9 307.2 75.5 53.9 270.3 69.0 68.9
Lease financing 11.8 78.2 9.1 6.4 19.6 7.2 4.8
---------------------------------------------------------------------------------------------
Total commercial 81.7 385.4 84.6 60.3 289.9 76.2 73.7
Commercial mortgages 1.4 6.9 (0.2) 3.1 28.5 6.8 0.7
Construction and development (0.6) 3.4 2.5 0.8 0.8 3.9 5.8
---------------------------------------------------------------------------------------------
Total commercial real estate 0.8 10.3 2.3 3.9 29.3 10.7 6.5
Residential mortgages 3.6 3.6 3.3 3.2 3.2 3.0 2.3
Credit card 71.5 71.5 68.5 57.8 57.8 54.4 52.4
Retail leasing 7.1 7.1 7.0 6.2 6.2 4.6 3.7
Other retail 85.4 85.4 74.6 95.7 90.7 80.6 75.3
---------------------------------------------------------------------------------------------
Total retail 164.0 164.0 150.1 159.7 154.7 139.6 131.4
---------------------------------------------------------------------------------------------
Total net charge-offs 250.1 563.3 240.3 227.1 477.1 229.5 213.9
Provision for credit losses
Operating basis 961.8 1,275.0 240.0 282.4 365.8 229.5 214.0
Merger-related 14.3 14.3 201.3 -- 166.6 -- --
---------------------------------------------------------------------------------------------
Total provision for 976.1 1,289.3 441.3 282.4 532.4 229.5 214.0
credit losses
Losses from loan sales/transfers (1.3) (1.3) (214.4) (113.6) (113.6) -- --
Acquisitions and other changes 17.6 17.6 -- 0.5 0.5 10.3 19.5
---------------------------------------------------------------------------------------------
Balance, end of period $2,458.0 $2,458.0 $1,715.7 $1,729.1 $1,729.1 $1,786.9 $1,776.6
=============================================================================================
Net charge-offs to average loans (%) 0.85 1.90 0.81 0.76 1.59 0.75 0.71
Allowance for credit losses to
Period-end loans (%) 2.15 2.15 1.45 1.45 1.45 1.46 1.46
* categories adjusted for merger-related ($90.0 million) and portfolio restructuring-related ($160.0 million) net-charge-offs
** categories adjusted for specific management credit initiatives in the third quarter ($313.2 million)
------------------------------------------------------------------------------------------------------------------------------------
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 13
Credit Quality
The allowance for credit losses was $2,458.0 million at September 30, 2001,
compared with the allowance for credit losses of $1,715.7 million at June 30,
2001. The ratio of allowance for credit losses to nonperforming loans was 243
percent at September 30, 2001, higher than the ratio of 156 percent at June 30,
2001. The ratio of allowance for credit losses to period-end loans was 2.15
percent at September 30, 2001, compared with 1.45 percent at June 30, 2001.
During the third quarter of 2001, the Company recognized an incremental
provision for credit losses to strengthen its allowance coverage ratios. This
action recognizes an increasing probability that the current economic slowdown
will accelerate or be more prolonged as a result of recent events. Management's
action reflects increasing uncertainties surrounding the timing of an economic
recovery and its impact on the credit quality of the loan portfolio. Given
recent events, deterioration in the manufacturing and transportation sectors is
now expected to continue. Uncertainty with respect to the airline industry,
travel and entertainment and consumer-related businesses also has been
considered by management in determining the allowance for credit losses as of
September 30, 2001.
Total net charge-offs in the third quarter of 2001 were $563.3 million,
compared with the second quarter of 2001 net charge-offs of $240.3 million and
the third quarter of 2000 net charge-offs of $213.9 million. Total net
charge-offs in the third quarter of 2001 included $313.2 million of commercial
charge-offs related to specific credit initiatives taken by management.
Commercial and commercial real estate loan net charge-offs were $395.7
million for the third quarter of 2001, or 2.07 percent of average loans
outstanding, compared with $86.9 million, or .45 percent, in the second quarter
of 2001 and $80.2 million, or .41 percent, of average loans outstanding, in the
third quarter of 2000. Approximately $313.2 million of the increase in
charge-offs reflects several factors including: a large cattle fraud, recent
collateral deterioration specific to transportation equipment caused by the
impact of fuel prices and the economy, further deterioration in the
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 14
manufacturing, communications and technology sectors and specific management
decisions to accelerate its workout strategy for certain borrowers. Excluding
net charge-offs associated with these events and management credit initiatives
("normalized" net charge-offs), commercial and commercial real estate loan net
charge-offs in the third quarter of 2001 were $82.5 million, or .43 percent of
average loans outstanding.
Retail loan net charge-offs of $164.0 million in the third quarter of 2001
were higher than the same period of 2000 by $32.6 million, or 24.8 percent, and
$13.9 million, or 9.3 percent, higher than the second quarter of 2001. The
increase in retail loan net charge-offs in the third quarter of 2001 from the
second quarter of 2001 was primarily due to higher bankruptcies, reflecting the
continuing downturn in economic conditions. Retail loan net charge-offs as a
percent of average loans outstanding were 1.85 percent in the third quarter of
2001, compared with 1.75 percent and 1.58 percent in the second quarter of 2001
and third quarter of 2000, respectively.
---------------------------------------------------------------------------------------------------
CREDIT RATIOS TABLE 8
---------------------------------------------------------------------------------------------------
SEP 30 JUN 30 MAR 31 DEC 31 SEP 30
2001 2001 2001 2000 2000
-------------------------------------------------
Net charge-offs ratios*
Commercial 2.79 0.66 2.34 0.59 0.59
Lease financing 5.24 0.62 1.38 0.51 0.43
Total commercial 3.08 0.66 2.24 0.58 0.57
Commercial real estate 0.16 0.04 0.45 0.16 0.10
Residential mortgage 0.22 0.18 0.17 0.14 0.10
Credit card 4.97 4.86 4.15 4.15 4.16
Retail leasing 0.61 0.63 0.59 0.46 0.43
Other retail 1.37 1.23 1.46 1.27 1.22
Total retail 1.85 1.75 1.79 1.62 1.58
Total net charge-offs 1.90 0.81 1.59 0.75 0.71
Delinquent loan ratios**
Commercial past due 90+ days 1.45 1.41 1.22 0.95 0.84
Consumer past due 90+ days 1.05 1.00 1.01 0.92 0.79
* annualized and calculated on average loan balances
** ratios include nonperforming loans and are expressed as a percent of ending loan balances
--------------------------------------------------------------------------------------------------
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 15
The Company expects total net charge-offs in the fourth quarter of 2001 to
decrease modestly from the normalized net charge-offs in the third quarter of
2001. However, given the increasing probability that the current economic
slowdown will accelerate or be more prolonged by recent events, there is still
significant uncertainty as to the level and timing of commercial charge-offs
over the next several quarters.
------------------------------------------------------------------------------------------------
ASSET QUALITY TABLE 9
------------------------------------------------------------------------------------------------
($ in millions)
SEP 30 JUN 30 MAR 31 DEC 31 SEP 30
2001 2001 2001 2000 2000
----------------------------------------------------
Nonperforming loans
Commercial $580.8 $724.1 $631.9 $470.4 $383.8
Lease financing 136.6 126.4 103.8 70.5 57.5
----------------------------------------------------
Total commercial 717.4 850.5 735.7 540.9 441.3
Commercial mortgages 124.7 114.4 98.5 105.5 107.6
Construction and development 55.5 37.3 57.8 38.2 34.8
----------------------------------------------------
Commercial real estate 180.2 151.7 156.3 143.7 142.4
Residential mortgages 76.7 67.7 64.8 56.9 60.7
Retail 37.0 30.0 25.1 23.8 22.0
----------------------------------------------------
Total nonperforming loans 1,011.3 1,099.9 981.9 765.3 666.4
Other real estate 55.4 52.7 55.0 61.1 42.6
Other nonperforming assets 65.7 62.5 53.9 40.6 30.4
----------------------------------------------------
Total nonperforming assets* $1,132.4 $1,215.1 $1,090.8 $867.0 $739.4
====================================================
Accruing loans 90 days past due $483.8 $395.9 $390.7 $385.2 $329.1
====================================================
Allowance to nonperforming loans (%) 243 156 176 233 267
Allowance to nonperforming assets (%) 217 141 159 206 240
Nonperforming assets to loans
plus ORE (%) 0.99 1.02 0.91 0.71 0.61
*does not include accruing loans 90 days past due
-------------------------------------------------------------------------------------------------
Nonperforming assets at September 30, 2001, totaled $1,132.4 million,
compared with $1,215.1 million at June 30, 2001, and $739.4 million at September
30, 2000. The $82.7 million decrease in nonperforming assets from June 30, 2001,
to September 30, 2001, was primarily due to
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 16
the commercial charge-offs taken in the quarter. The ratio of nonperforming
assets to loans and other real estate was .99 percent at September 30, 2001,
compared with 1.02 percent at June 30, 2001, and .61 percent at September 30,
2000.
------------------------------------------------------------------------------------------------
CAPITAL POSITION TABLE 10
------------------------------------------------------------------------------------------------
($ in millions) SEP 30 JUN 30 MAR 31 DEC 31 SEP 30
2001 2001 2001 2000 2000
----------------------------------------------------
Total shareholders' equity $16,817 $15,456 $15,243 $15,168 $14,334
Tier 1 capital 11,781 12,860 11,831 11,602 11,179
Total risk-based capital 18,666 18,066 17,135 17,038 16,740
Common equity to assets 10.0% 9.4% 9.5% 9.2% 8.9%
Tangible common equity to assets 5.9 6.6 6.6 6.3 6.3
Tier 1 capital ratio 7.2 8.0 7.4 7.2 7.1
Total risk-based capital ratio 11.4 11.2 10.7 10.6 10.6
Leverage ratio 7.3 8.0 7.5 7.4 7.2
------------------------------------------------------------------------------------------------
Total shareholder's equity was $16.8 billion at September 30, 2001,
compared with $14.3 billion at September 30, 2000. The increase was the result
of strong corporate earnings, including merger and restructuring-related items,
offset by dividend payments and share buybacks in the third quarter of 2000
prior to the announcement of the merger of Firstar and the former U.S. Bancorp.
Tangible common equity to assets was 5.9 percent at September 30, 2001,
compared with 6.6 percent at June 30, 2001, and 6.3 percent at September 30,
2000. The Tier 1 capital ratio was 7.2 percent at September 30, 2001, compared
with 8.0 percent at June 30, 2001, and 7.1 percent at September 30, 2000. The
decrease primarily reflects the NOVA acquisition, including the level of
intangibles and the capital structure utilized to acquire the company. The total
risk-based capital ratio was 11.4 percent at September 30, 2001, compared with
11.2 percent at June 30, 2001, and 10.6 percent at September 30, 2000. The
improvement in the total risk-based capital ratio in the third quarter of 2001
primarily reflects changes in the mix of investment securities in addition to
the second quarter of 2001 issuance of "trust preferred" securities. The
leverage ratio was 7.3 percent at September 30, 2001, compared with 8.0 percent
at June 30, 2001, and 7.2 percent at September 30, 2000. All regulatory ratios
continue to be in excess of stated "well capitalized" requirements.
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 17
-----------------------------------------------------------------------------------------------------
COMMON SHARES TABLE 11
-----------------------------------------------------------------------------------------------------
(Millions) 3Q 2Q 1Q 4Q 3Q
2001 2001 2001 2000 2000
-------------------------------------------------
Beginning shares outstanding 1,907.6 1,905.3 1,902.1 1,890.3 1,905.5
Shares issued for stock option and stock
purchase plans, acquisitions and other
corporate purposes 62.7 2.3 3.2 11.8 1.9
Shares repurchased (1.3) -- -- -- (17.1)
-------------------------------------------------
Ending shares outstanding 1,969.0 1,907.6 1,905.3 1,902.1 1,890.3
=================================================
------------------------------------------------------------------------------------------------------
On July 17, 2001, the board of directors of U.S. Bancorp approved a plan to
repurchase 56.4 million shares of its outstanding common stock to replace the
shares issued in connection with the acquisition of NOVA. During the third
quarter of 2001, the Company repurchased 1.3 million shares of common stock in
both public and private transactions. The Company also entered into forward
contracts to repurchase the majority of the remaining shares authorized for
repurchase. These contracts include agreements to repurchase 18.4 million shares
in the fourth quarter of 2001, 17.8 million shares in the first quarter of 2002
and 8.9 million shares in the second quarter of 2002.
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 18
--------------------------------------------------------------------------------------------------------------------------------
LINE OF BUSINESS FINANCIAL PERFORMANCE* TABLE 12
--------------------------------------------------------------------------------------------------------------------------------
($ in millions)
PRE-TAX OPERATING INCOME** PERCENT CHANGE
------------------------------ ----------------- 3Q 2001
3Q 2Q 3Q 3Q01 VS 3Q01 VS YTD YTD PERCENT EARNINGS
BUSINESS LINE 2001 2001 2000 2Q01 3Q00 2001 2000 CHANGE COMPOSITION
------------------------------------------------------------------------------------------------------------------------------
Wholesale Banking $483.3 $498.6 $456.8 (3.1) 5.8 $1,471.9 $1,355.1 8.6 32 %
Consumer Banking 540.8 609.6 613.9 (11.3) (11.9) 1,732.0 1,779.5 (2.7) 36
Private Client, Trust and
Asset Management 162.9 162.9 168.3 -- (3.2) 483.7 486.3 (0.5) 11
Payment Services 294.8 285.0 276.7 3.4 6.5 854.0 782.9 9.1 20
Capital Markets 20.0 32.8 39.2 (39.0) (49.0) 88.5 166.7 (46.9) 1
Treasury and Corporate Support 7.6 (80.4) (120.8) nm nm (31.5) (399.9) nm --
----------------------------- --------------------
Consolidated Company $1,509.4 $1,508.5 $1,434.1 0.1 5.3 $4,598.6 $4,170.6 10.3 100 %
============================= ====================
* preliminary data
** pre-tax income before merger and restructuring-related items and provision for credit losses
--------------------------------------------------------------------------------------------------------------------------------
Line of Business
Within the Company, financial performance is measured by major lines of
business which include: Wholesale Banking, Consumer Banking, Private Client,
Trust and Asset Management, Payment Services, Capital Markets, and Treasury and
Other Corporate Support. The business line results are derived from the
Company's profitability reporting systems. Designations, assignments and
allocations may change from time to time as product lines change or segments are
realigned to better respond to our diverse customer base. All results for 2001
and 2000 have been restated to present consistent methodologies for all business
lines.
Wholesale Banking offers lending, depository, treasury management and other
financial services to middle market, large corporate and public sector clients.
Wholesale Banking contributed $483.3 million of the Company's pre-tax operating
income in the third quarter of 2001, a 5.8 percent increase over the same period
of 2000 and a 3.1 percent decrease from the second quarter of 2001. Total
revenue grew by 7.9 percent from the third quarter of 2000 to the third quarter
of 2001, the result of deposit growth, as well as the impact of an equipment
finance division acquisition, and an increase in noninterest income (21.7
percent), particularly cash management-related fees. Offsetting the favorable
variance in revenue was an increase in noninterest expense (18.6 percent),
primarily due to the leasing acquisition and planned growth in targeted markets.
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 19
Consumer Banking delivers products and services to the broad consumer
market and small businesses through banking offices, telemarketing, on-line
service, direct mail and automated teller machines ("ATM"). It encompasses
community banking, metropolitan banking, small business banking, consumer
lending, mortgage banking and investment sales. Consumer Banking contributed
$540.8 million of the Company's pre-tax operating income in the third quarter of
2001, an 11.9 percent decrease from the same period of 2000, and an 11.3 percent
decrease from the second quarter of 2001. Total revenue declined by 2.5 percent
in the third quarter of 2001 from the same quarter of 2000. Fee-based revenue
increased 13.7 percent from a year ago, while net interest income declined 8.2
percent. The decrease in net interest income reflects the impact of declining
interest rates on the funding benefit of consumer deposits, the divestiture of
home equity and indirect automobile loans in the first quarter of 2001, and
branches divestitures during the second quarter of 2001 in connection with the
FSR/USB merger. The decline was partially offset by a funding benefit related to
the acquisition of 41 branches in Tennessee. Growth in fee-based revenue from a
year ago is primarily attributed to an increase in retail deposit and cash
management fees, the result of core account growth, product pricing
enhancements, the alignment and re-design of products and features following the
merger, and fee revenue related to the Tennessee branch acquisition. Mortgage
banking revenue also contributed to the favorable variance. Noninterest expense
increased over the third quarter of 2000 (11.2 percent), primarily due to MSR
impairment and the Tennessee branch acquisition.
Private Client, Trust and Asset Management provides mutual fund processing
services, trust, private banking and financial advisory services through four
businesses, including: the Private Client Group, Corporate Trust, Institutional
Trust and Custody, and Mutual Fund Services. The business segment also offers
investment management services to several client segments including mutual
funds, institutional customers, and private asset management. Private Client,
Trust and Asset Management contributed $162.9 million of the Company's pre-tax
operating income in the third quarter of 2001, a 3.2 percent decrease from the
same period of 2000 and equal to the second quarter of 2001. Growth in net
interest income (1.3 percent) in the third quarter of 2001 from the third
quarter of 2000 was driven by growth in loans and deposits of 11.6 percent and
4.0 percent, respectively. Noninterest income declined by 3.7 percent primarily
due to softness in account management fees affected by the markets. Noninterest
expense decreased by 1.9 percent due to integration activities.
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 20
Payment Services includes consumer and business credit cards, corporate and
purchasing card services, consumer lines of credit, ATM processing and merchant
processing. Payment Services contributed $294.8 million of the Company's pre-tax
operating income in the third quarter of 2001, a 6.5 percent increase over the
same period of 2000 and a 3.4 percent increase over the second quarter of 2001.
Strong revenue growth of 16.2 percent, primarily due to the acquisition of NOVA,
was partially offset by an increase in noninterest expense (39.3 percent)
related to the acquisition.
Capital Markets engages in equity and fixed income trading activities,
offers investment banking and underwriting services for corporate and public
sector customers and provides financial advisory services and securities, mutual
funds, annuities and insurance products to consumers and regionally-based
businesses through a network of brokerage offices. Capital Markets contributed
$20.0 million of the Company's pre-tax operating income in the third quarter of
2001, a 49.0 percent decline from the third quarter of 2000 and a 39.0 percent
decline from the second quarter of 2001. The unfavorable variances in pre-tax
operating income from the third quarter of 2000 and second quarter of 2001 were
due to significant decreases in fees related to trading, investment products
fees and commissions and investment banking revenues.
Treasury and Corporate Support includes the Company's investment and
residential mortgage portfolios, funding, capital management and asset
securitization activities, interest rate risk management, the net effect of
transfer pricing related to loan and deposit balances, and the change in
residual allocations associated with the provision for credit losses. It also
includes business activities managed on a corporate basis, including income and
expense of enterprise-wide operations and administrative support functions.
Treasury and Corporate Support recorded a pre-tax operating income of $7.6
million in the third quarter of 2001, compared with losses of $120.8 million in
the third quarter of 2000 and $80.4 million in the second quarter of 2001. The
increase in pre-tax operating earnings was primarily driven by an improvement in
net interest income due to the funding and asset liability management activities
during the declining rate environment.
U.S. Bancorp Reports Third Quarter 2001 Results
October 16, 2001
Page 21
VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER DAVID M. MOFFETT WILL HOST A
CONFERENCE CALL TO REVIEW THE FINANCIAL RESULTS ON TUESDAY, OCTOBER 16, 2001 AT
1:00 P.M. (CDT). To access the conference call, please dial 800-235-0452 and ask
for the U.S. Bancorp earnings conference call. Participants calling from outside
the United States, please call 785-832-1077. For those unable to participate
during the live call, a recording of the call will be available from 5:00 p.m.
(CDT) on Tuesday, October 16, 2001 through 11:00 p.m. (CDT) on Tuesday, October
23, 2001. To access the recorded message dial 800-374-0328. If calling from
outside the United States, please dial 402-220-0663.
Minneapolis-based U.S. Bancorp ("USB"), with $168 billion in assets, is the
8th largest financial services holding company in the United States. The company
operates 2,186 banking offices and 4,937 ATMs, and provides a comprehensive line
of banking, brokerage, insurance, investment, mortgage, and trust payment
services products to consumers, businesses and institutions. U.S. Bancorp is the
parent company of Firstar Bank and U.S. Bank. Visit U.S. Bancorp on the web at
www.usbank.com and Firstar Bank at www.firstar.com.
Forward-Looking Statements
This press release contains forward-looking statements. Statements that
are not historical or current facts, including statements about beliefs and
expectations, are forward-looking statements. These forward-looking statements
cover, among other things, projected earnings growth, anticipated future
expenses and revenues, and the future prospects of the Company. Forward-looking
statements involve inherent risks and uncertainties, and important factors could
cause actual results to differ materially from those anticipated, including the
following, in addition to those contained in the Company's reports on file with
the SEC: (i) general economic or industry conditions could be less favorable
than expected, resulting in a deterioration in credit quality, a change in the
allowance for credit losses, or a reduced demand for credit or fee-based
products and services; (ii) changes in the domestic interest rate environment
could reduce net interest income and could increase credit losses; (iii) the
conditions of the securities markets could change, adversely affecting revenues
from capital markets businesses, the value or credit quality of the Company's
on-balance sheet and off-balance sheet assets, or the availability and terms of
funding necessary to meet the Company's liquidity needs; (iv) changes in the
extensive laws, regulations and policies governing financial services companies
could alter the Company's business environment or affect operations; (v) the
potential need to adapt to industry changes in information technology systems,
on which the Company is highly dependent, could present operational issues or
require significant capital spending; (vi) competitive pressures could intensify
and affect the Company's profitability, including as a result of continued
industry consolidation, the increased availability of financial services from
non-banks, technological developments such as the Internet, or bank regulatory
reform; and (vii) acquisitions may not produce revenue enhancements or cost
savings at levels or within time frames originally anticipated, or may result in
unforeseen integration difficulties. Forward-looking statements speak only as of
the date they are made, and the Company undertakes no obligation to update them
in light of new information or future events.
# # #
U.S. Bancorp
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars and Shares in Millions, Except Per Share Data) -------------------------------------------------------
(Unaudited) 2001 2000 2001 2000
----------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans $2,285.6 $2,710.7 $7,384.4 $7,774.6
Loans held for sale 53.9 32.7 96.4 79.9
Investment securities
Taxable 321.2 250.4 862.3 757.0
Non-taxable 15.9 34.8 74.9 107.2
Money market investments 6.3 14.5 22.6 43.1
Trading securities 11.2 12.8 41.2 39.7
Other interest income 24.3 37.7 82.4 112.0
-------------------------------------------------------
Total interest income 2,718.4 3,093.6 8,564.2 8,913.5
INTEREST EXPENSE
Deposits 670.0 954.0 2,336.7 2,643.1
Short-term borrowings 122.9 191.2 433.5 561.0
Long-term debt 276.7 403.9 957.4 1,112.1
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the junior
subordinated debentures of the parent company 39.7 31.5 102.7 89.2
-------------------------------------------------------
Total interest expense 1,109.3 1,580.6 3,830.3 4,405.4
-------------------------------------------------------
Net interest income 1,609.1 1,513.0 4,733.9 4,508.1
Provision for credit losses 1,289.3 214.0 2,263.0 598.5
-------------------------------------------------------
Net interest income after provision for credit losses 319.8 1,299.0 2,470.9 3,909.6
NONINTEREST INCOME
Credit card fee revenue 192.2 208.2 588.9 569.0
Merchant and ATM processing revenue 138.5 53.0 252.1 158.4
Trust and investment management fees 226.2 231.1 679.2 692.4
Deposit service charges 168.7 144.3 491.9 405.7
Cash management fees 89.7 74.7 251.4 220.6
Mortgage banking revenue 60.3 44.7 165.5 135.5
Trading account profits and commissions 43.6 50.9 171.3 196.0
Investment products fees and commissions 108.0 107.8 347.9 357.7
Investment banking revenue 56.9 100.6 188.2 267.5
Commercial product revenue 96.2 86.0 266.1 219.2
Securities gains, net 59.8 1.1 307.1 1.1
Merger and restructuring-related gains -- -- 62.2 --
Other 68.2 131.2 264.0 395.2
-------------------------------------------------------
Total noninterest income 1,308.3 1,233.6 4,035.8 3,618.3
NONINTEREST EXPENSE
Salaries 580.3 602.4 1,741.3 1,833.4
Employee benefits 85.4 89.4 284.2 301.6
Net occupancy 102.5 99.8 314.0 292.7
Furniture and equipment 74.9 79.6 226.7 232.0
Communication 49.4 35.7 138.4 103.1
Postage 44.7 43.1 135.4 130.3
Goodwill 64.9 60.4 196.6 178.6
Other intangible assets 82.2 37.3 177.5 111.7
Merger and restructuring-related charges 148.8 117.7 805.8 264.6
Other 334.4 286.0 940.8 837.1
-------------------------------------------------------
Total noninterest expense 1,567.5 1,451.4 4,960.7 4,285.1
-------------------------------------------------------
Income before income taxes 60.6 1,081.2 1,546.0 3,242.8
Applicable income taxes 21.9 370.9 534.9 1,135.9
-------------------------------------------------------
Net income $38.7 $710.3 $1,011.1 $2,106.9
=======================================================
EARNINGS PER COMMON SHARE
Average common shares 1,952.7 1,895.6 1,919.9 1,909.5
Earnings per share $.02 $.37 $.53 $1.10
=======================================================
Average diluted common shares 1,965.4 1,907.1 1,932.9 1,922.1
Diluted earnings per share $.02 $.37 $.52 $1.10
=======================================================
U.S. Bancorp
CONSOLIDATED ENDING BALANCE SHEET
September 30, December 31, September 30,
(Dollars in Millions) 2001 2000 2000
------------------------------------------------------------------------------------------------------------------------
ASSETS (Unaudited) (Unaudited)
Cash and due from banks $7,570 $8,475 $6,805
Money market investments 763 657 822
Trading account securities 746 753 693
Investment securities
Held-to-maturity 279 252 234
Available-for-sale 25,349 17,390 16,480
Loans held for sale 2,407 764 1,142
Loans
Commercial 47,259 52,817 52,370
Commercial real estate 25,535 26,443 26,320
Residential mortgages 6,279 7,753 8,924
Retail 35,494 35,352 33,669
------------------------------------------------
Total loans 114,567 122,365 121,283
Less allowance for credit losses 2,458 1,787 1,777
------------------------------------------------
Net loans 112,109 120,578 119,506
Premises and equipment 1,773 1,836 1,847
Customers' liability on acceptances 150 183 233
Goodwill and other intangible assets 7,448 5,309 4,924
Other assets 9,236 8,724 8,079
------------------------------------------------
Total assets $167,830 $164,921 $160,765
================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $27,074 $26,633 $23,984
Interest-bearing 65,874 68,177 65,674
Time deposits greater than $100,000 10,857 14,725 15,017
-----------------------------------------------
Total deposits 103,805 109,535 104,675
Short-term borrowings 12,614 11,833 12,717
Long-term debt 26,881 21,876 22,971
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the junior
subordinated debentures of the parent company 2,115 1,400 1,400
Acceptances outstanding 150 183 233
Other liabilities 5,448 4,926 4,435
-----------------------------------------------
Total liabilities 151,013 149,753 146,431
Shareholders' equity
Common stock 20 19 19
Capital surplus 4,918 4,276 4,269
Retained earnings 11,585 11,658 11,206
Treasury stock (62) (880) (1,082)
Other comprehensive income 356 95 (78)
------------------------------------------------
Total shareholders' equity 16,817 15,168 14,334
------------------------------------------------
Total liabilities and shareholders' equity $167,830 $164,921 $160,765
=======================================================================================================================