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U.S. Bancorp Reports 28 Percent Increase In Net Income For The First Quarter Of 2012

Noninterest income was $192 million (7.9 percent) lower in the first quarter of 2012 than the fourth quarter of 2011, primarily due to the impact of the fourth quarter of 2011 merchant settlement gain, partially offset by strong mortgage banking revenue. Credit and debit card revenue was $29 million (12.6 percent) lower due to the change in classification of credit card balance transfer fees and seasonally lower transaction volumes. Merchant processing services revenue declined $41 million (10.8 percent) on a linked quarter basis, principally due to seasonally lower fees and the reversal of an accrual for the termination of a revenue sharing agreement recorded in the fourth quarter of 2011. ATM processing services revenue decreased $24 million (21.6 percent) as a result of the change in classification of the surcharge revenue passed through to others. Deposit service charges were $18 million (10.5 percent) lower on a linked quarter basis, principally due to seasonally lower transaction volumes. Other income declined $245 million (54.9 percent) from the prior quarter, due to the merchant settlement and Visa gains recorded in the fourth quarter of 2011, partially offset by higher income from equity investments and investment grade bond trading.

NONINTEREST EXPENSE                             Table 7
($ in millions)                 Percent     Percent
Change Change
1Q 4Q 1Q 1Q12 vs 1Q12 vs
2012     2011     2011     4Q11     1Q11
Compensation $ 1,052 $ 1,057 $ 959 (.5 ) 9.7
Employee benefits 260 202 230 28.7 13.0
Net occupancy and equipment 220 249 249 (11.6 ) (11.6 )
Professional services 84 131 70 (35.9 ) 20.0
Marketing and business development 109 112 65 (2.7 ) 67.7
Technology and communications 201 195 185 3.1 8.6
Postage, printing and supplies 74 77 74 (3.9 ) --
Other intangibles 71 74 75 (4.1 ) (5.3 )
Other   489       599       407 (18.4 ) 20.1
Total noninterest expense $ 2,560     $ 2,696     $ 2,314 (5.0 ) 10.6

Noninterest Expense

Noninterest expense in the first quarter of 2012 totaled $2,560 million, an increase of $246 million (10.6 percent) over the first quarter of 2011, and a $136 million (5.0 percent) decrease from the fourth quarter of 2011. The increase in total noninterest expense year-over-year was primarily due to higher compensation expense, employee benefits expense, marketing and business development expense and other expense. Compensation and employee benefits expense increased over the prior year by $93 million (9.7 percent) and $30 million (13.0 percent), respectively. The increase in compensation expense was primarily the result of growth in staffing related to branch expansion, mortgage-related activities and other business initiatives, in addition to merit increases. Employee benefits expense increased due to higher pension costs and the impact of additional staffing. Professional services expense was $14 million (20.0 percent) higher year-over-year as a result of technology and mortgage servicing-related projects. Marketing and business development expense increased $44 million (67.7 percent) compared with the first quarter of 2011 due to the timing of charitable contributions and payments-related initiatives. Technology and communications expense was $16 million (8.6 percent) higher year-over-year, due to business expansion and technology projects. In addition, other expense increased $82 million (20.1 percent) driven by regulatory and insurance-related costs. These increases were partly offset by a decrease in net occupancy and equipment expense of $29 million (11.6 percent) principally reflecting the change in classification of ATM surcharge revenue passed through to others as a reduction of ATM processing services revenue.

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