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U.S. Bancorp Reports Fourth Quarter And Full Year 2012 Earnings

Stocks in this article: USB

U.S. Bancorp (NYSE: USB) today reported net income of $1,420 million for the fourth quarter of 2012, or $.72 per diluted common share, and $5,647 million of net income, or $2.84 per diluted common share, for full year 2012. Included in the fourth quarter of 2012 results was a previously disclosed $80 million expense accrual for a mortgage foreclosure-related regulatory settlement, which reduced quarterly diluted earnings per common share by $.03.

Summary highlights for the full year of 2012 included:

  • Record full year 2012 net income of $5.6 billion, 15.9 percent higher than 2011
    • Record full year diluted earnings per common share of $2.84, 15.4 percent higher than 2011
    • Record full year total net revenue of $20.3 billion, 6.2 percent higher than 2011
    • Industry-leading performance measures, including return on average assets of 1.65 percent, return on average common equity of 16.2 percent and efficiency ratio of 51.5 percent
    • Positive full year operating leverage

Highlights for the fourth quarter of 2012 included:

  • Strong new lending activity of $71.5 billion during the fourth quarter, including:
    • $39.8 billion of new and renewed commercial and commercial real estate commitments
    • $2.6 billion of lines related to new credit card accounts
    • $29.1 billion of mortgage and other retail loan originations
  • Growth in average total loans of 6.4 percent over the fourth quarter of 2011 (8.6 percent excluding covered loans) and 1.5 percent on a linked quarter basis (6.0 percent annualized)
    • Growth in average total commercial loans of 15.7 percent over the fourth quarter of 2011 and 2.8 percent over the third quarter of 2012
    • Growth in average commercial and commercial real estate commitments of 15.6 percent year-over-year and 2.5 percent over the prior quarter
  • Significant growth in average deposits of 9.2 percent over the fourth quarter of 2011, including:
    • Growth in average noninterest-bearing deposits of 14.2 percent year-over-year and 6.6 percent over the third quarter
    • Growth in average total savings deposits of 6.6 percent year-over-year and 3.7 percent over the third quarter
  • Net interest income growth of 4.1 percent over the fourth quarter of 2011
    • Average earning assets growth of 5.8 percent year-over-year and 1.1 percent on a linked quarter basis
    • Continued strong growth in lower cost core deposit funding on a year-over-year and linked quarter basis
    • Net interest margin of 3.55 percent for the fourth quarter of 2012, compared with 3.60 percent for the fourth quarter of 2011, and 3.59 percent for the third quarter of 2012
  • Positive operating leverage and an improved efficiency ratio on a year-over-year basis
  • Net charge-offs declined on both a linked quarter and year-over-year basis. Provision for credit losses was $25 million less than net charge-offs
    • Net charge-offs were $70 million lower than the third quarter of 2012; third quarter of 2012 included $54 million of incremental charge-offs due to a regulatory clarification
    • Annualized net charge-offs to average total loans ratio declined to .85 percent
    • Excluding covered loans, allowance to period-end loans was 2.15 percent at year end
  • Nonperforming assets declined on both a linked quarter and year-over-year basis
    • Nonperforming assets (excluding covered assets) decreased 4.6 percent from the third quarter of 2012 (5.8 percent including covered assets)
    • Allowance to nonperforming assets (excluding covered assets) was 218 percent at year end, compared with 213 percent at September 30, 2012, and 191 percent at December 31, 2011
  • Capital generation continues to reinforce capital position; ratios at December 31, 2012 were:
    • Tier 1 capital ratio of 10.8 percent
    • Total risk based capital ratio of 13.1 percent
    • Tier 1 common equity to risk-weighted assets ratio of 9.0 percent
    • Tier 1 common equity ratio of approximately 8.1 percent using proposed rules for the Basel III standardized approach released June 2012
                                 
EARNINGS SUMMARY                               Table 1
($ in millions, except per-share data)         Percent   Percent      
Change Change
4Q 3Q 4Q 4Q12 vs 4Q12 vs Full Year Full Year Percent
2012   2012   2011   3Q12   4Q11   2012   2011   Change
 
Net income attributable to U.S. Bancorp $1,420 $1,474 $1,350 (3.7 ) 5.2 $5,647 $4,872 15.9
Diluted earnings per common share $.72 $.74 $.69 (2.7 ) 4.3 $2.84 $2.46 15.4
 
Return on average assets (%) 1.62 1.70 1.62 1.65 1.53
Return on average common equity (%) 15.6 16.5 16.8 16.2 15.8
Net interest margin (%) 3.55 3.59 3.60 3.58 3.65
Efficiency ratio (%) 52.6 50.4 52.7 51.5 51.8
Tangible efficiency ratio (%) (a) 51.3 49.1 51.3 50.2 50.2
 
Dividends declared per common share $.195 $.195 $.125 -- 56.0 $.780 $.500 56.0
Book value per common share (period-end) $18.31 $18.03 $16.43 1.6 11.4
 

(a) Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income     excluding net securities gains (losses) and intangible amortization.

 

Net income attributable to U.S. Bancorp was $1,420 million for the fourth quarter of 2012, 5.2 percent higher than the $1,350 million for the fourth quarter of 2011, but 3.7 percent lower than the $1,474 million for the third quarter of 2012. Diluted earnings per common share of $.72 in the fourth quarter of 2012 were $.03 higher than the fourth quarter of 2011 and $.02 lower than the previous quarter. Return on average assets and return on average common equity were 1.62 percent and 15.6 percent, respectively, for the fourth quarter of 2012, compared with 1.62 percent and 16.8 percent, respectively, for the fourth quarter of 2011. During the fourth quarter of 2012, the Company recorded an $80 million expense accrual for a mortgage foreclosure-related regulatory settlement, which reduced diluted earnings per common share by $.03. Earnings in the fourth quarter of 2011 included a $263 million merchant settlement gain, partially offset by a $130 million accrual related to mortgage servicing matters, which together increased diluted earnings per common share for the fourth quarter of 2011 by $.05. The provision for credit losses was $25 million lower than net charge-offs in the fourth quarter of 2012, $50 million lower than net charge-offs in the third quarter of 2012 and $125 million lower than net charge-offs in the fourth quarter of 2011.

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