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

Noninterest income was $67 million (2.8 percent) lower in the fourth quarter of 2012 than the third quarter of 2012. Corporate payment products revenue decreased $23 million (11.4 percent) due to seasonally lower volumes. Mortgage banking revenue was $43 million (8.3 percent) lower than the third quarter of 2012, principally due to lower origination and sales revenue, including the impact of an increase to the representations and warranties repurchase reserve. Other income was $41 million (21.2 percent) lower on a linked quarter basis due to the net impact of the gain on sale of a credit card portfolio and the charge related to an investment under the equity method of accounting, both of which were recorded in the third quarter of 2012. These negative variances were offset by a $29 million (13.6 percent) increase in credit and debit card revenue over the prior quarter, principally due to seasonally higher credit card sales and prepaid card fees. Merchant processing services revenue was $9 million (2.6 percent) higher than the third quarter of 2012, reflecting higher seasonal product fees, partially offset by a reduction in net interchange revenue on slightly lower volume. Trust and investment management fees were $11 million (4.2 percent) higher on a linked quarter basis due to seasonally higher fee income and business expansion.

NONINTEREST EXPENSE                               Table 7
($ in millions)         Percent   Percent      
Change Change
4Q 3Q 4Q 4Q12 vs 4Q12 vs Full Year Full Year Percent
2012   2012   2011   3Q12   4Q11   2012   2011   Change
Compensation $1,083 $1,109 $1,057 (2.3 ) 2.5 $4,320 $4,041 6.9
Employee benefits 231 225 202 2.7 14.4 945 845 11.8
Net occupancy and equipment 234 233 249 .4 (6.0 ) 917 999 (8.2 )
Professional services 166 144 131 15.3 26.7 530 383 38.4
Marketing and business development 103 96 112 7.3 (8.0 ) 388 369 5.1
Technology and communications 214 205 195 4.4 9.7 821 758 8.3
Postage, printing and supplies 78 75 77 4.0 1.3 304 303 .3
Other intangibles 66 67 74 (1.5 ) (10.8 ) 274 299 (8.4 )
Other 511   455   599 12.3 (14.7 ) 1,957   1,914 2.2
Total noninterest expense $2,686   $2,609   $2,696 3.0 (.4 ) $10,456   $9,911 5.5

Noninterest Expense

Noninterest expense in the fourth quarter of 2012 totaled $2,686 million, a decrease of $10 million (.4 percent) from the fourth quarter of 2011, and a $77 million (3.0 percent) increase over the third quarter of 2012. The decrease in total noninterest expense year-over-year was primarily due to a reduction in other expense, partially offset by higher compensation, employee benefits and professional services expense. Other expense decreased by $88 million (14.7 percent) as the $130 million mortgage servicing-related expense accrual recorded in the fourth quarter of 2011, as well as year-over-year declines in FDIC insurance expense and other real estate owned costs, were partially offset by the current quarter’s $80 million accrual for a mortgage foreclosure-related regulatory settlement. Net occupancy and equipment expense decreased $15 million (6.0 percent), principally reflecting the change in classification in the first quarter of 2012 of ATM surcharge revenue passed through to others. In addition, marketing and business development expense was $9 million (8.0 percent) lower than last year, reflecting the timing of charitable contributions, and other intangibles expense decreased $8 million (10.8 percent) due to the reduction or completion of the amortization of certain intangibles. These reductions were partially offset by higher compensation and employee benefits expense of $26 million (2.5 percent) and $29 million (14.4 percent), respectively. The increase in compensation expense was primarily the result of growth in staffing for business initiatives and mortgage servicing-related activities, in addition to higher commissions and merit increases. Employee benefits expense increased principally due to higher pension and medical insurance costs and staffing levels. Professional services expense was $35 million (26.7 percent) higher year-over-year, principally due to mortgage servicing review-related projects. Technology and communications expense was $19 million (9.7 percent) higher year-over-year as a result of business expansion and technology projects.

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