1
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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): July 17, 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 July 17, 2001
3
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
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Name: Terrance R. Dolan
Title: Senior Vice President
Date: July 17, 2001
4
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 2ND QUARTER 2001
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EARNINGS SUMMARY TABLE 1
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($ in millions, except per-share data)
PERCENT PERCENT
CHANGE CHANGE
2Q 1Q 2Q 2Q01 VS 2Q01 VS YTD YTD PERCENT
2001 2001 2000 1Q01 2Q00 2001 2000 CHANGE
-----------------------------------------------------------------------
Before merger and restructuring-
related items*:
Operating earnings $818.6 $797.3 $764.1 2.7 7.1 $1,615.9 $1,493.9 8.2
Earnings per common share 0.43 0.42 0.40 2.4 7.5 0.84 0.77 9.1
(diluted)
Cash earnings per common share 0.49 0.48 0.45 2.1 8.9 0.96 0.87 10.3
(diluted)**
Net income 562.3 410.1 709.8 37.1 (20.8) 972.4 1,396.6 (30.4)
Earnings per common share (diluted) 0.29 0.21 0.37 38.1 (21.6) 0.51 0.72 (29.2)
Cash earnings per common share 0.35 0.27 0.42 29.6 (16.7) 0.63 0.82 (23.2)
(diluted)**
Dividends paid per common share 0.1875 0.1875 0.1625 -- 15.4 0.375 0.325 15.4
Book value per common share 8.10 8.00 7.42 1.3 9.2
(period-end)
Return on average common equity***(%) 21.0 20.9 21.6 21.0 21.2
Return on average assets*** (%) 1.99 1.98 1.95 1.99 1.93
Net interest margin (%) 4.37 4.41 4.37 4.39 4.41
Efficiency ratio*** (%) 47.6 50.5 48.7 49.1 49.5
Banking efficiency ratio****(%) 41.7 45.7 44.1 43.6 44.7
* merger and restructuring-related items (net of taxes) totaled $256.3
million in 2Q01, $387.2 million in 1Q01 and $54.3 million in 2Q00 merger
and restructuring-related items (net of taxes) totaled $643.5 million
year-to-date 2001 and $97.3 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, July 17, 2001 - U.S. Bancorp (NYSE: USB) today reported operating
earnings of $818.6 million for the second quarter of 2001, compared with $764.1
million for the second quarter of 2000. Operating earnings of $.43 per diluted
share in the second quarter of 2001 were $.03, or 7.5 percent, higher than the
same period of 2000. Operating earnings on a cash basis increased to $.49 per
diluted share in the second quarter of 2001 from $.45 in the second quarter of
2000. Return on average common equity and return on average assets, excluding
merger and restructuring-related items, were 21.0 percent and 1.99 percent,
respectively, in the second quarter of 2001, compared with returns of 21.6
percent and 1.95 percent in the second quarter of 2000.
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U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 2
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. The
Company's operating earnings of $.43 per diluted share represent a 16.2 percent
increase over Firstar's second quarter of 2000 operating earnings, as originally
reported, of $.37 per diluted share.
Including after-tax merger and restructuring-related items of $256.3
million in the second quarter of 2001 and $54.3 million in the second quarter of
2000, the Company recorded net income for the second quarter of 2001 of $562.3
million, or $.29 per diluted share, compared with $709.8 million, or $.37 per
diluted share, for the same period of 2000.
U.S. Bancorp President and Chief Executive Officer Jerry A. Grundhofer
said, "I am very pleased with our second quarter operating results. The results
demonstrate that the earnings momentum is building at the new U.S. Bancorp, as
core banking revenue grew by 13.2 percent, on an annualized basis, over the
first quarter of 2001. Our ability to produce these results in a difficult
economic environment, in addition to maintaining our focus on the integration,
is a tribute to the dedication and ability of our employees. During the quarter,
we made significant progress in further aligning the business units, products
and infrastructure of the two organizations, and began the systems conversion
stage of the integration process. First mortgage origination and indirect lease
and loan origination capabilities were in place in the former U.S. Bank markets
for the entire second quarter, which contributed to our core banking revenue
growth. We also took additional actions during the quarter to reduce the risk
profile of the organization by exiting certain business lines and products.
These actions reaffirm our commitment to our customers to efficiently deliver
quality products and services in all of the markets that we serve and to provide
quality earnings growth for our shareholders."
Total revenue, before merger and restructuring-related items, on a
taxable-equivalent basis for the second quarter of 2001 grew by $120.3 million,
or 4.4 percent, over the second quarter of 2000. Core banking revenue, (revenue
excluding capital markets activities, nonrecurring income, acquisitions and
divestitures) on a taxable-equivalent basis, however, grew by approximately 6.5
percent quarter over quarter. Total noninterest expense, before merger and
restructuring-related items, increased over the second quarter of 2000 by $12.7
million, or 1.0 percent, primarily reflecting growth in the core banking
businesses and acquisitions, principally offset by the reduction in capital
markets activity and
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U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 3
cost savings from the integration of recent acquisitions. Provision for credit
losses, before merger and restructuring-related items, for the second quarter of
2001 increased by $38.7 million over the second quarter of 2000, reflecting the
increase in charge-offs quarter over quarter.
Net charge-offs in the second quarter of 2001 were $240.3 million, compared
with the first quarter of 2001 net charge-offs, excluding merger-related items,
of $387.1 million and second quarter of 2000 net charge-offs of $198.9 million.
Included in the first quarter of 2001 net charge-offs were $160.0 million of
charge-offs related to the Company's previously announced accelerated loan
workout strategy. Nonperforming assets increased from $1,090.8 million at March
31, 2001, to $1,215.1 million at June 30, 2001. The ratio of allowance for
credit losses to nonperforming loans was 156 percent at June 30, 2001, compared
with 176 percent at March 31, 2001.
On May 7, 2001, the Company announced an agreement to acquire NOVA
Corporation (NYSE: NIS) in a stock and cash transaction valued at approximately
$2.1 billion. The transaction is expected to close during the third quarter of
2001 and will be accounted for as a purchase.
On June 5, 2001, the Company announced an agreement to purchase 20 branches
in Southern California from Pacific Century Bank in a cash transaction. The
acquisition includes approximately $640 million in deposits, $570 million in
loans and 300 employees. The transaction is expected to close by the end of the
third quarter of 2001.
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U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 4
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LINE OF BUSINESS FINANCIAL PERFORMANCE* TABLE 2
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($ in millions)
PRE-TAX OPERATING PERCENT
INCOME** CHANGE
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2Q01 2Q01 2Q 2001
2Q 1Q 2Q VS VS YTD YTD PERCENT EARNINGS
BUSINESS LINE 2001 2001 2000 1Q01 2Q00 2001 2000 CHANGE COMPOSITION
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Wholesale Banking $491.1 $487.1 $459.5 0.8 6.9 $978.2 $890.1 9.9 32 %
Consumer Banking 604.8 575.2 606.9 5.1 (0.3) 1,180.0 1,162.7 1.5 40
Private Client, Trust
Services and Asset
Management 162.5 151.1 158.5 7.5 2.5 313.6 316.1 (.8) 11
Payment Services 281.4 272.6 261.5 3.2 7.6 554.0 503.2 10.1 19
Capital Markets 32.1 35.0 59.0 (8.3) (45.6) 67.1 130.2 (48.5) 2
Treasury and Corporate (63.4) 59.7 (144.5) nm nm (3.7) (265.8) nm (4)
Support
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Consolidated Company*** $1,508.5 $1,580.7 $1,400.9 (4.6) 7.7 $3,089.2 $2,736.5 12.9 100 %
============================ ==================
* preliminary data
** pre-tax income before merger and restructuring-related items and
provision for credit losses
*** securities gains equaled $31.3 million in 2Q01, $216.0 million in 1Q01 and
$.3 million in 2Q00 and were assigned to Treasury and and Corporate
Support
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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 $491.1 million of the Company's pre-tax operating
income in the second quarter of 2001, a 6.9 percent increase over the same
period of 2000 and a .8 percent increase over the first quarter of 2001. Total
revenue grew by 7.6 percent from the second quarter of 2000 to the second
quarter of 2001, the result of core loan and deposit growth, as well as the
impact of an equipment finance division acquisition, and an increase in
noninterest income (18.2 percent), particularly cash management-related fees.
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U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 5
Offsetting the favorable variance in revenue was an increase in noninterest
expense (11.2 percent), primarily due to the leasing acquisitions and planned
growth in targeted markets.
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
$604.8 million of the Company's pre-tax operating income in the second quarter
of 2001, a .3 percent decrease from the same period of 2000, but a 5.1 percent
increase from the first quarter of 2001. Total revenue grew by 3.1 percent in
the second quarter of 2001 over the same quarter of 2000. Fee-based revenue
increased 25.3 percent from a year ago, while net interest income declined 4.7
percent. The decline 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
merger. The decline was partially offset by a funding benefit of approximately
$14 million related to the acquisition of 41 branches in Tennessee. Growth in
fee-based revenue is primarily attributed to an increase in retail deposit and
cash management fees, the result of core account growth, product pricing
enhancements and approximately $6 million of fee revenue related to the
Tennessee branch acquisition. Mortgage banking revenue also contributed to the
favorable variance. Partially offsetting the increase in revenue was an increase
in noninterest expense (8.1 percent), primarily related to the growth in
mortgage banking activities 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, LLC. 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 $162.5 million of the Company's
pre-tax operating income in the second quarter of 2001, a 2.5 percent increase
over the same period of 2000 and a 7.5 percent increase from the first quarter
of 2001. Strong growth in net interest income (8.7 percent) in the second
quarter of 2001 from the second quarter of 2000, in addition to a decrease in
noninterest expense (.7 percent) was slightly offset by a decrease in
noninterest income (.7 percent).
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U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 6
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 $281.4 million of the
Company's pre-tax operating income in the second quarter of 2001, a 7.6 percent
increase over the same period of 2000 and a 3.2 percent increase from the first
quarter of 2001. Strong revenue growth of 8.2 percent, primarily due to growth
in credit card and payment processing fees, was partially offset by an increase
in noninterest expense (9.7 percent).
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
$32.1 million of the Company's pre-tax operating income in the second quarter of
2001, a 45.6 percent decline from the second quarter of 2000 and an 8.3 percent
decline from the first quarter of 2001. The unfavorable variances in pre-tax
operating income from the second quarter of 2000 and first 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 loss of $63.4
million in the second quarter of 2001, compared to a loss of $144.5 million in
the second quarter of 2000 and operating income of $59.7 million in the first
quarter of 2001.
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U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 7
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INCOME STATEMENT HIGHLIGHTS TABLE 3
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(Taxable-equivalent basis, $ in PERCENT PERCENT
millions, except per-share data) CHANGE CHANGE
2Q 1Q 2Q 2Q01 VS 2Q01 VS YTD YTD PERCENT
2001 2001 2000 1Q01 2Q00 2001 2000 CHANGE
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Net interest income $1,586.0 $1,574.1 $1,526.8 0.8 3.9 $3,160.1 $3,038.6 4.0
Noninterest income* 1,264.4 1,400.9 1,203.3 (9.7) 5.1 2,665.3 2,384.7 11.8
------------------------------ ------------------
Total revenue 2,850.4 2,975.0 2,730.1 (4.2) 4.4 5,825.4 5,423.3 7.4
Noninterest expense* 1,341.9 1,394.3 1,329.2 (3.8) 1.0 2,736.2 2,686.8 1.8
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Operating income before merger and
restructuring-related items 1,508.5 1,580.7 1,400.9 (4.6) 7.7 3,089.2 2,736.5 12.9
Provision for credit losses* 240.0 365.8 201.3 (34.4) 19.2 605.8 384.5 57.6
------------------------------ ------------------
Income before taxes, merger and
restructuring-related items 1,268.5 1,214.9 1,199.6 4.4 5.7 2,483.4 2,352.0 5.6
Taxable-equivalent adjustment 16.8 18.5 21.3 (9.2) (21.1) 35.3 43.5 (18.9)
Income taxes* 433.1 399.1 414.2 8.5 4.6 832.2 814.6 2.2
------------------------------ ------------------
Income before merger and
restructuring-related items 818.6 797.3 764.1 2.7 7.1 1,615.9 1,493.9 8.2
Merger and restructuring-related
items (after-tax) (256.3) (387.2) (54.3) nm nm (643.5) (97.3) nm
------------------------------ ------------------
Net income $562.3 $410.1 $709.8 37.1 (20.8) $972.4 $1,396.6 (30.4)
============================== ==================
Per diluted common share:
Earnings, before merger and
restructuring-related items $0.43 $0.42 $0.40 2.4 7.5 $0.84 $0.77 9.1
============================== ==================
Earnings on a cash basis, before
merger and
restructuring-related items $0.49 $0.48 $0.45 2.1 8.9 $0.96 $0.87 10.3
============================== ==================
Net income $0.29 $0.21 $0.37 38.1 (21.6) $0.51 $0.72 (29.2)
============================== ==================
Earnings on a cash basis** $0.35 $0.27 $0.42 29.6 (16.7) $0.63 $0.82 (23.2)
============================== ==================
* 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
Second quarter net interest income on a taxable-equivalent basis was
$1,586.0 million, compared with $1,526.8 million recorded in the second quarter
of 2000. Average earning assets for the period increased over the second quarter
of 2000 by $5.2 billion, or 3.7 percent, primarily driven by increases in the
investment portfolio, core commercial and retail loan growth, and the impact of
acquisitions, partially offset by a $2.1 billion decline in lower margin
residential mortgages and a $4.2 billion reduction related to transfers of low
margin, higher quality, commercial loans to Stellar
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U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 8
Funding Group, Inc. ("loan conduit"). The net interest margin was flat in the
second quarter of 2001 at 4.37 percent, compared with the second quarter of
2000. The four basis point decline in the net interest margin in the second
quarter of 2001 from the first quarter of 2001 reflects the funding benefit of
the declining rate environment, product re-pricing dynamics and loan conduit
activities, offset by the first quarter 2001 sale of the high loan-to-value home
equity and indirect automobile portfolios and lower yields on the investment
portfolio.
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AVERAGE LOANS TABLE 4
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($ in millions) PERCENT PERCENT
CHANGE CHANGE
2Q 1Q 2Q 2Q01 VS 2Q01 VS YTD YTD PERCENT
2001 2001 2000 1Q01 2Q00 2001 2000 CHANGE
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Commercial $45,632 $46,805 $45,539 (2.5) 0.2 $ 46,215 $44,297 4.3
Lease financing 5,865 5,768 4,197 1.7 39.7 5,817 4,012 45.0
------------------------------ -------------------
Total 51,497 52,573 49,736 (2.0) 3.5 52,032 48,309 7.7
commercial
Commercial mortgages 18,991 19,305 19,119 (1.6) (0.7) 19,148 18,936 1.1
Construction and development 7,360 7,151 6,826 2.9 7.8 7,256 6,729 7.8
------------------------------ -------------------
Total commercial real 26,351 26,456 25,945 (0.4) 1.6 26,404 25,665 2.9
estate
Residential 7,189 7,618 9,269 (5.6) (22.4) 7,402 10,305 (28.2)
mortgages
Credit card 5,652 5,655 4,872 (0.1) 16.0 5,653 4,808 17.6
Retail leasing 4,465 4,291 2,844 4.1 57.0 4,379 2,586 69.3
Other retail 24,315 25,176 24,342 (3.4) (0.1) 24,743 24,107 2.6
------------------------------ -------------------
Total retail 34,432 35,122 32,058 (2.0) 7.4 34,775 31,501 10.4
Total loans $119,469 $121,769 $117,008 (1.9) 2.1 $120,613 $115,780 4.2
============================== ===================
Total loans, excl.
residential mortgages $112,280 $114,151 $107,739 (1.6) 4.2 $113,211 $105,475 7.3
============================== ===================
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Average loans for the second quarter of 2001 were $2.5 billion higher, or
2.1 percent, than the second 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, recent acquisitions,
branch divestitures, and funding of short-term, high quality, commercial loans
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U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 9
through the loan conduit. In addition, the Company continued to reduce its lower
margin residential mortgage portfolio. Excluding residential mortgage loans,
average loans for the second quarter were higher by $4.5 billion, or 4.2
percent, than the second quarter of 2000, reflecting both core loan growth and
acquisitions. Core loan growth (total average loans for the second quarter,
excluding residential mortgage loans and the impact of loan sales, but including
loans funded in the loan conduit) grew by $6.7 billion, or 6.2 percent, over the
second quarter of 2000.
Excluding residential mortgage loans, average loans for the second quarter
of 2001 were lower than the first quarter of 2001 by $1.9 billion, or 1.6
percent, reflecting the March 30, 2001, $1.3 billion sale of a portfolio of high
loan-to-value home equity loans and the indirect automobile portfolio held by
the former U.S. Bancorp.
Investment securities at June 30, 2001, were $4.0 billion more than at June
30, 2000, and $4.6 billion higher than at March 31, 2001, reflecting net
purchases of securities. Average investment securities for the second quarter of
2001 were $3.7 billion higher, or 21.0 percent, than the same of quarter of
2000.
Average noninterest-bearing deposits, excluding the impact of branch
divestitures, in the second quarter of 2001 were higher than the second quarter
of 2000 by $563 million, or 2.4 percent. Average interest-bearing deposits,
excluding the impact of branch divestitures, grew by $4.0 billion, or 5.1
percent, over the second quarter of 2000, reflecting bank acquisitions, growth
in core money market deposits and increases in time deposits greater than
$100,000.
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U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 10
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NONINTEREST INCOME TABLE 5
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($ in millions) PERCENT PERCENT
CHANGE CHANGE
2Q 1Q 2Q 2Q01 VS 2Q01 VS YTD YTD PERCENT
2001 2001 2000 1Q01 2Q00 2001 2000 CHANGE
---------------------------------------------------------------------
Credit card and payment processing
revenue $ 260.6 $ 249.7 $ 247.3 4.4 5.4 $510.3 $466.2 9.5
Trust and investment management fees 228.0 225.0 230.4 1.3 (1.0) 453.0 461.3 (1.8)
Deposit service charges 176.7 146.5 138.0 20.6 28.0 323.2 261.4 23.6
Cash management fees 84.9 76.8 74.1 10.5 14.6 161.7 145.9 10.8
Mortgage banking revenue 57.0 48.2 48.1 18.3 18.5 105.2 90.8 15.9
Trading account profits and 55.8 71.9 59.8 (22.4) (6.7) 127.7 145.1 (12.0)
commissions
Investment products fees and 114.2 125.7 109.1 (9.1) 4.7 239.9 249.9 (4.0)
commissions
Investment banking revenue 71.1 60.2 72.9 18.1 (2.5) 131.3 166.9 (21.3)
Commercial product revenue 93.8 76.1 71.6 23.3 31.0 169.9 133.2 27.6
Securities gains, net 31.3 216.0 0.3 nm nm 247.3 -- nm
Other 91.0 104.8 151.7 (13.2) (40.0) 195.8 264.0 (25.8)
-------------------------- ----------------
Subtotal 1,264.4 1,400.9 1,203.3 (9.7) 5.1 2,665.3 2,384.7 11.8
Merger and restructuring-related
gains 62.2 -- -- 62.2 --
-------------------------- -----------------
Total noninterest income $1,326.6 $1,400.9 $1,203.3 $2,727.5 $2,384.7
========================== =================
--------------------------------------------------------------------------------
Noninterest Income
Second quarter noninterest income, excluding merger and
restructuring-related items, was $1,264.4 million, an increase of $61.1 million,
or 5.1 percent, from the same quarter of 2000, and a $136.5 million, or 9.7
percent, decrease from the first quarter of 2001. Excluding the impact of
securities gains, merger and restructuring-related items and the second quarter
of 2000 $35 million gain on the disposal of an office building, noninterest
income in the second quarter of 2001 was $65.1 million, or 5.6 percent, higher
than the second quarter of 2000, and $48.2 million, or 4.1 percent, higher than
the first quarter of 2001. Credit card and payment processing revenue was higher
in the second quarter of 2001 over the same period of 2000 by $13.3 million, or
5.4 percent, reflecting continued growth in corporate, merchant and retail card
product fees. Deposit service charges, commercial product revenue, cash
management fees, and mortgage banking revenue also improved in the second
quarter of 2001 over the second quarter of 2000 by $38.7 million (28.0 percent),
$22.2 million (31.0 percent), $10.8 million (14.6 percent), and $8.9 million
(18.5 percent), respectively.
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U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 11
The increase in deposit service charges was primarily due to the alignment
and redesign 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. The increase in mortgage banking revenue in the second quarter of
2001 over the second quarter of 2000 was 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.
Excluding securities gains and merger and restructuring-related items,
noninterest income increased in the second quarter of 2001 by $48.2 million, or
4.1 percent, over the first quarter of 2001. Credit card and payment processing
revenue increased by $10.9 million (4.4 percent), reflecting seasonal spending
patterns. Mortgage banking revenue increased by $8.8 million, the result of
higher mortgage loan origination and sales fees and loan servicing revenue.
15
U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 12
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NONINTEREST EXPENSE TABLE 6
---------------------------------------------------------------------------------------------------------------
($ in millions) PERCENT PERCENT
CHANGE CHANGE
2Q 1Q 2Q 2Q01 VS 2Q01 VS YTD YTD PERCENT
2001 2001 2000 1Q01 2Q00 2001 2000 CHANGE
----------------------------------------------------------------------
Salaries $ 570.5 $590.5 $601.4 (3.4) (5.1) $1,161.0 $1,231.0 (5.7)
Employee benefits 90.7 108.1 100.3 (16.1) (9.6) 198.8 212.2 (6.3)
Net occupancy 101.4 110.1 95.7 (7.9) 6.0 211.5 192.9 9.6
Furniture and equipment 74.9 76.9 75.7 (2.6) (1.1) 151.8 152.4 (0.4)
Postage 43.8 46.9 42.6 (6.6) 2.8 90.7 87.2 4.0
Goodwill 61.2 70.5 59.8 (13.2) 2.3 131.7 118.2 11.4
Other intangible assets 51.4 43.9 37.0 17.1 38.9 95.3 74.4 28.1
Other 348.0 347.4 316.7 0.2 9.9 695.4 618.5 12.4
-------------------------- ------------------
Subtotal 1,341.9 1,394.3 1,329.2 (3.8) 1.0 2,736.2 2,686.8 1.8
Merger and restructuring-related 252.8 404.2 81.9 657.0 146.9
charges
-------------------------- ------------------
Total noninterest expense $1,594.7 $1,798.5 $1,411.1 $3,393.2 $2,833.7
========================== ==================
--------------------------------------------------------------------------------
Noninterest Expense
Second quarter noninterest expense, before merger and restructuring-related
charges, totaled $1,341.9 million, an increase of $12.7 million, or 1.0 percent,
from the second quarter of 2000. The increase in noninterest expense was
primarily the result of approximately $26 million related to recent
acquisitions, including Scripps Financial, Lyon Financial and 41 branches in
Tennessee, partially offset by cost savings related to merger integration and
restructuring activities.
Second quarter of 2001 noninterest expense, before merger and
restructuring-related charges, was lower than the first quarter of 2001 by $52.4
million, or 3.8 percent, primarily due to $44.2 million of unusual or
nonrecurring expense items recorded in the first quarter of 2001. Excluding
unusual or nonrecurring expense items, before merger and restructuring-related
charges, noninterest expense in the second quarter of 2001 would have been
essentially flat to the first quarter of 2001.
16
U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 13
---------------------------------------------------------------------------------------------------
SIGNIFICANT ITEMS - MERGER AND RESTRUCTURING TABLE 7
---------------------------------------------------------------------------------------------------
($ in millions) REVISED
ESTIMATED TIMING
CURRENT --------------------- ACTUAL ACTUAL
SUMMARY OF ITEMS ESTIMATE 2001 2002 1Q 2001 2Q2001
-----------------------------------------------------------------------------------------------
Firstar/U.S. Bancorp
Severance and employee-related
costs $225.9 $218.4 $7.5 $123.6 $98.1
Building and equipment 105.3 46.6 58.7 23.6 7.7
Investment banking and
transaction costs 61.6 61.6 -- 60.6 1.0
Charitable foundation 76.0 76.0 76.0
-- --
Restructurings
Credit - portfolio sales 277.9 277.9 -- 76.6 201.3
Credit - policy/practice
alignment 90.0 90.0 -- 90.0 --
Other 120.4 120.4 -- 15.0 45.4
------------------------------------------------------
Total restructurings 488.3 488.3 -- 181.6 246.7
Branch sale (62.2) (62.2) -- -- (62.2)
Other, net 138.2 102.6 35.6 38.5 28.0
------------------------------------------------------
Subtotal 1,033.1 931.3 101.8 503.9 319.3
Conversion and integration 367.4 227.7 139.7 19.2 53.0
------------------------------------------------------
Total Firstar/U.S. Bancorp* 1,400.5 1,159.0 241.5 523.1 372.3
U.S. Bancorp Piper Jaffray
restructuring 28.9 28.9 -- 22.6 5.4
Other acquisitions, net 85.5 81.4 4.1 25.1 14.2
------------------------------------------------------
Total merger and
restructuring $1,514.9 $1,269.3 $245.6 $570.8 $391.9
======================================================
* orignally estimated to be $800 million - see Table 8 for changes
--------------------------------------------------------------------------------
Earnings in the second quarter of 2001 included pre-tax net merger and
restructuring-related items of $391.9 million. The total merger and
restructuring-related items included $372.3 million of net expense associated
with the Firstar/U.S. Bancorp merger. In addition, $19.6 million of expense was
included in the second quarter of 2001 for the U.S. Bancorp Piper Jaffray
restructuring and other recent, smaller acquisitions.
The $372.3 million of net merger and restructuring-related items
associated with the U.S. Bancorp/Firstar merger included $201.3 million of
provision for credit losses, $98.1 million of severance and employee-related
costs, $7.7 million of building and equipment costs, $45.4 million of other
restructuring expense, $53.0 million of conversion and integration costs, and
$29.0 million of miscellaneous other expense, partially offset by a $62.2
million gain from branch divestitures. The $201.3 million of provision for
credit losses included in the merger and restructuring-related items during the
second quarter of 2001 was associated with the Company's integration of certain
small
17
U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 14
business credit products and management's decision to discontinue an
unsecured small business product of the former U.S. Bancorp. The Company plans
to sell the related portfolio by the fourth quarter of 2001 and, as such, has
transferred product balances of approximately $680 million to loans held for
sale.
-----------------------------------------------------------------------------------------------------
FIRSTAR/U.S. BANCORP MERGER AND RESTRUCTURING ITEMS TABLE 8
-----------------------------------------------------------------------------------------------------
($ in millions) INCREASE/(DECREASE)
-------------------
6/30/01 6/30/01
ESTIMATED CHARGES VS VS
6/30/01 3/31/01 ORIGINAL 3/31/01 ORIGINAL
-------------------------------------------------
Category
Severance and employee-related costs $225.9 $187.4 $208.0 $38.5 $17.9
Building and equipment 105.3 103.5 108.0 1.8 (2.7)
Investment banking and transaction costs 61.6 58.5 60.0 3.1 1.6
Charitable foundation 76.0 76.0 76.0 -- --
Restructurings* 488.3 178.1 -- 310.2 488.3
Branch sale (62.2) (64.0) (60.0) 1.8 (2.2)
Other, net 138.2 103.8 64.0 34.4 74.2
-------------------------------------------------
Subtotal 1,033.1 643.3 456.0 389.8 577.1
Conversion and integration 367.4 326.7 344.0 40.7 23.4
-------------------------------------------------
Total Firstar/U.S. Bancorp $1,400.5 $970.0 $800.0 $430.5 $600.5
=================================================
----------------------------------------------------------------------------------------------
ESTIMATE
*DETAIL OF RESTRUCTURING CHARGES 6/30/01 TIMING OF CHARGE
------------------------------------------
Unsecured small business credit line $201.3 2Q2001
portfolio
Credit policy and risk management practice 90.0 1Q2001
alignment
Sale of high LTV home equity and indirect 76.6 1Q2001
auto portfolios
Exit U.S. Bancorp Libra1 45.4 2Q2001
Branch consolidation 20.0 3Q2001
Exit other business lines and/or portfolios 55.0 $15M in 1Q2001/$40M in 3Q2001
---------
Total restructurings $488.3
=========
(1) an additional $36.6 million of expense related to the discontinuation of
U.S. Bancorp Libra is included in severance and employee-related and
other, net charges above
--------------------------------------------------------------------------------
Total merger and restructuring-related charges associated with the
Firstar/U.S. Bancorp merger are expected to reach $1,400.5 million, exceeding
the original estimate of $800 million by $600.5 million. The majority of the
increase is due to risk management policy conformance, the restructuring of the
credit portfolio and discontinuing products or exiting businesses that do not
correspond with the
18
U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 15
newly combined Company's strategic direction. These actions were not anticipated
at the time the merger was announced. The actions are expected, however, to
reduce the overall risk profile of the Company, as well as lead to higher cost
savings than originally anticipated.
Included in the total merger and restructuring-related charges is $82
million associated with the closing of U.S. Bancorp Libra, a business unit that
specializes in underwriting and trading high yield debt and mezzanine
securities. The charge includes the cost of contractual obligations, liquidation
of inventory and investments, severance and other miscellaneous items. The
former U.S. Bancorp acquired Libra Investments, Inc. in January of 1999.
19
U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 16
-----------------------------------------------------------------------------------------------
ALLOWANCE FOR CREDIT LOSSES TABLE 9
-----------------------------------------------------------------------------------------------
($ in millions) 1Q2001
2Q ---------------------- 4Q 3Q 2Q
2001 "NORMALIZED*" ACTUAL 2000 2000 2000
--------------------------------------------------------------
Balance, beginning of period $1,729.1 $1,786.9 $1,786.9 $1,776.6 $1,757.0 $1,726.1
Net charge-offs
Commercial 75.5 53.9 270.3 69.0 68.9 68.5
Lease financing 9.1 6.4 19.6 7.2 4.8 5.6
--------------------------------------------------------------
Total
commercial 84.6 60.3 289.9 76.2 73.7 74.1
Commercial mortgages (0.2) 3.1 28.5 6.8 0.7 (2.7)
Construction and
development 2.5 0.8 0.8 3.9 5.8 (1.6)
--------------------------------------------------------------
Total commercial
real estate 2.3 3.9 29.3 10.7 6.5 (4.3)
Residential mortgages 3.3 3.2 3.2 3.0 2.3 2.3
Credit card 68.5 57.8 57.8 54.4 52.4 52.8
Retail leasing 7.0 6.2 6.2 4.6 3.7 2.6
Other retail 74.6 95.7 90.7 80.6 75.3 71.4
--------------------------------------------------------------
Total retail 150.1 159.7 154.7 139.6 131.4 126.8
--------------------------------------------------------------
Total net
charge-offs 240.3 227.1 477.1 229.5 213.9 198.9
Provision for credit losses
Operating basis 240.0 282.4 365.8 229.5 214.0 201.3
Merger-related 201.3 -- 166.6 -- -- --
--------------------------------------------------------------
Total provision
for credit losses 441.3 282.4 532.4 229.5 214.0 201.3
Losses from loan
sales/transfers (214.4) (113.6) (113.6) -- -- --
Acquisitions and other
changes -- 0.5 0.5 10.3 19.5 28.5
--------------------------------------------------------------
Balance, end of period $1,715.7 $1,729.1 $1,729.1 $1,786.9 $1,776.6 $1,757.0
==============================================================
Net charge-offs to average
loans (%) 0.81 0.76 1.59 0.75 0.71 0.68
Allowance for credit losses
to period-end loans (%) 1.45 1.45 1.45 1.46 1.46 1.48
* categories adjusted for merger-related ($90.0 million) and portfolio
restructuring-related ($160.0 million) net-charge-offs
--------------------------------------------------------------------------------
Credit Quality
The allowance for credit losses was $1,715.7 million at June 30, 2001,
compared with the allowance for credit losses of $1,729.1 million at March 31,
2001. The decrease was due to the transfer of the unsecured small business line
of credit portfolio to loans held for sale. The ratio of allowance for credit
losses to nonperforming loans was 156 percent at June 30, 2001, down from the
20
U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 17
ratio of 176 percent at March 31, 2001. The ratio of allowance for credit losses
to period-end loans was 1.45 percent at June 30, 2001, equal to the ratio at
March 31, 2001.
Total net charge-offs in the second quarter of 2001 were $240.3 million,
compared with the first quarter of 2001 net charge-offs, before merger-related
items, of $387.1 million and the second quarter of 2000 net charge-offs of
$198.9 million. Total net charge-offs in the first quarter of 2001, before
merger-related items, included $160.0 million of charge-offs related to the
Company's accelerated loan workout strategy. Retail loan net charge-offs of
$150.1 million in the second quarter of 2001 were higher than the same period of
2000 by $23.3 million, or 18.4 percent, but $4.6 million, or 3.0 percent, less
than the first quarter of 2001. The reduction in retail loan net charge-offs in
the second quarter of 2001 from the first quarter of 2001 was primarily due to
the impact of the sale of the high loan-to-value home equity and indirect
automobile portfolios at the end of the first quarter of 2000, partially offset
by seasonal factors and higher bankruptcies. Retail loan net charge-offs as a
percent of average loans outstanding were 1.75 percent in the second quarter of
2001, compared with 1.79 percent and 1.59 percent in the first quarter of 2001
and second quarter of 2000, respectively.
Commercial and commercial real estate loan net charge-offs were $86.9
million for the second quarter of 2001, or .45 percent of average loans
outstanding, compared with $319.2 million, or 1.64 percent, in the first quarter
of 2001 and $69.8 million, or .37 percent, of average loans outstanding, in the
second quarter of 2000. Commercial and commercial real estate loan net
charge-offs in the first quarter of 2001 included $255.0 million in merger and
restructuring-related charge-offs and charge-offs associated with the Company's
accelerated loan workout strategy. Excluding net charge-offs associated with the
merger and accelerated workout strategy, commercial and commercial real estate
loan net charge-offs in the first quarter of 2001 were .33 percent of average
loans outstanding. The Company expects total net charge-offs in the third and
fourth quarters of 2001 to increase modestly from the net charge-offs reported
in the second quarter of 2001.
21
U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 18
--------------------------------------------------------------------------------
CREDIT RATIOS TABLE 10
--------------------------------------------------------------------------------
JUN 30 MAR 31 DEC 31 SEP 30 JUN 30
2001 2001 2000 2000 2000
-------------------------------------------
Net charge-offs ratios*
Commercial 0.66 2.34 0.59 0.59 0.60
Lease financing 0.62 1.38 0.51 0.43 0.54
Total commercial 0.66 2.24 0.58 0.57 0.60
Commercial real estate 0.04 0.45 0.16 0.10 (0.07)
Residential mortgage 0.18 0.17 0.14 0.10 0.10
Credit cards 4.86 4.15 4.15 4.16 4.36
Retail leasing 0.63 0.59 0.46 0.43 0.37
Other retail 1.23 1.46 1.27 1.22 1.18
Total retail 1.75 1.79 1.62 1.58 1.59
Total net charge-offs 0.81 1.59 0.75 0.71 0.68
Delinquent loan ratios**
Commercial past due 90+ days 1.41 1.22 0.95 0.84 0.78
Consumer past due 90+ days 1.00 1.01 0.92 0.79 0.74
* annualized and calculated on average loan balances
** ratios include nonperforming loans and are expressed as a percent of
ending loan balances
--------------------------------------------------------------------------------
22
U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 19
--------------------------------------------------------------------------------
ASSET QUALITY TABLE 11
--------------------------------------------------------------------------------
($ in millions)
JUN 30 MAR 31 DEC 31 SEP 30 JUN 30
2001 2001 2000 2000 2000
-------------------------------------------
Nonperforming loans
Commercial $724.1 $631.9 $470.4 $383.8 $325.3
Lease financing 126.4 103.8 70.5 57.5 53.5
-------------------------------------------
Total commercial 850.5 735.7 540.9 441.3 378.8
Commercial mortgages 114.4 98.5 105.5 107.6 103.4
Construction and development 37.3 57.8 38.2 34.8 24.1
-------------------------------------------
Commercial real estate 151.7 156.3 143.7 142.4 127.5
Residential mortgages 67.7 64.8 56.9 60.7 63.5
Retail 30.0 25.1 23.8 22.0 26.3
-------------------------------------------
Total nonperforming loans 1,099.9 981.9 765.3 666.4 596.1
Other real estate 52.7 55.0 61.1 42.6 42.0
Other nonperforming assets 62.5 53.9 40.6 30.4 30.1
-------------------------------------------
Total nonperforming assets* $1,215.1 $1,090.8 $867.0 $739.4 $668.2
===========================================
Accruing loans 90 days past due $395.9 $390.7 $385.2 $329.1 $319.7
===========================================
Allowance to nonperforming
loans (%) 156 176 233 267 295
Allowance to nonperforming
assets (%) 141 159 206 240 263
Nonperforming assets to loans
plus ORE (%) 1.02 0.91 0.71 0.61 0.56
* does not include accruing loans 90 days past due
--------------------------------------------------------------------------------
Nonperforming assets at June 30, 2001, totaled $1,215.1 million,
compared with $1,090.8 million at March 31, 2000, and $668.2 million at June 30,
2000. The $124.3 million increase in nonperforming assets from March 31, 2001,
to June 30, 2001, was primarily due to continuing stress in sectors of the
economy, particularly in manufacturing, automobile and transportation, partially
offset by the disposition of nonperforming assets identified as part of the
Company's accelerated workout program in the first quarter of 2001. The ratio of
nonperforming assets to loans and other real estate was 1.02 percent at June 30,
2001, compared with .91 percent at March 31, 2001, and .56 percent at June 30,
2000.
23
U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 20
--------------------------------------------------------------------------------
CAPITAL POSITION TABLE 12
--------------------------------------------------------------------------------
($ in millions) JUN 30 MAR 31 DEC 31 SEP 30 JUN 30
2001 2001 2000 2000 2000
-------------------------------------------
Total shareholders' equity $15,456 $15,243 $15,168 $14,334 $14,137
Tier 1 capital 12,848 11,831 11,602 11,179 11,125
Total risk-based capital 18,054 17,135 17,038 16,740 16,718
Common equity to assets 9.4% 9.5% 9.2% 8.9% 8.8%
Tangible common equity to assets 6.6 6.6 6.3 6.3 6.3
Tier 1 capital ratio 8.0 7.4 7.2 7.1 7.2
Total risk-based capital ratio 11.2 10.7 10.6 10.6 10.8
Leverage ratio 8.0 7.5 7.4 7.2 7.2
--------------------------------------------------------------------------------
Total shareholder's equity was $15.5 billion at June 30, 2001, compared
to $14.1 billion reported at June 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 second and third quarters
of 2000.
Tangible common equity to assets was 6.6 percent at June 30, 2001,
compared with 6.6 percent at March 31, 2001, and 6.3 percent at June 30, 2000.
The Tier 1 capital ratio was 8.0 percent at June 30, 2001, compared with 7.4
percent at March 31, 2001, and 7.2 percent at June 30, 2000. The increase
primarily reflects the issuance of $700 million of "trust preferred" securities
during the second quarter of 2001. The total risk-based capital ratio was 11.2
percent at June 30, 2001, compared with 10.7 percent at March 31, 2001, and 10.8
percent at June 30, 2000. The improvement in the total risk-based capital ratio
during the second quarter of 2001 primarily reflects changes in the mix of
investment securities in addition to the issuance of "trust preferred"
securities. The leverage ratio was 8.0 percent at June 30, 2001, compared with
7.5 percent at March 31, 2001, and 7.2 percent at June 30, 2000. All regulatory
ratios continue to be in excess of stated "well capitalized" requirements.
24
U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 21
---------------------------------------------------------------------------------------
COMMON SHARES TABLE 13
---------------------------------------------------------------------------------------
(Millions) 2Q 1Q 4Q 3Q 2Q
2001 2001 2000 2000 2000
-------------------------------------------
Beginning shares outstanding 1,905.3 1,902.1 1,890.3 1,905.5 1,917.5
Shares issued for stock option and
stock purchase plans, acquisitions
and other corporate purposes 2.3 3.2 11.8 1.9 8.2
Shares repurchased -- -- -- (17.1) (20.2)
-------------------------------------------
Ending shares outstanding 1,907.6 1,905.3 1,902.1 1,890.3 1,905.5
-------------------------------------------
--------------------------------------------------------------------------------
The stock repurchase programs of Firstar and the former U.S. Bancorp
were rescinded on October 4, 2000, and January 17, 2001, respectively, in
connection with the planned merger of the two companies.
Minneapolis-based U.S. Bancorp ("USB"), with $165 billion in assets, is the 8th
largest financial services holding company in the United States. The company
operates 2,242 banking offices and 5,208 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 Banks and U.S. Bank. Visit U.S. Bancorp on the web at
www.usbank.com and Firstar Bank at www.firstar.com.
A RECORDED REVIEW OF THE FINANCIAL RESULTS BY VICE CHAIRMAN AND CHIEF FINANCIAL
OFFICER DAVID M. MOFFETT WILL BE AVAILABLE BY TELEPHONE OR ON THE INTERNET. The
recorded message will be available at approximately 11:00 A.M. (CDT) on Tuesday,
July 17, 2001 through 12:00 midnight (CDT) on Monday, July 23, 2001. To access
the recorded message dial 800-642-1687 and enter ID number 1295517. If calling
from outside the United States, please dial 706-645-9291 and enter the ID
number.
25
U.S. Bancorp Reports Second Quarter 2001 Results
July 17, 2001
Page 22
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.
###
26
U.S. Bancorp
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended Six Months Ended
-----------------------------------------------------------
(Dollars and Shares in Millions, Except June 30, June 30, June 30, June 30,
Per Share Data)(Unaudited) 2001 2000 2001 2000
----------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans $2,437.9 $2,591.8 $5,098.8 $5,063.9
Loans held for sale 25.9 35.2 42.5 47.2
Investment securities
Taxable 287.8 255.6 541.1 506.6
Non-taxable 27.8 33.5 59.0 72.4
Money market investments 7.4 15.0 16.3 28.6
Trading securities 14.1 12.6 30.0 26.9
Other interest income 26.1 37.0 58.1 74.3
----------------------------------------------------------
Total interest income 2,827.0 2,980.7 5,845.8 5,819.9
INTEREST EXPENSE
Deposits 783.0 875.9 1,666.7 1,689.1
Short-term borrowings 157.6 198.7 376.7 369.8
Long-term debt 281.8 371.3 614.6 708.2
Company-obligated mandatorily redeemable
preferred securities of subsidiary
trusts holding solely the junior
subordinated debentures of the parent
company 35.4 29.3 63.0 57.7
---------------------------------------------------------
Total interest expense 1,257.8 1,475.2 2,721.0 2,824.8
---------------------------------------------------------
Net interest income 1,569.2 1,505.5 3,124.8 2,995.1
Provision for credit losses 441.3 201.3 973.7 384.5
---------------------------------------------------------
Net interest income after provision for credit
losses 1,127.9 1,304.2 2,151.1 2,610.6
NONINTEREST INCOME
Credit card and payment processing revenue 260.6 247.3 510.3 466.2
Trust and investment management fees 228.0 230.4 453.0 461.3
Deposit service charges 176.7 138.0 323.2 261.4
Cash management fees 84.9 74.1 161.7 145.9
Mortgage banking revenue 57.0 48.1 105.2 90.8
Trading account profits and commissions 55.8 59.8 127.7 145.1
Investment products fees and commissions 114.2 109.1 239.9 249.9
Investment banking revenue 71.1 72.9 131.3 166.9
Commercial product revenue 93.8 71.6 169.9 133.2
Securities gains, net 31.3 .3 247.3 --
Merger and restructuring-related gains 62.2 -- 62.2 --
Other 91.0 151.7 195.8 264.0
---------------------------------------------------------
Total noninterest income 1,326.6 1,203.3 2,727.5 2,384.7
NONINTEREST EXPENSE
Salaries 570.5 601.4 1,161.0 1,231.0
Employee benefits 90.7 100.3 198.8 212.2
Net occupancy 101.4 95.7 211.5 192.9
Furniture and equipment 74.9 75.7 151.8 152.4
Postage 43.8 42.6 90.7 87.2
Goodwill 61.2 59.8 131.7 118.2
Other intangible assets 51.4 37.0 95.3 74.4
Merger and restructuring-related charges 252.8 81.9 657.0 146.9
Other 348.0 316.7 695.4 618.5
---------------------------------------------------------
Total noninterest expense 1,594.7 1,411.1 3,393.2 2,833.7
---------------------------------------------------------
Income before income taxes 859.8 1,096.4 1,485.4 2,161.6
Applicable income taxes 297.5 386.6 513.0 765.0
---------------------------------------------------------
Net income $562.3 $709.8 $972.4 $1,396.6
=========================================================
EARNINGS PER COMMON SHARE
Average common shares 1,905.3 1,911.4 1,903.2 1,916.5
Earnings per share $.30 $.37 $.51 $.73
=========================================================
Average diluted common shares 1,917.2 1,925.9 1,916.4 1,929.7
Diluted earnings per share $.29 $.37 $.51 $.72
=========================================================
27
U.S. Bancorp
CONSOLIDATED ENDING BALANCE SHEET
June 30, December 31, June 30,
(Dollars in Millions) 2001 2000 2000
----------------------------------------------------------------------------------------------------------------------------------
ASSETS (Unaudited) (Unaudited)
Cash and due from banks $7,032 $8,475 $7,277
Money market investments 1,045 657 1,299
Trading account securities 805 753 765
Investment securities
Held-to-maturity 271 252 245
Available-for-sale 20,813 17,390 16,876
Loans held for sale 2,400 764 1,628
Loans
Commercial 50,489 52,817 51,489
Commercial real estate 26,125 26,443 26,063
Residential mortgages 6,950 7,753 9,109
Retail 34,948 35,352 32,391
-----------------------------------------------
Total loans 118,512 122,365 119,052
Less allowance for credit losses 1,716 1,787 1,757
-----------------------------------------------
Net loans 116,796 120,578 117,295
Premises and equipment 1,746 1,836 1,863
Customers' liability on acceptances 151 183 182
Goodwill and other intangible assets 5,202 5,309 4,882
Other assets 8,895 8,724 8,150
-----------------------------------------------
Total assets $165,156 $164,921 $160,462
===============================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $26,122 $26,633 $25,765
Interest-bearing 66,084 68,177 65,863
Time deposits greater than $100,000 14,738 14,725 13,340
-----------------------------------------------
Total deposits 106,944 109,535 104,968
Short-term borrowings 14,012 11,833 11,702
Long-term debt 21,425 21,876 23,673
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the junior
subordinated debentures of the parent company 2,039 1,400 1,400
Acceptances outstanding 151 183 182
Other liabilities 5,129 4,926 4,400
-----------------------------------------------
Total liabilities 149,700 149,753 146,325
Shareholders' equity
Common stock 19 19 19
Capital surplus 3,534 4,276 4,275
Retained earnings 11,916 11,658 10,810
Treasury stock (26) (880) (774)
Other comprehensive income 13 95 (193)
-----------------------------------------------
Total shareholders' equity 15,456 15,168 14,137
-----------------------------------------------
Total liabilities and shareholders' equity $165,156 $164,921 $160,462
===============================================