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u.s.bancorp 1Q 2005 Earnings Release 

 

 
 
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Published:  December 11, 2010
 
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Slide 1: News Release Contact: Steve Dale Media Relations (612) 303-0784 H. D. McCullough Investor Relations (612) 303-0786 Judith T. Murphy Investor Relations (612) 303-0783 U.S. BANCORP REPORTS RECORD NET INCOME FOR THE FIRST QUARTER OF 2005 EARNINGS SUMMARY ($ in millions, except per-share data) 1Q 2005 Net income Earnings per share (diluted) Return on average assets (%) Return on average equity(%) Efficiency ratio (%) Dividends declared per share Book value per share (period-end) Net interest margin (%) $1,071 0.57 2.21 21.9 41.7 $0.30 10.43 4.08 4Q 2004 $1,056 0.56 2.16 21.2 48.5 $0.30 10.52 4.20 1Q 2004 $1,008 0.52 2.14 20.7 47.0 $0.24 10.23 4.29 -(0.9) 25.0 2.0 Table 1 Percent Change 1Q05 vs 4Q04 1.4 1.8 Percent Change 1Q05 vs 1Q04 6.3 9.6 MINNEAPOLIS, April 19, 2005 – U.S. Bancorp (NYSE: USB) today reported net income of $1,071 million for the first quarter of 2005, compared with $1,008 million for the first quarter of 2004. Net income of $.57 per diluted share in the first quarter of 2005 was higher than the same period of 2004 by $.05 (9.6 percent). Return on average assets and return on average equity were 2.21 percent and 21.9 percent, respectively, for the first quarter of 2005, compared with returns of 2.14 percent and 20.7 percent, respectively, for the first quarter of 2004. U.S. Bancorp Chairman and Chief Executive Officer Jerry A. Grundhofer said, “Once again, I am pleased to announce record earnings for the first quarter of 2005, along with industryleading returns on equity and assets. In addition, we returned 108 percent of earnings to our shareholders during the quarter in the form of dividends and share repurchases. Growth in our feebased businesses, as well as continued improvement in credit quality, were the primary drivers of the Company’s earnings’ growth year-over-year. Fee revenue, excluding the impact of securities losses, grew by over 9 percent, with the payment services categories increasing over 15 percent, driven primarily by investments in the businesses and improvements in the economy. Deposit service charges increased by over 13 percent, driven primarily by increases in net new checking
Slide 2: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 2 accounts. Commercial loan growth gained momentum as the quarter progressed, with period-end commercial loan outstandings increasing an annualized 16.1 percent from December 31, 2004. As we enter the second quarter, historically our strongest in producing linked-quarter revenue growth, we expect to achieve our target of 10 percent earnings per share growth for the full year 2005. “Although average commercial loan balances continued to show encouraging trends this quarter, growing 7.3 percent year-over-year and at an annualized rate of 8.4 percent over the fourth quarter of 2004, loan pricing remains competitive. Tighter credit spreads accounted for 6 of the 12 basis points drop in our net interest margin between the fourth quarter of 2004 and the current quarter. We will continue to compete aggressively on loan pricing, but will remain disciplined on credit structure. Our low-cost position in the industry and extensive fee-based product and service offerings that can be used to penetrate commercial relationships, give us pricing advantages over our competitors. We are confident that this approach to the market will allow us to best capitalize on the strengths of our franchise. “As many already know, customer service has been, and continues to be, an important focus in this Company. Customer service is our brand and we believe it distinguishes us from our competition. We have been measuring the results of our efforts for just over three years, and I am pleased to report that we have significantly increased the number of retail customers that we define as loyal customers based on their satisfaction with our service, the likelihood that they will remain with the Company and the likelihood that they will recommend U.S. Bank to their friends and relatives. “Looking ahead, we will continue to enhance this great franchise through growth initiatives designed specifically to increase our market penetration, introduce new products and services and expand our market presence, all the while remaining focused on providing great customer service and improving customer loyalty. “Finally, I want to thank all 51,000 of our employees for their hard work and dedication, and would like to recognize the nearly 24,000 employees that have been with our Company for five years or longer. We took time this past month to honor these employees for their contributions, as we believe that loyal and experienced employees provide the type of service that attracts and retains loyal customers.” The Company’s results for the first quarter of 2005 improved over the same period of 2004, as net income rose by $63 million (6.3 percent), primarily due to lower credit costs and growth in (MORE)
Slide 3: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 3 fee-based products and services. During the first quarter of 2005, the Company recognized a $54 million reparation of its mortgage servicing rights (“MSR”) asset, reflecting rising longer-term interest rates in 2005, compared with the recognition of $109 million of MSR impairment in the first quarter of 2004. The yield on both 10-year Treasury Notes and 30-year Fannie Mae The Company sold certain commitments increased approximately 26 to 34 basis points. investment securities during the first quarter of 2005, resulting in net securities losses of $59 million. The Company realized no securities gains or losses in the first quarter of 2004. Also included in the first quarter of 2004 results was a $35 million expense charge related to the prepayment of certain debt and a $90 million reduction in income tax expense related to the resolution of federal tax examinations. Total net revenue on a taxable-equivalent basis for the first quarter of 2005 was $36 million (1.2 percent) higher than the first quarter of 2004, primarily reflecting 9.3 percent growth in feebased revenue across the majority of fee categories. The expansion of the Company’s merchant acquiring business in Europe accounted for approximately 1.9 percent of the change in fee-based revenue year-over-year. Fee based revenue growth was offset somewhat by the unfavorable variances in securities gains (losses) and net interest income. Total noninterest expense in the first quarter of 2005 was $124 million (8.5 percent) lower than the first quarter of 2004, primarily reflecting the $163 million favorable change in the valuation of mortgage servicing rights and the $35 million debt prepayment expense that was taken in the first quarter of 2004. The expansion of the Company’s merchant acquiring business in Europe added approximately $31 million of expense. In addition, expenses reflected incremental investments in in-store branches, middle-market and community bankers, marketing initiatives and higher pension costs from a year ago. Provision for credit losses for the first quarter of 2005 was $172 million, a decrease of $63 million (26.8 percent) from the first quarter of 2004. The decrease in the provision for credit losses year-over-year reflected a decrease in total net charge-offs. Net charge-offs in the first quarter of 2005 were $172 million, compared with the fourth quarter of 2004 net charge-offs of $163 million and the first quarter of 2004 net charge-offs of $234 million. The decline in losses from a year ago was primarily the result of declining levels of stressed and nonperforming loans, continuing collection efforts and improving economic conditions. Total nonperforming assets declined to $665 million at March 31, 2005, from $748 million at December 31, 2004 (11.1 (MORE)
Slide 4: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 4 percent), and $1,047 million at March 31, 2004 (36.5 percent). The ratio of the allowance for credit losses to nonperforming loans was 404 percent at March 31, 2005, compared with 355 percent at December 31, 2004, and 258 percent at March 31, 2004. INCOME STATEMENT HIGHLIGHTS (Taxable-equivalent basis, $ in millions, except per-share data) 1Q 2005 Net interest income Noninterest income Total net revenue Noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Taxable-equivalent adjustment Applicable income taxes Net income Diluted earnings per share $1,751 1,382 3,133 1,331 1,802 172 1,630 7 552 $1,071 $0.57 4Q 2004 $1,800 1,435 3,235 1,579 1,656 64 1,592 8 528 $1,056 $0.56 1Q 2004 $1,779 1,318 3,097 1,455 1,642 235 1,407 7 392 $1,008 $0.52 Percent Change 1Q05 vs 4Q04 (2.7) (3.7) (3.2) (15.7) 8.8 nm 2.4 (12.5) 4.5 1.4 1.8 Table 2 Percent Change 1Q05 vs 1Q04 (1.6) 4.9 1.2 (8.5) 9.7 (26.8) 15.8 -40.8 6.3 9.6 Net Interest Income First quarter net interest income on a taxable-equivalent basis was $1,751 million, compared with $1,779 million recorded in the first quarter of 2004. Average earning assets for the period increased over the first quarter of 2004 by $6.9 billion (4.2 percent), primarily driven by a $3.8 billion (9.5 percent) increase in retail loans and a $2.5 billion (7.3 percent) increase in commercial loans, partially offset by a $1.9 billion (4.3 percent) decline in investment securities. The growth in earning assets contributed approximately $83 million of net interest income yearover-year. The positive impact of the growth in earning assets was more than offset by an unfavorable rate variance, which reduced net interest income by approximately $102 million. A reduction in the number of days in the first quarter of 2005 relative to the first quarter of 2004 and a slight decline in loan fees accounted for the remainder of the variance. Net interest income in the first quarter of 2005 was lower than the fourth quarter of 2004 by $49 million (2.7 percent). Average earning assets grew quarter-over-quarter by $2.4 billion (MORE)
Slide 5: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 5 (1.4 percent). Growth in most loan categories, including a 2.0 percent increase in total commercial loans and increases in residential mortgages, retail loans and investment securities, drove the increase in average earning assets over the prior quarter. The growth in earning assets contributed approximately $24 million of additional net interest income quarter-over-quarter. The positive impact of the growth in earning assets was more than offset by an unfavorable rate variance, which reduced net interest income by approximately $52 million. Net interest income also declined by approximately $21 million due to fewer days in the first quarter of 2005 relative to the fourth quarter of 2004. The net interest margin in the first quarter of 2005 was 4.08 percent, compared with 4.29 percent in the first quarter of 2004. The decline in the net interest margin reflected the current lending environment, asset/liability management decisions and the impact of changes in the yield curve from a year ago. Since the first quarter of 2004, credit spreads have tightened by approximately 14 basis points across most lending products due to competitive pricing and a higher proportion of lower spread credit products. The net interest margin also declined due to higher short-term rates and asset/liability decisions designed to maintain a neutral rate risk position, including a 40 percent reduction in the net receive fixed swap position between March 31, 2004, and March 31, 2005. Lower prepayment fees also contributed to the year-over-year decline. Increases in the value of deposits and net free funds helped to partially offset these factors. The net interest margin in the first quarter of 2005 was 12 basis points lower than the net interest margin of 4.20 percent recorded in the fourth quarter of 2004. The decline in the net interest margin from the fourth quarter of 2004 reflected tighter credit spreads (6 basis points), due to increased competition, and changes in loan mix. Lower interest recoveries, higher short-term rates, asset/liability actions designed to maintain a neutral rate risk position and lower loan fees, partially offset by the higher value of deposits and net free funds, accounted for the remainder of the reduction. (MORE)
Slide 6: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 6 NET INTEREST INCOME (Taxable-equivalent basis; $ in millions) 1Q 2005 Components of net interest income Income on earning assets Expense on interest-bearing liabilities Net interest income Average yields and rates paid Earning assets yield Rate paid on interest-bearing liabilities Gross interest margin Net interest margin Average balances Investment securities Loans Earning assets Interest-bearing liabilities Net free funds* $2,442 691 $1,751 4Q 2004 $2,397 597 $1,800 1Q 2004 $2,265 486 $1,779 Change 1Q05 vs 4Q04 $45 94 $(49) Table 3 Change 1Q05 vs 1Q04 $177 205 $(28) 5.69 1.97 3.72 4.08 % 5.59 1.72 3.87 4.20 % 5.47 1.45 4.02 4.29 % 0.10 0.25 (0.15) (0.12) % 0.22 0.52 (0.30) (0.21) % % % % % % % % % % % $42,813 127,654 173,294 142,052 31,242 $42,315 125,639 170,924 138,303 32,621 $44,744 118,810 166,359 134,966 31,393 $498 2,015 2,370 3,749 (1,379) $(1,931) 8,844 6,935 7,086 (151) * Represents noninterest-bearing deposits, allowance for loan losses, unrealized gain (loss) on available-for-sale securities, non-earning assets, other noninterest-bearing liabilities and equity (MORE)
Slide 7: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 7 AVERAGE LOANS ($ in millions) 1Q 2005 Commercial Lease financing Total commercial Commercial mortgages Construction and development Total commercial real estate Residential mortgages Credit card Retail leasing Home equity and second mortgages Other retail Total retail Total loans $36,083 4,914 40,997 20,268 7,236 27,504 15,827 6,417 7,198 14,844 14,867 43,326 $127,654 4Q 2004 $35,348 4,855 40,203 20,286 7,360 27,646 15,044 6,347 7,087 14,711 14,601 42,746 $125,639 1Q 2004 $33,629 4,902 38,531 20,554 6,556 27,110 13,610 5,878 6,192 13,376 14,113 39,559 $118,810 Percent Change 1Q05 vs 4Q04 2.1 1.2 2.0 (0.1) (1.7) (0.5) 5.2 1.1 1.6 0.9 1.8 1.4 1.6 Table 4 Percent Change 1Q05 vs 1Q04 7.3 0.2 6.4 (1.4) 10.4 1.5 16.3 9.2 16.2 11.0 5.3 9.5 7.4 Average loans for the first quarter of 2005 were $8.8 billion (7.4 percent) higher than the first quarter of 2004, driven by growth in average retail loans of $3.8 billion (9.5 percent), residential mortgages of $2.2 billion (16.3 percent) and total commercial loans of $2.5 billion (6.4 percent). Total commercial real estate loans also increased slightly year-over-year by $394 million (1.5 percent) relative to the first quarter of 2004. Average loans for the first quarter of 2005 were higher than the fourth quarter of 2004 by $2.0 billion (1.6 percent), reflecting growth in substantially all loan categories. Average investment securities in the first quarter of 2005 were $1.9 billion (4.3 percent) lower than in the first quarter of 2004. The decline principally reflected the repositioning of the investment portfolio in mid-2004 as part of asset/liability risk management decisions to acquire variable rate and shorter-term fixed securities while selling more longer-term fixed rate mortgagebacked securities. Investment securities at March 31, 2005, were $2.3 billion lower than at March 31, 2004, but $1.6 billion higher than the balance at December 31, 2004. During the first quarter of 2005, the Company retained its mix of approximately 39 percent variable rate securities while (MORE)
Slide 8: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 8 investing in some principal-only and fixed-rate securities to economically hedge the MSR portfolio against a flattening yield curve. AVERAGE DEPOSITS ($ in millions) 1Q 2005 Noninterest-bearing deposits Interest-bearing deposits Interest checking Money market accounts Savings accounts Savings products Time certificates of deposit less than $100,000 Time deposits greater than $100,000 Total interest-bearing deposits Total deposits $28,417 23,146 30,264 5,968 59,378 12,978 18,650 91,006 $119,423 4Q 2004 $29,841 21,630 30,955 5,776 58,361 12,794 15,448 86,603 $116,444 1Q 2004 $29,025 20,948 34,397 5,898 61,243 13,618 12,133 86,994 $116,019 Percent Change 1Q05 vs 4Q04 (4.8) 7.0 (2.2) 3.3 1.7 1.4 20.7 5.1 2.6 Table 5 Percent Change 1Q05 vs 1Q04 (2.1) 10.5 (12.0) 1.2 (3.0) (4.7) 53.7 4.6 2.9 Average noninterest-bearing deposits for the first quarter of 2005 were lower than the first quarter of 2004 by $608 million (2.1 percent). The year-over-year change in the average balance of noninterest-bearing deposits was impacted by product changes in the Consumer Banking business line. In late 2004, the Company migrated approximately $1.3 billion of noninterestbearing deposit balances to interest checking accounts as an enhancement to its Silver Elite Checking product. Average branch-based noninterest-bearing deposits in the first quarter of 2005, excluding the migration of certain high-value customers to Silver Elite Checking, were higher by approximately $599 million (5.4 percent) over the same quarter of 2004, as net new checking account growth continued to gain momentum. Average noninterest-bearing deposits in other areas, including commercial banking, private client, corporate trust, and mortgage, also increased year-over-year. These favorable variances were offset, however, by expected declines in average noninterest-bearing deposits in corporate banking as business customers utilize their excess liquidity. Average total savings products declined year-over-year by $1.9 billion (3.0 percent), principally due to a reduction in average money market account balances, partially offset by higher (MORE)
Slide 9: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 9 interest checking and savings accounts balances. Average branch-based interest checking deposits increased by $2.6 billion (18.0 percent) over the same quarter of 2004, in part, due to the change in the Silver Elite Checking product, as well as new account growth. Average branch-based interest checking deposits, excluding Silver Elite Checking, were higher by approximately $1.3 billion (9.2 percent) year-over-year. This positive variance in branch-based interest checking account deposits was partially offset by reductions in other areas, including broker dealer and institutional trust. Average money market account balances declined by $4.1 billion (12.0 percent) year-over-year, with the largest declines in government banking, national corporate banking, and the branches. These reductions were partially offset by strong growth in corporate trust deposits. The overall decrease in average money market account balances year-over-year was the result of the Company’s decision to lag deposit pricing, given modest loan growth and excess liquidity throughout 2004. A portion of the money market balances migrated to time deposits greater than $100,000 as rates increased on the time deposit products. Average time certificates less than $100,000 were lower in the first quarter of 2005 than the first quarter of 2004 by $640 million (4.7 percent), as older, higher rate certificates continued to mature. This reduction was more than offset by an increase year-over-year of average time deposits greater than $100,000, most notably in corporate banking. Average noninterest-bearing deposits for the first quarter of 2005 were $1.4 billion (4.8 percent) lower than the fourth quarter of 2004. Average noninterest-bearing deposits were somewhat impacted quarter-over-quarter by the change in the Silver Elite Checking product. Average branch-related products, excluding Silver Elite Checking, declined by approximately $212 million (1.8 percent) quarter-over-quarter. Average savings products were higher in the current quarter than the fourth quarter of 2004 by $1.0 billion (1.7 percent), primarily due to increases in interest checking, partially driven by the Silver Elite Checking product switch from noninterest- bearing accounts to interest checking accounts. Average branch-related interest checking balances, excluding Silver Elite Checking, rose by 2.4 percent in the first quarter of 2005 over the prior quarter. Average money market account balances declined by $691 million (2.2 percent) as the Company continued to lag deposit pricing. Time certificates of deposit less than $100,000 increased modestly from the fourth quarter of 2004, while time deposits greater than $100,000 rose by $3.2 billion (20.7 percent), primarily due to growth in foreign branch time deposits and corporate banking customer balances. (MORE)
Slide 10: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 10 NONINTEREST INCOME ($ in millions) 1Q 2005 Credit and debit card revenue Corporate payment products revenue ATM processing services Merchant processing services Trust and investment management fees Deposit service charges Treasury management fees Commercial products revenue Mortgage banking revenue Investment products fees and commissions Securities losses, net Other Total noninterest income $154 107 47 178 247 210 107 96 102 39 (59) 154 $1,382 4Q 2004 $184 101 43 181 241 212 110 108 96 37 (21) 143 $1,435 1Q 2004 $142 95 42 141 249 185 118 110 94 39 -103 $1,318 Percent Change 1Q05 vs 4Q04 (16.3) 5.9 9.3 (1.7) 2.5 (0.9) (2.7) (11.1) 6.3 5.4 nm 7.7 (3.7) Table 6 Percent Change 1Q05 vs 1Q04 8.5 12.6 11.9 26.2 (0.8) 13.5 (9.3) (12.7) 8.5 -nm 49.5 4.9 Noninterest Income First quarter noninterest income was $1,382 million, an increase of $64 million (4.9 percent) from the same quarter of 2004, but $53 million (3.7 percent) lower than the fourth quarter of 2004. The increase in noninterest income over the first quarter of 2004 was driven by favorable variances in the majority of fee income categories, slightly offset by a $59 million increase in losses on the sale of securities. Credit and debit card revenue and corporate payment products revenue were both higher in the first quarter of 2005 than the first quarter of 2004 by $12 million, or 8.5 percent and 12.6 percent, respectively. The growth in credit and debit card revenue was driven by higher transaction volumes and rate changes. The corporate payment products revenue growth reflected growth in sales, card usage, rate changes and the recent acquisition of a small fleet card business. ATM processing services revenue was higher by $5 million (11.9 percent) in the first quarter of 2005 than the same quarter of the prior year due to increases in transaction volumes and sales. Merchant processing services revenue was higher in the first quarter of 2005 than the same quarter of 2004 by $37 million (26.2 percent), reflecting an increase in same store sales volume, new business, higher equipment fees, and the recent expansion of the Company’s (MORE)
Slide 11: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 11 merchant acquiring business in Europe. The recent European acquisitions accounted for approximately $26 million of the total increase. Deposit service charges were higher year-overyear by $25 million (13.5 percent) due to account growth, revenue enhancement initiatives and transaction-related fees. The favorable variance year-over-year in mortgage banking revenue of $8 million (8.5 percent) was primarily due to higher loan servicing revenue. Other income was higher by $51 million (49.5 percent), primarily due to higher income from equity investments relative to the same quarter of 2004. Partially offsetting these positive variances year-over-year were commercial products revenue, treasury management fees and trust and investment management fees, which declined by $14 million (12.7 percent), $11 million (9.3 percent), and $2 million (.8 percent), respectively. Commercial products revenue declined due to reductions in loan syndication fees and leasing revenues. The decrease in treasury management fees was primarily due to higher earnings credit on customers’ compensating balances. Trust and investment management fees declined as revenues generated by favorable equity market valuations and core balance growth were more than offset by a change in the mix of fund balances and customers’ migration from paying for services with fees to paying with compensating balances. Noninterest income was lower in the first quarter of 2005 than the fourth quarter of 2004 by $53 million (3.7 percent), primarily due to a $38 million unfavorable change in gains (losses) on the sale of securities and seasonally lower credit and debit card revenue, merchant processing services revenue and deposit services charges, in addition to declines in commercial products revenue and treasury management fees. Credit and debit card revenue and merchant processing services declined by $30 million (16.3 percent) and $3 million (1.7 percent), respectively, reflecting seasonally lower consumer spending after the holidays. Deposit service charges were lower by $2 million (.9 percent) in the first quarter of 2005 compared with the fourth quarter of 2004, also reflecting the seasonality of transaction-related fees. Commercial products revenue was lower quarter-over-quarter due to reductions in loan syndication fees, leasing revenue and international product revenue, while treasury management fees were lower in the current quarter by $3 million (2.7 percent) than the prior quarter, primarily due to higher interest earnings credits being received by customers that are maintaining compensating balances and fewer business processing days. Offsetting these negative variances were increases in corporate payment products revenue, ATM processing services, trust and investment management fees, mortgage banking revenue, investment products fees and commissions and other income. Corporate (MORE)
Slide 12: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 12 payment products revenue was higher quarter-over-quarter by $6 million (5.9 percent), primarily due to stronger transaction volumes and the acquisition of a small fleet card business. ATM processing services revenue was higher than the prior quarter by $4 million (9.3 percent), primarily due to new ATM installs and one-time incentive payments. The $6 million (2.5 percent) increase in trust and investment management fees in the first quarter of 2005 over the prior quarter was primarily due to the impact of higher equity market valuations and core account growth. Mortgage banking revenue rose quarter-over-quarter by $6 million (6.3 percent), as a result of higher originations and sales. Investment products fees and commissions increased by $2 million (5.4 percent) quarter-over-quarter due to higher investment sales. Other income increased by $11 million (7.7 percent) in the first quarter of 2005 primarily due to higher revenue from equity investments relative to the fourth quarter of 2004. (MORE)
Slide 13: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 13 NONINTEREST EXPENSE ($ in millions) 1Q 2005 Compensation Employee benefits Net occupancy and equipment Professional services Marketing and business development Technology and communications Postage, printing and supplies Other intangibles Debt prepayment Other Total noninterest expense $567 116 154 36 43 106 63 71 -175 $1,331 4Q 2004 $579 98 163 45 49 116 65 161 113 190 $1,579 1Q 2004 $536 100 156 32 35 102 62 226 35 171 $1,455 Percent Change 1Q05 vs 4Q04 (2.1) 18.4 (5.5) (20.0) (12.2) (8.6) (3.1) (55.9) nm (7.9) (15.7) Table 7 Percent Change 1Q05 vs 1Q04 5.8 16.0 (1.3) 12.5 22.9 3.9 1.6 (68.6) nm 2.3 (8.5) Noninterest Expense First quarter noninterest expense totaled $1,331 million, a decrease of $124 million (8.5 percent) from the same quarter of 2004 and a $248 million (15.7 percent) decrease from the fourth quarter of 2004. The decrease in expense year-over-year was primarily driven by the $163 million favorable change in the valuation of mortgage servicing rights, as well as the decrease of $35 million in debt prepayment charges relative to the first quarter of 2004. Offsetting these favorable variances were increases in compensation, employee benefits, professional services, marketing and business development, technology and communications, postage, printing and supplies and other expense. Included in the first quarter of 2005 was approximately $31 million related to the recent European acquisitions completed during 2004. Compensation expense was higher year-over-year by $31 million (5.8 percent), principally due to business expansion of in-store branches, investments in commercial and community bankers, and the expansion of the Company’s merchant acquiring business in Europe and other initiatives. Employee benefits increased yearover-year by $16 million (16.0 percent), primarily as a result of higher pension expense and payroll taxes. Professional services and marketing and business development were higher in the first quarter of 2005 than the first quarter of 2004 by $4 million (12.5 percent) and $8 million (22.9 (MORE)
Slide 14: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 14 percent), respectively, due to general growth in business activity and timing of marketing programs. Technology and communications expense rose by $4 million (3.9 percent), reflecting technology investments that increased software expense amortization, in addition to outside data processing. Other expense was higher in the first quarter than the same quarter of 2004 by $4 million (2.3 percent), primarily due to increases in loan-related expense, affordable housing operating costs and processing costs for payment services products, the result of increases in transaction volume year-over-year. Noninterest expense in the first quarter of 2005 was lower than the fourth quarter of 2004 by $248 million (15.7 percent). The decrease in noninterest expense in the first quarter of 2005 from the fourth quarter of 2004 was primarily driven by the $113 million debt prepayment charge taken in the fourth quarter of 2004, as well as an $86 million favorable change in the valuation of mortgage servicing rights quarter-over-quarter. Favorable variances were also recorded in substantially all other expense categories. The decrease in compensation expense of $12 million (2.1 percent) in the first quarter from the prior quarter was primarily due to higher deferred compensation costs in the fourth quarter of 2004. The quarter-over-quarter decrease in net occupancy and equipment costs of $9 million (5.5 percent) primarily reflected lower depreciation and building maintenance services. Professional services expense, marketing and business development and technology and communications declined quarter-over-quarter by $9 million (20.0 percent), $6 million (12.2 percent) and $10 million (8.6 percent), respectively. The variance in professional services fees primarily reflected higher year-end activity in the fourth quarter of 2004 related to business activity, regulatory compliance, tax-related costs, and affordable housing, while lower marketing and business development reflected the timing of marketing programs. Technology and communications declined relative to the prior quarter due to a write-off of capitalized software replaced during the fourth quarter of 2004. The positive variance in postage, printing and supplies quarter-over-quarter primarily reflected the new account-related expense in the fourth quarter of 2004. Other expense was lower in the first quarter of 2005 than the fourth quarter of 2004, primarily due to lower fraud losses, loan expense and affordable housing operating costs. Offsetting these decreases in expense was an unfavorable change in employee benefits of $18 million (18.4 percent), primarily due to timing of payroll taxes and 401K expense. (MORE)
Slide 15: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 15 ALLOWANCE FOR CREDIT LOSSES ($ in millions) 1Q 2005 Balance, beginning of period Net charge-offs Commercial Lease financing Total commercial Commercial mortgages Construction and development Total commercial real estate Residential mortgages Credit card Retail leasing Home equity and second mortgages Other retail Total retail Total net charge-offs Provision for credit losses Acquisitions and other changes Balance, end of period Components Allowance for loan losses Liability for unfunded credit commitments Total allowance for credit losses Gross charge-offs Gross recoveries Net charge-offs to average loans (%) Allowance as a percentage of: Period-end loans Nonperforming loans Nonperforming assets $2,269 4Q 2004 $2,370 3Q 2004 $2,370 2Q 2004 $2,370 Table 8 1Q 2004 $2,369 14 13 27 4 2 6 9 65 8 17 40 130 172 172 -$2,269 8 10 18 9 1 10 8 61 9 18 39 127 163 64 (2) $2,269 2 19 21 3 3 6 7 65 9 18 40 132 166 166 -$2,370 36 19 55 2 -2 7 63 10 20 47 140 204 204 -$2,370 54 21 75 4 5 9 7 63 11 20 49 143 234 235 -$2,370 $2,082 187 $2,269 $231 $59 0.55 $2,080 189 $2,269 $235 $72 0.52 $2,184 186 $2,370 $260 $94 0.54 $2,190 180 $2,370 $274 $70 0.68 $2,186 184 $2,370 $305 $71 0.79 1.76 404 341 1.80 355 303 1.90 337 294 1.93 299 260 1.98 258 226 Credit Quality The allowance for credit losses was $2,269 million at March 31, 2005, equal to the allowance for credit losses at December 31, 2004, and lower than the allowance for credit losses of $2,370 (MORE)
Slide 16: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 16 million at March 31, 2004. The ratio of the allowance for credit losses to period-end loans was 1.76 percent at March 31, 2005, compared with 1.80 percent at December 31, 2004, and 1.98 percent at March 31, 2004. The ratio of the allowance for credit losses to nonperforming loans was 404 percent at March 31, 2005, compared with 355 percent at December 31, 2004, and 258 percent at March 31, 2004. Total net charge-offs in the first quarter of 2005 were $172 million, compared with the fourth quarter of 2004 net charge-offs of $163 million and the first quarter of 2004 net charge-offs of $234 million. Commercial and commercial real estate loan net charge-offs were $33 million for the first quarter of 2005, or .20 percent of average loans outstanding, compared with $28 million, or .16 percent of average loans outstanding, in the fourth quarter of 2004 and $84 million, or .51 percent of average loans outstanding, in the first quarter of 2004. The decline in net charge-offs continues to be broad-based across most industries within the commercial loan portfolio. Retail loan net charge-offs of $130 million in the first quarter of 2005 were $3 million (2.4 percent) higher than the fourth quarter of 2004 and $13 million (9.1 percent) lower than the first quarter of 2004. Retail loan net charge-offs as a percent of average loans outstanding were 1.22 percent in the first quarter of 2005, compared with 1.18 percent and 1.45 percent in the fourth quarter of 2004 and first quarter of 2004, respectively. Lower levels of retail loan net charge-offs principally reflected the Company’s ongoing improvement in collection efforts and risk management. (MORE)
Slide 17: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 17 CREDIT RATIOS (Percent) 1Q 2005 4Q 2004 0.09 0.82 0.18 0.18 0.05 0.14 0.21 3.82 0.51 0.49 1.06 1.18 0.52 3Q 2004 0.02 1.56 0.21 0.06 0.17 0.09 0.19 4.21 0.52 0.50 1.09 1.26 0.54 2Q 2004 0.42 1.58 0.56 0.04 -0.03 0.20 4.23 0.62 0.58 1.31 1.38 0.68 Table 9 1Q 2004 0.65 1.72 0.78 0.08 0.31 0.13 0.21 4.31 0.71 0.60 1.40 1.45 0.79 Net charge-offs ratios* Commercial Lease financing Total commercial Commercial mortgages Construction and development Total commercial real estate Residential mortgages Credit card Retail leasing Home equity and second mortgages Other retail Total retail Total net charge-offs 0.16 1.07 0.27 0.08 0.11 0.09 0.23 4.11 0.45 0.46 1.09 1.22 0.55 Delinquent loan ratios - 90 days or more past due excluding nonperforming loans** Commercial 0.06 0.05 0.05 0.05 Commercial real estate 0.02 -0.01 0.01 Residential mortgages 0.41 0.46 0.46 0.50 Retail 0.43 0.47 0.47 0.48 Total loans 0.22 0.23 0.23 0.24 Delinquent loan ratios - 90 days or more past due including nonperforming loans** Commercial 0.84 0.99 1.14 1.37 Commercial real estate 0.68 0.73 0.75 0.76 Residential mortgages 0.66 0.74 0.77 0.79 Retail 0.47 0.51 0.51 0.52 Total loans 0.66 0.74 0.80 0.88 * annualized and calculated on average loan balances ** ratios are expressed as a percent of ending loan balances 0.06 0.01 0.56 0.54 0.27 1.67 0.85 0.87 0.59 1.03 The overall level of net charge-offs in the first quarter of 2005 reflected the Company’s ongoing efforts to reduce the overall risk profile of the organization. (MORE)
Slide 18: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 18 ASSET QUALITY ($ in millions) Mar 31 2005 Nonperforming loans Commercial Lease financing Total commercial Commercial mortgages Construction and development Commercial real estate Residential mortgages Retail Total nonperforming loans Other real estate Other nonperforming assets Total nonperforming assets* Accruing loans 90 days or more past due Nonperforming assets to loans plus ORE (%) $254 70 324 159 21 180 41 16 561 66 38 $665 $285 Dec 31 2004 $289 91 380 175 25 200 43 17 640 72 36 $748 $294 Sep 30 2004 $348 91 439 166 35 201 46 17 703 69 33 $805 $292 Jun 30 2004 $416 111 527 164 41 205 42 18 792 70 49 $911 $293 Table 10 Mar 31 2004 $511 116 627 185 44 229 42 20 918 76 53 $1,047 $319 0.52 0.59 0.64 0.74 0.87 *does not include accruing loans 90 days or more past due Nonperforming assets at March 31, 2005, totaled $665 million, compared with $748 million at December 31, 2004, and $1,047 million at March 31, 2004. The ratio of nonperforming assets to loans and other real estate was .52 percent at March 31, 2005, compared with .59 percent at December 31, 2004, and .87 percent at March 31, 2004. (MORE)
Slide 19: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 19 CAPITAL POSITION ($ in millions) Mar 31 2005 Total shareholders' equity Tier 1 capital Total risk-based capital Common equity to assets Tangible common equity to assets Tier 1 capital ratio Total risk-based capital ratio Leverage ratio $19,208 14,943 23,099 9.7 6.2 8.6 13.3 7.9 % Dec 31 2004 $19,539 14,720 22,352 10.0 6.4 8.6 13.1 7.9 % Sep 30 2004 $19,600 14,589 21,428 10.2 6.4 8.7 12.7 7.9 % Jun 30 2004 $18,675 14,294 21,255 9.8 6.3 8.7 12.9 7.8 % Table 11 Mar 31 2004 $19,452 14,499 21,559 10.1 6.4 8.9 13.3 8.0 % Total shareholders’ equity was $19.2 billion at March 31, 2005, compared with $19.5 billion at March 31, 2004. The decrease was the result of corporate earnings offset by share buybacks and dividends. Tangible common equity to assets was 6.2 percent at March 31, 2005, compared with 6.4 percent at December 31, 2004, and at March 31, 2004. The Tier 1 capital ratio was 8.6 percent at March 31, 2005, and at December 31, 2004, compared with 8.9 percent at March 31, 2004. The total risk-based capital ratio was 13.3 percent at March 31, 2005, compared with 13.1 percent at December 31, 2004, and 13.3 percent at March 31, 2004. The leverage ratio was 7.9 percent at March 31, 2005, and at December 31, 2004, compared with 8.0 percent at March 31, 2004. All regulatory ratios continue to be in excess of stated “well capitalized” requirements. (MORE)
Slide 20: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 20 COMMON SHARES (Millions) 1Q 2005 Beginning shares outstanding Shares issued for stock option and stock purchase plans, acquisitions and other corporate purposes Shares repurchased Ending shares outstanding 1,858 4Q 2004 1,871 3Q 2004 1,884 2Q 2004 1,901 Table 12 1Q 2004 1,923 4 (20) 1,842 7 (20) 1,858 6 (19) 1,871 4 (21) 1,884 12 (34) 1,901 On December 21, 2004, the Board of Directors of U.S. Bancorp approved an authorization to repurchase up to 150 million shares of outstanding common stock during the following 24 months. This repurchase program replaced the Company’s previous program. During the first quarter of 2005, the Company repurchased 20 million shares of common stock under these authorizations. As of March 31, 2005, there were approximately 125 million shares remaining to be repurchased under the current authorization. (MORE)
Slide 21: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 21 LINE OF BUSINESS FINANCIAL PERFORMANCE* ($ in millions) Net Income 1Q Business Line Wholesale Banking Consumer Banking Private Client, Trust and Asset Management Payment Services Treasury and Corporate Support Consolidated Company * preliminary data Table 13 Percent Change 1Q 2004 $240 260 104 152 252 $1,008 1Q05 vs 4Q04 (4.9) 9.5 11.8 (9.4) (0.8) 1.4 1Q05 vs 1Q04 12.5 55.8 9.6 7.9 (53.2) 6.3 1Q 2005 Earnings Composition 25 38 11 15 11 100 % % 4Q 2004 $284 370 102 181 119 $1,056 2005 $270 405 114 164 118 $1,071 Lines 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, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is available and is evaluated regularly in deciding how to allocate resources and assess performance. Noninterest expenses incurred by centrally managed operations or business lines that directly support another business line’s operations are charged to the applicable business line based on its utilization of those services primarily measured by the volume of customer activities. These allocated expenses are reported as net shared services expense. Designations, assignments and allocations may change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to our diverse customer base. During 2005, certain organization and methodology changes were made and, accordingly, prior period results have been restated and presented on a comparable basis. Wholesale Banking offers lending, depository, treasury management and other financial services to middle market, large corporate and public sector clients. Wholesale Banking contributed $270 million of the Company’s net income in the first quarter of 2005, a 12.5 percent (MORE)
Slide 22: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 22 increase over the same period of 2004, but a 4.9 percent decrease from the fourth quarter of 2004. The increase in Wholesale Banking’s first quarter 2005 contribution over the first quarter of 2004 was primarily the result of favorable variances in total net revenue (3.9 percent) and the provision for credit losses, which benefited from a $31 million decline in net charge-offs quarter-overquarter. Offsetting these positive variances was an increase in total noninterest expense of 3.4 percent. Total net revenue in the first quarter of 2005 included positive changes in both net interest income (2.1 percent) and noninterest income (10.1 percent). The increase in net interest income was primarily due to an increase in average loans outstanding and wider deposit spreads, partially offset by tighter credit spreads. The increase in noninterest income was primarily the result of growth in other revenue related to equity investments, partially offset by reductions in commercial products revenue and treasury management fees. The decline in commercial products revenue (15.1 percent) was driven by lower loan syndication fees and leasing revenue, while treasury management fees were lower (10.7 percent) year-over-year due to higher earnings credit on customers’ compensating balances. Wholesale Banking’s unfavorable variance in total noninterest expense year-over-year was primarily the result of higher compensation and employee benefits and net shared services expense. The decrease in Wholesale Banking’s contribution to net income in the first quarter of 2005 from the fourth quarter of 2004 was the result of unfavorable variances in total net revenue (3.5 percent) and the provision for credit losses, partially offset by a decline in total noninterest expense (5.6 percent). Total net revenue was lower on a linked quarter basis, with reductions in both net interest income (3.4 percent) and noninterest income (1.8 percent). The unfavorable variance quarter-over-quarter in net interest income was primarily attributed to tighter credit spreads, partially offset by wider deposit spreads and an increase in average loans outstanding. The decrease in noninterest income quarter-over-quarter was primarily due to unfavorable variances in commercial products revenue and treasury management fees, partially offset by an increase in other income. The decrease in total noninterest expense was principally due to lower net shared services and other expense, partially offset by higher compensation and employee benefits. Net charge-offs of $3 million in the first quarter of 2005, compared with net recoveries of $8 million in the fourth quarter of 2004, drove the unfavorable variance in the provision for credit losses from the prior quarter. Consumer Banking delivers products and services to the broad consumer market and small businesses through banking offices, telemarketing, on-line services, direct mail and automated (MORE)
Slide 23: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 23 teller machines (“ATMs”). It encompasses community banking, metropolitan banking, small business banking, including lending guaranteed by the Small Business Administration, small-ticket leasing, consumer lending, mortgage banking, workplace banking, student banking, 24-hour banking, and investment product and insurance sales. Consumer Banking contributed $405 million of the Company’s net income in the first quarter of 2005, a 55.8 percent increase over the same period of 2004 and a 9.5 percent increase over the fourth quarter of 2004. During the first quarter, the retail banking business segment grew net income by 26.4 percent and 5.3 percent over the first quarter of 2004 and the fourth quarter of 2004, respectively. The contribution of the mortgage banking business also increased over the previous reporting periods. The increase in the mortgage banking business’s contribution over the first quarter of 2004 was primarily the result of a reduction in total noninterest expense, driven by the $163 million favorable change in MSR valuation. Fee-based revenue related to mortgage production and servicing improved year-overyear by 7.4 percent. The increase in total noninterest expense, excluding the change in MSR valuation, was primarily due to an increase in other intangible amortization, the result of the growing servicing portfolio. The mortgage banking business line’s contribution rose in the first quarter of 2005 over the previous quarter, primarily due to the favorable change in the MSR valuation net of offsetting securities gains (losses). For the Consumer Banking business, as a whole, the favorable variance in MSR valuation year-over-year of $163 million was only partially offset by a $54 million unfavorable variance in gains (losses) on the sale of securities year-over-year. Total net revenue was higher than the same quarter of the 2004 by 4.3 percent, primarily due to increases in both net interest income (9.5 percent) and noninterest income (6.2 percent). Consumer Banking’s results also benefited from a reduction in the provision for credit losses (25.9 percent), while total noninterest expense, excluding the change in MSR valuations, was higher (2.6 percent) than the first quarter of 2004. Net interest income was higher year-over-year as a result of higher deposit spreads. Noninterest income improved in the first quarter of 2005 over the same period of 2004, primarily due to growth in deposit service charges (13.6 percent) and mortgage banking revenue (7.4 percent). Total noninterest expense, excluding the change in MSR valuation, in the first quarter of 2005 was slightly higher than the first quarter of 2004, primarily due to an increase in compensation and employee benefits (3.4 percent) and net shared services. A reduction in net charge-offs year-overyear drove the positive variance in the business line’s provision for credit losses. (MORE)
Slide 24: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 24 The increase in Consumer Banking’s contribution in the first quarter of 2005 over the fourth quarter of 2004 was the net result of favorable variances in total noninterest expense (15.2 percent) and the provision for credit losses (8.0 percent), offset by an unfavorable variance in total net revenue (4.7 percent). A $54 million unfavorable change in securities gains (losses) was the primary driver of the decline in total net revenue. Net interest income was slightly lower quarterover-quarter due to tighter credit spreads, partially offset by higher average loan balances and deposit spreads relative to the prior quarter. Noninterest income, excluding securities gains (losses), was lower than the prior quarter primarily due to other revenue. The favorable variance in total noninterest expense quarter-over-quarter was driven by the change in MSR valuation, lower net shared services expense and a reduction in other expense, primarily losses and loanrelated expense. Offsetting these favorable variances in expense was an increase in compensation and employee benefits. Private Client, Trust and Asset Management provides trust, private banking, financial advisory, investment management and mutual fund servicing through five businesses: Private Client Group, Corporate Trust, Asset Management, Institutional Trust and Custody, and Fund Services, LLC. Private Client, Trust and Asset Management contributed $114 million of the Company’s net income earnings in the first quarter of 2005, 9.6 percent higher than the same period of 2004 and 11.8 percent higher than the fourth quarter of 2004. The increase in the business line’s contribution in the first quarter of 2005 over the first quarter of 2004 was the result of favorable variances in total net revenue (6.3 percent), partially offset by an increase in total noninterest expense (3.5 percent). Net interest income was favorably impacted year-over-year by strong deposit growth and deposit spreads, while noninterest income was essentially equal to the same quarter of 2004, as gains from equity market valuations were more than offset by lower fees, partially due to a change in the mix of fund balances and customers’ migration from paying for services with fees to paying with compensating balances. Total noninterest expense was slightly higher year-over-year due to a modest increase in compensation and employee benefits, net shared services expense and other expense. The increase in the business line’s contribution (11.8 percent) in the first quarter of 2005 over the fourth quarter of 2004 was primarily the result of higher total net revenue (2.9 percent) and lower total noninterest expense (4.3 percent). Net interest income and noninterest income rose quarter-over-quarter by 4.0 percent and 2.4 percent, respectively. The increase in net interest income was primarily driven by growth in average deposits and favorable (MORE)
Slide 25: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 25 deposit spreads, while noninterest income increased due to equity market valuations and core account growth. Total noninterest expense was slightly lower in the first quarter due to net shared services expense and other expense, which reflected lower losses relative to the prior quarter. Partially offsetting these favorable variances was an increase quarter-over-quarter in incentivebased compensation and employee benefits. Payment Services includes consumer and business credit cards, debit cards, corporate and purchasing card services, consumer lines of credit, ATM processing, and merchant processing. Payment Services contributed $164 million of the Company’s net income in the first quarter of 2005, a 7.9 percent increase over the same period of 2004, but a 9.4 percent decrease from the fourth quarter of 2004. The increase in Payment Services’ contribution in the first quarter of 2005 over the same period of 2004 was the result of higher total net revenue (11.1 percent) and a lower provision for credit losses (4.3 percent), partially offset by an increase in total noninterest expense (20.6 percent). The increase in total net revenue year-over-year was primarily due to growth in noninterest income (16.2 percent), partially offset by lower net interest income (3.4 percent), which primarily reflected higher corporate card balances and rebates. The increase in noninterest income was principally the result of growth in credit and debit card revenue (9.2 percent), corporate payment products revenue (12.6 percent), ATM processing services revenue (13.8 percent) and merchant processing services revenue (26.2 percent). All categories benefited from higher transaction volumes and some rate changes. The increase in merchant processing revenue also included approximately $26 million associated with the expansion of the Company’s merchant acquiring business in Europe. The growth in total noninterest expense year-over-year primarily reflected an increase in processing expense related to the business line’s revenue growth, including approximately $31 million associated with the European merchant acquiring business. The decrease in Payment Services’ contribution in the first quarter of 2005 from the fourth quarter of 2004 was primarily due to lower total net revenue (4.0 percent) and a slightly higher provision for credit losses (3.5 percent). Net interest income decreased 1.4 percent, while fee-based revenue declined by 4.8 percent due to seasonally lower retail credit card sales volumes and merchant processing fees. Treasury and Corporate Support includes the Company’s investment portfolios, funding, capital management and asset securitization activities, interest rate risk management, the net effect of transfer pricing related to average balances and the residual aggregate of expenses associated (MORE)
Slide 26: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 26 with business activities managed on a corporate basis, including enterprise-wide operations and administrative support functions. Operational expenses incurred by Treasury and Corporate Support on behalf of the other business lines are allocated back to the appropriate business unit, primarily based on customer transaction volume and account activities, deposit balances and employee levels and are identified as net shared services expense. Treasury and Corporate Support recorded net income of $118 million in the first quarter of 2005, compared with net income of $252 million in the first quarter of 2004 and $119 million in the fourth quarter of 2004. The decrease in net income in the current quarter from the first quarter of 2004 was largely due to lower total net revenue (42.3 percent) and the $90 million tax benefit realized by the Company in the first quarter of 2004. Partially offsetting these unfavorable variances was total noninterest expense, which was lower year-over-year by 48.1 percent. The unfavorable change in net interest income (47.7 percent) year-over-year reflected the Company’s asset/liability management decisions to invest in lower-yield floating-rate securities, higher-cost fixed funding and repositioning of the balance sheet for changes in the interest rate environment. Partially offsetting this negative variance was a favorable change in noninterest income in the first quarter of 2005 over the same quarter of 2004, primarily the result of other revenue related to income from equity investments. The decrease in total noninterest expense year-over-year was driven by a $35 million debt prepayment charge taken in the first quarter of 2004. Net income in the first quarter of 2005 was essentially equal to net income in the fourth quarter of 2004, the net result of unfavorable variances in net interest income (17.2 percent) and the provision for credit losses, offset by favorable variances in securities gains (losses) and total noninterest expense. Total net interest income declined quarter-over-quarter, primarily due to the continuing asset/liability management decisions of the Company, while noninterest income benefited quarter-over-quarter from equity investments. The decrease in total noninterest expense quarter-over-quarter primarily reflected the debt prepayment charge of $113 million taken in the fourth quarter of 2004. The unfavorable variance in the provision for credit losses was the result of the release of a portion of the allowance for credit losses in the fourth quarter of 2004. Additional schedules containing more detailed information about the Company’s business line results are available on the web at usbank.com or by calling Investor Relations at 612-303-0781. (MORE)
Slide 27: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 27 CHAIRMAN AND CHIEF EXECUTIVE OFFICER, JERRY A. GRUNDHOFER, AND VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER, DAVID M. MOFFETT, WILL HOST A CONFERENCE CALL TO REVIEW THE FINANCIAL RESULTS ON TUESDAY, April 19, 2005, AT 2:00 p.m. (CDT). To access the conference call, please dial 800-540-0559 and ask for the U.S. Bancorp earnings conference call. Participants calling from outside the United States, please call 785-832-1508. For those unable to participate during the live call, a recording of the call will be available approximately one hour after the conference call ends on Tuesday, April 19, 2005, and will run through Tuesday, April 26, 2005, at 11:00 p.m. (CDT). To access the recorded message dial 800-753-5207. If calling from outside the United States, please dial 402-220-2156. After April 26th, a recording of the call will continue to be available by webcast on the U.S. Bancorp web site at usbank.com. Minneapolis-based U.S. Bancorp (“USB”), with $198 billion in assets, is the 6th largest financial services holding company in the United States. The Company operates 2,377 banking offices and 4,654 ATMs, and provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses and institutions. U.S. Bancorp is the parent company of U.S. Bank. Visit U.S. Bancorp on the web at usbank.com. (MORE)
Slide 28: U.S. Bancorp Reports First Quarter 2005 Results April 19, 2005 Page 28 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 statements often include the words “may,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions. These forward-looking statements cover, among other things, anticipated future revenue and expenses 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) inflation, changes in securities market conditions and monetary fluctuations could adversely affect the value or credit quality of the Company's 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, or bank regulatory reform; (vii) changes in consumer spending and savings habits could adversely affect the Company’s results of operations; (viii) changes in the financial performance and condition of the Company’s borrowers could negatively affect repayment of such borrowers’ loans; (ix) acquisitions may not produce revenue enhancements or cost savings at levels or within time frames originally anticipated, or may result in unforeseen integration difficulties; (x) capital investments in the Company's businesses may not produce expected growth in earnings anticipated at the time of the expenditure; and (xi) acts or threats of terrorism, and/or political and military actions taken by the U.S. or other governments in response to acts or threats of terrorism or otherwise could adversely affect general economic or industry conditions. 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. ### (MORE)
Slide 29: U.S. Bancorp Consolidated Statement of Income (Dollars and Shares in Millions, Except Per Share Data) (Unaudited) Interest Income Loans Loans held for sale Investment securities Other interest income Total interest income Interest Expense Deposits Short-term borrowings Long-term debt Total interest expense Net interest income Provision for credit losses Net interest income after provision for credit losses Noninterest Income Credit and debit card revenue Corporate payment products revenue ATM processing services Merchant processing services Trust and investment management fees Deposit service charges Treasury management fees Commercial products revenue Mortgage banking revenue Investment products fees and commissions Securities losses, net Other Total noninterest income Noninterest Expense Compensation Employee benefits Net occupancy and equipment Professional services Marketing and business development Technology and communications Postage, printing and supplies Other intangibles Debt prepayment Other Total noninterest expense Income before income taxes Applicable income taxes Net income Earnings per share Diluted earnings per share Dividends declared per share Average common shares outstanding Average diluted common shares outstanding Three Months Ended March 31, 2005 2004 $1,911 21 476 27 2,435 308 112 271 691 1,744 172 1,572 154 107 47 178 247 210 107 96 102 39 (59) 154 1,382 567 116 154 36 43 106 63 71 -175 1,331 1,623 552 $1,071 $.58 $.57 $.30 1,852 1,880 $1,747 20 469 22 2,258 227 50 209 486 1,772 235 1,537 142 95 42 141 249 185 118 110 94 39 -103 1,318 536 100 156 32 35 102 62 226 35 171 1,455 1,400 392 $1,008 $.53 $.52 $.24 1,915 1,941 Page 29
Slide 30: U.S. Bancorp Consolidated Ending Balance Sheet (Dollars in Millions) Assets Cash and due from banks Investment securities Held-to-maturity Available-for-sale Loans held for sale Loans Commercial Commercial real estate Residential mortgages Retail Total loans Less allowance for loan losses Net loans Premises and equipment Customers' liability on acceptances Goodwill Other intangible assets Other assets Total assets Liabilities and Shareholders' Equity Deposits Noninterest-bearing Interest-bearing Time deposits greater than $100,000 Total deposits Short-term borrowings Long-term debt Acceptances outstanding Other liabilities Total liabilities Shareholders' equity Common stock Capital surplus Retained earnings Less treasury stock Other comprehensive income Total shareholders' equity Total liabilities and shareholders' equity March 31, 2005 (Unaudited) $5,881 121 42,982 1,635 41,540 27,363 16,572 43,430 128,905 (2,082) 126,823 1,877 91 6,277 2,533 10,246 $198,466 December 31, 2004 $6,336 127 41,354 1,439 40,173 27,585 15,367 43,190 126,315 (2,080) 124,235 1,890 95 6,241 2,387 11,000 $195,104 March 31, 2004 (Unaudited) $7,177 137 45,268 1,644 39,006 27,215 13,717 39,945 119,883 (2,186) 117,697 1,924 148 6,095 2,025 10,030 $192,145 $28,880 71,751 19,087 119,718 14,273 38,071 91 7,105 179,258 20 5,889 17,276 (3,590) (387) 19,208 $198,466 $30,756 71,936 18,049 120,741 13,084 34,739 95 6,906 175,565 20 5,902 16,758 (3,125) (16) 19,539 $195,104 $31,086 74,262 13,616 118,964 13,431 33,568 148 6,582 172,693 20 5,832 15,059 (1,853) 394 19,452 $192,145 Page 30
Slide 31: Supplemental Analyst Schedules 1Q 2005
Slide 32: U.S. Bancorp Income Statement Highlights Financial Results and Ratios Three Months Ended December 31, 2004 $1,800 1,435 3,235 1,579 1,656 64 1,592 8 528 $1,056 $.56 Percent Change v. March 31, 2005 December 31, March 31, 2004 2004 (2.7) % (1.6) % (3.7) 4.9 (3.2) 1.2 (15.7) (8.5) 8.8 9.7 * (26.8) 2.4 15.8 (12.5) -4.5 40.8 1.4 6.3 1.8 9.6 (Dollars and Shares in Millions, Except Per Share Data) (Unaudited) Net interest income (taxable-equivalent basis) Noninterest income Total net revenue Noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Taxable-equivalent adjustment Applicable income taxes Net income Diluted earnings per share March 31, 2005 $1,751 1,382 3,133 1,331 1,802 172 1,630 7 552 $1,071 $.57 March 31, 2004 $1,779 1,318 3,097 1,455 1,642 235 1,407 7 392 $1,008 $.52 Financial Ratios Net interest margin** 4.08 % 4.20 % 4.29 % Interest yield on average loans** 6.08 5.97 5.93 Rate paid on interest-bearing liabilities 1.97 1.72 1.45 Return on average assets 2.21 2.16 2.14 Return on average equity 21.9 21.2 20.7 Efficiency ratio*** 41.7 48.5 47.0 Tangible efficiency ratio**** 39.5 43.6 39.7 * Not meaningful ** On a taxable-equivalent basis *** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net **** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net and intangible amortization Page 32
Slide 33: U.S. Bancorp Quarterly Consolidated Statement of Income (Dollars and Shares in Millions, Except Per Share Data) (Unaudited) Interest Income Loans Loans held for sale Investment securities Other interest income Total interest income Interest Expense Deposits Short-term borrowings Long-term debt Total interest expense Net interest income Provision for credit losses Net interest income after provision for credit losses Noninterest Income Credit and debit card revenue Corporate payment products revenue ATM processing services Merchant processing services Trust and investment management fees Deposit service charges Treasury management fees Commercial products revenue Mortgage banking revenue Investment products fees and commissions Securities gains (losses), net Other Total noninterest income Noninterest Expense Compensation Employee benefits Net occupancy and equipment Professional services Marketing and business development Technology and communications Postage, printing and supplies Other intangibles Debt prepayment Other Total noninterest expense Income before income taxes Applicable income taxes Net income Earnings per share Diluted earnings per share Dividends declared per share Average common shares outstanding Average diluted common shares outstanding March 31, 2005 $1,911 21 476 27 2,435 308 112 271 691 1,744 172 1,572 154 107 47 178 247 210 107 96 102 39 (59) 154 1,382 567 116 154 36 43 106 63 71 -175 1,331 1,623 552 $1,071 $.58 $.57 $.30 1,852 1,880 December 31, 2004 $1,878 23 461 27 2,389 250 80 267 597 1,792 64 1,728 184 101 43 181 241 212 110 108 96 37 (21) 143 1,435 579 98 163 45 49 116 65 161 113 190 1,579 1,584 528 $1,056 $.57 $.56 $.30 1,865 1,894 Three Months Ended September 30, 2004 $1,803 21 453 26 2,303 222 74 232 528 1,775 166 1,609 164 108 45 188 240 208 118 106 97 37 88 125 1,524 564 100 159 37 61 110 61 210 5 211 1,518 1,615 549 $1,066 $.57 $.56 $.24 1,877 1,904 June 30, 2004 $1,740 27 444 25 2,236 205 59 200 464 1,772 204 1,568 159 103 45 165 251 202 121 108 110 43 (172) 107 1,242 573 91 153 35 49 102 60 (47) 2 215 1,233 1,577 540 $1,037 $.55 $.54 $.24 1,892 1,913 March 31, 2004 $1,747 20 469 22 2,258 227 50 209 486 1,772 235 1,537 142 95 42 141 249 185 118 110 94 39 -103 1,318 536 100 156 32 35 102 62 226 35 171 1,455 1,400 392 $1,008 $.53 $.52 $.24 1,915 1,941 Financial Ratios Net interest margin* 4.08 % 4.20 % 4.22 % Interest yield on average loans* 6.08 5.97 5.86 Rate paid on interest-bearing liabilities 1.97 1.72 1.55 Return on average assets 2.21 2.16 2.21 Return on average equity 21.9 21.2 21.9 Efficiency ratio** 41.7 48.5 47.2 Tangible efficiency ratio*** 39.5 43.6 40.6 * On a taxable-equivalent basis ** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net *** Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net and intangible amortization 4.28 % 5.79 1.38 2.19 21.9 38.6 40.1 4.29 % 5.93 1.45 2.14 20.7 47.0 39.7 Page 33
Slide 34: U.S. Bancorp Consolidated Ending Balance Sheet (Dollars in Millions) Assets Cash and due from banks Investment securities Held-to-maturity Available-for-sale Loans held for sale Loans Commercial Commercial real estate Residential mortgages Retail Total loans Less allowance for loan losses Net loans Premises and equipment Customers' liability on acceptances Goodwill Other intangible assets Other assets Total assets Liabilities and Shareholders' Equity Deposits Noninterest-bearing Interest-bearing Time deposits greater than $100,000 Total deposits Short-term borrowings Long-term debt Acceptances outstanding Other liabilities Total liabilities Shareholders' equity Common stock Capital surplus Retained earnings Less treasury stock Other comprehensive income Total shareholders' equity Total liabilities and shareholders' equity March 31, 2005 (Unaudited) $5,881 121 42,982 1,635 41,540 27,363 16,572 43,430 128,905 (2,082) 126,823 1,877 91 6,277 2,533 10,246 $198,466 December 31, 2004 $6,336 127 41,354 1,439 40,173 27,585 15,367 43,190 126,315 (2,080) 124,235 1,890 95 6,241 2,387 11,000 $195,104 September 30, 2004 (Unaudited) $6,969 120 39,534 1,372 40,151 27,414 14,741 42,520 124,826 (2,184) 122,642 1,894 146 6,226 2,419 11,522 $192,844 June 30, 2004 (Unaudited) $7,476 125 40,160 1,383 40,065 27,204 14,380 41,181 122,830 (2,190) 120,640 1,893 169 6,226 2,475 9,737 $190,284 March 31, 2004 (Unaudited) $7,177 137 45,268 1,644 39,006 27,215 13,717 39,945 119,883 (2,186) 117,697 1,924 148 6,095 2,025 10,030 $192,145 $28,880 71,751 19,087 119,718 14,273 38,071 91 7,105 179,258 20 5,889 17,276 (3,590) (387) 19,208 $198,466 $30,756 71,936 18,049 120,741 13,084 34,739 95 6,906 175,565 20 5,902 16,758 (3,125) (16) 19,539 $195,104 $31,585 70,011 13,971 115,567 12,648 38,004 146 6,879 173,244 20 5,868 16,260 (2,710) 162 19,600 $192,844 $32,786 71,314 15,827 119,927 11,592 33,665 169 6,256 171,609 20 5,860 15,644 (2,316) (533) 18,675 $190,284 $31,086 74,262 13,616 118,964 13,431 33,568 148 6,582 172,693 20 5,832 15,059 (1,853) 394 19,452 $192,145 Page 34
Slide 35: U.S. Bancorp Consolidated Quarterly Average Balance Sheet (Dollars in Millions, Unaudited) Assets Investment securities Loans held for sale Loans Commercial Commercial Lease financing Total commercial Commercial real estate Commercial mortgages Construction and development Total commercial real estate Residential mortgages Retail Credit card Retail leasing Home equity and second mortgages Other retail Total retail Total loans Other earning assets Total earning assets Allowance for loan losses Unrealized gain (loss) on available-for-sale securities Other assets Total assets Liabilities and Shareholders' Equity Noninterest-bearing deposits Interest-bearing deposits Interest checking Money market accounts Savings accounts Time certificates of deposit less than $100,000 Time deposits greater than $100,000 Total interest-bearing deposits Short-term borrowings Long-term debt Total interest-bearing liabilities Other liabilities Shareholders' equity Total liabilities and shareholders' equity March 31, 2005 $42,813 1,429 December 31, 2004 $42,315 1,598 September 30, 2004 $42,502 1,405 June 30, 2004 $42,489 1,987 March 31, 2004 $44,744 1,445 36,083 4,914 40,997 20,268 7,236 27,504 15,827 6,417 7,198 14,844 14,867 43,326 127,654 1,398 173,294 (2,114) (261) 26,016 $196,935 35,348 4,855 40,203 20,286 7,360 27,646 15,044 6,347 7,087 14,711 14,601 42,746 125,639 1,372 170,924 (2,207) (150) 26,093 $194,660 34,457 4,860 39,317 20,231 6,963 27,194 14,569 6,145 6,842 14,288 14,551 41,826 122,906 1,374 168,187 (2,287) (492) 26,177 $191,585 34,484 4,846 39,330 20,477 6,639 27,116 14,052 5,989 6,484 13,775 14,415 40,663 121,161 1,353 166,990 (2,289) (729) 26,458 $190,430 33,629 4,902 38,531 20,554 6,556 27,110 13,610 5,878 6,192 13,376 14,113 39,559 118,810 1,360 166,359 (2,431) (14) 25,749 $189,663 $28,417 23,146 30,264 5,968 12,978 18,650 91,006 15,606 35,440 142,052 6,663 19,803 $196,935 $29,841 21,630 30,955 5,776 12,794 15,448 86,603 14,020 37,680 138,303 6,696 19,820 $194,660 $29,791 20,413 31,854 5,854 12,869 14,535 85,525 15,382 35,199 136,106 6,301 19,387 $191,585 $30,607 20,739 34,242 5,936 13,021 12,571 86,509 15,310 33,000 134,819 5,961 19,043 $190,430 $29,025 20,948 34,397 5,898 13,618 12,133 86,994 13,419 34,553 134,966 6,088 19,584 $189,663 Page 35
Slide 36: U.S. Bancorp Consolidated Daily Average Balance Sheet and Related Yields and Rates (a) For the Three Months Ended March 31, 2005 March 31, 2004 Yields Yields Average and Average and Balances Interest Rates Balances Interest Rates $42,813 1,429 40,997 27,504 15,827 43,326 127,654 1,398 173,294 (2,114) (261) 26,016 $196,935 $477 21 577 413 218 709 1,917 27 2,442 4.46 % 5.83 5.69 6.09 5.55 6.63 6.08 7.88 5.69 $44,744 1,445 38,531 27,110 13,610 39,559 118,810 1,360 166,359 (2,431) (14) 25,749 $189,663 $29,025 31 70 4 86 117 308 112 271 691 .54 .93 .31 2.70 2.54 1.37 2.91 3.09 1.97 20,948 34,397 5,898 13,618 12,133 86,994 13,419 34,553 134,966 6,088 19,584 $189,663 19 67 4 91 46 227 50 209 486 .36 .79 .31 2.68 1.51 1.05 1.50 2.43 1.45 $472 20 545 374 197 635 1,751 22 2,265 4.22 % 5.52 5.69 5.55 5.82 6.46 5.93 6.49 5.47 (Dollars in Millions, Unaudited) Assets Investment securities Loans held for sale Loans (b) Commercial Commercial real estate Residential mortgages Retail Total loans Other earning assets Total earning assets Allowance for loan losses Unrealized gain (loss) on available-for-sale securities Other assets Total assets % Change Average Balances (4.3) % (1.1) 6.4 1.5 16.3 9.5 7.4 2.8 4.2 (13.0) * 1.0 3.8 (2.1) 10.5 (12.0) 1.2 (4.7) 53.7 4.6 16.3 2.6 5.3 9.4 1.1 3.8 % Liabilities and Shareholders' Equity Noninterest-bearing deposits $28,417 Interest-bearing deposits Interest checking 23,146 Money market accounts 30,264 Savings accounts 5,968 Time certificates of deposit less than $100,000 12,978 Time deposits greater than $100,000 18,650 Total interest-bearing deposits 91,006 Short-term borrowings 15,606 Long-term debt 35,440 Total interest-bearing liabilities 142,052 Other liabilities 6,663 Shareholders' equity 19,803 Total liabilities and shareholders' equity $196,935 Net interest income Gross interest margin Gross interest margin without taxable-equivalent increments Percent of Earning Assets Interest income Interest expense Net interest margin Net interest margin without taxable-equivalent increments $1,751 3.72 % 3.70 5.69 % 1.61 4.08 % 4.06 % $1,779 4.02 % 4.00 5.47 % 1.18 4.29 % 4.27 % * Not meaningful (a) Interest and rates are presented on a fully taxable-equivalent basis under a tax rate of 35 percent. (b) Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances. Page 36
Slide 37: U.S. Bancorp Consolidated Daily Average Balance Sheet and Related Yields and Rates (a) For the Three Months Ended March 31, 2005 December 31, 2004 Yields Yields Average and Average and Balances Interest Rates Balances Interest Rates $42,813 1,429 40,997 27,504 15,827 43,326 127,654 1,398 173,294 (2,114) (261) 26,016 $196,935 $477 21 577 413 218 709 1,917 27 2,442 4.46 % 5.83 5.69 6.09 5.55 6.63 6.08 7.88 5.69 $42,315 1,598 40,203 27,646 15,044 42,746 125,639 1,372 170,924 (2,207) (150) 26,093 $194,660 $29,841 31 70 4 86 117 308 112 271 691 .54 .93 .31 2.70 2.54 1.37 2.91 3.09 1.97 21,630 30,955 5,776 12,794 15,448 86,603 14,020 37,680 138,303 6,696 19,820 $194,660 22 57 3 84 84 250 80 267 597 .40 .74 .25 2.61 2.16 1.15 2.25 2.82 1.72 $463 23 569 409 211 695 1,884 27 2,397 4.38 % 5.81 5.63 5.90 5.59 6.46 5.97 7.78 5.59 (Dollars in Millions, Unaudited) Assets Investment securities Loans held for sale Loans (b) Commercial Commercial real estate Residential mortgages Retail Total loans Other earning assets Total earning assets Allowance for loan losses Unrealized gain (loss) on available-for-sale securities Other assets Total assets % Change Average Balances 1.2 % (10.6) 2.0 (.5) 5.2 1.4 1.6 1.9 1.4 (4.2) 74.0 (.3) 1.2 (4.8) 7.0 (2.2) 3.3 1.4 20.7 5.1 11.3 (5.9) 2.7 (.5) (.1) 1.2 % Liabilities and Shareholders' Equity Noninterest-bearing deposits $28,417 Interest-bearing deposits Interest checking 23,146 Money market accounts 30,264 Savings accounts 5,968 Time certificates of deposit less than $100,000 12,978 Time deposits greater than $100,000 18,650 Total interest-bearing deposits 91,006 Short-term borrowings 15,606 Long-term debt 35,440 Total interest-bearing liabilities 142,052 Other liabilities 6,663 Shareholders' equity 19,803 Total liabilities and shareholders' equity $196,935 Net interest income Gross interest margin Gross interest margin without taxable-equivalent increments Percent of Earning Assets Interest income Interest expense Net interest margin Net interest margin without taxable-equivalent increments $1,751 3.72 % 3.70 5.69 % 1.61 4.08 % 4.06 % $1,800 3.87 % 3.85 5.59 % 1.39 4.20 % 4.18 % (a) Interest and rates are presented on a fully taxable-equivalent basis under a tax rate of 35 percent. (b) Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances. Page 37
Slide 38: U.S. Bancorp Loan Portfolio (Dollars in Millions, Unaudited) Commercial Commercial Lease financing Total commercial Commercial real estate Commercial mortgages Construction and development Total commercial real estate Residential mortgages Residential mortgages Home equity loans, first liens Total residential mortgages Retail Credit card Retail leasing Home equity and second mortgages Other retail Revolving credit Installment Automobile Student Total other retail Total retail Total loans March 31, 2005 Percent Amount of Total $36,623 4,917 41,540 20,134 7,229 27,363 10,747 5,825 16,572 6,276 7,253 14,867 2,480 3,006 7,445 2,103 15,034 43,430 $128,905 28.4 % 3.8 32.2 15.6 5.6 21.2 8.4 4.5 12.9 4.9 5.6 11.5 1.9 2.4 5.8 1.6 11.7 33.7 100.0 % December 31, 2004 Percent Amount of Total $35,210 4,963 40,173 20,315 7,270 27,585 9,722 5,645 15,367 6,603 7,166 14,851 2,541 2,767 7,419 1,843 14,570 43,190 $126,315 27.9 % 3.9 31.8 16.1 5.7 21.8 7.7 4.5 12.2 5.2 5.7 11.8 2.0 2.2 5.9 1.4 11.5 34.2 100.0 % September 30, 2004 Percent Amount of Total $35,286 4,865 40,151 20,232 7,182 27,414 8,955 5,786 14,741 6,216 7,004 14,548 2,555 2,790 7,481 1,926 14,752 42,520 $124,826 28.3 % 3.9 32.2 16.2 5.7 21.9 7.2 4.6 11.8 5.0 5.6 11.7 2.1 2.2 6.0 1.5 11.8 34.1 100.0 % June 30, 2004 Percent Amount of Total $35,170 4,895 40,065 20,382 6,822 27,204 8,420 5,960 14,380 6,079 6,640 14,017 2,544 2,656 7,515 1,730 14,445 41,181 $122,830 28.6 % 4.0 32.6 16.6 5.6 22.2 6.9 4.8 11.7 4.9 5.4 11.4 2.1 2.2 6.1 1.4 11.8 33.5 100.0 % March 31, 2004 Percent Amount of Total $34,165 4,841 39,006 20,623 6,592 27,215 7,705 6,012 13,717 5,815 6,365 13,515 2,477 2,441 7,425 1,907 14,250 39,945 $119,883 28.5 % 4.0 32.5 17.2 5.5 22.7 6.5 5.0 11.5 4.8 5.3 11.3 2.1 2.0 6.2 1.6 11.9 33.3 100.0 % Page 38
Slide 39: U.S. Bancorp Supplemental Financial Data (Dollars in Millions, Unaudited) Book value of intangibles Goodwill Merchant processing contracts Core deposit benefits Mortgage servicing rights Trust relationships Other identified intangibles Total March 31, 2005 $6,277 748 317 948 285 235 $8,810 December 31, 2004 $6,241 714 336 866 297 174 $8,628 September 30, 2004 $6,226 713 356 865 309 176 $8,645 Three Months Ended September 30, 2004 $32 20 134 13 11 $210 $30 67 $97 $4,024 $63,208 June 30, 2004 $6,226 751 376 863 322 163 $8,701 March 31, 2004 $6,095 527 396 634 299 169 $8,120 March 31, 2005 Amortization of intangibles Merchant processing contracts Core deposit benefits Mortgage servicing rights Trust relationships Other identified intangibles Total Mortgage banking revenue Origination and sales Loan servicing Total mortgage banking revenue Mortgage production volume Mortgages serviced for others $33 19 (5) 12 12 $71 $35 67 $102 $4,505 $63,252 December 31, 2004 $39 20 78 12 12 $161 $28 68 $96 $4,409 $63,163 June 30, 2004 $33 20 (123) 12 11 $(47) $47 63 $110 $5,220 $58,675 March 31, 2004 $28 21 154 12 11 $226 $34 60 $94 $3,733 $57,667 A summary of the Company's mortgage servicing rights and related characteristics by portfolio as of March 31, 2005, was as follows: (Dollars in Millions) Servicing portfolio Fair market value Value (bps) Weighted-average servicing fees (bps) Multiple (value/servicing fees) Weighted-average note rate Age (in years) Expected life (in years) Discount rate * MRBP represents mortgage revenue bond programs MRBP* $7,429 $133 179 43 4.16 6.19 % 3.7 6.8 10.1 % Government Conventional $9,259 $46,564 $148 $679 160 146 45 35 3.56 4.17 6.03 % 5.69 % 2.4 1.8 5.4 6.1 10.7 % 9.6 % Total $63,252 $960 152 37 4.11 5.80 % 2.1 6.1 9.8 % Page 39
Slide 40: U.S. Bancorp Line of Business Financial Performance * Three Months Ended (Dollars in Millions, Unaudited) Condensed Income Statement Net interest income (taxable-equivalent basis) Noninterest income Securities gains (losses), net Total net revenue Noninterest expense Other intangibles Total noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Income taxes and taxable-equivalent adjustment Net income Average Balance Sheet Data Loans Other earning assets Goodwill Other intangible assets Assets Noninterest-bearing deposits Interest-bearing deposits Total deposits Shareholders' equity Wholesale Banking Mar 31, Mar 31, 2005 2004 $398 218 (4) 612 180 4 184 428 3 425 155 $270 $43,682 226 1,225 76 49,605 11,920 19,848 31,768 5,091 $390 198 1 589 173 5 178 411 34 377 137 $240 $41,711 234 1,225 95 47,958 12,396 16,456 28,852 5,100 Percent Change 2.1 % 10.1 ** 3.9 4.0 (20.0) 3.4 4.1 (91.2) 12.7 13.1 12.5 4.7 % (3.4) -(20.0) 3.4 (3.8) 20.6 10.1 (.2) Consumer Banking Mar 31, Mar 31, 2005 2004 $959 465 (54) 1,370 643 10 653 717 80 637 232 $405 $67,773 1,719 2,243 1,116 75,472 13,077 59,044 72,121 6,415 $876 438 -1,314 628 170 798 516 108 408 148 $260 $61,880 1,702 2,243 986 69,423 13,765 58,755 72,520 6,336 Percent Change 9.5 % 6.2 ** 4.3 2.4 (94.1) (18.2) 39.0 (25.9) 56.1 56.8 55.8 9.5 1.0 -13.2 8.7 (5.0) .5 (.6) 1.2 % Private Client, Trust and Asset Management Mar 31, Mar 31, Percent 2005 2004 Change $104 253 -357 163 15 178 179 -179 65 $114 $4,856 11 843 331 6,638 3,356 8,943 12,299 2,133 $82 254 -336 157 15 172 164 1 163 59 $104 $4,656 8 769 357 6,415 2,999 8,417 11,416 2,064 26.8 % (.4) -6.3 3.8 -3.5 9.1 ** 9.8 10.2 9.6 4.3 % 37.5 9.6 (7.3) 3.5 11.9 6.2 7.7 3.3 Three Months Ended (Dollars in Millions, Unaudited) Condensed Income Statement Net interest income (taxable-equivalent basis) Noninterest income Securities gains (losses), net Total net revenue Noninterest expense Other intangibles Total noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Income taxes and taxable-equivalent adjustment Net income Average Balance Sheet Data Loans Other earning assets Goodwill Other intangible assets Assets Noninterest-bearing deposits Interest-bearing deposits Total deposits Shareholders' equity * Preliminary data ** Not meaningful Payment Services Mar 31, Mar 31, 2005 2004 $141 481 -622 234 41 275 347 89 258 94 $164 $11,023 65 1,941 907 14,498 140 14 154 3,432 $146 414 -560 193 35 228 332 93 239 87 $152 $10,212 29 1,815 649 13,084 106 11 117 3,025 Percent Change (3.4) % 16.2 -11.1 21.2 17.1 20.6 4.5 (4.3) 7.9 8.0 7.9 7.9 ** 6.9 39.8 10.8 32.1 27.3 31.6 13.5 % Treasury and Corporate Support Mar 31, Mar 31, Percent 2005 2004 Change $149 24 (1) 172 40 1 41 131 -131 13 $118 $320 43,619 -12 50,722 (76) 3,157 3,081 2,732 $285 14 (1) 298 78 1 79 219 (1) 220 (32) $252 $351 45,576 -9 52,783 (241) 3,355 3,114 3,059 (47.7) % 71.4 -(42.3) (48.7) -(48.1) (40.2) ** (40.5) ** (53.2) Consolidated Company Mar 31, Mar 31, Percent 2005 2004 Change $1,751 1,441 (59) 3,133 1,260 71 1,331 1,802 172 1,630 559 $1,071 $1,779 1,318 -3,097 1,229 226 1,455 1,642 235 1,407 399 $1,008 (1.6) % 9.3 ** 1.2 2.5 (68.6) (8.5) 9.7 (26.8) 15.8 40.1 6.3 7.4 % (4.0) 3.3 16.5 3.8 (2.1) 4.6 2.9 1.1 (8.8) % $127,654 $118,810 (4.3) 45,640 47,549 -6,252 6,052 33.3 2,442 2,096 (3.9) 196,935 189,663 68.5 (5.9) (1.1) (10.7) 28,417 91,006 119,423 19,803 29,025 86,994 116,019 19,584 Page 40
Slide 41: U.S. Bancorp Line of Business Financial Performance * Three Months Ended (Dollars in Millions, Unaudited) Condensed Income Statement Net interest income (taxable-equivalent basis) Noninterest income Securities gains (losses), net Total net revenue Noninterest expense Other intangibles Total noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Income taxes and taxable-equivalent adjustment Net income Average Balance Sheet Data Loans Other earning assets Goodwill Other intangible assets Assets Noninterest-bearing deposits Interest-bearing deposits Total deposits Shareholders' equity Wholesale Banking Mar 31, Dec 31, 2005 2004 $398 218 (4) 612 180 4 184 428 3 425 155 $270 $43,682 226 1,225 76 49,605 11,920 19,848 31,768 5,091 $412 222 -634 191 4 195 439 (8) 447 163 $284 $43,025 200 1,225 81 48,896 12,128 18,004 30,132 5,136 Percent Change (3.4) % (1.8) ** (3.5) (5.8) -(5.6) (2.5) ** (4.9) (4.9) (4.9) 1.5 % 13.0 -(6.2) 1.5 (1.7) 10.2 5.4 (.9) Consumer Banking Mar 31, Dec 31, 2005 2004 $959 465 (54) 1,370 643 10 653 717 80 637 232 $405 $67,773 1,719 2,243 1,116 75,472 13,077 59,044 72,121 6,415 $965 473 -1,438 677 93 770 668 87 581 211 $370 $66,188 2,170 2,243 1,102 74,585 14,220 58,430 72,650 6,405 Percent Change (.6) % (1.7) ** (4.7) (5.0) (89.2) (15.2) 7.3 (8.0) 9.6 10.0 9.5 2.4 % (20.8) -1.3 1.2 (8.0) 1.1 (.7) .2 Private Client, Trust and Asset Management Mar 31, Dec 31, Percent 2005 2004 Change $104 253 -357 163 15 178 179 -179 65 $114 $4,856 11 843 331 6,638 3,356 8,943 12,299 2,133 $100 247 -347 170 16 186 161 -161 59 $102 $4,950 9 845 346 6,777 3,630 8,466 12,096 2,053 4.0 % 2.4 -2.9 (4.1) (6.3) (4.3) 11.2 -11.2 10.2 11.8 (1.9) % 22.2 (.2) (4.3) (2.1) (7.5) 5.6 1.7 3.9 Three Months Ended (Dollars in Millions, Unaudited) Condensed Income Statement Net interest income (taxable-equivalent basis) Noninterest income Securities gains (losses), net Total net revenue Noninterest expense Other intangibles Total noninterest expense Income before provision and income taxes Provision for credit losses Income before income taxes Income taxes and taxable-equivalent adjustment Net income Average Balance Sheet Data Loans Other earning assets Goodwill Other intangible assets Assets Noninterest-bearing deposits Interest-bearing deposits Total deposits Shareholders' equity * Preliminary data ** Not meaningful Payment Services Mar 31, Dec 31, 2005 2004 $141 481 -622 234 41 275 347 89 258 94 $164 $11,023 65 1,941 907 14,498 140 14 154 3,432 $143 505 -648 230 47 277 371 86 285 104 $181 $11,063 20 1,916 836 14,464 119 13 132 3,336 Percent Change (1.4) % (4.8) -(4.0) 1.7 (12.8) (.7) (6.5) 3.5 (9.5) (9.6) (9.4) (.4) % ** 1.3 8.5 .2 17.6 7.7 16.7 2.9 Treasury and Corporate Support Mar 31, Dec 31, Percent 2005 2004 Change $149 24 (1) 172 40 1 41 131 -131 13 $118 $320 43,619 -12 50,722 (76) 3,157 3,081 2,732 $180 9 (21) 168 150 1 151 17 (101) 118 (1) $119 $413 42,886 -6 49,938 (256) 1,690 1,434 2,890 (17.2) % ** 95.2 2.4 (73.3) -(72.8) ** ** 11.0 ** (.8) Consolidated Company Mar 31, Dec 31, Percent 2005 2004 Change $1,751 1,441 (59) 3,133 1,260 71 1,331 1,802 172 1,630 559 $1,071 $1,800 1,456 (21) 3,235 1,418 161 1,579 1,656 64 1,592 536 $1,056 (2.7) % (1.0) ** (3.2) (11.1) (55.9) (15.7) 8.8 ** 2.4 4.3 1.4 1.6 .8 .4 3.0 1.2 (4.8) 5.1 2.6 (.1) % (22.5) % $127,654 $125,639 1.7 45,640 45,285 -6,252 6,229 100.0 2,442 2,371 1.6 196,935 194,660 70.3 86.8 ** (5.5) 28,417 91,006 119,423 19,803 29,841 86,603 116,444 19,820 Page 41

   
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