<PAGE>
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): OCTOBER 16, 1997
U.S. BANCORP
(Exact name of registrant as specified in its charter)
DELAWARE 1-6880 41-0255900
(State or other jurisdiction (Commission (I.R.S Employer
of Incorporation) File Number) Identification No.)
601 SECOND AVENUE SOUTH, MINNEAPOLIS, MINNESOTA 55402
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 612-973-1111
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE>
Item 5. OTHER EVENTS
On October 16, 1997, U.S. Bancorp (the "Company") released its third
quarter 1997 earnings summary to the public. The Company's press
release, dated October 16, 1997, announcing such earnings summary is
included as Exhibit 99 hereto and is incorporated herein by
reference.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(c.) Exhibits (filed herewith)
Exhibit 99 Press release of U.S. Bancorp dated October 16, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
U.S. BANCORP
By /s/ DAVID J. PARRIN
--------------------
David J. Parrin
Senior Vice President & Controller
DATE: OCTOBER 17, 1997
<PAGE>
NEWS RELEASE
- --------------------------------------------------------------------------------
[LETTERHEAD]
CONTACT:
Wendy L. Raway John R. Danielson Judith T. Murphy
Media Relations Investor Relations Investor Relations
(612) 973-2429 (612) 973-2261 (612) 973-2264
U.S. BANCORP REPORTS RECORD OPERATING EARNINGS FOR 3Q 1997
<TABLE>
<CAPTION>
3Q 3Q PERCENT YTD YTD PERCENT
EARNINGS SUMMARY 1997 1996 CHANGE 1997 1996 CHANGE
- ---------------------------------------------------------------------------------------------------------------------------
($ in millions, except per-share data)
<S> <C> <C> <C> <C> <C> <C>
Before nonrecurring items*:
Operating earnings $324.8 $290.6 11.8 $919.7 $850.3 8.2
Operating earnings to common 321.7 286.0 12.5 910.5 836.3 8.9
Earnings per common share (fully diluted) 1.29 1.11 16.2 3.64 3.26 11.7
Net income (loss) (47.6) 255.7 nm 549.6 926.6 (40.7)
Earnings (loss) per common share (fully diluted) (0.20) 0.98 nm 2.16 3.55 (39.2)
Dividends paid per common share 0.4650 0.4125 12.7 1.3950 1.2375 12.7
Book value per common share (period-end) 22.82 22.97 (0.7)
Return on average common equity** (%) 22.3 19.7 21.5 19.7
Return on average assets** (%) 1.88 1.70 1.80 1.69
Net interest margin (%) 5.03 5.05 5.05 5.03
Efficiency ratio** (%) 47.7 51.6 49.3 52.4
</TABLE>
* Net nonrecurring items totaled $(525.8) million, or $(372.4) million,
after-tax, in 3Q97 and $(56.2) million, or $(34.9) million, after-tax, in
3Q96. Net nonrecurring items totaled $(522.2) million, or $(370.1)
million, after-tax, year-to-date 1997 and $144.6 million, or $76.3
million, after-tax, year-to-date 1996.
** before nonrecurring items
MINNEAPOLIS, October 16, 1997 -- U.S. Bancorp (NYSE: USB) today reported record
operating earnings of $324.8 million, or $1.29 per fully diluted share, for the
third quarter of 1997, compared with $290.6 million, or $1.11 per fully diluted
share, in the third quarter of 1996. Return on average assets and return on
average common equity, excluding nonrecurring items, were 1.88 percent and 22.3
percent, respectively, in the third quarter of 1997, compared with returns,
excluding nonrecurring items, of 1.70 percent and 19.7 percent in the third
quarter of 1996.
U.S. Bancorp, formerly known as First Bank System, Inc., (the "Company") is
the organization created by the merger of First Bank System, Inc. ("FBS") and
U.S. Bancorp ("USBC") of Portland,
<PAGE>
Page 2
Oregon. The merger was completed on August 1, 1997 as a pooling-of-interests,
and prior periods have been restated.
As a result of the merger, the Company recorded a net loss for the third
quarter of 1997, including nonrecurring items, of $(47.6) million, or $(0.20)
per fully diluted share, compared to net income of $255.7 million, or $0.98 per
fully diluted share, in the third quarter of 1996.
During the third quarter, senior management and employees continued to
focus on the goal of successfully completing the integration of the former FBS
and former USBC into the new U.S. Bancorp. The integration and conversion plans
were completed prior to close on August 1st, and the planned tasks are on
schedule. The credit card system conversion is planned for October, 1997. The
trust and core systems conversions are scheduled for the first and second
quarters of 1998. The planned cost take-outs of $340 million, or 28% of the
former USBC's expense base, are expected to be substantially achieved on a
run-rate basis by the third quarter of 1998.
Earnings in the third quarter of 1997 included nonrecurring charges of
$535.2 million, consisting of $440.2 million ($318.5 million after-tax) of
merger-related expenses and a $95.0 million ($59.8 million after-tax)
merger-related provision for credit losses. The $440.2 million of merger-related
expenses included $232.3 million of severance and retention costs, $65.8 million
of occupancy/equipment writedowns, $43.4 million of capitalized software and
other asset writeoffs, $35.0 million of investment banking and other transaction
costs, $27.1 million of conversion expense, and $36.6 million of other
merger-related expenses. Approximately $190.0 million ($120.0 million
after-tax) of additional merger-related expenses are expected to be incurred
over the next four quarters. Merger-related credit activity included the $95.0
million merger-related provision for credit losses and $62.3 million of
charge-offs, taken as a result of efforts to align the classification and
charge-off practices of the former USBC with those of the Company. The quarter
also included nonrecurring income of $9.4 million ($5.9 million after-tax) from
the gain on sale of USBC's affinity credit card portfolio.
<PAGE>
Page 3
U.S. Bancorp's President and Chief Executive Officer, John F. Grundhofer,
said, "We are very pleased with the results of our first quarter as the new
U.S. Bancorp. Our integration and conversion efforts are progressing on
schedule, while our day-to-day business continues to grow. Our operating return
on assets of 1.88 percent, return on equity of 22.3 percent and efficiency ratio
of 47.7 percent are among the best in the industry."
The strong operating earnings for the third quarter reflected growth in
both net interest income and noninterest income and a decrease in noninterest
expense from the third quarter of 1996. Excluding nonrecurring items,
noninterest income for the quarter increased $44.3 million, or 12.4 percent,
from the third quarter of 1996, while noninterest expense declined by $18.1
million, or 3.1 percent. The combination of growing revenues and declining
expense led to an efficiency ratio (ratio of expenses to revenues), before
nonrecurring items, of 47.7 percent in the third quarter of 1997, compared with
51.6 percent in the third quarter of 1996.
Excluding merger-related charge-offs, net charge-offs were .76 percent of
average loans in the third quarter of 1997, compared with .73 percent in the
second quarter of 1997 and .54 percent in same period of last year. Consumer
loans (excluding first mortgage loans) 30 days or more past due were 2.18
percent of loans outstanding for the third quarter of 1997, slightly below the
2.26 percent for the second quarter of 1997, and slightly above the 2.06 percent
in the same period of last year. The ratio of allowance for credit losses to
nonperforming loans continued to indicate strong reserve coverage of 343 percent
at September 30, 1997, higher than the coverage ratio of 310 percent at June
30, 1997, and slightly below the coverage ratio of 357 percent at September 30,
1996.
On September 15, 1997, U.S. Bancorp announced that it would acquire Zappco,
Inc., a bank holding company headquartered in St. Cloud, Minnesota, with three
banks, six banking locations and total assets of $360 million. The acquisition
is subject to regulatory approval and is expected to close around year end 1997.
<PAGE>
Page 4
<TABLE>
<CAPTION>
INCOME STATEMENT HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------
(Taxable-equivalent basis, $ in millions,
except per-share data) 3Q 3Q PERCENT YTD YTD PERCENT
1997 1996 CHANGE 1997 1996 CHANGE
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income $779.8 $770.0 1.3 $2,321.3 $2,256.6 2.9
Provision for credit losses* 90.0 73.1 23.1 275.3 195.7 40.7
Noninterest income* 400.3 356.0 12.4 1,181.7 1,071.4 10.3
Noninterest expense* 562.9 581.0 (3.1) 1,727.9 1,744.9 (1.0)
------------------- --------------------
Income before taxes and
nonrecurring items 527.2 471.9 11.7 1,499.8 1,387.4 8.1
Taxable-equivalent adjustment 14.5 16.1 (9.9) 44.2 48.2 (8.3)
Income taxes* 187.9 165.2 13.7 535.9 488.9 9.6
------------------- --------------------
Income before nonrecurring items 324.8 290.6 11.8 919.7 850.3 8.2
Net nonrecurring items (after-tax) (372.4) (34.9) nm (370.1) 76.3 nm
------------------- --------------------
Net income (loss) ($47.6) $255.7 nm $549.6 $926.6 (40.7)
------------------- --------------------
------------------- --------------------
Net income (loss) to common ($50.7) $251.1 nm $540.4 $912.6 (40.8)
------------------- --------------------
------------------- --------------------
Per fully diluted common share:**
Earnings, before nonrecurring items $1.29 $1.11 16.2 $3.64 $3.26 11.7
------------------- --------------------
------------------- --------------------
Earnings on a cash basis,
before nonrecurring items*** $1.41 $1.22 15.6 $3.97 $3.54 12.1
------------------- --------------------
------------------- --------------------
Net income (loss) ($0.20) $0.98 nm $2.16 $3.55 (39.2)
------------------- --------------------
------------------- --------------------
Earnings (loss) on a cash basis*** ($0.09) $1.08 nm $2.49 $3.95 (37.0)
------------------- --------------------
------------------- --------------------
</TABLE>
* before effect of nonrecurring items
** nonrecurring items reduced earnings by $1.49 in 3Q97, $0.13 in 3Q96 and
$1.48 year-to-date 1997 and added $0.29 year-to-date 1996
nonrecurring items reduced cash basis earnings by $1.50 in 3Q97, $0.14 in
3Q96 and 1.48 year-to-date 1997 and added $0.41 year-to-date 1996
*** calculated by adding amortization of goodwill and other intangible assets
to net income
NET INTEREST INCOME
Third quarter net interest income on a taxable-equivalent basis was $779.8
million, which was higher by $9.8 million, or 1.3 percent, than the third
quarter of 1996. The increase was primarily the result of an increase in
earning assets of $902 million in the third quarter of 1997, driven by loan
production, partially offset by reductions in investment securities and
residential mortgages. Average loans were up $2.5 billion, or 4.8 percent, from
the third quarter of 1996. Excluding residential mortgage loans and the effect
of the $420 million first quarter corporate card securitization, average loans
for the third quarter were higher by $3.2 billion, or 7.0 percent, than third
quarter of 1996. This increase reflected growth in both core commercial and
consumer loans.
<PAGE>
Page 5
Average securities for the third quarter were lower by $942 million than
the third quarter of 1996, reflecting both maturities and sales of securities.
The net interest margin in the third quarter of 1997 of 5.03 percent was
slightly below the 1996 margin of 5.05 percent.
AVERAGE LOANS
--------------------------------------------------------------------------
($ in millions)
3Q 3Q PERCENT
1997 1996 CHANGE
----------------------------------
Commercial* $22,574 $21,015 7.4
Commercial real estate 10,300 9,482 8.6
------- -------
Total commercial 32,874 30,497 7.8
Home equity and second mortgage 5,204 4,679 11.2
Credit card 3,764 3,547 6.1
Other 6,847 7,161 (4.4)
------- -------
Total consumer, excl. residential 15,815 15,387 2.8
Residential mortgage 5,001 5,356 (6.6)
------- -------
Total loans $53,690 $51,240 4.8
------- -------
------- -------
Total loans, excluding residential
mortgages $48,689 $45,884 6.1
------- -------
------- -------
* $420 million of corporate charge card receivables were securitized and
removed from the loan portfolio during the 1Q 1997. Excluding the
securitization, commercial loans would have increased by $2.0 billion,
or 9.4%, and, excluding residential mortgage loans, total loans would
have increased by $3.2 billion, or 7.0 percent.
<PAGE>
Page 6
<TABLE>
<CAPTION>
NONINTEREST INCOME
- ----------------------------------------------------------------------------------------------------------------------
($ in millions)
3Q 3Q PERCENT YTD YTD PERCENT
1997 1996 CHANGE 1997 1996 CHANGE
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Credit card fee revenue* $106.2 $90.1 17.9 $295.7 $260.2 13.6
Service charges on deposit accounts 102.2 96.4 6.0 295.0 279.8 5.4
Trust fees 87.4 74.2 17.8 259.2 225.0 15.2
Investment products fees and commissions 16.5 13.1 26.0 49.0 44.9 9.1
Other 88.0 82.2 7.1 282.8 261.5 8.1
------------------- --------------------
Subtotal 400.3 356.0 12.4 1,181.7 1,071.4 10.3
Termination fee, net of transaction costs -- -- -- 190.0
State income tax refund -- -- -- 65.0
Gain on sale of mortgage banking operations -- -- -- 45.8
Gain on sale of operations and loans 9.4 -- 9.4 25.6
Net securities gains -- 0.9 3.6 20.3
Other -- 4.2 -- 4.2
------------------- --------------------
Nonrecurring gains 9.4 5.1 13.0 350.9
------------------- --------------------
Total noninterest income $409.7 $361.1 $1,194.7 $1,422.3
------------------- --------------------
------------------- --------------------
</TABLE>
* Excluding the effect of the 1Q 1997 corporate card securitization, credit
card fee income would have increased by $21.2 million, or 23.5 percent,
over 3Q 1996 and $47.2 million, or 18.1 percent over year-to-date 1996.
NONINTEREST INCOME
Third quarter noninterest income, before nonrecurring items, was $400.3
million, an increase of $44.3 million, or 12.4 percent, from the same quarter of
1996. Excluding the reduction in fees related to the first quarter corporate
card securitization, noninterest income, before nonrecurring items, increased by
$49.4 million, or 13.9 percent. The increase in noninterest income resulted
from growth in all categories of fee revenue. Credit card fee revenue increased
by $16.1 million, or 17.9 percent, as a result of higher volumes for Purchasing
and Corporate Cards and the Northwest Airlines WorldPerks credit card, partially
offset by the effect of the first quarter corporate card securitization.
Excluding the effect of the corporate card securitization, credit card fee
revenue would have increased by $21.2 million, or 23.5 percent. Trust fees were
up over the third quarter of 1996 by $13.2 million, or 17.8 percent, due to
growth in the corporate, institutional and personal
<PAGE>
Page 7
trust businesses. The nonrecurring gain on sale resulted from the sale of the
former USBC's $45 million affinity credit card portfolio.
<TABLE>
<CAPTION>
NONINTEREST EXPENSE
- ----------------------------------------------------------------------------------------------------------------------
($ in millions)
3Q 3Q PERCENT YTD YTD PERCENT
1997 1996 CHANGE 1997 1996 CHANGE
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salaries* $242.2 $238.1 1.7 $729.7 $715.3 2.0
Employee benefits* 49.2 52.2 (5.7) 167.5 167.2 0.2
Net occupancy 45.3 44.6 1.6 136.3 133.9 1.8
Furniture and equipment 40.4 42.1 (4.0) 127.4 131.4 (3.0)
Goodwill and intangibles* 29.1 27.1 7.4 82.3 73.2 12.4
Professional services* 18.9 13.5 40.0 47.5 40.6 17.0
Other personnel costs 14.3 23.8 (39.9) 47.1 61.1 (22.9)
Telephone 15.5 15.9 (2.5) 44.8 44.7 0.2
Advertising and marketing 13.3 15.7 (15.3) 42.2 46.3 (8.9)
FDIC insurance 2.4 2.5 (4.0) 6.9 11.4 (39.5)
Other* 92.3 105.5 (12.5) 296.2 319.8 (7.4)
--------------------- ---------------------
Subtotal 562.9 581.0 (3.1) 1,727.9 1,744.9 (1.0)
Merger-related 440.2 -- 440.2 49.5
SAIF special assessment -- 61.3 -- 61.3
Branch distribution resizing -- -- -- 38.6
Goodwill and intangibles -- -- -- 29.5
Salaries and employee benefits -- -- -- 10.1
Other -- -- -- 17.3
--------------------- ---------------------
Nonrecurring charges 440.2 61.3 440.2 206.3
--------------------- ---------------------
Total noninterest expense $1,003.1 $642.3 $2,168.1 $1,951.2
--------------------- ---------------------
--------------------- ---------------------
</TABLE>
* before effect of nonrecurring items in 1996
NONINTEREST EXPENSE
Third quarter noninterest expense, before nonrecurring items, totaled $562.9
million, a decrease of $18.1 million, or 3.1 percent, from the third quarter of
1996. Expense reductions in a number of categories reflect the initial benefits
of the merger, realized through lower expenditures for furniture and equipment
expense, telephone and other expense, such as travel and entertainment and
printing, stationary and supplies. The reduction in other personnel reflects
lower contract labor expense associated with 1996 technology projects that are
now complete. Offsetting a portion of the favorable variance in contract labor
was an increase in professional services expense, which was
<PAGE>
Page 8
$5.4 million higher than the third quarter of 1996, primarily due to several
1997 technology initiatives which involve third party consulting arrangements.
The $440.2 million of nonrecurring expenses in the third quarter of 1997
were merger-related, including $232.3 million of severance and retention costs,
$65.8 million of occupancy/equipment write-downs, $43.4 million of capitalized
software and other asset write-offs, $35.0 million of investment banking and
other transaction costs, $27.1 million of conversion expense, and all other
merger-related expenses of $36.6 million. Additional merger-related charges of
approximately $190.0 million are expected to be incurred over the next four
quarters. The 1996 third quarter nonrecurring item was a $61.3 million SAIF
special assessment.
<TABLE>
<CAPTION>
ALLOWANCE FOR CREDIT LOSSES
----------------------------------------------------------------------------------------------------
($ in millions)
3Q 2Q 1Q 4Q 3Q
1997 1997 1997 1996 1996
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period $999.4 $993.4 $992.5 $987.4 $984.2
Net charge-offs (recoveries)
Commercial 83.8 25.2 9.2 8.1 6.1
Consumer 80.7 72.8 74.7 63.1 63.8
-------------------------------------------------
Total 164.5 98.0 83.9 71.2 69.9
Provision for credit losses 90.0 101.1 84.2 75.5 73.1
Merger-related provision for credit losses 95.0 -- -- -- --
Acquisitions and other additions -- 2.9 0.6 0.8 --
-------------------------------------------------
Balance, end of period $1,019.9 $999.4 $993.4 $992.5 $987.4
-------------------------------------------------
-------------------------------------------------
Net charge-offs to average loans (%) 1.22 0.73 0.65 0.54 0.54
Allowance for credit losses to
period-end loans (%) 1.88 1.85 1.88 1.90 1.91
</TABLE>
CREDIT QUALITY
Total net charge-offs of $164.5 million in the third quarter of 1997
included $62.3 million of merger-related charge-offs. These charge-offs were
taken to align the classification and charge-off practices of the former USBC
with those of the Company. Consumer loan net charge-offs,
<PAGE>
Page 9
excluding merger related charge-offs of $7.0 million, were $73.7 million, an
increase of $.9 million, or 1.2 percent, from the second quarter of 1997.
Excluding merger-related charge-offs, total consumer charge-offs as a percent of
average loans were 1.40 percent for the third quarter of 1997, equal to the
second quarter of 1997. Consumer loans (excluding first mortgage loans) 30 days
or more past due were 2.18 percent of the portfolio at September 30, 1997,
compared with 2.26 percent in the second quarter and 2.06 percent a year
earlier. Commercial loan net charge-offs, excluding merger-related charge-offs
of $55.3 million, were $28.5 million for the third quarter, compared with net
charge-offs of $25.2 million in the second quarter of 1997 and $6.1 million in
the third quarter of 1996. The majority of the $28.5 million of commercial net
charge-offs can be attributed to one large credit.
<TABLE>
<CAPTION>
CONSUMER CREDIT
-----------------------------------------------------------------------------------------------------
(Percent)
SEP 30 JUN 30 MAR 31 DEC 31 SEP 30
1997 1997 1997 1996 1996
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Charge-off Ratios:*
Credit cards 4.23 4.03 4.35 3.97 4.15
Other consumer 1.28 1.20 1.20 0.82 0.87
Subtotal, excl. first mortgage 1.98 1.84 1.92 1.56 1.63
First mortgage 0.13 0.05 0.09 0.17 0.07
Total consumer 1.54 1.40 1.46 1.21 1.22
Delinquency Ratios (including NPLs):
Total consumer, excl. first mortgage
Past due 30+ days 2.18 2.26 2.30 2.26 2.06
Past due 90+ days 0.43 0.42 0.48 0.47 0.44
Total consumer
Past due 30+ days 2.56 2.47 2.68 2.57 2.47
Past due 90+ days 0.65 0.67 0.69 0.71 0.67
</TABLE>
* annualized and calculated on average loan balances
The allowance for credit losses was $1,019.9 million at September 30, 1997,
up from $987.4 million at September 30, 1996. The ratio of allowance for
credit losses to nonperforming loans was
<PAGE>
Page 10
343 percent at September 30, 1997, compared with 310 percent at June 30, 1997,
and 357 percent at September 30, 1996.
<TABLE>
<CAPTION>
ASSET QUALITY
($ in millions)
SEP 30 JUN 30 MAR 31 DEC 31 SEP 30
1997 1997 1997 1996 1996
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming loans
Commercial $176.2 $199.4 $194.8 $143.7 $144.2
Commercial real estate 62.4 59.4 63.3 63.2 67.8
Consumer 58.5 63.2 64.5 62.4 64.6
-------------------------------------------------
Total 297.1 322.0 322.6 269.3 276.6
Other real estate 29.0 22.7 30.3 43.2 58.2
Other nonperforming assets 12.1 8.1 9.8 7.5 9.9
-------------------------------------------------
Total nonperforming assets* $338.2 $352.8 $362.7 $320.0 $344.7
-------------------------------------------------
-------------------------------------------------
Accruing loans 90 days past due $79.5 $86.0 $85.0 $90.6 $85.1
-------------------------------------------------
-------------------------------------------------
Allowance to nonperforming loans (%) 343 310 308 369 357
Allowance to nonperforming assets (%) 302 283 274 310 286
Nonperforming assets to loans
plus ORE (%)0.62 0.62 0.65 0.69 0.61 0.66
</TABLE>
* does not include accruing loans 90 days past due
Nonperforming assets at September 30, 1997, totaled $338.2 million, down by
$6.5 million, or 1.9 percent, from September 30, 1996. The ratio of
nonperforming assets to loans and other real estate was .62 percent at September
30, 1997, down from .65 percent at June 30, 1996, and .66 percent at September
30, 1996.
<PAGE>
Page 11
<TABLE>
<CAPTION>
CAPITAL POSITION
----------------------------------------------------------------------------------------------------
(Percent)
SEP 30 JUN 30 MAR 31 DEC 31 SEP 30
1997 1997 1997 1996 1996
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common equity to assets 8.0 8.0 8.1 8.0 8.2
Total shareholders' equity to assets 8.2 8.2 8.3 8.3 8.5
Tangible common equity to assets* 6.7 6.7 6.8 6.7 6.8
Tier 1 capital ratio 7.0 7.6 7.7 7.6 7.1
Total risk-based capital ratio 11.1 11.9 12.0 11.9 11.3
Leverage ratio 7.3 7.5 7.6 7.5 6.9
</TABLE>
* calculated by deducting goodwill from common equity and assets
CAPITAL
At September 30, 1997, the common-equity-to-assets ratio was 8.0 percent,
compared with a ratio of 8.2 percent at September 30, 1996, and the regional
bank peer group average of 7.9 percent at June 30, 1997.
Minneapolis-based U.S. Bancorp ("USB"), is the result of a merger between
First Bank System, Inc. of Minneapolis and U.S. Bancorp, formerly headquartered
in Portland, Oregon. With $70 billion in assets, USB is the 14th largest bank
holding company in the nation operating more than 1,000 banking offices in 17
states: Minnesota, Oregon, Washington, Colorado, California, Idaho, Nebraska,
North Dakota, Nevada, South Dakota, Montana, Iowa, Illinois, Utah, Wisconsin,
Kansas, and Wyoming. The company provides comprehensive banking, trust,
investment and payment systems products and services to consumers, businesses
and institutions. It operates a network of 4,500 ATMs throughout the U.S. and
24 hour, seven days a week telephone customer service centers. The company is
the largest provider of Visa corporate and purchasing cards in the world and one
of the largest providers of corporate trust services in the U.S.
###
<PAGE>
U. S. Bancorp
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------------------------------------
(In Millions, Except
Per-Share Data) September 30 September 30 September 30 September 30
(Unaudited) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $1,211.1 $1,149.3 $3,561.9 $3,370.3
Securities:
Taxable 89.0 104.5 281.0 319.4
Exempt from federal income taxes 16.8 18.0 51.5 53.5
Other interest income 15.2 22.6 50.7 68.0
-------------------------------------------------------------
Total interest income 1,332.1 1,294.4 3,945.1 3,811.2
INTEREST EXPENSE
Deposits 362.3 363.6 1,077.7 1,078.7
Federal funds purchased and repurchase agreements 41.9 51.2 140.6 150.2
Other short-term funds borrowed 28.2 48.2 98.2 149.2
Long-term debt 122.1 77.5 314.6 224.7
Company-obligated mandatorily redeemable preferred securities
of subsidiary trusts holding solely the junior subordinated
debentures of the parent company 12.3 -- 36.9 --
------------------------------------------------------------
Total interest expense 566.8 540.5 1,668.0 1,602.8
------------------------------------------------------------
Net interest income 765.3 753.9 2,277.1 2,208.4
Provision for credit losses 185.0 73.1 370.3 195.7
------------------------------------------------------------
Net interest income after provision for credit losses 580.3 680.8 1,906.8 2,012.7
NONINTEREST INCOME
Credit card fee revenue 106.2 90.1 295.7 260.2
Service charges on deposit accounts 102.2 96.4 295.0 279.8
Trust fees 87.4 74.2 259.2 225.0
Investment products fees and commissions 16.5 13.1 49.0 44.9
Gain on sale of operations and loans 9.4 -- 9.4 25.6
Securities gains -- .9 3.6 20.3
Termination fee -- -- -- 190.0
State income tax refund -- -- -- 65.0
Gain on sale of mortgage banking operations -- -- -- 45.8
Other 88.0 86.4 282.8 265.7
------------------------------------------------------------
Total noninterest income 409.7 361.1 1,194.7 1,422.3
NONINTEREST EXPENSE
Salaries 242.2 238.1 729.7 724.5
Employee benefits 49.2 52.2 167.5 168.1
Net occupancy 45.3 44.6 136.3 133.9
Furniture and equipment 40.4 42.1 127.4 131.4
Goodwill and other intangible assets 29.1 27.1 82.3 102.7
Professional services 18.9 13.5 47.5 40.6
Other personnel costs 14.3 23.8 47.1 61.1
Telephone 15.5 15.9 44.8 44.7
Advertising and marketing 13.3 15.7 42.2 46.3
FDIC insurance 2.4 2.5 6.9 11.4
Merger, integration, and resizing 440.2 -- 440.2 88.1
SAIF special assessment -- 61.3 -- 61.3
Other 92.3 105.5 296.2 337.1
------------------------------------------------------------
Total noninterest expense 1,003.1 642.3 2,168.1 1,951.2
------------------------------------------------------------
Income before income taxes (13.1) 399.6 933.4 1,483.8
Applicable income taxes 34.5 143.9 383.8 557.2
------------------------------------------------------------
Net income ($47.6) $255.7 $549.6 $926.6
------------------------------------------------------------
------------------------------------------------------------
Net income applicable to common equity ($50.7) $251.1 $540.4 $912.6
------------------------------------------------------------
------------------------------------------------------------
EARNINGS PER COMMON SHARE
Primary average common and common equivalent shares 248,459,568 254,981,925 248,819,246 254,385,569
Primary net income ($.20) $.98 $2.17 $3.59
------------------------------------------------------------
------------------------------------------------------------
Fully diluted average common and common equivalent shares 249,008,302 258,388,435 250,024,705 258,303,532
Fully diluted net income ($.20) $.98 $2.16 $3.55
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
Page 12
<PAGE>
U.S. Bancorp
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30 December 31 September 30
(In Millions) 1997 1996 1996
- ----------------------------------------------------------------------------------------------------
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash and due from banks $4,342 $4,813 $5,102
Federal funds sold 56 95 414
Securities purchased under agreements to resell 473 803 720
Trading account securities 156 231 207
Available-for-sale securities 6,832 6,473 6,743
Held-to-maturity securities* -- 797 825
Loans 54,143 52,355 51,792
Less allowance for credit losses 1,020 993 987
------------------------------------------
Net loans 53,123 51,362 50,805
Bank premises and equipment 885 1,018 1,020
Interest receivable 401 377 387
Customers' liability on acceptances 591 497 592
Other assets 3,315 3,283 3,241
------------------------------------------
Total assets $70,174 $69,749 $70,056
------------------------------------------
------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $14,433 $14,344 $14,387
Interest-bearing 33,941 35,012 35,184
------------------------------------------
Total deposits 48,374 49,356 49,571
Federal funds purchased 1,199 1,672 1,875
Securities sold under agreements to repurchase 1,294 1,729 1,372
Other short-term funds borrowed 2,004 3,191 3,932
Long-term debt 8,710 5,369 5,069
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the
junior subordinated debentures of the parent company 600 600 --
Acceptances outstanding 591 497 592
Other liabilities 1,661 1,572 1,677
------------------------------------------
Total liabilities 64,433 63,986 64,088
Shareholders' equity:
Preferred stock 150 150 237
Common stock 306 316 320
Capital surplus 1,767 1,929 2,077
Retained earnings 3,472 3,809 3,742
Unrealized gain (loss) on securities, net of tax 46 5 (27)
Treasury stock -- (446) (381)
------------------------------------------
Total shareholders' equity 5,741 5,763 5,968
------------------------------------------
Total liabilities and shareholders' equity $70,174 $69,749 $70,056
------------------------------------------
------------------------------------------
</TABLE>
*The fair value of held-to-maturity securities was as follows: December 31,
1996 - $811 and September 30, 1996 - $836
Page 13
