<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): JANUARY 20, 1999
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 January 20, 1999, U.S. Bancorp (the "Company") released its fourth
quarter and full year 1998 earnings summary to the public. The Company's
press release, dated January 20, 1999, 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 January 20, 1999.
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/ Terrance R. Dolan
----------------------------------
Terrance R. Dolan
Senior Vice President & Controller
DATE: January 20, 1999
<PAGE>
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 4TH QUARTER AND FULL YEAR
1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
4Q 4Q PERCENT FULL YEAR FULL YEAR PERCENT
EARNINGS SUMMARY 1998 1997 CHANGE 1998 1997 CHANGE
- -------------------------------------------------------------------------------------------------------------------------------
($ in millions, except per-share data)
<S> <C> <C> <C> <C> <C> <C>
Before nonrecurring items*:
Operating earnings $377.3 $335.5 12.5 $1,455.8 $1,255.2 16.0
Operating earnings to common 377.3 334.1 12.9 1,455.8 1,244.6 17.0
Earnings per common share (diluted) 0.52 0.45 15.6 1.96 1.68 16.7
Cash earnings per common share (diluted)** 0.57 0.49 16.3 2.15 1.83 17.5
Net income 349.2 288.9 20.9 1,327.4 838.5 58.3
Earnings per common share (diluted) 0.48 0.39 23.1 1.78 1.11 60.4
Cash earnings per common share (diluted)** 0.53 0.43 23.3 1.98 1.27 55.9
Dividends paid per common share 0.175 0.155 12.9 0.70 0.62 12.9
Book value per common share (period-end) 8.23 7.96 3.4
Return on average common equity***(%) 25.5 23.3 24.1 22.0
Return on average assets*** (%) 2.03 1.91 2.03 1.83
Net interest margin (%) 4.78 4.99 4.87 5.04
Efficiency ratio*** (%) 49.8 47.5 49.1 48.9
Banking efficiency ratio****(%) 43.2 46.5 44.2 47.9
* Net nonrecurring items totaled $(28.1) million, after-tax, in 4Q98
and $(46.6) million, after tax, in 4Q97. Net nonrecurring items
totaled $(128.4) million, after tax, full year 1998, and $(416.7)
million, after tax, full year 1997.
** calculated by adding amortization of goodwill and other intangible
assets to net income
*** before nonrecurring items
**** before nonrecurring items; without investment banking and brokerage
activity
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
MINNEAPOLIS, January 20, 1999 -- U.S. Bancorp (NYSE: USB) today reported record
operating earnings of $377.3 million, or $.52 per diluted share, for the fourth
quarter of 1998, compared with $335.5 million, or $.45 per diluted share, in the
fourth quarter of 1997. Operating earnings on a cash basis increased from $.49
per diluted share in the fourth quarter of 1997 to $.57 per diluted share, or
16.3 percent, in the fourth quarter of 1998. Return on average common equity and
return on average
<PAGE>
U.S. Bancorp Reports Fourth Quarter 1998 Results
January 20, 1999
Page 2
assets, excluding nonrecurring items, were 25.5 percent and
2.03 percent, respectively, in the fourth quarter of 1998, compared with
returns, excluding nonrecurring items, of 23.3 percent and 1.91 percent in the
fourth quarter of 1997.
Including nonrecurring, merger-related charges of $28.1 million,
after-tax, the Company recorded net income for the fourth quarter of 1998 of
$349.2 million, or $.48 per diluted share, compared to $288.9 million, or $.39
per diluted share, in the fourth quarter of 1997.
Operating earnings for the full year 1998 were $1,455.8 million, or $1.96
per diluted share, compared to $1,255.2 million, or $1.68 per diluted share, for
the full year 1997. The positive year-over-year results were driven by growth in
noninterest income and a decrease in noninterest expense from core banking
activity, resulting primarily from the cost savings achieved from the
acquisition of the former U.S. Bancorp ("USBC") of Portland, Oregon. Comparisons
to prior periods are affected by the May 1, 1998, acquisition of Piper Jaffray
Companies Inc. ("Piper Jaffray"). Excluding Piper Jaffray, noninterest income,
before nonrecurring items, increased by $237.6 million, or 14.8 percent, and
noninterest expense, before nonrecurring items, decreased by $87.8 million, or
3.8 percent. Including nonrecurring items of $128.4 million, the Company
recorded net income for the full year 1998 of $1,327.4 million, or $1.78 per
diluted share, compared to net income of $838.5 million, or $1.11 per diluted
share, in 1997.
U.S. Bancorp's Chairman, President and Chief Executive Officer, John F.
Grundhofer, said, "1998 was a year marked by tremendous change for our employees
and customers. The successful integration of the banking operations of First
Bank System, Inc. and the former U.S. Bancorp of Portland, Oregon was our
primary focus and achievement for the year. In addition, we expanded our array
of solutions for our business clients and private banking customers with the May
1998 acquisition of Piper Jaffray, a full-service investment banking and
securities company. Our continued focus on providing solutions for customers and
creating value for our shareholders has served us well, even through the
volatile economic times we experienced during the past year. Our strong fourth
quarter and full year profitability ratios and earnings per share growth are
among the best in the industry, and we are well-positioned to make the most of
our new opportunities during 1999 and beyond."
<PAGE>
U.S. Bancorp Reports Fourth Quarter 1998 Results
January 20, 1999
Page 3
Earnings in the fourth quarter of 1998 included after-tax nonrecurring,
merger-related charges of $28.1 million, including charges associated with USBC,
Piper Jaffray and Zappco, Inc. Since August of 1997, after-tax merger-related
items associated with the acquisition of USBC have totaled $546.3 million. No
additional charges for USBC are expected to be incurred. Approximately $12
million, after-tax, in merger-related charges are expected to be incurred with
respect to Piper Jaffray in 1999.
Operating earnings for the fourth quarter reflected growth in core banking
noninterest income and a decrease in core banking noninterest expense from the
fourth quarter of 1997. Without the Piper Jaffray acquisition, noninterest
income, before nonrecurring items, increased by $51.3 million, or 12.2 percent,
reflecting growth in credit card fee revenue, trust and investment management
fees, and other fees. On the same basis, noninterest expense, before
nonrecurring items, declined by $24.8 million, or 4.3 percent. The banking
efficiency ratio (the ratio of expenses to revenues without the impact of
investment banking and brokerage activity), before nonrecurring items, for the
fourth quarter of 1998 was 43.2 percent, compared to 46.5 percent in the fourth
quarter of 1997.
Net charge-offs in the fourth quarter of 1998 were $118.2 million, higher
than the third quarter of 1998 net charge-offs of $106.1 million and the fourth
quarter of 1997 net charge-offs of $103.3 million. The increases were primarily
a result of growth in consumer loan balances, excluding residential mortgages,
and higher fraud losses. Net charge-offs were .81 percent of average loans in
the fourth quarter of 1998, compared to .75 percent in both the third quarter of
1998 and fourth quarter of last year. Nonperforming assets increased from $292.0
million at September 30, 1998, to $304.3 million at December 31, 1998. Consumer
loans (excluding first mortgage loans) 30 days or more past due were 2.16
percent of loans outstanding at December 31, 1998, above the 2.04 percent at
September 30, 1998, but below the 2.30 percent at December 31, 1997. The ratio
of allowance for credit losses to nonperforming loans continued to indicate
strong reserve coverage of 359 percent at December 31, 1998.
In December, the Company purchased a $900 million portfolio of
high-loan-to-value ("high-LTV") second mortgage loans, together with the related
servicing rights. Both the yields and credit costs associated with these loans
are expected to be higher than the typical home equity loans originated by the
Company. The Company has experience in originating and servicing high-LTV
<PAGE>
U.S. Bancorp Reports Fourth Quarter 1998 Results
January 20, 1999
Page 4
loans and, given the purchase price paid for the portfolio, expects to earn
unusually high returns on the transaction.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------------------
(Taxable-equivalent basis, $ in millions,
except per-share data) 4Q 4Q PERCENT FULL YEAR FULL YEAR PERCENT
1998 1997 CHANGE 1998 1997 CHANGE
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income $787.1 $784.7 0.3 $3,111.9 $3,106.0 0.2
Provision for credit losses* 101.0 90.0 12.2 379.0 365.3 3.8
Noninterest income* 620.1 420.5 47.5 2,244.0 1,602.2 40.1
Noninterest expense* 701.2 572.8 22.4 2,627.8 2,300.7 14.2
----------------------- ------------------------
Income before taxes and
nonrecurring items 605.0 542.4 11.5 2,349.1 2,042.2 15.0
Taxable-equivalent adjustment 12.8 13.7 (6.6) 51.3 57.9 (11.4)
Income taxes* 214.9 193.2 11.2 842.0 729.1 15.5
----------------------- ------------------------
Income before nonrecurring items 377.3 335.5 12.5 1,455.8 1,255.2 16.0
Net nonrecurring items (after-tax) (28.1) (46.6) nm (128.4) (416.7) nm
----------------------- ------------------------
Net income $349.2 $288.9 20.9 $1,327.4 $838.5 58.3
----------------------- ------------------------
----------------------- ------------------------
Net income to common $349.2 $287.5 21.5 $1,327.4 $827.9 60.3
----------------------- ------------------------
----------------------- ------------------------
Per diluted common share:
Earnings, before nonrecurring items $0.52 $0.45 15.6 $1.96 $1.68 16.7
----------------------- ------------------------
Earnings on a cash basis,
before nonrecurring items** $0.57 $0.49 16.3 $2.15 $1.83 17.5
----------------------- ------------------------
Net income $0.48 $0.39 23.1 $1.78 $1.11 60.4
----------------------- ------------------------
----------------------- ------------------------
Earnings on a cash basis** $0.53 $0.43 23.3 $1.98 $1.27 55.9
----------------------- ------------------------
----------------------- ------------------------
* before effect of nonrecurring items
** calculated by adding amortization of goodwill and other intangible
assets to net income
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NET INTEREST INCOME
Fourth quarter net interest income on a taxable-equivalent basis was
$787.1 million, compared to $784.7 million recorded in the fourth quarter of
1997. Average earning assets for the period increased by $3.0 billion, or 4.8
percent, driven by core commercial and consumer loan growth, partially offset by
reductions in securities and residential mortgages. Net interest income rose
only
<PAGE>
U.S. Bancorp Reports Fourth Quarter 1998 Results
January 20, 1999
Page 5
modestly, due to a decline in net interest margin. The decline in the
margin resulted from growth in Payment Systems' noninterest-bearing assets,
including corporate and purchasing card loan balances, the funding required for
the Piper Jaffray acquisition and the share repurchase program, and margin
compression in the commercial loan portfolio.
Excluding residential mortgage loans, average loans for the fourth quarter
were higher by $4.4 billion, or 8.7 percent, than fourth quarter of 1997,
reflecting strong growth in commercial loans and home equity and second
mortgages.
Average securities available-for-sale for the fourth quarter of 1998 were
lower than the fourth quarter of 1997 by $1.3 billion, reflecting both
maturities and sales of securities.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AVERAGE LOANS
- ------------------------------------------------------------------------------------------------------------------------
($ in millions) 4Q 4Q PERCENT FULL YEAR FULL YEAR PERCENT
1998 1997 CHANGE 1998 1997 CHANGE
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial $25,844 $23,276 11.0 $24,608 $22,466 9.5
Commercial real estate 11,057 10,407 6.2 10,781 10,292 4.8
------------------------- -------------------------
Total commercial 36,901 33,683 9.6 35,389 32,758 8.0
Home equity and second mortgage 6,439 5,760 11.8 6,130 5,555 10.4
Credit card 4,084 3,964 3.0 4,021 3,702 8.6
Other 7,022 6,660 5.4 6,803 6,894 (1.3)
------------------------- -------------------------
Total consumer, excl. residential 17,545 16,384 7.1 16,954 16,151 5.0
Residential mortgage 3,202 4,319 (25.9) 3,636 4,604 (21.0)
------------------------- -------------------------
Total loans $57,648 $54,386 6.0 $55,979 $53,513 4.6
------------------------- -------------------------
------------------------- -------------------------
Total loans, excluding residential mortgages $54,446 $50,067 8.7 $52,343 $48,909 7.0
------------------------- -------------------------
------------------------- -------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Net interest income on a taxable-equivalent basis for the full year 1998
was $3,111.9 million, slightly higher than the $3,106.0 million recorded in the
full year 1997. During 1998, average earning assets grew by $2.2 billion, or 3.6
percent, primarily due to core commercial and consumer loan growth, partially
offset by reductions in securities and residential mortgages. The net interest
<PAGE>
U.S. Bancorp Reports Fourth Quarter 1998 Results
January 20, 1999
Page 6
margin declined from 5.04 percent in 1997 to 4.87 percent in 1998, primarily as
a result of growth in Payment Systems' noninterest-bearing assets, the funding
required for the Piper Jaffray acquisition and the share repurchase program, and
margin compression in the commercial loan portfolio.
Excluding residential mortgage loans, average loans for 1998 were higher
by $3.4 billion, or 7.0 percent. Average securities for 1998 were lower than
1997 by $1.0 billion, or 14.6 percent, reflecting both maturities and sales of
securities.
Average noninterest-bearing deposits were higher in both the fourth
quarter and the full year 1998, compared to the fourth quarter and the full year
1997, by 6.2 percent and 6.4 percent, respectively.
<PAGE>
U.S. Bancorp Reports Fourth Quarter 1998 Results
January 20, 1999
Page 7
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
- ------------------------------------------------------------------------------------------------------------------------------
($ in millions) 4Q 4Q PERCENT FULL YEAR FULL YEAR PERCENT
1998 1997 CHANGE 1998 1997 CHANGE
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Credit card fee revenue $144.3 $123.1 17.2 $574.8 $418.8 37.2
Trust and investment management fees 105.3 88.8 18.6 413.0 348.0 18.7
Service charges on deposit accounts 107.0 101.2 5.7 406.0 396.2 2.5
Investment products fees and commissions 78.0 16.7 367.1 229.7 65.7 249.6
Trading account profits and commissions 40.2 7.1 466.2 118.1 30.9 282.2
Investment banking revenue 33.1 -- nm 100.4 -- nm
Other 112.2 83.6 34.2 402.0 342.6 17.3
----------------------- -----------------------
Subtotal* 620.1 420.5 47.5 2,244.0 1,602.2 40.1
Net securities gains -- -- 12.6 3.6
Gain on credit card portfolio sale -- -- -- 9.4
----------------------- -----------------------
Nonrecurring gains -- -- 12.6 13.0
----------------------- -----------------------
Total noninterest income $620.1 $420.5 $2,256.6 $1,615.2
----------------------- -----------------------
* Excluding Piper Jaffray, 4Q98 fee income, before nonrecurring items, would
have increased by $51.3 million, or 12.2%.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NONINTEREST INCOME
Fourth quarter noninterest income, before nonrecurring items, was $620.1
million, an increase of $199.6 million, or 47.5 percent, from the same quarter
of 1997. The increase for the quarter without the Piper Jaffray acquisition was
$51.3 million, or 12.2 percent. Credit card fee revenue increased by $21.2
million, or 17.2 percent. Credit card fee revenue in the fourth quarter of 1998
was affected by the loss of a portion of the U.S. Government purchasing card
business. The new contracts were effective December 1, 1998. As a result, the
Company expects a more moderate growth rate in credit card fee revenue in 1999,
and on a pro forma basis, a reduction in earnings per share of $.05 annually.
Trust and investment management fees were up over the fourth quarter of 1997 by
$16.5 million, or 18.6 percent, due to growth in the corporate, institutional
and personal trust businesses and the addition of Piper Jaffray. Investment
products fees and commissions, trading account profits and commissions and
investment banking revenue were higher, principally due to the acquisition of
Piper
<PAGE>
U.S. Bancorp Reports Fourth Quarter 1998 Results
January 20, 1999
Page 8
Jaffray. Other noninterest income was higher than the fourth quarter of
1997 by $28.6 million, or 34.2 percent. Without Piper Jaffray, other noninterest
income increased by $16.4 million, or 19.6 percent.
Noninterest income, before nonrecurring items, for the full year 1998 was
$2,244.0 million, an increase of $641.8 million, or 40.1 percent, over the full
year 1997. Excluding Piper Jaffray, noninterest income, before nonrecurring
items, increased by $237.6 million, or 14.8 percent, primarily as a result of
strong growth in credit card fee revenue and trust and investment management
fees.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
- -------------------------------------------------------------------------------------------------------------------------------
($ in millions)
4Q 4Q PERCENT FULL YEAR FULL YEAR PERCENT
1998 1997 CHANGE 1998 1997 CHANGE
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salaries and employee benefits $382.1 $289.5 32.0 $1,433.2 $1,186.7 20.8
Net occupancy 46.8 45.7 2.4 187.4 182.0 3.0
Furniture and equipment 39.0 38.0 2.6 153.4 165.4 (7.3)
Goodwill and other intangible assets 37.2 31.0 20.0 143.7 113.3 26.8
Professional services 26.4 22.8 15.8 71.3 70.3 1.4
Telephone 18.0 14.9 20.8 69.7 59.7 16.8
Advertising and marketing 19.4 14.4 34.7 67.2 56.6 18.7
Other personnel costs 12.7 19.5 (34.9) 53.0 66.6 (20.4)
Other 119.6 97.0 23.3 448.9 400.1 12.2
----------------------- ------------------------
Subtotal* 701.2 572.8 22.4 2,627.8 2,300.7 14.2
Nonrecurring charges 44.1 71.4 216.5 511.6
----------------------- ------------------------
Total noninterest expense $745.3 $644.2 $2,844.3 $2,812.3
----------------------- ------------------------
* Excluding Piper Jaffray, 4Q98 noninterest expense, before nonrecurring
items, would have decreased by $24.8 million, or 4.3%.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NONINTEREST EXPENSE
Fourth quarter noninterest expense, before nonrecurring items, totaled
$701.2 million, an increase of $128.4 million, or 22.4 percent, from the fourth
quarter of 1997. Without the effect of Piper Jaffray, noninterest expense,
before nonrecurring items, decreased by $24.8 million, or 4.3 percent. The
favorable variance in expense primarily reflects the expense savings from the
integration of
<PAGE>
U.S. Bancorp Reports Fourth Quarter 1998 Results
January 20, 1999
Page 9
USBC, with year-over-year reductions in salaries and employee benefits, other
personnel expense, net occupancy, and furniture and equipment.
The $44.1 million of nonrecurring, merger-related expenses incurred in the
fourth quarter of 1998 included $39.0 million of conversion expense for USBC and
$4.4 million related to the acquisition of Piper Jaffray.
Noninterest expense, before nonrecurring items, totaled $2,627.8 million
for the full year 1998, an increase of $327.1 million, or 14.2 percent, over the
full year 1997. Excluding Piper Jaffray, noninterest expense, before
nonrecurring items, decreased by $87.8 million, or 3.8 percent, primarily due to
savings related to the acquisition of USBC, with the largest favorable variances
occurring in salaries and benefits, furniture and equipment, other personnel,
and net occupancy.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
ALLOWANCE FOR CREDIT LOSSES
- ---------------------------------------------------------------------------------------------------------------
($ in millions) 4Q 3Q 2Q 1Q 4Q
1998 1998 1998 1998 1997
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period $980.1 $981.8 $995.5 $1,008.7 $1,019.9
Net charge-offs
Commercial 17.7 16.7 16.7 14.1 14.7
Consumer 100.5 89.4 90.0 89.1 88.6
-----------------------------------------------------------
Total 118.2 106.1 106.7 103.2 103.3
Provision for credit losses 101.0 95.0 93.0 90.0 90.0
Acquisitions and other additions 38.0 9.4 -- -- 2.1
-----------------------------------------------------------
Balance, end of period $1,000.9 $980.1 $981.8 $995.5 $1,008.7
-----------------------------------------------------------
Net charge-offs to average loans (%) 0.81 0.75 0.77 0.77 0.75
Allowance for credit losses to
period-end loans (%) 1.69 1.72 1.76 1.81 1.84
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
CREDIT QUALITY
Total net charge-offs in the fourth quarter of 1998 were $118.2 million,
higher than the third quarter of 1998 net charge-offs of $106.1 million and the
fourth quarter of 1997 net charge-offs of
<PAGE>
U.S. Bancorp Reports Fourth Quarter 1998 Results
January 20, 1999
Page 10
$103.3 million. Consumer loan net charge-offs of $100.5 million were $11.1
million higher than the third quarter of 1998 and higher than the same period of
1997 by $11.9 million, reflecting growth in the portfolio, excluding residential
mortgages, and an increase in fraud losses. Credit card loan net charge-offs
were 4.16 percent of average loans for the fourth quarter of 1998, lower than
the third quarter of 1998 ratio of 4.26 percent, but higher than the fourth
quarter of 1997 ratio of 3.87 percent. Other consumer loan net charge-offs were
1.67 percent of average loans for the fourth quarter of 1998, higher than the
third quarter of 1998 ratio of 1.35 percent and the fourth quarter of 1997 ratio
of 1.53 percent.
Commercial loan net charge-offs were $17.7 million for the fourth quarter,
slightly higher than the $16.7 million in the third quarter of 1998 and $14.7
million in the fourth quarter of 1997.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
CONSUMER CREDIT
- ----------------------------------------------------------------------------------------------------------------------
(Percent) DEC 31 SEP 30 JUN 30 MAR 31 DEC 31
1998 1998 1998 1998 1997
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Charge-off Ratios:*
Credit cards 4.16 4.26 4.84 4.20 3.87
Other consumer 1.67 1.35 1.29 1.47 1.53
Subtotal, excl. first mortgage 2.25 2.04 2.13 2.13 2.10
First mortgage 0.12 0.14 0.17 0.25 0.17
Total consumer 1.92 1.72 1.77 1.76 1.70
Delinquency Ratios (including NPLs):
Total consumer, excl. first mortgage
Past due 30+ days 2.16 2.04 1.97 1.92 2.30
Past due 90+ days 0.56 0.53 0.48 0.50 0.48
Total consumer
Past due 30+ days 2.39 2.30 2.31 2.38 2.76
Past due 90+ days 0.75 0.72 0.70 0.77 0.70
* annualized and calculated on average loan balances
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
U.S. Bancorp Reports Fourth Quarter 1998 Results
January 20, 1999
Page 11
Consumer loans (excluding first mortgage loans) 30 days or more past due
were 2.16 percent of the portfolio at December 31, 1998, compared with 2.04
percent at September 30, 1998, and 2.30 percent at December 31, 1997.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
ASSET QUALITY
- --------------------------------------------------------------------------------------------------------------
($ in millions)
DEC 31 SEP 30 JUN 30 MAR 31 DEC 31
1998 1998 1998 1998 1997
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming loans
Commercial $165.7 $149.4 $140.2 $161.5 $179.1
Commercial real estate 52.7 57.7 68.9 61.3 60.3
Consumer 60.5 62.0 64.4 70.1 57.7
----------------------------------------------------------
Total 278.9 269.1 273.5 292.9 297.1
Other real estate 14.3 15.5 17.3 21.6 30.1
Other nonperforming assets 11.1 7.4 9.6 10.9 12.3
----------------------------------------------------------
Total nonperforming assets* $304.3 $292.0 $300.4 $325.4 $339.5
----------------------------------------------------------
Accruing loans 90 days past due $106.8 $93.9 $86.6 $91.7 $93.8
----------------------------------------------------------
Allowance to nonperforming loans (%) 359 364 359 340 340
Allowance to nonperforming assets (%) 329 336 327 306 297
Nonperforming assets to loans
plus ORE (%) 0.51 0.51 0.54 0.59 0.62
* does not include accruing loans 90 days past due
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The allowance for credit losses was $1,000.9 million at December 31, 1998,
up from $980.1 million at September 30, 1998. The ratio of allowance for credit
losses to nonperforming loans was 359 percent at December 31, 1998, compared to
364 percent at September 30, 1998, and 340 percent at December 31, 1997.
Nonperforming assets at December 31, 1998, totaled $304.3 million,
higher by $12.3 million, or 4.2 percent, than September 30, 1998, but lower by
$35.2 million, or 10.4 percent, than December 31, 1997. The ratio of
nonperforming assets to loans and other real estate was .51 percent at
<PAGE>
U.S. Bancorp Reports Fourth Quarter 1998 Results
January 20, 1999
Page 12
December 31, 1998, equal to the ratio at September 30, 1998, and lower than the
ratio at December 31, 1997, of .62 percent.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
CAPITAL POSITION
- --------------------------------------------------------------------------------------------------------------
(Percent) DEC 31 SEP 30 JUN 30 MAR 31 DEC 31
1998 1998 1998 1998 1997
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common equity to assets 7.8 8.0 8.3 8.6 8.3
Tangible common equity to assets* 6.0 6.2 6.5 7.4 7.0
Tier 1 capital ratio 6.5 6.8 7.2 7.8 7.4
Total risk-based capital ratio 10.9 11.4 11.5 11.9 11.6
Leverage ratio 6.8 7.0 7.4 7.7 7.3
* calculated by deducting goodwill from common equity and assets
- --------------------------------------------------------------------------------------------------------------
</TABLE>
CAPITAL
At December 31, 1998, the common-equity-to-assets ratio was 7.8 percent,
lower than the ratio at September 30, 1998, of 8.0 percent and the ratio at
December 31, 1997, of 8.3 percent. The decline in the capital ratio is primarily
a result of the Company's share repurchase program.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
COMMON SHARES
- ---------------------------------------------------------------------------------------------------------------------------
(Millions)
4Q 3Q 2Q 1Q 4Q
1998 1998 1998 1998 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning shares outstanding 730.7 739.7 742.5 739.9 735.1
Shares issued for stock option and stock
purchase plans and other corporate purposes 1.7 2.4 3.8 2.6 4.9
Shares repurchased (6.6) (11.4) (6.6) -- (0.1)
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Ending shares outstanding 725.8 730.7 739.7 742.5 739.9
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</TABLE>
<PAGE>
U.S. Bancorp Reports Fourth Quarter 1998 Results
January 20, 1999
Page 13
On June 9, 1998, the Company announced a share repurchase program of up to
$2.5 billion of common stock over the period ending March 31, 2000. During the
fourth quarter, the Company repurchased 6.6 million shares for a total dollar
value of $240 million in both open market and privately negotiated transactions.
The Company has repurchased 24.6 million shares under this program for a total
dollar value of $963 million.
Minneapolis-based U.S. Bancorp ("USB"), with $76 billion in assets, is
the 13th largest bank holding company in the nation and operates approximately
1,000 banking offices in 17 Midwestern and Western states. The Company provides
comprehensive banking, trust, investment and payment systems products and
services to consumers, businesses and institutions. It operates a network of
4,800 ATMs and provides 24-hour, seven-days-a-week telephone customer service.
The Company offers full-service brokerage services at approximately 100 offices
in the West and Midwest through U.S. Bancorp Piper Jaffray Companies Inc., the
11th largest brokerage in the nation. The Company is the largest provider of
Visa corporate and purchasing cards in the world, and is one of the largest
providers of corporate trust services in the nation.
FORWARD-LOOKING STATEMENTS
This press release includes forward-looking statements that involve
inherent risks and uncertainties. U.S. Bancorp cautions readers that a number of
important factors could cause actual results to differ materially from those in
the forward-looking statements. These factors include economic conditions and
competition in the geographic and business areas in which the Company operates,
inflation, fluctuations in interest rates, legislation and governmental
regulation, Year 2000 issues, and the progress of integrating the former U.S.
Bancorp.
<PAGE>
U. S. Bancorp
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Year Ended
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December 31 December 31 December 31 December 31
(Dollars in Millions, Except Per Share Data) 1998 1997 1998 1997
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INTEREST INCOME (Unaudited)
<S> <C> <C> <C> <C>
Loans $1,245.2 $1,222.6 $4,921.8 $4,784.5
Securities:
Taxable 68.2 90.5 303.6 371.5
Exempt from federal income taxes 15.5 16.6 62.8 68.1
Other interest income 34.0 18.8 119.2 69.5
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Total interest income 1,362.9 1,348.5 5,407.4 5,293.6
INTEREST EXPENSE
Deposits 332.4 359.1 1,391.0 1,436.8
Federal funds purchased and repurchase agreements 36.3 42.4 153.6 183.0
Other short-term funds borrowed 13.9 19.4 59.1 117.6
Long-term debt 186.7 144.4 672.7 459.0
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the
junior subordinated debentures of the parent company 19.3 12.2 70.4 49.1
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Total interest expense 588.6 577.5 2,346.8 2,245.5
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Net interest income 774.3 771.0 3,060.6 3,048.1
Provision for credit losses 101.0 90.0 379.0 460.3
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Net interest income after provision for credit losses 673.3 681.0 2,681.6 2,587.8
NONINTEREST INCOME
Credit card fee revenue 144.3 123.1 574.8 418.8
Trust and investment management fees 105.3 88.8 413.0 348.0
Service charges on deposit accounts 107.0 101.2 406.0 396.2
Investment products fees and commissions 78.0 16.7 229.7 65.7
Trading account profits and commissions 40.2 7.1 118.1 30.9
Investment banking revenue 33.1 -- 100.4 --
Securities gains -- -- 12.6 3.6
Gain on sale of credit card portfolio -- -- -- 9.4
Other 112.2 83.6 402.0 342.6
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Total noninterest income 620.1 420.5 2,256.6 1,615.2
NONINTEREST EXPENSE
Salaries 328.4 239.6 1,210.9 969.3
Employee benefits 53.7 49.9 222.3 217.4
Net occupancy 46.8 45.7 187.4 182.0
Furniture and equipment 39.0 38.0 153.4 165.4
Goodwill and other intangible assets 37.2 31.0 143.7 113.3
Professional services 26.4 22.8 71.3 70.3
Telephone 18.0 14.9 69.7 59.7
Advertising and marketing 19.4 14.4 67.2 56.6
Other personnel costs 12.7 19.5 53.0 66.6
Merger-related 44.1 71.4 216.5 511.6
Other 119.6 97.0 448.9 400.1
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Total noninterest expense 745.3 644.2 2,844.3 2,812.3
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Income before income taxes 548.1 457.3 2,093.9 1,390.7
Applicable income taxes 198.9 168.4 766.5 552.2
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Net income $349.2 $288.9 $1,327.4 $838.5
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Net income applicable to common equity $349.2 $287.5 $1,327.4 $827.9
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EARNINGS PER COMMON SHARE
Average shares outstanding 722,842,350 734,764,128 733,897,845 733,550,892
Earnings per share $.48 $.39 $1.81 $1.13
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Diluted average shares outstanding 730,093,607 745,854,264 744,178,143 742,913,736
Diluted earnings per share $.48 $.39 $1.78 $1.11
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</TABLE>
<PAGE>
U.S. Bancorp
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31 December 31
(Dollars in Millions) 1998 1997
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<S> <C> <C>
ASSETS
Cash and due from banks $ 4,772 $ 4,739
Federal funds sold 83 62
Securities purchased under agreements to resell 461 630
Trading account securities 537 195
Available-for-sale securities 5,577 6,885
Loans 59,122 54,708
Less allowance for credit losses 1,001 1,009
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Net loans 58,121 53,699
Premises and equipment 879 860
Interest receivable 456 405
Customers' liability on acceptances 166 535
Goodwill and other intangible assets 1,975 1,482
Other assets 3,411 1,803
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Total assets $ 76,438 $ 71,295
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LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 16,377 $ 14,544
Interest-bearing 33,657 34,483
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Total deposits 50,034 49,027
Federal funds purchased 1,255 800
Securities sold under agreements to repurchase 1,427 1,518
Other short-term funds borrowed 683 974
Long-term debt 13,781 10,247
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the
junior subordinated debentures of the parent company 950 600
Acceptances outstanding 166 535
Other liabilities 2,172 1,704
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Total liabilities 70,468 65,405
Shareholders' equity:
Common stock 931 925
Capital surplus 1,247 1,261
Retained earnings 4,456 3,645
Accumulated other comprehensive income 72 59
Treasury stock (736) --
---------------------------
Total shareholders' equity 5,970 5,890
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Total liabilities and shareholders' equity $ 76,438 $ 71,295
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