U.S. Bancorp (NYSE: USB):

4Q18 and Full Year Key Financial Data

                     
        Full Year   Full Year
PROFITABILITY METRICS   4Q18   3Q18   4Q17   2018   2017
Return on average assets (%) 1.59 1.58 1.46 1.55 1.39
Return on average common equity (%) 15.8 15.5 14.7 15.4 13.8
Return on tangible common equity (%) (a) 20.2 19.9 18.8 19.8 17.6
Net interest margin (%) 3.15 3.15 3.11 3.14 3.10
Efficiency ratio (%) (a) 56.3 53.5 69.8 55.1 58.5
                     
Full Year Full Year
INCOME STATEMENT (b)   4Q18   3Q18   4Q17   2018   2017
Net interest income (taxable-equivalent basis) $3,331 $3,281 $3,228 $13,035 $12,585
Noninterest income $2,498 $2,418 $2,370 $9,602 $9,317
Net income attributable to U.S. Bancorp $1,856 $1,815 $1,682 $7,096 $6,218
Diluted earnings per common share $1.10 $1.06 $.97 $4.14 $3.51
Dividends declared per common share $.37 $.37 $.30 $1.34 $1.16
                     
Full Year Full Year
BALANCE SHEET (b)   4Q18   3Q18   4Q17   2018   2017
Average total loans $283,677 $281,065 $279,751 $280,701 $276,537
Average total deposits $334,365 $330,121 $339,162 $333,462 $333,514
Net charge-off ratio .49 % .46 % .46 % .48 % .48 %
Book value per common share (period end) $28.01 $27.35 $26.34
Basel III standardized CET1 (c) 9.1 % 9.0 % 9.1 %
                     
(a) See Non-GAAP Financial Measures reconciliation on pages 16-17
(b) Dollars in millions, except per share data
(c) CET1 = Common equity tier 1 capital ratio, 4Q17 as if fully implemented
 

4Q18 and Full Year Highlights

  • Net income of $1,856 million and diluted earnings per common share of $1.10 for 4Q18, including $45 million of notable items, net of taxes, representing an increase of $0.03 per diluted common share
  • Industry leading return on average assets of 1.59% and return on average common equity of 15.8% for 4Q18
  • Return on tangible common equity of 20.2% for 4Q18
  • Returned 80% of 4Q earnings to shareholders through dividends and share buybacks
  • Net interest income grew 4.0% year-over-year (3.2% on a taxable-equivalent basis)
  • Average total loans increased 0.9% and 1.4% compared to 3Q18 and 4Q17, respectively (1.5% and 2.6% excluding the impact of loan sales)
  • Total noninterest income grew 5.4% year-over year, driven by payments revenue and trust and investment management fees
  • Full year net income of $7,096 million and diluted earnings per common share of $4.14
  • Positive operating leverage for full year 2018 with net revenue increase of 3.4% and noninterest expense decrease of 2.5%. Excluding notable items, net revenue increase of 3.0% and noninterest expense increase of 2.7%.

CEO Commentary

“Fourth quarter results capped a strong year for U.S. Bank and the momentum we are seeing in our lending and fee businesses positions us well for 2019. This quarter we achieved record revenue and EPS and delivered a best-in-class return on tangible common equity of 20.2%. These strong results enabled us to return 80% to our shareholders through dividends and share repurchases. Loan growth accelerated in the fourth quarter even as we maintained our consistent and disciplined underwriting standards. Furthermore, we continued to see strong sales activity and expanded customer relationships across all of our businesses supported by our investments in technology and innovation, as well as our employees’ dedication to helping to make our customers’ financial lives simpler and more productive. I want to thank our employees for their efforts this year and every year, and for their unwavering commitment to making U.S. Bank the most trusted choice for our customers.”

— Andy Cecere, Chairman, President and CEO, U.S. Bancorp

In the Spotlight

Termination of AML-Related Consent Order
U.S. Bancorp recently announced that the Office of the Comptroller of the Currency has terminated its 2015 consent order related to the Company’s Anti-Money Laundering (AML) and Bank Secrecy Act (BSA) program and controls. Since 2014, U.S. Bancorp has made significant investments to risk management and compliance to enhance and strengthen our programs.

Elavon Acquisitions enhance Payments Capabilities
Recent acquisitions of financial technologies companies Electronic Transaction Systems and CenPOS, Inc. by Elavon, a global merchant payment processing provider and subsidiary of USB, enhances its eCommerce offerings and integrated payments capabilities.

U.S. Bank Pullman Community Center
The U.S. Bank Pullman Community Center, a 135,000-square-foot facility, recently opened in the historic Pullman neighborhood of Chicago and is the latest result of significant community investment U.S. Bank has made in the Pullman community since 2009. U.S. Bank has partnered with the community to help welcome major retailers, a grocery store, healthcare, workout facilities, restaurants and several plants and distribution centers to the community.

Digital Small Business Lending
We launched a fully digital small business lending experience in the third quarter that has successfully fostered small business digital adoption during the past few months. Small businesses, on a national basis, have started borrowing through the digital experience, and two-thirds of funded deals were approved in one day or less.

                                   
INCOME STATEMENT HIGHLIGHTS

($ in millions, except per-share data)

        Percent Change      
4Q 3Q 4Q 4Q18 vs   4Q18 vs Full Year Full Year Percent
  2018   2018   2017   3Q18   4Q17   2018   2017   Change
 
Net interest income $3,303 $3,251 $3,175 1.6 4.0 $12,919 $12,380 4.4
Taxable-equivalent adjustment 28     30     53   (6.7 ) (47.2 ) 116     205   (43.4 )
Net interest income (taxable-equivalent basis) 3,331 3,281 3,228 1.5 3.2 13,035 12,585 3.6
Noninterest income 2,498     2,418     2,370   3.3 5.4 9,602     9,317   3.1
Total net revenue 5,829 5,699 5,598 2.3 4.1 22,637 21,902 3.4
Noninterest expense 3,280     3,044     3,899   7.8 (15.9 ) 12,464     12,790   (2.5 )
Income before provision and income taxes 2,549 2,655 1,699 (4.0 ) 50.0 10,173 9,112 11.6
Provision for credit losses 368     343     335   7.3 9.9 1,379     1,390   (.8 )
Income before taxes 2,181 2,312 1,364 (5.7 ) 59.9 8,794 7,722 13.9

Income taxes and taxable-equivalent adjustment

319     490     (322 ) (34.9 ) nm 1,670     1,469   13.7
Net income 1,862 1,822 1,686 2.2 10.4 7,124 6,253 13.9

Net (income) loss attributable to noncontrolling interests

(6 )  

(7

)   (4 ) 14.3 (50.0 ) (28 )   (35 ) 20.0
Net income attributable to U.S. Bancorp $1,856     $1,815     $1,682   2.3 10.3 $7,096     $6,218   14.1

Net income applicable to U.S. Bancorp common shareholders

$1,777     $1,732     $1,611   2.6 10.3 $6,784     $5,913   14.7
Diluted earnings per common share $1.10     $1.06     $.97   3.8 13.4 $4.14     $3.51   17.9
                                   
 

Net income attributable to U.S. Bancorp was $1,856 million for the fourth quarter of 2018, which was 10.3 percent higher than the $1,682 million for the fourth quarter of 2017, and 2.3 percent higher than the $1,815 million for the third quarter of 2018. Diluted earnings per common share were $1.10 in the fourth quarter of 2018, compared with $0.97 in the fourth quarter of 2017 and $1.06 in the third quarter of 2018. The fourth quarter of 2018 included $0.03 per diluted common share of notable items related to the impact of the gain from the sale of the Company’s ATM servicing business and the sale of a majority of the Company’s FDIC covered loans, charges related to severance, certain asset impairments, an accrual for legal matters, and the favorable impact to deferred tax assets and liabilities related to changes in estimates from tax reform.

The increase in net income year-over-year was due to total net revenue growth of 4.1 percent and a decrease in noninterest expense of 15.9 percent. Net interest income increased 4.0 percent (3.2 percent on a taxable-equivalent basis), mainly a result of the impact of rising interest rates on assets, earning assets growth, and higher yields on reinvestment of securities, partially offset by higher rates on deposits and funding mix. Excluding the notable items, noninterest income increased 2.2 percent compared with a year ago, driven by strong growth in payment services revenue and trust and investment management fees, along with higher other noninterest revenue, partially offset by decreases in mortgage banking revenue and ATM processing services. Excluding the notable items, noninterest expense increased 1.0 percent primarily due to increased compensation expense supporting business growth and compliance programs, merit increases, and variable compensation related to revenue growth, higher employee benefits expense, an increase in legal and professional expense, and higher technology and communications expense in support of business growth. Partially offsetting these increases was lower other noninterest expense driven by lower costs related to tax-advantaged projects, lower FDIC assessment costs, and a reduction in mortgage servicing costs.

Net income increased on a linked quarter basis primarily driven by total net revenue growth of 2.3 percent offset by an increase in noninterest expense of 7.8 percent. Net interest income increased 1.6 percent (1.5 percent on a taxable-equivalent basis) due to the impact of rising interest rates on assets, earning assets growth, and interest recoveries, partially offset by higher rates on deposits and funding mix. Excluding the notable items, noninterest income increased 0.2 percent compared with the third quarter of 2018 driven by higher payment services revenue primarily due to seasonally higher credit and debit card revenue and higher commercial products revenue, partially offset by lower ATM processing services due to the ATM servicing sale. Excluding the notable items, noninterest expense increased 2.0 percent primarily driven by compensation expense due to timing of payroll cycles and variable compensation related to revenue growth, along with an increase in employee benefits expense due to higher medical costs, seasonally higher professional services expense, and seasonally higher costs related to investments in tax-advantaged projects. Partially offsetting these increases was lower FDIC assessment costs.

 
NET INTEREST INCOME

(Taxable-equivalent basis; $ in millions)

        Change      
4Q 3Q 4Q 4Q18 vs   4Q18 vs Full Year Full Year
  2018   2018   2017   3Q18   4Q17   2018   2017   Change
Components of net interest income
Income on earning assets $4,341 $4,155 $3,785 $186 $556 $16,298 $14,559 $1,739
Expense on interest-bearing liabilities 1,010     874     557     136     453     3,263     1,974     1,289  
Net interest income $3,331     $3,281     $3,228     $50     $103     $13,035     $12,585     $450  
 
Average yields and rates paid
Earning assets yield 4.11 % 3.98 % 3.64 % .13 % .47 % 3.93 % 3.58 % .35 %
Rate paid on interest-bearing liabilities 1.26     1.10     .72     .16     .54     1.04     .65     .39  
Gross interest margin 2.85 %   2.88 %   2.92 %   (.03 )%   (.07 )%   2.89 %   2.93 %   (.04 )%
Net interest margin 3.15 %   3.15 %   3.11 %   -- %   .04 %   3.14 %   3.10 %   .04 %
 
Average balances
Investment securities (a) $114,138 $113,547 $113,287 $591 $851 $113,940 $111,820 $2,120
Loans 283,677 281,065 279,751 2,612 3,926 280,701 276,537 4,164
Earning assets 420,472 415,177 413,510 5,295 6,962 415,067 406,421 8,646
Interest-bearing liabilities 319,289 314,816 308,976 4,473 10,313 314,506 302,204 12,302
 
(a) Excludes unrealized gain (loss)
 
 

Net interest income on a taxable-equivalent basis in the fourth quarter of 2018 was $3,331 million, an increase of $103 million (3.2 percent) over the fourth quarter of 2017. The increase was principally driven by the impact of rising interest rates, earning assets growth, and higher yields on securities, partially offset by higher rates on deposits and funding mix shift, as well as the impact of tax reform which reduced the taxable-equivalent adjustment benefit related to tax exempt assets. Average earning assets were $7.0 billion (1.7 percent) higher than the fourth quarter of 2017, reflecting increases of $3.9 billion (1.4 percent) in average total loans and $3.0 billion (18.0 percent) in average other earning assets. Excluding the impact of the second quarter of 2018 sale of the Company’s federally guaranteed student loan portfolio and the fourth quarter of 2018 sale of the majority of the Company’s FDIC covered loans, average total loans grew 2.6 percent compared with the fourth quarter of 2017.

Net interest income on a taxable-equivalent basis increased $50 million (1.5 percent) on a linked quarter basis primarily driven by the impact of higher interest rates on assets and earning assets growth, partially offset by higher rates on deposits and funding mix shift. Average earning assets were $5.3 billion (1.3 percent) higher on a linked quarter basis, reflecting increases of $2.6 billion (0.9 percent) in average total loans and $2.1 billion (11.8 percent) in average other earning assets. Excluding the impact of the fourth quarter of 2018 sale of the majority of FDIC covered loans, total average loans grew 1.5 percent over the third quarter of 2018.

The net interest margin in the fourth quarter of 2018 was 3.15 percent, compared with 3.11 percent in the fourth quarter of 2017 and 3.15 percent in the third quarter of 2018. The increase in the net interest margin year-over-year was primarily due to higher interest rates, partially offset by deposit and funding mix, lower loan spreads due to mix, higher cash balances, and the impact of tax reform. Net interest margin was flat on a linked quarter basis reflecting the impact of higher rates on assets and higher interest recoveries, offset by deposit and funding mix, as well as higher cash balances.

Average investment securities in the fourth quarter of 2018 increased $851 million (0.8 percent) from the fourth quarter of 2017 and $591 million (0.5 percent) from the third quarter of 2018 due to purchases of U.S. Treasury, mortgage-backed and state and political securities, net of prepayments and maturities.

 
AVERAGE LOANS
($ in millions)         Percent Change      
4Q 3Q 4Q 4Q18 vs   4Q18 vs Full Year Full Year Percent
    2018   2018   2017   3Q18   4Q17   2018   2017   Change
 
Commercial $95,025 $93,541 $92,101 1.6 3.2 $93,342 $90,393 3.3
Lease financing 5,490   5,507   5,457 (.3 ) .6 5,512   5,511 --
Total commercial 100,515 99,048 97,558 1.5 3.0 98,854 95,904 3.1
 
Commercial mortgages 28,930 28,362 29,543 2.0 (2.1 ) 28,793 30,430 (5.4 )
Construction and development 11,219   11,180   11,466 .3 (2.2 ) 11,184   11,647 (4.0 )
Total commercial real estate 40,149 39,542 41,009 1.5 (2.1 ) 39,977 42,077 (5.0 )
 
Residential mortgages 64,476 62,042 59,639 3.9 8.1 61,893 58,784 5.3
 
Credit card 22,396 21,774 21,218 2.9 5.6 21,672 20,906 3.7
 
Retail leasing 8,489 8,383 7,982 1.3 6.4 8,253 7,354 12.2
Home equity and second mortgages 16,065 16,000 16,299 .4 (1.4 ) 16,076 16,278 (1.2 )
Other 31,587   31,520   32,856 .2 (3.9 ) 31,807   31,784 .1
Total other retail 56,141 55,903 57,137 .4 (1.7 ) 56,136 55,416 1.3
 
Covered loans (a) --   2,756   3,190 nm nm 2,169   3,450 (37.1 )
 
Total loans $283,677   $281,065   $279,751 .9 1.4 $280,701   $276,537 1.5
 
(a) During the fourth quarter of 2018, the majority of the Company's covered loans were sold or the loss share coverage expired.

At December 31, 2018, remaining acquired loan balances are included in the portfolio type they would have otherwise been included in had the loss share coverage not been in place.

 

 

Average total loans were $3.9 billion (1.4 percent) higher than the fourth quarter of 2017. Excluding the impact of the second quarter of 2018 sale of the Company’s federally guaranteed student loan portfolio and the fourth quarter of 2018 sale of the majority of the Company’s FDIC covered loans, average total loans grew 2.6 percent over the prior year quarter. The increase was due to growth in residential mortgages (8.1 percent), total commercial loans (3.0 percent), credit card loans (5.6 percent), and retail leasing (6.4 percent). These increases were partially offset by a decrease in total commercial real estate loans (2.1 percent) due to customers paying down balances and a decrease in other loans (3.9 percent) impacted by the sale of student loans.

Average total loans were $2.6 billion (0.9 percent) higher than the third quarter of 2018 driven by growth in residential mortgages (3.9 percent) and total commercial loans (1.5 percent), partially offset by the sale of covered loans in the fourth quarter of 2018. Excluding the impact of the fourth quarter of 2018 covered loans sale, total average loans grew 1.5 percent over the third quarter of 2018.

 
AVERAGE DEPOSITS
($ in millions)         Percent Change      
4Q 3Q 4Q 4Q18 vs   4Q18 vs Full Year Full Year Percent
    2018   2018   2017   3Q18   4Q17   2018   2017   Change
 
Noninterest-bearing deposits $77,160 $77,192 $82,303 -- (6.2 ) $78,196 $81,933 (4.6 )
Interest-bearing savings deposits
Interest checking 71,013 69,330 70,717 2.4 .4 70,154 67,953 3.2
Money market savings 99,594 100,688 105,348 (1.1 ) (5.5 ) 101,732 106,476 (4.5 )
Savings accounts 44,544   44,848   43,772 (.7 ) 1.8 44,713   43,393 3.0
Total savings deposits 215,151 214,866 219,837 .1 (2.1 ) 216,599 217,822 (.6 )
Time deposits 42,054   38,063   37,022 10.5 13.6 38,667   33,759 14.5
Total interest-bearing deposits 257,205   252,929   256,859 1.7 .1 255,266   251,581 1.5
Total deposits $334,365   $330,121   $339,162 1.3 (1.4 ) $333,462   $333,514 --
 

Average total deposits for the fourth quarter of 2018 were $4.8 billion (1.4 percent) lower than the fourth quarter of 2017. Average noninterest-bearing deposits decreased $5.1 billion (6.2 percent) year-over-year primarily due to decreases in business deposits within Corporate and Commercial Banking and corporate trust balances within Wealth Management and Investment Services. Average total savings deposits were $4.7 billion (2.1 percent) lower year-over-year driven by decreases in Wealth Management and Investment Services and Corporate and Commercial Banking, partially offset by an increase in Consumer and Business Banking. Average time deposits were $5.0 billion (13.6 percent) higher than the prior year quarter. Changes in time deposits are largely related to those deposits managed as an alternative to other funding sources such as wholesale borrowing, based largely on relative pricing and liquidity characteristics.

Average total deposits increased $4.2 billion (1.3 percent) from the third quarter of 2018. On a linked quarter basis, average noninterest-bearing deposits were essentially flat reflecting seasonal growth in Wealth Management and Investment Services balances, offset by decreases in balances within Corporate and Commercial Banking. Average total savings deposits increased $285 million (0.1 percent) primarily due to increases in Corporate and Commercial Banking, partially offset by decreases in Wealth Management and Investment Services and Consumer and Business Banking. Average time deposits increased $4.0 billion (10.5 percent) during the quarter. Average time deposit growth partially reflects consumer customers’ migration to certificates of deposit for higher yields. In addition, the balance of time deposits is managed based on funding needs, relative pricing and liquidity characteristics.

                                 
NONINTEREST INCOME
($ in millions)         Percent Change      
4Q 3Q 4Q 4Q18 vs   4Q18 vs Full Year Full Year Percent
    2018   2018   2017   3Q18   4Q17   2018   2017   Change
 
Credit and debit card revenue $382 $344 $342 11.0 11.7 $1,401 $1,289 8.7
Corporate payment products revenue 163 169 148 (3.6 ) 10.1 644 575 12.0
Merchant processing services 389 392 374 (.8 ) 4.0 1,531 1,486 3.0
ATM processing services 54 85 80 (36.5 ) (32.5 ) 308 303 1.7
Trust and investment management fees 409 411 394 (.5 ) 3.8 1,619 1,522 6.4
Deposit service charges 199 198 194 .5 2.6 762 732 4.1
Treasury management fees 143 146 152 (2.1 ) (5.9 ) 594 618 (3.9 )
Commercial products revenue 225 216 224 4.2 .4 895 954 (6.2 )
Mortgage banking revenue 171 174 202 (1.7 ) (15.3 ) 720 834 (13.7 )
Investment products fees 48 47 45 2.1 6.7 188 173 8.7
Securities gains (losses), net 5 10 10 (50.0 ) (50.0 ) 30 57 (47.4 )
Other 310   226   205 37.2 51.2 910   774 17.6
 
Total noninterest income $2,498   $2,418   $2,370 3.3 5.4 $9,602   $9,317 3.1
                                 
 

Fourth quarter noninterest income of $2,498 million was $128 million (5.4 percent) higher than the fourth quarter of 2017 led by strong growth in payment services revenue and trust and investment management fees. Payment services revenue increased $70 million (8.1 percent) due to higher credit and debit card revenue of $40 million (11.7 percent), an increase in corporate payment products revenue of $15 million (10.1 percent), and higher merchant processing services of $15 million (4.0 percent) all driven by higher sales volumes. Trust and investment management fees increased $15 million (3.8 percent) due to business growth. Other noninterest income included the impacts of notable items related to the gain from the sale of the Company’s ATM servicing business of $340 million and charges for asset impairments related to the sale of a majority of the Company’s covered loans and other certain assets of $264 million. Excluding these notable items, other noninterest income increased year-over-year primarily due to higher equity investment income. Partially offsetting these increases was a decline in mortgage banking revenue of $31 million (15.3 percent) primarily due to lower mortgage production. Also, ATM processing services decreased $26 million (32.5 percent) due to the sale of the Company’s ATM servicing business.

Noninterest income was $80 million (3.3 percent) higher in the fourth quarter of 2018 compared with the third quarter of 2018 reflecting higher payment services revenue as credit and debit card revenue grew $38 million (11.0 percent) due to seasonally higher sales volumes, partially offset by seasonally lower corporate payment products revenue of $6 million (3.6 percent). Due to the sale of the Company’s ATM third party servicing business, ATM processing services fees declined $31 million (36.5 percent) in the fourth quarter. Excluding the notable items, noninterest income increased 0.2 percent on a linked quarter basis.

                                 
NONINTEREST EXPENSE
($ in millions)         Percent Change      
4Q 3Q 4Q 4Q18 vs   4Q18 vs Full Year Full Year Percent
    2018   2018   2017   3Q18   4Q17   2018   2017   Change
 
Compensation $1,568 $1,529 $1,499 2.6 4.6 $6,162 $5,746 7.2
Employee benefits 308 294 291 4.8 5.8 1,231 1,134 8.6
Net occupancy and equipment 266 270 259 (1.5 ) 2.7 1,063 1,019 4.3
Professional services 133 96 114 38.5 16.7 407 419 (2.9 )
Marketing and business development 115 106 251 8.5 (54.2 ) 429 542 (20.8 )
Technology and communications 254 247 236 2.8 7.6 978 903 8.3
Postage, printing and supplies 80 84 79 (4.8 ) 1.3 324 323 .3
Other intangibles 41 41 44 -- (6.8 ) 161 175 (8.0 )
Other 515   377   1,126 36.6 (54.3 ) 1,709   2,529 (32.4 )
 
Total noninterest expense $3,280   $3,044   $3,899 7.8 (15.9 ) $12,464   $12,790 (2.5 )
                                       
 

Fourth quarter noninterest expense of $3,280 million was $619 million (15.9 percent) lower than the fourth quarter of 2017. Included in the fourth quarter are Company expenses related to severance charges and accruals of legal matters of $174 million in 2018 and incurred expenses of $825 million in 2017 related to a special employee bonus and contribution to its foundation as well as the settlement of a regulatory matter. Excluding the impact of the notable items, fourth quarter noninterest expense was 1.0 percent higher than fourth quarter of 2017 primarily due to an increase in compensation expense driven by the impact of hiring to support business growth and compliance programs, merit increases, and higher variable compensation related to business production. Employee benefits expense increased primarily due to higher medical costs compared with a year ago. Partially offsetting these increases was a decrease in other noninterest expense due to lower costs related to tax-advantaged projects, lower FDIC assessment costs, driven by the elimination of the surcharge in the fourth quarter of 2018, and a reduction in mortgage servicing costs.

Noninterest expense increased $236 million (7.8 percent) on a linked quarter basis. Excluding the impact of the notable items, fourth quarter noninterest expense increased 2.0 percent primarily due to an increase in compensation expense, including higher incentives, seasonally higher professional services expenses, and growth in other noninterest expense due to seasonally higher costs related to tax-advantaged projects, partially offset by lower FDIC assessment costs driven by the elimination of the surcharge in the fourth quarter of 2018.

Provision for Income Taxes

The provision for income taxes for the fourth quarter of 2018 resulted in a tax rate of 14.6 percent on a taxable-equivalent basis (effective tax rate of 13.5 percent), compared with a tax benefit of 23.6 percent on a taxable-equivalent basis (effective tax benefit of 28.6 percent) in the fourth quarter of 2017, and a tax rate of 21.2 percent on a taxable-equivalent basis (effective tax rate of 20.2 percent) in the third quarter of 2018. The tax benefit in the fourth quarter of 2017 reflected the impact of tax reform legislation that was enacted during that quarter. The 2018 tax rates reflected the reduced statutory tax rate for corporations from 35 percent to 21 percent effective beginning in 2018 and the fourth quarter of 2018 tax rates reflected the favorable impact of deferred tax assets and liabilities adjustments related to tax reform estimates. Excluding the changes in estimates related to deferred tax assets and liabilities, the taxable-equivalent rate was 20.1 percent in the fourth quarter of 2018.

 
ALLOWANCE FOR CREDIT LOSSES
($ in millions)   4Q     3Q     2Q     1Q     4Q  
    2018   % (b)   2018   % (b)   2018   % (b)   2018   % (b)   2017   % (b)
 
Balance, beginning of period $4,426 $4,411 $4,417 $4,417 $4,407
 
Net charge-offs
Commercial 64 .27 63 .27 54 .23 56 .25 22 .09
Lease financing 3   .22 3   .22 4   .29 4   .29 6   .44
Total commercial 67 .26 66 .26 58 .24 60 .25 28 .11
Commercial mortgages (8 ) (.11 ) (5 ) (.07 ) -- -- (4 ) (.06 ) 18 .24
Construction and development 1   .04 (4 ) (.14 ) --   -- 1   .04 --   --
Total commercial real estate (7 ) (.07 ) (9 ) (.09 ) -- -- (3 ) (.03 ) 18 .17
 
Residential mortgages 2 .01 4 .03 4 .03 7 .05 10 .07
 
Credit card 219 3.88 206 3.75 210 3.97 211 4.02 205 3.83
 
Retail leasing 3 .14 3 .14 3 .15 3 .15 3 .15
Home equity and second mortgages 1 .02 (1 ) (.02 ) (2 ) (.05 ) (1 ) (.03 ) (2 ) (.05 )
Other 68   .85 59   .74 59   .76 64   .79 63   .76
Total other retail 72   .51 61   .43 60   .43 66   .47 64   .44
Total net charge-offs 353 .49 328 .46 332 .48 341 .49 325 .46
Provision for credit losses 368 343 327 341 335
Other changes (a) --   --   (1 ) --   --  
Balance, end of period $4,441   $4,426   $4,411   $4,417   $4,417  
 
Components
Allowance for loan losses $3,973 $3,954 $3,920 $3,918 $3,925

Liability for unfunded credit commitments

468   472   491   499   492  
Total allowance for credit losses $4,441   $4,426   $4,411   $4,417   $4,417  
 
Gross charge-offs $442 $428 $437 $453 $464
Gross recoveries $89 $100 $105 $112 $139
 
Allowance for credit losses as a percentage of
Period-end loans 1.55 1.57 1.57 1.59 1.58
Nonperforming loans 544 544 484 431 438

Nonperforming assets

449 441 404 367 368
 

(a) Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the indemnification asset, and the impact of any loan sales.

(b) Annualized and calculated on average loan balances
 
 

Credit quality was relatively stable on both a linked quarter and year-over-year basis. The Company’s provision for credit losses for the fourth quarter of 2018 was $368 million, which was $25 million (7.3 percent) higher than the prior quarter and $33 million (9.9 percent) higher than the fourth quarter of 2017.

Total net charge-offs in the fourth quarter of 2018 were $353 million, compared with $328 million in the third quarter of 2018, and $325 million in the fourth quarter of 2017. Net charge-offs increased $25 million (7.6 percent) compared with the third quarter of 2018 mainly due to seasonally lower credit card net charge-offs in the third quarter and higher total other retail net charge-offs in the fourth quarter. Net charge-offs increased $28 million (8.6 percent) compared with the fourth quarter of 2017 primarily due to higher total commercial and credit card net charge-offs, partially offset by lower total commercial real estate net charge-offs. The net charge-off ratio was 0.49 percent in the fourth quarter of 2018, compared with 0.46 percent in both the third quarter of 2018 and in the fourth quarter of 2017.

The allowance for credit losses was $4,441 million at December 31, 2018, compared with $4,426 million at September 30, 2018, and $4,417 million at December 31, 2017. The ratio of the allowance for credit losses to period-end loans was 1.55 percent at December 31, 2018, compared with 1.57 percent at September 30, 2018, and 1.58 percent at December 31, 2017. The ratio of the allowance for credit losses to nonperforming loans was 544 percent at December 31, 2018, and at September 30, 2018, compared with 438 percent at December 31, 2017.

Nonperforming assets were $989 million at December 31, 2018, compared with $1,004 million at September 30, 2018, and $1,200 million at December 31, 2017. The ratio of nonperforming assets to loans and other real estate was 0.34 percent at December 31, 2018, compared with 0.36 percent at September 30, 2018, and 0.43 percent at December 31, 2017. The year-over-year decrease in nonperforming assets was driven by improvements in nonperforming residential mortgages, total commercial loans, total commercial real estate and other real estate owned. Accruing loans 90 days or more past due were $584 million at December 31, 2018, compared with $551 million at September 30, 2018, and $720 million at December 31, 2017.

 
DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES
(Percent)   Dec 31   Sep 30   Jun 30   Mar 31   Dec 31
    2018   2018   2018   2018   2017
 
Delinquent loan ratios - 90 days or more past due excluding nonperforming loans
Commercial .07 .06 .06 .06 .06
Commercial real estate -- .01 .01 .01 .01
Residential mortgages .18 .19 .18 .22 .22
Credit card 1.25 1.18 1.15 1.29 1.28
Other retail .19 .17 .16 .18 .17
Covered loans -- .86 4.46 4.57 4.74
Total loans .20 .20 .23 .25 .26
 
Delinquent loan ratios - 90 days or more past due including nonperforming loans
Commercial .27 .28 .28 .37 .31
Commercial real estate .29 .27 .27 .31 .37
Residential mortgages .63 .69 .84 .93 .96
Credit card 1.25 1.18 1.15 1.29 1.28
Other retail .54 .49 .48 .48 .46
Covered loans -- .86 4.68 4.77 4.93
Total loans .49 .48 .55 .62 .62
                     
 
 
ASSET QUALITY (a)
($ in millions)          
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31
    2018   2018   2018   2018   2017
Nonperforming loans
Commercial $186 $193 $199 $274 $225
Lease financing 23   23   25   27   24

Total commercial

209 216 224 301 249
 
Commercial mortgages 76 77 72 86 108
Construction and development 39   28   32   33   34
Total commercial real estate 115 105 104 119 142
 
Residential mortgages 296 317 400 430 442
Credit card -- -- -- -- 1
Other retail 197 175 178 168 168
Covered loans --   --   6   6   6
Total nonperforming loans 817 813 912 1,024 1,008
 
Other real estate 111 100 108 124 141
Covered other real estate -- 19 20 20 21
Other nonperforming assets 61   72   51   36   30
Total nonperforming assets $989   $1,004   $1,091   $1,204   $1,200
 
Accruing loans 90 days or more past due $584   $551   $640   $702   $720
 
Performing restructured loans, excluding GNMA $2,218   $2,272   $2,194   $2,222   $2,338
Performing restructured GNMA $1,639   $1,668   $1,665   $1,566   $1,681
 
Nonperforming assets to loans plus ORE (%) .34 .36 .39 .43 .43
 
(a) Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due
 
 
 
COMMON SHARES
(Millions)   4Q   3Q   2Q   1Q   4Q
    2018   2018   2018   2018   2017
 
Beginning shares outstanding 1,623 1,636 1,649 1,656 1,667

Shares issued for stock incentive plans, acquisitions and other corporate purposes

1 1 -- 4 1
Shares repurchased (16 )   (14 )   (13 )   (11 )   (12 )
Ending shares outstanding 1,608     1,623     1,636     1,649     1,656  
                     
 
 
CAPITAL POSITION
($ in millions)   Dec 31   Sep 30   Jun 30   Mar 31   Dec 31
    2018     2018     2018     2018     2017  
 
Total U.S. Bancorp shareholders' equity $51,029 $50,375 $49,628 $49,187 $49,040
 
Basel III Standardized Approach (a)
Common equity tier 1 capital $34,724 $34,097 $34,161 $33,539 $34,369
Tier 1 capital 40,741 40,114 39,611 38,991 39,806
Total risk-based capital 48,178 47,531 47,258 46,640 47,503
 
Fully implemented common equity tier 1 capital ratio (a) 9.1 % 9.0 % 9.1 % 9.0 % 9.1 % (b)
Tier 1 capital ratio 10.7 10.6 10.5 10.4 10.8
Total risk-based capital ratio 12.6 12.6 12.6 12.5 12.9
Leverage ratio 9.0 9.0 8.9 8.8 8.9
 
Basel III Advanced Approaches (a)
Fully implemented common equity tier 1 capital ratio (a) 11.8 11.8 11.6 11.5 11.6 (b)
 
Tangible common equity to tangible assets (b) 7.8 7.7 7.8 7.7 7.6
Tangible common equity to risk-weighted assets (b) 9.4 9.3 9.3 9.3 9.4
 

Common equity tier 1 capital ratio calculated under the transitional standardized approach (a)

-- -- -- -- 9.3

Common equity tier 1 capital ratio calculated under the transitional advanced approaches (a)

-- -- -- -- 12.0
 

(a) Beginning January 1, 2018, the regulatory capital requirements fully reflect implementation of Basel III. Prior to 2018, the Company's capital ratios reflected certain transitional adjustments. Basel III includes two comprehensive methodologies for calculating risk-weighted assets: a general standardized approach and more risk-sensitive advanced approaches, with the Company's capital adequacy being evaluated against the methodology that is most restrictive.

(b) See Non-GAAP Financial Measures reconciliation on page 16

 

 

Total U.S. Bancorp shareholders’ equity was $51.0 billion at December 31, 2018, compared with $50.4 billion at September 30, 2018, and $49.0 billion at December 31, 2017. During the fourth quarter, the Company returned 80 percent of earnings to shareholders through dividends and share buybacks.

All regulatory ratios continue to be in excess of “well-capitalized” requirements. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III standardized approach was 9.1 percent at December 31, 2018, compared with 9.0 percent at September 30, 2018, and 9.3 percent at December 31, 2017. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III advanced approaches method was 11.8 percent at December 31, 2018, and at September 30, 2018, compared with 12.0 percent at December 31, 2017.

Investor Conference Call

On Wednesday, January 16, 2019, at 8:00 a.m. CST, Andy Cecere, chairman, president and chief executive officer, and Terry Dolan, vice chairman and chief financial officer, will host a conference call to review the financial results. The conference call will be available online or by telephone. To access the webcast and presentation, visit U.S. Bancorp’s website at usbank.com and click on “About US”, “Investor Relations” and “Webcasts & Presentations.” To access the conference call from locations within the United States and Canada, please dial 866-316-1409. Participants calling from outside the United States and Canada, please dial 706-634-9086. The conference ID number for all participants is 1486427. For those unable to participate during the live call, a recording will be available at approximately 11:00 a.m. CST on Wednesday, January 16 and will be accessible until Wednesday, January 23 at 11:00 p.m. CST. To access the recorded message within the United States and Canada, please dial 855-859-2056. If calling from outside the United States and Canada, please dial 404-537-3406 to access the recording. The conference ID is 1486427.

About U.S. Bancorp

U.S. Bancorp, with 74,000 employees and $467 billion in assets as of December 31, 2018, is the parent company of U.S. Bank, the fifth-largest commercial bank in the United States. The Minneapolis-based bank blends its relationship teams, branches and ATM network with mobile and online tools that allow customers to bank how, when and where they prefer. U.S. Bank is committed to serving its millions of retail, business, wealth management, payment, commercial and corporate, and investment services customers across the country and around the world as a trusted financial partner, a commitment recognized by the Ethisphere Institute naming the bank a 2018 World’s Most Ethical Company. Visit U.S. Bank at www.usbank.com or follow on social media to stay up to date with company news.

Forward-looking Statements

The following information appears in accordance with the Private Securities Litigation Reform Act of 1995:

This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. Deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. Stress in the commercial real estate markets, as well as a downturn in the residential real estate markets, could cause credit losses and deterioration in asset values. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; changes in the level of tariffs and other trade policies of the United States and its global trading partners; changes in customer behavior and preferences; breaches in data security; failures to safeguard personal information; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputational risk.

For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2017, on file with the Securities and Exchange Commission, including the sections entitled “Corporate Risk Profile” and “Risk Factors” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. However, factors other than these also could adversely affect U.S. Bancorp’s results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.

Non-GAAP Financial Measures

In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:

  • Tangible common equity to tangible assets
  • Tangible common equity to risk-weighted assets
  • Return on tangible common equity

These capital measures are viewed by management as useful additional methods of evaluating the Company’s utilization of its capital held and the level of capital available to withstand unexpected negative market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Company’s capital position relative to other financial services companies. These capital measures are not defined in generally accepted accounting principles (“GAAP”), or are not defined in banking regulations. As a result, these capital measures disclosed by the Company may be considered non-GAAP financial measures. In addition, certain capital measures related to prior periods are presented on the same basis as those capital measures in the current period. The effective capital ratios defined by banking regulations for these periods were subject to certain transitional provisions. Management believes this information helps investors assess trends in the Company’s capital adequacy.

The Company also discloses net interest income and related ratios and analysis on a taxable-equivalent basis, which may also be considered non-GAAP financial measures. The Company believes this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable and tax-exempt sources. In addition, certain performance measures, including the efficiency ratio and net interest margin utilize net interest income on a taxable-equivalent basis.

There may be limits in the usefulness of these measures to investors. As a result, the Company encourages readers to consider the consolidated financial statements and other financial information contained in this press release in their entirety, and not to rely on any single financial measure. A table follows that shows the Company’s calculation of these non-GAAP financial measures.

 
CONSOLIDATED STATEMENT OF INCOME

(Dollars and Shares in Millions, Except Per Share Data)

  Three Months Ended   Year Ended
December 31,   December 31,
(Unaudited)   2018   2017   2018   2017
Interest Income    
Loans $3,475 $3,060 $13,120 $11,788
Loans held for sale 57 40 165 144
Investment securities 689 579 2,616 2,232
Other interest income 90     51     272     182  
Total interest income 4,311 3,730 16,173 14,346
Interest Expense
Deposits 606 311 1,869 1,041
Short-term borrowings 113 45 378 141
Long-term debt 289     199     1,007     784  
Total interest expense 1,008     555     3,254     1,966  
Net interest income 3,303 3,175 12,919 12,380
Provision for credit losses 368     335     1,379     1,390  
Net interest income after provision for credit losses 2,935 2,840 11,540 10,990
Noninterest Income
Credit and debit card revenue 382 342 1,401 1,289
Corporate payment products revenue 163 148 644 575
Merchant processing services 389 374 1,531 1,486
ATM processing services 54 80 308 303
Trust and investment management fees 409 394 1,619 1,522
Deposit service charges 199 194 762 732
Treasury management fees 143 152 594 618
Commercial products revenue 225 224 895 954
Mortgage banking revenue 171 202 720 834
Investment products fees 48 45 188 173
Securities gains (losses), net 5 10 30 57
Other 310     205     910     774  
Total noninterest income 2,498 2,370 9,602 9,317
Noninterest Expense
Compensation 1,568 1,499 6,162 5,746
Employee benefits 308 291 1,231 1,134
Net occupancy and equipment 266 259 1,063 1,019
Professional services 133 114 407 419
Marketing and business development 115 251 429 542
Technology and communications 254 236 978 903
Postage, printing and supplies 80 79 324 323
Other intangibles 41 44 161 175
Other 515     1,126     1,709     2,529  
Total noninterest expense 3,280     3,899     12,464     12,790  
Income before income taxes 2,153 1,311 8,678 7,517
Applicable income taxes 291     (375 )   1,554     1,264  
Net income 1,862 1,686 7,124 6,253
Net (income) loss attributable to noncontrolling interests (6 )   (4 )   (28 )   (35 )
Net income attributable to U.S. Bancorp $1,856     $1,682     $7,096     $6,218  
Net income applicable to U.S. Bancorp common shareholders $1,777     $1,611     $6,784     $5,913  
 
Earnings per common share $1.10 $.97 $4.15 $3.53
Diluted earnings per common share $1.10 $.97 $4.14 $3.51
Dividends declared per common share $.37 $.30 $1.34 $1.16
Average common shares outstanding 1,615 1,659 1,634 1,677
Average diluted common shares outstanding   1,618     1,664     1,638     1,683  
 
 
CONSOLIDATED ENDING BALANCE SHEET
   
December 31, December 31,
(Dollars in Millions)   2018   2017
Assets
Cash and due from banks $21,453 $19,505
Investment securities
Held-to-maturity 46,050 44,362
Available-for-sale 66,115 68,137
Loans held for sale 2,056 3,554
Loans
Commercial 102,444 97,561
Commercial real estate 39,539 40,463
Residential mortgages 65,034 59,783
Credit card 23,363 22,180
Other retail 56,430 57,324
Covered loans --     3,121  
Total loans 286,810 280,432
Less allowance for loan losses (3,973 )   (3,925 )
Net loans 282,837 276,507
Premises and equipment 2,457 2,432
Goodwill 9,369 9,434
Other intangible assets 3,392 3,228
Other assets 33,645     34,881  
Total assets $467,374     $462,040  
 
Liabilities and Shareholders' Equity
Deposits
Noninterest-bearing $81,811 $87,557
Interest-bearing 263,664     259,658  
Total deposits 345,475 347,215
Short-term borrowings 14,139 16,651
Long-term debt 41,340 32,259
Other liabilities 14,763     16,249  
Total liabilities 415,717 412,374
Shareholders' equity
Preferred stock 5,984 5,419
Common stock 21 21
Capital surplus 8,469 8,464
Retained earnings 59,065 54,142
Less treasury stock (20,188 ) (17,602 )
Accumulated other comprehensive income (loss) (2,322 )   (1,404 )
Total U.S. Bancorp shareholders' equity 51,029 49,040
Noncontrolling interests 628     626  
Total equity 51,657     49,666  
Total liabilities and equity   $467,374     $462,040  
 
   
NON-GAAP FINANCIAL MEASURES
         
December 31, September 30, June 30, March 31, December 31,
(Dollars in Millions, Unaudited)   2018   2018   2018   2018   2017
Total equity $51,657 $51,007 $50,257 $49,812 $49,666
Preferred stock (5,984 ) (5,984 ) (5,419 ) (5,419 ) (5,419 )
Noncontrolling interests (628 ) (632 ) (629 ) (625 ) (626 )
Goodwill (net of deferred tax liability) (1) (8,549 ) (8,682 ) (8,585 ) (8,609 ) (8,613 )
Intangible assets, other than mortgage servicing rights (601 )   (627 )   (571 )   (608 )   (583 )
Tangible common equity (a) 35,895 35,082 35,053 34,551 34,425
 
Total assets 467,374 464,607 461,329 460,119 462,040
Goodwill (net of deferred tax liability) (1) (8,549 ) (8,682 ) (8,585 ) (8,609 ) (8,613 )
Intangible assets, other than mortgage servicing rights (601 )   (627 )   (571 )   (608 )   (583 )
Tangible assets (b) 458,224 455,298 452,173 450,902 452,844
 

Risk-weighted assets, determined in accordance with the Basel III standardized approach (c)

381,661

*

377,713 375,466 373,141 367,771
 
Tangible common equity (as calculated above) 34,425
Adjustments (2) (550 )

Common equity tier 1 capital estimated for the Basel III fully implemented standardized and advanced approaches (d)

33,875
 

Risk-weighted assets, determined in accordance with prescribed transitional standardized approach regulatory requirements

367,771
Adjustments (3) 4,473  

Risk-weighted assets estimated for the Basel III fully implemented standardized approach (e)

372,244
 

Risk-weighted assets, determined in accordance with prescribed transitional advanced approaches regulatory requirements

287,211
Adjustments (4) 4,769  

Risk-weighted assets estimated for the Basel III fully implemented advanced approaches (f)

291,980
 
Ratios *
Tangible common equity to tangible assets (a)/(b) 7.8 % 7.7 % 7.8 % 7.7 % 7.6 %
Tangible common equity to risk-weighted assets (a)/(c) 9.4 9.3 9.3 9.3 9.4

Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach (d)/(e)

9.1

Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches (d)/(f)

 

11.6
 
 
Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2018   2018   2018   2018   2017
Net income applicable to U.S. Bancorp common shareholders $1,777 $1,732 $1,678 $1,597 $1,611
Intangibles amortization (net-of-tax) 32     32     32     31     28  

Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization

1,809 1,764 1,710 1,628 1,639

Annualized net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization (g)

7,177 6,998 6,859 6,602 6,503
 
Average total equity 51,370 50,768 49,950 49,450 49,461
Less: Average preferred stock 5,984 5,714 5,419 5,419 5,419
Less: Average noncontrolling interests 630 630 628 625 627
Less: Average goodwill (net of deferred tax liability) (1) 8,574 8,620 8,602 8,627 8,154
Less: Average intangible assets, other than mortgage servicing rights 605     584     588     603     591  

Average U.S. Bancorp common shareholders' equity, excluding intangible assets (h)

35,577 35,220 34,713 34,176 34,670
 
Return on tangible common equity (g)/(h)   20.2 %   19.9 %   19.8 %   19.3 %   18.8 %
 

* Preliminary data. Subject to change prior to filings with applicable regulatory agencies.

(1) Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.
(2) Includes net losses on cash flow hedges included in accumulated other comprehensive income (loss) and other adjustments.
(3) Includes higher risk-weighting for unfunded loan commitments, investment securities, residential mortgages, mortgage servicing rights and other adjustments.
(4) Primarily reflects higher risk-weighting for mortgage servicing rights.
 
 
NON-GAAP FINANCIAL MEASURES

(Dollars in Millions, Unaudited)

  Three Months Ended     Year Ended
December 31,   September 30,   June 30,   March 31,   December 31,     December 31,   December 31,
  2018   2018   2018   2018   2017     2018   2017
Net interest income $3,303 $3,251 $3,197 $3,168 $3,175 $12,919 $12,380
Taxable-equivalent adjustment (1) 28     30     29     29     53       116     205  
Net interest income, on a taxable-equivalent basis 3,331 3,281 3,226 3,197 3,228 13,035 12,585
 
Net interest income, on a taxable-equivalent basis (as calculated above) 3,331 3,281 3,226 3,197 3,228 13,035 12,585
Noninterest income 2,498 2,418 2,414 2,272 2,370 9,602 9,317
Less: Securities gains (losses), net 5     10     10     5     10       30     57  
Total net revenue, excluding net securities gains (losses) (a) 5,824 5,689 5,630 5,464 5,588 22,607 21,845
 
Noninterest expense (b) 3,280 3,044 3,085 3,055 3,899 12,464 12,790
Less: Intangible amortization 41     41     40     39     44       161     175  
Noninterest expense, excluding intangible amortization (c) 3,239 3,003 3,045 3,016 3,855 12,303 12,615
 
Efficiency ratio (b)/(a) 56.3 % 53.5 % 54.8 % 55.9 % 69.8 % 55.1 % 58.5 %
Tangible efficiency ratio (c)/(a)   55.6     52.8     54.1     55.2     69.0       54.4     57.7  
 
(1) Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent for 2018 and 35 percent for 2017.