U.S. Bancorp Reports Earnings for the First Quarter of 2014

  U.S. Bancorp Reports Earnings for the First Quarter of 2014

Business Wire

MINNEAPOLIS -- April 16, 2014

U.S. Bancorp (NYSE: USB) today reported net income of $1,397 million for the
first quarter of 2014, or $.73 per diluted common share, compared with $1,428
million, or $.73 per diluted common share, in the first quarter of 2013.

Highlights for the first quarter of 2014 included:

  *Growth in average total loans of 6.0 percent over the first quarter of
    2013 (7.6 percent excluding covered loans) and 1.3 percent on a linked
    quarter basis (1.7 percent excluding covered loans)

       *Growth in average total commercial loans of 8.5 percent over the
         first quarter of 2013 and 2.8 percent over the fourth quarter of 2013
       *Growth in average total commercial real estate loans of 7.6 percent
         over the first quarter of 2013 and 1.9 percent over the fourth
         quarter of 2013
       *Growth in average commercial and commercial real estate commitments
         of 11.7 percent year-over-year and 3.4 percent over the prior quarter

  *Strong new lending activity of $41.0 billion during the first quarter,
    including:

       *$26.9 billion of new and renewed commercial and commercial real
         estate commitments
       *$2.6 billion of lines related to new credit card accounts
       *$11.5 billion of mortgage and other retail loan originations

  *Strong growth in average total deposits of 5.1 percent over the first
    quarter of 2013

       *Average low cost deposits, including noninterest-bearing and total
         savings deposits, grew by 7.7 percent year-over-year and were stable
         on a linked quarter basis

  *Industry-leading performance ratios, including:

       *Return on average assets of 1.56 percent
       *Return on average common equity of 14.6 percent
       *Efficiency ratio of 52.9 percent

  *Net charge-offs declined 21.2 percent on a year-over-year basis. Provision
    for credit losses was $35 million less than net charge-offs

       *Allowance to period-end loans was 1.89 percent at March 31, 2014
       *Annualized net charge-offs to average total loans ratio was .59
         percent

  *Nonperforming assets decreased on both a linked quarter and a
    year-over-year basis

       *Nonperforming assets (excluding covered assets) decreased 1.0 percent
         on a linked quarter basis and 11.6 percent from the first quarter of
         2013
       *Allowance to nonperforming assets (excluding covered assets) was 243
         percent at March 31, 2014, compared with 242 percent at December 31,
         2013, and 221 percent at March 31, 2013

  *Capital generation continued to reinforce capital position and returns.
    Ratios at March 31, 2014, were:

       *Basel III transitional:

            *Common equity tier 1 capital ratio of 9.7 percent
            *Tier 1 capital ratio of 11.4 percent
            *Total risk based capital ratio of 13.5 percent

       *Common equity tier 1 capital to risk-weighted assets estimated for
         the Basel III fully implemented standardized approach of 9.0 percent
       *Returned 67 percent of first quarter earnings to shareholders through
         dividends and the buyback of 12 million common shares

  *Received the Federal Reserve’s non-objection to our capital plan on March
    26, 2014

       *Announced a new share repurchase authorization of $2.3 billion,
         effective April 1st
       *Expect to recommend a second quarter dividend of $0.245 per common
         share, a 6.5 percent increase over the current dividend rate

                                                            
EARNINGS SUMMARY                                             Table 1
($ in millions,
except per-share                                      Percent    Percent
data)
                                                          Change      Change
                      1Q           4Q          1Q         1Q14 vs     1Q14 vs
                      2014        2013       2013      4Q13       1Q13
                                                                      
Net income
attributable to       $1,397       $1,456      $1,428     (4.1  )     (2.2  )
U.S. Bancorp
Diluted earnings      $.73         $.76        $.73       (3.9  )     --
per common share
                                                                      
Return on average     1.56         1.62        1.65
assets (%)
Return on average     14.6         15.4        16.0
common equity (%)
Net interest          3.35         3.40        3.48
margin (%)
Efficiency ratio      52.9         54.9        50.7
(%)
Tangible
efficiency ratio      51.9         53.7        49.6
(%) (a)
                                                                      
Dividends
declared per          $.230        $.230       $.195      --          17.9
common share
Book value per
common share          $20.48       $19.92      $18.71     2.8         9.5
(period-end)
                                                                      
(a) Computed as noninterest expense divided by the sum of net interest income
on a taxable-equivalent basis and noninterest income excluding net securities
gains (losses) and intangible amortization.



Net income attributable to U.S. Bancorp was $1,397 million for the first
quarter of 2014, 2.2 percent lower than the $1,428 million for the first
quarter of 2013, and 4.1 percent lower than the $1,456 million for the fourth
quarter of 2013. Diluted earnings per common share of $.73 in the first
quarter of 2014 were equal to the first quarter of 2013 and $.03 lower than
the previous quarter. Return on average assets and return on average common
equity were 1.56 percent and 14.6 percent, respectively, for the first quarter
of 2014, compared with 1.65 percent and 16.0 percent, respectively, for the
first quarter of 2013. The provision for credit losses was lower than net
charge-offs by $35 million in the first quarter of 2014 and the fourth quarter
of 2013, and $30 million lower than net charge-offs in the first quarter of
2013.

U.S. Bancorp Chairman, President and Chief Executive Officer Richard K. Davis
said, “Our first quarter earnings of $1.4 billion, or $.73 per diluted common
share, demonstrated our Company’s ability to generate strong results in the
face of a slow-growing and uncertain economy. Our industry-leading returns on
average assets of 1.56 percent and average common equity of 14.6 percent,
combined with our strong efficiency ratio of 52.9 percent, remain among the
top performance ratios in our peer group. Our performance clearly reflects the
advantage of our diversified business mix and disciplined expense management
which has enabled us to withstand the revenue challenges facing our industry
in this slow-growth economy.

“Average loan growth remained strong at 6.0 percent year-over-year and 1.3
percent on a linked quarter basis. Total loan and commitment growth continued
to be an area of strength for the Bank, particularly highlighted by our
commercial business, which grew loans by 8.5 percent year-over-year and 2.8
percent on a linked quarter basis. This growth demonstrates our ability to
gain market share as customers choose to partner with us to expand their
businesses when opportunities arise.

“Noninterest income was impacted by seasonal factors, reflected in our
payments businesses and in lower deposit service fees. Our mortgage banking
revenue stabilized, as expected, on a linked quarter basis and declined
compared to the prior year. Our diversified revenue mix helped offset this
revenue decline and we managed expenses prudently.

“Credit quality continued to be strong in the first quarter as net charge-offs
declined 21.2 percent compared with the prior year and rose modestly on a
linked quarter basis due to unusually high recoveries in the prior quarter.
Nonperforming assets, excluding covered assets, fell by 1.0 percent and
delinquencies also improved in the quarter. Overall credit quality is expected
to remain relatively stable in the coming quarters.

“On March 20th, the Federal Reserve released the summary results of the
Dodd-Frank Act Stress Test and once again, I am proud to report that, compared
with our peer banks, our Company posted the highest pre-provision net revenue
and net income before taxes as a percent of average assets under the Federal
Reserve’s supervisory severely adverse scenario. On March 26th, we received
notice of the Federal Reserve’s non-objection to our capital plan and we
announced our new share buyback authorization of $2.3 billion, effective April
1, and our intention to recommend to our board of directors a 6.5% increase in
our common stock dividend at our June board meeting. These combined actions
allow us to maintain our goal of returning 60 – 80 percent of earnings to our
shareholders, a goal we again met in the first quarter when we returned 67
percent. Our ability to generate significant capital each quarter allows us to
provide this return to our shareholders while maintaining a strong capital
position. Our common equity tier 1 capital ratio is 9.0 percent under the
Basel III fully implemented standardized approach and 9.7 percent under the
transition rules.

“As I shared at our Annual Shareholder Meeting yesterday in Kansas City, our
67,000 employees are focused every day on extending our advantage by
delivering outstanding service and the highest quality products. I am grateful
to them for their hard work and dedication. I am also grateful to our nearly
18 million customers who trust U.S. Bank with their business. Our business
model has shown strength and resilience through times of challenge, change and
new opportunities. We are well positioned for the strengthening economic
climate and the team is working every day to create value for our
shareholders.”

                                                                  
INCOME STATEMENT HIGHLIGHTS                                   Table 2
(Taxable-equivalent basis,                                Percent  Percent
$ in millions,
except per-share data)                                      Change    Change
                              1Q         4Q         1Q       1Q14 vs   1Q14 vs
                              2014      2013      2013    4Q13     1Q13
                                                                             
Net interest income           $2,706     $2,733     $2,709   (1.0  )   (.1   )
Noninterest income            2,108    2,156    2,165    (2.2  )   (2.6  )
Total net revenue             4,814      4,889      4,874    (1.5  )   (1.2  )
Noninterest expense           2,544    2,682    2,470    (5.1  )   3.0
Income before provision and   2,270      2,207      2,404    2.9       (5.6  )
taxes
Provision for credit losses   306      277      403      10.5      (24.1 )
Income before taxes           1,964      1,930      2,001    1.8       (1.8  )
Taxable-equivalent            56         56         56       --        --
adjustment
Applicable income taxes       496      403      558      23.1      (11.1 )
Net income                    1,412      1,471      1,387    (4.0  )   1.8
Net (income) loss
attributable to               (15    )  (15    )  41       --        nm
noncontrolling interests
Net income attributable to    $1,397   $1,456   $1,428   (4.1  )   (2.2  )
U.S. Bancorp
Net income applicable to
U.S. Bancorp common           $1,331   $1,389   $1,358   (4.2  )   (2.0  )
shareholders
Diluted earnings per common   $.73     $.76     $.73     (3.9  )   --
share
                                                               
                                                                             

Net income attributable to U.S. Bancorp for the first quarter of 2014 was $31
million (2.2 percent) lower than the first quarter of 2013, and $59 million
(4.1 percent) lower than the fourth quarter of 2013. The decrease in net
income year-over-year was principally due to a decrease in mortgage banking
revenue, partially offset by a favorable variance in the provision for credit
losses. The decrease in net income on a linked quarter basis was principally
due to a reduction in total net revenue, mainly due to seasonally lower fee
revenue, partially offset by lower noninterest expense.

Total net revenue on a taxable-equivalent basis for the first quarter of 2014
was $4,814 million; $60 million (1.2 percent) lower than the first quarter of
2013, reflecting a .1 percent decrease in net interest income and a 2.6
percent decrease in noninterest income. Net interest income was essentially
flat year-over-year, as an increase in average earning assets was offset by a
decrease in the net interest margin. Noninterest income declined
year-over-year, primarily due to lower mortgage banking revenue. Total net
revenue on a taxable-equivalent basis decreased on a linked quarter basis, as
a 1.0 percent decrease in net interest income, reflecting the impact of two
fewer days in the first quarter relative to the prior quarter and seasonally
lower loan fees, was combined with a 2.2 percent decrease in noninterest
income, mainly due to seasonally lower fee revenue.

Total noninterest expense in the first quarter of 2014 was $2,544 million; $74
million (3.0 percent) higher than the first quarter of 2013 and $138 million
(5.1 percent) lower than the fourth quarter of 2013. The increase in total
noninterest expense year-over-year was primarily due to an increase in other
expense driven by insurance-related recoveries in the first quarter of 2013,
partially offset by a decrease in costs related to foreclosed properties, and
the Company’s adoption in first quarter of 2014 of accounting changes for
certain affordable housing tax credit investments (“the affordable housing tax
credit change”). The decrease in total noninterest expense on a linked quarter
basis was primarily due to a decrease in professional services and marketing
and business development expense and lower tax-advantaged investment expense
due to seasonally lower volume and the affordable housing tax credit change.

The Company’s provision for credit losses for the first quarter of 2014 was
$306 million, $29 million higher than the prior quarter and $97 million lower
than the first quarter of 2013. The provision for credit losses was lower than
net charge-offs by $35 million in the first quarter of 2014 and in the fourth
quarter of 2013, and $30 million lower than net charge-offs in the first
quarter of 2013. Net charge-offs in the first quarter of 2014 were $341
million, compared with $312 million in the fourth quarter of 2013 and $433
million in the first quarter of 2013. The increase in net charge-offs compared
with the prior quarter was due to unusually high recoveries in the fourth
quarter of 2013. Given current economic conditions, the Company expects the
level of net charge-offs to remain relatively stable in the second quarter of
2014.

Nonperforming assets include assets originated or acquired by the Company, as
well as loans and other real estate acquired under FDIC loss sharing
agreements that substantially reduce the risk of credit losses to the Company
(“covered assets”). Excluding covered assets, nonperforming assets were $1,794
million at March 31, 2014, compared with $1,813 million at December 31, 2013,
and $2,029 million at March 31, 2013. The decrease in nonperforming assets,
excluding covered assets, compared with a year ago was driven primarily by
reductions in the commercial mortgage portfolio, as well as by improvement in
construction and development and credit card loans. Covered nonperforming
assets were $205 million at March 31, 2014, compared with $224 million at
December 31, 2013, and $377 million at March 31, 2013. The ratio of the
allowance for credit losses to period-end loans was 1.89 percent at March 31,
2014, compared with 1.93 percent at December 31, 2013, and 2.11 percent at
March 31, 2013. The Company expects total nonperforming assets to remain
relatively stable in the second quarter of 2014.

                                                            
NET INTEREST INCOME                                          Table 3
(Taxable-equivalent
basis; $ in                                                     
millions)
                                                          Change      Change
                      1Q          4Q          1Q          1Q14 vs     1Q14 vs
                      2014       2013       2013       4Q13       1Q13
Components of net
interest income
Income on earning     $3,078      $3,125      $3,168      $(47   )    $(90   )
assets
Expense on
interest-bearing      372       392       459       (20    )   (87    )
liabilities
Net interest income   $2,706    $2,733    $2,709    $(27   )   $(3    )
                                                                      
Average yields and
rates paid
Earning assets        3.81    %   3.89    %   4.07    %   (.08   )%   (.26   )%
yield
Rate paid on
interest-bearing      .63       .68       .80       (.05   )   (.17   )
liabilities
Gross interest        3.18    %  3.21    %  3.27    %  (.03   )%  (.09   )%
margin
Net interest margin   3.35    %  3.40    %  3.48    %  (.05   )%  (.13   )%
                                                                      
Average balances
Investment            $82,216     $77,248     $73,467     $4,968      $8,749
securities (a)
Loans                 235,859     232,791     222,421     3,068       13,438
Earning assets        326,226     319,516     313,992     6,710       12,234
Interest-bearing      238,276     229,201     232,186     9,075       6,090
liabilities
                                                                      
(a) Excludes
unrealized gain
(loss)
                                                            
                                                                      

Net Interest Income

Net interest income on a taxable-equivalent basis in the first quarter of 2014
was $2,706 million, a decrease of $3 million (.1 percent) from the first
quarter of 2013. The decrease was the result of lower rates on loans and
investment securities, partially offset by growth in the corresponding average
balances, growth in lower cost core  deposit funding and the positive impact
from maturities of higher-rate long-term debt. Average earning assets were
$12.2 billion (3.9 percent) higher than the first quarter of 2013, driven by
increases of $13.4 billion (6.0 percent) in average total loans and $8.7
billion (11.9 percent) in average investment securities, partially offset by
decreases of $6.1 billion (70.0 percent) in average loans held for sale and
$3.8 billion (40.8 percent) in other earning assets, principally due to the
deconsolidation of certain community development and tax-advantaged project
variable interest entities during the second quarter of 2013. Net interest
income decreased $27 million (1.0 percent) on a linked quarter basis, due to
the impact of two fewer days in the first quarter relative to the prior
quarter and seasonally lower loan fees, partially offset by higher average
earning assets. The net interest margin in the first quarter of 2014 was 3.35
percent, compared with 3.48 percent in the first quarter of 2013, and 3.40
percent in the fourth quarter of 2013. The decline in the net interest margin
on a year-over-year basis primarily reflected lower reinvestment rates on
investment securities, as well as growth in the investment portfolio at lower
average rates, and lower rates on loans, partially offset by lower rates on
deposits and short-term borrowings and a reduction in higher cost long-term
debt. On a linked quarter basis, the reduction in net interest margin was
principally due to growth in lower rate investment securities and lower rates
on loans.

                                                             
AVERAGE LOANS                                                 Table 4
($ in millions)                                          Percent  Percent
                                                             Change    Change
                            1Q         4Q         1Q         1Q14 vs   1Q14 vs
                            2014      2013      2013      4Q13     1Q13
                                                                       
Commercial                  $65,645    $63,714    $59,921    3.0       9.6
Lease financing             5,189     5,210     5,378      (.4   )   (3.5  )
Total commercial            70,834     68,924     65,299     2.8       8.5
                                                                       
Commercial mortgages        32,049     31,780     31,011     .8        3.3
Construction and            8,001     7,538     6,207      6.1       28.9
development
Total commercial real       40,050     39,318     37,218     1.9       7.6
estate
                                                                       
Residential mortgages       51,584     50,732     45,109     1.7       14.4
                                                                       
Credit card                 17,407     17,366     16,528     .2        5.3
                                                                       
Retail leasing              5,979      5,847      5,448      2.3       9.7
Home equity and second      15,366     15,488     16,434     (.8   )   (6.5  )
mortgages
Other                       26,312    26,059    25,364     1.0       3.7
Total other retail          47,657    47,394    47,246     .6        .9
                                                                       
Total loans, excluding      227,532   223,734   211,400    1.7       7.6
covered loans
                                                                       
Covered loans               8,327     9,057     11,021     (8.1  )   (24.4 )
                                                                       
Total loans                 $235,859  $232,791  $222,421   1.3       6.0
                                                             
                                                                       

Average total loans were $13.4 billion (6.0 percent) higher in the first
quarter of 2014 than the first quarter of 2013, driven by growth in
residential mortgages (14.4 percent), commercial loans (9.6 percent), retail
leasing (9.7 percent), total commercial real estate (7.6 percent), credit card
(5.3 percent), and other retail loans (3.7 percent). These increases were
partially offset by declines in home equity and second mortgages (6.5
percent), lease financing (3.5 percent) and covered loans (24.4 percent).
Average total loans, excluding covered loans, were higher by 7.6 percent
year-over-year. Average total loans were $3.1 billion (1.3 percent) higher in
the first quarter of 2014 than the fourth quarter of 2013, driven by increases
in commercial loans (3.0 percent), retail leasing (2.3 percent), total
commercial real estate (1.9 percent), residential mortgages (1.7 percent),
other retail loans (1.0 percent) and credit card (.2 percent), partially
offset by decreases in home equity and second mortgages (.8 percent), lease
financing (.4 percent) and covered loans (8.1 percent). Excluding covered
loans, average total loans grew by 1.7 percent on a linked quarter basis.

Average investment securities in the first quarter of 2014 were $8.7 billion
(11.9 percent) higher year-over-year and $5.0 billion (6.4 percent) higher
than the prior quarter. The increases were primarily due to purchases of U.S.
government agency-backed securities, net of prepayments and maturities, in
anticipation of final liquidity coverage ratio regulatory requirements.

                                                             
AVERAGE DEPOSITS                                              Table 5
($ in millions)                                          Percent  Percent
                                                             Change    Change
                            1Q         4Q         1Q         1Q14 vs   1Q14 vs
                            2014      2013      2013      4Q13     1Q13
                                                                       
Noninterest-bearing         $70,824    $74,468    $66,400    (4.9  )   6.7
deposits
Interest-bearing savings
deposits
Interest checking           51,305     50,112     48,404     2.4       6.0
Money market savings        59,244     57,550     53,096     2.9       11.6
Savings accounts            33,200    32,235    31,409     3.0       5.7
Total of savings deposits   143,749    139,897    132,909    2.8       8.2
Time deposits less than     11,443     11,979     13,610     (4.5  )   (15.9 )
$100,000
Time deposits greater       31,463    30,562    32,099     2.9       (2.0  )
than $100,000
Total interest-bearing      186,655   182,438   178,618    2.3       4.5
deposits
Total deposits              $257,479  $256,906  $245,018   .2        5.1
                                                                       
                                                                       

Average total deposits for the first quarter of 2014 were $12.5 billion (5.1
percent) higher than the first quarter of 2013. Average noninterest-bearing
deposits increased $4.4 billion (6.7 percent) year-over-year, mainly in
balances related to corporate trust, commercial real estate and commercial
banking businesses. Average total savings deposits were $10.8 billion (8.2
percent) higher year-over-year, the result of growth in Consumer and Small
Business Banking, Wholesale Banking and Commercial Real Estate balances. Time
deposits less than $100,000 were $2.2 billion (15.9 percent) lower due to
maturities, while time deposits greater than $100,000 decreased $636 million
(2.0 percent), primarily due to a decline in Consumer and Small Business
Banking and corporate trust balances, partially offset by an increase in
Wholesale Banking and Commercial Real Estate balances. Time deposits greater
than $100,000 are managed as an alternative to other funding sources, such as
wholesale borrowing, based largely on relative pricing.

Average total deposits increased $573 million (.2 percent) over the fourth
quarter of 2013. Average noninterest-bearing deposits decreased $3.6 billion
(4.9 percent) on a linked quarter basis, due to seasonally lower balances in
corporate trust, Consumer and Small Business Banking and Wholesale Banking and
Commercial Real Estate. Average total savings deposits increased $3.9 billion
(2.8 percent), including increases in Consumer and Small Business Banking and
government banking balances. Compared with the fourth quarter of 2013, average
time deposits less than $100,000 declined $536 million (4.5 percent) due to
maturities. Average time deposits greater than $100,000 increased $901 million
(2.9 percent) on a linked quarter basis, principally due to higher
broker-dealer balances.

                                                            
NONINTEREST INCOME                                           Table 6
($ in millions)                                          Percent  Percent
                                                             Change    Change
                                  1Q       4Q       1Q       1Q14 vs   1Q14 vs
                                  2014    2013    2013    4Q13     1Q13
                                                                       
Credit and debit card revenue     $239     $263     $214     (9.1  )   11.7
Corporate payment products        173      166      172      4.2       .6
revenue
Merchant processing services      356      367      347      (3.0  )   2.6
ATM processing services           78       79       82       (1.3  )   (4.9  )
Trust and investment management   304      297      278      2.4       9.4
fees
Deposit service charges           157      177      153      (11.3 )   2.6
Treasury management fees          133      130      134      2.3       (.7   )
Commercial products revenue       205      243      200      (15.6 )   2.5
Mortgage banking revenue          236      231      401      2.2       (41.1 )
Investment products fees          46       45       41       2.2       12.2
Securities gains (losses), net    5        1        5        nm        --
Other                             176     157     138      12.1      27.5
                                                                       
Total noninterest income          $2,108  $2,156  $2,165   (2.2  )   (2.6  )
                                                            
                                                                       

Noninterest Income

First quarter noninterest income was $2,108 million; $57 million (2.6 percent)
lower than the first quarter of 2013 and $48 million (2.2 percent) lower than
the fourth quarter of 2013. The year-over-year decrease in noninterest income
was principally due to a $165 million (41.1 percent) reduction in mortgage
banking revenue due to lower origination and sales revenue. Growth in several
fee categories partially offset the decline in mortgage banking revenue.
Credit and debit card revenue increased $25 million (11.7 percent) over the
prior year primarily due to higher transaction volumes. Merchant processing
services revenue was $9 million (2.6 percent) higher as a result of an
increase in product fees and higher volumes, partially offset by lower rates.
Trust and investment management fees increased $26 million (9.4 percent)
year-over-year, reflecting account growth, improved market conditions and
business expansion. Commercial products revenue increased $5 million (2.5
percent) over the prior year, principally due to higher syndication fees on
tax-advantaged projects, while investment products fees increased $5 million
(12.2 percent) due to higher sales volumes and fees. In addition, other income
increased $38 million (27.5 percent) driven by higher equity investment
revenue.

Noninterest income was $48 million (2.2 percent) lower in the first quarter of
2014 than the fourth quarter of 2013, primarily due to decreases in commercial
products revenue, deposit service charges, and credit and debit card revenue.
Commercial products revenue decreased $38 million (15.6 percent) due to lower
wholesale transaction activity and seasonally lower tax-advantaged
project-related revenue. Deposit service charges were $20 million (11.3
percent) lower due to seasonality. Credit and debit card revenue was $24
million (9.1 percent) lower due to seasonally lower transaction volumes.
Merchant processing revenue was $11 million (3.0 percent) lower on a linked
quarter basis due to seasonally lower product fees and volumes. Partially
offsetting these declines on a linked quarter basis were increases in
corporate payment products revenue, trust and investment management fees and
other income. Corporate payment products revenue was higher by $7 million (4.2
percent), primarily due to seasonally higher government-related transaction
volumes. Trust and investment management fees were $7 million (2.4 percent)
higher than the prior quarter due to improved market conditions and account
growth, including business expansion. Other income was $19 million (12.1
percent) higher on a linked quarter basis, primarily due to higher equity
investment and retail leasing revenue.

                                                             
NONINTEREST EXPENSE                                           Table 7
($ in millions)                                          Percent  Percent
                                                             Change    Change
                                  1Q       4Q       1Q       1Q14 vs   1Q14 vs
                                  2014    2013    2013    4Q13     1Q13
                                                                       
Compensation                      $1,115   $1,103   $1,082   1.1       3.0
Employee benefits                 289      275      310      5.1       (6.8  )
Net occupancy and equipment       249      240      235      3.8       6.0
Professional services             83       118      78       (29.7 )   6.4
Marketing and business            79       103      73       (23.3 )   8.2
development
Technology and communications     211      209      211      1.0       --
Postage, printing and supplies    81       80       76       1.3       6.6
Other intangibles                 49       56       57       (12.5 )   (14.0 )
Other                             388     498     348      (22.1 )   11.5
                                                                       
Total noninterest expense         $2,544  $2,682  $2,470   (5.1  )   3.0
                                                                       
                                                             
                                                                       

Noninterest Expense

Noninterest expense in the first quarter of 2014 totaled $2,544 million, an
increase of $74 million (3.0 percent) from the first quarter of 2013, and a
$138 million (5.1 percent) decrease from the fourth quarter of 2013. The
increase in total noninterest expense year-over-year was primarily the result
of higher compensation expense, reflecting growth in staffing for business
initiatives and the impact of merit increases, an increase in other expense
driven by insurance-related recoveries in the prior year, partially offset by
lower tax-advantaged projects costs, including the affordable housing tax
credit change, and lower costs related to other real estate owned. In
addition, net occupancy and equipment expense increased $14 million (6.0
percent) due to business initiatives, higher rent expense and maintenance
costs, and marketing and business development increased $6 million (8.2
percent) due to the timing of Payment Services projects. Offsetting these
increases was a $21 million (6.8 percent) reduction in employee benefits
expense driven by lower pension costs and an $8 million (14.0 percent)
reduction in other intangibles expense from the reduction or completion of the
amortization of certain intangibles.

Noninterest expense decreased $138 million (5.1 percent) on a linked quarter
basis, driven by lower professional services costs, costs related to
tax-advantaged projects, and marketing and business development costs.
Professional services were $35 million (29.7 percent) lower compared with the
fourth quarter of 2013 due to seasonally lower costs across a majority of the
lines of business. Marketing and business development expense decreased $24
million (23.3 percent) due to the timing of various marketing programs in
Payments Services and Consumer and Small Business Banking. Other expense was
$110 million (22.1 percent) lower than the fourth quarter of 2013, principally
due to lower costs related to investments in tax-advantaged projects,
reflecting seasonally lower volume and the affordable housing tax credit
change. In addition, other intangibles expense was $7 million (12.5 percent)
lower due to the reduction or completion of the amortization of certain
intangibles. Partially offsetting these positive variances was a $12 million
(1.1 percent) increase in compensation expense due to merit increases and a
$14 million (5.1 percent) increase in employee benefits expense resulting from
seasonally higher payroll taxes, partially offset by lower pension expense.

Provision for Income Taxes

The provision for income taxes for the first quarter of 2014 resulted in a tax
rate on a taxable-equivalent basis of 28.1 percent (effective tax rate of 26.0
percent), compared with 30.7 percent (effective tax rate of 28.7 percent) in
the first quarter of 2013, and 23.8 percent (effective tax rate of 21.5
percent) in the fourth quarter of 2013. The decrease on a year-over-year basis
primarily reflected the impact of the accounting presentation changes, begun
in the fourth quarter of 2013, related to certain investments in
tax-advantaged projects. The increase over the prior quarter principally
reflected the affordable housing tax credit change and the favorable
conclusion of certain tax matters in the fourth quarter of 2013.

                                                                                 
ALLOWANCE FOR CREDIT                                                       Table   
LOSSES                                                                                            8
($ in          1Q                4Q                 3Q                2Q                 1Q     
millions)
                2014     %      2013     % (b)   2013     %      2013     % (b)   2013    %
                           (b)                                      (b)                                    (b)
                                                                                                           
Balance,
beginning of    $4,537              $4,578               $4,612              $4,708               $4,733
period
                                                                                                           
Net
charge-offs
Commercial      34         .21      33         .21       18         .11      34         .22       32       .22
Lease           2         .16      3         .23       (7     )   (.53 )   4         .31       3        .23
financing
Total           36         .21      36         .21       11         .06      38         .23       35       .22
commercial
Commercial      (1     )   (.01 )   1          .01       2          .03      8          .10       15       .20
mortgages
Construction
and             (2     )   (.10 )   (30    )   (1.58 )   (8     )   (.46 )   (25    )   (1.54 )   4        .26
development
Total
commercial      (3     )   (.03 )   (29    )   (.29  )   (6     )   (.06 )   (17    )   (.18  )   19       .21
real estate
                                                                                                           
Residential     57         .45      49         .38       57         .46      74         .63       92       .83
mortgages
                                                                                                           
Credit card     170        3.96     163        3.72      160        3.75     173        4.23      160      3.93
                                                                                                           
Retail          --         --       --         --        1          .07      (1     )   (.07  )   1        .07
leasing
Home equity
and second      31         .82      37         .95       43         1.09     58         1.45      73       1.80
mortgages
Other           45        .69      52        .79       54        .83      48        .76       52       .83
Total other     76         .65      89         .75       98         .83      105        .90       126      1.08
retail
Total net                                                                                 
charge-offs,
excluding       336        .60      308        .55       320        .58      373        .70       432      .83
covered loans
Covered loans   5         .24      4         .18       8         .33      19        .73       1        .04
Total net       341        .59      312        .53       328        .57      392        .70       433      .79
charge-offs
Provision for   306                 277                  298                 362                  403
credit losses
Other changes   (5     )            (6     )             (4     )            (66    )             5
(a)
Balance, end    $4,497             $4,537              $4,578             $4,612              $4,708
of period
                                                                                                           
Components
Allowance for   $4,189              $4,250               $4,258              $4,312               $4,390
loan losses
Liability for
unfunded
credit          308                287                 320                300                 318
commitments
Total
allowance for   $4,497             $4,537              $4,578             $4,612              $4,708
credit losses
                                                                                                           
Gross           $422                $429                 $450                $506                 $549
charge-offs
Gross           $81                 $117                 $122                $114                 $116
recoveries
                                                                                                           
Allowance for credit
losses as a percentage
of
Period-end
loans,
excluding       1.90                1.94                 1.99                2.03                 2.11
covered loans
Nonperforming
loans,
excluding       293                 297                  294                 287                  274
covered loans
Nonperforming
assets,
excluding
covered         243                 242                  235                 231                  221
assets
                                                                                                           
Period-end      1.89                1.93                 1.98                2.02                 2.11
loans
Nonperforming   278                 283                  276                 269                  255
loans
Nonperforming   225                 223                  207                 203                  196
assets
                                                                                                           
(a) Includes net changes in credit losses to be reimbursed by the FDIC and, beginning in the second quarter of
2013, 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.
(b) Annualized and calculated on average loan balances
                                                                                                 
                                                                                                           

Credit Quality

The allowance for credit losses was $4,497 million at March 31, 2014, compared
with $4,537 million at December 31, 2013, and $4,708 million at March 31,
2013. Net charge-offs and nonperforming assets declined on a year-over-year
basis as economic conditions continued to slowly improve. On a linked quarter
basis, net charge-offs increased $29 million (9.3 percent), while
nonperforming assets, excluding covered assets, decreased $19 million (1.0
percent). Total net charge-offs in the first quarter of 2014 were $341
million, compared with $312 million in the fourth quarter of 2013, and $433
million in the first quarter of 2013. The $92 million (21.2 percent) decline
in net charge-offs year-over-year was due to improvements in the commercial
real estate, residential mortgages and home equity and second mortgages
portfolios, while the increase on a linked quarter basis reflected recoveries
in the prior quarter in commercial real estate. The Company recorded $306
million of provision for credit losses in the current quarter, which was $35
million less than net charge-offs.

Commercial and commercial real estate loan net charge-offs were $33 million
(.12 percent of average loans outstanding) in the first quarter of 2014,
compared with $7 million (.03 percent of average loans outstanding) in the
fourth quarter of 2013, and $54 million (.21 percent of average loans
outstanding) in the first quarter of 2013.

Residential mortgage loan net charge-offs were $57 million (.45 percent of
average loans outstanding) in the first quarter of 2014, compared with $49
million (.38 percent of average loans outstanding) in the fourth quarter of
2013, and $92 million (.83 percent of average loans outstanding) in the first
quarter of 2013. Credit card loan net charge-offs were $170 million (3.96
percent of average loans outstanding) in the first quarter of 2014, compared
with $163 million (3.72 percent of average loans outstanding) in the fourth
quarter of 2013, and $160 million (3.93 percent of average loans outstanding)
in the first quarter of 2013. Total other retail loan net charge-offs were $76
million (.65 percent of average loans outstanding) in the first quarter of
2014, compared with $89 million (.75 percent of average loans outstanding) in
the fourth quarter of 2013, and $126 million (1.08 percent of average loans
outstanding) in the first quarter of 2013.

The ratio of the allowance for credit losses to period-end loans was 1.89
percent (1.90 percent excluding covered loans) at March 31, 2014, compared
with 1.93 percent (1.94 percent excluding covered loans) at December 31, 2013,
and 2.11 percent (2.11 percent excluding covered loans) at March 31, 2013. The
ratio of the allowance for credit losses to nonperforming loans was 278
percent (293 percent excluding covered loans) at March 31, 2014, compared with
283 percent (297 percent excluding covered loans) at December 31, 2013, and
255 percent (274 percent excluding covered loans) at March 31, 2013.

                                                                   
DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES         Table 9
(Percent)                                                        
                                   Mar 31   Dec 31   Sep 30   Jun 30   Mar 31
                                   2014    2013    2013    2013    2013
                                                                       
Delinquent loan ratios - 90 days or more past due excluding nonperforming
loans
Commercial                         .06      .08      .07      .09      .09
Commercial real estate             .06      .07      .02      .03      .02
Residential mortgages              .64      .65      .53      .53      .54
Credit card                        1.21     1.17     1.11     1.10     1.26
Other retail                       .18      .18      .16      .16      .18
Total loans, excluding covered     .30      .31      .27      .27      .29
loans
Covered loans                      5.83     5.63     5.47     5.40     5.18
Total loans                        .49      .51      .48      .49      .52
                                                                       
Delinquent loan ratios - 90 days or more past due including nonperforming
loans
Commercial                         .32      .27      .24      .24      .25
Commercial real estate             .73      .83      .94      1.13     1.38
Residential mortgages              2.14     2.16     1.99     1.96     2.01
Credit card                        1.59     1.60     1.66     1.75     2.04
Other retail                       .58      .58      .60      .63      .67
Total loans, excluding covered     .95      .97      .94      .97      1.06
loans
Covered loans                      7.46     7.13     7.13     7.08     7.13
Total loans                        1.17     1.19     1.20     1.24     1.35
                                                             
                                                                       

                                                            
ASSET QUALITY                                                Table 10
($ in millions)                                                 
                             Mar 31     Dec 31     Sep 30    Jun 30   Mar 31
                             2014      2013      2013     2013    2013
Nonperforming loans
Commercial                   $174       $122       $104      $91      $85
Lease financing              14        12        12       14      16
Total commercial             188        134        116       105      101
                                                                      
Commercial mortgages         156        182        210       263      289
Construction and             113       121       146      161     218
development
Total commercial real        269        303        356       424      507
estate
                                                                      
Residential mortgages        777        770        732       685      673
Credit card                  65         78         94        109      127
Other retail                 188       191       206      222     228
Total nonperforming
loans, excluding covered     1,487      1,476      1,504     1,545    1,636
loans
                                                                      
Covered loans                132       127       156      168     209
Total nonperforming loans    1,619      1,603      1,660     1,713    1,845
                                                                      
Other real estate (a)        296        327        366       364      379
Covered other real estate    73         97         176       187      168
(a)
Other nonperforming          11        10        10       12      14
assets
                                                                      
Total nonperforming          $1,999    $2,037    $2,212   $2,276  $2,406
assets (b)
                                                                      
Total nonperforming
assets, excluding covered    $1,794    $1,813    $1,880   $1,921  $2,029
assets
                                                                      
Accruing loans 90 days or
more
past due, excluding          $695      $713      $591     $580    $609
covered loans
                                                                      
Accruing loans 90 days or    $1,167    $1,189    $1,105   $1,119  $1,165
more past due
                                                                      
Performing restructured
loans, excluding GNMA
and covered loans            $3,006    $3,067    $3,097   $3,311  $3,318
                                                                      
Performing restructured      $3,003    $2,932    $2,262   $2,217  $2,294
GNMA and covered loans
                                                                      
Nonperforming assets to
loans
plus ORE, excluding          .78        .80        .85       .88      .95
covered assets (%)
                                                                      
Nonperforming assets to
loans
plus ORE (%)                 .84        .86        .95       1.00     1.07
                                                                      
(a) Includes equity investments in entities whose principal assets
are other real estate owned.
(b) Does not include accruing loans 90 days or more past due.
                                                              
                                                                      

Nonperforming assets at March 31, 2014, totaled $1,999 million, compared with
$2,037 million at December 31, 2013, and $2,406 million at March 31, 2013.
Total nonperforming assets at March 31, 2014, included $205 million of covered
assets. The ratio of nonperforming assets to loans and other real estate was
.84 percent (.78 percent excluding covered assets) at March 31, 2014, compared
with .86 percent (.80 percent excluding covered assets) at December 31, 2013,
and 1.07 percent (.95 percent excluding covered assets) at March 31, 2013.
Total commercial nonperforming assets were $54 million (40.3 percent) higher
on a linked quarter basis and $87 million (86.1 percent) higher
year-over-year. Commercial real estate nonperforming assets declined by $34
million (11.2 percent) on a linked quarter basis and $238 million (46.9
percent) year-over-year. Residential mortgage nonperforming assets increased
$7 million (.9 percent) on a linked quarter basis and $104 million (15.5
percent) year-over-year. Credit card nonperforming assets were $13 million
(16.7 percent) lower on a linked basis and $62 million (48.8 percent) lower
year-over-year. Other retail nonperforming assets decreased $3 million (1.6
percent) on a linked quarter basis and $40 million (17.5 percent)
year-over-year.

Accruing loans 90 days or more past due were $1,167 million ($695 million
excluding covered loans) at March 31, 2014, compared with the $1,189 million
($713 million excluding covered loans) at December 31, 2013, and the $1,165
million ($609 million excluding covered loans) at March 31, 2013.

                                                              
CAPITAL                                                 Table   
POSITION                                                             11
($ in           Mar 31      Dec 31      Sep 30      Jun 30      Mar 31
millions)
                 2014       2013       2013       2013       2013
                                                                             
Total U.S.
Bancorp          $42,054      $41,113      $40,132      $39,683      $39,531
shareholders'
equity
                                                                             
Basel III
transitional
standardized
approach/Basel
I (a)
Common equity    $29,463      $27,942      $27,265      $26,778      $26,321
tier 1 capital
Tier 1 capital   34,627       33,386       32,707       32,219       31,774
Total
risk-based       40,741       39,340       38,873       38,378       38,099
capital
                                                                             
Common equity
tier 1 capital   9.7     %   9.4     %   9.3     %   9.2     %   9.1     %
ratio
Tier 1 capital   11.4         11.2         11.2         11.1         11.0
ratio
Total
risk-based       13.5         13.2         13.3         13.3         13.2
capital ratio
Leverage ratio   9.7          9.6          9.6          9.5          9.3
                                                                             
Common equity
tier 1 capital
to
risk-weighted
assets
estimated for    9.0          8.8          8.6          8.6          8.2
the Basel III
fully
implemented
standardized
approach (b)
                                                                             
Tangible
common equity    7.8          7.7          7.4          7.5          7.4
to tangible
assets
Tangible
common equity
to               9.3          9.1          8.9          8.9          8.8
risk-weighted
assets
                                                                             
(a) March 31, 2014, based on the Basel III transitional standardized approach,
all prior periods under Basel I
(b) The Basel III regulatory requirements for March 31, 2013, were based on the
proposed rules for the Basel III fully implemented standardized approach
released June 2012, all other periods were based on the final rules for the
Basel III fully implemented standardized approach
                                                                            


Total U.S. Bancorp shareholders’ equity was $42.1 billion at March 31, 2014,
compared with $41.1 billion at December 31, 2013, and $39.5 billion at March
31, 2013. During the first quarter, the Company returned 67 percent of first
quarter earnings to shareholders, including $420 million in common stock
dividends and $482 million of repurchased common stock.

Prior to 2014, the regulatory capital requirements effective for the Company
followed Basel I. During 2013, U.S. banking regulators approved final
regulatory capital rule enhancements, which implemented aspects of Basel III
and the Dodd-Frank Act, such as redefining the regulatory capital elements and
minimum capital ratios, introducing regulatory capital buffers above those
minimums, revising rules for calculating risk-weighted assets and introducing
a new common equity tier 1 ratio. Beginning January 1, 2014, the regulatory
capital requirements effective for the company follow Basel III, subject to
certain transition provisions from Basel I over the next four years to full
implementation by January 1, 2018. The common equity tier 1 capital ratio
using the transition provisions was 9.7 percent at March 31, 2014. The tier 1
capital ratio was 11.4 percent at March 31, 2014, compared with 11.2 percent
at December 31, 2013, and 11.0 percent at March 31, 2013. The tangible common
equity to tangible assets ratio was 7.8 percent at March 31, 2014, compared
with 7.7 percent at December 31, 2013, and 7.4 percent at March 31, 2013. All
regulatory ratios continue to be in excess of “well-capitalized” requirements.
The common equity tier 1 capital to risk-weighted assets ratio estimated for
the Basel III fully implemented standardized approach was 9.0 percent at March
31, 2014, compared with 8.8 percent at December 31, 2013, and 8.2 percent at
March 31, 2013.

                                                              
COMMON SHARES                                          Table 12 
(Millions)                 1Q       4Q       3Q       2Q       1Q
                            2014    2013    2013    2013    2013     
                                                                             
Beginning shares            1,825     1,832     1,844     1,858     1,869
outstanding
Shares issued for stock
option and stock purchase
plans, acquisitions and     8         6         5         4         6
other corporate purposes
Shares repurchased          (12   )  (13   )  (17   )  (18   )  (17      )
Ending shares outstanding   1,821   1,825   1,832   1,844   1,858    
                                                              
                                                                             

                                                                      
LINE OF BUSINESS FINANCIAL PERFORMANCE (a)                  Table 13    
($ in millions)                                           
                  Net Income Attributable
                  to U.S. Bancorp            Percent Change      1Q 2014
                  1Q       4Q       1Q       1Q14 vs   1Q14 vs   Earnings
Business Line    2014    2013    2013    4Q13     1Q13     Composition 
Wholesale
Banking and
Commercial Real   $288     $289     $319     (.3   )   (9.7  )   21          %
Estate
Consumer and
Small Business
Banking           291      396      368      (26.5 )   (20.9 )   21
Wealth
Management and
Securities        48       40       34       20.0      41.2      3
Services
Payment           233      236      210      (1.3  )   11.0      17
Services
Treasury and
Corporate         537     495     497      8.5       8.0       38
Support
                                                                             
Consolidated      $1,397  $1,456  $1,428   (4.1  )   (2.2  )   100         %
Company
                                                                             
(a) preliminary
data
                                                                
                                                                             

Lines of Business

The Company’s major lines of business are Wholesale Banking and Commercial
Real Estate, Consumer and Small Business Banking, Wealth Management and
Securities Services, Payment Services, and Treasury and Corporate Support.
These operating segments are components of the Company about which financial
information is prepared and is evaluated regularly by management in deciding
how to allocate resources and assess performance. Noninterest expenses
incurred by centrally managed operations or business lines that directly
support another business line’s operations are charged to the applicable
business line based on its utilization of those services, primarily measured
by the volume of customer activities, number of employees or other relevant
factors. These allocated expenses are reported as net shared services expense
within noninterest expense. Designations, assignments and allocations change
from time to time as management systems are enhanced, methods of evaluating
performance or product lines change or business segments are realigned to
better respond to the Company’s diverse customer base. During 2014, certain
organization and methodology changes were made and, accordingly, prior period
results were restated and presented on a comparable basis.

Wholesale Banking and Commercial Real Estate offers lending, equipment finance
and small-ticket leasing, depository services, treasury management, capital
markets, international trade services and other financial services to middle
market, large corporate, commercial real estate, financial institution,
non-profit and public sector clients. Wholesale Banking and Commercial Real
Estate contributed $288 million of the Company’s net income in the first
quarter of 2014, compared with $319 million in the first quarter of 2013 and
$289 million in the fourth quarter of 2013. Wholesale Banking and Commercial
Real Estate’s net income decreased $31 million (9.7 percent) from the same
quarter of 2013 due to a decrease in total net revenue and a higher provision
for credit losses, partially offset by a reduction in total noninterest
expense. Total net revenue declined by $38 million (4.9 percent), due to a
12.1 percent decrease in total noninterest income, and a .8 percent decrease
in net interest income. Net interest income decreased $4 million (.8 percent)
year-over-year, primarily due to lower rates on loans and the impact of lower
rates on the margin benefit from deposits, partially offset by an increase in
average total loans. Total noninterest income decreased by $34 million (12.1
percent), driven by lower wholesale transaction activity and other
loan-related fees. In addition, equity investment revenue was lower
year-over-year. Total noninterest expense decreased by $6 million (1.9
percent) from a year ago, primarily due to lower costs related to other real
estate owned. The provision for credit losses was $18 million higher
year-over-year due to an unfavorable change in the reserve allocation,
partially offset by lower net charge-offs.

Wholesale Banking and Commercial Real Estate’s contribution to net income in
the first quarter of 2014 was $1 million (.3 percent) lower than the fourth
quarter of 2013, mainly due to lower total net revenue, partially offset by a
decrease in the provision for credit losses. Total net revenue decreased by
$48 million (6.1 percent) compared with the prior quarter. Net interest income
decreased by $20 million (3.9 percent) on a linked quarter basis, primarily
due to lower loan rates, the impact of lower rates on the margin benefit from
deposits and two fewer days in the current quarter relative to the prior
quarter, partially offset by an increase in average total loans. Total
noninterest income decreased by $28 million (10.2 percent), driven by lower
wholesale transaction activity, in part due to seasonally higher transaction
volumes in the prior quarter and lower equity investment revenue, partially
offset by higher treasury management fees. Total noninterest expense was
relatively flat, decreasing $2 million (.7 percent), as lower professional
services and loan-related expense was offset by higher net shared services
costs. The provision for credit losses decreased by $43 million due to a
favorable change in the reserve allocation, partially offset by higher net
charge-offs due to a high level of recoveries in the prior quarter.

Consumer and Small Business Banking delivers products and services through
banking offices, telephone servicing and sales, on-line services, direct mail,
ATM processing and mobile devices, such as mobile phones and tablet computers.
It encompasses community banking, metropolitan banking, in-store banking,
small business banking, consumer lending, mortgage banking, workplace banking,
student banking and 24-hour banking. Consumer and Small Business Banking
contributed $291 million of the Company’s net income in the first quarter of
2014, a $77 million (20.9 percent) decrease from the first quarter of 2013 and
a $105 million (26.5 percent) decrease from the prior quarter. Within Consumer
and Small Business Banking, the retail banking division reported a 7.5 percent
increase in its contribution over the same quarter of last year, principally
due to a reduction in the provision for credit losses. Retail banking’s total
net revenue was 2.2 percent lower than the first quarter of 2013. Net interest
income decreased 3.5 percent, primarily due to the lower rates on loans and
the impact of lower rates on the margin benefit from deposits, partially
offset by higher average loan and deposit balances. Total noninterest income
for the retail banking division increased 1.0 percent over a year ago,
principally due to higher deposit service charges, mainly due to increased
monthly account fees, and an increase in retail lease revenue, partially
offset by decreases in ATM processing services and commercial products
revenue. Total noninterest expense for the retail banking division in the
first quarter of 2014 increased 1.5 percent from the same quarter of the prior
year, largely due to higher compensation and employee benefits expense and net
shared services costs, partially offset by lower other intangibles expense.
The provision for credit losses for the retail banking division decreased 30.0
percent on a year-over-year basis due to lower net charge-offs and a favorable
change in the reserve allocation. The contribution of the mortgage banking
division was lower by 42.6 percent than the first quarter of 2013, reflecting
a decrease in total net revenue, partially offset by a reduction in total
noninterest expense. The division’s 35.4 percent decrease in total net revenue
was due to a 41.9 percent decrease in total noninterest income, driven by
lower mortgage origination and sales revenue, as well as a 21.3 percent
decrease in net interest income, primarily the result of lower average loans
held for sale. Total noninterest expense was 14.2 percent lower than the prior
year, reflecting lower compensation and employee benefits expense and mortgage
servicing-related costs. The provision for credit losses for the mortgage
banking division decreased by $32 million due to a favorable change in the
reserve allocation and lower net charge-offs.

Consumer and Small Business Banking’s contribution in the first quarter of
2014 was $105 million (26.5 percent) lower than the fourth quarter of 2013,
driven by a higher provision for credit losses and lower total net revenue.
Within Consumer and Small Business Banking, the retail banking division’s
contribution decreased 43.8 percent, mainly due to an increase in the
provision for credit losses and lower total net revenue. Total net revenue for
the retail banking division decreased 3.7 percent compared with the previous
quarter. Net interest income was 4.3 percent lower, primarily due to lower
rates on loans, two less days in the current quarter relative to the prior
quarter and seasonally lower loan fees, partially offset by higher average
loan and deposits balances. Total noninterest income was 2.2 percent lower on
a linked quarter basis, driven by seasonally lower deposit service charges,
partially offset by higher retail lease revenue. Total noninterest expense for
the retail banking division was relatively flat on a linked quarter basis, as
an increase in compensation and employee benefits expense was offset by lower
marketing expense and other intangibles expense. The provision for credit
losses increased $157 million on a linked quarter basis due to an unfavorable
change in the reserve allocation, reflecting a reduction in the home equity
allocation in the prior quarter, and higher net charge-offs in the current
quarter. The contribution of the mortgage banking division increased 30.4
percent from the fourth quarter of 2013 mainly due to a decrease in the
provision for credit losses. Total net revenue decreased 1.1 percent due to a
4.6 percent decline in net interest income, the result of lower average loans
held for sale, partially offset by a 1.3 percent increase in total noninterest
income, primarily due to a favorable change in the valuation of mortgage
servicing rights, net of hedging activities, partially offset by lower
origination and sales revenue. Total noninterest expense increased 1.5
percent, primarily reflecting higher net shared services costs and employee
benefits expense, partially offset by lower professional services expense. The
provision for credit losses for the mortgage banking division decreased by $51
million on a linked quarter basis due to a favorable change in the reserve
allocation.

Wealth Management and Securities Services provides private banking, financial
advisory services, investment management, retail brokerage services,
insurance, trust, custody and fund servicing through five businesses: Wealth
Management, Corporate Trust Services, U.S. Bancorp Asset Management,
Institutional Trust & Custody and Fund Services. Wealth Management and
Securities Services contributed $48 million of the Company’s net income in the
first quarter of 2014, compared with $34 million in the first quarter of 2013
and $40 million in the fourth quarter of 2013. The business line’s
contribution was $14 million (41.2 percent) higher than the same quarter of
2013, as an increase in total net revenue was partially offset by higher total
noninterest expense. Total net revenue increased by $31 million (8.1 percent)
year-over-year, driven by a $36 million (12.2 percent) increase in total
noninterest income, reflecting the impact of account growth, improved market
conditions, business expansion and higher investment products fees. Net
interest income decreased $5 million (5.7 percent), principally due to the
impact of lower rates on the margin benefit from deposits, partially offset by
higher average loan balances. Total noninterest expense increased by $12
million (3.6 percent) primarily as a result of higher compensation and
employee benefits expense, including the impact of business expansion. The
provision for credit losses decreased $4 million mainly from a favorable
change in the reserve allocation.

The business line’s contribution in the first quarter of 2014 was $8 million
(20.0 percent) higher than the prior quarter. Total net revenue remained
relatively flat on a linked quarter basis, reflecting a decrease in net
interest income (2.4 percent), principally due to lower average deposit
balances and the impact of lower rates on the margin benefit of deposits,
offset by an increase in total noninterest income (1.9 percent), primarily due
to higher trust and investment management fees, resulting from improved market
conditions and account growth, including business expansion. Total noninterest
expense decreased $6 million (1.7 percent), primarily as a result of lower
professional services and litigation-related costs, partially offset by higher
compensation and employee benefits expense. The provision for credit losses
decreased $3 million on a linked quarter basis due to lower net charge-offs.

Payment Services includes consumer and business credit cards, stored-value
cards, debit cards, corporate and purchasing card services, consumer lines of
credit and merchant processing. Payment Services contributed $233 million of
the Company’s net income in the first quarter of 2014, compared with $210
million in the first quarter of 2013 and $236 million in the fourth quarter of
2013. The $23 million (11.0 percent) increase in the business line’s
contribution from the prior year was driven by an increase in total net
revenue, partially offset by an increase in total noninterest expense. Total
net revenue increased by $54 million (4.8 percent) year-over-year. Net
interest income increased by $26 million (6.7 percent), primarily due to
higher average loan balances and improved loan rates. Total noninterest income
was $28 million (3.7 percent) higher year-over-year, due to an increase in
credit and debit card revenue on higher transaction volumes, and higher
merchant processing services revenue, the result of an increase in product
fees and higher volumes, partially offset lower rates. Total noninterest
expense increased by $22 million (3.8 percent) over the first quarter of 2013,
primarily due to higher compensation and employee benefits expense, including
the impact of business expansion, partially offset by reductions in technology
and communications expense and other intangibles expense. The provision for
credit losses decreased by $4 million (2.0 percent) due to a favorable change
in the reserve allocation, partially offset by higher net charge-offs.

Payment Services’ contribution in the first quarter of 2014 declined $3
million (1.3 percent) from the fourth quarter of 2013. Total net revenue
decreased $35 million (2.9 percent) on a linked quarter basis. Net interest
income decreased by $2 million (.5 percent) due to two fewer days in the
current quarter and higher rebate costs on the Company’s government card
program, partially offset by improved loan rates. Total noninterest income
declined by $33 million (4.1 percent), reflecting a decrease in credit and
debit card revenue due to seasonally lower transaction volumes, and a decline
in merchant processing revenue due to seasonally lower product fees and
volumes, partially offset by an increase in corporate payment products revenue
on seasonally higher volumes. Total noninterest expense decreased by $13
million (2.1 percent) due to lower net shared services, professional services,
marketing and other intangibles expense, partially offset by an increase in
compensation and employee benefits expense, due principally to seasonally
higher payroll taxes. The provision for credit losses was $15 million (6.9
percent) lower on a linked quarter basis due to a favorable change in the
reserve allocation, partially offset by an increase in net charge-offs.

Treasury and Corporate Support includes the Company’s investment portfolios,
most covered commercial and commercial real estate loans and related other
real estate owned, funding, capital management, interest rate risk management,
the net effect of transfer pricing related to average balances, income taxes
not allocated to business lines, including most investments in tax-advantaged
projects, and the residual aggregate of those expenses associated with
corporate activities that are managed on a consolidated basis. Treasury and
Corporate Support recorded net income of $537 million in the first quarter of
2014, compared with net income of $497 million in the first quarter of 2013
and net income of $495 million in the fourth quarter of 2013. Net interest
income increased by $53 million (9.2 percent) from the first quarter of 2013,
principally due to an increase in the investment portfolio average balances
and lower rates on short- term borrowings. Total noninterest income increased
by $75 million over the first quarter of last year, driven by higher equity
investment and commercial products revenue, including an increase in
syndication fees on tax-advantaged projects. Total noninterest expense
increased by $65 million (62.5 percent), principally reflecting an increase in
other expense driven by insurance-related recoveries in the prior year and an
increase in occupancy costs, partially offset by lower costs related to
investments in tax-advantaged projects. The provision for credit losses was
$12 million lower year-over-year, due to a favorable change in the reserve
allocation, partially offset by higher net charge-offs.

Net income in the first quarter of 2014 was $42 million (8.5 percent) higher
on a linked quarter basis, driven by higher total net revenue and lower total
noninterest expense. Total net revenue was $59 million (8.4 percent) higher
than the prior quarter, driven by higher equity investment revenue, partially
offset by a decrease in commercial products revenue, mainly due to seasonally
lower syndication fees on tax-advantaged projects. A $121 million (41.7
percent) decrease in total noninterest expense was primarily due to lower
tax-advantaged investment expense due to seasonally lower volume and the
affordable housing tax credit change. The provision for credit losses was $16
million lower compared with the fourth quarter of 2013, due to a favorable
change in the reserve allocation.

Additional schedules containing more detailed information about the Company’s
business line results are available on the web at usbank.com or by calling
Investor Relations at 612-303-4328.

On Wednesday, April 16, 2014, at 8:00 a.m. (CDT) Richard K. Davis, chairman,
president and chief executive officer, and Andrew Cecere, vice chairman and
chief financial officer, will host a conference call to review the financial
results. The conference call will be available by telephone or on the
Internet. A presentation will be used during the call and will be available on
the Company’s website at www.usbank.com. 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 32344679. For
those unable to participate during the live call, a recording of the call will
be available approximately two hours after the conference call ends on
Wednesday, April 16th, and will run through Wednesday, April 23rd, at 11:00
p.m. (CDT). To access the recorded message within the United States and
Canada, 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
32344679. To access the webcast and presentation go to www.usbank.com and
click on “About U.S. Bank.” The “Webcasts & Presentations” link can be found
under the Investor/Shareholder information heading, which is at the left side
of the bottom of the page.

Minneapolis-based U.S. Bancorp (“USB”), with $371 billion in assets as of
March 31, 2014, is the parent company of U.S. Bank National Association, the
5th largest commercial bank in the United States. The Company operates 3,083
banking offices in 25 states and 4,878 ATMs and provides a comprehensive line
of banking, brokerage, insurance, investment, mortgage, trust and payment
services products to consumers, businesses and institutions. Visit U.S.
Bancorp on the web at usbank.com.

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. A reversal or slowing of
the current moderate economic recovery or another severe contraction could
adversely affect U.S. Bancorp’s revenues and the values of its assets and
liabilities. Global financial markets could experience a recurrence of
significant turbulence, which could reduce the availability of funding to
certain financial institutions and lead to a tightening of credit, a reduction
of business activity, and increased market volatility. Continued stress in the
commercial real estate markets, as well as a delay or failure of recovery in
the residential real estate markets could cause additional credit losses and
deterioration in asset values. In addition, U.S. Bancorp’s business and
financial performance is likely to be negatively impacted by recently enacted
and future legislation and regulation. U.S. Bancorp’s results could also be
adversely affected by deterioration in general business and economic
conditions; 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 securities held in its investment securities
portfolio; legal and regulatory developments; increased competition from both
banks and non-banks; changes in customer behavior and preferences; effects of
mergers and acquisitions and related integration; effects of critical
accounting policies and judgments; and management’s ability to effectively
manage credit risk, residual value risk, market risk, operational risk,
interest rate risk and liquidity 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, 2013, on file with the Securities and Exchange
Commission, including the sections entitled “Risk Factors” and “Corporate Risk
Profile” 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,
  *Tier 1 common equity to risk-weighted assets using Basel I definition, and
  *Common equity tier 1 capital to risk-weighted assets estimated for the
    Basel III fully implemented standardized approach

These measures are viewed by management as useful additional methods of
reflecting the level of capital available to withstand unexpected 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 measures differ
from currently effective capital ratios defined by banking regulations
principally in that the numerator includes unrealized gains and losses related
to available-for-sale securities and excludes preferred securities, including
preferred stock, the nature and extent of which varies among different
financial services companies. These measures are not defined in generally
accepted accounting principles (“GAAP”), or are not currently effective or
defined in federal banking regulations. As a result, these measures disclosed
by the Company may be considered non-GAAP financial measures.

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.

U.S. Bancorp                                                         
Consolidated Statement of Income
                                                            Three Months Ended
(Dollars and Shares in Millions, Except Per Share Data)     March 31,
(Unaudited)                                                2014      2013
Interest Income
Loans                                                       $2,522      $2,562
Loans held for sale                                         27          72
Investment securities                                       441         410
Other interest income                                       32        67
Total interest income                                       3,022       3,111
Interest Expense
Deposits                                                    119         155
Short-term borrowings                                       69          85
Long-term debt                                              184       218
Total interest expense                                      372       458
Net interest income                                         2,650       2,653
Provision for credit losses                                 306       403
Net interest income after provision for credit losses       2,344       2,250
Noninterest Income
Credit and debit card revenue                               239         214
Corporate payment products revenue                          173         172
Merchant processing services                                356         347
ATM processing services                                     78          82
Trust and investment management fees                        304         278
Deposit service charges                                     157         153
Treasury management fees                                    133         134
Commercial products revenue                                 205         200
Mortgage banking revenue                                    236         401
Investment products fees                                    46          41
Securities gains (losses), net                              5           5
Other                                                       176       138
Total noninterest income                                    2,108       2,165
Noninterest Expense
Compensation                                                1,115       1,082
Employee benefits                                           289         310
Net occupancy and equipment                                 249         235
Professional services                                       83          78
Marketing and business development                          79          73
Technology and communications                               211         211
Postage, printing and supplies                              81          76
Other intangibles                                           49          57
Other                                                       388       348
Total noninterest expense                                   2,544     2,470
Income before income taxes                                  1,908       1,945
Applicable income taxes                                     496       558
Net income                                                  1,412       1,387
Net (income) loss attributable to noncontrolling            (15     )  41
interests
Net income attributable to U.S. Bancorp                     $1,397    $1,428
Net income applicable to U.S. Bancorp common shareholders   $1,331    $1,358
                                                                        
Earnings per common share                                   $.73        $.73
Diluted earnings per common share                           $.73        $.73
Dividends declared per common share                         $.230       $.195
Average common shares outstanding                           1,818       1,858
Average diluted common shares outstanding                  1,828     1,867
                                                                        

U.S. Bancorp                                                   
Consolidated Ending Balance Sheet
                                                                             
                                    March 31,     December 31,     March 31,
(Dollars in Millions)              2014        2013           2013      
Assets                              (Unaudited)                    (Unaudited)
Cash and due from banks             $7,408        $8,477           $6,932
Investment securities
Held-to-maturity                    40,712        38,920           34,716
Available-for-sale                  44,761        40,935           40,570
Loans held for sale                 1,843         3,268            7,719
Loans
Commercial                          73,701        70,033           66,323
Commercial real estate              40,131        39,885           37,400
Residential mortgages               51,708        51,156           45,984
Credit card                         17,129        18,021           16,229
Other retail                        47,607      47,678         46,680    
Total loans, excluding covered      230,276       226,773          212,616
loans
Covered loans                       8,099       8,462          10,735    
Total loans                         238,375       235,235          223,351
Less allowance for loan losses      (4,189    )  (4,250       )  (4,390    )
Net loans                           234,186       230,985          218,961
Premises and equipment              2,589         2,606            2,656
Goodwill                            9,204         9,205            9,152
Other intangible assets             3,422         3,529            2,918
Other assets                        27,164      26,096         31,823    
Total assets                        $371,289    $364,021       $355,447  
                                                                             
Liabilities and Shareholders'
Equity
Deposits
Noninterest-bearing                 $73,363       $76,941          $67,802
Interest-bearing                    157,918       156,165          148,906
Time deposits greater than          29,331      29,017         31,304    
$100,000
Total deposits                      260,612       262,123          248,012
Short-term borrowings               30,781        27,608           27,126
Long-term debt                      23,774        20,049           25,239
Other liabilities                   13,379      12,434         14,223    
Total liabilities                   328,546       322,214          314,600
Shareholders' equity
Preferred stock                     4,756         4,756            4,769
Common stock                        21            21               21
Capital surplus                     8,236         8,216            8,138
Retained earnings                   39,584        38,667           35,720
Less treasury stock                 (9,693    )   (9,476       )   (8,176    )
Accumulated other comprehensive     (850      )  (1,071       )  (941      )
income (loss)
Total U.S. Bancorp shareholders'    42,054        41,113           39,531
equity
Noncontrolling interests            689         694            1,316     
Total equity                        42,743      41,807         40,847    
Total liabilities and equity       $371,289    $364,021       $355,447  
                                                                             

U.S. Bancorp                                                           
Non-GAAP
Financial
Measures

                  March         December       September       June          March
                  31,           31,            30,             30,           31,
(Dollars in
Millions,        2014       2013        2013         2013       2013    
Unaudited)
Total equity      $42,743       $41,807        $41,552         $41,050       $40,847
Preferred stock   (4,756  )     (4,756   )     (4,756    )     (4,756  )     (4,769  )
Noncontrolling    (689    )     (694     )     (1,420    )     (1,367  )     (1,316  )
interests
Goodwill (net
of deferred tax   (8,352  )     (8,343   )     (8,319    )     (8,317  )     (8,333  )
liability) (1)
Intangible
assets, other
than mortgage     (804    )   (849     )   (878      )   (910    )   (963    )
servicing
rights
  Tangible
  common equity   28,142        27,165         26,179          25,700        25,466
  (a)
                                                                                       
Tangible common
equity (as        28,142        27,165         26,179          25,700        25,466
calculated
above)
Adjustments (2)   239        224         258          195        81      
  Common equity
  tier 1
  capital
  estimated for
  the Basel III   28,381        27,389         26,437          25,895        25,547
  fully
  implemented
  standardized
  approach (b)
                                                                                       
Tier 1 capital,
determined in
accordance with
prescribed                      33,386         32,707          32,219        31,774
regulatory
requirements
using Basel I
definition
Preferred stock                 (4,756   )     (4,756    )     (4,756  )     (4,769  )
Noncontrolling
interests, less
preferred stock                 (688     )   (686      )   (685    )   (684    )
not eligible
for Tier 1
capital
  Tier 1 common
  equity using
  Basel I                       27,942         27,265          26,778        26,321
  definition
  (c)
                                                                                       
Total assets      371,289       364,021        360,681         353,415       355,447
Goodwill (net
of deferred tax   (8,352  )     (8,343   )     (8,319    )     (8,317  )     (8,333  )
liability) (1)
Intangible
assets, other
than mortgage     (804    )   (849     )   (878      )   (910    )   (963    )
servicing
rights
  Tangible        362,133       354,829        351,484         344,188       346,151
  assets (d)
                                                                                       
Risk-weighted
assets,
determined in
accordance with   302,841   *   297,919        293,155         289,613       289,672
prescribed
regulatory
requirements
(e)
Adjustments (3)   13,238   *  13,712      13,473       12,476     21,021  
  Risk-weighted
  assets
  estimated for
 the Basel III   316,079   *   311,631        306,628         302,089       310,693
  fully
  implemented
  standardized
  approach (f)
                                                                                       
Ratios *
Tangible common
equity to         7.8       %   7.7        %   7.4         %   7.5       %   7.4       %
tangible assets
(a)/(d)
Tangible common
equity to         9.3           9.1            8.9             8.9           8.8
risk-weighted
assets (a)/(e)
Tier 1 common
equity to
risk-weighted
assets using      --            9.4            9.3             9.2           9.1
Basel I
definition
(c)/(e)
Common equity
tier 1 capital
to
risk-weighted
assets
estimated for    9.0        8.8         8.6          8.6        8.2     
the Basel III
fully
implemented
standardized
approach
(b)/(f)
                                                                                       
* Preliminary data. Subject to change prior to filings with applicable regulatory
agencies.
Note: The Basel III regulatory requirements for March 31, 2013, were based on the
proposed rules for the Basel III fully implemented standardized approach released June
2012, all other periods were based on the final rules for the Basel III fully
implemented standardized approach.
(1) Includes goodwill related to certain investments in unconsolidated financial
institutions per prescribed regulatory requirements beginning March 31, 2014.
(2) Includes net losses on cash flow hedges included in accumulated other comprehensive
income and other adjustments. March 31, 2013, also includes a deduction for disallowed
mortgage servicing rights.
(3) Includes higher risk-weighting for unfunded loan commitments, investment securities,
mortgage servicing rights and other adjustments. March 31, 2013, also includes higher
risk-weighting for residential mortgages.
  

Contact:

U.S. Bancorp
Thomas Joyce, 612-303-3167
Media
or
Sean O’Connor, 612-303-0778
Investors/Analysts
 
Press spacebar to pause and continue. Press esc to stop.