01—Abstract
Summary
Summary of the 10-K filed February 28, 2011. Cited figures are marked; the original filing is the authoritative source.
U.S. Bancorp (USB) reported a strong 2010 in its 10-K filed February 28, 2011.
Net income attributable to the company rose 50.4 percent to $3.3 billiona, or $1.73 per diluted share, versus $0.97 in 2009. Total net revenue grew 8.9 percent to $18.1 billion, driven by a 12.3 percent increase in net interest income and a 5.1 percent rise in noninterest income. Net interest margin improved to 3.88 percent from 3.67 percent, and the efficiency ratio was 51.5 percent.
Provision for credit losses fell 21.6 percent to $4.4 billionb, and net charge-offs peaked in Q1 2010 before declining through year-end. Capital strengthened over the year. The Tier 1 common equity ratio reached 7.8 percent (up from 6.8 percent), the Tier 1 capital ratio was 10.5 percent, and the total risk-based capital ratio was 13.3 percent.
Deposits grew 11.5 percent to $204.3 billionc, aided partly by the acquisition of Bank of America's securitization trust administration business. Nonperforming assets declined to $5.0 billion from $5.9 billion, though residential mortgage and covered-loan stress persisted. Investors should note several watch items: the Dodd-Frank Act and pending Basel III rules are expected to reduce debit interchange revenue and raise deposit insurance and capital costs; the company has requested Federal Reserve approval to increase its dividend, which remained at $0.05 per quarter; and regulators' review of foreclosure practices may lead to monetary penalties of undetermined amount.
02—Key points
Key Highlights
- Net income attributable to U.S. Bancorp of $3.3 billion in 2010, up 50.4% from $2.2 billion in 2009; diluted EPS of $1.73 vs. $0.97.
- Total net revenue of $18.1 billion, up 8.9%, with net interest income up 12.3% to $9.8 billion (taxable-equivalent) and net interest margin of 3.88%.
- Provision for credit losses declined 21.6% to $4.4 billion; net charge-offs peaked in Q1 2010 and fell through Q4.
- Tier 1 common equity ratio rose to 7.8% (from 6.8%); Tier 1 capital ratio 10.5%; total risk-based capital ratio 13.3%.
- Total deposits grew 11.5% to $204.3 billion, including about $8 billion acquired with the Bank of America securitization trust administration business.
- Nonperforming assets fell to $5.0 billion from $5.9 billion, with residential mortgage stress still elevated.
- Dodd-Frank and forthcoming Basel III rules are expected to pressure debit interchange revenue, deposit insurance costs and capital requirements; the company has applied to raise its dividend from $0.05 per quarter.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 28, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Interest Expense | $2.58B$3.02B | −14.6% |
| Net Income | $3.32B$2.21B | +50.4% |
| EPS (Basic) | $1.74$0.97 | +79.4% |
| EPS (Diluted) | $1.73$0.97 | +78.4% |
| Shares Outstanding (Basic) | 1.91B1.85B | +3.3% |
| Shares Outstanding (Diluted) | 1.92B1.86B | +3.3% |
05—Questions
Frequently Asked Questions
How did U.S. Bancorp perform financially in 2010 compared with 2009?
Net income attributable to U.S. Bancorp rose 50.4% to $3.3 billion, and diluted EPS increased to $1.73 from $0.97. Return on average assets improved to 1.16% from 0.82%, and return on average common equity rose to 12.7% from 8.2%. Results benefited from higher net interest income and a lower provision for credit losses.
Is the company's credit quality improving?
Partially. Total net charge-offs peaked in Q1 2010 and declined through the year, and the provision fell $1.2 billion. However, total nonperforming assets remained elevated at $5.0 billion, and 2010 net charge-offs were 8% higher than in 2009. Residential mortgage and covered loan (FDIC-assisted acquisition) delinquencies remained significant.
What regulatory risks could affect future earnings?
The Dodd-Frank Act is expected to reduce debit interchange fee revenue, increase FDIC deposit insurance assessments, impose stricter capital requirements, and create a new Consumer Financial Protection Bureau. Basel III implementation beginning in 2013 will increase capital requirements. Federal regulators also expect to require remedial actions on foreclosure practices, and monetary penalties may be assessed, though the amount is unknown.
What is the company's capital position and shareholder return outlook?
Capital ratios strengthened, with a Tier 1 common equity ratio of 7.8% and total risk-based capital of 13.3% at year-end 2010. The company repurchased about 1 million shares in 2010 and has authorization for about 20 million more. It submitted a plan to the Federal Reserve on January 7, 2011, to increase its dividend, which had been held at $0.05 per quarter; regulatory feedback was expected in late Q1 2011.
06—Continue