U.S. Bancorp Reports Record Revenue and Net Income for the Second Quarter of 2016

U.S. Bancorp (NYSE: USB) today reported net income of $1,522 million for the second quarter of 2016, or $0.83 per diluted common share, compared with $1,483 million, or $0.80 per diluted common share, in the second quarter of 2015. The second quarter of 2016 included notable items related to equity investments, legal and regulatory matters and charitable contributions that, combined, increased diluted earnings per common share by $0.01.

Highlights for the second quarter of 2016 included:

• Industry-leading return on average assets of 1.43 percent, return on average common equity of 13.8 percent and efficiency ratio of 54.9 percent (54.0 percent excluding notable items)
• Record revenue, net income and diluted earnings per common share for the second quarter of 2016 both as reported and excluding notable items
• Returned 77 percent of second quarter earnings to shareholders through dividends and share buybacks
• Average total loans grew 1.6 percent on a linked quarter basis and 8.1 percent over the second quarter of 2015 (6.5 percent year-over-year, excluding the credit card portfolio acquisition at the end of the fourth quarter of 2015 and student loans, which were carried in held for sale in the second quarter of 2015)
• Average total deposits grew 3.9 percent on a linked quarter basis and 7.6 percent over the second quarter of 2015
• Net interest income grew 0.3 percent on a linked quarter basis and 4.5 percent year-over-year
  • Average earnings assets grew 1.9 percent on a linked quarter basis and 5.2 percent year-over-year
  • Net interest margin of 3.02 percent for the second quarter of 2016 was down 4 basis points from 3.06 percent in the first quarter of 2016 and down 1 basis point from 3.03 percent in the second quarter of 2015
• Payments-related fee revenue grew 8.8 percent linked quarter and 4.9 percent year-over-year, driven by an increase in credit and debit card revenue, including the impact of recent portfolio acquisitions, as well as an increase in corporate payment products revenue
• Credit quality was relatively stable
  • Nonperforming assets decreased 2.7 percent on a linked quarter basis
  • Commercial nonperforming assets within the energy portfolio decreased $54 million linked quarter
  • Reserves for energy portfolio commercial loans were 8.8 percent of outstanding balances at June 30, 2016, compared with 9.1 percent at March 31, 2016
• Strong capital position. At June 30, 2016, the estimated common equity tier 1 capital to risk-weighted assets ratio was 9.3 percent using the Basel III fully implemented standardized approach and was 12.0 percent using the Basel III fully implemented advanced approaches method

EARNINGS SUMMARY																	Table 1
($ in millions, except per-share data)									Percent		Percent
									Change		Change
			2Q		1Q		2Q		2Q16 vs		2Q16 vs		YTD		YTD		Percent
			2016		2016		2015		1Q16		2Q15		2016		2015		Change
Net income attributable to U.S. Bancorp			$1,522		$1,386		$1,483		9.8		2.6		$2,908		$2,914		(.2	)
Diluted earnings per common share			$.83		$.76		$.80		9.2		3.8		$1.59		$1.56		1.9
Return on average assets (%)			1.43		1.32		1.46						1.38		1.45
Return on average common equity (%)			13.8		13.0		14.3						13.4		14.2
Net interest margin (%)			3.02		3.06		3.03						3.04		3.05
Efficiency ratio (%) (a)			54.9		54.6		53.2						54.8		53.7
Tangible efficiency ratio (%) (a)			54.1		53.7		52.3						53.9		52.9
Dividends declared per common share			$.255		$.255		$.255		--		--		$.510		$.500		2.0
Book value per common share (period end)			$24.37		$23.82		$22.51		2.3		8.3
(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 for tangible efficiency ratio, intangible amortization.

Net income attributable to U.S. Bancorp was $1,522 million for the second quarter of 2016, 2.6 percent higher than the $1,483 million for the second quarter of 2015, and 9.8 percent higher than the $1,386 million for the first quarter of 2016. Diluted earnings per common share were $0.83 in the second quarter of 2016, $0.03 higher than the second quarter of 2015 and $0.07 higher than the $0.76 reported for the first quarter of 2016. The second quarter of 2016 included $0.01 in notable items, including $180 million of equity investment income, primarily the result of our membership in Visa Europe Limited (“Visa Europe”) which was sold to Visa, Inc. on June 21, 2016, and $110 million in accruals related to legal and regulatory matters along with a $40 million charitable contribution. Excluding the notable items, the increase in net income year-over-year was primarily due to an increase in net interest income of 4.5 percent , mainly a result of strong loan growth, and higher noninterest income of 4.4 percent, driven by growth in credit and debit card revenue, commercial products revenue, and trust and investment management fees. This increase was partially offset by higher noninterest expense related to merit increases and higher variable compensation expense, increased compliance costs, which peaked in the second quarter 2016, and higher marketing expense as a result of brand investment. Excluding the notable items, the increase in net income on a linked quarter basis was principally due to total net revenue growth of 4.6 percent reflecting typical seasonality in certain lines of businesses, including payments, mortgage banking and deposit services, partially offset by higher noninterest expense of 3.4 percent related to increased compliance costs and marketing expense.

U.S. Bancorp Chairman and Chief Executive Officer Richard K. Davis said, “U.S. Bancorp reported strong second quarter results, delivering record revenue and net income in an economy that continues to be challenged by global concerns and low interest rates. Despite these economic headwinds we continued to effectively execute on our strategy to be the most trusted choice and to unify the customer experience. The second quarter was a record quarter for us as we once again delivered industry-leading returns, steady loan growth and strength in our fee-based businesses. Steady loan growth, demonstrated by continued strength in commercial loans and momentum in consumer loans, led to increased net interest income despite a decline in net interest margin. Growth in our fee revenue continued across many of our fee-based businesses, including our payments business lines. We also reported strong results in our capital markets business as we were positioned well to provide products and services to our customers as they navigated through the recent market volatility. And we managed our capital effectively, delivering 77 percent of our second quarter earnings back to shareholders through dividends and share buybacks. During the quarter, we were pleased to receive the Federal Reserve’s non-objection to our capital plan, allowing us once again to return value to our shareholders by increasing our annual common dividend by 9.8 percent in the third quarter of 2016. We also made important investments in our vision for the future, including investments in the U.S. Bank brand that will help us more effectively articulate our compelling story to customers in order to generate long-term growth.

“The strength of our company continues to be driven by the commitment of our employees. Through their hard work and dedication, we continue to deliver consistent, predictable and repeatable industry-leading financial results. We remain well positioned to provide the right products and services to our customers so that they may achieve their financial objectives as we continue to create value for our shareholders.”

INCOME STATEMENT HIGHLIGHTS																								Table 2
(Taxable-equivalent basis, $ in millions, except per-share data)												Percent			Percent
												Change			Change
			2Q			1Q			2Q			2Q16 vs			2Q16 vs			YTD			YTD			Percent
			2016			2016			2015			1Q16			2Q15			2016			2015			Change
Net interest income			$2,896			$2,888			$2,770			.3			4.5			$5,784			$5,522			4.7
Noninterest income			2,552			2,149			2,272			18.8			12.3			4,701			4,426			6.2
Total net revenue			5,448			5,037			5,042			8.2			8.1			10,485			9,948			5.4
Noninterest expense			2,992			2,749			2,682			8.8			11.6			5,741			5,347			7.4
Income before provision and taxes			2,456			2,288			2,360			7.3			4.1			4,744			4,601			3.1
Provision for credit losses			327			330			281			(.9	)		16.4			657			545			20.6
Income before taxes			2,129			1,958			2,079			8.7			2.4			4,087			4,056			.8
Taxable-equivalent adjustment			51			53			54			(3.8	)		(5.6	)		104			108			(3.7	)
Applicable income taxes			542			504			528			7.5			2.7			1,046			1,007			3.9
Net income			1,536			1,401			1,497			9.6			2.6			2,937			2,941			(.1	)
Net (income) loss attributable to noncontrolling interests			(14	)		(15	)		(14	)		6.7			--			(29	)		(27	)		(7.4	)
Net income attributable to U.S. Bancorp			$1,522			$1,386			$1,483			9.8			2.6			$2,908			$2,914			(.2	)
Net income applicable to U.S. Bancorp common shareholders			$1,435			$1,329			$1,417			8.0			1.3			$2,764			$2,782			(.6	)
Diluted earnings per common share			$.83			$.76			$.80			9.2			3.8			$1.59			$1.56			1.9

NET INTEREST INCOME																								Table 3
(Taxable-equivalent basis; $ in millions)
												Change			Change
			2Q			1Q			2Q			2Q16 vs			2Q16 vs			YTD			YTD
			2016			2016			2015			1Q16			2Q15			2016			2015			Change
Components of net interest income
Income on earning assets			$3,305			$3,275			$3,123			$30			$182			$6,580			$6,239			$341
Expense on interest-bearing liabilities			409			387			353			22			56			796			717			79
Net interest income			$2,896			$2,888			$2,770			$8			$126			$5,784			$5,522			$262
Average yields and rates paid
Earning assets yield			3.44	%		3.48	%		3.42	%		(.04	)%		.02	%		3.46	%		3.45	%		.01	%
Rate paid on interest-bearing liabilities			.58			.56			.52			.02			.06			.57			.54			.03
Gross interest margin			2.86	%		2.92	%		2.90	%		(.06	)%		(.04	)%		2.89	%		2.91	%		(.02	)%
Net interest margin			3.02	%		3.06	%		3.03	%		(.04	)%		(.01	)%		3.04	%		3.05	%		(.01	)%
Average balances
Investment securities (a)			$107,132			$106,031			$102,391			$1,101			$4,741			$106,581			$101,556			$5,025
Loans			266,582			262,281			246,560			4,301			20,022			264,432			247,251			17,181
Earning assets			385,368			378,208			366,428			7,160			18,940			381,788			363,650			18,138
Interest-bearing liabilities			285,796			279,516			270,573			6,280			15,223			282,656			269,235			13,421
(a) Excludes unrealized gain (loss)

Net Interest Income

Net interest income on a taxable-equivalent basis in the second quarter of 2016 was $2,896 million, an increase of $126 million (4.5 percent) over the second quarter of 2015. The increase was driven by loan growth and higher rates, partially offset by the loan portfolio mix. Average earning assets were $18.9 billion (5.2 percent) higher than the second quarter of 2015, driven by increases of $20.0 billion (8.1 percent) in average total loans and $4.7 billion (4.6 percent) in average investment securities. Net interest income increased $8 million (0.3 percent) on a linked quarter basis, primarily due to growth in average total loans, partially offset by the loan portfolio mix and higher funding costs. Average total loans were $4.3 billion (1.6 percent) higher on a linked quarter basis.

The net interest margin in the second quarter of 2016 was 3.02 percent, compared with 3.03 percent in the second quarter of 2015, and 3.06 percent in the first quarter of 2016. The decrease in the net interest margin on a year-over-year basis was principally due to securities purchases at lower average rates and lower reinvestment rates on maturing securities, partially offset by higher rates on new loans. On a linked quarter basis, the decrease in net interest margin primarily reflected the loan portfolio mix as well as lower average rates on new securities purchases and lower reinvestment rates on maturing securities.

Investment Securities

Average investment securities in the second quarter of 2016 were $4.7 billion (4.6 percent) higher year-over-year and $1.1 billion (1.0 percent) higher than the prior quarter. These increases were primarily due to purchases of U.S. Treasury and U.S. government agency-backed securities, net of prepayments and maturities, to support regulatory liquidity coverage ratio requirements.

AVERAGE LOANS																			Table 4
($ in millions)									Percent			Percent
									Change			Change
			2Q		1Q		2Q		2Q16 vs			2Q16 vs			YTD		YTD		Percent
			2016		2016		2015		1Q16			2Q15			2016		2015		Change
Commercial			$86,899		$84,582		$77,932		2.7			11.5			$85,741		$77,062		11.3
Lease financing			5,255		5,238		5,321		.3			(1.2	)		5,246		5,323		(1.4	)
Total commercial			92,154		89,820		83,253		2.6			10.7			90,987		82,385		10.4
Commercial mortgages			31,950		31,836		32,499		.4			(1.7	)		31,893		32,807		(2.8	)
Construction and development			11,038		10,565		9,947		4.5			11.0			10,801		9,751		10.8
Total commercial real estate			42,988		42,401		42,446		1.4			1.3			42,694		42,558		.3
Residential mortgages			55,501		54,208		51,114		2.4			8.6			54,854		51,269		7.0
Credit card			20,140		20,244		17,613		(.5	)		14.3			20,192		17,718		14.0
Retail leasing			5,326		5,179		5,696		2.8			(6.5	)		5,253		5,756		(8.7	)
Home equity and second mortgages			16,394		16,368		15,958		.2			2.7			16,381		15,928		2.8
Other			29,748		29,550		25,415		.7			17.0			29,649		26,504		11.9
Total other retail			51,468		51,097		47,069		.7			9.3			51,283		48,188		6.4
Total loans, excluding covered loans			262,251		257,770		241,495		1.7			8.6			260,010		242,118		7.4
Covered loans			4,331		4,511		5,065		(4.0	)		(14.5	)		4,422		5,133		(13.9	)
Total loans			$266,582		$262,281		$246,560		1.6			8.1			$264,432		$247,251		6.9

Loans

Average total loans were $20.0 billion (8.1 percent) higher in the second quarter of 2016 than the second quarter of 2015 (6.5 percent excluding student loans and the credit card portfolio acquisition). The increase was driven by growth in total commercial loans (10.7 percent), residential mortgages (8.6 percent), and credit card loans (14.3 percent, 5.8 percent excluding the credit card portfolio acquisition), and total other retail loans (9.3 percent, 4.1 percent excluding student loans). These increases were partially offset by a decline in the run-off covered loans portfolio (14.5 percent). Average total loans were $4.3 billion (1.6 percent) higher in the second quarter of 2016 than the first quarter of 2016. The increase was driven by growth in total commercial loans (2.6 percent), residential mortgages (2.4 percent) and total commercial real estate (1.4 percent).

AVERAGE DEPOSITS																		Table 5
($ in millions)									Percent		Percent
									Change		Change
			2Q		1Q		2Q		2Q16 vs		2Q16 vs			YTD		YTD		Percent
			2016		2016		2015		1Q16		2Q15			2016		2015		Change
Noninterest-bearing deposits			$79,171		$78,569		$77,347		.8		2.4			$78,870		$75,937		3.9
Interest-bearing savings deposits
Interest checking			60,842		57,910		55,205		5.1		10.2			59,376		54,933		8.1
Money market savings			92,904		86,462		79,898		7.5		16.3			89,683		76,910		16.6
Savings accounts			40,258		39,250		37,071		2.6		8.6			39,754		36,555		8.8
Total of savings deposits			194,004		183,622		172,174		5.7		12.7			188,813		168,398		12.1
Time deposits			34,211		33,687		36,223		1.6		(5.6	)		33,949		37,787		(10.2	)
Total interest-bearing deposits			228,215		217,309		208,397		5.0		9.5			222,762		206,185		8.0
Total deposits			$307,386		$295,878		$285,744		3.9		7.6			$301,632		$282,122		6.9

Deposits

Average total deposits for the second quarter of 2016 were $21.6 billion (7.6 percent) higher than the second quarter of 2015. Average noninterest-bearing deposits increased $1.8 billion (2.4 percent) year-over-year, mainly in Consumer and Small Business Banking and Wholesale Banking and Commercial Real Estate, partially offset by a decline in Wealth Management and Securities Services. Average total savings deposits were $21.8 billion (12.7 percent) higher year-over-year, the result of growth across all business lines. Growth in Consumer and Small Business Banking total savings deposits included net new account growth of 2.8 percent. Average time deposits were $2.0 billion (5.6 percent) lower than the prior year quarter. Changes in time deposits are largely related to those deposits managed as an alternative to other funding sources such as wholesale borrowing, based largely on relative pricing and liquidity characteristics.

Average total deposits increased $11.5 billion (3.9 percent) over the first quarter of 2016. Average noninterest-bearing deposits increased $602 million (0.8 percent) on a linked quarter basis, mainly due to higher balances in Consumer and Small Business Banking, partially offset by lower balances in Wholesale Banking and Commercial Real Estate. Average total savings deposits increased $10.4 billion (5.7 percent) reflecting increases across all business lines. Average time deposits, which are managed based on funding needs, relative pricing, and liquidity characteristics increased $524 million (1.6 percent) on a linked quarter basis.

NONINTEREST INCOME																			Table 6
($ in millions)									Percent			Percent
									Change			Change
			2Q		1Q		2Q		2Q16 vs			2Q16 vs			YTD		YTD		Percent
			2016		2016		2015		1Q16			2Q15			2016		2015		Change
Credit and debit card revenue			$296		$266		$266		11.3			11.3			$562		$507		10.8
Corporate payment products revenue			181		170		178		6.5			1.7			351		348		.9
Merchant processing services			403		373		395		8.0			2.0			776		754		2.9
ATM processing services			84		80		80		5.0			5.0			164		158		3.8
Trust and investment management fees			358		339		334		5.6			7.2			697		656		6.3
Deposit service charges			179		168		174		6.5			2.9			347		335		3.6
Treasury management fees			147		142		142		3.5			3.5			289		279		3.6
Commercial products revenue			238		197		214		20.8			11.2			435		414		5.1
Mortgage banking revenue			238		187		231		27.3			3.0			425		471		(9.8	)
Investment products fees			39		40		48		(2.5	)		(18.8	)		79		95		(16.8	)
Securities gains (losses), net			3		3		--		--			nm			6		--		nm
Other			386		184		210		nm			83.8			570		409		39.4
Total noninterest income			$2,552		$2,149		$2,272		18.8			12.3			$4,701		$4,426		6.2

Noninterest Income

Second quarter noninterest income was $2,552 million, which was $280 million higher than the second quarter of 2015. Excluding the Visa Europe sale, noninterest income increased 4.4 percent reflecting increases in credit and debit card revenue, trust and investment management fees, and commercial products revenue. Credit and debit card revenue increased $30 million (11.3 percent) reflecting higher transaction volumes including acquired portfolios. Merchant processing services revenue increased $8 million (2.0 percent). Adjusted for the approximate $4 million impact of foreign currency rate changes, year-over-year merchant processing services revenue growth would have been approximately 3.0 percent. Trust and investment management fees increased $24 million (7.2 percent) reflecting lower money market fee waivers. Commercial products revenue increased $24 million (11.2 percent) driven by higher bond underwriting fees, foreign currency customer activity and other capital markets activity as a result of market volatility.

Noninterest income was $403 million higher in the second quarter of 2016 than the first quarter of 2016. Excluding the Visa Europe sale, noninterest income increased 10.4 percent reflecting seasonally higher fee-based revenue including credit and debit card revenue, merchant processing services revenue, mortgage banking revenue and deposit service charges. Credit and debit card revenue increased $30 million (11.3 percent), primarily due to seasonally higher transaction volumes. Merchant processing services revenue increased $30 million (8.0 percent) as a result of seasonally higher transaction volumes. Mortgage banking revenue increased $51 million (27.3 percent) mainly due to seasonally higher production volumes. Commercial products revenue increased $41 million (20.8 percent) primarily due to higher bond underwriting fees, foreign currency customer activity and capital markets volume, partially reflecting market volatility. Trust and investment management fees increased $19 million (5.6 percent) primarily due to account growth, improved market conditions and lower money market fee waivers. Deposit service charges increased $11 million (6.5 percent) due to seasonally higher transaction volumes.

NONINTEREST EXPENSE																			Table 7
($ in millions)									Percent			Percent
									Change			Change
			2Q		1Q		2Q		2Q16 vs			2Q16 vs			YTD		YTD		Percent
			2016		2016		2015		1Q16			2Q15			2016		2015		Change
Compensation			$1,277		$1,249		$1,196		2.2			6.8			$2,526		$2,375		6.4
Employee benefits			278		300		293		(7.3	)		(5.1	)		578		610		(5.2	)
Net occupancy and equipment			243		248		247		(2.0	)		(1.6	)		491		494		(.6	)
Professional services			121		98		106		23.5			14.2			219		183		19.7
Marketing and business development			149		77		96		93.5			55.2			226		166		36.1
Technology and communications			241		233		221		3.4			9.0			474		435		9.0
Postage, printing and supplies			77		79		64		(2.5	)		20.3			156		146		6.8
Other intangibles			44		45		43		(2.2	)		2.3			89		86		3.5
Other			562		420		416		33.8			35.1			982		852		15.3
Total noninterest expense			$2,992		$2,749		$2,682		8.8			11.6			$5,741		$5,347		7.4

Noninterest Expense

Second quarter noninterest expense was $2,992 million, which was $310 million (11.6 percent) higher than the second quarter of 2015. Excluding the notable expense items, noninterest expense increased $160 million (6.0 percent) related to higher compensation expense, professional services expense, and technology and communications expense, partially offset by lower employee benefits expense. Compensation expense increased $81 million (6.8 percent), principally due to the impact of merit increases along with higher variable compensation including performance-based incentives. Professional services expense increased $15 million (14.2 percent) primarily due to compliance-related matters, while technology and communications expense increased $20 million (9.0 percent) due to acquired card portfolio conversion costs. Excluding the notable charitable contribution, the marketing and business development increase of $13 million reflected brand advertising. Postage, printing and supplies expense increased $13 million (20.3 percent) reflecting the impact of a prior year reimbursement from a business partner. Offsetting these increases was lower employee benefits expense of $15 million (5.1 percent) mainly due to lower pension costs.

Noninterest expense increased $243 million (8.8 percent) on a linked quarter basis, $93 million (3.4 percent) excluding the second quarter 2016 notable items, reflecting higher professional services and compensation expenses, partially offset by lower employee benefits expense. Excluding the notable charitable contribution, the marketing and business development expense increase of $32 million was driven by brand advertising. Professional services expense was $23 million (23.5 percent) higher compared with the first quarter of 2016 principally due to higher costs for compliance-related matters. Compensation expense increased $28 million (2.2 percent) due to merit increases and higher variable compensation including performance-based incentives. Partially offsetting these increases was a decrease in employee benefits expense of $22 million (7.3 percent), driven by seasonally lower payroll tax expense.

Provision for Income Taxes

The provision for income taxes for the second quarter of 2016 resulted in a tax rate on a taxable-equivalent basis of 27.9 percent (effective tax rate of 26.1 percent), compared with 28.0 percent (effective tax rate of 26.1 percent) in the second quarter of 2015, and 28.4 percent (effective tax rate of 26.5 percent) in the first quarter of 2016, reflecting the favorable settlement of certain tax exam matters in the second quarter of 2016.

ALLOWANCE FOR CREDIT LOSSES																											Table 8
($ in millions)			2Q						1Q						4Q						3Q						2Q
			2016			% (b)			2016			% (b)			2015			% (b)			2015			% (b)			2015			% (b)
Balance, beginning of period			$4,320						$4,306						$4,306						$4,326						$4,351
Net charge-offs
Commercial			74			.34			78			.37			58			.28			68			.34			39			.20
Lease financing			5			.38			5			.38			5			.38			3			.23			3			.23
Total commercial			79			.34			83			.37			63			.29			71			.33			42			.20
Commercial mortgages			(4	)		(.05	)		(2	)		(.03	)		2			.02			--			--			4			.05
Construction and development			4			.15			(3	)		(.11	)		(2	)		(.08	)		(11	)		(.43	)		(3	)		(.12	)
Total commercial real estate			--			--			(5	)		(.05	)		--			--			(11	)		(.10	)		1			.01
Residential mortgages			17			.12			19			.14			16			.12			25			.19			33			.26
Credit card			170			3.39			164			3.26			166			3.50			153			3.38			169			3.85
Retail leasing			2			.15			1			.08			1			.08			2			.14			1			.07
Home equity and second mortgages			(1	)		(.02	)		2			.05			6			.15			7			.17			11			.28
Other			50			.68			51			.69			53			.71			45			.65			39			.62
Total other retail			51			.40			54			.43			60			.47			54			.44			51			.43
Total net charge-offs,
excluding covered loans			317			.49			315			.49			305			.48			292			.47			296			.49
Covered loans			--			--			--			--			--			--			--			--			--			--
Total net charge-offs			317			.48			315			.48			305			.47			292			.46			296			.48
Provision for credit losses			327						330						305						282						281
Other changes (a)			(1	)					(1	)					--						(10	)					(10	)
Balance, end of period			$4,329						$4,320						$4,306						$4,306						$4,326
Components
Allowance for loan losses			$3,806						$3,853						$3,863						$3,965						$4,013
Liability for unfunded
credit commitments			523						467						443						341						313
Total allowance for credit losses			$4,329						$4,320						$4,306						$4,306						$4,326
Gross charge-offs			$407						$405						$381						$372						$380
Gross recoveries			$90						$90						$76						$80						$84
Allowance for credit losses as a percentage of
Period-end loans,
excluding covered loans			1.62						1.65						1.67						1.71						1.76
Nonperforming loans,
excluding covered loans			311						302						360						347						348
Nonperforming assets,
excluding covered assets			263						255						288						280						279
Period-end loans			1.61						1.63						1.65						1.69						1.74
Nonperforming loans			312						303						361						347						349
Nonperforming assets			259						251						283						275						274
(a) Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the indemnification asset, and the impact of any loan sales.
(b) Annualized and calculated on average loan balances

Credit Quality

The Company’s provision for credit losses for the second quarter of 2016 was $327 million, which was $3 million (0.9 percent) lower than the prior quarter and $46 million (16.4 percent) higher than the second quarter of 2015. Credit quality was relatively stable.

The provision for credit losses was $10 million higher than net charge-offs in the second quarter of 2016, $15 million higher than net charge-offs in the first quarter of 2016 and $15 million lower than net charge-offs in the second quarter of 2015. The reserve build for the second quarter of 2016 was driven by portfolio growth, partially offset by reduced energy portfolio exposures and residential mortgage credit quality improvement. Total net charge-offs in the second quarter of 2016 were $317 million, compared with $315 million in the first quarter of 2016, and $296 million in the second quarter of 2015. Net charge-offs increased $2 million (0.6 percent) compared with the first quarter of 2016 mainly due to modest increases in construction and development and credit card net charge-offs. Net charge-offs increased $21 million (7.1 percent) compared with the second quarter of 2015 primarily due to higher commercial loan net charge-offs, partially offset by lower charge-offs related to residential mortgages. The net charge-off ratio was 0.48 percent in the second quarter of 2016, the first quarter of 2016 and in the second quarter of 2015.

The allowance for credit losses was $4,329 million at June 30, 2016, compared with $4,320 million at March 31, 2016, and $4,326 million at June 30, 2015. The ratio of the allowance for credit losses to period-end loans was 1.61 percent at June 30, 2016, compared with 1.63 percent at March 31, 2016, and 1.74 percent at June 30, 2015. The ratio of the allowance for credit losses to nonperforming loans was 312 percent at June 30, 2016, compared with 303 percent at March 31, 2016, and 349 percent at June 30, 2015.

Nonperforming assets were $1,672 million at June 30, 2016, compared with $1,719 million at March 31, 2016, and $1,577 million at June 30, 2015. The ratio of nonperforming assets to loans and other real estate was 0.62 percent at June 30, 2016, compared with 0.65 percent at March 31, 2016, and 0.63 percent at June 30, 2015. The $95 million (6.0 percent) increase in nonperforming assets on a year-over-year basis was driven by commercial loans within the energy portfolio, partially offset by improvements in the Company’s residential and commercial real estate portfolios. The decrease in nonperforming assets on a linked quarter basis of $47 million (2.7 percent) was driven by improvements in the energy portfolio and in residential mortgages. Accruing loans 90 days or more past due were $724 million ($478 million excluding covered loans) at June 30, 2016, compared with $804 million ($528 million excluding covered loans) at March 31, 2016, and $801 million ($469 million excluding covered loans) at June 30, 2015.

Commercial loans to customers in the energy sector were approximately $3.0 billion ($11.3 billion of commitments) at June 30, 2016, compared with $3.4 billion ($11.9 billion of commitments) at March 31, 2016. The decline was primarily driven by the completion of our spring borrowing base redeterminations on reserve-based loans within our energy portfolio. During the second quarter 2016, criticized commitments within the energy portfolio decreased by $509 million while nonperforming loans in the energy portfolio decreased $54 million. Energy portfolio loans represent 1.1 percent of the Company’s total loans outstanding at June 30, 2016, and 1.3 percent at March 31, 2016. At June 30, 2016, the Company had credit reserves of 8.8 percent of total outstanding energy loan balances, compared with 9.1 percent of total outstanding energy loan balances at March 31, 2016.

DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES											Table 9
(Percent)
			Jun 30		Mar 31		Dec 31		Sep 30		Jun 30
			2016		2016		2015		2015		2015
Delinquent loan ratios - 90 days or more past due excluding nonperforming loans
Commercial			.05		.05		.05		.05		.05
Commercial real estate			.03		.04		.03		.05		.05
Residential mortgages			.27		.31		.33		.33		.30
Credit card			.98		1.10		1.09		1.10		1.03
Other retail			.13		.15		.15		.14		.14
Total loans, excluding covered loans			.18		.20		.21		.20		.19
Covered loans			5.81		6.23		6.31		6.57		6.66
Total loans			.27		.30		.32		.32		.32
Delinquent loan ratios - 90 days or more past due including nonperforming loans
Commercial			.58		.57		.25		.25		.16
Commercial real estate			.27		.28		.33		.39		.46
Residential mortgages			1.39		1.54		1.66		1.73		1.80
Credit card			1.00		1.14		1.13		1.16		1.12
Other retail			.43		.45		.46		.47		.51
Total loans, excluding covered loans			.70		.75		.67		.70		.70
Covered loans			5.98		6.39		6.48		6.80		6.88
Total loans			.79		.84		.78		.81		.82

ASSET QUALITY								Table 10
($ in millions)
			Jun 30		Mar 31		Dec 31		Sep 30		Jun 30
			2016		2016		2015		2015		2015
Nonperforming loans
Commercial			$450		$457		$160		$157		$78
Lease financing			39		16		14		12		12
Total commercial			489		473		174		169		90
Commercial mortgages			91		94		92		105		116
Construction and development			12		10		35		39		59
Total commercial real estate			103		104		127		144		175
Residential mortgages			628		677		712		735		769
Credit card			5		7		9		12		16
Other retail			157		157		162		171		178
Total nonperforming loans, excluding covered loans			1,382		1,418		1,184		1,231		1,228
Covered loans			7		7		8		11		11
Total nonperforming loans			1,389		1,425		1,192		1,242		1,239
Other real estate (a)			229		242		280		276		287
Covered other real estate (a)			34		33		32		31		35
Other nonperforming assets			20		19		19		18		16
Total nonperforming assets (b)			$1,672		$1,719		$1,523		$1,567		$1,577
Total nonperforming assets, excluding covered assets			$1,631		$1,679		$1,483		$1,525		$1,531
Accruing loans 90 days or more
past due, excluding covered loans			$478		$528		$541		$510		$469
Accruing loans 90 days or more past due			$724		$804		$831		$825		$801
Performing restructured loans, excluding GNMA
and covered loans			$2,676		$2,735		$2,766		$2,746		$2,815
Performing restructured GNMA and covered loans			$1,602		$1,851		$1,944		$2,031		$2,111
Nonperforming assets to loans
plus ORE, excluding covered assets (%)			.62		.64		.58		.61		.63
Nonperforming assets to loans plus ORE (%)			.62		.65		.58		.61		.63
(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.

COMMON SHARES												Table 11
(Millions)			2Q			1Q			4Q			3Q			2Q
			2016			2016			2015			2015			2015
Beginning shares outstanding			1,732			1,745			1,754			1,767			1,780
Shares issued for stock incentive plans,
acquisitions and other corporate purposes			2			3			1			3			1
Shares repurchased			(15	)		(16	)		(10	)		(16	)		(14	)
Ending shares outstanding			1,719			1,732			1,745			1,754			1,767

CAPITAL POSITION															Table 12
($ in millions)			Jun 30			Mar 31			Dec 31			Sep 30			Jun 30
			2016			2016			2015			2015			2015
Total U.S. Bancorp shareholders' equity			$47,390			$46,755			$46,131			$45,075			$44,537
Standardized Approach
Basel III transitional standardized approach
Common equity tier 1 capital			$33,444			$32,827			$32,612			$32,124			$31,674
Tier 1 capital			39,148			38,532			38,431			37,197			36,748
Total risk-based capital			47,049			45,412			45,313			44,015			43,526
Common equity tier 1 capital ratio			9.5	%		9.5	%		9.6	%		9.6	%		9.5	%
Tier 1 capital ratio			11.1			11.1			11.3			11.1			11.0
Total risk-based capital ratio			13.4			13.1			13.3			13.1			13.1
Leverage ratio			9.3			9.3			9.5			9.3			9.2
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented
standardized approach			9.3			9.2			9.1			9.2			9.2
Advanced Approaches
Common equity tier 1 capital to risk-weighted assets
for the Basel III transitional advanced approaches			12.3			12.3			12.5			13.0			12.9
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented
advanced approaches			12.0			11.9			11.9			12.4			12.4
Tangible common equity to tangible assets			7.6			7.7			7.6			7.7			7.5
Tangible common equity to risk-weighted assets			9.3			9.3			9.2			9.3			9.2
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 following four years to full implementation by January 1, 2018. Basel III includes two comprehensive methodologies for calculating risk-weighted assets: a general standardized approach and more risk-sensitive advanced approaches, with the Company's capital adequacy being evaluated against the methodology that is most restrictive.

Capital Management

Total U.S. Bancorp shareholders’ equity was $47.4 billion at June 30, 2016, compared with $46.8 billion at March 31, 2016, and $44.5 billion at June 30, 2015. During the second quarter, the Company returned 77 percent of earnings to shareholders through dividends and share buybacks.

All regulatory ratios continue to be in excess of “well-capitalized” requirements. The estimated common equity tier 1 capital to risk-weighted assets ratio using the Basel III fully implemented standardized approach was 9.3 percent at June 30, 2016, compared with 9.2 percent at March 31, 2016, and at June 30, 2015. The estimated common equity tier 1 capital to risk-weighted assets ratio using the Basel III fully implemented advanced approaches method was 12.0 percent at June 30, 2016, compared with 11.9 percent at March 31, 2016, and 12.4 percent at June 30, 2015.

On Friday, July 15, 2016, at 8:00 a.m. CDT, Richard K. Davis, chairman and chief executive officer, and Kathy Rogers, vice chair and chief financial officer, will host a conference call to review the financial results. The conference call will be available online or by telephone. To access the webcast and presentation, 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 near the bottom of the page. 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 8158556. For those unable to participate during the live call, a recording will be available at approximately 11:00 a.m. CDT on Friday, July 15 and be accessible through Friday, July 22 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 8158556.

Minneapolis-based U.S. Bancorp (NYSE: USB), with $438 billion in assets as of June 30, 2016, is the parent company of U.S. Bank National Association, the fifth largest commercial bank in the United States. The Company operates 3,122 banking offices in 25 states and 4,923 ATMs and provides a comprehensive line of banking, investment, mortgage, trust and payment services products to consumers, businesses and institutions. Visit U.S. Bancorp on the web at www.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 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. Stress in the commercial real estate markets, as well as a downturn in the residential real estate markets could cause credit losses and deterioration in asset values. In addition, 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; litigation; increased competition from both banks and non-banks; changes in customer behavior and preferences; breaches in data security; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputational risk.

For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2015, 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,
• Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach, and
• Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches.

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
(Dollars and Shares in Millions, Except Per Share Data)			Three Months Ended									Six Months Ended
			June 30,									June 30,
(Unaudited)			2016				2015					2016				2015
Interest Income
Loans			$	2,664			$	2,463				$	5,308			$	4,956
Loans held for sale				36				65					67				106
Investment securities				523				505					1,040				1,000
Other interest income				29				35					58				67
Total interest income				3,252				3,068					6,473				6,129
Interest Expense
Deposits				152				113					291				231
Short-term borrowings				66				62					131				123
Long-term debt				189				177					371				361
Total interest expense				407				352					793				715
Net interest income				2,845				2,716					5,680				5,414
Provision for credit losses				327				281					657				545
Net interest income after provision for credit losses				2,518				2,435					5,023				4,869
Noninterest Income
Credit and debit card revenue				296				266					562				507
Corporate payment products revenue				181				178					351				348
Merchant processing services				403				395					776				754
ATM processing services				84				80					164				158
Trust and investment management fees				358				334					697				656
Deposit service charges				179				174					347				335
Treasury management fees				147				142					289				279
Commercial products revenue				238				214					435				414
Mortgage banking revenue				238				231					425				471
Investment products fees				39				48					79				95
Securities gains (losses), net				3				--					6				--
Other				386				210					570				409
Total noninterest income				2,552				2,272					4,701				4,426
Noninterest Expense
Compensation				1,277				1,196					2,526				2,375
Employee benefits				278				293					578				610
Net occupancy and equipment				243				247					491				494
Professional services				121				106					219				183
Marketing and business development				149				96					226				166
Technology and communications				241				221					474				435
Postage, printing and supplies				77				64					156				146
Other intangibles				44				43					89				86
Other				562				416					982				852
Total noninterest expense				2,992				2,682					5,741				5,347
Income before income taxes				2,078				2,025					3,983				3,948
Applicable income taxes				542				528					1,046				1,007
Net income				1,536				1,497					2,937				2,941
Net (income) loss attributable to noncontrolling interests				(14	)			(14	)				(29	)			(27	)
Net income attributable to U.S. Bancorp			$	1,522			$	1,483				$	2,908			$	2,914
Net income applicable to U.S. Bancorp common shareholders			$	1,435			$	1,417				$	2,764			$	2,782
Earnings per common share			$	.83			$	.80				$	1.60			$	1.57
Diluted earnings per common share			$	.83			$	.80				$	1.59			$	1.56
Dividends declared per common share			$	.255			$	.255				$	.510			$	.500
Average common shares outstanding				1,725				1,771					1,731				1,776
Average diluted common shares outstanding				1,731				1,779					1,737				1,784

U.S. Bancorp
Consolidated Ending Balance Sheet
			June 30,				December 31,				June 30,
(Dollars in Millions)			2016				2015				2015
Assets			(Unaudited)								(Unaudited)
Cash and due from banks			$	14,038			$	11,147			$	17,925
Investment securities
Held-to-maturity				42,030				43,590				46,233
Available-for-sale				66,490				61,997				57,078
Loans held for sale				4,311				3,184				8,498
Loans
Commercial				92,514				88,402				84,620
Commercial real estate				43,290				42,137				42,258
Residential mortgages				55,904				53,496				51,337
Credit card				20,571				21,012				17,788
Other retail				52,008				51,206				47,652
Total loans, excluding covered loans				264,287				256,253				243,655
Covered loans				4,234				4,596				4,984
Total loans				268,521				260,849				248,639
Less allowance for loan losses				(3,806	)			(3,863	)			(4,013	)
Net loans				264,715				256,986				244,626
Premises and equipment				2,459				2,513				2,551
Goodwill				9,359				9,361				9,374
Other intangible assets				2,852				3,350				3,225
Other assets				32,209				29,725				29,565
Total assets			$	438,463			$	421,853			$	419,075
Liabilities and Shareholders' Equity
Deposits
Noninterest-bearing			$	86,572			$	83,766			$	86,189
Interest-bearing				231,018				216,634				210,659
Total deposits				317,590				300,400				296,848
Short-term borrowings				18,433				27,877				27,784
Long-term debt				36,941				32,078				34,141
Other liabilities				17,470				14,681				15,071
Total liabilities				390,434				375,036				373,844
Shareholders' equity
Preferred stock				5,501				5,501				4,756
Common stock				21				21				21
Capital surplus				8,402				8,376				8,335
Retained earnings				48,269				46,377				44,434
Less treasury stock				(14,241	)			(13,125	)			(12,144	)
Accumulated other comprehensive income (loss)				(562	)			(1,019	)			(865	)
Total U.S. Bancorp shareholders' equity				47,390				46,131				44,537
Noncontrolling interests				639				686				694
Total equity				48,029				46,817				45,231
Total liabilities and equity			$	438,463			$	421,853			$	419,075

U.S. Bancorp
Non-GAAP Financial Measures
(Dollars in Millions, Unaudited)			June 30,				March 31,				December 31,				September 30,				June 30,
			2016				2016				2015				2015				2015
Total equity			$	48,029			$	47,393			$	46,817			$	45,767			$	45,231
Preferred stock				(5,501	)			(5,501	)			(5,501	)			(4,756	)			(4,756	)
Noncontrolling interests				(639	)			(638	)			(686	)			(692	)			(694	)
Goodwill (net of deferred tax liability) (1)				(8,246	)			(8,270	)			(8,295	)			(8,324	)			(8,350	)
Intangible assets, other than mortgage servicing rights				(796	)			(820	)			(838	)			(779	)			(744	)
Tangible common equity (a)				32,847				32,164				31,497				31,216				30,687
Tangible common equity (as calculated above)				32,847				32,164				31,497				31,216				30,687
Adjustments (2)				133				99				67				118				125
Common equity tier 1 capital estimated for the Basel III fully
implemented standardized and advanced approaches (b)				32,980				32,263				31,564				31,334				30,812
Total assets				438,463				428,638				421,853				415,943				419,075
Goodwill (net of deferred tax liability) (1)				(8,246	)			(8,270	)			(8,295	)			(8,324	)			(8,350	)
Intangible assets, other than mortgage servicing rights				(796	)			(820	)			(838	)			(779	)			(744	)
Tangible assets (c)				429,421				419,548				412,720				406,840				409,981
Risk-weighted assets, determined in accordance with prescribed
transitional standardized approach regulatory requirements (d)			351,462		*			346,227				341,360				336,227				333,177
Adjustments (3)			3,079		*			3,485				3,892				3,532				3,532
Risk-weighted assets estimated for the Basel III fully implemented
standardized approach (e)			354,541		*			349,712				345,252				339,759				336,709
Risk-weighted assets, determined in accordance with prescribed
transitional advanced approaches regulatory requirements			271,495		*			267,309				261,668				248,048				245,038
Adjustments (4)			3,283		*			3,707				4,099				3,723				3,721
Risk-weighted assets estimated for the Basel III fully implemented
advanced approaches (f)			274,778		*			271,016				265,767				251,771				248,759
Ratios *
Tangible common equity to tangible assets (a)/(c)				7.6	%			7.7	%			7.6	%			7.7	%			7.5	%
Tangible common equity to risk-weighted assets (a)/(d)				9.3				9.3				9.2				9.3				9.2
Common equity tier 1 capital to risk-weighted assets estimated for the
Basel III fully implemented standardized approach (b)/(e)				9.3				9.2				9.1				9.2				9.2
Common equity tier 1 capital to risk-weighted assets estimated for the
Basel III fully implemented advanced approaches (b)/(f)				12.0				11.9				11.9				12.4				12.4

*		Preliminary data. Subject to change prior to filings with applicable regulatory agencies.
(1)		Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.
(2)		Includes net losses on cash flow hedges included in accumulated other comprehensive income (loss) and other adjustments.
(3)		Includes higher risk-weighting for unfunded loan commitments, investment securities, residential mortgages, mortgage servicing rights and other adjustments.
(4)		Primarily reflects higher risk-weighting for mortgage servicing rights.

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