U.S. Bancorp is in the business of "making possible happen." Every single day. 67,000 committed bankers. We make possible happen for our shareholders, our customers, our communities and each other. It is what our brilliant red shield represents: the Power of Possible.
We make possible happen for our shareholders by delivering consistent, predictable, repeatable, industry-leading financial results year after year after year. And, by returning capital and running a trustworthy and reputable banking business, our shareholders know that we will do it well and we will do it right.
That's why we were named one of the World's Most Ethical Companies™ in 2015 by the Ethisphere Institute—the largest U.S.-based bank ever to make the list. And, we proudly returned to Ethisphere's list in 2016.
We make possible happen for our customers by helping them navigate deeply personal financial milestones—from first paycheck to first day of retirement; by helping small businesses convert back-of-the-envelope drawings into hung shingles and open doors; by helping merchants direct commerce efficiently, effectively, conveniently and securely; by being there for families when they walk into their neighborhood branch or connect with us through their mobile devices; and by helping large commercial enterprises manage their daily activities and expand when new opportunities present themselves.
That's why, in 2016, we were named the "most admired superregional bank" in the country by Fortune magazine for the sixth year in a row.
We make possible happen for our communities by investing our time, resources and passion to build and support vibrant communities. Our new corporate responsibility framework is called Community Possible, and it focuses our community investments in Work, Home and Play. The building blocks that made our country great—a stable job, a home to call your own and a community connected through culture, recreation and play—continue to be at the heart of possibility for all of us.
In addition to more than 255,000 volunteer hours and more than $25.4 million in foundation grants, our Community Development Corporation (CDC) invested $4.4 billion in the revitalization of communities and economic centers across the country.
That's why we are recognized every year by organizations like Junior Achievement, Americans for the Arts, United Way and local Chambers of Commerce as well as civic partners for making our communities better.
We make possible happen for our employees by investing in our collective vision and skills to create value for shareholders and customers while building productive and successful careers. We are one U.S. Bank. We make sound financial decisions for the enterprise that protect our employees when the external environment becomes unsteady, like it was in 2015, such as delaying spending and hiring instead of reducing our workforce.
Likewise, we make sound financial decisions for the enterprise that allow us to support and cultivate our employees' futures. We recently made every employee a shareholder of U.S. Bancorp by awarding an appreciation stock grant—because we believe in the power of ownership and we want our employees to know their role as visionaries for our future, with a personal stake in our success.
That's why U.S. Bancorp's employee engagement scores remain in the top quartile of all companies, across all industries and across all regions of the world.
The Power of Possible: Make Value Happen
I am extremely proud of the remarkable financial performance that U.S. Bancorp delivered in 2015 and the value we created for our shareholders.
Remarkable, because it was a year underscored by persistent and historically low interest rates, modest economic growth, increasing regulatory requirements and rapidly evolving customer needs and expectations. More than any year in recent history, 2015 required strong management focus and conviction as we balanced decisions about operating efficiencies with opportunities for investing in future growth.
U.S. Bancorp rose to that challenge, delivering record net income and record diluted EPS for the year and returning 72 percent of our 2015 earnings to shareholders through dividends and share buybacks. In addition, our return on average assets (ROA), return on average equity (ROE) and efficiency ratio continued to lead the industry.
As we managed the twists and turns of a challenging 2015, we also positioned ourselves for growth as we head into 2016 —as was indicated by our record fourth quarter revenue driven by continued momentum in payment-related fees, increasing loan growth and stable net interest margin. We also made solid progress toward achieving positive operating leverage as we finished 2015, due to our continued focus on prudent expense management.
The Power of Possible: Make Growth Happen
With a solid foundation established, we are well positioned for growth in the years ahead. Our business footprint is attractive, with leadership in the most growth-oriented marketplaces that we have chosen to compete in, including Payments, Treasury Services, Wholesale Banking, Consumer and Small Business Banking and Wealth Management. And, our capital position is strong—having exceptional capital ratios and among the world's best debt ratings in the banking industry.
Plus, we have an innovation engine backing all our financial and competitive strength. Bank Innovation recently called U.S. Bank "arguably the most forward-thinking major financial institution in the United States." With consumer behavior changing nearly every day, experience-enhancing innovation permeates our decisions about mobile payments, branch modernization and every other customer touch point we have. It's central to our growth agenda.
The rapid evolution of consumer behavior required us to evaluate our strategic framework in order to keep current with their pace of change. The bank—as we know it today—exists everywhere, and our customers expect us to be available to them everywhere: branch, ATM, website, phone or mobile app. This is not the future of banking—it is the present of banking.
Likewise, our institutional and merchant customers—in the United States and across the globe—expect even more from their banking partner. More financial strength. More innovation. More security. More information. More connectivity. More partnership. More flexibility.
Layered with a deeper knowledge of our customers through data analytics and customer relationship management tools, it is imperative that U.S. Bancorp keep pace with the swift strides of change and optimism our customers are experiencing. Whether they are building a small business or a lasting family legacy, we must be available to them in new ways. In 2015, we witnessed this pivot point in the customer experience, and we are investing in the journey and preparing to grow U.S. Bancorp alongside the evolution of our customers' financial plans and dreams.
Our core businesses—Wholesale Banking and Commercial Real Estate, Consumer and Small Business Banking, Wealth Management and Securities Services and Payment Services—are all well positioned for growth. In 2015, we focused our strategic framework on three foundational pillars that will guide our activities and investments in our vision for the future:
- Be the most trusted choice (governance);
- Get better every day (optimization); and
- Unify the customer experience (customer focus).
This strategic framework powers our momentum as we invest in the expansion of our leadership presence in the banking industry.
The Power of Possible: Make Leadership Happen
Leadership. It's an important word. Our nation deserves responsible bankers to lead the way in our economic recovery—to once again—make possible happen.
At U.S. Bancorp, leadership starts with our exceptional Board of Directors. I am grateful for their dedication and guidance. They provide us with the confidence and courage to make the best decisions and they represent our shareholder interests in every action we take. I am also grateful for our Managing Committee, who provides their industry-leading expertise to every decision and turn day-to-day management into moments for everyday excellence.
We make possible happen every day as we pursue our collective vision for the future. As the economic environment improves and our customers look for a strong and stable banking partner to help them achieve their distinct financial goals and objectives, we will be there for them, leading the way.
As U.S. Bancorp contemplates the opportunities facing us in 2016, we will provide leadership as we help to restore confidence in the banking industry.
The Power of Possible: Make Opportunities Happen
In 1863, Hugh McCulloch, the country's first Comptroller of the Currency, wrote a letter to all national banks that he titled Advice to Bankers of 1863. In the letter he reiterated the basic tenets of effective banking—make good loans, distribute the risk, treat customers well, be fair with employees, make good financial decisions and run the bank with integrity.
Important advice; however, the fundamental theme of his letter was much bigger and more consequential than the banking activities at the beginning of a new era in American history. His advice remains relevant today and applies to all 6,799 banks in the United States as we—once again—stand at the beginning of another new era in American history.
At the heart of McCulloch's letter was his conviction that banks are at the center of the U.S. economy. They are the engine that makes possible happen every day from Maine to California, and Florida to Alaska. It was a resounding reminder of the enormous responsibility and moral imperative of being a banker. Do not enter into this career lightly, for bankers hold the keys to progress, productivity and prosperity. A cup of coffee isn't poured at a neighborhood coffee house, a field of corn isn't harvested, a widget doesn't come off the assembly line, a merchant doesn't protect its customers' personal information, without the expertise and steady ballast of a bank.
In 2016, banks have the opportunity to return to their place of prominence and prestige—being at the center of progress—provided we handle that opportunity with care and responsibility.
I, for one, am proud to be a banker.
It is an honorable profession and McCulloch's bold challenge resonates deeply with me. My focus is forward-looking. My focus is on value creation for our shareholders, customers, communities and employees. My focus is on running an honorable bank that aligns with McCulloch's vision for one of the most important industries in the world.
Because I am in the business of making possible happen. Every single day.
Richard K. Davis
Chairman and Chief Executive Officer
February 25, 2016