UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form

10-Q


☑		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2022


☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from (not applicable)

Commission file number

1-6880

U.S. BANCORP

(Exact name of registrant as specified in its charter)


Delaware		41-0255900
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

800 Nicollet Mall

Minneapolis, Minnesota 55402

(Address of principal executive offices, including zip code)

651-466-3000

(Registrant’s telephone number, including area code)

(not applicable)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbols	~~Trading~~ ~~symbols~~	Name of each exchange on which registered
Common Stock, $.01 par value per share	USB	New York Stock Exchange
Depositary Shares (each representing 1/100th interest in a share of Series A Non-Cumulative Perpetual Preferred Stock, par value $1.00)	USB PrA	New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series B Non-Cumulative Perpetual Preferred Stock, par value $1.00)	USB PrH	New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series K Non-Cumulative Perpetual Preferred Stock, par value $1.00)	USB Pr PPrP	New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series L Non-Cumulative Perpetual Preferred Stock, par value $1.00)	USB PrQ	New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series M Non-Cumulative Perpetual Preferred Stock, par value $1.00)	USB PrR	New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series O Non-Cumulative Perpetual Preferred Stock, par value $1.00)	USB PrS	New York Stock Exchange
0.850% Medium-Term Notes, Series X (Senior), due June 7, 2024	USB/24B	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

YES☑ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of

Regulation S-T

during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES☑ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in

Rule 12b-2

of the Exchange Act.


Large accelerated ~~filer~~file r ☑		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by ~~checkmark~~check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act).

YES ☐ NO ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding as of ~~April 30,~~July 31, 2022
Common Stock, $0.01 Par Value		~~1,485,740,142~~1,485,784,028 shares

Table of Contents

Table of Contents and

Form 10-Q

Cross Reference Index


Part I — Financial Information

1) Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2)			4

a) Overview			4

b) Statement of Income Analysis			45

c) Balance Sheet Analysis			67

d) Non-GAAP Financial Measures			3031

e) Critical Accounting Policies			3233

f) Controls and Procedures (Item 4)			3233

2) Quantitative and Qualitative Disclosures About Market Risk/Corporate Risk Profile (Item 3)			9

a) Overview			9

b) Credit Risk Management			10

c) Residual Value Risk Management			21

d) Operational Risk Management			21

e) Compliance Risk Management			21

f) Interest Rate Risk Management			21

g) Market Risk Management			23

h) Liquidity Risk Management			24

i) Capital Management			26

3) Line of Business Financial Review			27

4) Financial Statements (Item 1)			3334

Part II — Other Information

1) Legal Proceedings (Item 1)			7276

2) Risk Factors (Item 1A)			7276

3) Unregistered Sales of Equity Securities and Use of Proceeds (Item 2)			7276

4) Exhibits (Item 6)			7276

5) Signature			7377

6) Exhibits			7478


U.S. Bancorp		1

Table of Contents

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995.

This quarterly report on

Form 10-Q

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 often use words such as “anticipates,” “targets,” “expects,” “hopes,” “estimates,” “projects,” “forecasts,” “intends,” “plans,” “goals,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Forward-looking statements involve inherent risks and uncertainties, including the following risks and uncertainties and the risks and uncertainties more fully discussed in the section entitled “Risk Factors” of Exhibit 13 to U.S. Bancorp’s Annual Report on Form

10-K

for the year ended December 31, 2021, which could cause actual results to differ materially from those anticipated. ~~The~~

~~COVID-19~~

pandemic is adversely affecting U.S. Bancorp, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; the impacts of the

COVID-19

pandemic on its business, financial position, results of operations, liquidity and prospects; increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and

non-banks;

civil unrest; the effects of climate change; changes in customer behavior and preferences; breaches in data security, including as a result of work-from-home arrangements; failures to safeguard personal information; the impacts of international hostilities or geopolitical events; impacts of supply chain disruptions and rising inflation; 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 reputation risk. In addition, U.S. Bancorp’s proposed acquisition of MUFG Union Bank presents risks and uncertainties, including, among others: the risk that the cost savings, any revenue synergies and other anticipated benefits of the proposed acquisition may not be realized or may take longer than anticipated to be realized; the risk that U.S. Bancorp’s business could be disrupted as a result of the announcement and pendency of the proposed acquisition and diversion of management’s attention from ongoing business operations and opportunities; the possibility that the proposed acquisition, including the integration of MUFG Union Bank, may be more costly or difficult to complete than anticipated; delays in closing the proposed acquisition; and the failure of required governmental approvals to be obtained or any other closing conditions in the definitive purchase agreement to be satisfied.

For discussion of these and other risks that may cause actual results to differ from those described in forward-looking statements, refer to U.S. Bancorp’s Annual Report on Form

10-K

for the year ended December 31, 2021, on file with the Securities and Exchange Commission, including the sections entitled “Corporate Risk Profile” and “Risk Factors” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. In addition, factors other than these risks also could adversely affect U.S. Bancorp’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements. 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.


2		U.S. Bancorp

Table of Contents


Table 1		Selected Financial Data


		Three Months Ended March 31										Three Months Ended June 30									Six Months Ended June 30
(Dollars and Shares in Millions, Except Per Share Data)		2022			2021			Percent Change				2022			2021			Percent Change			2022			2021			Percent Change
Condensed Income Statement	Condensed Income Statement										Condensed Income Statement
Net interest income		$	3,173		$	3,063			3.6	%		$	3,435		$	3,137			9.5	%	$	6,608		$	6,200			6.6	%
Taxable-equivalent adjustment (a)			27			26			3.8				29			27			7.4			56			53			5.7
Net interest income (taxable-equivalent basis) (b)			3,200			3,089			3.6				3,464			3,164			9.5			6,664			6,253			6.6
Noninterest income			2,396			2,381			.6				2,548			2,619			(2.7	)		4,944			5,000			(1.1	)
Total net revenue			5,596			5,470			2.3				6,012			5,783			4.0			11,608			11,253			3.2
Noninterest expense			3,502			3,379			3.6				3,724			3,387			9.9			7,226			6,766			6.8
Provision for credit losses			112			(827	)		*				311			(170	)		*			423			(997	)		*
Income before taxes			1,982			2,918			(32.1	)			1,977			2,566			(23.0	)		3,959			5,484			(27.8	)
Income taxes and taxable-equivalent adjustment			424			633			(33.0	)			443			578			(23.4	)		867			1,211			(28.4	)
Net income			1,558			2,285			(31.8	)			1,534			1,988			(22.8	)		3,092			4,273			(27.6	)
Net (income) loss attributable to noncontrolling interests			(1	)		(5	)		80.0				(3	)		(6	)		50.0			(4	)		(11	)		63.6
Net income attributable to U.S. Bancorp		$	1,557		$	2,280			(31.7	)		$	1,531		$	1,982			(22.8	)	$	3,088		$	4,262			(27.5	)
Net income applicable to U.S. Bancorp common shareholders		$	1,466		$	2,175			(32.6	)		$	1,464		$	1,914			(23.5	)	$	2,930		$	4,089			(28.3	)
Per Common Share	Per Common Share										Per Common Share
Earnings per share		$	.99		$	1.45			(31.7	)%		$	.99		$	1.29			(23.3	)%	$	1.97		$	2.73			(27.8	)%
Diluted earnings per share			.99			1.45			(31.7	)			.99			1.28			(22.7	)		1.97			2.73			(27.8	)
Dividends declared per share			.46			.42			9.5				.46			.42			9.5			.92			.84			9.5
Book value per share (c)			29.87			30.53			(2.2	)			28.13			31.74			(11.4	)
Market value per share			53.15			55.31			(3.9	)			46.02			56.97			(19.2	)
Average common shares outstanding			1,485			1,502			(1.1	)			1,486			1,489			(.2	)		1,485			1,495			(.7	)
Average diluted common shares outstanding			1,486			1,503			(1.1	)			1,487			1,490			(.2	)		1,486			1,497			(.7	)
Financial Ratios
Return on average assets			1.09	%		1.69	%						1.06	%		1.44	%					1.08	%		1.56	%
Return on average common equity			12.7			19.0							13.9			16.3						13.3			17.6
Net interest margin (taxable-equivalent basis) (a)			2.44			2.50							2.59			2.53						2.51			2.52
Efficiency ratio (b)			62.8			62.1							62.1			59.0						62.4			60.5
Net charge-offs as a percent of average loans outstanding			.21			.31							.20			.25						.20			.28
Average Balances	Average Balances										Average Balances
Loans		$	312,966		$	293,989			6.5	%		$	324,187		$	294,284			10.2	%	$	318,608		$	294,138			8.3	%
Loans held for sale			5,479			10,032			(45.4	)			3,688			7,825			(52.9	)		4,579			8,922			(48.7	)
Investment securities (d)			174,762			145,520			20.1				171,296			160,615			6.7			173,019			153,109			13.0
Earning assets			529,837			497,711			6.5				536,761			500,751			7.2			533,318			499,239			6.8
Assets			577,402			548,734			5.2				579,911			551,365			5.2			578,663			550,057			5.2
Noninterest-bearing deposits			127,963			118,352			8.1				120,827			125,297			(3.6	)		124,375			121,844			2.1
Deposits			454,176			426,364			6.5				456,516			429,210			6.4			455,352			427,795			6.4
Short-term borrowings			19,038			13,107			45.3				23,294			16,462			41.5			21,178			14,794			43.2
Long-term debt			32,972			39,463			(16.4	)			31,390			36,190			(13.3	)		32,177			37,817			(14.9	)
Total U.S. Bancorp shareholders’ equity			53,466			52,729			1.4				49,166			52,962			(7.2	)		51,304			52,846			(2.9	)

		March 31, 2022			December 31, 2021							June 30, 2022			December 31, 2021
Period End Balances	Period End Balances										Period End Balances
Loans		$	318,934		$	312,028			2.2	%		$	332,369		$	312,028			6.5	%
Investment securities			167,247			174,821			(4.3	)			160,309			174,821			(8.3	)
Assets			586,517			573,284			2.3				591,381			573,284			3.2
Deposits			461,546			456,083			1.2				467,102			456,083			2.4
Long-term debt			32,931			32,125			2.5				29,408			32,125			(8.5	)
Total U.S. Bancorp shareholders’ equity			51,200			54,918			(6.8	)			48,605			54,918			(11.5	)
Asset Quality
Nonperforming assets		$	811		$	878			(7.6	)%		$	770		$	878			(12.3	)%
Allowance for credit losses			6,105			6,155			(.8	)			6,255			6,155			1.6
Allowance for credit losses as a percentage of period-end loans			1.91	%		1.97	%						1.88	%		1.97	%
Capital Ratios
Common equity tier 1 capital			9.8	%		10.0	%						9.7	%		10.0	%
Tier 1 capital			11.5			11.6							11.4			11.6
Total risk-based capital			13.4			13.4							13.2			13.4
Leverage			8.6			8.6							8.6			8.6
Total leverage exposure			7.0			6.9							7.1			6.9
Tangible common equity to tangible assets (b)			6.0			6.8							5.5			6.8
Tangible common equity to risk-weighted assets (b)			8.0			9.2							7.2			9.2
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (b)			9.5			9.6							9.4			9.6

*	Not meaningful

(a)	Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.

(b)	See Non-GAAP Financial Measures beginning on page ~~30.~~31.

(c)	Calculated as U.S. Bancorp common shareholders’ equity divided by common shares outstanding at end of the period.

(d)	Excludes unrealized gains and losses on available-for-sale investment securities and any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity.


U.S. Bancorp		3

Table of Contents

Management’s Discussion and Analysis

OVERVIEW

Earnings Summary

U.S. Bancorp and its subsidiaries (the “Company”) reported net income attributable to U.S. Bancorp of ~~$1.6~~$1.5 billion for the ~~first~~second quarter of 2022, or $0.99 per diluted common share, compared with ~~$2.3~~$2.0 billion, or ~~$1.45~~$1.28 per diluted common share, for the ~~first~~second quarter of 2021. Return on average assets and return on average common equity were ~~1.09~~1.06 percent and ~~12.7~~13.9 percent, respectively, for the ~~first~~second quarter of 2022, compared with ~~1.69~~1.44 percent and ~~19.0~~16.3 percent, respectively, for the ~~first~~second quarter of 2021. The results for the second quarter of 2022 included the impact of $197 million ($153 million net-of-tax) of merger and integration-related charges associated with the planned acquisition of MUFG Union Bank’s core regional banking franchise from Mitsubishi UFJ Financial Group, Inc. (“MUFG”), which decreased diluted earnings per common share by $0.10.

Total net revenue for the ~~first~~second quarter of 2022 was ~~$126~~$229 million ~~(2.3~~(4.0 percent) higher than the ~~first~~second quarter of 2021, reflecting a ~~3.6~~9.5 percent increase in net interest income and a ~~0.6~~2.7 percent ~~increase~~decrease in noninterest income. The increase in net interest income from the ~~first~~second quarter of 2021 was primarily due to higher average loan and investment securities balances, as well as rising interest rates in the current year and the impact of a favorable ~~deposit and funding mix due in part to higher noninterest-bearing deposits,~~yield curve on earning assets, partially offset by ~~lower loan yields~~deposit pricing changes and ~~changes in loan mix, as well as~~ lower loan fees driven by the impact of loan forgiveness related to the Small Business Administration (“SBA”) Paycheck Protection Program in the ~~first~~second quarter of 2021. The reduction in noninterest income ~~increase primarily~~ reflected ~~stronger payment services revenue, trust and investment management fees, deposit service charges and treasury management fees, mostly offset by~~ lower mortgage banking revenue as refinancing activities ~~decline, lower commercial products revenue related to capital markets activities and~~declined, lower other noninterest ~~income.~~income and lower gains on the sale of securities, mostly offset by higher payment services revenue and trust and investment management fees.

Noninterest expense in the ~~first~~second quarter of 2022 was ~~$123~~$337 million ~~(3.6~~(9.9 percent) higher than the ~~first~~second quarter of 2021, reflecting increases in compensation expense, ~~professional services~~employee benefits expense, ~~and~~ marketing and business development ~~expense.~~expense, and the impact of merger and integration-related charges of $197 million.

The provision for credit losses for the ~~first~~second quarter of 2022 was ~~$112~~$311 million, compared with a benefit of ~~$827~~$170 million for the ~~first~~second quarter of 2021. The provision for credit losses in the ~~first~~second quarter of 2022 reflected the impact of ~~improving credit quality, partially offset by~~ loan growth and increasing economic uncertainty. The provision for credit losses for the ~~first~~second quarter of 2021 reflected a decrease in the allowance for credit losses as a result of improving economic conditions and credit quality. Net charge-offs in the ~~first~~second quarter of 2022 were ~~$162~~$161 million, compared with ~~$223~~$180 million in the second quarter of 2021. Refer to “Corporate Risk Profile” for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.

Net income attributable to U.S. Bancorp for the first six months of 2022 was $3.1 billion, or $1.97 per diluted common share, compared with $4.3 billion, or $2.73 per diluted common share, for the first six months of 2021. Return on average assets and return on average common equity were 1.08 percent and 13.3 percent, respectively, for the first six months of 2022, compared with 1.56 percent and 17.6 percent, respectively, for the first six months of 2021.

Total net revenue for the first six months of 2022 was $355 million (3.2 percent) higher than the first six months of 2021, reflecting a 6.6 percent increase in net interest income and a 1.1 percent decrease in noninterest income. The increase in net interest income from the first six months of 2021 was primarily due to higher average loan and investment securities balances, as well as rising interest rates in the current year and the impact of a favorable yield curve on earning assets, partially offset by deposit pricing changes and lower loan fees driven by the impact of loan forgiveness related to the SBA Paycheck Protection Program in the first six months of 2021. The reduction in noninterest income reflected lower mortgage banking revenue, lower other noninterest income and lower gains on the sale of securities, mostly offset by higher payment services revenue and trust and investment management fees.

Noninterest expense in the first six months of 2022 was $460 million (6.8 percent) higher than the first six months of 2021, reflecting increases in compensation expense, employee benefits expense, marketing and business development expense, professional services expense and the impact of merger and integration-related charges of $197 million.

The provision for credit losses for the first six months of 2022 was $423 million, compared with a benefit of


4		U.S. Bancorp

Table of Contents

$997 million for the first six months of 2021. The provision for credit losses for the first six months of 2022 reflected the impact of loan growth and increasing economic uncertainty. The provision for credit losses for the first six months of 2021 reflected a decrease in the allowance for credit losses as a result of improving economic conditions and credit quality. Net charge-offs in the first six months of 2022 were $323 million, compared with $403 million in the first ~~quarter~~six months of 2021. Refer to “Corporate Risk Profile” for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.

Pending Acquisition

In September 2021, the Company announced that it entered into a definitive agreement to acquire MUFG Union Bank’s core regional banking franchise, ~~from Mitsubishi UFJ Financial Group (“MUFG”),~~ for an expected purchase price of approximately $8.0 billion, including $5.5 billion in cash and approximately 44 million shares of ~~U.S. Bancorp~~the Company’s common stock. The transaction excludes the purchase of substantially all of MUFG Union Bank’s Global Corporate & Investment Bank (other than certain deposits), certain middle and back office functions, and other assets. MUFG Union Bank ~~currently~~ has approximately 300 branches in California, Washington and Oregon and is expected to add approximately $105 billion in total assets, $58 billion of loans and $90 billion of deposits to the Company’s consolidated balance sheet. Closing of the transaction is subject to customary closing conditions, including regulatory approvals which are not within the Company’s control. The Company expects to close the transaction approximately 45 days after being granted U.S. regulatory approvals. At this time, it is uncertain whether such approvals will be received in time to allow for closing to occur in the first half of 2022; however, the parties continue to make significant progress in planning for closing and integration while awaiting regulatory approvals. At this time, the Company expects to receive U.S. regulatory approvals in time for closing to occur in the second half of 2022.

STATEMENT OF INCOME ANALYSIS

Net Interest Income

Net interest income, on a taxable-equivalent basis, was ~~$3.2~~$3.5 billion in the second quarter and $6.7 billion in the first ~~quarter~~six months of 2022, representing ~~an increase~~increases of ~~$111~~$300 million ~~(3.6~~(9.5 percent) and $411 million (6.6 percent), respectively, compared with the ~~first quarter~~same periods of 2021. The ~~increase was~~increases were primarily due to higher loan and investment securities balances, in addition to rising interest rates in the current year and a favorable ~~deposit and funding mix due in part to higher noninterest-bearing deposits,~~yield curve impacting earning assets, partially offset by ~~lower loan yields~~deposit pricing changes and ~~changes in loan mix, as well as~~ lower loan fees driven by the impact of loan forgiveness related to the SBA Paycheck Protection Program in the first ~~quarter~~six months of 2021. Average earning assets for the second quarter and first six months of 2022 were ~~$32.1~~$36.0 billion ~~(6.5~~(7.2 percent) and $34.1 billion (6.8 percent) higher, respectively, than the ~~first quarter~~same periods of ~~2021,~~the prior year, reflecting increases ~~of $29.2 billion (20.1 percent)~~ in investment securities and ~~$19.0 billion (6.5 percent) in~~ loans, partially offset by ~~a decrease of $11.9 billion (28.6 percent)~~decreases in interest-bearing deposits with banks. The net interest margin, on a taxable-equivalent basis, in the second quarter and first ~~quarter~~six months of 2022 was ~~2.44~~2.59 percent and 2.51 percent, respectively, compared with ~~2.50~~2.53 percent and 2.52 percent in the second quarter and first ~~quarter~~six months of ~~2021.~~2021, respectively. The ~~decrease~~increase in net interest margin ~~from~~in the ~~first~~second quarter of 2022, compared with the second quarter of 2021, was primarily due to the net impact of rising interest rates in the current year and higher yields in the investment portfolio, partially offset by deposit pricing and loan mix changes. The decrease in net interest margin in the first six months of ~~loans~~2022, compared with the first six months of 2021, was primarily driven by earning asset mix and lower loan ~~spreads within fixed-rate portfolios, partially offset~~fees driven by ~~favorable changes in funding mix and~~ the ~~yield curve.~~impact of loan forgiveness related to the SBA Paycheck Protection Program. Refer to the “Consolidated Daily Average Balance Sheet and Related Yields and Rates” table for further information on net interest income.


4		~~U.S. Bancorp~~

~~Table of Contents~~


~~Table 2~~		~~Noninterest Income~~

Three Months Ended
March 31

(Dollars in Millions) 2022    2021
Percent
Change

Credit and debit card revenue
$ 338    $ 336    .6 %
Corporate payment products revenue
158    126    25.4
Merchant processing services
363    318    14.2
Trust and investment management fees
500    444    12.6
Deposit service charges
177    161    9.9
Treasury management fees
156    147    6.1
Commercial products revenue
266    280    (5.0 )
Mortgage banking revenue
200    299    (33.1 )
Investment products fees
62    55    12.7
Securities gains (losses), net
18    25    (28.0 )
Other
158    190    (16.8 )
Total noninterest income
$ 2,396    $ 2,381    .6 %

Average total loans in the second quarter and first ~~quarter~~six months of 2022 were ~~$19.0~~$29.9 billion ~~(6.5~~(10.2 percent) and $24.5 billion (8.3 percent) higher, respectively, than the ~~first quarter~~same periods of 2021. The ~~increase was~~increases were primarily due to strong growth in commercial loans, ~~(11.4 percent),~~ residential mortgages ~~(3.0 percent)~~ and other retail ~~loans (8.8 percent).~~loans. The increase in commercial loans was primarily due to higher utilization driven by working capital needs of corporate customers, ~~and~~ slower payoffs given higher volatility in the capital markets, as well as core growth, partially offset by expected reductions related to the forgiveness of loans in the SBA Paycheck Protection Program. The increase in residential mortgages was driven by stronger

on-balance

sheet loan activities and slower refinance activity. The increase in other retail loans was driven by higher auto and recreational vehicle ~~lending during 2021,~~loans, partially offset by lower retail leasing balances and home equity and second mortgages.

Average investment securities in the second quarter and first ~~quarter~~six months of 2022 were ~~$29.2~~$10.7 billion ~~(20.1~~(6.7 percent) and $19.9 billion (13.0 percent) higher, respectively, than the ~~first quarter~~same periods of 2021, primarily due to purchases of mortgage-backed and U.S. Treasury securities, net of prepayments, sales and maturities.

Average total deposits for the second quarter and first ~~quarter~~six months of 2022 were ~~$27.8~~$27.3 billion ~~(6.5~~(6.4 percent) and $27.6 billion (6.4 percent) higher, respectively, than the ~~first quarter~~same periods of 2021. Average total savings deposits

for the second quarter and first ~~quarter~~six months of 2022 were ~~$20.6~~$29.7 billion ~~(7.3~~(10.6 percent) and $25.1 billion (9.0 percent) higher, respectively, than the ~~first quarter~~same periods of ~~2021,~~the prior year, driven by increases in Corporate and Commercial Banking, and Consumer and Business


U.S. Bancorp		5

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Banking balances. Average time deposits for the second quarter and first six months of 2022 were $2.1 billion (8.5 percent) higher and $115 million (0.4 percent) lower, respectively, than the same periods of the prior year. The changes in time deposits were primarily driven by increases in Corporate and Commercial Banking balances, ~~partially~~ offset by a decrease in Wealth Management and Investment Services balances. Average noninterest-bearing deposits were $9.6 billion (8.1 percent) higher than the prior year, primarily due to higher Corporate and Commercial Banking, and Wealth Management and Investment Services balances. Average time deposits were $2.4 billion (8.8 percent) lower than the prior year, primarily driven by decreases in Consumer and Business ~~Banking, and Wealth Management and Investment Services balances, partially offset by an increase in Corporate and Commercial~~ Banking balances. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics. Average noninterest-bearing deposits for the second quarter of 2022 were $4.5 billion (3.6 percent) lower than the second quarter of 2021, driven by decreases in Corporate and Commercial Banking, Consumer and Business Banking, and Payment Services balances, partially offset by an increase in Wealth Management and Investment Services balances. Average noninterest-bearing deposits for the first six months of 2022 were $2.5 billion (2.1 percent) higher than the first six months of 2021, primarily due to increases in Wealth Management and Investment Services, and Corporate and Commercial Banking balances, partially offset by decreases in Payment Services and Consumer and Business Banking balances.

Provision for Credit Losses

The provision for credit losses was ~~$112~~$311 million ~~for~~in the second quarter and $423 million in first ~~quarter~~six months of 2022, compared with a benefit of ~~$827~~$170 million and $997 million, respectively, for the ~~first quarter~~same periods of 2021. The provision for credit losses in the second quarter and first ~~quarter~~six months of 2022 reflected the impact of ~~improving credit quality, partially offset by~~ loan growth and increasing economic uncertainty primarily associated with ongoing supply chain challenges and rising ~~inflation and geopolitical tensions.~~inflationary concerns. The provision for credit losses in the second quarter and first ~~quarter~~six months of 2021 reflected the enactment of additional government stimulus programs and widespread

COVID-19

vaccine availability, contributing to economic improvement during the period, which resulted in a significant ~~decrease~~decreases in the allowance for credit losses. Net charge-offs decreased ~~$61~~$19 million ~~(27.4~~(10.6 percent) in the second quarter and $80 million (19.9 percent) in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of ~~2021, reflecting improvement across most loan categories, associated with strong asset values and borrower liquidity.~~the prior year, primarily driven by lower credit card net charge-offs. Refer to “Corporate Risk Profile” for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.

Noninterest Income

Noninterest income was ~~$2.4~~$2.5 billion in the second quarter and $4.9 billion in the first ~~quarter~~six months of 2022, representing ~~an increase~~decreases of ~~$15~~$71 million ~~(0.6~~(2.7 percent) and $56 million (1.1 percent), respectively, compared with the ~~first quarter~~same periods of 2021. The ~~increase~~decreases from athe prior year ~~ago~~ reflected ~~strong~~lower mortgage banking revenue, lower other noninterest income and lower gains on the sale of securities, mostly offset by higher payment services revenue ~~growth in~~and trust and investment management ~~fees, improving deposit service charges~~fees. Mortgage banking revenue decreased primarily due to lower application volume, given declining refinance activities experienced in the mortgage industry, lower related gain on sale margins and ~~higher treasury management fees, mostly~~lower performing loan sales, partially offset by increases in mortgage servicing rights (“MSRs”) valuations, net of hedging activities. Other noninterest income decreased primarily due to lower ~~commercial products revenue, mortgage banking revenue~~retail leasing end-of-term residual gains and ~~other noninterest income.~~lower gains on sales of certain assets. Payment services revenue increased ~~$79 million (10.1 percent)~~ as a result of increases in corporate payment products revenue ~~increased $32 million (25.4 percent) primarily~~ due to higher sales volume ~~while~~and increases in merchant processing services revenue ~~increased $45 million~~


~~U.S. Bancorp~~		5

~~Table of Contents~~


~~Table 3~~		~~Noninterest Expense~~

Three Months Ended
March 31

(Dollars in Millions) 2022 2021
Percent
Change

Compensation
$ 1,853 $ 1,803 2.8 %
Employee benefits
396 384 3.1
Net occupancy and equipment
269 263 2.3
Professional services
114 98 16.3
Marketing and business development
80 48 66.7
Technology and communications
349 359 (2.8 )
Postage, printing and supplies
72 69 4.3
Other intangibles
47 38 23.7
Other
322 317 1.6
Total noninterest expense
$ 3,502 $ 3,379 3.6 %
Efficiency ratio (a)
62.8 % 62.1 %

~~(a)~~

~~See~~

~~Non-GAAP~~

~~Financial Measures beginning on page 30.~~

~~(14.2 percent)~~ driven by higher sales ~~volumes~~volume and merchant fees. Trust and investment management fees increased ~~$56 million (12.6 percent) driven by~~primarily due to business growth, ~~favorable market conditions and~~ activity related to the fourth quarter of 2021 acquisition of PFM Asset Management LLC (“PFM”)~~, partially offset by higher~~ and lower money market fee waivers. ~~Deposit service charges increased $16 million (9.9 percent) primarily due to higher customer spend activity, net~~


Table 2		Noninterest Income


	Three Months Ended June 30							Six Months Ended June 30
(Dollars in Millions)	2022		2021		Percent Change			2022		2021		Percent Change
Credit and debit card revenue	$	399	$	396		.8	%	$	737	$	732		.7	%
Corporate payment products revenue		172		138		24.6			330		264		25.0
Merchant processing services		425		374		13.6			788		692		13.9
Trust and investment management fees		566		446		26.9			1,066		890		19.8
Deposit service charges		165		176		(6.3	)		342		337		1.5
Treasury management fees		169		160		5.6			325		307		5.9
Commercial products revenue		290		280		3.6			556		560		(.7	)
Mortgage banking revenue		142		346		(59.0	)		342		645		(47.0	)
Investment products fees		59		60		(1.7	)		121		115		5.2
Securities gains (losses), net		19		43		(55.8	)		37		68		(45.6	)
Other		142		200		(29.0	)		300		390		(23.1	)
Total noninterest income	$	2,548	$	2,619		(2.7	)%	$	4,944	$	5,000		(1.1	)%


6		U.S. Bancorp


Table 4		Investment Securities


	March 31, 2022									December 31, 2021									June 30, 2022									December 31, 2021
(Dollars in Millions)	Amortized Cost		Fair Value		Weighted- Average Maturity in Years		Weighted- Average Yield (d)			Amortized Cost		Fair Value		Weighted- Average Maturity in Years		Weighted- Average Yield (d)			Amortized Cost		Fair Value		Weighted- Average Maturity in Years		Weighted- Average Yield (d)			Amortized Cost		Fair Value		Weighted- Average Maturity in Years		Weighted- Average Yield (d)
Held-to-maturity
U.S. Treasury and agencies																			$	1,343	$	1,337		3.8		2.85	%	$	—	$	—		—		—	%
Mortgage-backed securities (a)	$	43,654	$	40,572		9.7		1.64	%	$	41,858	$	41,812		7.4		1.45	%		60,160		54,320		10.0		1.92			41,858		41,812		7.4		1.45
Total held-to-maturity	$	43,654	$	40,572		9.7		1.64	%	$	41,858	$	41,812		7.4		1.45	%	$	61,503	$	55,657		9.8		1.94	%	$	41,858	$	41,812		7.4		1.45	%
Available-for-sale
U.S. Treasury and agencies	$	27,653	$	26,350		7.2		1.83	%	$	36,648	$	36,609		6.7		1.54	%	$	25,779	$	23,767		6.9		1.95	%	$	36,648	$	36,609		6.7		1.54	%
Mortgage-backed securities (a)		91,277		86,955		7.3		1.80			85,394		85,564		4.9		1.58			71,544		65,316		8.0		1.96			85,394		85,564		4.9		1.58
Asset-backed securities (a)		4		7		4.1		2.00			62		66		5.2		1.53			—		—		—		—			62		66		5.2		1.53
Obligations of state and political subdivisions (b) (c)		10,701		10,274		9.5		3.64			10,130		10,717		6.6		3.67			10,925		9,716		13.0		3.64			10,130		10,717		6.6		3.67
Other		7		7		.1		2.07			7		7		3.4		2.07			7		7		2.9		2.07			7		7		3.4		2.07
Total available-for-sale	$	129,642	$	123,593		7.5		1.96	%	$	132,241	$	132,963		5.5		1.73	%	$	108,255	$	98,806		8.2		2.13	%	$	132,241	$	132,963		5.5		1.73	%

(a)	Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities that take into account anticipated future prepayments.

(b)	Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, and yield to maturity if the security is purchased at par or a discount.

(c)	Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and the contractual maturity date for securities with a fair value equal to or below par.

(d)	Yields on investment securities are computed based on amortized cost balances. Weighted-average yields for obligations of state and political subdivisions are presented on a fully-taxable equivalent basis based on a federal income tax rate of 21 percent.

Other retail loans decreased $336 million (0.5 percent) at March 31, 2022, compared with December 31, 2021, due to decreases in retail leasing balances and auto loans, partially offset by an increase in installment loans.

The Company generally retains portfolio loans through maturity; however, the Company’s intent may change over time based upon various factors such as ongoing asset/liability management activities, assessment of product profitability, credit risk, liquidity needs, and capital implications. If the Company’s intent or ability to hold an existing portfolio loan changes, it is transferred to loans held for sale.

Loans Held for Sale

Loans held for sale, consisting primarily of residential mortgages to be sold in the secondary market, were ~~$3.3~~$3.9 billion at ~~March 31,~~June 30, 2022, compared with $7.8 billion at December 31, 2021. The decrease in loans held for sale was principally due to a lower level of mortgage loan closings in the ~~first~~second quarter of 2022, compared with the fourth quarter of 2021. Almost all of the residential mortgage loans the Company originates or purchases for sale follow guidelines that allow the loans to be sold into existing, highly liquid secondary markets, in particular in government agency transactions and to government-sponsored enterprises (“GSEs”).

Investment Securities

Investment securities totaled ~~$167.2~~$160.3 billion at ~~March 31,~~June 30, 2022, compared with $174.8 billion at December 31, 2021. The ~~$7.6~~$14.5 billion ~~(4.3~~(8.3 percent) decrease was primarily due to ~~a $6.8~~an $11.4 billion unfavorable change in net unrealized gains (losses) on

available-for-sale

investment securities and $2.3 billion of net investment sales and maturities. During the second quarter of 2022, the Company transferred $17.1 billion amortized cost ($15.7 billion fair value) of

available-for-sale

investment securities to the

held-to-maturity

category to reflect its new intent for these securities. Subsequent to June 30, 2022, the Company transferred an additional $19.8 billion amortized cost ($17.6 billion fair value) of available-for-sale investment securities to the held-to-maturity category.

The Company’s

available-for-sale

investment securities are carried at fair value with changes in fair value reflected in other comprehensive income (loss) unless a portion of a security’s unrealized loss is related to credit and an allowance for credit losses is necessary. At ~~March 31,~~June 30, 2022, the Company’s net unrealized losses on

available-for-sale

investment securities were ~~$6.0~~$9.4 billion, compared with $722 million of net unrealized gains at December 31, 2021. The unfavorable change in net unrealized gains (losses) was primarily due to decreases in the fair value of mortgage-backed, U.S. Treasury and state and political securities as a result of changes in interest ~~rates.~~rates, partially offset by the impact of the transfer of

available-for-sale

investment securities to the

held-to-maturity

category. Gross unrealized losses on

available-for-sale

investment securities totaled ~~$6.3~~$9.5 billion at ~~March 31,~~June 30, 2022, compared with $812 million at December 31, 2021. At ~~March 31,~~June 30, 2022, the Company had no plans to sell securities with unrealized losses, and ~~believes~~believed it is more likely than not that it would not be required to sell such securities before recovery of their amortized cost.

Refer to Notes 4 and 15 in the Notes to Consolidated Financial Statements for further information on investment securities.

Deposits

Total deposits were $467.1 billion at June 30, 2022, compared with $456.1 billion at December 31, 2021. The $11.0 billion (2.4 percent) increase in total


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~~Deposits~~

~~Total deposits were $461.5 billion at March 31, 2022, compared with $456.1 billion at December 31, 2021. The $5.5 billion (1.2 percent) increase in total~~ deposits reflected increases in total savings deposits and time deposits, partially offset by a decrease in noninterest-bearing deposits. Money market deposit balances increased ~~$3.7~~$8.9 billion ~~(3.2~~(7.6 percent) at ~~March 31,~~June 30, 2022, compared with December 31, 2021, primarily due to higher ~~Corporate and Commercial Banking, and~~ Wealth Management and Investment Services, and Corporate and Commercial Banking balances. Savings account balances increased ~~$2.6~~$2.3 billion ~~(4.0~~(3.4 percent), driven by higher Consumer and Business Banking balances. Interest checking balances ~~increased $2.6~~decreased $2.4 billion ~~(2.2~~(2.0 percent), primarily due to lower Wealth Management and Investment Services balances, partially offset by higher Corporate and Commercial Banking, and Consumer and Business Banking ~~balances, partially offset by a decrease in Wealth Management and Investment Services~~ balances. Time deposits increased ~~$1.6~~$8.0 billion ~~(7.2~~(35.1 percent) at ~~March 31,~~June 30, 2022, compared with December 31, 2021, driven by higher Corporate and Commercial Banking balances, partially offset by lower Consumer and Business Banking balances. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics. Noninterest-bearing deposits decreased ~~$5.1~~$5.8 billion ~~(3.8~~(4.3 percent) at ~~March 31,~~June 30, 2022, compared with December 31, 2021, primarily due to lower Corporate and Commercial Banking balances, partially offset by higher Wealth Management and Investment Services balances.

Borrowings

The Company utilizes both short-term and long-term borrowings as part of its asset/liability management and funding strategies. Short-term borrowings, which include federal funds purchased, commercial paper, repurchase agreements, borrowings secured by high-grade assets and other short-term borrowings, were ~~$21.0~~$25.0 billion at ~~March 31,~~June 30, 2022, compared with $11.8 billion at December 31, 2021. The ~~$9.2~~$13.2 billion ~~(78.4 percent)~~ increase in short-term borrowings was primarily due to ~~an increase~~increases in

short-term

Federal Home Loan Bank (“FHLB”) ~~advances.~~advances and commercial paper balances. Long-term debt was ~~$32.9~~$29.4 billion at ~~March 31,~~June 30, 2022, compared with $32.1 billion at December 31, 2021. The ~~$806 million (2.5~~$2.7 billion (8.5 percent) ~~increase~~decrease was primarily due to $2.6 billion of bank note repayments and maturities, $1.3 billion of subordinated note repayments and $1.0 billion of medium-term note repayments, partially offset by $2.1 billion of medium-term note ~~issuances, partially offset by $1.0 billion of medium-term note repayments.~~issuances. Refer to the “Liquidity Risk Management” section for discussion of liquidity management of the Company.


8		~~U.S. Bancorp~~

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CORPORATE RISK PROFILE

Overview

Managing risks is an essential part of successfully operating a financial services company. The Company’s Board of Directors has approved a risk management framework which establishes governance and risk management requirements for all risk-taking activities. This framework includes Company and business line risk appetite statements which set boundaries for the types and amount of risk that may be undertaken in pursuing business objectives and initiatives. The Board of Directors, primarily through its Risk Management Committee, oversees performance relative to the risk management framework, risk appetite statements, and other policy requirements.

The Executive Risk Committee (“ERC”), which is chaired by the Chief Risk Officer and includes the Chief Executive Officer and other members of the executive management team, oversees execution against the risk management framework and risk appetite statements. The ERC focuses on current and emerging risks, including strategic and reputation risks, by directing timely and comprehensive actions. Senior operating committees have also been established, each responsible for overseeing a specified category of risk.

The Company’s most prominent risk exposures are credit, interest rate, market, liquidity, operational, compliance, strategic, and reputation. Credit risk is the risk of loss associated with a change in the credit profile or the failure of a borrower or counterparty to meet its contractual obligations. Interest rate risk is the current or prospective risk to earnings and capital, or market valuations, arising from the impact of changes in interest rates. Market risk arises from fluctuations in interest rates, foreign exchange rates, and security prices that may result in changes in the values of financial instruments, such as trading and

available-for-sale

securities, mortgage loans held for sale (“MLHFS”), MSRs and derivatives that are accounted for on a fair value basis. Liquidity risk is the risk that financial condition or overall safety and soundness is adversely affected by the Company’s inability, or perceived inability, to meet its cash flow obligations in a timely and complete manner in either normal or stressed conditions. Operational risk is the risk to current or projected financial condition and resilience arising from inadequate or failed internal processes or systems, people (including human errors or misconduct), or adverse external events, including the risk of loss resulting from breaches in data security. Operational risk can also include the risk of loss due to failures by third parties with which the Company does business. Compliance risk is the risk that the Company may suffer legal or regulatory sanctions, financial losses, and reputational damage if it fails to adhere to compliance requirements and the Company’s compliance policies. Strategic risk is the risk to current or projected financial condition and resilience arising from adverse business decisions, poor implementation of business decisions, or


U.S. Bancorp		9

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lack of responsiveness to changes in the banking industry and operating environment. Reputation risk is the risk to current or anticipated earnings, capital, or franchise or enterprise value arising from negative public opinion. This risk may impair the Company’s competitiveness by affecting its ability to establish new relationships or services, or continue serving existing relationships. In addition to the risks identified above, other risk factors exist that may impact the Company. Refer to “Risk Factors” in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2021, for a detailed discussion of these factors.

The Company’s Board and management-level governance committees are supported by a “three lines of defense” model for establishing effective checks and balances. The first line of defense, the business lines, manages risks in conformity with established limits and policy requirements. In turn, business line leaders and their risk officers establish programs to ensure conformity with these limits and policy requirements. The second line of defense, which includes the Chief Risk Officer’s organization as well as policy and oversight activities of corporate support functions, translates risk appetite and strategy into actionable risk limits and policies. The second line of defense monitors first line of defense conformity with limits and policies, and provides reporting and escalation of emerging risks and other concerns to senior management and the Risk Management Committee of the Board of Directors. The third line of defense, internal audit, is responsible for providing the Audit Committee of the Board of Directors and senior management with independent assessment and assurance regarding the effectiveness of the Company’s governance, risk management and control processes.

Management regularly provides reports to the Risk Management Committee of the Board of Directors. The Risk Management Committee discusses with management the Company’s risk management performance, and provides a summary of key risks to the entire Board of Directors, covering the status of existing matters, areas of potential future concern and specific information on certain types of loss events. The Risk Management


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Committee considers quarterly reports by management assessing the Company’s performance relative to the risk appetite statements and the associated risk limits, including:

Macroeconomic environment and other qualitative considerations, such as regulatory and compliance changes, litigation developments, geopolitical events, and technology and cybersecurity;

Credit measures, including adversely rated and nonperforming loans, leveraged transactions, credit concentrations and lending limits;

Interest rate and market risk, including market value and net income simulation, and trading-related Value at Risk (“VaR”);

Liquidity risk, including funding projections under various stressed scenarios;

Operational and compliance risk, including losses stemming from events such as fraud, processing errors, control breaches, breaches in data security or adverse business decisions, as well as reporting on technology performance, and various legal and regulatory compliance measures;

Capital ratios and projections, including regulatory measures and stressed scenarios; and

Strategic and reputation risk considerations, impacts and responses.

Credit Risk Management

The Company’s strategy for credit risk management includes well-defined, centralized credit policies, uniform underwriting criteria, and ongoing risk monitoring and review processes for all commercial and consumer credit exposures. In evaluating its credit risk, the Company considers changes, if any, in underwriting activities, the loan portfolio composition (including product mix and geographic, industry or customer-specific concentrations), collateral values, trends in loan performance and macroeconomic factors, such as changes in unemployment rates, gross domestic product levels and consumer bankruptcy filings. The Risk Management Committee oversees the Company’s credit risk management process.

In addition, credit quality ratings as defined by the Company are an important part of the Company’s overall credit risk management and evaluation of its allowance for credit losses. Loans with a pass rating represent those loans not classified on the Company’s rating scale for problem credits, as minimal credit risk has been identified. Loans with a special mention or classified rating, including consumer lending and small business loans that are 90 days or more past due and still accruing, nonaccrual loans, those loans considered troubled debt restructurings (“TDRs”), and loans in a junior lien position that are current but are behind a first lien position on nonaccrual, encompass all loans held by the Company that it considers to have a potential or well-defined weakness that may put full collection of contractual cash flows at risk. The Company’s internal credit quality ratings for consumer loans are primarily based on delinquency and nonperforming status, except for a limited population of larger loans within those portfolios that are individually evaluated. For this limited population, the determination of the internal credit quality rating may also consider collateral value and customer cash flows. Refer to Note 5 in the Notes to


10		U.S. Bancorp

Table of Contents

Consolidated Financial Statements for further discussion of the Company’s loan portfolios including internal credit quality ratings. In addition, refer to “Management’s Discussion and Analysis — Credit Risk Management” in the Company’s Annual Report on

Form 10-K

for the year ended December 31, 2021, for a more detailed discussion on credit risk management processes.

The Company manages its credit risk, in part, through diversification of its loan portfolio which is achieved through limit setting by product type criteria, such as industry, and identification of credit concentrations. As part of its normal business activities, the Company offers a broad array of lending products. The Company categorizes its loan portfolio into two segments, which is the level at which it develops and documents a systematic methodology to determine the allowance for credit losses. The Company’s two loan portfolio segments are commercial lending and consumer lending.

The commercial lending segment includes loans and leases made to small business, middle market, large corporate, commercial real estate, financial institution,

non-profit

and public sector customers. Key risk characteristics relevant to commercial lending segment loans include the industry and geography of the borrower’s business, purpose of the loan, repayment source, borrower’s debt capacity and financial flexibility, loan covenants, and nature of pledged collateral, if any, as well as macroeconomic factors such as unemployment rates, gross domestic product levels, corporate bond spreads and long-term interest rates. These risk characteristics, among others, are considered in determining estimates about the likelihood of default by the borrowers and the severity of loss in the event of default. The Company considers these risk characteristics in assigning internal risk ratings to, or forecasting losses on, these loans, which are the significant factors in determining the allowance for credit losses for loans in the commercial lending segment.

The consumer lending segment represents loans and leases made to consumer customers, including residential


10		~~U.S. Bancorp~~

~~Table of Contents~~

mortgages, credit card loans, and other retail loans such as revolving consumer lines, auto loans and leases, home equity loans and lines, and student loans, a

run-off

portfolio. Home equity or second mortgage loans are junior lien

closed-end

accounts fully disbursed at origination. These loans typically are fixed rate loans, secured by residential real estate, with a

10-

15-year

fixed payment amortization schedule. Home equity lines are revolving accounts giving the borrower the ability to draw and repay balances repeatedly, up to a maximum commitment, and are secured by residential real estate. These include accounts in either a first or junior lien position. Typical terms on home equity lines in the portfolio are variable rates benchmarked to the prime rate, with a

10-

15-year

draw period during which a minimum payment is equivalent to the monthly interest, followed by a

20-

10-year

amortization period, respectively. At ~~March 31,~~June 30, 2022, substantially all of the Company’s home equity lines were in the draw period. Key risk characteristics relevant to consumer lending segment loans primarily relate to the borrowers’ capacity and willingness to repay and include unemployment rates, consumer bankruptcy filings and other macroeconomic factors, customer payment history and credit scores, and in some cases, updated

loan-to-value

(“LTV”) information reflecting current market conditions on real estate-based loans. These and other risk characteristics are reflected in forecasts of delinquency levels, bankruptcies and losses which are the primary factors in determining the allowance for credit losses for the consumer lending segment.

The Company further disaggregates its loan portfolio segments into various classes based on their underlying risk characteristics. The two classes within the commercial lending segment are commercial loans and commercial real estate loans. The three classes within the consumer lending segment are residential mortgages, credit card loans and other retail loans.

The Company’s consumer lending segment utilizes several distinct business processes and channels to originate consumer credit, including traditional branch lending, mobile and

on-line

banking, indirect lending, alliance partnerships and correspondent banks. Each distinct underwriting and origination activity manages unique credit risk characteristics and prices its loan production commensurate with the differing risk profiles.

Residential mortgage originations are generally limited to prime borrowers and are performed through the Company’s branches, loan production offices, mobile and

on-line

services and a wholesale network of originators. The Company may retain residential mortgage loans it originates on its balance sheet or sell the loans into the secondary market while retaining the servicing rights and customer relationships. Utilizing the secondary markets enables the Company to effectively reduce its credit and other asset/liability risks. For residential mortgages that are retained in the Company’s portfolio and for home equity and second mortgages, credit risk is also diversified by geography and managed by adherence to LTV and borrower credit criteria during the underwriting process.

The Company estimates updated LTV information on its outstanding residential mortgages quarterly, based on a method that combines automated valuation model updates and relevant home price indices. LTV is the ratio of the loan’s outstanding principal balance to the current estimate of property value. For home equity and second


U.S. Bancorp		11

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mortgages, combined

loan-to-value

(“CLTV”) is the combination of the first mortgage original principal balance and the second lien outstanding principal balance, relative to the current estimate of property value. Certain loans do not have an LTV or CLTV, primarily due to lack of availability of relevant automated valuation model and/or home price indices values, or lack of necessary valuation data on acquired loans.

The following tables provide summary information of residential mortgages and home equity and second mortgages by LTV at ~~March 31,~~June 30, 2022:


Residential Mortgages (Dollars in Millions)	Interest Only		Amortizing		Total		Percent of Total			Interest Only		Amortizing		Total		Percent of Total
Loan-to-Value
Less than or equal to 80%	$	4,097	$	64,696	$	68,793		87.6	%	$	4,391	$	68,699	$	73,090		89.0	%
Over 80% through 90%		1		2,277		2,278		2.9			2		1,605		1,607		2.0
Over 90% through 100%		—		210		210		.3			—		113		113		.2
Over 100%		—		63		63		.1			—		39		39		—
No LTV available		—		19		19		—			—		17		17		—
Loans purchased from GNMA mortgage pools (a)		—		7,124		7,124		9.1			—		7,248		7,248		8.8
Total ~~(b)~~	$	4,098	$	74,389	$	78,487		100.0	%	$	4,393	$	77,721	$	82,114		100.0	%

(a)

Represents loans purchased and loans that could be purchased from Government National Mortgage Association (“GNMA”) mortgage pools under delinquent loan repurchase options whose payments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.

~~(b)~~

~~At March 31, 2022, approximately $399 million of residential mortgage balances were considered~~

~~sub-prime.~~


Home Equity and Second Mortgages (Dollars in Millions)	Lines		Loans		Total		Percent of Total			Lines		Loans		Total		Percent of Total
Loan-to-Value / Combined Loan-to-Value
Less than or equal to 80%	$	9,065	$	681	$	9,746		93.2	%	$	9,557	$	868	$	10,425		95.0	%
Over 80% through 90%		340		215		555		5.3			203		214		417		3.8
Over 90% through 100%		38		21		59		.6			22		17		39		.4
Over 100%		39		4		43		.4			33		3		36		.3
No LTV/CLTV available		52		2		54		.5			54		2		56		.5
Total ~~(a)~~	$	9,534	$	923	$	10,457		100.0	%	$	9,869	$	1,104	$	10,973		100.0	%

~~(a)~~

~~At March 31, 2022, approximately $29 million of home equity and second mortgage balances were considered~~

~~sub-prime.~~


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Home equity and second mortgages were ~~$10.5~~$11.0 billion at ~~March 31,~~June 30, 2022, compared with $10.4 billion at December 31, 2021, and included $3.0 billion of home equity lines in a first lien position and ~~$7.5~~$8.0 billion of home equity and second mortgage loans and lines in a junior lien position. Loans and lines in a junior lien position at ~~March 31,~~June 30, 2022, included approximately $2.7 billion of loans and lines for which the Company also serviced the related first lien loan, and approximately ~~$4.8~~$5.3 billion where the Company did not service the related first lien loan. The Company was able to determine the status of the related first liens using information the Company has as the servicer of the first lien or information reported on customer credit bureau files. The Company also evaluates other indicators of credit risk for these junior lien loans and lines including delinquency, estimated average CLTV ratios and updated weighted-average credit scores in making its assessment of credit risk, related loss estimates and determining the allowance for credit losses.

The following table provides a summary of delinquency statistics and other credit quality indicators for the Company’s junior lien positions at ~~March 31,~~June 30, 2022:


	Junior Liens Behind									Junior Liens Behind
(Dollars in Millions)	Company Owned or Serviced First Lien			Third Party First Lien			Total			Company Owned or Serviced First Lien			Third Party First Lien			Total
Total	$	2,644		$	4,840		$	7,484		$	2,755		$	5,267		$	8,022
Percent 30—89 days past due		.43	%		.33	%		.36	%		.25	%		.24	%		.24	%
Percent 90 days or more past due		.10	%		.09	%		.09	%		.03	%		.03	%		.03	%
Weighted-average CLTV		59	%		57	%		58	%		56	%		54	%		55	%
Weighted-average credit score		782			783			783			785			786			785

See the “Analysis and Determination of the Allowance for Credit Losses” section for additional information on how the Company determines the allowance for credit losses for loans in a junior lien position.

Credit card and other retail loans are diversified across customer segments and geographies. Diversification in the credit card portfolio is achieved with broad customer relationship distribution through the Company’s and financial institution partners’ branches, retail and affinity partners, and digital channels.

The following table provides a summary of the Company’s credit card loan balances disaggregated based upon updated credit score at June 30, 2022:


	Percent of Total (a)
Credit score > 660		88	%
Credit score < 660		12
No credit score		—

(a)	Credit score distribution excludes loans serviced by others.

Loan Delinquencies

Trends in delinquency ratios are an indicator, among other considerations, of credit risk within the Company’s loan portfolios. Accruing loans 90 days or more past due totaled ~~$450~~$423 million at ~~March 31,~~June 30, 2022, compared with $472 million at December 31, 2021. These balances exclude loans purchased and loans that could be purchased from GNMA mortgage pools under delinquent loan repurchase options whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. Accruing loans 90 days or more past due are not included in nonperforming assets and continue to accrue interest because they are adequately secured by collateral, are in the process of collection and are reasonably expected to result in repayment or restoration to current status, or are managed in homogeneous portfolios with specified

charge-off

timeframes adhering to regulatory guidelines. The ratio of accruing loans 90 days or more past due to total loans was ~~0.14~~0.13 percent at ~~March 31,~~June 30, 2022 compared with 0.15 percent at December 31, 2021.


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Table 5		Delinquent Loan Ratios as a Percent of Ending Loan Balances


90 days or more past due excluding nonperforming loans	March 31, 2022			December 31, 2021			June 30, 2022			December 31, 2021
Commercial
Commercial		.07	%		.05	%		.08	%		.05	%
Lease financing		—			—			—			—
Total commercial		.06			.04			.07			.04
Commercial Real Estate
Commercial mortgages		—			—			—			—
Construction and development		.01			.10			.04			.10
Total commercial real estate		—			.03			.01			.03
Residential Mortgages (a)		.18			.24			.12			.24
Credit Card		.74			.73			.69			.73
Other Retail
Retail leasing		.03			.04			.03			.04
Home equity and second mortgages		.42			.35			.35			.35
Other		.05			.06			.05			.06
Total other retail		.11			.11			.10			.11
Total loans		.14	%		.15	%		.13	%		.15	%

90 days or more past due including nonperforming loans	March 31, 2022			December 31, 2021			June 30, 2022			December 31, 2021
Commercial		.21	%		.20	%		.19	%		.20	%
Commercial real estate		.55			.76			.53			.76
Residential mortgages (a)		.45			.53			.40			.53
Credit card		.74			.73			.69			.73
Other retail		.37			.35			.35			.35
Total loans		.38	%		.42	%		.35	%		.42	%

(a)

Delinquent loan ratios exclude ~~$1.3~~$1.7 billion at ~~March 31,~~June 30, 2022, and $1.5 billion at December 31, 2021, of loans purchased and loans that could be purchased from GNMA mortgage pools under delinquent loan repurchase options whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. Including these loans, the ratio of residential mortgages 90 days or more past due including all nonperforming loans was ~~2.08~~2.42 percent at ~~March 31,~~June 30, 2022, and 2.43 percent at December 31, 2021.

The following table provides summary delinquency information for residential mortgages, credit card and other retail loans included in the consumer lending segment:


	Amount				As a Percent of Ending Loan Balances						Amount				As a Percent of Ending Loan Balances
(Dollars in Millions)	March 31, 2022		December 31, 2021		March 31, 2022			December 31, 2021			June 30, 2022		December 31, 2021		June 30, 2022			December 31, 2021
Residential Mortgages (a)
30-89 days	$	105	$	124		.13	%		.15	%	$	100	$	124		.12	%		.15	%
90 days or more		140		181		.18			.24			102		181		.12			.24
Nonperforming		214		226		.27			.30			223		226		.27			.30
Total	$	459	$	531		.58	%		.69	%	$	425	$	531		.52	%		.69	%
Credit Card
30-89 days	$	194	$	193		.88	%		.86	%	$	200	$	193		.84	%		.86	%
90 days or more		165		165		.74			.73			164		165		.69			.73
Nonperforming		—		—		—			—			—		—		—			—
Total	$	359	$	358		1.62	%		1.59	%	$	364	$	358		1.54	%		1.59	%
Other Retail
Retail Leasing
30-89 days	$	27	$	29		.39	%		.40	%	$	25	$	29		.39	%		.40	%
90 days or more		2		3		.03			.04			2		3		.03			.04
Nonperforming		10		10		.14			.14			9		10		.14			.14
Total	$	39	$	42		.56	%		.58	%	$	36	$	42		.55	%		.58	%
Home Equity and Second Mortgages
30-89 days	$	41	$	55		.40	%		.53	%	$	35	$	55		.32	%		.53	%
90 days or more		44		37		.42			.35			38		37		.35			.35
Nonperforming		129		116		1.23			1.11			118		116		1.08			1.11
Total	$	214	$	208		2.05	%		1.99	%	$	191	$	208		1.74	%		1.99	%
Other (b)
30-89 days	$	169	$	191		.38	%		.43	%	$	176	$	191		.41	%		.43	%
90 days or more		22		26		.05			.06			22		26		.05			.06
Nonperforming		22		24		.05			.05			21		24		.05			.05
Total	$	213	$	241		.48	%		.54	%	$	219	$	241		.51	%		.54	%

(a)

Excludes ~~$662~~$642 million of loans

30-89

days past due and ~~$1.3~~$1.7 billion of loans 90 days or more past due at ~~March 31,~~June 30, 2022, purchased and loans that could be purchased from GNMA mortgage pools under delinquent loan repurchase options that continue to accrue interest, compared with $791 million and $1.5 billion at December 31, 2021, respectively.

(b)	Includes revolving credit, installment, automobile and student loans.


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Restructured Loans

In certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term. In most cases the modification is either a concessionary reduction in interest rate, extension of the maturity date or reduction in the principal balance that would otherwise not be considered.

Troubled Debt Restructurings

Concessionary modifications are classified as TDRs unless the modification results in only an insignificant delay in the payments to be received. TDRs accrue interest if the borrower complies with the revised terms and conditions and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles, which is generally six months or greater. At ~~March 31,~~June 30, 2022, ~~and December 31, 2021,~~ performing TDRs were $3.2 billion, compared with $3.1 ~~billion.~~billion at December 31, 2021.

The Company continues to work with customers to modify loans for borrowers who are experiencing financial difficulties. Many of the Company’s TDRs are determined on a

case-by-case

basis in connection with ongoing loan collection processes. The modifications vary within each of the Company’s loan classes. Commercial lending segment TDRs generally include extensions of the maturity date and may be accompanied by an increase or decrease to the interest rate. The Company may also work with the borrower to make other changes to the loan to mitigate losses, such as obtaining additional collateral and/or guarantees to support the loan.

The Company has also implemented certain residential mortgage loan restructuring programs that may result in TDRs. The Company modifies residential mortgage loans under Federal Housing Administration, United States Department of Veterans Affairs, and its own internal programs. Under these programs, the Company offers qualifying homeowners the opportunity to permanently modify their loan and achieve more affordable monthly payments by providing loan concessions. These concessions may include adjustments to interest rates, conversion of adjustable rates to fixed rates, extensions of maturity dates or deferrals of payments, capitalization of accrued interest and/or outstanding advances, or in limited situations, partial forgiveness of loan principal. In most instances, participation in residential mortgage loan restructuring programs requires the customer to complete a short-term trial period. A permanent loan modification is contingent on the customer successfully completing the trial period arrangement, and the loan documents are not modified until that time. The Company reports loans in a trial period arrangement as TDRs and continues to report them as TDRs after the trial period.

Credit card and other retail loan TDRs are generally part of distinct restructuring programs providing customers modification solutions over a specified time period, generally up to 60 months.

In accordance with regulatory guidance, the Company considers secured consumer loans that have had debt discharged through bankruptcy where the borrower has not reaffirmed the debt to be TDRs. If the loan amount exceeds the collateral value, the loan is charged down to collateral value and the remaining amount is reported as nonperforming.

The following table provides a summary of TDRs by loan class, including the delinquency status for TDRs that continue to accrue interest and TDRs included in nonperforming assets:


			As a Percent of Performing TDRs														As a Percent of Performing TDRs
At March 31, 2022 (Dollars in Millions)	Performing TDRs		30-89 Days Past Due			90 Days or More Past Due			Nonperforming TDRs			Total TDRs
At June 30, 2022 (Dollars in Millions)															Performing TDRs		30-89 Days Past Due			90 Days or More Past Due			Nonperforming TDRs			Total TDRs
Commercial	$	137		5.3	%		2.2	%	$	76	(a)	$	213		$	141		4.7	%		2.4	%	$	63	(a)	$	204
Commercial real estate		86		2.0			—			145	(b)		231			110		.7			—			117	(b)		227
Residential mortgages		1,521		3.3			3.5			116			1,637	(d)		1,533		2.6			2.4			134			1,667	(d)
Credit card		243		11.8			5.6			—			243			252		11.7			5.9			—			252
Other retail		179		9.4			4.8			39	(c)		218	(e)		183		8.8			4.6			36	(c)		219	(e)
TDRs, excluding loans purchased from GNMA mortgage pools		2,166		4.9			3.6			376			2,542			2,219		4.2			2.9			350			2,569
Loans purchased from GNMA mortgage pools (g)		978		—			—			—			978	(f)		965		—			—			—			965	(f)
Total	$	3,144		3.4	%		2.5	%	$	376		$	3,520		$	3,184		2.9	%		2.0	%	$	350		$	3,534

(a)	Primarily represents loans less than six months from the modification date that have not met the performance period required to return to accrual status (generally six months) and small business credit cards with a modified rate equal to 0 percent.

(b)	Primarily represents loans less than six months from the modification date that have not met the performance period required to return to accrual status (generally six months).

(c)	Primarily represents loans with a modified rate equal to 0 percent.

(d)	Includes ~~$222~~$214 million of residential mortgage loans to borrowers that have had debt discharged through bankruptcy and ~~$21~~$20 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed.

(e)	Includes ~~$65~~$60 million of other retail loans to borrowers that have had debt discharged through bankruptcy and ~~$14~~$13 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed.

(f)

Includes ~~$165~~$159 million of Federal Housing Administration and United States Department of Veterans Affairs residential mortgage loans to borrowers that have had debt discharged through bankruptcy and ~~$132~~$126 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed.

(g)

Approximately ~~9.6~~7.2 percent and ~~34.9~~35.4 percent of the total TDR loans purchased from GNMA mortgage pools are

30-89

days past due and 90 days or more past due, respectively, but are not classified as delinquent as their repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.


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Short-term and Other Loan Modifications

The Company makes short-term and other modifications that it does not consider to be TDRs, in limited circumstances, to assist borrowers experiencing temporary hardships, including previously offering payment relief to borrowers that ~~have~~ experienced financial hardship resulting directly from the effects of the

COVID-19

pandemic. Short-term consumer lending modification programs include payment reductions, deferrals of up to three past due payments, and the ability to return to current status if the borrower makes required payments. The Company may also make short-term modifications to commercial lending loans, with the most common modification being an extension of the maturity date of three months or less. Such extensions generally are used when the maturity date is imminent and the borrower is experiencing some level of financial stress, but the Company believes the borrower will pay all contractual amounts owed.

Nonperforming Assets

The level of nonperforming assets represents another indicator of the potential for future credit losses. Nonperforming assets include nonaccrual loans, restructured loans not performing in accordance with modified terms and not accruing interest, restructured loans that have not met the performance period required to return to accrual status, other real estate owned (“OREO”) and other nonperforming assets owned by the Company. Interest payments collected from assets on nonaccrual status are generally applied against the principal balance and not recorded as income. However, interest income may be recognized for interest payments if the remaining carrying amount of the loan is believed to be collectible.

At ~~March 31,~~June 30, 2022, total nonperforming assets were ~~$811~~$770 million, compared to $878 million at December 31, 2021. The ~~$67~~$108 million ~~(7.6~~(12.3 percent) decrease in nonperforming assets was driven by a decrease in nonperforming commercial real estate and commercial loans. The ratio of total nonperforming assets to total loans and other real estate was ~~0.25~~0.23 percent at ~~March 31,~~June 30, 2022, compared with 0.28 percent at December 31, 2021.

OREO was $23 million at ~~March 31,~~June 30, 2022, compared with $22 million at December 31, 2021, and was related to foreclosed properties that previously secured loan balances. These balances exclude foreclosed GNMA loans whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.


U.S. Bancorp		15

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Table 6		Nonperforming Assets (a)


(Dollars in Millions)	March 31, 2022			December 31, 2021			June 30, 2022			December 31, 2021
Commercial
Commercial		$139			$139			$116			$139
Lease financing		35			35			32			35
Total commercial		174			174			148			174
Commercial Real Estate
Commercial mortgages		178			213			147			213
Construction and development		38			71			59			71
Total commercial real estate		216			284			206			284
Residential Mortgages (b)		214			226			223			226
Credit Card		—			—			—			—
Other Retail
Retail leasing		10			10			9			10
Home equity and second mortgages		129			116			118			116
Other		22			24			21			24
Total other retail		161			150			148			150
Total nonperforming loans (1)		765			834			725			834
Other Real Estate (c)		23			22			23			22
Other Assets		23			22			22			22
Total nonperforming assets		$811			$878			$770			$878
Accruing loans 90 days or more past due (b)		$450			$472			$423			$472
Period-end loans (2)		$318,934			$312,028			$332,369			$312,028
Nonperforming loans to total loans (1)/(2)		.24	%		.27	%		.22	%		.27	%
Nonperforming assets to total loans plus other real estate (c)		.25	%		.28	%		.23	%		.28	%

Changes in Nonperforming Assets


(Dollars in Millions)	Commercial and Commercial Real Estate			Residential Mortgages, Credit Card and Other Retail			Total			Commercial and Commercial Real Estate			Residential Mortgages, Credit Card and Other Retail			Total
Balance December 31, 2021	$	461		$	417		$	878		$	461		$	417		$	878
Additions to nonperforming assets
New nonaccrual loans and foreclosed properties		92			58			150			168			123			291
Advances on loans		4			—			4			5			1			6
Total additions		96			58			154			173			124			297
Reductions in nonperforming assets
Paydowns, payoffs		(134	)		(15	)		(149	)		(173	)		(36	)		(209	)
Net sales		—			(4	)		(4	)		(6	)		(12	)		(18	)
Return to performing status		(9	)		(35	)		(44	)		(47	)		(76	)		(123	)
Charge-offs (d)		(21	)		(3	)		(24	)		(51	)		(4	)		(55	)
Total reductions		(164	)		(57	)		(221	)		(277	)		(128	)		(405	)
Net additions to (reductions in) nonperforming assets		(68	)		1			(67	)		(104	)		(4	)		(108	)
Balance March 31, 2022	$	393		$	418		$	811
Balance June 30, 2022										$	357		$	413		$	770

(a)	Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due.

(b)

Excludes ~~$1.3~~$1.7 billion at ~~March 31,~~June 30, 2022, and $1.5 billion at December 31, 2021, of loans purchased and loans that could be purchased from GNMA mortgage pools under delinquent loan repurchase options that are 90 days or more past due that continue to accrue interest, as their repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.

(c)

Foreclosed GNMA loans of ~~$27~~$40 million at ~~March 31,~~June 30, 2022, and $22 million at December 31, 2021, continue to accrue interest and are recorded as other assets and excluded from nonperforming assets because they are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.

(d)	Charge-offs exclude actions for certain card products and loan sales that were not classified as nonperforming at the time the charge-off occurred.


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Table 7		Net Charge-offs as a Percent of Average Loans Outstanding


	Three Months Ended March 31																Three Months Ended June 30
	2022								2021								2022								2021
	Average								Average								Average								Average
	Loan		Net						Loan		Net						Loan		Net						Loan		Net
(Dollars in Millions)	Balance		Charge-offs			Percent			Balance		Charge-offs			Percent			Balance		Charge-offs			Percent			Balance		Charge-offs			Percent
Commercial
Commercial	$	107,819	$	26			.10	%	$	96,757	$	52			.22	%	$	115,758	$	28			.10	%	$	97,713	$	26			.11	%
Lease financing		5,003		6			.49			5,334		4			.30			4,899		2			.16			5,261		1			.08
Total commercial		112,822		32			.12			102,091		56			.22			120,657		30			.10			102,974		27			.11
Commercial real estate
Commercial mortgages		28,826		—			—			27,968		(12	)		(.17	)		29,676		(2	)		(.03	)		27,721		—			—
Construction		10,258		(5	)		(.20	)		10,818		5			.19			9,841		8			.33			10,843		—			—
Total commercial real estate		39,084		(5	)		(.05	)		38,786		(7	)		(.07	)		39,517		6			.06			38,564		—			—
Residential mortgages		77,449		(6	)		(.03	)		75,201		(5	)		(.03	)		80,228		(9	)		(.04	)		73,351		(10	)		(.05	)
Credit card		21,842		112			2.08			21,144		144			2.76			22,748		118			2.08			21,116		148			2.81
Other retail
Retail leasing		7,110		1			.06			7,975		1			.05			6,708		—			—			7,873		(1	)		(.05	)
Home equity and second mortgages		10,394		(2	)		(.08	)		12,062		(2	)		(.07	)		10,726		(3	)		(.11	)		11,368		(3	)		(.11	)
Other		44,265		30			.27			36,730		36			.40			43,603		19			.17			39,038		19			.20
Total other retail		61,769		29			.19			56,767		35			.25			61,037		16			.11			58,279		15			.10
Total loans	$	312,966	$	162			.21	%	$	293,989	$	223			.31	%	$	324,187	$	161			.20	%	$	294,284	$	180			.25	%


	Six Months Ended June 30
	2022								2021
	Average								Average
	Loan		Net						Loan		Net
(Dollars in Millions)	Balance		Charge-offs			Percent			Balance		Charge-offs			Percent
Commercial
Commercial	$	111,810	$	54			.10	%	$	97,237	$	78			.16	%
Lease financing		4,951		8			.33			5,298		5			.19
Total commercial		116,761		62			.11			102,535		83			.16
Commercial real estate
Commercial mortgages		29,253		(2	)		(.01	)		27,844		(12	)		(.09	)
Construction		10,049		3			.06			10,831		5			.09
Total commercial real estate		39,302		1			.01			38,675		(7	)		(.04	)
Residential mortgages		78,847		(15	)		(.04	)		74,271		(15	)		(.04	)
Credit card		22,297		230			2.08			21,130		292			2.79
Other retail
Retail leasing		6,908		1			.03			7,924		—			—
Home equity and second mortgages		10,561		(5	)		(.10	)		11,713		(5	)		(.09	)
Other		43,932		49			.22			37,890		55			.29
Total other retail		61,401		45			.15			57,527		50			.18
Total loans	$	318,608	$	323			.20	%	$	294,138	$	403			.28	%

Analysis of Loan Net Charge-Offs

Total loan net charge-offs were ~~$162~~$161 million for the second quarter and $323 million for the first ~~quarter~~six months of 2022, compared with ~~$223~~$180 million and $403 million, respectively, for the ~~first quarter~~same periods of 2021. The ~~$61 million (27.4 percent) decrease~~year-over-year decreases in net charge-offs ~~reflected improvement across most loan categories, associated with borrower liquidity and strong asset prices in the market that support repayment and recovery on problem loans.~~were primarily driven by lower credit card net charge-offs. The ratio of total loan net charge-offs to average loans outstanding on an annualized basis for both the second quarter and first ~~quarter~~six months of 2022 was ~~0.21~~0.20 percent, compared with ~~0.31~~0.25 percent and 0.28 percent, respectively, for the ~~first quarter~~same periods of 2021.

Analysis and Determination of the Allowance for Credit Losses

The allowance for credit losses is established for current expected credit losses on the Company’s loan and lease portfolio, including unfunded credit commitments. The allowance considers expected losses for the remaining lives of the applicable assets, inclusive of expected recoveries. The allowance for credit losses is increased through provisions charged to earnings and reduced by net charge-offs.

Management evaluates the appropriateness of the allowance for credit losses on a quarterly basis. Multiple economic scenarios are considered over a three-year reasonable and supportable forecast period, which includes increasing consideration of historical loss experience over years two and three. These economic scenarios are constructed with interrelated projections of multiple economic variables, and loss estimates are produced that consider the historical correlation of those economic variables with credit losses. After the forecast period, the Company fully reverts to long-term historical


U.S. Bancorp		17

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loss experience, adjusted for prepayments and characteristics of the current loan and lease portfolio, to estimate losses over the remaining life of the portfolio. The economic scenarios are updated at least quarterly and are designed to provide a range of reasonable estimates from better to worse than current expectations. Scenarios are weighted based on the Company’s expectation of economic conditions for the foreseeable future and reflect significant judgment and consideration of economic forecast uncertainty. Final loss estimates also consider factors affecting credit losses not reflected in the scenarios, due to the unique aspects of current conditions and expectations. These factors may include, but are not limited to, loan servicing practices, regulatory guidance, and/or fiscal and monetary policy actions.

Because business processes and credit risks associated with unfunded credit commitments are essentially the same as for loans, the Company utilizes similar processes to estimate its liability for unfunded credit commitments, which is included in other liabilities in the Consolidated Balance Sheet. Both the allowance for loan losses and the liability for unfunded credit commitments are included in the Company’s analysis of credit losses and reported reserve ratios.

The allowance recorded for credit losses utilizes forward-looking expected loss models to consider a variety of factors affecting lifetime credit losses. These factors include, but are not limited to, macroeconomic variables such as unemployment rates, real estate prices, gross domestic product levels and corporate bond spreads, as well as loan and borrower characteristics, such as internal risk ratings on commercial loans and consumer credit scores, delinquency status, collateral type and available valuation information, consideration of

end-of-term

losses on lease residuals, and the remaining


~~U.S. Bancorp~~		17

~~Table of Contents~~

term of the loan, adjusted for expected prepayments. For each loan portfolio, model estimates are adjusted as necessary to consider any relevant changes in portfolio composition, lending policies, underwriting standards, risk management practices, economic conditions or other factors that may affect the accuracy of the model. Expected credit loss estimates also include consideration of expected cash recoveries on loans previously

charged-off

or expected recoveries on collateral-dependent loans where recovery is expected through sale of the collateral. Where loans do not exhibit similar risk characteristics, an individual analysis is performed to consider expected credit losses.

The allowance recorded for individually evaluated loans greater than $5 million in the commercial lending segment is based on an analysis utilizing expected cash flows discounted using the original effective interest rate, the observable market price of the loan, or the fair value of the collateral, less selling costs, for collateral-dependent loans as appropriate. For commercial TDRs individually evaluated for impairment, attributes of the borrower are the primary factors in determining the allowance for credit losses. For smaller commercial loans collectively evaluated for impairment, historical loss experience is also incorporated into the allowance methodology applied to this category of loans.

The allowance recorded for TDR loans in the consumer lending segment is determined on a homogenous pool basis utilizing expected cash flows discounted using the original effective interest rate of the pool. The expected cash flows on TDR loans consider subsequent payment defaults since modification, the borrower’s ability to pay under the restructured terms, and the timing and amount of payments. The allowance for collateral-dependent loans in the consumer lending segment is determined based on the current fair value of the collateral less costs to sell.

When evaluating the appropriateness of the allowance for credit losses for any loans and lines in a junior lien position, the Company considers the delinquency and modification status of the first lien. At ~~March 31,~~June 30, 2022, the Company serviced the first lien on 3534 percent of the home equity loans and lines in a junior lien position. The Company also considers the status of first lien mortgage accounts reported on customer credit bureau files when the first lien is not serviced by the Company. Regardless of whether the Company services the first lien, an assessment is made of economic conditions, problem loans, recent loss experience and other factors in determining the allowance for credit losses. Based on the available information, the Company estimated ~~$205~~$193 million or ~~2.0~~1.8 percent of its total home equity portfolio at ~~March 31,~~June 30, 2022, represented

non-delinquent

junior liens where the first lien was delinquent or modified.

The Company considers historical loss experience on the loans and lines in a junior lien position to establish loss estimates for junior lien loans and lines the Company services that are current, but the first lien is delinquent or modified. The historical long-term average loss experience related to junior liens has been relatively limited (less than 1 percent of the total portfolio annually), and estimates are adjusted to consider current collateral support and portfolio risk characteristics. These include updated credit scores and collateral estimates obtained on the Company’s home equity portfolio each quarter. In its evaluation of the allowance for credit losses, the Company also considers the increased risk of loss associated with home equity lines that are contractually scheduled to convert from a revolving status to a fully amortizing payment.


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When a loan portfolio is purchased, the acquired loans are divided into those considered purchased with more than insignificant credit deterioration (“PCD”) and those not considered ~~purchased with more than insignificant credit deterioration.~~PCD. An allowance is established for each population and considers product mix, risk characteristics of the portfolio, bankruptcy experience, delinquency status and refreshed LTV ratios when possible. The allowance established for purchased loans not considered PCD is recognized through provision expense upon acquisition, whereas the allowance established for loans considered PCD at acquisition is offset by an increase in the basis of the acquired loans. Any subsequent increases and decreases in the allowance related to purchased loans, regardless of PCD status, are recognized through provision expense, with charge-offs charged to the allowance. The Company did not have a material amount of PCD loans included in its loan portfolio at ~~March 31,~~June 30, 2022.

The Company’s methodology for determining the appropriate allowance for credit losses also considers the imprecision inherent in the methodologies used and allocated to the various loan portfolios. As a result, amounts determined under the methodologies described above are adjusted by management to consider the potential impact of other qualitative factors not captured in quantitative model adjustments which include, but are not limited to, the following: model imprecision, imprecision in economic scenario assumptions, and emerging risks related to either changes in the economic environment that are affecting specific portfolios, or changes in portfolio concentrations over time that may affect model performance. The consideration of these items results in adjustments to allowance amounts included in the Company’s allowance for credit losses for each loan portfolio.


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~~Table of Contents~~

Although the Company determined the amount of each element of the allowance separately and considers this process to be an important credit management tool, the entire allowance for credit losses is available for the entire loan portfolio. The actual amount of losses can vary significantly from the estimated amounts.

At ~~March 31,~~June 30, 2022, the allowance for credit losses was ~~$6.1~~$6.3 billion ~~(1.91~~(1.88 percent of

period-end

loans), compared with an allowance of $6.2 billion (1.97 percent of

period-end

loans) at December 31, 2021. The ratio of the allowance for credit losses to nonperforming loans was ~~798~~863 percent at ~~March 31,~~June 30, 2022, compared with 738 percent at December 31, 2021. The ratio of the allowance for credit losses to annualized loan net charge-offs was ~~929~~969 percent at ~~March 31,~~June 30, 2022, compared with 902 percent of full year 2021 net charge-offs at December 31, 2021.

The ~~decrease~~increase in the allowance for credit losses of ~~$50~~$100 million ~~(0.8~~(1.6 percent) at ~~March 31,~~June 30, 2022, compared with December 31, 2021, was driven by ~~continued~~ strong ~~credit quality,~~loan growth and increased economic uncertainty, partially offset by ~~loan growth and increasing economic uncertainty.~~stabilizing credit quality. Economic uncertainty ~~remains high associated with~~and recession risk has been increasing due to ongoing supply chain ~~and~~challenges, rising inflationary concerns, market volatility, rising oil prices resulting from the Russia-Ukraine conflict and, to a lesser extent, additional

COVID-19

virus variants. In addition to these factors, expected loss estimates consider various factors including customer specific information impacting changes in risk ratings, projected delinquencies, ~~and the detrimental~~potential effects of inflationary pressures and the impact of rising interest rates ~~which impact~~on borrowers’ liquidity and ability to repay.

Economic conditions considered in estimating the allowance for credit losses at ~~March 31,~~June 30, 2022 included changes in projected gross domestic product and unemployment levels. These factors are evaluated through a combination of quantitative calculations using economic scenarios and qualitative assessments that consider the high degree of economic uncertainty in the current environment.

The following table summarizes the baseline forecast for key economic variables the Company used in its estimate of the allowance for credit losses at ~~March 31,~~June 30, 2022 and December 31, 2021:


	March 31, 2022			December 31, 2021			June 30, 2022			December 31, 2021
United States unemployment rate for the three months ending (a)
March 31, 2022		3.9	%		3.9	%
June 30, 2022		3.7			3.6			3.6	%		3.6	%
September 30, 2022								3.4			3.5
December 31, 2022		3.5			3.5			3.3			3.5
United States real gross domestic product for the three months ending (b)
March 31, 2022		4.1	%		5.2	%
June 30, 2022		3.7			4.4			2.5	%		4.4	%
September 30, 2022								2.8			4.5
December 31, 2022		2.7			3.4			1.8			3.4

(a)	Reflects quarterly average of forecasted reported United States unemployment rate.

(b)	Reflects year-over-year growth rates.

Baseline economic forecasts are used in combination with alternative scenarios and historical loss experience as is considered reasonable and supportable to inform the Company’s allowance for credit losses.

The allowance for credit losses related to commercial lending segment loans decreased ~~$62~~$103 million during the first ~~quarter~~six months of 2022, ~~primarily due~~reflecting select commercial portfolios continuing to ~~portfolio credit quality that reflected further return~~recover from the effects of ~~economic activity in certain industry sectors affected by~~ the

COVID-19

pandemic, partially offset by the ~~impact~~impacts of loan growth and rising economic uncertainty.

The allowance for credit losses related to consumer lending segment loans increased ~~$12~~$203 million during the first ~~quarter~~six months of 2022, mainly due to loan growth and rising economic uncertainty.


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Table 8		Summary of Allowance for Credit Losses


	Three Months Ended						Three Months Ended						Six Months Ended
	March 31						June 30						June 30
(Dollars in Millions)	2022			2021			2022			2021			2022			2021
Balance at beginning of period	$	6,155		$	8,010		$	6,105		$	6,960		$	6,155		$	8,010
Charge-Offs
Commercial
Commercial		47			80			48			54			95			134
Lease financing		8			6			5			4			13			10
Total commercial		55			86			53			58			108			144
Commercial real estate
Commercial mortgages		—			5			1			3			1			8
Construction and development		1			5			8			1			9			6
Total commercial real estate		1			10			9			4			10			14
Residential mortgages		5			5			2			5			7			10
Credit card		158			190			162			192			320			382
Other retail
Retail leasing		5			11			4			4			9			15
Home equity and second mortgages		3			4			2			2			5			6
Other		53			68			44			49			97			117
Total other retail		61			83			50			55			111			138
Total charge-offs		280			374			276			314			556			688
Recoveries
Commercial
Commercial		21			28			20			28			41			56
Lease financing		2			2			3			3			5			5
Total commercial		23			30			23			31			46			61
Commercial real estate
Commercial mortgages		—			17			3			3			3			20
Construction and development		6			—			—			1			6			1
Total commercial real estate		6			17			3			4			9			21
Residential mortgages		11			10			11			15			22			25
Credit card		46			46			44			44			90			90
Other retail
Retail leasing		4			10			4			5			8			15
Home equity and second mortgages		5			6			5			5			10			11
Other		23			32			25			30			48			62
Total other retail		32			48			34			40			66			88
Total recoveries		118			151			115			134			233			285
Net Charge-Offs
Commercial
Commercial		26			52			28			26			54			78
Lease financing		6			4			2			1			8			5
Total commercial		32			56			30			27			62			83
Commercial real estate
Commercial mortgages		—			(12	)		(2	)		—			(2	)		(12	)
Construction and development		(5	)		5			8			—			3			5
Total commercial real estate		(5	)		(7	)		6			—			1			(7	)
Residential mortgages		(6	)		(5	)		(9	)		(10	)		(15	)		(15	)
Credit card		112			144			118			148			230			292
Other retail
Retail leasing		1			1			—			(1	)		1			—
Home equity and second mortgages		(2	)		(2	)		(3	)		(3	)		(5	)		(5	)
Other		30			36			19			19			49			55
Total other retail		29			35			16			15			45			50
Total net charge-offs		162			223			161			180			323			403
Provision for credit losses		112			(827	)		311			(170	)		423			(997	)
Balance at end of period	$	6,105		$	6,960		$	6,255		$	6,610		$	6,255		$	6,610
Components
Allowance for loan losses	$	5,664		$	6,343		$	5,832		$	6,026
Liability for unfunded credit commitments		441			617			423			584
Total allowance for credit losses (1)	$	6,105		$	6,960		$	6,255		$	6,610
Period-end loans (2)	$	318,934		$	294,427		$	332,369		$	296,912
Nonperforming loans (3)		765			1,128			725			1,018
Allowance for Credit Losses as a Percentage of
Period-end loans (1)/(2)		1.91	%		2.36	%		1.88	%		2.23	%
Nonperforming loans (1)/(3)		798			617			863			649
Nonperforming and accruing loans 90 days or more past due		502			434			545			474
Nonperforming assets		753			579			812			624
Annualized net charge-offs		929			770			969			916


20		U.S. Bancorp

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Residual Value Risk Management

The Company manages its risk to changes in the residual value of leased vehicles, office and business equipment, and other assets through disciplined residual valuation at the inception of a lease, diversification of its leased assets, regular residual asset valuation reviews and monitoring of residual value gains or losses upon the disposition of assets. As of ~~March 31,~~June 30, 2022, no significant change in the amount of residual values or concentration of the portfolios had occurred since December 31, 2021. Refer to “Management’s Discussion and Analysis — Residual Value Risk Management” in the Company’s Annual Report on

Form 10-K

for the year ended December 31, 2021, for further discussion on residual value risk management.

Operational Risk Management

The Company operates in many different businesses in diverse markets and relies on the ability of its employees and systems to process a high number of transactions. Operational risk is inherent in all business activities, and the management of this risk is important to the achievement of the Company’s objectives. Business lines have direct and primary responsibility and accountability for identifying, controlling, and monitoring operational risks embedded in their business activities, including those additional or increased risks created by economic and financial disruptions. The Company maintains a system of controls with the objective of providing proper transaction authorization and execution, proper system operations, proper oversight of third parties with whom it does business, safeguarding of assets from misuse or theft, and ensuring the reliability and security of financial and other data. Refer to “Management’s Discussion and Analysis — Operational Risk Management” in the Company’s Annual Report on

Form 10-K

for the year ended December 31, 2021, for further discussion on operational risk management.

Compliance Risk Management

The Company may suffer legal or regulatory sanctions, material financial loss, or damage to its reputation through failure to comply with laws, regulations, rules, standards of good practice, and codes of conduct, including those related to compliance with Bank Secrecy Act/anti-money laundering requirements, sanctions compliance requirements as administered by the Office of Foreign Assets Control, consumer protection and other requirements. The Company has controls and processes in place for the assessment, identification, monitoring, management and reporting of compliance risks and issues including those created or increased by economic and financial disruptions. Refer to “Management’s Discussion and Analysis — Compliance Risk Management” in the Company’s Annual Report on

Form 10-K

for the year ended December 31, 2021, for further discussion on compliance risk management.

Interest Rate Risk Management

In the banking industry, changes in interest rates are a significant risk that can impact earnings and the safety and soundness of an entity. The Company manages its exposure to changes in interest rates through asset and liability management activities within guidelines established by its Asset Liability Management Committee (“ALCO”) and approved by the Board of Directors. The ALCO has the responsibility for approving and ~~ensuring~~overseeing compliance with the ALCO management policies, including interest rate risk exposure. One way the Company measures and analyzes its interest rate risk is through net interest income simulation analysis.

Simulation analysis incorporates substantially all of the Company’s assets and liabilities and

off-balance

sheet instruments, together with forecasted changes in the balance sheet and assumptions that reflect the current interest rate environment. Through this simulation, management estimates the impact on net interest income of various interest rate changes that differ in the direction, amount and speed of change over time, as well as the shape of the yield curve. This simulation includes assumptions about how the balance sheet is likely to be affected by changes in loan and deposit growth. Assumptions are made to project interest rates for new loans and deposits based on historical analysis, management’s outlook and

re-pricing

strategies. These assumptions are reviewed and validated on a periodic basis with sensitivity analysis being provided for key variables of the simulation. The results are reviewed monthly by the ALCO and are used to guide asset/liability management strategies.

The Company manages its interest rate risk position by holding assets with desired interest rate risk characteristics on its balance sheet, implementing certain pricing strategies for loans and deposits and selecting derivatives and various funding and investment portfolio strategies.

Table 9 summarizes the projected impact to net interest income over the next 12 months of various potential interest rate changes. The sensitivity of the projected impact to net interest income over the next 12 months is dependent on balance sheet growth, product mix, deposit behavior, pricing and funding decisions. While the Company utilizes models and assumptions based on historical information and expected behaviors, actual outcomes could vary significantly. Net interest income sensitivities reflect the impact of current market expectations for interest rates,


~~U.S. Bancorp~~		21

~~Table of Contents~~


~~Table 9~~		~~Sensitivity of Net Interest Income~~

March 31, 2022       December 31, 2021
   Down 50 bps
Immediate Up 50 bps
Immediate Down 200 bps
Gradual    Up 200 bps
Gradual       Down 50 bps
Immediate Up 50 bps
Immediate Down 200 bps
Gradual    Up 200 bps
Gradual
Net interest income
(2.47 )% 2.15 % *    3.31 %    (3.77 )% 3.09 % *    5.39 %

*	~~Given the level of interest rates, downward rate scenario is not computed.~~

driving an increase in baseline projected net interest income. As market expectations are reflected in projected results, incremental interest rate sensitivity declines on a percentage basis.


U.S. Bancorp		21

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Table 9		Sensitivity of Net Interest Income


	June 30, 2022											December 31, 2021
	Down 50 bps Immediate			Up 50 bps Immediate			Down 200 bps Gradual		Up 200 bps Gradual			Down 50 bps Immediate			Up 50 bps Immediate			Down 200 bps Gradual		Up 200 bps Gradual
Net interest income		(1.45	)%		1.17	%		*		1.54	%		(3.77	)%		3.09	%		*		5.39	%

*	Given the level of interest rates, downward rate scenario is not computed.

Use of Derivatives to Manage Interest Rate and Other Risks

To manage the sensitivity of earnings and capital to interest rate, prepayment, credit, price and foreign currency fluctuations (asset and liability management positions), the Company enters into derivative transactions. The Company uses derivatives for asset and liability management purposes primarily in the following ways:

To convert fixed-rate debt and

available-for-sale

investment securities from fixed-rate payments to floating-rate payments;

To convert floating-rate loans and debt from floating-rate payments to fixed-rate payments;

To mitigate changes in value of the Company’s unfunded mortgage loan commitments, funded MLHFS and MSRs;

To mitigate remeasurement volatility of foreign currency denominated balances; and

To mitigate the volatility of the Company’s net investment in foreign operations driven by fluctuations in foreign currency exchange rates.

In addition, the Company enters into interest rate and foreign exchange derivative contracts to support the business requirements of its customers (customer-related positions). The Company minimizes the market and liquidity risks of customer-related positions by either entering into similar offsetting positions with broker-dealers, or on a portfolio basis by entering into other derivative or

non-derivative

financial instruments that partially or fully offset the exposure from these customer-related positions. The Company may enter into derivative contracts that are either exchange-traded, centrally cleared through clearinghouses or

over-the-counter.

The Company does not utilize derivatives for speculative purposes.

The Company does not designate all of the derivatives that it enters into for risk management purposes as accounting hedges because of the inefficiency of applying the accounting requirements and may instead elect fair value accounting for the related hedged items. In particular, the Company enters into interest rate swaps, swaptions, forward commitments to buy

to-be-announced

securities (“TBAs”), U.S. Treasury and Eurodollar futures and options on U.S. Treasury futures to mitigate fluctuations in the value of its MSRs, but does not designate those derivatives as accounting hedges.

Additionally, the Company uses forward commitments to sell TBAs and other commitments to sell residential mortgage loans at specified prices to economically hedge the interest rate risk in its residential mortgage loan production activities. At ~~March 31,~~June 30, 2022, the Company had ~~$3.9~~$5.1 billion of forward commitments to sell, hedging ~~$1.4~~$2.1 billion of MLHFS and ~~$3.3~~$4.0 billion of unfunded mortgage loan commitments. The forward commitments to sell and the unfunded mortgage loan commitments on loans intended to be sold are considered derivatives under the accounting guidance related to accounting for derivative instruments and hedging activities. The Company has elected the fair value option for the MLHFS.

Derivatives are subject to credit risk associated with counterparties to the contracts. Credit risk associated with derivatives is measured by the Company based on the probability of counterparty default. The Company manages the credit risk of its derivative positions by diversifying its positions among various counterparties, by entering into master netting arrangements, and, where possible, by requiring collateral arrangements. The Company may also transfer counterparty credit risk related to interest rate swaps to third parties through the use of risk participation agreements. In addition, certain interest rate swaps, interest rate forwards and credit contracts are required to be centrally cleared through clearinghouses to further mitigate counterparty credit risk.

For additional information on derivatives and hedging activities, refer to Notes 13 and 14 in the Notes to Consolidated Financial Statements.

LIBOR Transition

In July 2017, the United Kingdom’s Financial Conduct Authority (the “FCA”) announced that it would no longer require banks to submit rates for the London InterBank Offered Rate (“LIBOR”) after 2021. In March 2021, the FCA and the administrator of LIBOR announced that, with respect to the most commonly used tenors of United States Dollar LIBOR, LIBOR will no longer be published on a representative basis after June 30, 2023. The publication of all other tenors of United States Dollar LIBOR ceased to be


22		~~U.S. Bancorp~~

~~Table of Contents~~

provided or ceased to be representative after December 31, 2021. The Company holds financial instruments impacted by the discontinuance of LIBOR, including certain loans, investment securities, derivatives,


22		U.S. Bancorp

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borrowings and other financial instruments that use LIBOR as the benchmark rate. The Company also provides various services to customers in its capacities as trustee and servicer, which involve financial instruments that will be similarly impacted by the discontinuance of LIBOR.

The Company has transitioned financial instruments associated to LIBOR currencies and tenors that ceased or became nonrepresentative on December 31, 2021 to alternative reference rates, with limited exceptions. The Company also anticipates that additional financial instruments associated to the remaining United States Dollar LIBOR tenors will require transition to a new reference rate by June 30, 2023. The Company is currently assessing the applicability and scope of the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”), which was enacted on March 15, 2022. The LIBOR Act establishes a process for replacing LIBOR on existing LIBOR contracts that do not provide for the use of a clearly defined or practicable replacement benchmark rate by providing that a benchmark replacement identified by the Federal Reserve Board that is based on the Secured Overnight Financing Rate (“SOFR”) will replace LIBOR as the benchmark for such contracts. The final implementation of the LIBOR Act currently remains uncertain, as the Federal Reserve has 180 days after its enactment to issue any regulations that are necessary for its administration.

In order to facilitate the transition process, the Company has instituted a LIBOR Transition Office and commenced an enterprise-wide project to identify, assess, monitor and mitigate risks associated with the expected discontinuance or unavailability of LIBOR, actively engage with industry working groups and regulators, achieve operational readiness for the use of alternative reference rates and engage impacted customers to remediate and transition impacted instruments. The Company has also invested in updating its systems, models, procedures and internal infrastructure as part of the transition program. Additionally, in alignment with guidance from United States banking agencies and the FCA, the Company has ceased the use of LIBOR as a reference rate in new contracts, with limited exceptions, and continues to increase the usage of alternative reference rates such as SOFR. The Company has also adopted industry best practice guidelines for fallback language for new transactions, converted its cleared interest rate swaps discounting to SOFR discounting, and distributed communications related to the transition to certain impacted parties, both inside and outside the Company. Refer to “Risk Factors” in the Company’s Annual Report on

Form 10-K

for the year ended December 31, 2021, for further discussion on potential risks that could adversely affect the Company’s financial results as a result of the LIBOR transition.

Market Risk Management

In addition to interest rate risk, the Company is exposed to other forms of market risk, principally related to trading activities which support customers’ strategies to manage their own foreign currency, interest rate risk and funding activities. For purposes of its internal capital adequacy assessment process, the Company considers risk arising from its trading activities, as well as the remeasurement volatility of foreign currency denominated balances included on its Consolidated Balance Sheet (collectively, “Covered Positions”), employing methodologies consistent with the requirements of regulatory rules for market risk. The Company’s Market Risk Committee (“MRC”), within the framework of the ALCO, oversees market risk management. The MRC monitors and reviews the Company’s Covered Positions and establishes policies for market risk management, including exposure limits for each portfolio. The Company uses a VaR approach to measure general market risk. Theoretically, VaR represents the statistical risk of loss the Company has to adverse market movements over a

one-day

time horizon. The Company uses the Historical Simulation method to calculate VaR for its Covered Positions measured at the ninety-ninth percentile using a

one-year

look-back period for distributions derived from past market data. The market factors used in the calculations include those pertinent to market risks inherent in the underlying trading portfolios, principally those that affect the Company’s corporate bond trading business, foreign currency transaction business, client derivatives business, loan trading business and municipal securities business, as well as those inherent in the Company’s foreign denominated balances and the derivatives used to mitigate the related measurement volatility. On average, the Company expects the

one-day

VaR to be exceeded by actual losses two to three times per year related to these positions. The Company monitors the accuracy of internal VaR models and modeling processes by back-testing model performance, regularly updating the historical data used by the VaR models and regular model validations to assess the accuracy of the models’ input, processing, and reporting components. All models are required to be independently reviewed and approved prior to being placed in use. If the Company were to experience market losses in excess of the estimated VaR more often than expected, the VaR models and associated assumptions would be analyzed and adjusted.


U.S. Bancorp		23

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The average, high, low and

period-end

one-day

VaR amounts for the Company’s Covered Positions were as follows:


Three Months Ended March 31 (Dollars in Millions)	2022		2021
Six Months Ended June 30 (Dollars in Millions)					2022		2021
Average	$	2	$	3	$	1	$	2
High		2		4		2		4
Low		1		1		1		1
Period-end		2		2		2		2

The Company did not experience any actual losses for its combined Covered Positions that exceeded VaR during the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021. The Company stress tests its market risk measurements to provide management with perspectives on market events that may not be captured by its VaR models, including worst case historical market movement combinations that have not necessarily occurred on the same date.

The Company calculates Stressed VaR using the same underlying methodology and model as VaR, except that a historical continuous

one-year

look-back period is utilized that reflects a period of significant financial stress appropriate to the Company’s Covered Positions. The period selected by the Company includes the significant market volatility of the last four months of 2008.

The average, high, low and

period-end

one-day

Stressed VaR amounts for the Company’s Covered Positions were as follows:


Three Months Ended March 31 (Dollars in Millions)	2022		2021
Six Months Ended June 30 (Dollars in Millions)					2022		2021
Average	$	7	$	7	$	5	$	7
High		8		9		9		9
Low		6		5		3		5
Period-end		7		9		9		8

Valuations of positions in client derivatives and foreign currency activities are based on discounted cash flow or other valuation techniques using market-based assumptions. These valuations are compared to third party quotes or other market prices to determine if there are significant variances. Significant variances are approved by senior management in the Company’s corporate functions. Valuation of positions in the corporate bond trading, loan trading and municipal securities businesses are based on trader marks. These trader marks are evaluated against third-party prices, with significant variances approved by senior management in the Company’s corporate functions.

The Company also measures the market risk of its hedging activities related to residential MLHFS and MSRs using the Historical Simulation method. The VaRs are measured at the ninety-ninth percentile and employ factors pertinent to the market risks inherent in the valuation of the assets and hedges. A

one-year

look-back period is used to obtain past market data for the models.

The average, high and low VaR amounts for the residential MLHFS and related hedges and the MSRs and related hedges were as follows:


Three Months Ended March 31 (Dollars in Millions)	2022		2021
Six Months Ended June 30 (Dollars in Millions)					2022		2021
Residential Mortgage Loans Held For Sale and Related Hedges
Average	$	2	$	12	$	2	$	10
High		5		19		5		19
Low		1		7		1		5
Mortgage Servicing Rights and Related Hedges
Average	$	6	$	5	$	7	$	4
High		13		11		13		11
Low		3		2		3		1

Liquidity Risk Management

The Company’s liquidity risk management process is designed to identify, measure, and manage the Company’s funding and liquidity risk to meet its daily funding needs and to address expected and unexpected changes in its funding requirements. The Company engages in various activities to manage its liquidity risk. These activities include diversifying its funding sources, stress testing, and holding readily-marketable assets which can be used as a source of liquidity if needed. In addition, the Company’s profitable operations, sound credit quality and strong capital position have enabled it to develop a large and reliable base of core deposit funding within its market areas and in domestic and global capital markets.

The Company’s Board of Directors approves the Company’s liquidity policy. The Risk Management Committee of the Company’s Board of Directors oversees the Company’s liquidity risk management process and approves a contingency funding plan. The ALCO reviews the Company’s liquidity policy and limits, and regularly assesses the Company’s ability to meet funding requirements arising from adverse company-specific or market events.

The Company regularly projects its funding needs under various stress scenarios and maintains a contingency funding plan consistent with the Company’s access to diversified sources of contingent funding. The Company maintains a substantial level of total available liquidity in the form of

on-balance

sheet and

off-balance

sheet funding sources. These liquidity sources include cash at the Federal Reserve Bank and certain European central banks, unencumbered liquid assets, and capacity to borrow from the FHLB and at the Federal Reserve Bank’s Discount Window. At ~~March 31,~~June 30, 2022, the fair value of unencumbered investment securities totaled ~~$143.2~~$137.5 billion, compared with $144.0 billion at December 31, 2021. Refer to Note 4 of the Notes to Consolidated Financial Statements and “Balance Sheet


24		~~U.S. Bancorp~~

~~Table of Contents~~

Analysis” for further information on investment securities maturities and trends. Asset liquidity is further enhanced by the Company’s practice of pledging loans to access secured borrowing facilities through the FHLB and


24		U.S. Bancorp

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Federal Reserve Bank. At ~~March 31,~~June 30, 2022, the Company could have borrowed a total of an additional ~~$96.3~~$95.5 billion from the FHLB and Federal Reserve Bank based on collateral available for additional borrowings.

The Company’s diversified deposit base provides a sizeable source of relatively stable and

low-cost

funding, while reducing the Company’s reliance on the wholesale markets. Total deposits were ~~$461.5~~$467.1 billion at ~~March 31,~~June 30, 2022, compared with $456.1 billion at December 31, 2021. Refer to “Balance Sheet Analysis” for further information on the Company’s deposits.

Additional funding is provided by long-term debt and short-term borrowings. Long-term debt was ~~$32.9~~$29.4 billion at ~~March 31,~~June 30, 2022, and is an important funding source because of its multi-year borrowing structure. Short-term borrowings were ~~$21.0~~$25.0 billion at ~~March 31,~~June 30, 2022, and supplement the Company’s other funding sources. Refer to “Balance Sheet Analysis” for further information on the Company’s long-term debt and short-term borrowings.

In addition to assessing liquidity risk on a consolidated basis, the Company monitors the parent company’s liquidity. The Company establishes limits for the minimal number of months into the future where the parent company can meet existing and forecasted obligations with cash and securities held that can be readily monetized. The Company measures and manages this limit in both normal and adverse conditions. The Company maintains sufficient funding to meet expected capital and debt service obligations for 24 months without the support of dividends from subsidiaries and assuming access to the wholesale markets is maintained. The Company maintains sufficient liquidity to meet its capital and debt service obligations for 12 months under adverse conditions without the support of dividends from subsidiaries or access to the wholesale markets. The parent company is currently well in excess of required liquidity minimums.

At ~~March 31,~~June 30, 2022, parent company long-term debt outstanding was ~~$19.8~~$18.4 billion, compared with $18.9 billion at December 31, 2021. The ~~increase~~decrease was primarily due to $1.3 billion of subordinated note and $1.0 billion of medium-term note repayments, partially offset by $2.1 billion of medium-term note ~~issuances, partially offset by $1.0 billion of medium-term note repayments.~~issuances. As of ~~March 31,~~June 30, 2022, there was ~~$1.3 billion of~~no parent company debt scheduled to mature in the remainder of 2022.

The Company is subject to a regulatory Liquidity Coverage Ratio (“LCR”) requirement which requires banks to maintain an adequate level of unencumbered high quality liquid assets to meet estimated liquidity needs over a

30-day

stressed period. At ~~March 31,~~June 30, 2022, the Company was compliant with this requirement.

The Company is also subject to a regulatory Net Stable Funding Ratio (“NSFR”) requirement which requires banks to maintain a minimum level of stable funding based on the liquidity characteristics of their assets, commitments, and derivative exposures over a

one-year

time horizon. At ~~March 31,~~June 30, 2022, the Company was compliant with this requirement.

Refer to “Management’s Discussion and Analysis — Liquidity Risk Management” in the Company’s Annual Report on

Form 10-K

for the year ended December 31, 2021, for further discussion on liquidity risk management.

European Exposures

The Company provides merchant processing and corporate trust services in Europe either directly or through banking affiliations in Europe. Revenue generated from sources in Europe represented approximately 2 percent of the Company’s total net revenue for both the three and six months ended ~~March 31,~~June 30, 2022. Operating cash for these businesses is deposited on a short-term basis typically with certain European central banks. For deposits placed at other European banks, exposure is mitigated by the Company placing deposits at multiple banks and managing the amounts on deposit at any bank based on institution-specific deposit limits. At ~~March 31,~~June 30, 2022, the Company had an aggregate amount on deposit with European banks of approximately ~~$8.3~~$7.3 billion, predominately with the Central Bank of Ireland and Bank of England.

In addition, the Company provides financing to domestic multinational corporations that generate revenue from customers in European countries, transacts with various European banks as counterparties to certain derivative-related activities, and through a subsidiary, manages money market funds that hold certain investments in European sovereign debt. Any deterioration in economic conditions in Europe, including the impacts resulting from the Russia-Ukraine conflict, is not expected to have a significant effect on the Company related to these activities.

Commitments, Contingent Liabilities and Other Contractual Obligations

The Company participates in many different contractual arrangements which may or may not be recorded on its balance sheet, with unrelated or consolidated entities, under which the Company has an obligation to pay certain amounts, provide credit or liquidity enhancements or provide market risk support. These arrangements include commitments to extend credit, letters of credit and various forms of guarantees. Refer to Note 16 of the Notes to Consolidated Financial Statements for further information on guarantees and contingent liabilities. These arrangements also include any obligation related to a variable interest held in an unconsolidated entity that provides financing, liquidity, credit enhancement or market risk support. Refer to Note 6 of the Notes to Consolidated Financial Statements for further information related to the Company’s interests in variable interest entities.


U.S. Bancorp		25

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Table 10		Regulatory Capital Ratios

(Dollars in Millions)    March 31,
2022 December 31,
2021
Basel III standardized approach:

Common equity tier 1 capital
   $ 41,950 $ 41,701
Tier 1 capital
   49,198 48,516
Total risk-based capital
   57,403 56,250
Risk-weighted assets
   427,174 418,571
Common equity tier 1 capital as a percent of risk-weighted assets
   9.8 % 10.0 %
Tier 1 capital as a percent of risk-weighted assets
   11.5 11.6
Total risk-based capital as a percent of risk-weighted assets
   13.4 13.4
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio)
   8.6 8.6
Tier 1 capital as a percent of total
on-
and
off-balance
sheet leverage exposure (total leverage exposure ratio)
   7.0 6.9


(Dollars in Millions)	June 30, 2022			December 31, 2021
Basel III standardized approach:
Common equity tier 1 capital	$	42,944		$	41,701
Tier 1 capital		50,195			48,516
Total risk-based capital		58,307			56,250
Risk-weighted assets		441,804			418,571

Common equity tier 1 capital as a percent of risk-weighted assets		9.7	%		10.0	%
Tier 1 capital as a percent of risk-weighted assets		11.4			11.6
Total risk-based capital as a percent of risk-weighted assets		13.2			13.4
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio)		8.6			8.6
Tier 1 capital as a percent of total on- and off-balance sheet leverage exposure (total leverage exposure ratio)		7.1			6.9

Capital Management

The Company is committed to managing capital to maintain strong protection for depositors and creditors and for maximum shareholder benefit. The Company also manages its capital to exceed regulatory capital requirements for banking organizations. The regulatory capital requirements effective for the Company follow Basel III, with the Company being subject to calculating its capital adequacy as a percentage of risk-weighted assets under the standardized approach. Beginning in 2022, the Company began to phase into its regulatory capital requirements the cumulative deferred impact of its 2020 adoption of the accounting guidance related to the impairment of financial instruments based on the current expected credit losses (“CECL”) methodology plus 25 percent of its quarterly credit reserve increases over the past two years. This cumulative deferred impact will be phased into the Company’s regulatory capital over the next three years, culminating with a fully phased in regulatory capital calculation beginning in 2025. Table 10 provides a summary of statutory regulatory capital ratios in effect for the Company at ~~March 31,~~June 30, 2022 and December 31, 2021. All regulatory ratios exceeded regulatory “well-capitalized” requirements.

The Company believes certain other capital ratios are useful in evaluating its capital adequacy. The Company’s tangible common equity, as a percent of tangible assets and as a percent of risk-weighted assets determined in accordance with transitional regulatory capital requirements related to the CECL methodology under the standardized approach, was ~~6.0~~5.5 percent and ~~8.0~~7.2 percent, respectively, at ~~March 31,~~June 30, 2022, compared with 6.8 percent and 9.2 percent, respectively, at December 31, 2021. In addition, the Company’s common equity tier 1 capital to risk-weighted assets ratio, reflecting the full implementation of the CECL methodology was ~~9.5~~9.4 percent at ~~March 31,~~June 30, 2022, compared with 9.6 percent at December 31, 2021. Refer to

~~“Non-GAAP~~

“Non-GAAP Financial Measures” beginning on page 3031 for further information on these other capital ratios.

Total U.S. Bancorp shareholders’ equity was ~~$51.2~~$48.6 billion at ~~March 31,~~June 30, 2022, compared with $54.9 billion at December 31, 2021. The decrease was primarily the result of changes in unrealized gains and losses on

available-for-sale

investment securities included in other comprehensive income (loss) and dividends paid, partially offset by corporate earnings and the issuance of preferred stock.

The Company announced on December 22, 2020 that its Board of Directors had approved an authorization to repurchase $3.0 billion of its common stock beginning January 1, 2021, and repurchased $1.5 billion of its common stock during the first six months of 2021 under this program. The Company suspended all common stock repurchases at the beginning of the third quarter of 2021, except for those done exclusively in connection with its stock-based compensation programs, due to its pending acquisition of MUFG Union Bank’s core regional banking franchise. The Company expects to operate at a common equity tier 1 capital ratio ~~between~~near its target ratio of 8.5 percent at the time of closing the acquisition and increasing toward 9.0 percent after closing of the acquisition. The Company does not expect to commence repurchasing its common stock until after the acquisition closes and its common equity tier 1 capital ratio approximates 9.0 percent.

The following table provides a detailed analysis of all shares of common stock of the Company purchased by the Company or any affiliated purchaser during the ~~first~~second quarter of 2022:

Period Total Number
of Shares
Purchased Average
Price Paid
Per Share Total Number of
Shares Purchased
as Part of Publicly
Announced
Program
Approximate Dollar
Value of Shares
that May Yet Be
Purchased Under
the Program
(In Millions)

January
208,269 (a) $ 56.22 8,269 $ 1,444
February
620,109 58.98 620,109 1,407
March
412,339 (b) 55.54 312,339 1,390
Total
1,240,717 (c) $ 57.37 940,717 $ 1,390


Period	Total Number of Shares Purchased			Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (In Millions)
April		308,312	(a)	$	53.07		8,312	$	1,390
May		392			44.52		392		1,390
June		994			48.05		994		1,390
Total		309,698	(a)	$	53.05		9,698	$	1,390

(a)

Includes ~~200,000~~300,000 shares of common stock purchased, at an average price per share of ~~$56.24,~~$53.11, in open-market transactions by U.S. Bank National Association, the Company’s banking subsidiary, in its capacity as trustee of the U.S. Bank 401(k) Savings Plan, which is the Company’s employee retirement savings plan.

~~(b)~~

Includes 100,000 shares of common stock purchased, at an average price per share of $56.46, in open-market transactions by U.S. Bank National Association in its capacity as trustee of the U.S. Bank 401(k) Savings Plan.

~~(c)~~

Includes 300,000 shares of common stock purchased, at an average price per share of $56.31, in open-market transactions by U.S. Bank National Association in its capacity as trustee of the U.S. Bank 401(k) Savings Plan.


26		U.S. Bancorp

Table of Contents

The Company will continue to monitor its capital position and may adjust its capital distributions based on economic conditions and its financial performance. Capital distributions, including dividends and stock repurchases, are subject to the approval of the Company’s Board of Directors and ~~will align~~compliance with regulatory requirements.

Refer to “Management’s Discussion and Analysis — Capital Management” in the Company’s Annual Report on

Form 10-K

for the year ended December 31, 2021, for further discussion on capital management.

LINE OF BUSINESS FINANCIAL REVIEW

The Company’s major lines of business are Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment 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.

Basis for Financial Presentation

Business line results are derived from the Company’s business unit profitability reporting systems by specifically attributing managed balance sheet assets, deposits and other liabilities and their related income or expense. Refer to Note 17 of the Notes to Consolidated Financial Statements for further information on the business lines’ basis for financial presentation.

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 2022, certain organization and methodology changes were made and, accordingly, 2021 results were restated and presented on a comparable basis.

Corporate and Commercial Banking

Corporate and Commercial Banking offers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets services, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution,

non-profit

and public sector clients. Corporate and Commercial Banking contributed ~~$418~~$377 million of the Company’s net income in the second quarter and $793 million in the first ~~quarter~~six months of 2022, or ~~a decrease~~decreases of ~~$51~~$41 million ~~(10.9~~(9.8 percent) and $87 million (9.9 percent), respectively, compared with the ~~first quarter~~same periods of 2021.

Net revenue ~~decreased $7~~increased $65 million ~~(0.7~~(6.6 percent) in the second quarter and $59 million (3.0 percent) in the first six months of 2022, compared with the same periods of 2021. Net interest income, on a taxable-equivalent basis, increased $58 million (8.0 percent) in the second quarter and $75 million (5.2 percent) in the first six months of 2022, compared with the same periods of 2021. The increases were primarily due to higher loan and interest-bearing deposit balances, partially offset by lower spreads on loans and unfavorable changes in deposit rates. Noninterest income increased $7 million (2.6 percent) in the second quarter of 2022, compared with the ~~first~~second quarter of ~~2021.~~2021, primarily due to stronger treasury management fees driven by core growth and increased federal government volume. Noninterest income decreased ~~$23~~$16 million ~~(8.6~~(3.0 percent) in the first ~~quarter~~six months of 2022, compared with the first ~~quarter~~six months of 2021, primarily due to lower corporate bond fees and trading revenue within the capital markets business, partially offset by ~~stronger~~higher treasury management ~~fees due to core growth driven by~~fees.

Noninterest expense increased $20 million (4.6 percent) in the ~~economic recovery. Net interest income, on a taxable-equivalent basis, increased $16~~second quarter and $25 million ~~(2.2~~(2.9 percent) in the first ~~quarter~~six months of 2022, compared with the first quarter of 2021. The increase was primarily due to higher loan and deposit balances, partially offset by the impact of loan mix and related yields as well as unfavorable changes in deposit rates.

~~Noninterest expense increased $10 million (2.4 percent) in the first quarter of 2022, compared with the first quarter~~same periods of 2021, primarily due to ~~an increase in net shared services~~higher Federal Deposit Insurance Corporation insurance expense ~~driven by investment in infrastructure~~ and ~~technology development as well as~~ higher compensation expense primarily due to merit increases, variable compensation and hiring to support business growth, partially offset by lower performance-based incentives related to capital markets activity. The provision for credit losses increased ~~$51~~$100 million in the second quarter and $150 million in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of 2021, primarily due to loan loss provisions supporting stronger growth in loan balances, partially offset by improving portfolio credit quality.

Consumer and Business Banking

Consumer and Business Banking delivers products and services through banking offices, telephone servicing and sales,

on-line

services, direct mail, ATM processing and mobile devices. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking. Consumer and Business Banking contributed ~~$393~~$501 million of the Company’s net income in the second quarter and $880 million in the first ~~quarter~~six months of 2022, or ~~a decrease~~decreases of ~~$182~~$145 million ~~(31.7~~(22.4 percent) and $331 million (27.3 percent), respectively, compared with the ~~first quarter~~same periods of 2021.

Net revenue decreased $96 million (4.6 percent) in the first quarter of 2022, compared with the first quarter of 2021. Noninterest income decreased $108 million (19.0 percent) in the first quarter of 2022, compared with the first quarter of 2021, primarily due to lower mortgage banking revenue reflecting lower application volume, given declining refinance activities, and lower related gain on sale margins, partially offset by an increase in the fair value of MSRs, net of hedging activities, as well as higher performing loan sales. Noninterest income further decreased due to lower other noninterest income, driven by lower retail leasing

~~end-of-term~~

~~residual gains. Offsetting these decreases, deposit service charges increased driven by higher customer spend activity, net of the impact of the elimination of certain consumer~~

~~non-sufficient~~

~~funds fees in the first quarter of 2022. Net interest income, on a~~


U.S. Bancorp		27

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Table 11		Line of Business Financial Performance

~~taxable-equivalent basis, increased $12~~


	Corporate and Commercial Banking							Consumer and Business Banking									Wealth Management and Investment Services
Three Months Ended June 30 (Dollars in Millions)	2022		2021		Percent Change			2022			2021			Percent Change			2022			2021			Percent Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	784	$	726		8.0	%	$	1,617		$	1,534			5.4	%	$	352		$	246			43.1	%
Noninterest income		272		265		2.6			395			634			(37.7	)		652			549			18.8
Total net revenue		1,056		991		6.6			2,012			2,168			(7.2	)		1,004			795			26.3
Noninterest expense		453		433		4.6			1,419			1,375			3.2			581			521			11.5
Income (loss) before provision and income taxes		603		558		8.1			593			793			(25.2	)		423			274			54.4
Provision for credit losses		100		—		*			(75	)		(68	)		(10.3	)		(4	)		(4	)		—
Income (loss) before income taxes		503		558		(9.9	)		668			861			(22.4	)		427			278			53.6
Income taxes and taxable-equivalent adjustment		126		140		(10.0	)		167			215			(22.3	)		107			70			52.9
Net income (loss)		377		418		(9.8	)		501			646			(22.4	)		320			208			53.8
Net (income) loss attributable to noncontrolling interests		—		—		—			—			—			—			—			—			—
Net income (loss) attributable to U.S. Bancorp	$	377	$	418		(9.8	)	$	501		$	646			(22.4	)	$	320		$	208			53.8
Average Balance Sheet
Loans	$	123,210	$	102,275		20.5		$	141,135		$	140,826			.2		$	22,320		$	17,442			28.0
Goodwill		1,912		1,647		16.1			3,244			3,476			(6.7	)		1,718			1,618			6.2
Other intangible assets		4		5		(20.0	)		3,634			2,828			28.5			300			84			*
Assets		137,773		114,186		20.7			156,132			161,695			(3.4	)		25,786			20,470			26.0
Noninterest-bearing deposits		58,266		60,696		(4.0	)		31,642			33,702			(6.1	)		25,019			23,288			7.4
Interest-bearing deposits		93,678		70,019		33.8			168,486			158,164			6.5			71,759			73,347			(2.2	)
Total deposits		151,944		130,715		16.2			200,128			191,866			4.3			96,778			96,635			.1
Total U.S. Bancorp shareholders’ equity		13,989		13,816		1.3			12,366			12,337			.2			3,618			3,089			17.1


	Payment Services							Treasury and Corporate Support									Consolidated Company
Three Months Ended June 30 (Dollars in Millions)	2022		2021		Percent Change			2022			2021			Percent Change			2022			2021			Percent Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	619	$	595		4.0	%	$	92		$	63			46.0	%	$	3,464		$	3,164			9.5	%
Noninterest income		994		913		8.9			235			258			(8.9	)		2,548			2,619			(2.7	)
Total net revenue		1,613		1,508		7.0			327			321			1.9			6,012			5,783			4.0
Noninterest expense		871		829		5.1			400			229			74.7			3,724			3,387			9.9
Income (loss) before provision and income taxes		742		679		9.3			(73	)		92			*			2,288			2,396			(4.5	)
Provision for credit losses		221		91		*			69			(189	)		*			311			(170	)		*
Income (loss) before income taxes		521		588		(11.4	)		(142	)		281			*			1,977			2,566			(23.0	)
Income taxes and taxable-equivalent adjustment		130		147		(11.6	)		(87	)		6			*			443			578			(23.4	)
Net income (loss)		391		441		(11.3	)		(55	)		275			*			1,534			1,988			(22.8	)
Net (income) loss attributable to noncontrolling interests		—		—		—			(3	)		(6	)		50.0			(3	)		(6	)		50.0
Net income (loss) attributable to U.S. Bancorp	$	391	$	441		(11.3	)	$	(58	)	$	269			*		$	1,531		$	1,982			(22.8	)
Average Balance Sheet
Loans	$	33,854	$	30,030		12.7		$	3,668		$	3,711			(1.2	)	$	324,187		$	294,284			10.2
Goodwill		3,318		3,176		4.5			—			—			—			10,192			9,917			2.8
Other intangible assets		438		518		(15.4	)		—			—			—			4,376			3,435			27.4
Assets		41,054		35,618		15.3			219,166			219,396			(.1	)		579,911			551,365			5.2
Noninterest-bearing deposits		3,396		5,030		(32.5	)		2,504			2,581			(3.0	)		120,827			125,297			(3.6	)
Interest-bearing deposits		167		141		18.4			1,599			2,242			(28.7	)		335,689			303,913			10.5
Total deposits		3,563		5,171		(31.1	)		4,103			4,823			(14.9	)		456,516			429,210			6.4
Total U.S. Bancorp shareholders’ equity		8,115		7,413		9.5			11,078			16,307			(32.1	)		49,166			52,962			(7.2	)

*	Not meaningful


28		U.S. Bancorp

Table of Contents


	Corporate and Commercial Banking								Consumer and Business Banking									Wealth Management and Investment Services
Six Months Ended June 30 (Dollars in Millions)	2022		2021			Percent Change			2022			2021			Percent Change			2022		2021		Percent Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	1,523	$	1,448			5.2	%	$	3,129		$	3,035			3.1	%	$	627	$	514		22.0	%
Noninterest income		517		533			(3.0	)		856			1,203			(28.8	)		1,248		1,080		15.6
Total net revenue		2,040		1,981			3.0			3,985			4,238			(6.0	)		1,875		1,594		17.6
Noninterest expense		878		853			2.9			2,839			2,731			4.0			1,174		1,020		15.1
Income (loss) before provision and income taxes		1,162		1,128			3.0			1,146			1,507			(24.0	)		701		574		22.1
Provision for credit losses		104		(46	)		*			(28	)		(108	)		74.1			4		1		*
Income (loss) before income taxes		1,058		1,174			(9.9	)		1,174			1,615			(27.3	)		697		573		21.6
Income taxes and taxable-equivalent adjustment		265		294			(9.9	)		294			404			(27.2	)		175		144		21.5
Net income (loss)		793		880			(9.9	)		880			1,211			(27.3	)		522		429		21.7
Net (income) loss attributable to noncontrolling interests		—		—			—			—			—			—			—		—		—
Net income (loss) attributable to U.S. Bancorp	$	793	$	880			(9.9	)	$	880		$	1,211			(27.3	)	$	522	$	429		21.7
Average Balance Sheet
Loans	$	119,557	$	102,201			17.0		$	140,984		$	141,170			(.1	)	$	21,521	$	17,147		25.5
Goodwill		1,912		1,647			16.1			3,252			3,476			(6.4	)		1,739		1,618		7.5
Other intangible assets		4		5			(20.0	)		3,406			2,661			28.0			283		63		*
Assets		132,856		114,229			16.3			156,770			162,803			(3.7	)		25,124		20,297		23.8
Noninterest-bearing deposits		60,298		58,524			3.0			31,807			33,244			(4.3	)		26,204		22,339		17.3
Interest-bearing deposits		90,336		70,943			27.3			167,279			154,450			8.3			71,024		78,489		(9.5	)
Total deposits		150,634		129,467			16.3			199,086			187,694			6.1			97,228		100,828		(3.6	)
Total U.S. Bancorp shareholders’ equity		13,859		14,092			(1.7	)		12,311			12,407			(.8	)		3,607		3,062		17.8


	Payment Services							Treasury and Corporate Support									Consolidated Company
Six Months Ended June 30 (Dollars in Millions)	2022		2021		Percent Change			2022			2021			Percent Change			2022			2021			Percent Change
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	1,241	$	1,224		1.4	%	$	144		$	32			*	%	$	6,664		$	6,253			6.6	%
Noninterest income		1,852		1,698		9.1			471			486			(3.1	)		4,944			5,000			(1.1	)
Total net revenue		3,093		2,922		5.9			615			518			18.7			11,608			11,253			3.2
Noninterest expense		1,726		1,627		6.1			609			535			13.8			7,226			6,766			6.8
Income (loss) before provision and income taxes		1,367		1,295		5.6			6			(17	)		*			4,382			4,487			(2.3	)
Provision for credit losses		351		50		*			(8	)		(894	)		99.1			423			(997	)		*
Income (loss) before income taxes		1,016		1,245		(18.4	)		14			877			(98.4	)		3,959			5,484			(27.8	)
Income taxes and taxable-equivalent adjustment		254		311		(18.3	)		(121	)		58			*			867			1,211			(28.4	)
Net income (loss)		762		934		(18.4	)		135			819			(83.5	)		3,092			4,273			(27.6	)
Net (income) loss attributable to noncontrolling interests		—		—		—			(4	)		(11	)		63.6			(4	)		(11	)		63.6
Net income (loss) attributable to U.S. Bancorp	$	762	$	934		(18.4	)	$	131		$	808			(83.8	)	$	3,088		$	4,262			(27.5	)
Average Balance Sheet
Loans	$	32,802	$	29,831		10.0		$	3,744		$	3,789			(1.2	)	$	318,608		$	294,138			8.3
Goodwill		3,322		3,175		4.6			—			—			—			10,225			9,916			3.1
Other intangible assets		450		530		(15.1	)		—			—			—			4,143			3,259			27.1
Assets		39,803		35,356		12.6			224,110			217,372			3.1			578,663			550,057			5.2
Noninterest-bearing deposits		3,534		5,146		(31.3	)		2,532			2,591			(2.3	)		124,375			121,844			2.1
Interest-bearing deposits		164		137		19.7			2,174			1,932			12.5			330,977			305,951			8.2
Total deposits		3,698		5,283		(30.0	)		4,706			4,523			4.0			455,352			427,795			6.4
Total U.S. Bancorp shareholders’ equity		8,067		7,535		7.1			13,460			15,750			(14.5	)		51,304			52,846			(2.9	)

*	Not meaningful


U.S. Bancorp		29

Table of Contents

Net revenue decreased $156 million ~~(0.8~~(7.2 percent) in the second quarter and $253 million (6.0 percent) in the first ~~quarter~~six months of 2022, compared with the same periods of 2021. Noninterest income decreased $239 million (37.7 percent) in the second quarter and $347 million (28.8 percent) in the first six months of 2022, compared with the same periods of 2021, primarily due to lower mortgage banking revenue reflecting lower application volume, given declining refinance activities, lower related gain on sale margins and lower performing loan sales, partially offset by an increase in the fair value of MSRs, net of hedging activities. Net interest income, on a taxable-equivalent basis, increased $83 million (5.4 percent) in the second quarter and $94 million (3.1 percent) in the first six months of 2022, compared with the same periods of 2021, reflecting strong growth in interest-bearing deposit balances and favorable funding mix, partially offset by lower spreads on loans and lower loan fees driven by the impact of loan forgiveness related to the SBA Paycheck Protection Program.

Noninterest expense increased ~~$61~~$44 million ~~(4.5~~(3.2 percent) in the second quarter and $108 million (4.0 percent) in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of 2021, primarily due to increases in net shared services expense due to investments in digital ~~capabilities and higher compensation expense related~~capabilities. The provision for credit losses decreased $7 million (10.3 percent) in the second quarter of 2022, compared with the second quarter of 2021, due to ~~merit increases and core business growth.~~strong improvements in credit quality in the second quarter of 2022. The provision for credit losses increased ~~$86~~$80 million (74.1 percent) in the first ~~quarter~~six months of 2022, compared with the first ~~quarter~~six months of 2021, reflecting ~~higher ending loan balances, partially offset by~~a decrease in the reserve allocation in the first six months of 2021 due to credit quality improvement.

Wealth Management and Investment Services

Wealth Management and Investment Services provides private banking, financial advisory services, investment management, retail brokerage services, insurance, trust, custody and fund servicing through four businesses: Wealth Management, Global Corporate Trust & Custody, U.S. Bancorp Asset Management and Fund Services. Wealth Management and Investment Services contributed ~~$206~~$320 million of the Company’s net income in the second quarter and $522 million in the first ~~quarter~~six months of 2022, or ~~a decrease~~increases of ~~$19~~$112 million ~~(8.4~~(53.8 percent) and $93 million (21.7 percent), respectively, compared with the ~~first quarter~~same periods of 2021.

Net revenue increased ~~$71~~$209 million ~~(8.9~~(26.3 percent) in the second quarter and $281 million (17.6 percent) in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of 2021. Net interest income, on a taxable-equivalent basis, increased $6$106 million ~~(2.2~~(43.1 percent) in the second quarter and $113 million (22.0 percent) in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of 2021, primarily due to favorable funding mix, higher average noninterest-bearing deposit balances ~~as well as~~and higher average loan balances. Noninterest income increased ~~$65~~$103 million ~~(12.2~~(18.8 percent) in the second quarter and $168 million (15.6 percent) in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of 2021, primarily due to the impact of the PFM acquisition and core business growth in trust and investment management fees, ~~and investment products fees, both driven by favorable market conditions,~~ as well as ~~the impact of the PFM acquisition on trust and investment management fees, partially offset by higher~~lower fee waivers related to money market funds.

Noninterest expense increased ~~$93~~$60 million ~~(18.8~~(11.5 percent) in the second quarter and $154 million (15.1 percent) in the first ~~quarter~~six months of 2022, compared with the same periods of 2021, reflecting higher compensation as a result of merit increases, the PFM acquisition, core business growth and performance-based incentives, as well as higher net shared services expense driven by investment in support of business growth. Noninterest expense further increased in the first six months of 2022, compared with the first ~~quarter~~six months of 2021, ~~reflecting the PFM acquisition, higher compensation expense as a result of merit increases and performance-based incentives,~~due to litigation settlements and fraud-related ~~losses and core business growth.~~losses. The provision for credit losses was flat in the second quarter and increased $3 million ~~(60.0 percent)~~ in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of ~~2021, primarily due to stronger growth in ending loans.~~2021.

Payment Services

Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services, consumer lines of credit and merchant processing. Payment Services contributed ~~$372~~$391 million of the Company’s net income in the second quarter and $762 million in the first ~~quarter~~six months of 2022, or ~~a decrease~~decreases of ~~$115~~$50 million ~~(23.6~~(11.3 percent) and $172 million (18.4 percent), respectively, compared with the ~~first quarter~~same periods of 2021.

Net revenue increased ~~$66~~$105 million ~~(4.7~~(7.0 percent) in the second quarter and $171 million (5.9 percent) in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of 2021. Noninterest income increased ~~$73~~$81 million ~~(9.3~~(8.9 percent) in the second quarter and $154 million (9.1 percent) in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of 2021, mainly due to continued strengthening of consumer and business spending across most ~~sectors as local jurisdictions reduce pandemic related restrictions and consumer behaviors normalize.~~sectors. As a result, there was strong growth in merchant processing services revenue driven by higher sales volume and higher merchant fees, partially offset by higher rebates. There was also growth in corporate payment products revenue driven by improving business spending across ~~nearly~~ all product groups. Strong ~~sales~~consumer spending also drove an increase in credit and debit card revenue, mostly offset by declining prepaid processing fees as the beneficial impact of


30		U.S. Bancorp

Table of Contents

government stimulus programs ~~continues to dissipate.~~dissipated year-over-year. Net interest income, on a taxable-equivalent basis, ~~decreased $7~~increased $24 million ~~(1.1~~(4.0 percent) in the second quarter and $17 million (1.4 percent) in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of 2021, primarily due to higher loan balances and loan fees, partially offset by lower loan yields driven by declining customer revolve ~~rates, mostly offset by higher loan balances due to investment in customer acquisition.~~rates.

Noninterest expense increased ~~$49~~$42 million (5.1 percent) in the second quarter and $99 million (6.1 percent) in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of 2021, reflecting higher net shared services expense driven by investment in infrastructure and technology development, in addition to higher compensation expense as a result of merit increases, ~~performance-based incentives and~~ core business ~~growth.~~growth and variable compensation. The provision for credit losses increased ~~$171~~$130 million in the second quarter and $301 million in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of 2021, primarily due to ~~ending~~stronger growth in loan ~~balance growth~~balances and relatively stable credit quality in the ~~first quarter of 2022,~~current year, compared with a stronger decline in ~~loan balances and~~ delinquencies in the prior year.


28		~~U.S. Bancorp~~

~~Table of Contents~~


~~Table 11~~		~~Line of Business Financial Performance~~

Corporate and
Commercial Banking

Consumer and
Business Banking

Wealth Management and
Investment Services

Three Month Ended March 31
(Dollars in Millions)
2022 2021 Percent
Change    2022 2021 Percent
Change    2022 2021 Percent
Change
Condensed Income Statement

Net interest income (taxable-equivalent basis)
$ 735 $ 719 2.2 % $ 1,517 $ 1,505 .8 % $ 274 $ 268 2.2 %
Noninterest income
245 268 (8.6 ) 461 569 (19.0 ) 596 531 12.2
Total net revenue
980 987 (.7 ) 1,978 2,074 (4.6 ) 870 799 8.9
Noninterest expense
419 409 2.4 1,405 1,344 4.5 587 494 18.8
Income (loss) before provision and income taxes
561 578 (2.9 ) 573 730 (21.5 ) 283 305 (7.2 )
Provision for credit losses
3 (48 ) * 49 (37 ) * 8 5 60.0
Income (loss) before income taxes
558 626 (10.9 ) 524 767 (31.7 ) 275 300 (8.3 )
Income taxes and taxable-equivalent adjustment
140 157 (10.8 ) 131 192 (31.8 ) 69 75 (8.0 )
Net income (loss)
418 469 (10.9 ) 393 575 (31.7 ) 206 225 (8.4 )
Net (income) loss attributable to noncontrolling interests
— — — — — — — — —
Net income (loss) attributable to U.S. Bancorp
$ 418 $ 469 (10.9 ) $ 393 $ 575 (31.7 ) $ 206 $ 225 (8.4 )
Average Balance Sheet

Loans
$ 115,634 $ 101,927 13.4 $ 141,106 $ 141,719 (.4 ) $ 20,666 $ 16,846 22.7
Goodwill
1,912 1,647 16.1 3,261 3,475 (6.2 ) 1,761 1,619 8.8
Other intangible assets
4 5 (20.0 ) 3,176 2,493 27.4 265 42 *
Assets
127,651 114,069 11.9 157,696 164,131 (3.9 ) 24,446 20,120 21.5
Noninterest-bearing deposits
62,285 56,281 10.7 32,094 32,861 (2.3 ) 27,350 21,338 28.2
Interest-bearing deposits
86,618 71,377 21.4 166,765 151,406 10.1 69,909 83,474 (16.3 )
Total deposits
148,903 127,658 16.6 198,859 184,267 7.9 97,259 104,812 (7.2 )
Total U.S. Bancorp shareholders’ equity
13,710 14,354 (4.5 ) 12,275 12,496 (1.8 ) 3,595 3,034 18.5

Payment
Services

Treasury and
Corporate Support

Consolidated
Company

Three Month Ended March 31
(Dollars in Millions)
2022 2021 Percent
Change    2022 2021 Percent
Change    2022 2021 Percent
Change
Condensed Income Statement

Net interest income (taxable-equivalent basis)
$ 622 $ 629 (1.1 )% $ 52 $ (32 ) * % $ 3,200 $ 3,089 3.6 %
Noninterest income
858 785 9.3 236 228 3.5 2,396 2,381 .6
Total net revenue
1,480 1,414 4.7 288 196 46.9 5,596 5,470 2.3
Noninterest expense
854 805 6.1 237 327 (27.5 ) 3,502 3,379 3.6
Income (loss) before provision and income taxes
626 609 2.8 51 (131 ) * 2,094 2,091 .1
Provision for credit losses
130 (41 ) * (78 ) (706 ) 89.0 112 (827 ) *
Income (loss) before income taxes
496 650 (23.7 ) 129 575 (77.6 ) 1,982 2,918 (32.1 )
Income taxes and taxable-equivalent adjustment
124 163 (23.9 ) (40 ) 46 * 424 633 (33.0 )
Net income (loss)
372 487 (23.6 ) 169 529 (68.1 ) 1,558 2,285 (31.8 )
Net (income) loss attributable to noncontrolling interests
— — — (1 ) (5 ) 80.0 (1 ) (5 ) 80.0
Net income (loss) attributable to U.S. Bancorp
$ 372 $ 487 (23.6 ) $ 168 $ 524 (67.9 ) $ 1,557 $ 2,280 (31.7 )
Average Balance Sheet

Loans
$ 31,740 $ 29,630 7.1 $ 3,820 $ 3,867 (1.2 ) $ 312,966 $ 293,989 6.5
Goodwill
3,325 3,173 4.8 — — — 10,259 9,914 3.5
Other intangible assets
464 542 (14.4 ) — — — 3,909 3,082 26.8
Assets
38,540 35,091 9.8 229,069 215,323 6.4 577,402 548,734 5.2
Noninterest-bearing deposits
3,673 5,264 (30.2 ) 2,561 2,608 (1.8 ) 127,963 118,352 8.1
Interest-bearing deposits
160 132 21.2 2,761 1,623 70.1 326,213 308,012 5.9
Total deposits
3,833 5,396 (29.0 ) 5,322 4,231 25.8 454,176 426,364 6.5
Total U.S. Bancorp shareholders’ equity
8,019 7,658 4.7 15,867 15,187 4.5

53,466

52,729 1.4

*	~~Not meaningful~~


~~U.S. Bancorp~~		29

~~Table of Contents~~

Treasury and Corporate Support

Treasury and Corporate Support includes the Company’s investment portfolios, funding, capital management, interest rate risk management, income taxes not allocated to the 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 a net loss of $58 million in the second quarter and net income of ~~$168~~$131 million in the first ~~quarter~~six months of 2022, compared with ~~$524~~net income of $269 million and $808 million in the ~~first quarter~~same periods of ~~2021.~~2021, respectively.

Net revenue increased ~~$92~~$6 million ~~(46.9~~(1.9 percent) in the second quarter and $97 million (18.7 percent) in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of 2021. Net interest income, on a taxable-equivalent basis, increased ~~$84~~$29 million (46.0 percent) in the second quarter and $112 million in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of 2021, primarily due to higher investment securities portfolio and cash balances. Noninterest income ~~increased $8~~decreased $23 million ~~(3.5~~(8.9 percent) in the second quarter and $15 million (3.1 percent) in the first ~~quarter~~six months of 2022, compared with the ~~first quarter of 2021, primarily due to the impact of COVID-related deposit service charges refunds in the first quarter of 2021.~~

~~Noninterest expense decreased $90 million (27.5 percent) in the first quarter of 2022, compared with the first quarter~~same periods of 2021, primarily due to lower ~~performance-based incentives~~securities gains and lower ~~costs related to~~

~~tax-advantaged~~

~~investments,~~gains on the disposition of assets, partially offset by higher ~~costs~~commercial products revenue.

Noninterest expense increased $171 million (74.7 percent) in the second quarter and $74 million (13.8 percent) in the first six months of ~~capital investments~~2022, compared with the same periods of 2021, primarily due to merger and integration-related charges associated with the planned acquisition of MUFG Union Bank and higher compensation expense reflecting merit increases, hiring to support business growth and core business growth net of lower variable compensation, ~~expense as a result of merit increases.~~partially offset by lower net shared services expense. The provision for credit losses increased ~~$628~~$258 million ~~(89.0~~in the second quarter and $886 million (99.1 percent) in the first ~~quarter~~six months of 2022, compared with the ~~first quarter~~same periods of 2021, reflecting the residual impact of changes in the allowance for credit losses being impacted by ~~rising~~increasing economic uncertainty in the ~~first quarter of 2022,~~current year, compared to improving economic conditions in the ~~first quarter of 2021.~~prior year.

Income taxes are assessed to each line of business at a managerial tax rate of 25.0 percent with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in Treasury and Corporate Support.

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, and

Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the CECL methodology.

These capital measures are viewed by management as useful additional methods of evaluating the Company’s utilization of its capital held and the level of capital available to withstand unexpected negative market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Company’s capital position relative to other financial services companies. These capital measures are not defined in generally accepted accounting principles (“GAAP”), or are not currently effective or defined in banking regulations. In addition, certain of these measures differ from currently effective capital ratios defined by banking regulations principally in that the currently effective ratios, which are subject to certain transitional provisions, temporarily exclude the impact of the 2020 adoption of accounting guidance related to impairment of financial instruments based on the CECL methodology. As a result, these capital measures disclosed by the Company may be considered

non-GAAP

financial measures. Management believes this information helps investors assess trends in the Company’s capital adequacy.


U.S. Bancorp		31

Table of Contents

The Company also discloses net interest income and related ratios and analysis on a taxable-equivalent basis, which may also be considered

non-GAAP

financial measures. The Company believes this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable and

tax-exempt

sources. In addition, certain performance measures, including the efficiency ratio and net interest margin utilize net interest income on a taxable-equivalent basis.

There may be limits in the usefulness of these measures to investors. As a result, the Company encourages readers to consider the consolidated financial statements and other financial information contained in this report in their entirety, and not to rely on any single financial measure.


30		~~U.S. Bancorp~~

~~Table of Contents~~

The following table shows the Company’s calculation of these

non-GAAP

financial measures:


(Dollars in Millions)	March 31, 2022			December 31, 2021			June 30, 2022			December 31, 2021
Total equity	$	51,668		$	55,387		$	49,069		$	55,387
Preferred stock		(6,808	)		(6,371	)		(6,808	)		(6,371	)
Noncontrolling interests		(468	)		(469	)		(464	)		(469	)
Goodwill (net of deferred tax liability) (1)		(9,304	)		(9,323	)		(9,204	)		(9,323	)
Intangible assets, other than mortgage servicing rights		(762	)		(785	)		(780	)		(785	)
Tangible common equity (a)		34,326			38,439			31,813			38,439
Common equity tier 1 capital, determined in accordance with transitional regulatory capital requirements related to the CECL methodology implementation		41,950			41,701			42,944			41,701
Adjustments (2)		(1,298	)		(1,733	)		(1,300	)		(1,733	)
Common equity tier 1 capital, reflecting the full implementation of the CECL methodology (b)		40,652			39,968			41,644			39,968
Total assets		586,517			573,284			591,381			573,284
Goodwill (net of deferred tax liability) (1)		(9,304	)		(9,323	)		(9,204	)		(9,323	)
Intangible assets, other than mortgage servicing rights		(762	)		(785	)		(780	)		(785	)
Tangible assets (c)		576,451			563,176			581,397			563,176
Risk-weighted assets, determined in accordance with prescribed regulatory capital requirements effective for the Company (d)		427,174			418,571			441,804			418,571
Adjustments (3)		(351	)		(357	)		(317	)		(357	)
Risk-weighted assets, reflecting the full implementation of the CECL methodology (e)		426,823			418,214			441,487			418,214

Ratios
Tangible common equity to tangible assets (a)/(c)		6.0	%		6.8	%		5.5	%		6.8	%
Tangible common equity to risk-weighted assets (a)/(d)		8.0			9.2			7.2			9.2
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the CECL methodology (b)/(e)		9.5			9.6			9.4			9.6


	Three Months Ended March 31						Three Months Ended June 30						Six Months Ended June 30
	2022			2021			2022			2021			2022			2021
Net interest income	$	3,173		$	3,063		$	3,435		$	3,137		$	6,608		$	6,200
Taxable-equivalent adjustment (4)		27			26			29			27			56			53
Net interest income, on a taxable-equivalent basis		3,200			3,089			3,464			3,164			6,664			6,253
Net interest income, on a taxable-equivalent basis (as calculated above)		3,200			3,089			3,464			3,164			6,664			6,253
Noninterest income		2,396			2,381			2,548			2,619			4,944			5,000
Less: Securities gains (losses), net		18			25			19			43			37			68
Total net revenue, excluding net securities gains (losses) (f)		5,578			5,445			5,993			5,740			11,571			11,185

Noninterest expense (g)		3,502			3,379			3,724			3,387			7,226			6,766

Efficiency ratio (g)/(f)		62.8	%		62.1	%		62.1	%		59.0	%		62.4	%		60.5	%

(1)	Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.

(2)	Includes the estimated increase in the allowance for credit losses related to the adoption of the CECL methodology net of deferred taxes.

(3)	Includes the impact of the estimated increase in the allowance for credit losses related to the adoption of the CECL methodology.

(4)	Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.


~~U.S. Bancorp~~ 32		31 U.S. Bancorp

Table of Contents

CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies of the Company comply with accounting principles generally accepted in the United States and conform to general practices within the banking industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. The Company’s financial position and results of operations can be affected by these estimates and assumptions, which are integral to understanding the Company’s financial statements. Critical accounting policies are those policies management believes are the most important to the portrayal of the Company’s financial condition and results, and require management to make estimates that are difficult, subjective or complex. Most accounting policies are not considered by management to be critical accounting policies. Management has discussed the development and the selection of critical accounting policies with the Company’s Audit Committee. Those policies considered to be critical accounting policies relate to the allowance for credit losses, fair value estimates, MSRs, and income taxes. These accounting policies are discussed in detail in “Management’s Discussion and Analysis — Critical Accounting Policies” and the Notes to Consolidated Financial Statements in the Company’s Annual Report on

Form 10-K

for the year ended December 31, 2021.

CONTROLS AND PROCEDURES

Under the supervision and with the participation of the Company’s management, including its principal executive officer and principal financial officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in

Rules 13a-15(e)

and

15d-15(e)

under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon this evaluation, the principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

During the most recently completed fiscal quarter, there was no change made in the Company’s internal control over financial reporting (as defined in Rules

13a-15(f)

and

15d-15(f)

under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


32 U.S. Bancorp		~~U.S. Bancorp~~ 33

Table of Contents

U.S. Bancorp

Consolidated Balance Sheet

(Dollars in Millions)
March 31,
2022

December 31,
2021

(Unaudited)

Assets

Cash and due from banks
$ 44,303 $ 28,905
Investment securities

Held-to-maturity
(fair value $40,572 and $41,812, respectively)
43,654 41,858
Available-for-sale
($855 and $557 pledged as collateral, respectively) (a)
123,593 132,963
Loans held for sale (including $2,203 and $6,623 of mortgage loans carried at fair value, respectively)
3,321 7,775
Loans

Commercial
117,470 112,023
Commercial real estate
39,191 39,053
Residential mortgages
78,487 76,493
Credit card
22,163 22,500
Other retail
61,623 61,959
Total loans
318,934 312,028
Less allowance for loan losses
(5,664 ) (5,724 )
Net loans
313,270 306,304
Premises and equipment
3,207 3,305
Goodwill
10,250 10,262
Other intangible assets
4,194 3,738
Other assets (including $1,111 and $1,193 of trading securities at fair value pledged as collateral, respectively) (a)
40,725 38,174
Total assets
$ 586,517 $ 573,284

Liabilities and Shareholders’ Equity

Deposits

Noninterest-bearing
$ 129,793 $ 134,901
Interest-bearing
331,753 321,182
Total deposits
461,546 456,083
Short-term borrowings
21,042 11,796
Long-term debt
32,931 32,125
Other liabilities
19,330 17,893
Total liabilities
534,849 517,897
Shareholders’ equity

Preferred stock
6,808 6,371
Common stock, par value $0.01 a share—authorized: 4,000,000,000 shares; issued: 3/31/22 and 12/31/21—2,125,725,742 shares
21 21
Capital surplus
8,515 8,539
Retained earnings
69,987 69,201
Less cost of common stock in treasury: 3/31/22 - 640,053,754 shares; 12/31/21—642,223,571 shares
(27,193 ) (27,271 )
Accumulated other comprehensive income (loss)
(6,938 ) (1,943 )
Total U.S. Bancorp shareholders’ equity
51,200 54,918
Noncontrolling interests
468 469
Total equity
51,668 55,387
Total liabilities and equity
$ 586,517 $ 573,284


(Dollars in Millions)	June 30, 2022			December 31, 2021
	(Unaudited)

Assets
Cash and due from banks	$	39,124		$	28,905
Investment securities
Held-to-maturity (fair value $55,657 and $41,812, respectively)		61,503			41,858
Available-for-sale ($987 and $557 pledged as collateral, respectively) (a)		98,806			132,963
Loans held for sale (including $2,773 and $6,623 of mortgage loans carried at fair value, respectively)		3,943			7,775
Loans
Commercial		125,983			112,023
Commercial real estate		39,753			39,053
Residential mortgages		82,114			76,493
Credit card		23,697			22,500
Other retail		60,822			61,959
Total loans		332,369			312,028
Less allowance for loan losses		(5,832	)		(5,724	)
Net loans		326,537			306,304
Premises and equipment		3,177			3,305
Goodwill		10,157			10,262
Other intangible assets		4,487			3,738
Other assets (including $1,258 and $1,193 of trading securities at fair value pledged as collateral, respectively) (a)		43,647			38,174
Total assets	$	591,381		$	573,284

Liabilities and Shareholders’ Equity
Deposits
Noninterest-bearing	$	129,130		$	134,901
Interest-bearing		337,972			321,182
Total deposits		467,102			456,083
Short-term borrowings		24,963			11,796
Long-term debt		29,408			32,125
Other liabilities		20,839			17,893
Total liabilities		542,312			517,897
Shareholders’ equity
Preferred stock		6,808			6,371
Common stock, par value $0.01 a share—authorized: 4,000,000,000 shares; issued: 6/30/22 and 12/31/21—2,125,725,742 shares		21			21
Capital surplus		8,555			8,539
Retained earnings		70,772			69,201
Less cost of common stock in treasury: 6/30/22—639,959,317 shares; 12/31/21—642,223,571 shares		(27,190	)		(27,271	)
Accumulated other comprehensive income (loss)		(10,361	)		(1,943	)
Total U.S. Bancorp shareholders’ equity		48,605			54,918
Noncontrolling interests		464			469
Total equity		49,069			55,387
Total liabilities and equity	$	591,381		$	573,284

(a)	Includes only collateral pledged by the Company where counterparties have the right to sell or pledge the collateral.

See Notes to Consolidated Financial Statements.


3 4		U.S. Bancorp

Table of Contents

U.S. Bancorp

Consolidated Statement of Income


(Dollars and Shares in Millions, Except Per Share Data) (Unaudited)	Three Months Ended June 30						Six Months Ended June 30
	2022			2021			2022			2021
Interest Income
Loans	$	2,869		$	2,677		$	5,468		$	5,401
Loans held for sale		54			55			114			122
Investment securities		806			618			1,523			1,135
Other interest income		96			32			138			65
Total interest income		3,825			3,382			7,243			6,723
Interest Expense
Deposits		177			82			257			167
Short-term borrowings		57			18			78			34
Long-term debt		156			145			300			322
Total interest expense		390			245			635			523
Net interest income		3,435			3,137			6,608			6,200
Provision for credit losses		311			(170	)		423			(997	)
Net interest income after provision for credit losses		3,124			3,307			6,185			7,197
Noninterest Income
Credit and debit card revenue		399			396			737			732
Corporate payment products revenue		172			138			330			264
Merchant processing services		425			374			788			692
Trust and investment management fees		566			446			1,066			890
Deposit service charges		165			176			342			337
Treasury management fees		169			160			325			307
Commercial products revenue		290			280			556			560
Mortgage banking revenue		142			346			342			645
Investment products fees		59			60			121			115
Securities gains (losses), net		19			43			37			68
Other		142			200			300			390
Total noninterest income		2,548			2,619			4,944			5,000
Noninterest Expense
Compensation		1,872			1,798			3,725			3,601
Employee benefits		374			337			770			721
Net occupancy and equipment		265			258			534			521
Professional services		111			108			225			206
Marketing and business development		106			90			186			138
Technology and communications		350			362			699			721
Postage, printing and supplies		69			65			141			134
Other intangibles		40			40			87			78
Merger and integration charges		197			—			197			—
Other		340			329			662			646
Total noninterest expense		3,724			3,387			7,226			6,766
Income before income taxes		1,948			2,539			3,903			5,431
Applicable income taxes		414			551			811			1,158
Net income		1,534			1,988			3,092			4,273
Net (income) loss attributable to noncontrolling interests		(3	)		(6	)		(4	)		(11	)
Net income attributable to U.S. Bancorp	$	1,531		$	1,982		$	3,088		$	4,262
Net income applicable to U.S. Bancorp common shareholders	$	1,464		$	1,914		$	2,930		$	4,089
Earnings per common share	$	.99		$	1.29		$	1.97		$	2.73
Diluted earnings per common share	$	.99		$	1.28		$	1.97		$	2.73
Average common shares outstanding		1,486			1,489			1,485			1,495
Average diluted common shares outstanding		1,487			1,490			1,486			1,497

See Notes to Consolidated Financial Statements.


U.S. Bancorp		333 5

Table of Contents

U.S. Bancorp

Consolidated Statement of Comprehensive Income

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

Three Months Ended
March 31

2022 2021
Interest Income

Loans
$ 2,599 $ 2,724
Loans held for sale
60 67
Investment securities
717 517
Other interest income
42 33
Total interest income
3,418 3,341
Interest Expense

Deposits
80 85
Short-term borrowings
21 16
Long-term debt
144 177
Total interest expense
245 278
Net interest income
3,173 3,063
Provision for credit losses
112 (827 )
Net interest income after provision for credit losses
3,061 3,890
Noninterest Income

Credit and debit card revenue
338 336
Corporate payment products revenue
158 126
Merchant processing services
363 318
Trust and investment management fees
500 444
Deposit service charges
177 161
Treasury management fees
156 147
Commercial products revenue
266 280
Mortgage banking revenue
200 299
Investment products fees
62 55
Securities gains (losses), net
18 25
Other
158 190
Total noninterest income
2,396 2,381
Noninterest Expense

Compensation
1,853 1,803
Employee benefits
396 384
Net occupancy and equipment
269 263
Professional services
114 98
Marketing and business development
80 48
Technology and communications
349 359
Postage, printing and supplies
72 69
Other intangibles
47 38
Other
322 317
Total noninterest expense
3,502 3,379
Income before income taxes
1,955 2,892
Applicable income taxes
397 607
Net income
1,558 2,285
Net (income) loss attributable to noncontrolling interests
(1 ) (5 )
Net income attributable to U.S. Bancorp
$ 1,557 $ 2,280
Net income applicable to U.S. Bancorp common shareholders
$ 1,466 $ 2,175
Earnings per common share
$ .99 $ 1.45
Diluted earnings per common share
$ .99 $ 1.45
Average common shares outstanding
1,485 1,502
Average diluted common shares outstanding
1,486 1,503


(Dollars in Millions) (Unaudited)	Three Months Ended June 30						Six Months Ended June 30
(Dollars in Millions) (Unaudited)	2022			2021			2022			2021
Net income	$	1,534		$	1,988		$	3,092		$	4,273
Other Comprehensive Income (Loss)
Changes in unrealized gains (losses) on investment securities available-for-sale		(4,761	)		1,195			(11,515	)		(2,183	)
Changes in unrealized gains (losses) on derivative hedges		98			14			98			113
Foreign currency translation		(3	)		(1	)		(3	)		24
Reclassification to earnings of realized (gains) losses		84			(11	)		151			7
Income taxes related to other comprehensive income (loss)		1,159			(304	)		2,851			515
Total other comprehensive income (loss)		(3,423	)		893			(8,418	)		(1,524	)
Comprehensive income (loss)		(1,889	)		2,881			(5,326	)		2,749
Comprehensive (income) loss attributable to noncontrolling interests		(3	)		(6	)		(4	)		(11	)

Comprehensive income (loss) attributable to U.S. Bancorp	$	(1,892	)	$	2,875		$	(5,330	)	$	2,738

See Notes to Consolidated Financial Statements.


343 6		U.S. Bancorp

Table of Contents

U.S. Bancorp

~~Consolidated Statement of Comprehensive Income~~

(Dollars in Millions)
(Unaudited)
Three Months Ended
March 31
2022 2021
Net income
$ 1,558 $ 2,285
Other Comprehensive Income (Loss)

Changes in unrealized gains (losses) on investment securities
available-for-sale
(6,754 ) (3,378 )
Changes in unrealized gains (losses) on derivative hedges
– 99
Foreign currency translation
– 25
Reclassification to earnings of realized (gains) losses
67 18
Income taxes related to other comprehensive income (loss)
1,692 819
Total other comprehensive income (loss)
(4,995 ) (2,417 )
Comprehensive income (loss) (3,437 ) (132 )
Comprehensive (income) loss attributable to noncontrolling interests
(1 ) (5 )

Comprehensive income (loss) attributable to U.S. Bancorp $ (3,438 ) $ (137 )

~~See Notes to Consolidated Financial Statements.~~


~~U.S. Bancorp~~		35

~~Table of Contents~~

~~U.S. Bancorp~~

Consolidated Statement of Shareholders’ Equity

U.S. Bancorp Shareholders
(Dollars and Shares in Millions, Except Per
Share Data) (Unaudited)
Common
Shares
Outstanding

Preferred
Stock

Common
Stock

Capital
Surplus

Retained
Earnings

Treasury
Stock

Accumulated
Other
Comprehensive
Income (Loss)

Total
U.S. Bancorp
Shareholders’
Equity

Noncontrolling
Interests

Total
Equity

Balance December 31, 2020
1,507 $ 5,983 $ 21 $ 8,511 $ 64,188 $ (25,930 ) $ 322 $ 53,095 $ 630 $ 53,725
Net income (loss)
2,280 2,280 5 2,285
Other comprehensive income (loss)
(2,417 ) (2,417 ) (2,417 )
Preferred stock dividends (a)
(90 ) (90 ) (90 )
Common stock dividends ($.42 per share)
(633 ) (633 ) (633 )
Issuance of preferred stock
730 730 730
Call of preferred stock
(745 ) (5 ) (750 ) (750 )
Issuance of common and treasury stock
3 (119 ) 137 18 18
Purchase of treasury stock
(13 ) (650 ) (650 ) (650 )
Distributions to noncontrolling interests
— (5 ) (5 )
Stock option and restricted stock grants
95 95 95

Balance March 31, 2021
1,497 $ 5,968 $ 21 $ 8,487 $ 65,740 $ (26,443 ) $ (2,095 ) $ 51,678 $ 630 $ 52,308

Balance December 31, 2021
1,484 $ 6,371 $ 21 $ 8,539 $ 69,201 $ (27,271 ) $ (1,943 ) $ 54,918 $ 469 $ 55,387
Net income (loss)
1,557 1,557 1 1,558
Other comprehensive income (loss)
(4,995 ) (4,995 ) (4,995 )
Preferred stock dividends (b)
(84 ) (84 ) (84 )
Common stock dividends ($.46 per share)
(687 ) (687 ) (687 )
Issuance of preferred stock
437 437 437
Issuance of common and treasury stock
3 (116 ) 132 16 16
Purchase of treasury stock
(1 ) (54 ) (54 ) (54 )
Distributions to noncontrolling interests
— (2 ) (2 )
Stock option and restricted stock grants
92 92 92

Balance March 31, 2022
1,486 $ 6,808 $ 21 $ 8,515 $ 69,987 $ (27,193 ) $ (6,938 ) $ 51,200 $ 468 $ 51,668


	U.S. Bancorp Shareholders
(Dollars and Share s in Millions, Except Per Share Data) (Unaudited)	Common Shares Outstanding			Preferred Stock			Common Stock		Capital Surplus			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total U.S. Bancorp Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance March 31, 2021		1,497		$	5,968		$	21	$	8,487		$	65,740		$	(26,443	)	$	(2,095	)	$	51,678		$	630		$	52,308
Net income (loss)													1,982									1,982			6			1,988
Other comprehensive income (loss)																			893			893						893
Preferred stock dividends (a)													(58	)								(58	)					(58	)
Common stock dividends ($.42 per share)													(625	)								(625	)					(625	)
Issuance of common and treasury stock		1								(7	)					25						18						18
Purchase of treasury stock		(15	)													(887	)					(887	)					(887	)
Distributions to noncontrolling interests																						—			(6	)		(6	)
Net other changes in noncontrolling interests																						—			5			5
Stock option and restricted stock grants										38												38						38

Balance June 30, 2021		1,483		$	5,968		$	21	$	8,518		$	67,039		$	(27,305	)	$	(1,202	)	$	53,039		$	635		$	53,674

Balance March 31, 2022		1,486		$	6,808		$	21	$	8,515		$	69,987		$	(27,193	)	$	(6,938	)	$	51,200		$	468		$	51,668
Net income (loss)													1,531									1,531			3			1,534
Other comprehensive income (loss)																			(3,423	)		(3,423	)					(3,423	)
Preferred stock dividends (b)													(59	)								(59	)					(59	)
Common stock dividends ($.46 per share)													(687	)								(687	)					(687	)
Issuance of common and treasury stock										(3	)					4						1						1
Purchase of treasury stock																(1	)					(1	)					(1	)
Distributions to noncontrolling interests																						—			(2	)		(2	)
Net other changes in noncontrolling interests																						—			(5	)		(5	)
Stock option and restricted stock grants										43												43						43

Balance June 30, 2022		1,486		$	6,808		$	21	$	8,555		$	70,772		$	(27,190	)	$	(10,361	)	$	48,605		$	464		$	49,069

Balance December 31, 2020		1,507		$	5,983		$	21	$	8,511		$	64,188		$	(25,930	)	$	322		$	53,095		$	630		$	53,725
Net income (loss)													4,262									4,262			11			4,273
Other comprehensive income (loss)																			(1,524	)		(1,524	)					(1,524	)
Preferred stock dividends (c)													(148	)								(148	)					(148	)
Common stock dividends ($.84 per share)													(1,258	)								(1,258	)					(1,258	)
Issuance of preferred stock					730																	730						730
Redemption of preferred stock					(745	)							(5	)								(750	)					(750	)
Issuance of common and treasury stock		4								(126	)					162						36						36
Purchase of treasury stock		(28	)													(1,537	)					(1,537	)					(1,537	)
Distributions to noncontrolling interests																						—			(11	)		(11	)
Net other changes in noncontrolling interests																						—			5			5
Stock option and restricted stock grants										133												133						133

Balance June 30, 2021		1,483		$	5,968		$	21	$	8,518		$	67,039		$	(27,305	)	$	(1,202	)	$	53,039		$	635		$	53,674

Balance December 31, 2021		1,484		$	6,371		$	21	$	8,539		$	69,201		$	(27,271	)	$	(1,943	)	$	54,918		$	469		$	55,387
Net income (loss)													3,088									3,088			4			3,092
Other comprehensive income (loss)																			(8,418	)		(8,418	)					(8,418	)
Preferred stock dividends (d)													(143	)								(143	)					(143	)
Common stock dividends ($.92 per share)													(1,374	)								(1,374	)					(1,374	)
Issuance of preferred stock					437																	437						437
Issuance of common and treasury stock		3								(119	)					136						17						17
Purchase of treasury stock		(1	)													(55	)					(55	)					(55	)
Distributions to noncontrolling interests																						—			(4	)		(4	)
Net other changes in noncontrolling interests																						—			(5	)		(5	)
Stock option and restricted stock grants										135												135						135

Balance June 30, 2022		1,486		$	6,808		$	21	$	8,555		$	70,772		$	(27,190	)	$	(10,361	)	$	48,605		$	464		$	49,069

(a)	Reflects dividends declared per share on the Company’s Series A, Series B, Series F, Series K, Series L and Series M Non-Cumulative Perpetual Preferred Stock of $884.722, $221.181, $406.25, $343.75, $234.375 and $250.00 respectively.

(b)	Reflects dividends declared per share on the Company’s Series A, Series B, Series K, Series L, Series M, Series N and Series O Non-Cumulative Perpetual Preferred Stock of $884.722, $221.181, $343.75, $234.375, $250.00, $231.25 and $281.25 respectively.

(c)

Reflects dividends declared per share on the Company’s Series A, Series B, Series F, Series I, Series J, Series K, Series L and Series M

Non-Cumulative

Perpetual Preferred Stock of ~~$875.00, $218.75, $406.25,~~$1,759.722, $439.931, $812.50, $232.953, $662.50, ~~$343.75, $234.375,~~$687.50, $468.75 and ~~$202.778~~$452.778 respectively.

~~(b)~~(d)

Reflects dividends declared per share on the Company’s Series A, Series B, Series J, Series K, Series L, Series M, Series N and Series O

Non-Cumulative

Perpetual Preferred Stock of ~~$875.00, $218.75,~~$1,759.722, $439.931, $662.50, ~~$343.75, $234.375, $250.00, $231.25~~$687.50, $468.75, $500.00, $462.50 and ~~$206.25~~$487.50 respectively.

See Notes to Consolidated Financial Statements.


36		~~U.S. Bancorp~~

~~Table of Contents~~

~~U.S. Bancorp~~

~~Consolidated Statement of Cash Flows~~

(Dollars in Millions)
(Unaudited)

Three Months Ended
March 31

2022 2021
Operating Activities

Net income attributable to U.S. Bancorp
$ 1,557 $ 2,280
Adjustments to reconcile net income to net cash provided by operating activities

Provision for credit losses
112 (827 )
Depreciation and amortization of premises and equipment
85 84
Amortization of intangibles
47 38
(Gain) loss on sale of loans held for sale
62 (213 )
(Gain) loss on sale of securities and other assets
(42 ) (66 )
Loans originated for sale, net of repayments
(9,827 ) (20,928 )
Proceeds from sales of loans held for sale
13,874 20,397
Other, net
2,609 172
Net cash provided by operating activities
8,477 937
Investing Activities

Proceeds from sales of
available-for-sale
investment securities
12,527 1,062
Proceeds from maturities of
held-to-maturity
investment securities
1,173 —
Proceeds from maturities of
available-for-sale
investment securities
5,498 12,550
Purchases of
held-to-maturity
investment securities
(2,932 ) —
Purchases of
available-for-sale
investment securities
(15,989 ) (36,182 )
Net (increase) decrease in loans outstanding
(7,278 ) 3,562
Proceeds from sales of loans
1,309 1,062
Purchases of loans
(1,073 ) (1,600 )
Net increase in securities purchased under agreements to resell (147 ) (26 )
Other, net (452 ) 106
Net cash used in investing activities (7,364 ) (19,466 )
Financing Activities

Net increase in deposits
5,463 3,991
Net increase in short-term borrowings
9,246 332
Proceeds from issuance of long-term debt
2,153 69
Principal payments or redemption of long-term debt
(1,118 ) (3,830 )
Proceeds from issuance of preferred stock
437 730
Proceeds from issuance of common stock
15 17
Repurchase of preferred stock
(1,100 ) (500 )
Repurchase of common stock
(54 ) (646 )
Cash dividends paid on preferred stock
(70 ) (76 )
Cash dividends paid on common stock
(687 ) (637 )
Net cash provided by (used in) financing activities
14,285 (550 )
Change in cash and due from banks
15,398 (19,079 )
Cash and due from banks at beginning of period
28,905 62,580
Cash and due from banks at end of period
$ 44,303 $ 43,501

~~See Notes to Consolidated Financial Statements.~~


U.S. Bancorp		373 7

Table of Contents

are those loans where a well-defined weakness has been identified that may put full collection of contractual cash flows at risk. It is possible that others, given the same information, may reach different reasonable conclusions regarding the credit quality rating classification of specific loans.


~~U.S. Bancorp~~		45

~~Table of Contents~~

The following table provides a summary of loans by portfolio class and the Company’s internal credit quality rating:

March 31, 2022          December 31, 2021
Criticized       Criticized
(Dollars in Millions) Pass
Special
Mention
Classified (a)
Total
Criticized
Total          Pass
Special
Mention
Classified (a)
Total
Criticized
Total
Commercial

Originated in 2022
$ 13,554 $ 8 $ 45 $ 53 $ 13,607       $          – $       – $       – $         – $          –
Originated in 2021
47,131 378 283 661 47,792         51,155 387 287 674 51,829
Originated in 2020
11,779 38 312 350 12,129       14,091 304 133 437 14,528
Originated in 2019
8,761 24 99 123 8,884       10,159 151 54 205 10,364
Originated in 2018
4,475 11 44 55 4,530       5,122 3 36 39 5,161
Originated prior to 2018
4,251 17 49 66 4,317       4,923 30 81 111 5,034
Revolving
25,756 261 194 455 26,211       24,722 268 117 385 25,107
Total commercial
115,707 737 1,026 1,763 117,470       110,172 1,143 708 1,851 112,023

Commercial real estate

Originated in 2022
3,170 110 185 295 3,465       – – – – –
Originated in 2021
12,419 17 705 722 13,141       13,364 6 990 996 14,360
Originated in 2020
6,907 78 241 319 7,226       7,459 198 263 461 7,920
Originated in 2019
5,750 310 556 866 6,616       6,368 251 610 861 7,229
Originated in 2018
2,847 42 213 255 3,102       2,996 29 229 258 3,254
Originated prior to 2018
3,898 19 152 171 4,069       4,473 55 224 279 4,752
Revolving
1,530 – 42 42 1,572       1,494 1 43 44 1,538
Total commercial real estate
36,521 576 2,094 2,670 39,191       36,154 540 2,359 2,899 39,053

Residential mortgages (b)

Originated in 2022
6,431 – – – 6,431       – – – – –
Originated in 2021
29,721 – 4 4 29,725       29,882 – 3 3 29,885
Originated in 2020
14,850 – 10 10 14,860       15,948 1 8 9 15,957
Originated in 2019
6,154 – 23 23 6,177       6,938 – 36 36 6,974
Originated in 2018
2,553 – 20 20 2,573       2,889 – 30 30 2,919
Originated prior to 2018
18,407 – 313 313 18,720       20,415 – 342 342 20,757
Revolving
1 – – – 1       1 – – – 1
Total residential mortgages
78,117 – 370 370 78,487       76,073 1 419 420 76,493

Credit card (c)
21,998 – 165 165 22,163       22,335 – 165 165 22,500

Other retail

Originated in 2022
4,644 – – – 4,644       – – – – –
Originated in 2021
20,495 – 7 7 20,502       22,455 – 6 6 22,461
Originated in 2020
10,972 – 9 9 10,981       12,071 – 9 9 12,080
Originated in 2019
6,327 – 14 14 6,341       7,223 – 17 17 7,240
Originated in 2018
2,675 – 12 12 2,687       3,285 – 14 14 3,299
Originated prior to 2018
3,174 – 20 20 3,194       3,699 – 24 24 3,723
Revolving
12,644 – 127 127 12,771       12,532 – 112 112 12,644
Revolving converted to term
460 – 43 43 503       472 – 40 40 512
Total other retail
61,391 – 232 232 61,623       61,737 – 222 222 61,959
Total loans
$313,734 $1,313 $3,887 $  5,200 $318,934       $306,471 $1,684 $3,873 $ 5,557 $312,028
Total outstanding commitments
$678,366 $2,372 $5,684 $8,056 $686,422       $662,363 $3,372 $5,684 $ 9,056 $671,419


	June 30, 2022											December 31, 2021
			Criticized											Criticized
(Dollars in Millions)	Pass		Special Mention		Classified (a)		Total Criticized		Total		��	Pass		Special Mention		Classified (a)		Total Criticized		Total
Commercial
Originated in 2022		$ 32,672		$ 52		$ 142		$ 194		$ 32,866			$ –		$ –		$ –		$ –		$ –
Originated in 2021		40,532		298		110		408		40,940			51,155		387		287		674		51,829
Originated in 2020		9,809		11		292		303		10,112			14,091		304		133		437		14,528
Originated in 2019		6,624		6		61		67		6,691			10,159		151		54		205		10,364
Originated in 2018		3,313		3		20		23		3,336			5,122		3		36		39		5,161
Originated prior to 2018		3,902		18		38		56		3,958			4,923		30		81		111		5,034
Revolving (b)		27,628		277		175		452		28,080			24,722		268		117		385		25,107
Total commercial		124,480		665		838		1,503		125,983			110,172		1,143		708		1,851		112,023

Commercial real estate
Originated in 2022		6,689		148		449		597		7,286			–		–		–		–		–
Originated in 2021		11,992		63		452		515		12,507			13,364		6		990		996		14,360
Originated in 2020		6,570		16		181		197		6,767			7,459		198		263		461		7,920
Originated in 2019		5,009		140		340		480		5,489			6,368		251		610		861		7,229
Originated in 2018		2,348		29		211		240		2,588			2,996		29		229		258		3,254
Originated prior to 2018		3,438		19		143		162		3,600			4,473		55		224		279		4,752
Revolving		1,511		–		5		5		1,516			1,494		1		43		44		1,538
Total commercial real estate		37,557		415		1,781		2,196		39,753			36,154		540		2,359		2,899		39,053

Residential mortgages (c)
Originated in 2022		12,396		–		–		–		12,396			–		–		–		–		–
Originated in 2021		29,446		–		3		3		29,449			29,882		–		3		3		29,885
Originated in 2020		14,384		–		10		10		14,394			15,948		1		8		9		15,957
Originated in 2019		5,834		–		24		24		5,858			6,938		–		36		36		6,974
Originated in 2018		2,383		–		18		18		2,401			2,889		–		30		30		2,919
Originated prior to 2018		17,328		–		288		288		17,616			20,415		–		342		342		20,757
Revolving		–		–		–		–		–			1		–		–		–		1
Total residential mortgages		81,771		–		343		343		82,114			76,073		1		419		420		76,493

Credit card (d)		23,532		–		165		165		23,697			22,335		–		165		165		22,500

Other retail
Originated in 2022		7,650		–		1		1		7,651			–		–		–		–		–
Originated in 2021		18,825		–		8		8		18,833			22,455		–		6		6		22,461
Originated in 2020		9,981		–		10		10		9,991			12,071		–		9		9		12,080
Originated in 2019		5,476		–		13		13		5,489			7,223		–		17		17		7,240
Originated in 2018		2,204		–		10		10		2,214			3,285		–		14		14		3,299
Originated prior to 2018		2,626		–		18		18		2,644			3,699		–		24		24		3,723
Revolving		13,381		–		113		113		13,494			12,532		–		112		112		12,644
Revolving converted to term		464		–		42		42		506			472		–		40		40		512
Total other retail		60,607		–		215		215		60,822			61,737		–		222		222		61,959
Total loans		$327,947		$1,080		$3,342		$4,422		$332,369			$306,471		$1,684		$3,873		$5,557		$312,028
Total outstanding commitments		$702,561		$2,021		$4,851		$6,872		$709,433			$662,363		$3,372		$5,684		$9,056		$671,419

Note:

Year of origination is based on the origination date of a loan, or for existing loans the date when the maturity date, pricing or commitment amount is amended.

(a)	Classified rating on consumer loans primarily based on delinquency status.

(b)	Includes an immaterial amount of revolving converted to term loans.

(c)

At ~~March 31,~~June 30, 2022, ~~$1.3~~$1.7 billion of GNMA loans 90 days or more past due and ~~$978~~$965 million of restructured GNMA loans whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs were classified with a pass rating, compared with $1.5 billion and $1.1 billion at December 31, 2021, respectively.

~~(c)~~(d)

~~All~~Predominately all credit card loans are considered revolving loans. Includes an immaterial amount of revolving converted to term loans.

Troubled Debt Restructurings

In certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term. Concessionary modifications are classified as TDRs unless the modification results in only an insignificant delay in payments to be received. The Company recognizes interest on TDRs if the borrower complies with the revised terms and conditions as agreed upon with the Company and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles, which is generally six months or greater. To the extent a previous restructuring was insignificant, the Company considers the cumulative effect of past restructurings related to the receivable when determining whether a current restructuring is a TDR.


46 U.S. Bancorp		~~U.S. Bancorp~~ 4 7

Table of Contents

The following table provides a summary of loans modified as TDRs for the periods presented by portfolio class:

2022          2021
Three Months Ended March 31
(Dollars in Millions)
Number
of Loans
Pre-Modification

Outstanding
Loan Balance
Post-Modification

Outstanding
Loan Balance          Number
of Loans
Pre-Modification

Outstanding
Loan Balance
Post-Modification

Outstanding
Loan Balance
Commercial
509    $     38    $  32       704    $   75    $   60
Commercial real estate
9    11    10       56    86    71
Residential mortgages
840    228    226       336    104    104
Credit card
9,339    50    50       5,786    33    34
Other retail
728    37    37       1,325    37    32
Total loans, excluding loans purchased from GNMA mortgage pools
11,425    364    355       8,207    335    301
Loans purchased from GNMA mortgage pools
390    55    55       559    87    89
Total loans
11,815    $   419    $410       8,766    $   422    $   390


	2022						2021
(Dollars in Millions)	Number of Loans		Pre-Modification Outstanding Loan Balance		Post-Modification Outstanding Loan Balance		Number of Loans		Pre-Modification Outstanding Loan Balance		Post-Modification Outstanding Loan Balance
Three Months Ended June 30
Commercial		506		$ 50		$ 41		526		$ 12		$ 13
Commercial real estate		28		11		9		30		38		41
Residential mortgages		366		106		106		360		141		140
Credit card		8,696		48		49		5,050		31		31
Other retail		756		24		20		468		18		17
Total loans, excluding loans purchased from GNMA mortgage pools		10,352		239		225		6,434		240		242
Loans purchased from GNMA mortgage pools		353		47		50		478		67		69
Total loans		10,705		$ 286		$275		6,912		$ 307		$ 311

Six Months Ended June 30
Commercial		1,015		$ 88		$ 73		1,230		$ 87		$ 73
Commercial real estate		37		22		19		86		124		112
Residential mortgages		1,206		334		332		696		245		244
Credit card		18,035		98		99		10,836		64		65
Other retail		1,484		61		57		1,793		55		49
Total loans, excluding loans purchased from GNMA mortgage pools		21,777		603		580		14,641		575		543
Loans purchased from GNMA mortgage pools		743		102		105		1,037		154		158
Total loans		22,520		$ 705		$685		15,678		$ 729		$ 701

Residential mortgages, home equity and second mortgages, and loans purchased from GNMA mortgage pools in the table above include trial period arrangements offered to customers during the periods presented. The post-modification balances for these loans reflect the current outstanding balance until a permanent modification is made. In addition, the post-modification balances typically include capitalization of unpaid accrued interest and/or fees under the various modification programs. At ~~March 31,~~June 30, 2022, 68 residential mortgages, 18 home equity and second mortgage ~~loan~~loans and 9997 loans purchased from GNMA mortgage pools with outstanding balances of

less than $1

$1 million,

less than $1

$1 million and ~~$14~~$13 million, respectively, were in a trial period and have estimated post-modification balances of

less than $1

$1 million,

less than $1

$1 million and ~~$15~~$14 million, respectively, assuming permanent modification occurs at the end of the trial period.

The Company has implemented certain restructuring programs that may result in TDRs. However, many of the Company’s TDRs are also determined on a

case-by-case

basis in connection with ongoing loan collection processes.

For the commercial lending segment, modifications generally result in the Company working with borrowers on a

case-by-case

basis. Commercial and commercial real estate modifications generally include extensions of the maturity date and may be accompanied by an increase or decrease to the interest rate, which may not be deemed a market interest rate. In addition, the Company may work with the borrower in identifying other changes that mitigate loss to the Company, which may include additional collateral or guarantees to support the loan. To a lesser extent, the Company may waive contractual principal. The Company classifies all of the above concessions as TDRs to the extent the Company determines that the borrower is experiencing financial difficulty.

Modifications for the consumer lending segment are generally part of programs the Company has initiated. The Company modifies residential mortgage loans under Federal Housing Administration, United States Department of Veterans Affairs, or its own internal programs. Under these programs, the Company offers qualifying homeowners the opportunity to permanently modify their loan and achieve more affordable monthly payments by providing loan concessions. These concessions may include adjustments to interest rates, conversion of adjustable rates to fixed rates, extension of maturity dates or deferrals of payments, capitalization of accrued interest and/or outstanding advances, or in limited situations, partial forgiveness of loan principal. In most instances, participation in residential mortgage loan restructuring programs requires the customer to complete a short-term trial period. A permanent loan modification is contingent on the customer successfully completing the trial period arrangement, and the loan documents are not modified until that time. The Company reports loans in a trial period arrangement as TDRs and continues to report them as TDRs after the trial period.

Credit card and other retail loan TDRs are generally part of distinct restructuring programs providing customers experiencing financial difficulty with modifications whereby balances may be amortized up to 60 months, and generally include waiver of fees and reduced interest rates.


48		U.S. Bancorp

Table of Contents

In addition, the Company considers secured loans to consumer borrowers that have debt discharged through bankruptcy where the borrower has not reaffirmed the debt to be TDRs.


~~U.S. Bancorp~~		47

~~Table of Contents~~

The following table provides a summary of TDR loans that defaulted (fully or partially

charged-off

or became 90 days or more past due) for the periods presented, that were modified as TDRs within 12 months previous to default:


Three Months Ended March 31 (Dollars in Millions)	2022				2021
Three Months Ended March 31 (Dollars in Millions)	Number of Loans		Amount Defaulted		Number of Loans		Amount Defaulted
									2022				2021
(Dollars in Millions)									Number of Loans		Amount Defaulted		Number of Loans		Amount Defaulted
Three Months Ended June 30
Commercial		214		$ 3		285		$ 16		175		$ 3		327		$ 8
Commercial real estate		3		1		7		5		2		1		5		1
Residential mortgages		34		3		15		2		79		7		12		1
Credit card		1,634		9		1,764		9		1,727		9		1,805		11
Other retail		83		1		280		5		60		1		191		3
Total loans, excluding loans purchased from GNMA mortgage pools		1,968		17		2,351		37		2,043		21		2,340		24
Loans purchased from GNMA mortgage pools		49		8		30		4		120		17		43		6
Total loans		2,017		$25		2,381		$ 41		2,163		$38		2,383		$ 30

Six Months Ended June 30
Commercial										389		$ 6		612		$ 24
Commercial real estate										5		2		12		6
Residential mortgages										113		10		27		3
Credit card										3,361		18		3,569		20
Other retail										143		2		471		8
Total loans, excluding loans purchased from GNMA mortgage pools										4,011		38		4,691		61
Loans purchased from GNMA mortgage pools										169		25		73		10
Total loans										4,180		$63		4,764		$ 71

In addition to the defaults in the table above, the Company had a total of 1612 and 28 residential mortgage loans, home equity and second mortgage loans and loans purchased from GNMA mortgage pools for the three months and six months ended ~~March 31,~~June 30, 2022, respectively, where borrowers did not successfully complete the trial period arrangement and, therefore, are no longer eligible for a permanent modification under the applicable modification program. These loans had aggregate outstanding balances of $2 million and $4 million for the three months and six months ended ~~March 31, 2022.~~June 30, 2022, respectively.

As of ~~March 31,~~June 30, 2022, the Company had ~~$105~~$112 million of commitments to lend additional funds to borrowers whose terms of their outstanding owed balances have been modified in TDRs.


Note 6		Accounting for Transfers and Servicing of Financial Assets and Variable Interest Entities

The Company transfers financial assets in the normal course of business. The majority of the Company’s financial asset transfers are residential mortgage loan sales primarily to government-sponsored enterprises (“GSEs”), transfers of

tax-advantaged

investments, commercial loan sales through participation agreements, and other individual or portfolio loan and securities sales. In accordance with the accounting guidance for asset transfers, the Company considers any ongoing involvement with transferred assets in determining whether the assets can be derecognized from the balance sheet.~~~~ Guarantees provided to certain third parties in connection with the transfer of assets are further discussed in Note 16.

For loans sold under participation agreements, the Company also considers whether the terms of the loan participation agreement meet the accounting definition of a participating interest. With the exception of servicing and certain performance-based guarantees, the Company’s continuing involvement with financial assets sold is minimal and generally limited to market customary representation and warranty clauses. Any gain or loss on sale depends on the previous carrying amount of the transferred financial assets, the consideration received, and any liabilities incurred in exchange for the transferred assets. Upon transfer, any servicing assets and other interests that continue to be held by the Company are initially recognized at fair value. For further information on mortgage servicing rights (“MSRs”), refer to Note 7. On a limited basis, the Company may acquire and package high-grade corporate bonds for select corporate customers, in which the Company generally has no continuing involvement with these transactions. Additionally, the Company is an authorized GNMA issuer and issues GNMA securities on a regular basis. The Company has no other asset securitizations or similar asset-backed financing arrangements that are

off-balance

sheet.


U.S. Bancorp		49

Table of Contents

The Company also provides financial support primarily through the use of waivers of trust and investment management fees associated with various unconsolidated registered money market funds it manages. The Company provided ~~$58~~$7 million and ~~$47~~$70 million of support to the funds during the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and $65 million and $117 million during the six months ended June 30, 2022 and 2021, respectively.

The Company is involved in various entities that are considered to be variable interest entities (“VIEs”). The Company’s investments in VIEs are primarily related to investments promoting affordable housing, community development and renewable energy sources. Some of these

tax-advantaged

investments support the Company’s regulatory compliance with the Community Reinvestment Act. The Company’s investments in these entities generate a return primarily through the realization of federal and state income tax credits, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These tax credits are recognized as a reduction of tax expense or, for investments qualifying as investment tax credits, as a reduction to the related investment asset. The Company recognized federal and state income tax credits related to its affordable housing and other

tax-advantaged

investments in tax expense of ~~$113~~$112 million and ~~$133~~$110 million for the three months ended


48		~~U.S. Bancorp~~

~~Table of Contents~~

~~March 31,~~ June 30, 2022 and 2021, respectively, and $225 million and $243 million for the six months ended June 30, 2022 and 2021, respectively. The Company also recognized ~~$13~~$162 million and ~~$37~~$123 million of investment tax credits for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and $175 million and $160 million for the six months ended June 30, 2022 and 2021, respectively. The Company recognized ~~$102 million and $126~~$106 million of expenses related to all of these investments for both the three months ended ~~March 31,~~June 30, 2022 and 2021, ~~respectively,~~ of which ~~$91~~$92 million and ~~$92~~$87 million, respectively, were included in tax expense and the remaining amounts were included in noninterest expense. The Company recognized $208 million and $232 million of expenses related to all of these investments for the six months ended June 30, 2022 and 2021, respectively, of which $183 million and $179 million, respectively, were included in tax expense and the remaining amounts were included in noninterest expense.

The Company is not required to consolidate VIEs in which it has concluded it does not have a controlling financial interest, and thus is not the primary beneficiary. In such cases, the Company does not have both the power to direct the entities’ most significant activities and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs.~~~~

The Company’s investments in these unconsolidated VIEs are carried in other assets on the Consolidated Balance Sheet. The Company’s unfunded capital and other commitments related to these unconsolidated VIEs are generally carried in other liabilities on the Consolidated Balance Sheet. The Company’s maximum exposure to loss from these unconsolidated VIEs include the investment recorded on the Company’s Consolidated Balance Sheet, net of unfunded capital commitments, and previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level. While the Company believes potential losses from these investments are remote, the maximum exposure was determined by assuming a scenario where the community-based business and housing projects completely fail and do not meet certain government compliance requirements resulting in recapture of the related tax credits.

The following table provides a summary of investments in community development and

tax-advantaged

VIEs that the Company has not consolidated:

(Dollars in Millions) March 31,
2022    December 31,
2021
Investment carrying amount
$ 5,106    $ 4,484
Unfunded capital and other commitments
2,331    1,890
Maximum exposure to loss
9,764    9,899


(Dollars in Millions)	June 30, 2022		December 31, 2021
Investment carrying amount	$	4,999	$	4,484
Unfunded capital and other commitments		2,210		1,890
Maximum exposure to loss		9,872		9,899

The Company also has noncontrolling financial investments in private investment funds and partnerships considered to be VIEs, which are not consolidated. The Company’s recorded investment in these entities, carried in other assets on the Consolidated Balance Sheet, was approximately ~~$41~~$46 million at ~~March 31,~~June 30, 2022 and $40 million at December 31, 2021. The maximum exposure to loss related to these VIEs was $87 million at June 30, 2022 and $84 million at ~~March 31, 2022 and~~ December 31, 2021, representing the Company’s investment balance and its unfunded commitments to invest additional amounts.

The Company’s individual net investments in unconsolidated VIEs, which exclude any unfunded capital commitments, ranged from less than $1 million to ~~$74~~$105 million at ~~March 31,~~June 30, 2022, compared with less than $1 million to $75 million at December 31, 2021.


5 0		U.S. Bancorp

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The Company is required to consolidate VIEs in which it has concluded it has a controlling financial interest.~~~~

The Company sponsors entities to which it transfers its interests in

tax-advantaged

investments to third parties. At ~~March 31,~~June 30, 2022, approximately $4.9 billion of the Company’s assets and $3.3 billion of its liabilities included on the Consolidated Balance Sheet were related to community development and

tax-advantaged

investment VIEs which the Company has consolidated, primarily related to these transfers. These amounts compared to $5.0 billion and $3.4 billion, respectively, at December 31, 2021. The majority of the assets of these consolidated VIEs are reported in other assets, and the liabilities are reported in long-term debt and other liabilities. The assets of a particular VIE are the primary source of funds to settle its obligations. The creditors of the VIEs do not have recourse to the general credit of the Company. The Company’s exposure to the consolidated VIEs is generally limited to the carrying value of its variable interests plus any related tax credits previously recognized or transferred to others with a guarantee.

In addition, the Company sponsors a municipal bond securities tender option bond program. The Company controls the activities of the program’s entities, is entitled to the residual returns and provides liquidity and remarketing arrangements to the program. As a result, the Company has consolidated the program’s entities. At ~~March 31,~~June 30, 2022, ~~$1.6~~$1.5 billion of

available-for-sale

investment securities and $1.2 billion of short-term borrowings on the Consolidated Balance Sheet were related to the tender option bond program, compared with $1.7 billion of

available-for-sale

investment securities and $1.2 billion of short-term borrowings at December 31, 2021.


~~U.S. Bancorp~~		49

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Note 7		Mortgage Servicing Rights

The Company capitalizes MSRs as separate assets when loans are sold and servicing is retained. MSRs may also be purchased from others. The Company carries MSRs at fair value, with changes in the fair value recorded in earnings during the period in which they occur. The Company serviced ~~$227.2~~$226.4 billion of residential mortgage loans for others at ~~March 31,~~June 30, 2022, and $222.4 billion at December 31, 2021, including subserviced mortgages with no corresponding MSR asset. Included in mortgage banking revenue are the MSR fair value changes arising from market rate and model assumption changes, net of the value change in derivatives used to economically hedge MSRs. These changes resulted in a net ~~loss~~gains of ~~$29~~$13 million and ~~$120~~net losses of $27 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and net losses of $16 million and $147 million for the six months ended June 30, 2022 and 2021, respectively. Loan servicing and ancillary fees, not including valuation changes, included in mortgage banking revenue were ~~$185~~$186 million and ~~$175~~$178 million for the three months ended ~~March 31,~~June 30, 2022 and 2021 respectively, and $371 million and $353 million for the six months ended June 30, 2022 and 2021, respectively.

Changes in fair value of capitalized MSRs are summarized as follows:

Three Months Ended
March 31

(Dollars in Millions) 2022 2021
Balance at beginning of period
$ 2,953 $ 2,210
Rights purchased
3 16
Rights capitalized
237 319
Rights sold (a)
1 —
Changes in fair value of MSRs

Due to fluctuations in market interest rates (b)
368 486
Due to revised assumptions or models (c)
(27 ) (102 )
Other changes in fair value (d)
(103 ) (142 )
Balance at end of period
$ 3,432 $ 2,787


	Three Months Ended June 30						Six Months Ended June 30
(Dollars in Millions)	2022			2021			2022			2021
Balance at beginning of period	$	3,432		$	2,787		$	2,953		$	2,210
Rights purchased		3			11			6			27
Rights capitalized		102			293			339			612
Rights sold (a)		—			1			1			1
Changes in fair value of MSRs
Due to fluctuations in market interest rates (b)		289			(232	)		657			254
Due to revised assumptions or models (c)		6			(37	)		(21	)		(139	)
Other changes in fair value (d)		(125	)		(110	)		(228	)		(252	)
Balance at end of period	$	3,707		$	2,713		$	3,707		$	2,713

(a)	MSRs sold include those having a negative fair value, resulting from the loans being severely delinquent.

(b)	Includes changes in MSR value associated with changes in market interest rates, including estimated prepayment rates and anticipated earnings on escrow deposits.

(c)	Includes changes in MSR value not caused by changes in market interest rates, such as changes in assumed cost to service, ancillary income and option adjusted spread, as well as the impact of any model changes.

(d)	Primarily the change in MSR value from passage of time and cash flows realized (decay), but also includes the impact of changes to expected cash flows not associated with changes in market interest rates, such as the impact of delinquencies.


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The estimated sensitivity to changes in interest rates of the fair value of the MSR portfolio and the related derivative instruments was as follows:


	June 30, 2022												December 31, 2021
(Dollars in Millions)	Down 100 bps		Down 50 bps		Down 25 bps		Up 25 bps		Up 50 bps		Up 100 bps		Down 100 bps		Down 50 bps		Down 25 bps		Up 25 bps		Up 50 bps		Up 100 bps
MSR portfolio	$	(380)	$	(172)	$	(81)	$	71	$	133	$	231	$	(636)	$	(324)	$	(160)	$	150	$	287	$	511
Derivative instrument hedges		371		170		81		(73)		(141)		(261)		614		309		152		(142)		(278)		(536)
Net sensitivity	$	(9)	$	(2)	$	—	$	(2)	$	(8)	$	(30)	$	(22)	$	(15)	$	(8)	$	8	$	9	$	(25)

March 31, 2022       December 31, 2021
(Dollars in Millions) Down
100 bps Down
50 bps Down
25 bps Up
25 bps
Up
50 bps
Up
100 bps       Down
100 bps Down
50 bps Down
25 bps Up
25 bps Up
50 bps Up
100 bps
MSR portfolio
$ (485 ) $ (227 ) $ (109 ) $ 99 $ 189 $ 338    $ (636 ) $ (324 ) $ (160 ) $ 150 $ 287 $ 511
Derivative instrument hedges
485 224 106 (94 ) (180 ) (333 )    614 309 152 (142 ) (278 ) (536 )
Net sensitivity
$ 0 $ (3 ) $ (3 ) $ 5 $ 9 $ 5    $ (22 ) $ (15 ) $ (8 ) $ 8 $ 9 $ (25 )

~~The~~ fair value of MSRs and their sensitivity to changes in interest rates is influenced by the mix of the servicing portfolio and characteristics of each segment of the portfolio. The Company’s servicing portfolio consists of the distinct portfolios of government-insured mortgages, conventional mortgages and Housing Finance Agency (“HFA”) mortgages. The servicing portfolios are predominantly comprised of fixed-rate agency loans with limited adjustable-rate or jumbo mortgage loans. The HFA servicing portfolio is comprised of loans originated under state and local housing authority program guidelines which assist purchases by first-time or

low-

to moderate-income homebuyers through a favorable rate subsidy, down payment and/or closing cost assistance on government- and conventional-insured mortgages.


50		~~U.S. Bancorp~~

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A summary of the Company’s MSRs and related characteristics by portfolio was as follows:

March 31, 2022 December 31, 2021
(Dollars in Millions) HFA Government Conventional (d) Total HFA Government Conventional (d) Total
Servicing portfolio (a)
$ 41,430 $ 21,619 $ 160,611 $ 223,660 $ 40,652 $ 21,919 $ 156,382 $ 218,953
Fair value
$ 628 $ 365 $ 2,439 $ 3,432 $ 527 $ 308 $ 2,118 $ 2,953
Value (bps) (b)
152 169 152 153 130 141 135 135
Weighted-average servicing fees (bps)
36 41 30 32 36 41 30 32
Multiple (value/servicing fees)
4.23 4.12 5.02 4.75 3.63 3.43 4.50 4.18
Weighted-average note rate
4.02 % 3.66 % 3.38 % 3.53 % 4.07 % 3.70 % 3.41 % 3.56 %
Weighted-average age (in years)
3.8 6.0 3.3 3.7 3.8 5.9 3.3 3.7
Weighted-average expected prepayment (constant prepayment rate)
9.6 % 10.6 % 8.1 % 8.6 % 11.5 % 13.2 % 9.6 % 10.3 %
Weighted-average expected life (in years)
7.5 6.5 7.5 7.4 6.5 5.6 6.9 6.7
Weighted-average option adjusted spread (c)
6.8 % 6.7 % 6.0 % �� 6.2 % 7.3 % 7.3 % 6.3 % 6.6 %


	June 30, 2022												December 31, 2021
(Dollars in Millions)	HFA			Government			Conventional (d)			Total			HFA			Government			Conventional (d)			Total
Servicing portfolio (a)	$	41,701		$	21,358		$	159,657		$	222,716		$	40,652		$	21,919		$	156,382		$	218,953
Fair value	$	697		$	403		$	2,607		$	3,707		$	527		$	308		$	2,118		$	2,953
Value (bps) (b)		167			189			163			166			130			141			135			135
Weighted-average servicing fees (bps)		36			41			30			32			36			41			30			32
Multiple (value/servicing fees)		4.65			4.59			5.41			5.15			3.63			3.43			4.50			4.18
Weighted-average note rate		4.02	%		3.67	%		3.40	%		3.54	%		4.07	%		3.70	%		3.41	%		3.56	%
Weighted-average age (in years)		3.9			6.0			3.5			3.8			3.8			5.9			3.3			3.7
Weighted-average expected prepayment (constant prepayment rate)		7.5	%		8.5	%		6.5	%		6.9	%		11.5	%		13.2	%		9.6	%		10.3	%
Weighted-average expected life (in years)		8.6			7.4			8.2			8.2			6.5			5.6			6.9			6.7
Weighted-average option adjusted spread (c)		7.2	%		6.9	%		5.9	%		6.2	%		7.3	%		7.3	%		6.3	%		6.6	%

(a)	Represents principal balance of mortgages having corresponding MSR asset.

(b)	Calculated as fair value divided by the servicing portfolio.

(c)	Option adjusted spread is the incremental spread added to the risk-free rate to reflect optionality and other risk inherent in the MSRs.

(d)	Represents loans sold primarily to GSEs.


Note 8		Preferred Stock

At ~~March 31,~~June 30, 2022 and December 31, 2021, the Company had authority to issue 50 million shares of preferred stock. The number of shares issued and outstanding and the carrying amount of each outstanding series of the Company’s preferred stock were as follows:~~~~

March 31, 2022          December 31, 2021
At December 31 (Dollars in Millions)
Shares
Issued and
Outstanding

Liquidation
Preference
   Discount
Carrying
Amount

Shares
Issued and
Outstanding

Liquidation
Preference
   Discount
Carrying
Amount

Series A
12,510    $ 1,251    $ 145    $ 1,106       12,510    $ 1,251    $ 145    $ 1,106
Series B
40,000    1,000    —    1,000       40,000    1,000    —    1,000
Series J
40,000    1,000    7    993       40,000    1,000    7    993
Series K
23,000    575    10    565       23,000    575    10    565
Series L
20,000    500    14    486       20,000    500    14    486
Series M
30,000    750    21    729       30,000    750    21    729
Series N
60,000    1,500    8    1,492       60,000    1,500    8    1,492
Series O
18,000    450    13    437       —    —    —    —
Total preferred stock (a)
243,510    $ 7,026    $ 218    $ 6,808       225,510    $ 6,576    $ 205    $ 6,371


	June 30, 2022								December 31, 2021
(Dollars in Millions)	Shares Issued and Outstanding		Liquidation Preference		Discount		Carrying Amount		Shares Issued and Outstanding		Liquidation Preference		Discount		Carrying Amount
Series A		12,510	$	1,251	$	145	$	1,106		12,510	$	1,251	$	145	$	1,106
Series B		40,000		1,000		—		1,000		40,000		1,000		—		1,000
Series J		40,000		1,000		7		993		40,000		1,000		7		993
Series K		23,000		575		10		565		23,000		575		10		565
Series L		20,000		500		14		486		20,000		500		14		486
Series M		30,000		750		21		729		30,000		750		21		729
Series N		60,000		1,500		8		1,492		60,000		1,500		8		1,492
Series O		18,000		450		13		437		—		—		—		—
Total preferred stock (a)		243,510	$	7,026	$	218	$	6,808		225,510	$	6,576	$	205	$	6,371

(a)	The par value of all shares issued and outstanding at ~~March 31,~~June 30, 2022 and December 31, 2021, was $1.00 per share.

During the first ~~three~~six months of 2022, the Company issued depositary shares representing an ownership interest in 18,000 shares of Series O

Non-Cumulative

Perpetual Preferred Stock with a liquidation preference of $25,000 per share (the “Series O Preferred Stock”). The Series O Preferred Stock has no stated maturity and will not be subject to


5 2		U.S. Bancorp

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any sinking fund or other obligation of the Company. Dividends, if declared, will accrue and be payable quarterly, in arrears, at a rate per annum equal to 4.50 percent. The Series O Preferred Stock is redeemable at the Company’s option, in whole or in part, on or after April 15, 2027. The Series O Preferred Stock is redeemable at the Company’s option, in whole, but not in part, prior to April 15, 2027 within 90 days following an official administrative or judicial decision, amendment to, or change in the laws or regulations that would not allow the Company to treat the full liquidation value of the Series O Preferred Stock as Tier 1 capital for purposes of the capital adequacy guidelines of the Federal Reserve Board.


~~U.S. Bancorp~~		51

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Note 9		Accumulated Other Comprehensive Income (Loss)

Shareholders’ equity is affected by transactions and valuations of asset and liability positions that require adjustments to accumulated other comprehensive income (loss). The reconciliation of the transactions affecting accumulated other comprehensive income (loss) included in shareholders’ equity ~~for the three months ended March 31,~~ is as follows:

(Dollars in Millions)
Unrealized Gains
(Losses) on
Investment
Securities
Available-For-
Sale

Unrealized
Gains (Losses)
on Investment
Securities
Transferred
From Available-
For-Sale
to
Held-To-Maturity

Unrealized Gains
(Losses) on
Derivative Hedges

Unrealized Gains
(Losses) on
Retirement Plans

Foreign
Currency
Translation
Total
2022

Balance at beginning of period
$ 540 $ (935 ) $ (85 ) $ (1,426 ) $ (37 ) $ (1,943 )
Changes in unrealized gains (losses)
(6,754 ) — — — — (6,754 )
Foreign currency translation adjustment (a)
— — — — — —
Reclassification to earnings of realized (gains) losses
(18 ) 42 11 32 — 67
Applicable income taxes
1,714 (11 ) (3 ) (8 ) — 1,692
Balance at end of period
$ (4,518 ) $ (904 ) $ (77 ) $ (1,402 ) $ (37 ) $ (6,938 )
2021

Balance at beginning of period
$ 2,417 $ — $ (189 ) $ (1,842 ) $ (64 ) $ 322
Changes in unrealized gains (losses)
(3,378 ) — 99 — — (3,279 )
Foreign currency translation adjustment (a)
— — — — 25 25
Reclassification to earnings of realized (gains) losses
(25 ) — 4 39 — 18
Applicable income taxes
861 — (26 ) (10 ) (6 ) 819
Balance at end of period
$ (125 ) $ — $ (112 ) $ (1,813 ) $ (45 ) $ (2,095 )


Three Months Ended June 30 (Dollars in Millions)	Unrealized Gains (Losses) on Investment Securities Available-For- Sale			Unrealized Gains (Losses) on Investment Securities Transferred From Available- For-Sale to Held-To-Maturity			Unrealized Gains (Losses) on Derivative Hedges			Unrealized Gains (Losses) on Retirement Plans			Foreign Currency Translation			Total
2022
Balance at beginning of period	$	(4,518	)	$	(904	)	$	(77	)	$	(1,402	)	$	(37	)	$	(6,938	)
Changes in unrealized gains (losses)		(4,761	)		—			98			—			—			(4,663	)
Transfer of securities from available-for-sale to held-to-maturity		1,381			(1,381	)		—			—			—			—
Foreign currency translation adjustment (a)		—			—			—			—			(3	)		(3	)
Reclassification to earnings of realized (gains) losses		(19	)		61			10			32			—			84
Applicable income taxes		859			334			(27	)		(8	)		1			1,159
Balance at end of period	$	(7,058	)	$	(1,890	)	$	4		$	(1,378	)	$	(39	)	$	(10,361	)
2021
Balance at beginning of period	$	(125	)	$	—		$	(112	)	$	(1,813	)	$	(45	)	$	(2,095	)
Changes in unrealized gains (losses)		1,195			—			14			—			—			1,209
Foreign currency translation adjustment (a)		—			—			—			—			(1	)		(1	)
Reclassification to earnings of realized (gains) losses		(43	)		—			(8	)		40			—			(11	)
Applicable income taxes		(292	)		—			(1	)		(10	)		(1	)		(304	)
Balance at end of period	$	735		$	—		$	(107	)	$	(1,783	)	$	(47	)	$	(1,202	)

(a)	Represents the impact of changes in foreign currency exchange rates on the Company’s investment in foreign operations and related hedges.


Six Months Ended June 30 (Dollars in Millions)	Unrealized Gains (Losses) on Investment Securities Available-For- Sale			Unrealized Gains (Losses) on Investment Securities Transferred From Available- For-Sale to Held-To-Maturity			Unrealized Gains (Losses) on Derivative Hedges			Unrealized Gains (Losses) on Retirement Plans			Foreign Currency Translation			Total
2022
Balance at beginning of period	$	540		$	(935	)	$	(85	)	$	(1,426	)	$	(37	)	$	(1,943	)
Changes in unrealized gains (losses)		(11,515	)		—			98			—			—			(11,417	)
Transfer of securities from available-for-sale to held-to-maturity		1,381			(1,381	)		—			—			—			—
Foreign currency translation adjustment (a)		—			—			—			—			(3	)		(3	)
Reclassification to earnings of realized (gains) losses		(37	)		103			21			64			—			151
Applicable income taxes		2,573			323			(30	)		(16	)		1			2,851
Balance at end of period	$	(7,058	)	$	(1,890	)	$	4		$	(1,378	)	$	(39	)	$	(10,361	)
2021
Balance at beginning of period	$	2,417		$	—		$	(189	)	$	(1,842	)	$	(64	)	$	322
Changes in unrealized gains (losses)		(2,183	)		—			113			—			—			(2,070	)
Foreign currency translation adjustment (a)		—			—			—			—			24			24
Reclassification to earnings of realized (gains) losses		(68	)		—			(4	)		79			—			7
Applicable income taxes		569			—			(27	)		(20	)		(7	)		515
Balance at end of period	$	735		$	—		$	(107	)	$	(1,783	)	$	(47	)	$	(1,202	)

(a)	Represents the impact of changes in foreign currency exchange rates on the Company’s investment in foreign operations and related hedges.


U.S. Bancorp		53

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Additional detail about the impact to net income for items reclassified out of accumulated other comprehensive income (loss) and into earnings ~~for the three months ended March 31,~~ is as follows:

Impact to Net Income Affected Line Item in the
Consolidated Statement of Income
(Dollars in Millions) 2022 2021
Unrealized gains (losses) on investment securities
available-for-sale

Realized gains (losses) on sale of investment securities
$ 18 $ 25 Securities gains (losses), net
(5 ) (6 ) Applicable income taxes
13 19
Net-of-tax
Unrealized gains (losses) on investment securities transferred from
available-for-sale
to
held-to-maturity

Amortization of unrealized gains (42 ) — Interest income
11 — Applicable income taxes
(31 ) —
Net-of-tax
Unrealized gains (losses) on derivative hedges

Realized gains (losses) on derivative hedges
(11 ) (4 ) Interest expense
3 1 Applicable income taxes
(8 ) (3 )
Net-of-tax
Unrealized gains (losses) on retirement plans

Actuarial gains (losses) and prior service cost (credit) amortization
(32 ) (39 ) Other noninterest expense
8 10 Applicable income taxes
(24 ) (29 )
Net-of-tax
Total impact to net income
$ (50 ) $ (13 )


	Impact to Net Income												Affected Line Item in the Consolidated Statement of Income
	Three Months Ended June 30						Six Months Ended June 30
(Dollars in Millions)	2022			2021			2022			2021
Unrealized gains (losses) on investment securities available-for-sale
Realized gains (losses) on sale of investment securities	$	19		$	43		$	37		$	68		Securities gains (losses), net
		(5	)		(11)			(9)			(17)		Applicable income taxes
		14			32			28			51		Net-of-tax
Unrealized gains (losses) on investment securities transferred from available-for-sale to held-to-maturity
Amortization of unrealized gains		(61	)		—			(103	)		—		Interest income
		16			—			26			—		Applicable income taxes
		(45	)		—			(77)			—		Net-of-tax
Unrealized gains (losses) on derivative hedges
Realized gains (losses) on derivative hedges		(10	)		8			(21	)		4		Interest expense
		2			(2)			5			(1)		Applicable income taxes
		(8)			6			(16)			3		Net-of-tax
Unrealized gains (losses) on retirement plans
Actuarial gains (losses) and prior service cost (credit) amortization		(32	)		(40	)		(64	)		(79	)	Other noninterest expense
		8			10			16			20		Applicable income taxes
		(24)			(30)			(48)			(59)		Net-of-tax
Total impact to net income	$	(63	)	$	8		$	(113	)	$	(5)


52		~~U.S. Bancorp~~

~~Table of Contents~~


Note 10		Earnings Per Share

The ~~components~~component

of earnings per share were:

Three Months Ended
March 31
(Dollars and Shares in Millions, Except Per Share Data) 2022 2021
Net income attributable to U.S. Bancorp
$ 1,557 $ 2,280
Preferred dividends
(84 ) (90 )
Impact of preferred stock call (a)
— (5 )
Earnings allocated to participating stock awards
(7 ) (10 )
Net income applicable to U.S. Bancorp common shareholders
$ 1,466 $ 2,175
Average common shares outstanding
1,485 1,502
Net effect of the exercise and assumed purchase of stock awards
1 1
Average diluted common shares outstanding
1,486 1,503
Earnings per common share
$ .99 $ 1.45
Diluted earnings per common share
$ .99 $ 1.45


	Three Months Ended June 30						Six Months Ended June 30
(Dollars and Shares in Millions, Except Per Share Data)	2022			2021			2022			2021
Net income attributable to U.S. Bancorp	$	1,531		$	1,982		$	3,088		$	4,262
Preferred dividends		(59	)		(58	)		(143	)		(148	)
Impact of preferred stock call (a)		—			—			—			(5	)
Earnings allocated to participating stock awards		(8	)		(10	)		(15	)		(20	)
Net income applicable to U.S. Bancorp common shareholders	$	1,464		$	1,914		$	2,930		$	4,089
Average common shares outstanding		1,486			1,489			1,485			1,495
Net effect of the exercise and assumed purchase of stock awards		1			1			1			2
Average diluted common shares outstanding		1,487			1,490			1,486			1,497
Earnings per common share	$	.99		$	1.29		$	1.97		$	2.73
Diluted earnings per common share	$	.99		$	1.28		$	1.97		$	2.73

(a)	Represents stock issuance costs originally recorded in preferred stock upon issuance of the Company’s Series I Preferred Stock that were reclassified to retained earnings on the date the Company announced its intent to redeem the outstanding shares.

Options outstanding at ~~March 31,~~June 30, 2022, to purchase 1 million common shares for the three months and six months ended June 30, 2022, and outstanding at June 30, 2021, to purchase 1 million common shares for the six months ended June 30, 2021 were not included in the computation of diluted earnings per share ~~for the three months ended March 31, 2021~~ because they were antidilutive.


Note 11		Employee Benefits

The components of net periodic benefit cost for the Company’s retirement plans were:

Three Months Ended March 31
Pension Plans       Postretirement
Welfare Plan
(Dollars in Millions) 2022 2021       2022 2021
Service cost
$ 69 $ 66    $ — $ —
Interest cost
61 55    — —
Expected return on plan assets
(119 ) (112 )    — —
Prior service cost (credit) amortization
(1 ) —    — (1 )
Actuarial loss (gain) amortization
35 42    (2 ) (2 )
Net periodic benefit cost (a)
$ 45 $ 51    $ (2 ) $ (3 )


	Three Months Ended June 30												Six Months Ended June 30
	Pension Plans						Postretirement Welfare Plan						Pension Plans						Postretirement Welfare Plan
(Dollars in Millions)	2022			2021			2022			2021			2022			2021			2022			2021
Service cost	$	68		$	66		$	—		$	—		$	137		$	132		$	—		$	—
Interest cost		62			55			—			—			123			110			—			—
Expected return on plan assets		(120	)		(113	)		—			—			(239	)		(225	)		—			—
Prior service cost (credit) amortization		—			(1	)		(2	)		(1	)		(1	)		(1	)		(2	)		(2	)
Actuarial loss (gain) amortization		35			43			(1	)		(1	)		70			85			(3	)		(3	)
Net periodic benefit cost (a)	$	45		$	50		$	(3	)	$	(2	)	$	90		$	101		$	(5	)	$	(5	)

(a)	Service cost is included in employee benefits expense on the Consolidated Statement of Income. All other components are included in other noninterest expense on the Consolidated Statement of Income.


5 4		U.S. Bancorp

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Note 12		Income Taxes

The components of income tax expense were:

Three Months Ended
March 31
(Dollars in Millions) 2022 2021
Federal

Current
$ 404 $ 353
Deferred
(102 ) 130
Federal income tax
302 483
State

Current
89 94
Deferred
6 30

State income tax
95 124
Total income tax provision
$ 397 $ 607


~~U.S. Bancorp~~		53

~~Table of Contents~~


	Three Months Ended June 30					Six Months Ended June 30
(Dollars in Millions)	2022			2021		2022		2021
Federal
Current	$	221		$	350	$	625	$	703

Deferred		107			76		5		206
Federal income tax		328			426		630		909
State
Current		89			109		178		203

Deferred		(3	)		16		3		46

State income tax		86			125		181		249
Total income tax provision	$	414		$	551	$	811	$	1,158

A reconciliation of expected income tax expense at the federal statutory rate of 21 percent to the Company’s applicable income tax expense follows:


	Three Months Ended March 31						Three Months Ended June 30						Six Months Ended June 30
(Dollars in Millions)	2022			2021			2022			2021			2022			2021
Tax at statutory rate	$	411		$	607		$	409		$	533		$	820		$	1,140
State income tax, at statutory rates, net of federal tax benefit		84			114			84			105			168			219
Tax effect of
Tax credits and benefits, net of related expenses		(106	)		(93	)		(46	)		(83	)		(152	)		(176	)
Tax-exempt income		(28	)		(28	)		(29	)		(29	)		(57	)		(57	)
Other items		36			7			(4	)		25			32			32
Applicable income taxes	$	397		$	607		$	414		$	551		$	811		$	1,158

The Company’s income tax returns are subject to review and examination by federal, state, local and foreign government authorities. On an ongoing basis, numerous federal, state, local and foreign examinations are in progress and cover multiple tax years. As of ~~March 31,~~June 30, 2022, federal tax examinations for all years ending through December 31, 2014 are completed and resolved. The Company’s tax returns for the years ended December 31, 2015 ~~2016, 2017 and 2018~~through December 31, 2020 are under examination by the Internal Revenue Service. The years open to examination by foreign, state and local government authorities vary by jurisdiction.

The Company’s net deferred tax asset was ~~$2.6~~$3.6 billion at ~~March 31,~~June 30, 2022 and $785 million at December 31, 2021.


Note 13		Derivative Instruments

In the ordinary course of business, the Company enters into derivative transactions to manage various risks and to accommodate the business requirements of its customers. The Company recognizes all derivatives on the Consolidated Balance Sheet at fair value in other assets or in other liabilities. On the date the Company enters into a derivative contract, the derivative is designated as either a fair value hedge, cash flow hedge, net investment hedge, or a designation is not made as it is a customer-related transaction, an economic hedge for asset/liability risk management purposes or another stand-alone derivative created through the Company’s operations (“free-standing derivative”). When a derivative is designated as a fair value, cash flow or net investment hedge, the Company performs an assessment, at inception and, at a minimum, quarterly thereafter, to determine the effectiveness of the derivative in offsetting changes in the value or cash flows of the hedged item(s).

Fair Value Hedges

These derivatives are interest rate swaps the Company uses to hedge the change in fair value related to interest rate changes of its underlying

available-for-sale

investment securities and fixed-rate debt. Changes in the fair value of derivatives designated as fair value hedges, and changes in the fair value of the hedged items, are recorded in earnings.

Cash Flow Hedges

These derivatives are interest rate swaps the Company uses to hedge the forecasted cash flows from its underlying variable-rate loans and debt. Changes in the fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income (loss) until the cash flows of the hedged items are realized. If a derivative designated as a cash flow hedge is terminated or ceases to be highly effective, the gain or loss in other comprehensive income (loss) is amortized to earnings over the period the forecasted hedged transactions impact earnings. If a hedged


U.S. Bancorp		5 5

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forecasted transaction

is no longer probable, hedge accounting is ceased and any gain or loss included in other comprehensive income (loss) is reported in earnings immediately, unless the forecasted transaction is at least reasonably possible of occurring, whereby the amounts remain within other comprehensive income (loss). At ~~March 31,~~June 30, 2022, the Company had ~~$77~~ $4 million

~~million~~

(net-of-tax)

of realized and unrealized ~~losses~~gains on ~~discontinued~~

derivatives classified as

cash flow hedges recorded in other comprehensive income (loss), compared with

~~$85~~ $85 million

(net-of-tax)

of realized and unrealized losses at December 31, 2021. The estimated amount to be reclassified from other comprehensive income (loss) into earnings during the next 12 months is a loss of ~~$27~~$15 million

(net-of-tax).

All cash flow hedges were highly effective for the three months ended June 30, 2022. There were 0

derivatives held as

cash flow hedges at ~~March 31, 2022 and~~ December 31, 2021.

Net Investment Hedges

The Company uses forward commitments to sell specified amounts of certain foreign currencies, and

non-derivative

debt instruments, to hedge the volatility of its net investment in foreign operations driven by fluctuations in foreign currency exchange rates. The carrying amount of

non-derivative

debt instruments designated as net investment hedges was $1.2 billion at June 30, 2022, compared with $1.3 billion at ~~March 31, 2022, and~~ December 31, 2021.


54		~~U.S. Bancorp~~

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Other Derivative Positions

The Company enters into free-standing derivatives to mitigate interest rate risk and for other risk management purposes. These derivatives include forward commitments to sell

to-be-announced

securities (“TBAs”) and other commitments to sell residential mortgage loans, which are used to economically hedge the interest rate risk related to mortgage loans held for sale (“MLHFS”) and unfunded mortgage loan commitments. The Company also enters into interest rate swaps, swaptions, forward commitments to buy TBAs, U.S. Treasury and Eurodollar futures and options on U.S. Treasury futures to economically hedge the change in the fair value of the Company’s MSRs. The Company also enters into foreign currency forwards to economically hedge remeasurement gains and losses the Company recognizes on foreign currency denominated assets and liabilities. In addition, the Company acts as a seller and buyer of interest rate derivatives and foreign exchange contracts for its customers. The Company mitigates the market and liquidity risk associated with these customer derivatives by entering into similar offsetting positions with broker-dealers, or on a portfolio basis by entering into other derivative or

non-derivative

financial instruments that partially or fully offset the exposure to earnings from these customer-related positions. The Company’s customer derivatives and related hedges are monitored and reviewed by the Company’s Market Risk Committee, which establishes policies for market risk management, including exposure limits for each portfolio. The Company also has derivative contracts that are created through its operations, including certain unfunded mortgage loan commitments and swap agreements related to the sale of a portion of its Class B common and preferred shares of Visa Inc. Refer to Note 15 for further information on these swap agreements.

The following table summarizes the asset and liability management derivative positions of the Company:

March 31, 2022          December 31, 2021

Notional
Value
   Fair Value
Notional
Value
   Fair Value
(Dollars in Millions)    Assets    Liabilities          Assets    Liabilities
Fair value hedges

Interest rate contracts

Receive fixed/pay floating swaps
$ 2,250    $ —    $ —       $ 12,350    $ —    $ —
Pay fixed/receive floating swaps
8,600    —    —       16,650    —    —
Net investment hedges
Foreign exchange forward contracts
807    —    7       793    —    4
Other economic hedges

Interest rate contracts

Futures and forwards

Buy
16,432    54    179       9,322    10    16
Sell
12,509    193    60       29,348    25    27
Options

Purchased
9,310    281    —       18,570    256    —
Written
10,783    15    165       9,662    52    231
Receive fixed/pay floating swaps
10,829    —    —       9,653    —    —
Pay fixed/receive floating swaps
13,666    —    —       7,033    —    —
Foreign exchange forward contracts
647    1    5       735    2    6
Equity contracts
212    4    1       209    5    —
Other (a)
2,753    5    100       1,792    —    125
Total
$   88,798    $    553    $    517       $ 116,117    $    350    $ 409


	June 30, 2022						December 31, 2021
	Notional Value		Fair Value				Notional Value		Fair Value
(Dollars in Millions)	Notional Value		Assets		Liabilities		Notional Value		Assets		Liabilities
Fair value hedges
Interest rate contracts
Receive fixed/pay floating swaps	$	17,400	$	—	$	—	$	12,350	$	—	$	—
Pay fixed/receive floating swaps		3,820		—		—		16,650		—		—
Cash flow hedges
Interest rate contract s
Receive fixed/pay floating swaps		8,300		—		—		—		—		—
Net investment hedges
Foreign exchange forward contracts		805		6		1		793		—		4
Other economic hedges
Interest rate contracts
Futures and forwards
Buy		11,040		30		63		9,322		10		16
Sell		9,811		34		31		29,348		25		27
Options
Purchased		7,480		260		—		18,570		256		—
Written		7,208		20		93		9,662		52		231
Receive fixed/pay floating swaps		11,420		—		—		9,653		—		—
Pay fixed/receive floating swaps		12,481		—		—		7,033		—		—
Foreign exchange forward contracts		852		5		2		735		2		6
Equity contracts		186		4		—		209		5		—
Other (a)		2,344		2		81		1,792		—		125
Total	$	93,147	$	361	$	271	$	116,117	$	350	$	409

(a)

Includes derivative liability swap agreements related to the sale of a portion of the Company’s Class B common and preferred shares of Visa Inc. The Visa swap agreements had a total notional value and fair value of $1.8 billion and ~~$95~~$79 million at ~~March 31,~~June 30, 2022, respectively, compared to $1.8 billion and $125 million at December 31, 2021, respectively. In addition, includes short-term underwriting purchase and sale commitments with total notional values of ~~$973~~$565 million at ~~March 31,~~June 30, 2022, and $8 million at December 31, 2021.


~~U.S. Bancorp~~ 5 6		55 U.S. Bancorp

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The following table summarizes the customer-related derivative positions of the Company:

March 31, 2022          December 31, 2021

Notional
Value
   Fair Value
Notional
Value
   Fair Value
(Dollars in Millions)    Assets    Liabilities          Assets    Liabilities
Interest rate contracts

Receive fixed/pay floating swaps
$ 189,323    $ 752    $ 2,028       $ 178,701    $ 2,007    $ 438
Pay fixed/receive floating swaps
181,909    831    341       174,176    134    670
Other (a)
17,471    1    3       16,267    1    2
Options

Purchased
87,564    667    2       89,679    194    36
Written
84,177    2    649       85,211    36    176
Futures

Buy
291    —    —       3,607    —    —
Sell
5,185    —    —       3,941    —    —
Foreign exchange rate contracts

Forwards, spots and swaps
102,688    1,468    1,473       89,321    1,145    1,143
Options

Purchased
910    25    —       805    19    —
Written
910    —    25       805    —    19
Credit contracts
9,537    1    10       9,331    1    5
Total
$ 679,965    $ 3,747    $ 4,531       $ 651,844    $ 3,537    $ 2,489


	June 30, 2022						December 31, 2021
	Notional Value		Fair Value				Notional Value		Fair Value
(Dollars in Millions)	Notional Value		Assets		Liabilities		Notional Value		Assets		Liabilities
Interest rate contracts
Receive fixed/pay floating swaps	$	204,454	$	458	$	3,125	$	178,701	$	2,007	$	438
Pay fixed/receive floating swaps		193,869		1,308		214		174,176		134		670
Other (a)		19,451		1		3		16,267		1		2
Options
Purchased		90,183		993		5		89,679		194		36
Written		87,585		6		979		85,211		36		176
Futures
Buy		475		—		—		3,607		—		—
Sell		4,928		—		—		3,941		—		—
Foreign exchange rate contracts
Forwards, spots and swaps		95,611		2,222		2,239		89,321		1,145		1,143
Options
Purchased		861		39		—		805		19		—
Written		861		—		39		805		—		19
Credit contracts		9,152		1		6		9,331		1		5
Total	$	707,430	$	5,028	$	6,610	$	651,844	$	3,537	$	2,489

(a)	Primarily represents floating rate interest rate swaps that pay based on differentials between specified interest rate indexes.

The table below shows the effective portion of the gains (losses) recognized in other comprehensive income (loss) and the gains (losses) reclassified from other comprehensive income (loss) into earnings

(net-of-tax):

~~for the three months ended March 31:~~

Gains (Losses)
Recognized in
Other
Comprehensive
Income
(Loss)

Gains (Losses)
Reclassified
from Other
Comprehensive
Income (Loss)
into Earnings

(Dollars in Millions) 2022 2021          2022 2021
Asset and Liability Management Positions

Cash flow hedges

Interest rate contracts
$ — $ 74       $ (8 ) $ (3 )
Net investment hedges

Foreign exchange forward contracts
(1 ) 7       — —
Non-derivative
debt instruments
20 48       — —


	Three Months Ended June 30										Six Months Ended June 30
	Gains (Losses) Recognized in Other Comprehensive Income (Loss)					Gains (Losses) Reclassified from Other Comprehensive Income (Loss) into Earnings					Gains (Losses) Recognized in Other Comprehensive Income (Loss)					Gains (Losses) Reclassified from Other Comprehensive Income (Loss) into Earnings
(Dollars in Millions)	2022		2021			2022			2021		2022		2021			2022			2021
Asset and Liability Management Positions
Cash flow hedges
Interest rate contracts	$	73	$	11		$	(8	)	$	6	$	73	$	85		$	(16	)	$	3
Net investment hedges
Foreign exchange forward contracts		27		(8	)		—			—		26		(1	)		—			—
Non-derivative debt instruments		63		(14	)		—			—		83		34			—			—

Note:

The Company does not exclude components from effectiveness testing for cash flow and net investment hedges.

The table below shows the effect of fair value and cash flow hedge accounting on the Consolidated Statement of ~~Income for the three months ended March 31:~~Income:

Interest Income       Interest Expense
(Dollars in Millions) 2022 2021       2022 2021
Total amount of income and expense line items presented in the Consolidated Statement of Income in which the effects of fair value or cash flow hedges are recorded
$ 3,418 $ 3,341    $ 245 $ 278

Asset and Liability Management Positions

Fair value hedges

Interest rate contract derivatives
517 (1 )    72 55
Hedged items
(518 ) 1    (71 ) (55 )
Cash flow hedges

Interest rate contract derivatives
— —    11 4


	Three Months Ended June 30												Six Months Ended June 30
	Interest Income						Interest Expense						Interest Income						Interest Expense
(Dollars in Millions)	2022			2021			2022			2021			2022			2021			2022			2021
Total amount of income and expense line items presented in the Consolidated Statement of Income in which the effects of fair value or cash flow hedges are recorded	$	3,825		$	3,382		$	390		$	245		$	7,243		$	6,723		$	635		$	523

Asset and Liability Management Positions
Fair value hedges
Interest rate contract derivatives		(186	)		(30	)		(38	)		18			331			(31	)		34			73
Hedged items		187			29			36			(17	)		(331	)		30			(35	)		(72	)
Cash flow hedges
Interest rate contract derivatives		—			—			10			(8	)		—			—			21			(4	)

Note:

The Company does not exclude components from effectiveness testing for fair value and cash flow hedges. The Company reclassified losses of ~~$11~~$10 million and ~~$15~~$21 million into earnings during the three and six months ended ~~March 31,~~June 30, 2022, ~~and 2021,~~ respectively, as a result of realized cash flows on discontinued cash flow ~~hedges.~~hedges, compared with $12 million and $27 million during the three and six months ended June 30, 2021, respectively. No amounts were reclassified into earnings on discontinued cash flow hedges because it is probable the original hedged forecasted cash flows will not occur.


56 U.S. Bancorp		~~U.S. Bancorp~~ 5 7

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The table below shows cumulative hedging adjustments and the carrying amount of assets and liabilities designated in fair value hedges:

Carrying Amount of the Hedged Assets and
Liabilities          Cumulative Hedging Adjustment (a)
At December 31 (Dollars in Millions) March 31, 2022    December 31, 2021          March 31, 2022 December 31, 2021
Line Item in the Consolidated Balance Sheet

Available-for-sale
investment securities
$ 7,962    $ 16,445       $ (579 ) $ (26 )
Long-term debt
2,148    12,278       382 585


	Carrying Amount of the Hedged Assets and Liabilities				Cumulative Hedging Adjustment (a)
At December 31 (Dollars in Millions)	June 30, 2022		December 31, 2021		June 30, 2022			December 31, 2021
Line Item in the Consolidated Balance Sheet
Available-for-sale investment securities	$	3,124	$	16,445	$	(716	)	$	(26	)
Long-term debt		17,724		12,278		378			585

(a)

The cumulative hedging adjustment related to discontinued hedging relationships on

available-for-sale

investment securities and long-term debt was $

~~(40~~

)$(365) million and ~~$509~~$468 million, respectively, at ~~March 31,~~June 30, 2022, compared with $(6) million and $640 million at December 31, 2021, respectively.

The table below shows the gains (losses) recognized in earnings for other economic hedges and the customer-related ~~positions for the three months ended March 31:~~positions:


									Location of Gains (Losses) Recognized in Earnings		Three Months Ended June 30						Six Months Ended June 30
(Dollars in Millions)	Location of Gains (Losses) Recognized in Earnings		2022			2021			Location of Gains (Losses) Recognized in Earnings		2022			2021			2022			2021
Asset and Liability Management Positions
Other economic hedges
Interest rate contracts
Futures and forwards		Mortgage banking revenue	$	223		$	430			Mortgage banking revenue	$	74		$	(99	)	$	297		$	331
Purchased and written options		Mortgage banking revenue		(47	)		12			Mortgage banking revenue		6			253			(41	)		265
Swaps		Mortgage banking revenue		(204	)		(390	)		Mortgage banking revenue		(247	)		193			(451	)		(197	)
Foreign exchange forward contracts		Other noninterest income		(3	)		(3	)		Other noninterest income		4			(7	)		1			(10	)
Equity contracts		Compensation expense		(2	)		4			Compensation expense		(1	)		1			(3	)		5
Other		Other noninterest income		(1	)		—			Other noninterest income		1			1			—			1
Customer-Related Position s
Customer-Related Positions
Interest rate contracts
Swaps		Commercial products revenue		17			27			Commercial products revenue		30			25			47			52
Purchased and written options		Commercial products revenue		4			(7	)		Commercial products revenue		—			4			4			(3	)
Futures		Commercial products revenue		16			—			Commercial products revenue		8			—			24			—
Foreign exchange rate contracts
Forwards, spots and swaps		Commercial products revenue		15			19			Commercial products revenue		20			27			35			46
Purchased and written option s										Commercial products revenue		1			—			1			—
Credit contracts		Commercial products revenue		5			2			Commercial products revenue		17			(4	)		22			(2	)

Derivatives are subject to credit risk associated with counterparties to the derivative contracts. The Company measures that credit risk using a credit valuation adjustment and includes it within the fair value of the derivative. The Company manages counterparty credit risk through diversification of its derivative positions among various counterparties, by entering into derivative positions that are centrally cleared through clearinghouses, by entering into master netting arrangements and, where possible, by requiring collateral arrangements. A master netting arrangement allows two counterparties, who have multiple derivative contracts with each other, the ability to net settle amounts under all contracts, including any related collateral, through a single payment and in a single currency. Collateral arrangements generally require the counterparty to deliver collateral (typically cash or U.S. Treasury and agency securities) equal to the Company’s net derivative receivable, subject to minimum transfer and credit rating requirements.

The Company’s collateral arrangements are predominately bilateral and, therefore, contain provisions that require collateralization of the Company’s net liability derivative positions. Required collateral coverage is based on net liability thresholds and may be contingent upon the Company’s credit rating from two of the nationally recognized statistical rating organizations. If the Company’s credit rating were to fall below credit ratings thresholds established in the collateral arrangements, the counterparties to the derivatives could request immediate additional collateral coverage up to and including full collateral coverage for derivatives in a net liability position. The aggregate fair value of all derivatives under collateral arrangements that were in a net liability position at ~~March 31,~~June 30, 2022, was ~~$1.2~~$1.5 billion. At ~~March 31,~~June 30, 2022, the Company had ~~$841 million~~$1.2 billion of cash posted as collateral against this net liability position.


Note 14		Netting Arrangements for Certain Financial Instruments and Securities Financing Activities

The Company’s derivative portfolio consists of bilateral

over-the-counter

trades, certain interest rate derivatives and credit contracts required to be centrally cleared through clearinghouses per current regulations, and exchange-traded positions which may include U.S. Treasury and Eurodollar futures or options on U.S. Treasury futures. Of the Company’s ~~$768.8~~$800.6 billion total notional amount of derivative positions at ~~March 31,~~June 30, 2022, ~~$413.4~~$409.7 billion related to


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bilateral

over-the-counter

trades, ~~$349.3~~$383.9 billion related to those centrally cleared through clearinghouses and ~~$6.1~~$7.0 billion related to those that were exchange-traded. The Company’s derivative contracts typically include offsetting rights (referred to as netting arrangements), and depending on expected volume, credit risk, and counterparty preference, collateral maintenance may be required. For all derivatives under collateral support arrangements, fair value is determined daily and, depending on the collateral maintenance requirements, the Company and a counterparty may receive or deliver collateral, based upon the net fair value of all derivative positions between the Company and the counterparty. Collateral is typically cash, but securities may be allowed under collateral arrangements with certain counterparties. Receivables and payables related to cash collateral are included in other assets and other liabilities on the Consolidated Balance Sheet, along with the related derivative asset and liability fair values. Any securities pledged to counterparties as collateral remain on the Consolidated Balance Sheet. Securities received from counterparties as collateral are not recognized on the Consolidated Balance Sheet, unless the counterparty defaults. In general, securities used as collateral can be sold, repledged or otherwise used by the party in possession. No restrictions exist on the use of cash collateral by either party. Refer to Note 13 for further discussion of the Company’s derivatives, including collateral arrangements.

As part of the Company’s treasury and broker-dealer operations, the Company executes transactions that are treated as securities sold under agreements to repurchase or securities purchased under agreements to resell, both of which are accounted for as collateralized financings. Securities sold under agreements to repurchase include repurchase agreements and securities loaned transactions. Securities purchased under agreements to resell include reverse repurchase agreements and securities borrowed transactions. For securities sold under agreements to repurchase, the Company records a liability for the cash received, which is included in short-term borrowings on the Consolidated Balance Sheet. For securities purchased under agreements to resell, the Company records a receivable for the cash paid, which is included in other assets on the Consolidated Balance Sheet.

Securities transferred to counterparties under repurchase agreements and securities loaned transactions continue to be recognized on the Consolidated Balance Sheet, are measured at fair value, and are included in investment securities or other assets. Securities received from counterparties under reverse repurchase agreements and securities borrowed transactions are not recognized on the Consolidated Balance Sheet unless the counterparty defaults. The securities transferred under repurchase and reverse repurchase transactions typically are U.S. Treasury and agency securities, residential agency mortgage-backed securities or corporate debt securities. The securities loaned or borrowed typically are corporate debt securities traded by the Company’s broker-dealer subsidiary. In general, the securities transferred can be sold, repledged or otherwise used by the party in possession. No restrictions exist on the use of cash collateral by either party. Repurchase/reverse repurchase and securities loaned/borrowed transactions expose the Company to counterparty risk. The Company manages this risk by performing assessments, independent of business line managers, and establishing concentration limits on each counterparty. Additionally, these transactions include collateral arrangements that require the fair values of the underlying securities to be determined daily, resulting in cash being obtained or refunded to counterparties to maintain specified collateral levels.


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The following table summarizes the maturities by category of collateral pledged for repurchase agreements and securities loaned transactions:


(Dollars in Millions)	Overnight and Continuous		Less Than 30 Days		30-89 Days		Greater Than 90 Days		Total		Overnight and Continuous		Less Than 30 Days		30-89 Days		Greater Than 90 Days		Total
March 31, 2022
June 30, 2022
Repurchase agreements
U.S. Treasury and agencies	$	499	$	–	$	–	$	–	$	499	$	429	$	–	$	–	$	–	$	429
Residential agency mortgage-backed securities		843		–		–		–		843		969		–		–		–		969
Corporate debt securities		537		–		–		–		537		597		–		–		–		597
Total repurchase agreements		1,879		–		–		–		1,879		1,995		–		–		–		1,995
Securities loaned
Corporate debt securities		70		–		–		–		70		225		–		–		–		225
Total securities loaned		70		–		–		–		70		225		–		–		–		225
Gross amount of recognized liabilities	$	1,949	$	–	$	–	$	–	$	1,949	$	2,220	$	–	$	–	$	–	$	2,220
December 31, 2021
Repurchase agreements
U.S. Treasury and agencies	$	378	$	–	$	–	$	–	$	378	$	378	$	–	$	–	$	–	$	378
Residential agency mortgage-backed securities		551		–		–		–		551		551		–		–		–		551
Corporate debt securities		646		–		–		–		646		646		–		–		–		646
Total repurchase agreements		1,575		–		–		–		1,575		1,575		–		–		–		1,575
Securities loaned
Corporate debt securities		169		–		–		–		169		169		–		–		–		169
Total securities loaned		169		–		–		–		169		169		–		–		–		169
Gross amount of recognized liabilities	$	1,744	$	–	$	–	$	–	$	1,744	$	1,744	$	–	$	–	$	–	$	1,744

The Company executes its derivative, repurchase/reverse repurchase and securities loaned/borrowed transactions under the respective industry standard agreements. These agreements include master netting arrangements that allow for multiple contracts executed with the same counterparty to be viewed as a single arrangement. This allows for net settlement of a single amount on a daily basis. In the event of default, the master netting arrangement provides for

close-out

netting, which allows all of these positions with the defaulting counterparty to be terminated and net settled with a single payment amount.

The Company has elected to offset the assets and liabilities under netting arrangements for the balance sheet presentation of the majority of its derivative counterparties. The netting occurs at the counterparty level, and includes all assets and liabilities related to the derivative contracts, including those associated with cash collateral received or delivered. The Company has not elected to offset the assets and liabilities under netting arrangements for the balance sheet presentation of repurchase/reverse repurchase and securities loaned/borrowed transactions.

The following tables provide information on the Company’s netting adjustments, and items not offset on the Consolidated Balance Sheet but available for offset in the event of default:

(Dollars in Millions)

Gross
Recognized
Assets

Gross Amounts
Offset on the
Consolidated
Balance Sheet (a)

Net Amounts
Presented on the
Consolidated
Balance Sheet
   Gross Amounts Not Offset on the
Consolidated Balance Sheet Net Amount

Financial
Instruments (b)

Collateral
Received (c)

March 31, 2022

Derivative assets (d)
$ 4,279    $ (2,313 ) $ 1,966    $ (168 ) $ (24 ) $ 1,774
Reverse repurchase agreements
506    – 506    (405 ) (101 ) –
Securities borrowed
1,452    – 1,452    – (1,412 ) 40
Total
$ 6,237    $ (2,313 ) $ 3,924    $ (573 ) $ (1,537 ) $ 1,814
December 31, 2021

Derivative assets (d)
$ 3,830    $ (1,609 ) $ 2,221    $ (142 ) $ (106 ) $ 1,973
Reverse repurchase agreements
359    – 359    (249 ) (110 ) –
Securities borrowed
1,868    – 1,868    – (1,818 ) 50
Total
$ 6,057    $ (1,609 ) $ 4,448    $ (391 ) $ (2,034 ) $ 2,023


(Dollars in Millions)	Gross Recognized Assets		Gross Amounts Offset on the Consolidated Balance Sheet (a)			Net Amounts Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet						Net Amount
(Dollars in Millions)	Gross Recognized Assets		Gross Amounts Offset on the Consolidated Balance Sheet (a)			Net Amounts Presented on the Consolidated Balance Sheet		Financial Instruments (b)			Collateral Received (c)			Net Amount
June 30, 2022
Derivative assets (d)	$	5,359	$	(3,503	)	$	1,856	$	(175	)	$	(66	)	$	1,615
Reverse repurchase agreements		513		–			513		(386	)		(127	)		–
Securities borrowed		1,657		–			1,657		–			(1,609	)		48
Total	$	7,529	$	(3,503	)	$	4,026	$	(561	)	$	(1,802	)	$	1,663
December 31, 2021
Derivative assets (d)	$	3,830	$	(1,609	)	$	2,221	$	(142	)	$	(106	)	$	1,973
Reverse repurchase agreements		359		–			359		(249	)		(110	)		–
Securities borrowed		1,868		–			1,868		–			(1,818	)		50
Total	$	6,057	$	(1,609	)	$	4,448	$	(391	)	$	(2,034	)	$	2,023

(a)	Includes ~~$1.1~~$2.0 billion and $528 million of cash collateral related payables that were netted against derivative assets at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

(b)

For derivative assets this includes any derivative liability fair values that could be offset in the event of counterparty default; for reverse repurchase agreements this includes any repurchase agreement payables that could be offset in the event of counterparty default; for securities borrowed this includes any securities loaned payables that could be offset in the event of counterparty default.

(c)	Includes the fair value of securities received by the Company from the counterparty. These securities are not included on the Consolidated Balance Sheet unless the counterparty defaults.

(d)	Excludes ~~$21~~$30 million and $57 million at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, of derivative assets not subject to netting arrangements.


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(Dollars in Millions)

Gross
Recognized
Assets

Gross Amounts
Offset on the
Consolidated
Balance Sheet (a)

Net Amounts
Presented on the
Consolidated
Balance Sheet
   Gross Amounts Not Offset on the
Consolidated Balance Sheet Net Amount

Financial
Instruments (b)

Collateral
Received (c)

March 31, 2022

Derivative liabilities (d)
$ 4,908    $ (2,084 ) $ 2,824    $ (168 ) $ – $ 2,656
Repurchase agreements
1,879    – 1,879    (405 ) (1,474 ) –
Securities loaned
70    – 70    – (69 ) 1
Total
$ 6,857    $ (2,084 ) $ 4,773    $ (573 ) $ (1,543 ) $ 2,657
December 31, 2021

Derivative liabilities (d)
$ 2,761    $ (1,589 ) $ 1,172    $ (142 ) $ – $ 1,030
Repurchase agreements
1,575    – 1,575    (249 ) (1,326 ) –
Securities loaned
169    – 169    – (167 ) 2
Total
$ 4,505    $ (1,589 ) $ 2,916    $ (391 ) $ (1,493 ) $ 1,032


(Dollars in Millions)	Gross Recognized Liabilities		Gross Amounts Offset on the Consolidated Balance Sheet (a)			Net Amounts Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet
								Gross Amounts Not Offset on the Consolidated Balance Sheet
								Financial Instruments (b)			Collateral Pledged (c)			Net Amount
								Financial Instruments (b)			Collateral Pledged (c)			Net Amount
June 30, 2022
Derivative liabilities (d)	$	6,771	$	(2,639	)	$	4,132	$	(175	)	$	–		$	3,957
Repurchase agreements		1,995		–			1,995		(386	)		(1,609	)		–
Securities loaned		225		–			225		–			(223	)		2
Total	$	8,991	$	(2,639	)	$	6,352	$	(561	)	$	(1,832	)	$	3,959
December 31, 2021
Derivative liabilities (d)	$	2,761	$	(1,589	)	$	1,172	$	(142	)	$	–		$	1,030
Repurchase agreements		1,575		–			1,575		(249	)		(1,326	)		–
Securities loaned		169		–			169		–			(167	)		2
Total	$	4,505	$	(1,589	)	$	2,916	$	(391	)	$	(1,493	)	$	1,032

(a)	Includes ~~$841 million~~$1.2 billion and $508 million of cash collateral related receivables that were netted against derivative liabilities at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

(b)

For derivative liabilities this includes any derivative asset fair values that could be offset in the event of counterparty default; for repurchase agreements this includes any reverse repurchase agreement receivables that could be offset in the event of counterparty default; for securities loaned this includes any securities borrowed receivables that could be offset in the event of counterparty default.

(c)	Includes the fair value of securities pledged by the Company to the counterparty. These securities are included on the Consolidated Balance Sheet unless the Company defaults.

(d)	Excludes ~~$140~~$110 million and $137 million at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, of derivative liabilities not subject to netting arrangements.


Note 15		Fair Values of Assets and Liabilities

The Company uses fair value measurements for the initial recording of certain assets and liabilities, periodic remeasurement of certain assets and liabilities, and disclosures. Derivatives, trading and

available-for-sale

investment securities, MSRs and substantially all MLHFS are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of

lower-of-cost-or-fair

value accounting or impairment write-downs of individual assets.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value measurement reflects all of the assumptions that market participants would use in pricing the asset or liability, including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of nonperformance.

The Company groups its assets and liabilities measured at fair value into a three-level hierarchy for valuation techniques used to measure financial assets and financial liabilities at fair value. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:

Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 1 includes U.S. Treasury securities, as well as exchange-traded instruments.

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 includes debt securities that are traded less frequently than exchange-traded instruments and which are typically valued using third party pricing services; derivative contracts and other assets and liabilities, including securities, whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data; and MLHFS whose values are determined using quoted prices for similar assets or pricing models with inputs that are observable in the market or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category includes MSRs and certain derivative contracts.


U.S. Bancorp		6 1

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Valuation Methodologies

The valuation methodologies used by the Company to measure financial assets and liabilities at fair value are described below. In addition, the following section includes an indication of the level of the fair value hierarchy in which the


60		~~U.S. Bancorp~~

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assets or liabilities are classified. Where appropriate, the descriptions include information about the valuation models and key inputs to those models. During the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, there were no significant changes to the valuation techniques used by the Company to measure fair value.

Available-For-Sale

Investment Securities

When quoted market prices for identical securities are available in an active market, these prices are used to determine fair value and these securities are classified within Level 1 of the fair value hierarchy. Level 1 investment securities include U.S. Treasury and exchange-traded securities.

For other securities, quoted market prices may not be readily available for the specific securities. When possible, the Company determines fair value based on market observable information, including quoted market prices for similar securities, inactive transaction prices, and broker quotes. These securities are classified within Level 2 of the fair value hierarchy. Level 2 valuations are generally provided by a third-party pricing service. Level 2 investment securities are predominantly agency mortgage-backed securities, certain other asset-backed securities, obligations of state and political subdivisions and agency debt securities.

Mortgage Loans Held For Sale

MLHFS measured at fair value, for which an active secondary market and readily available market prices exist, are initially valued at the transaction price and are subsequently valued by comparison to instruments with similar collateral and risk profiles. MLHFS are classified within Level 2. Included in mortgage banking revenue ~~were~~was a net ~~losses~~loss of

~~$234~~

$64 million and

~~$215~~a net gain of $98 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and net losses of $298 million and $117 million for the six months ended June 30, 2022 and 2021, respectively, from the changes to fair value of these MLHFS under fair value option accounting guidance. Changes in fair value due to instrument specific credit risk were immaterial. Interest income for MLHFS is measured based on contractual interest rates and reported as interest income on the Consolidated Statement of Income. Electing to measure MLHFS at fair value reduces certain timing differences and better matches changes in fair value of these assets with changes in the value of the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting.

Mortgage Servicing Rights

MSRs are valued using a discounted cash flow methodology, and are classified within Level 3. The Company determines fair value of the MSRs by projecting future cash flows for different interest rate scenarios using prepayment rates and other assumptions, and discounts these cash flows using a risk adjusted rate based on option adjusted spread levels. There is minimal observable market activity for MSRs on comparable portfolios and, therefore, the determination of fair value requires significant management judgment. Refer to Note 7 for further information on MSR valuation assumptions.

Derivatives

The majority of derivatives held by the Company are executed

over-the-counter

or centrally cleared through clearinghouses and are valued using market standard cash flow valuation techniques. The models incorporate inputs, depending on the type of derivative, including interest rate curves, foreign exchange rates and volatility. All derivative values incorporate an assessment of the risk of counterparty nonperformance, measured based on the Company’s evaluation of credit risk including external assessments of credit risk. The Company monitors and manages its nonperformance risk by considering its ability to net derivative positions under master netting arrangements, as well as collateral received or provided under collateral arrangements. Accordingly, the Company has elected to measure the fair value of derivatives, at a counterparty level, on a net basis. The majority of the derivatives are classified within Level 2 of the fair value hierarchy, as the significant inputs to the models, including nonperformance risk, are observable. However, certain derivative transactions are with counterparties where risk of nonperformance cannot be observed in the market and, therefore, the credit valuation adjustments result in these derivatives being classified within Level 3 of the fair value hierarchy.

The Company also has other derivative contracts that are created through its operations, including commitments to purchase and originate mortgage loans and swap agreements executed in conjunction with the sale of a portion of its Class B common and preferred shares of Visa Inc. (the “Visa swaps”). The mortgage loan commitments are valued by pricing models that include market observable and unobservable inputs, which result in the commitments being classified within Level 3 of the fair value hierarchy. The unobservable inputs include assumptions about the percentage of commitments that actually become a closed loan and the MSR value that is inherent in the underlying loan value.


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The Visa swaps require payments by either the Company or the purchaser of the Visa Inc. Class B common and preferred shares when there are changes in the conversion rate of the Visa Inc. Class B common and preferred shares to Visa Inc. Class A common and preferred shares, respectively, as well as quarterly payments to the purchaser based on specified terms of the agreements. Management reviews and updates the Visa swaps fair value in conjunction with its review of Visa Inc. related litigation contingencies, and the associated escrow funding. The expected litigation


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resolution impacts the Visa Inc. Class B common share to Visa Inc. Class A common share conversion rate, as well as the ultimate termination date for the Visa swaps. Accordingly, the Visa swaps are classified within Level 3. Refer to Note 16 for further information on the Visa Inc. restructuring and related card association litigation.

Significant Unobservable Inputs of Level 3 Assets and Liabilities

The following section provides information to facilitate an understanding of the uncertainty in the fair value measurements for the Company’s Level 3 assets and liabilities recorded at fair value on the Consolidated Balance Sheet. This section includes a description of the significant inputs used by the Company and a description of any interrelationships between these inputs. The discussion below excludes nonrecurring fair value measurements of collateral value used for impairment measures for loans and OREO. These valuations utilize third party appraisal or broker price opinions, and are classified as Level 3 due to the significant judgment involved.

Mortgage Servicing Rights

The significant unobservable inputs used in the fair value measurement of the Company’s MSRs are expected prepayments and the option adjusted spread that is added to the risk-free rate to discount projected cash flows. Significant increases in either of these inputs in isolation would have resulted in a significantly lower fair value measurement. Significant decreases in either of these inputs in isolation would have resulted in a significantly higher fair value measurement. There is no direct interrelationship between prepayments and option adjusted spread. Prepayment rates generally move in the opposite direction of market interest rates. Option adjusted spread is generally impacted by changes in market return requirements.

The following table shows the significant valuation assumption ranges for MSRs at ~~March 31,~~June 30, 2022:

Minimum Maximum Weighted-
Average (a)
Expected prepayment
7 % 12 % 9 %
Option adjusted spread
5 11 6


	Minimum			Maximum			Weighted- Average (a)
Expected prepayment		5	%		10	%		7	%
Option adjusted spread		5			11			6

(a)	Determined based on the relative fair value of the related mortgage loans serviced.

Derivatives

The Company has two distinct Level 3 derivative portfolios: (i) the Company’s commitments to purchase and originate mortgage loans that meet the requirements of a derivative and (ii) the Company’s asset/liability and customer-related derivatives that are Level 3 due to unobservable inputs related to measurement of risk of nonperformance by the counterparty. In addition, the Company’s Visa swaps are classified within Level 3.

The significant unobservable inputs used in the fair value measurement of the Company’s derivative commitments to purchase and originate mortgage loans are the percentage of commitments that actually become a closed loan and the MSR value that is inherent in the underlying loan value. A significant increase in the rate of loans that close would have resulted in a larger derivative asset or liability. A significant increase in the inherent MSR value would have resulted in an increase in the derivative asset or a reduction in the derivative liability. Expected loan close rates and the inherent MSR values are directly impacted by changes in market rates and will generally move in the same direction as interest rates.

The following table shows the significant valuation assumption ranges for the Company’s derivative commitments to purchase and originate mortgage loans at ~~March 31,~~June 30, 2022:


										Minimum			Maximum			Weighted- Average (a)
	Minimum			Maximum			Weighted- Average (a)
Expected loan close rate		6	%		100	%		82	%		29	%		100	%		80	%
Inherent MSR value (basis points per loan)		38			207			110			37			219			108

(a)	Determined based on the relative fair value of the related mortgage loans.

The significant unobservable input used in the fair value measurement of certain of the Company’s asset/liability and customer-related derivatives is the credit valuation adjustment related to the risk of counterparty nonperformance.


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A significant increase in the credit valuation adjustment would have resulted in a lower fair value measurement. A significant decrease in the credit valuation adjustment would have resulted in a higher fair value measurement. The credit valuation adjustment is impacted by changes in market rates, volatility, market implied credit spreads, and loss recovery rates, as well as the Company’s assessment of the counterparty’s credit position. At ~~March 31,~~June 30, 2022, the minimum, maximum and weighted-average credit valuation adjustment as a percentage of the net fair value of the counterparty’s derivative contracts prior to adjustment was 0 percent, ~~798~~158 percent and 2 percent, respectively.


62		~~U.S. Bancorp~~

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The significant unobservable inputs used in the fair value measurement of the Visa swaps are management’s estimate of the probability of certain litigation scenarios occurring, and the timing of the resolution of the related litigation loss estimates in excess, or shortfall, of the Company’s proportional share of escrow funds. An increase in the loss estimate or a delay in the resolution of the related litigation would have resulted in an increase in the derivative liability. A decrease in ~~the~~th

loss estimate or an acceleration of the resolution of the related litigation would have resulted in a decrease in the derivative liability.

The following table summarizes the balances of assets and liabilities measured at fair value on a recurring basis:

(Dollars in Millions) Level 1    Level 2    Level 3    Netting Total
March 31, 2022

Available-for-sale
securities

U.S. Treasury and agencies
$ 20,924    $ 5,426    $ –    $ – $ 26,350
Mortgage-backed securities

Residential agency
–    78,992    –    – 78,992
Commercial agency
–    7,963    –    – 7,963
Asset-backed securities
–    –    7    – 7
Obligations of state and political subdivisions
–    10,273    1    – 10,274
Other
–    7    –    – 7
Total
available-for-sale
20,924    102,661    8    – 123,593
Mortgage loans held for sale
–    2,203    –    – 2,203
Mortgage servicing rights
–    –    3,432    – 3,432
Derivative assets
5    3,385    910    (2,313 ) 1,987
Other assets
256    1,589    –    – 1,845
Total
$ 21,185    $ 109,838    $ 4,350    $ (2,313 ) $ 133,060
Derivative liabilities
$ –    $ 3,127    $ 1,921    $ (2,084 ) $ 2,964
Short-term borrowings and other liabilities (a)
215    1,429    –    – 1,644
Total
$ 215    $ 4,556    $ 1,921    $ (2,084 ) $ 4,608
December 31, 2021

Available-for-sale
securities

U.S. Treasury and agencies
$ 30,917    $ 5,692    $ –    $ – $ 36,609
Mortgage-backed securities

Residential agenc
y
–    77,079    –    – 77,079
Commercial agency
–    8,485    –    – 8,485
Asset-backed securities
–    59    7    – 66
Obligations of state and political subdivisions
–    10,716    1    – 10,717
Other
–    7    –    – 7
Total
available-for-sale
30,917    102,038    8    – 132,963
Mortgage loans held for sale
–    6,623    –    – 6,623
Mortgage servicing rights
–    –    2,953    – 2,953
Derivative assets
8    2,490    1,389    (1,609 ) 2,278
Other assets
278    1,921    –    – 2,199
Total
$ 31,203    $ 113,072    $ 4,350    $ (1,609 ) $ 147,016
Derivative liabilities
$ –    $ 2,308    $ 590    $ (1,589 ) $ 1,309
Short-term borrowings and other liabilities (a)
209    1,837    –    – 2,046
Total
$ 209    $ 4,145    $ 590    $ (1,589 ) $ 3,355


(Dollars in Millions)	Level 1		Level 2		Level 3		Netting			Total
June 30, 2022
Available-for-sale securities
U.S. Treasury and agencies	$	18,539	$	5,228	$	–	$	–		$	23,767
Mortgage-backed securities
Residential agency		–		57,752		–		–			57,752
Commercial agency		–		7,564		–		–			7,564
Obligations of state and political subdivisions		–		9,715		1		–			9,716
Other		–		7		–		–			7
Total available-for-sale		18,539		80,266		1		–			98,806
Mortgage loans held for sale		–		2,773		–		–			2,773
Mortgage servicing rights		–		–		3,707		–			3,707
Derivative assets		–		4,555		834		(3,503	)		1,886
Other assets		187		1,830		–		–			2,017
Total	$	18,726	$	89,424	$	4,542	$	(3,503	)	$	109,189
Derivative liabilities	$	–	$	3,872	$	3,009	$	(2,639	)	$	4,242
Short-term borrowings and other liabilities (a)		190		1,645		–		–			1,835
Total	$	190	$	5,517	$	3,009	$	(2,639	)	$	6,077
December 31, 2021
Available-for-sale securities
U.S. Treasury and agencies	$	30,917	$	5,692	$	–	$	–		$	36,609
Mortgage-backed securities
Residential agency		–		77,079		–		–			77,079
Commercial agency		–		8,485		–		–			8,485
Asset-backed securities		–		59		7		–			66
Obligations of state and political subdivisions		–		10,716		1		–			10,717
Other		–		7		–		–			7
Total available-for-sale		30,917		102,038		8		–			132,963
Mortgage loans held for sale		–		6,623		–		–			6,623
Mortgage servicing rights		–		–		2,953		–			2,953
Derivative assets		8		2,490		1,389		(1,609	)		2,278
Other assets		278		1,921		—		—			2,199
Total	$	31,203	$	113,072	$	4,350	$	(1,609	)	$	147,016
Derivative liabilities	$	—	$	2,308	$	590	$	(1,589	)	$	1,309
Short-term borrowings and other liabilities (a)		209		1,837		—		—			2,046
Total	$	209	$	4,145	$	590	$	(1,589	)	$	3,355

Note:

Excluded from the table above are equity investments without readily determinable fair values. The Company has elected to carry these investments at historical cost, adjusted for impairment and any changes resulting from observable price changes for identical or similar investments of the issuer. The aggregate carrying amount of these equity investments was $80 million and $79 million at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively. The Company has not recorded impairments or adjustments for observable price changes on these equity investments during the first ~~three~~six months of 2022 and 2021, or on a cumulative basis.

(a)	Primarily represents the Company’s obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance.


~~U.S. Bancorp~~ 6 4		63 U.S. Bancorp

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The following table presents the changes in fair value for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended ~~March 31:~~June 30:

(Dollars in Millions) Beginning
of Period
Balance Net Gains
(Losses)
Included in
Net Income Purchases Sales Issuances Settlements
End
of Period
Balance

Net Change
in Unrealized
Gains (Losses)
Relating to
Assets and
Liabilities
Held at End
of Period

2022

Available-for-sale
securities

Asset-backed securities
$ 7

$ – $ – $ – $ – $ – $ 7 $ –
Obligations of state and political subdivisions
1

– – – – – 1 –
Total
available-for-sale
8

– – – – – 8 –
Mortgage servicing rights
2,953

238 (a) 3 1 237 (c) – 3,432 238 (a)
Net derivative assets and liabilities
�� 799

(1,867 ) (b) 11 (1 ) – $ 47 (1,011 ) (1,697 ) (d)

2021

Available-for-sale
securities

Asset-backed securities
$ 7

$ – $ – $ – $ – $ – $ 7 $ –
Obligations of state and political subdivisions
1

– – – – – 1 –
Total
available-for-sale
8

– – – – – 8 –
Mortgage servicing rights
2,210

242 (a) 16 – 319 (c) – 2,787 242 (a)
Net derivative assets and liabilities
2,326

(935 ) (e) 2 – – (237 ) 1,156 (900 ) (f)


(Dollars in Millions)	Beginning of Period Balance			Net Gains (Losses) Included in Net Income			Net Gains (Losses) Included in Other Comprehensive Income (Loss)		Purchases		Sales			Issuances			Settlements			End of Period Balance			Net Change in Unrealized Gains (Losses) Relating to Assets and Liabilities Held at End of Period
2022
Available-for-sale securities
Asset-backed securities	$	7		$	(3	)	$	–	$	–	$	(4	)	$	–		$	–		$	–		$	–
Obligations of state and political subdivisions		1			–			–		–		–			–			–			1			–
Total available-for-sale		8			(3	)		–		–		(4	)		–			–			1			–
Mortgage servicing rights		3,432			170	(a)		–		3		–			102	(c)		–			3,707			170	(a)
Net derivative assets and liabilities		(1,011	)		(1,494	) (b)		–		81		–			–			249			(2,175	)		(1,259	) (d)

2021
Available-for-sale securities
Asset-backed securities	$	7		$	–		$	1	$	–	$	–		$	–		$	–		$	8		$	1
Obligations of state and political subdivisions		1			–			–		–		–			–			–			1			–
Total available-for-sale		8			–			1		–		–			–			–			9			1
Mortgage servicing rights		2,787			(379	) (a)		–		11		1			293	(c)		–			2,713			(379	) (a)
Net derivative assets and liabilities		1,156			556	(e)		–		58		(1	)		–			(269	)		1,500			412	(f)

(a)	Included in mortgage banking revenue.

(b)	Approximately ~~$(83)~~$(20) million, ~~$(1.8)~~$(1.5) billion and ~~$(1)~~$1 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

(c)	Represents MSRs capitalized during the period.

(d)	Approximately ~~$(24)~~$(3) million, ~~$(1.7)~~$(1.3) billion and ~~$(1)~~$1 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

(e)	Approximately ~~$60~~$276 million, $279 million and $1 million included in mortgage banking revenue, ~~and $(995) million included in~~ commercial products ~~revenue.~~revenue and other noninterest income, respectively.

(f)	Approximately ~~$78~~$100 million, $311 million and $1 million included in mortgage banking revenue, commercial products revenue and ~~$(978)~~other noninterest income, respectively.


(Dollars in Millions)	Beginning of Period Balance		Net Gains (Losses) Included in Net Income			Net Gains (Losses) Included in Other Comprehensive Income (Loss)		Purchases		Sales			Issuances			Settlements			End of Period Balance			Net Change in Unrealized Gains (Losses) Relating to Assets and Liabilities Held at End of Period
2022
Available-for-sale securities
Asset-backed securities	$	7	$	(3	)	$	–	$	–	$	(4	)	$	–		$	–		$	–		$	–
Obligations of state and political subdivisions		1		–			–		–		–			–			–			1			–
Total available-for-sale		8		(3	)		–		–		(4	)		–			–			1			–
Mortgage servicing rights		2,953		408	(a)		–		6		1			339	(c)		–			3,707			408	(a)
Net derivative assets and liabilities		799		(3,361	) (b)		–		92		(1	)		–			296			(2,175	)		(2,739	) (d)

2021
Available-for-sale securities
Asset-backed securities	$	7	$	–		$	1	$	–	$	–		$	–		$	–		$	8		$	1
Obligations of state and political subdivisions		1		–			–		–		–			–			–			1			–
Total available-for-sale		8		–			1		–		–			–			–			9			1
Mortgage servicing rights		2,210		(137	) (a)		–		27		1			612	(c)		–			2,713			(137	) (a)
Net derivative assets and liabilities		2,326		(379	) (e)		–		60		(1	)		–			(506	)		1,500			(496	) (f)

(a)	Included in mortgage banking revenue.

(b)	Approximately $(103) million and $(3.3) billion included in mortgage banking revenue and commercial products revenue, respectively.

(c)	Represents MSRs capitalized during the period.

(d)	Approximately $(3) million and $(2.7) billion included in mortgage banking revenue and commercial products revenue, respectively.

(e)	Approximately $336 million, $(716) million and $1 million included in mortgage banking revenue, commercial products ~~revenue.~~revenue and other noninterest income, respectively.

(f)	Approximately $100 million, $(597) million and $1 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

The Company is also required periodically to measure certain other financial assets at fair value on a nonrecurring basis. These measurements of fair value usually result from the application of

lower-of-cost-or-fair

value accounting or write-downs of individual assets.


U.S. Bancorp		6 5

Table of Contents

The following table summarizes the balances as of the measurement date of assets measured at fair value on a nonrecurring basis, and still held as of the reporting date:


	March 31, 2022								December 31, 2021								June 30, 2022								December 31, 2021
(Dollars in Millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

Loans (a)	$	–	$	–	$	28	$	28	$	–	$	–	$	59	$	59	$	–	$	–	$	69	$	69	$	–	$	–	$	59	$	59

Other assets (b)		–		–		3		3		–		–		77		77		–		–		28		28		–		–		77		77

(a)	Represents the carrying value of loans for which adjustments were based on the fair value of the collateral, excluding loans fully charged-off.

(b)	Primarily represents the fair value of foreclosed properties that were measured at fair value based on an appraisal or broker price opinion of the collateral subsequent to their initial acquisition.

The following table summarizes losses recognized related to nonrecurring fair value measurements of individual assets or ~~portfolios for the three months ended March 31:~~portfolios:

(Dollars in Millions)     2022        2021

Loans (a)
$ 11    $ 31

Other assets (b)
1    1


	Three Months Ended June 30				Six Months Ended June 30
(Dollars in Millions)	2022		2021		2022		2021

Loans (a)	$	22	$	12	$	33	$	43

Other assets (b)		10		5		11		6

(a)	Represents write-downs of loans which were based on the fair value of the collateral, excluding loans fully charged-off.

(b)	Primarily represents related losses of foreclosed properties that were measured at fair value subsequent to their initial acquisition.


64		~~U.S. Bancorp~~

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Fair Value Option

The following table summarizes the differences between the aggregate fair value carrying amount of MLHFS for which the fair value option has been elected and the aggregate unpaid principal amount that the Company is contractually obligated to receive at maturity:

March 31, 2022          December 31, 2021
(Dollars in Millions) Fair
Value
Carrying
Amount    Aggregate
Unpaid
Principal    Carrying
Amount Over
(Under) Unpaid
Principal          Fair
Value
Carrying
Amount    Aggregate
Unpaid
Principal    Carrying
Amount Over
(Under) Unpaid
Principal
Total loans $ 2,203    $ 2,200    $ 3       $ 6,623    $ 6,453    $ 170
Nonaccrual loans
1    1    –       1    1    –
Loans 90 days or more past due
2    2    –       2    2    –


	June 30, 2022						December 31, 2021
(Dollars in Millions)	Fair Value Carrying Amount		Aggregate Unpaid Principal		Carrying Amount Over (Under) Unpaid Principal		Fair Value Carrying Amount		Aggregate Unpaid Principal		Carrying Amount Over (Under) Unpaid Principal
Total loans	$	2,773	$	2,753	$	20	$	6,623	$	6,453	$	170
Nonaccrual loans		1		1		–		1		1		–
Loans 90 days or more past due		1		1		–		2		2		–

Fair Value of Financial Instruments

The following section summarizes the estimated fair value for financial instruments accounted for at amortized cost as of ~~March 31,~~June 30, 2022 and December 31, 2021. In accordance with disclosure guidance related to fair values of financial instruments, the Company did not include assets and liabilities that are not financial instruments, such as the value of goodwill, long-term relationships with deposit, credit card, merchant processing and trust customers, other purchased intangibles, premises and equipment, deferred taxes and other liabilities. Additionally, in accordance with the disclosure guidance, receivables and payables due in one year or less, insurance contracts, equity investments not accounted for at fair value, and deposits with no defined or contractual maturities are excluded.


6 6		U.S. Bancorp

Table of Contents

The estimated fair values of the Company’s financial instruments are shown in the table below:


	March 31, 2022										December 31, 2021										June 30, 2022										December 31, 2021
	Carrying Amount		Fair Value								Carrying Amount		Fair Value								Carrying Amount		Fair Value								Carrying Amount		Fair Value
(Dollars in Millions)	Carrying Amount		Level 1		Level 2		Level 3		Total		Carrying Amount		Level 1		Level 2		Level 3		Total		Carrying Amount		Level 1		Level 2		Level 3		Total		Carrying Amount		Level 1		Level 2		Level 3		Total
Financial Assets
Cash and due from banks	$	44,303	$	44,303	$	–	$	–	$	44,303	$	28,905	$	28,905	$	–	$	–	$	28,905	$	39,124	$	39,124	$	–	$	–	$	39,124	$	28,905	$	28,905	$	–	$	–	$	28,905
Federal funds sold and securities purchased under resale agreements		513		–		513		–		513		359		–		359		–		359		520		–		520		–		520		359		–		359		–		359
Investment securities held-to-maturity		43,654		–		40,572		–		40,572		41,858		–		41,812		–		41,812		61,503		1,337		54,320		–		55,657		41,858		–		41,812		–		41,812
Loans held for sale (a)		1,118		–		–		1,118		1,118		1,152		–		–		1,152		1,152		1,170		–		–		1,170		1,170		1,152		–		–		1,152		1,152
Loans		313,270		–		–		311,120		311,120		306,304		–		–		312,724		312,724		326,537		–		–		321,095		321,095		306,304		–		–		312,724		312,724
Other (b)		1,941		–		1,129		812		1,941		1,521		–		630		891		1,521		2,391		–		1,679		712		2,391		1,521		–		630		891		1,521
Financial Liabilities
Time deposits		24,304		–		23,952		–		23,952		22,665		–		22,644		–		22,644		30,622		–		30,039		–		30,039		22,665		–		22,644		–		22,644
Short-term borrowings (c)		19,398		–		19,140		–		19,140		9,750		–		9,646		–		9,646		23,128		–		22,789		–		22,789		9,750		–		9,646		–		9,646
Long-term debt		32,931		–		32,228		–		32,228		32,125		–		32,547		–		32,547		29,408		–		27,901		–		27,901		32,125		–		32,547		–		32,547
Other (d)		3,797		–		1,151		2,646		3,797		3,862		–		1,170		2,692		3,862		3,896		–		1,135		2,761		3,896		3,862		–		1,170		2,692		3,862

(a)	Excludes mortgages held for sale for which the fair value option under applicable accounting guidance was elected.

(b)	Includes investments in Federal Reserve Bank and Federal Home Loan Bank stock and tax-advantaged investments.

(c)	Excludes the Company’s obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance.

(d)	Includes operating lease liabilities and liabilities related to tax-advantaged investments.

The fair value of unfunded commitments, deferred

non-yield

related loan fees, standby letters of credit and other guarantees is approximately equal to their carrying value. The carrying value of unfunded commitments, deferred

non-yield

related loan fees and standby letters of credit was ~~$504~~$486 million and $495 million at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively. The carrying value of other guarantees was ~~$212~~$224 million and $245 million at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.


Note 16		Guarantees and Contingent Liabilities

Visa Restructuring and Card Association Litigation

The Company’s payment services business issues credit and debit cards and acquires credit and debit card transactions through the Visa U.S.A. Inc. card association or its affiliates (collectively “Visa”). In 2007, Visa completed a restructuring and issued shares of Visa Inc. common stock to its financial institution


~~U.S. Bancorp~~		65

~~Table of Contents~~

members in contemplation of its initial public offering (“IPO”) completed in the first quarter of 2008 (the “Visa Reorganization”). As a part of the Visa Reorganization, the Company received its proportionate number of shares of Visa Inc. common stock, which were subsequently converted to Class B shares of Visa Inc. (“Class B shares”).

Visa U.S.A. Inc. (“Visa U.S.A.”) and MasterCard International (collectively, the “Card Brands”) are defendants in antitrust lawsuits challenging the practices of the Card Brands (the “Visa Litigation”). Visa U.S.A. member banks have a contingent obligation to indemnify Visa Inc. under the Visa U.S.A. bylaws (which were modified at the time of the restructuring in October 2007) for potential losses arising from the Visa Litigation. The indemnification by the Visa U.S.A. member banks has no specific maximum amount. Using proceeds from its IPO and through reductions to the conversion ratio applicable to the Class B shares held by Visa U.S.A. member banks, Visa Inc. has funded an escrow account for the benefit of member financial institutions to fund their indemnification obligations associated with the Visa Litigation. The receivable related to the escrow account is classified in other liabilities as a direct offset to the related Visa Litigation contingent liability.

In October 2012, Visa signed a settlement agreement to resolve class action claims associated with the multidistrict interchange litigation pending in the United States District Court for the Eastern District of New York (the “Multi-District Litigation”). The U.S. Court of Appeals for the Second Circuit reversed the approval of that settlement and remanded the matter to the district court. Thereafter, the case was split into two putative class actions, one seeking damages (the “Damages Action”) and a separate class action seeking injunctive relief only (the “Injunctive Action”). In September 2018, Visa signed a new settlement agreement, superseding the original settlement agreement, to resolve the Damages Action. The Damages Action settlement was approved by the United States District Court for the Eastern District of New York, but is now on appeal. The Injunctive Action, which generally seeks changes to Visa rules, is still pending.


U.S. Bancorp		6 7

Table of Contents

Other Guarantees and Contingent Liabilities

The following table is a summary of other guarantees and contingent liabilities of the Company at ~~March 31,~~June 30, 2022:

(Dollars in Millions) Collateral
Held    Carrying
Amount    Maximum
Potential
Future
Payments
Standby letters of credit
$ –    $ 55    $ 9,705
Third party borrowing arrangements
–    –    6
Securities lending indemnifications
10,342    –    9,933
Asset sales
–    85    7,382 (a)
Merchant processing
968    106    121,205
Tender option bond program guarantee
1,615    –    1,488
Other
–    21    1,331


(Dollars in Millions)	Collateral Held		Carrying Amount		Maximum Potential Future Payments
Standby letters of credit	$	—	$	55	$	9,844
Third party borrowing arrangements		—		—		7
Securities lending indemnifications		7,822		—		7,461
Asset sales		—		85		7,629	(a)
Merchant processing		1,415		118		141,453
Tender option bond program guarantee		1,521		—		1,489
Other		—		21		1,343

(a)

The maximum potential future payments do not include loan sales where the Company provides standard representation and warranties to the buyer against losses related to loan underwriting documentation defects that may have existed at the time of sale that generally are identified after the occurrence of a triggering event such as delinquency. For these types of loan sales, the maximum potential future payments is generally the unpaid principal balance of loans sold measured at the end of the current reporting period. Actual losses will be significantly less than the maximum exposure, as only a fraction of loans sold will have a representation and warranty breach, and any losses on repurchase would generally be mitigated by any collateral held against the loans.

Merchant Processing

The Company, through its subsidiaries, provides merchant processing services. Under the rules of credit card associations, a merchant processor retains a contingent liability for credit card transactions processed. This contingent liability arises in the event of a billing dispute between the merchant and a cardholder that is ultimately resolved in the cardholder’s favor. In this situation, the transaction is “charged-back” to the merchant and the disputed amount is credited or otherwise refunded to the cardholder. If the Company is unable to collect this amount from the merchant, it bears the loss for the amount of the refund paid to the cardholder.

The Company currently processes card transactions in the United States, Canada and Europe through wholly-owned subsidiaries. In the event a merchant was unable to fulfill product or services subject to future delivery, such as airline tickets, the Company could become financially liable for refunding the purchase price of such products or services purchased through the credit card associations under the charge-back provisions. Charge-back risk related to these merchants is evaluated in a manner similar to credit risk assessments and, as such, merchant processing contracts contain various provisions to protect the Company in the event of default.

At ~~March 31,~~June 30, 2022, the value of airline tickets purchased to be delivered at a future date through card transactions processed by the Company was ~~$7.7~~$9.1 billion. The Company held collateral of ~~$714 million~~$1.2 billion in escrow deposits, letters of credit and indemnities from financial institutions, and liens on various assets. In addition to specific collateral or other credit enhancements, the Company maintains a liability for its implied guarantees associated with future delivery. At ~~March 31,~~June 30, 2022, the liability was ~~$90~~$100 million primarily related to these airline processing arrangements.


66		~~U.S. Bancorp~~

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Asset Sales

The Company regularly sells loans to GSEs as part of its mortgage banking activities. The Company provides customary representations and warranties to GSEs in conjunction with these sales. These representations and warranties generally require the Company to repurchase assets if it is subsequently determined that a loan did not meet specified criteria, such as a documentation deficiency or rescission of mortgage insurance. If the Company is unable to cure or refute a repurchase request, the Company is generally obligated to repurchase the loan or otherwise reimburse the GSE for losses. At ~~March 31,~~June 30, 2022, the Company had reserved ~~$15~~$13 million for potential losses from representation and warranty obligations, compared with $18 million at December 31, 2021. The Company’s reserve reflects management’s

best estimate of losses for representation and warranty obligations. The Company’s repurchase reserve is modeled at the loan level, taking into consideration the individual credit quality and borrower activity that has transpired since origination. The model applies credit quality and economic risk factors to derive a probability of default and potential repurchase that are based on the Company’s historical loss experience, and estimates loss severity based on expected collateral value. The Company also considers qualitative factors that may result in anticipated losses differing from historical loss trends.

As of ~~March 31,~~June 30, 2022 and December 31, 2021, the Company had ~~$27~~$35 million and $19 million, respectively, of unresolved representation and warranty claims from GSEs. The Company does not have a significant amount of unresolved claims from investors other than GSEs.


68		U.S. Bancorp

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Litigation and Regulatory Matters

The Company is subject to various litigation and regulatory matters that arise in the ordinary course of its business. The Company establishes reserves for such matters when potential losses become probable and can be reasonably estimated. The Company believes the ultimate resolution of existing legal and regulatory matters will not have a material adverse effect on the financial condition, results of operations or cash flows of the Company. However, in light of the uncertainties inherent in these matters, it is possible that the ultimate resolution of one or more of these matters may have a material adverse effect on the Company’s results from operations for a particular period, and future changes in circumstances or additional information could result in additional accruals or resolution in excess of established accruals, which could adversely affect the Company’s results from operations, potentially materially.

Residential Mortgage-Backed Securities Litigation

Starting in 2011, the Company and other large financial institutions have been sued in their capacity as trustee for residential mortgage–backed securities trusts. In the lawsuits brought against the Company, the investors allege that the Company’s banking subsidiary, U.S. Bank National Association (“U.S. Bank”), as trustee caused them to incur substantial losses by failing to enforce loan repurchase obligations and failing to abide by appropriate standards of care after events of default allegedly occurred. The plaintiffs in these matters seek monetary damages in unspecified amounts and most also seek equitable relief.

Regulatory Matters

The Company is continually subject to examinations, inquiries and investigations in areas of heightened regulatory scrutiny, such as compliance, risk management, third-party risk management and consumer protection. For example, the Consumer Financial Protection Bureau (“CFPB”) has been investigating certain of the Company’s consumer sales practices and is now considering a potential enforcement action. The Company is engaged

~~in discussions~~

~~with the CFPB on this matter and does not believe an enforcement action is warranted, but there can be no assurance that these discussions will result in a resolution.~~ The Company is cooperating fully with all pending examinations, inquiries and investigations, any of which could lead to administrative or legal proceedings or settlements. Remedies in these proceedings or settlements may include fines, penalties, restitution or alterations in the Company’s business practices (which may increase the Company’s operating expenses and decrease its revenue).

On July 27, 2022, U.S. Bank agreed to the issuance of a consent order with the Consumer Financial Protection Bureau resolving the previously disclosed investigation of certain of the Company’s consumer sales practices. The financial impact of the resolution was not material to the Company’s financial condition, results of operations or cash flows.

Outlook

Due to their complex nature, it can be years before litigation and regulatory matters are resolved. The Company may be unable to develop an estimate or range of loss where matters are in early stages, there are significant factual or legal issues to be resolved, damages are unspecified or uncertain, or there is uncertainty as to a litigation class being certified or the outcome of pending motions, appeals or proceedings. For those litigation and regulatory matters where the Company has information to develop an estimate or range of loss, the Company believes the upper end of the range of reasonably possible losses in aggregate, in excess of any reserves established for matters where a loss is considered probable, will not be material to its financial condition, results of operations or cash flows. The Company’s estimates are subject to significant judgment and uncertainties, and the matters underlying the estimates will change from time to time. Actual results may vary significantly from the current estimates.


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Note 17		Business Segments

Within the Company, financial performance is measured by major lines of business based on the products and services provided to customers through its distribution channels. 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. The Company has five reportable operating segments:

Corporate and Commercial Banking

Corporate and Commercial Banking offers lending, equipment finance and

small-ticket

leasing, depository services, treasury management, capital markets services, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution,

non-profit

and public sector clients.

Consumer and Business Banking

Consumer and Business Banking delivers products and services through banking offices, telephone servicing and sales,

on-line

services, direct mail, ATM processing and mobile devices. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking.

Wealth Management and Investment Services

Wealth Management and Investment Services provides private banking, financial advisory services, investment management, retail brokerage services, insurance, trust, custody and fund


U.S. Bancorp		69

Table of Contents

servicing through four businesses: Wealth Management, Global Corporate Trust & Custody, U.S. Bancorp Asset Management and Fund Services.

Payment Services

Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services, consumer lines of credit and merchant processing.

Treasury and Corporate Support

Treasury and Corporate Support includes the Company’s investment portfolios, funding, capital management, interest rate risk management, income taxes not allocated to business segments, 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.

Basis of Presentation

Business segment results are derived from the Company’s business unit profitability reporting systems by specifically attributing managed balance sheet assets, deposits and other liabilities and their related income or expense. The allowance for credit losses and related provision expense are allocated to the business segments according to the volume and credit quality of the loan balances managed, but with the impact of changes in economic forecasts recorded in Treasury and Corporate Support. Goodwill and other intangible assets are assigned to the business segments based on the mix of business of an entity acquired by the Company. Within the Company, capital levels are evaluated and managed centrally; however, capital is allocated to the business segments to support evaluation of business performance. Business segments are allocated capital on a risk-adjusted basis considering economic and regulatory capital requirements. Generally, the determination of the amount of capital allocated to each business segment includes credit allocations following a Basel III regulatory framework. Interest income and expense is determined based on the assets and liabilities managed by the business segment. Because funding and asset/liability management is a central function, funds transfer-pricing methodologies are utilized to allocate a cost of funds used or credit for funds provided to all business segment assets and liabilities, respectively, using a matched funding concept. Also, each business unit is allocated the taxable-equivalent benefit of

tax-exempt

products. The residual effect on net interest income of asset/liability management activities is included in Treasury and Corporate Support. Noninterest income and expenses directly managed by each business segment, including fees, service charges, salaries and benefits, and other direct revenues and costs are accounted for within each segment’s financial results in a manner similar to the consolidated financial statements. Occupancy costs are allocated based on utilization of facilities by the business segments. Generally, operating losses are charged to the business segment when the loss event is realized in a manner similar to a loan

charge-off.

Noninterest expenses incurred by centrally managed operations or business segments that directly support another business segment’s operations are charged to the applicable business segment 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. Certain activities that do not directly support the operations of the business segments or for which the business segments are not considered financially accountable in evaluating their performance are not charged to the business segments. The income or expenses associated with these corporate activities, isincluding merger and integration charges, are reported within the Treasury and Corporate Support business segment. Income taxes are assessed to each business segment at a standard tax rate with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in Treasury and Corporate Support.


68		~~U.S. Bancorp~~

~~Table of Contents~~


7 0		U.S. Bancorp

Table of Contents

Business segment results for the three months ended ~~March 31~~June 30 were as follows:

Corporate and Commercial
Banking
Consumer and
Business Banking
      Wealth Management and
Investment Services
(Dollars in Millions) 2022 2021       2022 2021       2022    2021
Condensed Income Statement

Net interest income (taxable-equivalent basis)
$ 735 $ 719    $ 1,517 $ 1,505    $ 274    $ 268
Noninterest income
245 268    461 569    596    531
Total net revenue
980 987    1,978 2,074    870    799
Nointerest expense
419 409    1,405 1,344    587    494
Income (loss) before provision and income taxes
561 578    573 730    283    305
Provision for credit losses
3 (48 )    49 (37 )    8    5
Income (loss) before income taxes
558 626    524 767    275    300
Income taxes and taxable-equivalent adjustment
140 157    131 192    69    75
Net income (loss)
418 469    393 575    206    225
Net (income) loss attributable to noncontrolling interests
– –    – –    –    –
Net income (loss) attributable to U.S. Bancorp
$ 418 $ 469    $ 393 $ 575    $ 206    $ 225

Average Balance Sheet

Loans
$ 115,634 $ 101,927    $ 141,106 $ 141,719    $ 20,666    $ 16,846
Other earning assets
4,676 4,321    4,381 10,177    259    279
Goodwill
1,912 1,647    3,261 3,475    1,761    1,619
Other intangible assets
4 5    3,176 2,493    265    42
Assets
127,651 114,069    157,696 164,131    24,446    20,120

Noninterest-bearing deposits
62,285 56,281    32,094 32,861    27,350    21,338
Interest-bearing deposits
86,618 71,377    166,765 151,406    69,909    83,474
Total deposits
148,903 127,658    198,859 184,267    97,259    104,812

Total U.S. Bancorp shareholders’ equity
13,710 14,354    12,275 12,496    3,595    3,034

Payment
Services

Treasury and
Corporate Support

Consolidated
Company

(Dollars in Millions) 2022 2021       2022 2021       2022    2021
Condensed Income Statement

Net interest income (taxable-equivalent basis)
$ 622 $ 629    $ 52 $ (32 )    $ 3,200    $ 3,089
Noninterest income
858 (a) 785 (a)    236 228    2,396 (b)    2,381 (b)
Total net revenue
1,480 1,414    288 196    5,596 (c)    5,470 (c)
Noninterest expense
854 805    237 327    3,502    3,379
Income (loss) before provision and income taxes
626 609    51 (131 )    2,094    2,091
Provision for credit losses
130 (41 )    (78 ) (706 )    112    (827 )
Income (loss) before income taxes
496 650    129 575    1,982    2,918
Income taxes and taxable-equivalent adjustment
124 163    (40 ) 46    424    633
Net income (loss)
372 487    169 529    1,558    2,285
Net (income) loss attributable to noncontrolling interests
– –    (1 ) (5 )    (1 )    (5 )
Net income (loss) attributable to U.S. Bancorp
$ 372 $ 487    $ 168 $ 524    $ 1,557    $ 2,280

Average Balance Sheet

Loans
$ 31,740 $ 29,630    $ 3,820 $ 3,867    $ 312,966    $ 293,989
Other earning assets
1,023 5    206,532 188,940    216,871    203,722
Goodwill
3,325 3,173    – –    10,259    9,914
Other intangible assets
464 542    – –    3,909    3,082
Assets
38,540 35,091    229,069 215,323    577,402    548,734

Noninterest-bearing deposits
3,673 5,264    2,561 2,608    127,963    118,352
Interest-bearing deposits
160 132    2,761 1,623    326,213    308,012
Total deposits
3,833 5,396    5,322 4,231    454,176    426,364

Total U.S. Bancorp shareholders’ equity
8,019 7,658    15,867 15,187    53,466    52,729


	Corporate and Commercial Banking							Consumer and Business Banking						Wealth Management and Investment Services
(Dollars in Millions)	2022			2021				2022			2021			2022			2021
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	784		$	726			$	1,617		$	1,534		$	352		$	246
Noninterest income		272			265				395			634			652			549
Total net revenue		1,056			991				2,012			2,168			1,004			795
Nointerest expense		453			433				1,419			1,375			581			521
Income (loss) before provision and income taxes		603			558				593			793			423			274
Provision for credit losses		100			—				(75	)		(68	)		(4	)		(4	)
Income (loss) before income taxes		503			558				668			861			427			278
Income taxes and taxable-equivalent adjustment		126			140				167			215			107			70
Net income (loss)		377			418				501			646			320			208
Net (income) loss attributable to noncontrolling interests		—			—				—			—			—			—
Net income (loss) attributable to U.S. Bancorp	$	377		$	418			$	501		$	646		$	320		$	208

Average Balance Sheet
Loans	$	123,210		$	102,275			$	141,135		$	140,826		$	22,320		$	17,442
Other earning assets		4,161			4,409				2,579			8,018			251			237
Goodwill		1,912			1,647				3,244			3,476			1,718			1,618
Other intangible assets		4			5				3,634			2,828			300			84
Assets		137,773			114,186				156,132			161,695			25,786			20,470

Noninterest-bearing deposits		58,266			60,696				31,642			33,702			25,019			23,288
Interest-bearing deposits		93,678			70,019				168,486			158,164			71,759			73,347
Total deposits		151,944			130,715				200,128			191,866			96,778			96,635

Total U.S. Bancorp shareholders’ equity		13,989			13,816				12,366			12,337			3,618			3,089

	Payment Services							Treasury and Corporate Support						Consolidated Company
(Dollars in Millions)	2022			2021				2022			2021			2022			2021
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	619		$	595			$	92		$	63		$	3,464		$	3,164
Noninterest income		994	(a)		913	(a	)		235			258			2,548	(b)		2,619 (b)
Total net revenue		1,613			1,508				327			321			6,012 (c)			5,783 (c)
Noninterest expense		871			829				400			229			3,724			3,387
Income (loss) before provision and income taxes		742			679				(73	)		92			2,288			2,396
Provision for credit losses		221			91				69			(189	)		311			(170	)
Income (loss) before income taxes		521			588				(142	)		281			1,977			2,566
Income taxes and taxable-equivalent adjustment		130			147				(87	)		6			443			578
Net income (loss)		391			441				(55	)		275			1,534			1,988
Net (income) loss attributable to noncontrolling interests		—			—				(3	)		(6	)		(3	)		(6	)
Net income (loss) attributable to U.S. Bancorp	$	391		$	441			$	(58	)	$	269		$	1,531		$	1,982

Average Balance Sheet
Loans	$	33,854		$	30,030			$	3,668		$	3,711		$	324,187		$	294,284
Other earning assets		1,023			5				204,560			193,798			212,574			206,467
Goodwill		3,318			3,176				—			—			10,192			9,917
Other intangible assets		438			518				—			—			4,376			3,435
Assets		41,054			35,618				219,166			219,396			579,911			551,365

Noninterest-bearing deposits		3,396			5,030				2,504			2,581			120,827			125,297
Interest-bearing deposits		167			141				1,599			2,242			335,689			303,913
Total deposits		3,563			5,171				4,103			4,823			456,516			429,210

Total U.S. Bancorp shareholders’ equity		8,115			7,413				11,078			16,307			49,166			52,962

(a)	Presented net of related rewards and rebate costs and certain partner payments of ~~$671~~$772 million and ~~$535~~$633 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

(b)	Includes revenue generated from certain contracts with customers of ~~$1.9~~$2.0 billion and ~~$1.7~~$1.9 billion for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

(c)

The Company, as a lessor, originates retail and commercial leases either directly to the consumer or indirectly through dealer networks. Under these arrangments, the Company recorded ~~$204~~$188 million and ~~$228~~$238 million of revenue for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, primarily consisting of interest income on sales-type and direct financing leases.


U.S. Bancorp		697 1


	Less Than 12 Months					12 Months or Greater					Total					Less Than 12 Months					12 Months or Greater					Total
(Dollars in Millions)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury and agencies	$	18,851	$	(982	)	$	3,784	$	(349	)	$	22,635	$	(1,331	)	$	19,590	$	(1,581	)	$	3,511	$	(431	)	$	23,101	$	(2,012	)
Residential agency mortgage-backed securities		66,323		(3,181	)		5,090		(405	)		71,413		(3,586	)		50,819		(4,281	)		5,360		(778	)		56,179		(5,059	)
Commercial agency mortgage-backed securities		5,105		(414	)		2,856		(392	)		7,961		(806	)		4,852		(657	)		2,711		(535	)		7,563		(1,192	)
Asset-backed securities		–		–			2		–			2		–
Obligations of state and political subdivisions		4,378		(514	)		222		(61	)		4,600		(575	)		8,430		(1,057	)		396		(163	)		8,826		(1,220	)
Other		4		–			–		–			4		–			6		–			–		–			6		–
Total investment securities	$	94,661	$	(5,091	)	$	11,954	$	(1,207	)	$	106,615	$	(6,298	)	$	83,697	$	(7,576	)	$	11,978	$	(1,907	)	$	95,675	$	(9,483	)


(Dollars in Millions)	Commercial			Commercial Real Estate			Residential Mortgages			Credit Card			Other Retail			Total Loans
Balance at December 31, 2021		$1,849			$1,123			$565			$1,673			$ 945			$6,155
Add
Provision for credit losses		19			(54	)		29			78			40			112
Deduct
Loans charged-off		55			1			5			158			61			280
Less recoveries of loans charged-off		(23	)		(6	)		(11	)		(46	)		(32	)		(118	)
Net loan charge-offs (recoveries)		32			(5	)		(6	)		112			29			162
Balance at March 31, 2022		$1,836			$1,074			$600			$1,639			$956			$6,105
Balance at December 31, 2020		$2,423			$1,544			$573			$2,355			$1,115			$8,010
Add
Provision for credit losses		(435	)		(19	)		(39	)		(259	)		(75	)		(827	)
Deduct
Loans charged-off		86			10			5			190			83			374
Less recoveries of loans charged-off		(30	)		(17	)		(10	)		(46	)		(48	)		(151	)
Net loan charge-offs (recoveries)		56			(7	)		(5	)		144			35			223
Balance at March 31, 2021		$1,932			$1,532			$539			$1,952			$1,005			$6,960


	Accruing
(Dollars in Millions)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonperforming (b)		Total
March 31, 2022
Commercial	$	116,986		$ 234		$ 76		$ 174		$117,470
Commercial real estate		38,888		86		1		216		39,191
Residential mortgages (a)		78,028		105		140		214		78,487
Credit card		21,804		194		165		—		22,163
Other retail		61,157		237		68		161		61,623
Total loans	$	316,863		$ 856		$450		$ 765		$318,934
December 31, 2021
Commercial	$	111,270		$530		$49		$ 174		$112,023
Commercial real estate		38,678		80		11		284		39,053
Residential mortgages (a)		75,962		124		181		226		76,493
Credit card		22,142		193		165		—		22,500
Other retail		61,468		275		66		150		61,959
Total loans	$	309,520		$1,202		$472		$ 834		$312,028


	For the Three Months Ended June 30
				2022								2021
(Dollars in Millions) (Unaudited)	Average Balances			Interest		Yields and Rates			Average Balances			Interest		Yields and Rates			% Change Average Balances
Assets
Investment securities	$	171,296		$	825		1.93	%	$	160,615		$	635		1.58	%		6.7	%
Loans held for sale		3,688			54		5.89			7,825			55		2.78			(52.9	)
Loans (b)
Commercial		120,657			794		2.64			102,974			676		2.63			17.2
Commercial real estate		39,517			330		3.35			38,564			306		3.18			2.5
Residential mortgages		80,228			638		3.18			73,351			621		3.38			9.4
Credit card		22,748			589		10.38			21,116			554		10.54			7.7
Other retail		61,037			528		3.47			58,279			530		3.64			4.7
Total loans		324,187			2,879		3.56			294,284			2,687		3.66			10.2
Interest-bearing deposits with banks		31,116			57		.74			31,358			6		.08			(.8	)
Other earning assets		6,474			39		2.36			6,669			26		1.61			(2.9	)
Total earning assets		536,761			3,854		2.88			500,751			3,409		2.73			7.2
Allowance for loan losses		(5,710	)							(6,310	)							9.5
Unrealized gain (loss) on investment securities		(9,226	)							851								*
Other assets		58,086								56,073								3.6
Total assets	$	579,911							$	551,365								5.2
Liabilities and Shareholders’ Equity
Noninterest-bearing deposits	$	120,827							$	125,297								(3.6	)%
Interest-bearing deposits
Interest checking		116,878			20		.07			103,356			7		.03			13.1
Money market savings		123,788			121		.39			113,673			50		.18			8.9
Savings accounts		68,127			2		.01			62,102			1		.01			9.7
Time deposits		26,896			34		.51			24,782			24		.39			8.5
Total interest-bearing deposits		335,689			177		.21			303,913			82		.11			10.5
Short-term borrowings
Federal funds purchased		641			1		.17			2,204			—		.02			(70.9	)
Securities sold under agreements to repurchase		2,078			2		.10			1,658			1		.03			25.3
Commercial paper		6,289			4		.06			6,509			—		—			(3.4	)
Other short-term borrowings		14,286			50		.35			6,091			17		.27			*
Total short- term borrowings		23,294			57		.98			16,462			18		.43			41.5
Long-term debt		31,390			156		1.99			36,190			145		1.61			(13.3	)
Total interest-bearing liabilities		390,373			390		.40			356,565			245		.28			9.5
Other liabilities		19,078								15,910								19.9
Shareholders’ equity
Preferred equity		6,808								5,968								14.1
Common equity		42,358								46,994								(9.9	)
Total U.S. Bancorp shareholders’ equity		49,166								52,962								(7.2	)
Noncontrolling interests		467								631								(26.0	)
Total equity		49,633								53,593								(7.4	)
Total liabilities and equity	$	579,911							$	551,365								5.2
Net interest income				$	3,464							$	3,164
Gross interest margin							2.48	%							2.45	%
Gross interest margin without taxable-equivalent increments							2.46	%							2.43	%
Percent of Earning Assets
Interest income							2.88	%							2.73	%
Interest expense							.29								.20
Net interest margin							2.59	%							2.53	%
Net interest margin without taxable-equivalent increments							2.57	%							2.51	%


	For the Three Months Ended March 31																			For the Six Months Ended June 30
				2022								2021											2022								2021
(Dollars in Millions) (Unaudited)	Average Balances			Interest		Yields and Rates			Average Balances			Interest		Yields and Rates			% Change Average Balances			Average Balances			Interest		Yields and Rates			Average Balances			Interest		Yields and Rates			% Change Average Balances
Assets
Investment securities	$	174,762		$	736		1.68	%	$	145,520		$	534		1.47	%		20.1	%	$	173,019		$	1,561		1.80	%	$	153,109		$	1,169		1.53	%		13.0	%
Loans held for sale		5,479			60		4.40			10,032			67		2.69			(45.4	)		4,579			114		5.00			8,922			122		2.73			(48.7	)
Loans (b)
Commercial		112,822			629		2.26			102,091			673		2.67			10.5			116,761			1,423		2.46			102,535			1,349		2.65			13.9
Commercial real estate		39,084			295		3.06			38,786			305		3.19			.8			39,302			625		3.21			38,675			611		3.18			1.6
Residential mortgages		77,449			612		3.17			75,201			645		3.44			3.0			78,847			1,250		3.17			74,271			1,266		3.41			6.2
Credit card		21,842			562		10.44			21,144			578		11.08			3.3			22,297			1,151		10.41			21,130			1,132		10.81			5.5
Other retail		61,769			509		3.34			56,767			532		3.80			8.8			61,401			1,037		3.41			57,527			1,062		3.72			6.7
Total loans		312,966			2,607		3.37			293,989			2,733		3.76			6.5			318,608			5,486		3.47			294,138			5,420		3.71			8.3
Interest-bearing deposits with banks		29,851			14		.19			41,784			9		.08			(28.6	)		30,487			71		.47			36,542			15		.08			(16.6	)
Other earning assets		6,779			28		1.68			6,386			24		1.53			6.2			6,625			67		2.02			6,528			50		1.57			1.5
Total earning assets		529,837			3,445		2.62			497,711			3,367		2.73			6.5			533,318			7,299		2.75			499,239			6,776		2.73			6.8
Allowance for loan losses		(5,701	)							(7,272	)							21.6			(5,706	)							(6,788	)							15.9
Unrealized gain (loss) on investment securities		(2,551	)							1,838								*			(5,907	)							1,342								*
Other assets		55,817								56,457								(1.1	)		56,958								56,264								1.2
Total assets	$	577,402							$	548,734								5.2		$	578,663							$	550,057								5.2
Liabilities and Shareholders’ Equity
Noninterest-bearing deposits	$	127,963							$	118,352								8.1	%	$	124,375							$	121,844								2.1	%
Interest-bearing deposits
Interest checking		115,062			9		.03			97,385			6		.02			18.2			115,975			29		.05			100,387			13		.03			15.5
Money market savings		119,588			52		.18			124,825			50		.16			(4.2	)		121,700			173		.29			119,218			100		.17			2.1
Savings accounts		66,978			2		.01			58,848			2		.01			13.8			67,555			4		.01			60,484			3		.01			11.7
Time deposits		24,585			17		.28			26,954			27		.41			(8.8	)		25,747			51		.40			25,862			51		.40			(.4	)
Total interest-bearing deposits		326,213			80		.10			308,012			85		.11			5.9			330,977			257		.16			305,951			167		.11			8.2
Short-term borrowings
Federal funds purchased		1,236			—		.04			1,471			—		.02			(16.0	)		937			1		.16			1,840			1		.04			(49.1	)
Securities sold under agreements to repurchase		1,895			1		.03			1,673			1		.04			13.3			1,987			3		.14			1,665			1		.07			19.3
Commercial paper		6,473			—		.01			6,145			—		—			5.3			6,381			4		.06			6,328			—		—			.8
Other short-term borrowings		9,434			20		.21			3,818			15		.40			*			11,873			70		.59			4,961			32		.65			*
Total short- term borrowings		19,038			21		.46			13,107			16		.51			45.3			21,178			78		.75			14,794			34		.47			43.2
Long-term debt		32,972			144		1.77			39,463			177		1.81			(16.4	)		32,177			300		1.88			37,817			322		1.71			(14.9	)
Total interest-bearing liabilities		378,223			245		.26			360,582			278		.31			4.9			384,332			635		.33			358,562			523		.29			7.2
Other liabilities		17,282								16,441								5.1			18,184								16,174								12.4
Shareholders’ equity
Preferred equity		6,619								6,213								6.5			6,714								6,090								10.2
Common equity		46,847								46,516								.7			44,590								46,756								(4.6	)
Total U.S. Bancorp shareholders’ equity		53,466								52,729								1.4			51,304								52,846								(2.9	)
Noncontrolling interests		468								630								(25.7	)		468								631								(25.8	)
Total equity		53,934								53,359								1.1			51,772								53,477								(3.2	)
Total liabilities and equity	$	577,402							$	548,734								5.2		$	578,663							$	550,057								5.2
Net interest income				$	3,200							$	3,089										$	6,664							$	6,253
Gross interest margin							2.36	%							2.42	%										2.42	%							2.44	%
Gross interest margin without taxable-equivalent increments							2.34	%							2.40	%										2.40	%							2.42	%
Percent of Earning Assets
Interest income							2.62	%							2.73	%										2.75	%							2.73	%
Interest expense							.18								.23											.24								.21
Net interest margin							2.44	%							2.50	%										2.51	%							2.52	%
Net interest margin without taxable-equivalent increments							2.42	%							2.48	%										2.49	%							2.50	%


		2.1		Amendment No. 1 to the Share Purchase Agreement, dated as of May 10, 2022. *
		3.1		Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.4 to the Company’s Form 8-K filed on April 20, 2022).
		3.2		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on April 20, 2021).
		31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
		31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
		32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
		101		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheet, (ii) Consolidated Statement of Income, (iii) Consolidated Statement of Comprehensive Income, (iv) Consolidated Statement of Shareholders’ Equity, (v) Consolidated Statement of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
		104		Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).



/s/ S / A NDREW C ECERE				/s/ S / T ERRANCE R. D OLAN
Andrew Cecere Chief Executive Officer Dated: ~~May 3,~~August 4, 2022				Terrance R. Dolan Chief Financial Officer

U.S. BANCORP

/s/ L
ISA
R. S
TARK

Dated: ~~May 3,~~August 4, 2022

Lisa R. Stark
Controller
(Principal Accounting Officer and Duly Authorized Officer)