0000036104 us-gaap:ExtendedMaturityMember us-gaap:ResidentialPortfolioSegmentMember 2023-01-01 2023-06-30
Table of Contents

Table of Contents
 
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 SeptemberJune 30, 20222023
OR
 
☐
 
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
 
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 PrP 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 ☑  Accelerated filer ☐
Non-accelerated
filer ☐		  
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by 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 OctoberJuly 31, 20222023
Common Stock, $0.01 Par Value  1,485,823,4861,532,965,462 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 
a) Overview
4 
b) Statement of Income Analysis
     5 
c) Balance Sheet Analysis
     87 
d) Non-GAAP Financial Measures
     32 
e) Critical Accounting Policies
     3433 
f) Controls and Procedures (Item 4)
     3433 
2) Quantitative and Qualitative Disclosures About Market Risk/Corporate Risk Profile (Item 3)
9
a) Overview
     9 
a) Overview
9 
b) Credit Risk Management
     11 
c) Residual Value Risk Management
     2221 
d) Operational Risk Management
     2221 
e) Compliance Risk Management
     2221 
f) Interest Rate Risk Management
     2221 
g) Market Risk Management
23
h) Liquidity Risk Management
     24 
h) Liquidity Riski) Capital Management
     2526 
i) Capital Management3) Line of Business Financial Review
     27 
3) Line of Business Financial Review
28
4) Financial Statements (Item 1)
     3534 
Part II — Other Information
    
1) Legal Proceedings (Item 1)
     7782 
2) Risk Factors (Item 1A)
     7782 
3) Unregistered Sales of Equity Securities and Use of Proceeds (Item 2)
     7782 
4) Exhibits (Item 6)
77
5) Signature
     7882 
6) Exhibits5) Signature
     7983
6) Exhibits
84 
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, future economic conditions and the anticipated future revenue, expenses, financial condition, asset quality, capital and expensesliquidity levels, plans, prospects and the future plans and prospectsoperations 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, whichthat could cause actual results to differ materially from those anticipated. set forth in forward-looking statements, including the following risks and uncertainties:
Deterioration in general business and economic conditions or turbulence in domestic or global financial markets, which 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, changesvolatility;
Turmoil and volatility in the financial services industry, including failures or rumors of failures of other depository institutions, which could affect the ability of depository institutions, including U.S. Bank National Association, to attract and retain depositors, and could affect the ability of financial services providers, including U.S. Bancorp, to borrow or raise capital;
Increases in Federal Deposit Insurance Corporation (“FDIC”) assessments due to bank failures;
Actions taken by governmental agencies to stabilize the financial system and the effectiveness of such actions;
Changes to regulatory capital, liquidity and resolution-related requirements applicable to large banking organizations in response to recent developments affecting the banking sector;
Changes to statutes, regulations, or regulatory policies or practices, including capital and liquidity requirements, and the enforcement and interpretation of such laws and regulations, and U.S. Bancorp’s ability to address or satisfy those requirements and other requirements or conditions imposed by regulatory entities, could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changesentities;
U.S. Bancorp
1
Table of Contents
Changes in interest rates; the impacts of the
COVID-19
pandemic on its business, financial position, results of operations, liquidity and prospects; increases
Increases in unemployment rates; deterioration
Deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value
Risks related to originating and selling mortgages, including repurchase and indemnity demands, and related to U.S. Bancorp’s role as a loan servicer;
Impacts of its investment securities; legalcurrent, pending or future litigation and regulatory developments; litigation; increasedgovernmental proceedings;
Increased competition from both banks and
non-banks;
civil unrest; the effects
Effects of climate change; changeschange and related physical and transition risks;
Changes in customer behavior and preferences; breachespreferences and the ability to implement technological changes to respond to customer needs and meet competitive demands;
Breaches in data security;
Failures or disruptions in or breaches of U.S. Bancorp’s operational, technology or security including as a resultsystems or infrastructure, or those of work-from-home arrangements; failuresthird parties;
Failures to safeguard personal information;
Impacts of pandemics, including the impacts of
COVID-19
pandemic, natural disasters, terrorist activities, civil unrest, international hostilities orand geopolitical events; impacts
Impacts of supply chain disruptions, and rising inflation; effectsinflation, slower growth or a recession;
Failure to execute on strategic or operational plans;
Effects of mergers and acquisitions and related integration; effects
Effects of critical accounting policies and judgments;
Effects of changes in or interpretations of tax laws and management’sregulations;
Management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk. risk; and
The risks and uncertainties more fully discussed in the section entitled “Risk Factors” of U.S. Bancorp’s Form
10-K
for the year ended December 31, 2022, and subsequent filings with the Securities and Exchange Commission.
In addition, U.S. Bancorp’s proposed acquisition of MUFG Union Bank, N.A. (“MUB”) 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,combination of MUB with U.S. Bancorp, including the integration of MUFG Union Bank,MUB, may be more costly or difficult to complete than anticipated; delays in closing the proposed acquisition; and the failure of any closing conditions in the definitive purchase agreement to be satisfied.anticipated or have unanticipated adverse results.
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 September 30   Nine Months Ended September 30  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		  2023 2022 Percent
Change		   2023   2022   Percent
Change		 
Condensed Income Statement
Condensed Income Statement
 
         
Condensed Income Statement
 
         
Net interest income
 $3,827  $3,171  20.7%   $10,435   $9,371    11.4%  $4,415  $3,435  28.5%   $9,049   $6,608    36.9% 
Taxable-equivalent adjustment (a)
 30  26  15.4    86    79    8.9  34  29  17.2    68    56    21.4 
Net interest income (taxable-equivalent basis) (b)
 3,857  3,197  20.6    10,521    9,450    11.3  4,449  3,464  28.4    9,117    6,664    36.8 
Noninterest income
 2,469  2,693  (8.3)    7,413    7,693    (3.6)  2,726  2,548  7.0    5,233    4,944    5.8 
Total net revenue
 6,326  5,890  7.4    17,934    17,143    4.6  7,175  6,012  19.3    14,350    11,608    23.6 
Noninterest expense
 3,637  3,429  6.1    10,863    10,195    6.6  4,569  3,724  22.7    9,124    7,226    26.3 
Provision for credit losses
 362  (163)  *    785    (1,160)    *  821  311  *    1,248    423    * 
Income before taxes
 2,327  2,624  (11.3)    6,286    8,108    (22.5)  1,785  1,977  (9.7)    3,978    3,959    .5 
Income taxes and taxable-equivalent adjustment
 511  590  (13.4)    1,378    1,801    (23.5)  416  443  (6.1)    905    867    4.4 
Net income
 1,816  2,034  (10.7)    4,908    6,307    (22.2)  1,369  1,534  (10.8)    3,073    3,092    (.6) 
Net (income) loss attributable to noncontrolling interests
 (4)  (6)  33.3    (8)    (17)    52.9  (8)  (3)  *    (14)    (4)    * 
Net income attributable to U.S. Bancorp
 $1,812  $2,028  (10.7)   $4,900   $6,290    (22.1)  $1,361  $1,531  (11.1)   $3,059   $3,088    (.9) 
Net income applicable to U.S. Bancorp common shareholders
 $1,718  $1,934  (11.2)   $4,648   $6,023    (22.8)  $1,281  $1,464  (12.5)   $2,873   $2,930    (1.9) 
Per Common Share
Per Common Share
 
         
Per Common Share
 
         
Earnings per share
 $1.16  $1.30  (10.8)%   $3.13   $4.04    (22.5)%  $.84  $.99  (15.2)%   $1.87   $1.97    (5.1)% 
Diluted earnings per share
 1.16  1.30  (10.8)    3.13    4.04    (22.5)  .84  .99  (15.2)    1.87    1.97    (5.1) 
Dividends declared per share
 .48  .46  4.3    1.40    1.30    7.7  .48  .46  4.3    .96    .92    4.3 
Book value per share (c)
 27.39  32.22  (15.0)        30.14  28.13  7.1       
Market value per share
 40.32  59.44  (32.2)        33.04  46.02  (28.2)       
Average common shares outstanding
 1,486  1,483  .2    1,485    1,491    (.4)  1,533  1,486  3.2    1,532    1,485    3.2 
Average diluted common shares outstanding
 1,486  1,484  .1    1,486    1,492    (.4)  1,533  1,487  3.1    1,533    1,486    3.2 
Financial Ratios
                    
Return on average assets
 1.22%  1.45%      1.13%    1.53%    .81%  1.06%      .92%    1.08%   
Return on average common equity
 15.8  15.9      14.1    17.0    10.9  13.9      12.5    13.3   
Net interest margin (taxable-equivalent basis) (a)
 2.83  2.53      2.62    2.52    2.90  2.59      3.00    2.51   
Efficiency ratio (b)
 57.5  58.4      60.7    59.8    63.7  62.1      63.5    62.4   
Net charge-offs as a percent of average loans outstanding
 .19  .20      .20    .25    .67  .20      .53    .20   
Average Balances
Average Balances
 
         
Average Balances
 
         
Loans
 $336,778  $296,739  13.5%   $324,731   $295,014    10.1%  $388,817  $324,187  19.9%   $387,789   $318,608    21.7% 
Loans held for sale
 3,499  7,438  (53.0)    4,214    8,422    (50.0)  2,569  3,688  (30.3)    2,516    4,579    (45.1) 
Investment securities (d)
 164,851  151,755  8.6    170,267    152,653    11.5  159,824  171,296  (6.7)    162,957    173,019    (5.8) 
Earning assets
 541,666  503,325  7.6    536,131    500,616    7.1  613,839  536,761  14.4    610,744    533,318    14.5 
Assets
 588,764  553,446  6.4    582,067    551,199    5.6  673,012  579,911  16.1    669,251    578,663    15.7 
Noninterest-bearing deposits
 114,044  129,018  (11.6)    120,893    124,262    (2.7)  113,758  120,827  (5.9)    121,705    124,375    (2.1) 
Deposits
 456,769  431,487  5.9    455,829    429,039    6.2  497,265  456,516  8.9    503,758    455,352    10.6 
Short-term borrowings
 29,034  14,688  97.7    23,825    14,758    61.4  54,172  23,294  *    45,369    21,178    * 
Long-term debt
 31,814  35,972  (11.6)    32,055    37,196    (13.8)  42,771  31,390  36.3    41,902    32,177    30.2 
Total U.S. Bancorp shareholders’ equity
 49,820  54,273  (8.2)    50,804    53,327    (4.7)  53,822  49,166  9.5    53,248    51,304    3.8 
  
     September 30,
2022		 December 31,
2021		                     June 30,
2023		 December 31,
2022		                
Period End Balances
Period End Balances
 
         
Period End Balances
 
         
Loans
 $342,708  $312,028  9.8%        $379,428  $388,213  (2.3)%       
Investment securities
 154,097  174,821  (11.9)        156,159  161,650  (3.4)       
Assets
 600,973  573,284  4.8        680,825  674,805  .9       
Deposits
 471,148  456,083  3.3        521,600  524,976  (.6)       
Long-term debt
 32,228  32,125  .3        45,283  39,829  13.7       
Total U.S. Bancorp shareholders’ equity
 47,513  54,918  (13.5)        53,019  50,766  4.4       
Asset Quality
                    
Nonperforming assets
 $677  $878  (22.9)%        $1,085  $1,016  6.8%       
Allowance for credit losses
 6,455  6,155  4.9        7,695  7,404  3.9       
Allowance for credit losses as a percentage of
period-end
loans
 1.88%  1.97%          2.03%  1.91%         
Capital Ratios
                    
Common equity tier 1 capital
 9.7%  10.0%          9.1%  8.4%         
Tier 1 capital
 11.2  11.6          10.6  9.8         
Total risk-based capital
 13.3  13.4          12.7  11.9         
Leverage
 8.7  8.6          7.5  7.9         
Total leverage exposure
 7.1  6.9          6.2  6.4         
Tangible common equity to tangible assets (b)
 5.2  6.8          4.8  4.5         
Tangible common equity to risk-weighted assets (b)
 6.7  9.2          6.8  6.0         
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (b)
 9.4  9.6              8.9  8.1            
 
*
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 32.
(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 $1.8$1.4 billion for the thirdsecond quarter of 2022,2023, or $1.16$0.84 per diluted common share, compared with $2.0$1.5 billion, or $1.30$0.99 per diluted common share, for the thirdsecond quarter of 2021.2022. Return on average assets and return on average common equity were 1.220.81 percent and 15.810.9 percent, respectively, for the thirdsecond quarter of 2022,2023, compared with 1.451.06 percent and 15.913.9 percent, respectively, for the thirdsecond quarter of 2021.2022. The results for the thirdsecond quarter of 20222023 included the impact of $42$310 million ($33 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.Bank, N.A. (“MUFG”MUB”), which$243 million of provision for credit losses and an additional $22 million of losses related to balance sheet repositioning and capital management actions. Combined, these items decreased diluted earnings per common share by $0.02.$0.28.
Total net revenue for the thirdsecond quarter of 20222023 was $436 million (7.4$1.2 billion (19.3 percent) higher than the thirdsecond quarter of 2021,2022, reflecting a 20.728.5 percent increase in net interest income (20.6(28.4 percent on a taxable-equivalent basis) and an 8.3a 7.0 percent decreaseincrease in noninterest income. The increase in net interest income from the thirdsecond quarter of 20212022 was due to the impactimpacts of rising interest rates on earning assets and strong growth in average loan and investment securities balances, partially offset by deposit pricing, changes in funding mix and lower loan fees driven by the impact of loan forgiveness related to the Small Business Administration (“SBA”) Paycheck Protection Program in the third quarter of 2021.MUB acquisition. The reductionincrease in noninterest income reflected lower mortgage bankinghigher commercial products revenue, driven by a decline in refinancing activities, partially offset by higherpayment services revenue and trust and investment management fees and payment services revenue.fees.
Noninterest expense in the thirdsecond quarter of 20222023 was $208$845 million (6.1(22.7 percent) higher than the thirdsecond quarter of 2021,2022, reflecting increases in compensation expense, employee benefits expense, marketingmerger and business development expense, net occupancyintegration charges and equipment expense and other noninterestoperating expenses related to the MUB acquisition, including core deposit intangible amortization expense, as well as the impact of mergerincreases in compensation and integration-related charges of $42 million.employee benefits expense to support business growth.
The provision for credit losses for the thirdsecond quarter of 2023 of $821 million was $510 million higher than the second quarter of 2022, was $362 million, compared with a benefitdriven by the impacts of $163 million forbalance sheet repositioning and capital management actions, the third quarteracquisition of 2021. The provision forMUB, normalizing credit losses in the third quarter of 2022 reflected the impact of strong loan growth and increasingcontinued economic uncertainty. The provision for credit losses for the third 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 thirdsecond quarter of 20222023 were $162$649 million, compared with $147$161 million in the thirdsecond quarter of 2021.2022. 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 ninesix months of 20222023 was $4.9$3.1 billion, or $3.13$1.87 per diluted common share, compared with $6.3$3.1 billion, or $4.04$1.97 per diluted common share, for the first ninesix months of 2021.2022. Return on average assets and return on average common equity were 1.130.92 percent and 14.112.5 percent, respectively, for the first ninesix months of 2022,2023, compared with 1.531.08 percent and 17.013.3 percent, respectively, for the first ninesix months of 2021.2022. The results for the first ninesix months of 20222023 included the impact of $239$554 million ($186 million
net-of-tax)
of merger and integration-related charges, which$243 million of provision for credit losses and an additional $22 million of losses related to balance sheet repositioning and capital management actions. Combined, these items decreased diluted earnings per common share by $0.12.$0.40.
Total net revenue for the first ninesix months of 20222023 was $791 million (4.6$2.7 billion (23.6 percent) higher than the first ninesix months of 2021,2022, reflecting an 11.4a 36.9 percent increase in net interest income (11.3(36.8 percent on a taxable-equivalent basis) and a 3.65.8 percent decreaseincrease in noninterest income. The increase in net interest income from the first ninesix months of 20212022 was due to the impactimpacts of rising interest rates on earning assets and strong growth in average loan and investment securities balances, partially offset by deposit pricing, changes in funding mix and lower loan fees driven by the impact of loan forgiveness related to the SBA Paycheck Protection Program in the first nine months of 2021.MUB acquisition. The reductionincrease in noninterest income reflected lower mortgage banking revenue and other noninterest income, partially offset by higher trust and investment management fees, commercial products revenue and payment services revenue.revenue, partially offset by lower mortgage banking revenue and losses on securities.
Noninterest expense in the first ninesix months of 20222023 was $668 million (6.6$1.9 billion (26.3 percent) higher than the first ninesix months of 2021,2022, reflecting merger and integration charges and operating expenses related to the MUB acquisition, including core deposit intangible amortization expense, as well as increases in compensation and employee benefits expense to support business growth.
The provision for credit losses for the first six months of 2023 of $1.2 billion was $825 million higher than the first six months of 2022, driven by the impacts of balance sheet repositioning and capital management actions, the acquisition of MUB, normalizing credit losses and continued economic uncertainty. Net charge-offs in the first six months of 2023 were $1.0 billion, compared
 
4
 U.S. Bancorp
Table of Contents
compensation expense, employee benefits expense, marketing and business development expense, net occupancy and equipment expense and other noninterest expense, as well as the impact of merger and integration-related charges of $239 million.
The provision for credit losses for the first nine months of 2022 was $785 million, compared with a benefit of $1.2 billion for the first nine months of 2021. The provision for credit losses for the first nine months of 2022 reflected the impact of strong loan growth and increasing economic uncertainty. The provision for credit losses for the first nine 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 nine months of 2022 were $485 million, compared with $550$323 million in the first ninesix months of 2021.2022. 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.
PendingMUFG Union Bank Acquisition
In September 2021, On December 1, 2022, the Company announced that it entered into a definitive agreement to acquire MUFG Union Bank’sacquired MUB’s core regional banking franchise from Mitsubishi UFJ Financial Group, Inc. (“MUFG”). Pursuant to the terms of the Share Purchase Agreement, the Company acquired all of the issued and outstanding shares of common stock of MUB for an expecteda purchase price consisting of approximately $8.0 billion, including $5.5 billion in cash and approximately 44 million shares of the Company’s common stock. The transaction excludesCompany also received additional MUB cash of $3.5 billion upon completion of the purchaseacquisition, which is required to be repaid to MUFG on or prior to the fifth anniversary date of substantially allthe completion of the purchase. On August 3, 2023, the Company completed a debt/equity conversion with MUFG. As a result, the Company repaid $936 million of its debt obligation from the proceeds of the issuance of 24 million shares of common stock of the Company to an affiliate of MUFG Union Bank’s Global Corporate & Investment(the “Debt/Equity Conversion”). After the Debt/Equity Conversion, the Company had a remaining repayment obligation of $2.6 billion. On May 26, 2023, the Company merged MUB into U.S. Bank (other than certain deposits)National Association (“USBNA”), certain middle and back office functions, and other assets. MUFG Union Bank 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. On October 19, 2022,primary banking subsidiary. The Company’s results for the Company announced that all required regulatory approvals to completesecond quarter and first six months of 2023 reflect the transaction have been received. The transaction is expected to close on December 1, 2022, pending satisfactionfull financial results of customary closing conditions.the acquired business.
STATEMENT OF INCOME ANALYSIS
Net Interest Income
Net interest income, on a taxable-equivalent basis, was $3.9$4.4 billion in the thirdsecond quarter and $10.5$9.1 billion in the first ninesix months of 2022,2023, representing increases of $660$985 million (20.6(28.4 percent) and $1.1$2.5 billion (11.3(36.8 percent), respectively, compared with the same periods of 2021.2022. The increases were primarily due to the impact of rising interest rates on earning assets and strong growth in loan and investment securities balances, partially offset by deposit pricing, changes in funding mix, and lower loan fees driven by the impactacquisition of loan forgiveness related to the SBA Paycheck Protection Program in the first nine months of 2021.MUB. Average earning assets for the thirdsecond quarter and first ninesix months of 20222023 were $38.3$77.1 billion (7.6(14.4 percent) and $35.5$77.4 billion (7.1(14.5 percent) higher, respectively, than the same periods of the prior year,2022, reflecting increases in loans and investment securities,interest-bearing deposits with banks, partially offset by decreasesa decrease in interest-bearing deposits with banks.investment securities. The net interest margin, on a taxable-equivalent basis, in the thirdsecond quarter and first ninesix months of 20222023 was 2.832.90 percent and 2.623.00 percent, respectively, compared with 2.532.59 percent and 2.522.51 percent in the thirdsecond quarter and first ninesix months of 2021,2022, respectively. The increase in net interest margin from the prior year was primarily due to the impact of higher rates on earning assets partially offset by deposit pricing and short-term borrowing costs given the rise in short-term interest rates.acquisition of MUB. Refer to the “Consolidated Daily Average Balance Sheet and Related Yields and Rates” table for further information on net interest income.
Average total loans in the thirdsecond quarter and first ninesix months of 20222023 were $40.0$64.6 billion (13.5(19.9 percent) and $29.7$69.2 billion (10.1(21.7 percent) higher, respectively, than the same periods of 2021.2022. The increases were primarily due todriven by growth in the Company’s legacy loan portfolio as well as balances from the MUB acquisition. Increases in residential mortgages, commercial loans, residential mortgagescommercial real estate loans and credit card loans were partially offset by lower other retail loans. The increase in residential mortgages was driven by the impact related to the MUB acquisition, along with
on-balance
sheet loan activities and slower refinancing activity. The increase in commercial loans was primarily due to higher utilization driven by working capital needs of corporate customers, slower payoffs given higher volatility in the capital markets, as well as core growth partially offset by expected reductionsand the impact related to the forgiveness of loans in the SBA Paycheck Protection Program.MUB acquisition. The increase in residential mortgagescommercial real estate loans was driven by stronger
on-balance
sheet loan activities and slower refinance activity,the impact of the MUB acquisition, while the increase in credit cards loans was primarily due to increased consumer spendingdriven by higher spend volumes, account growth and account growth. In addition,lower payment rates. The decrease in other retail loans increased in the first nine months of 2022, compared with the first nine months of 2021,was driven by higherlower auto loans primarily due to balance sheet repositioning and recreational vehiclecapital management actions, along with lower installment loans and lower retail leasing balances, partially offset by lower retail leasing balances.higher home equity and second mortgages.
Average investment securities in the thirdsecond quarter and first ninesix months of 20222023 were $13.1$11.5 billion (8.6(6.7 percent) and $17.6$10.1 billion (11.5(5.8 percent) lower, respectively, than the same periods of 2022, driven by balance sheet repositioning and liquidity management in connection with the acquisition of MUB. The decrease from the prior year reflected sales of investments securities, partially offset by the impact of acquired MUB investment securities.
Average total deposits for the second quarter and first six months of 2023 were $40.7 billion (8.9 percent) and $48.4 billion (10.6 percent) higher, respectively, than the same periods of 2021, primarily due to purchases of mortgage-backed and U.S. Treasury securities, net of prepayments, sales and maturities.
2022. Average total savings deposits for the thirdsecond quarter and first ninesix months of 20222023 were $25.3$31.1 billion (5.9(10.1 percent) and $26.8$37.3 billion (6.2(12.2 percent) higher, respectively, than the same periods of 2021.2022, driven by increases in Corporate and Commercial Banking, and Consumer and Business Banking balances, including the impact of the MUB acquisition. Average total savingstime deposits for the second quarter and first six months of 2023 were $16.7 billion (62.2 percent) and $13.8 billion (53.6 percent) higher, respectively, than the same periods
 
U.S. Bancorp 
5
Table of Contents
 Table 2
   Noninterest Income
the third quarter and first nine months of 2022 were $27.6 billion (9.9 percent) and $26.0 billion (9.3 percent) higher, respectively, than the same periods
   
Three Months Ended
June 30
   
Six Months Ended
June 30
 
(Dollars in Millions)  2023   2022   Percent
Change		   2023   2022   Percent
Change		 
Card revenue
  $422   $399    5.8%   $782   $737    6.1% 
Corporate payment products revenue
   190    172    10.5    379    330    14.8 
Merchant processing services
   436    425    2.6    823    788    4.4 
Trust and investment management fees
   621    566    9.7    1,211    1,066    13.6 
Service charges
   324    334    (3.0)    648    667    (2.8) 
Commercial products revenue
   358    290    23.4    692    556    24.5 
Mortgage banking revenue
   131    142    (7.7)    259    342    (24.3) 
Investment products fees
   68    59    15.3    136    121    12.4 
Securities gains (losses), net
   3    19    (84.2)    (29)    37    * 
Other
   173    142    21.8    332    300    10.7 
Total noninterest income
  $2,726   $2,548    7.0%   $5,233   $4,944    5.8% 
*
Not meaningful
of the prior year, driven bymainly due to the acquisition of MUB and increases in Corporate and Commercial Banking, and Consumer and Business Banking, balances. The increase in total savings deposits for the first nine months of 2022, compared with the first nine months of 2021, was partially offset by a decrease inand Wealth Management and Investment Services balances. Average time deposits for the third quarter and first nine months of 2022 were $12.7 billion (54.0 percent) and $4.2 billion (16.8 percent) higher, respectively, than the same periods of the prior year, primarily driven by increases in Corporate and Commercial Banking balances, partially offset by decreases in 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. Average noninterest-bearing deposits for the thirdsecond quarter and first ninesix months of 20222023 were $15.0$7.1 billion (11.6(5.9 percent) and $3.4$2.7 billion (2.7(2.1 percent) lower, respectively, than the same periods of the prior year,2022, driven by decreases in Corporate and Commercial Banking, Consumer and Business Banking, and Payment Services balances. The decrease in average noninterest-bearing deposits in the first nine months of 2022, compared with the first nine months of 2021, was partially offset by an increase in Wealth Management and Investment Services balances.balances, partially offset by the impact of the MUB acquisition.
Provision for Credit Losses
The provision for credit losses was $362$821 million in the thirdsecond quarter and $785$1.2 billion in the first six months of 2023, representing increases of $510 million and $825 million, respectively, from the same periods of 2022. The increases were driven by the impact of balance sheet repositioning and capital management actions taken in the second quarter of 2023, the acquisition of MUB, normalizing credit losses and continued economic uncertainty. Net charge-offs increased $488 million in the second quarter and $699 million in the first ninesix months of 2022,2023, compared with a benefit of $163 million and $1.2 billion, respectively, for the same periods of 2021. The provision for2022, reflecting charge-offs related to balance sheet repositioning and capital management actions, as well as higher charge-offs in most loan categories consistent with normalizing credit losses in the third quarter and first nine months of 2022 reflected the impact of strong loan growth and increasing economic uncertainty. The provision for credit losses in the third quarter and first nine 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 significant decreases in the allowance for credit losses. Net charge-offs increased $15 million (10.2 percent) in the third quarter of 2022, compared with the third quarter of 2021, reflecting higher commercial, credit card and other retail loanconditions. In addition, net charge-offs partially offset by a decrease in commercial real estate loan charge-offs. Net charge-offs decreased $65 million (11.8 percent)were higher in the first ninesix months of 2022,2023, compared with the first ninesix months of 2021, primarily driven by lower credit card netthe prior year, due to charge-offs in the first nine monthsquarter of 2022.2023 related to the uncollectible amount of acquired loans, which were considered purchased credit deteriorated as of the date of the MUB acquisition. 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 $2.5$2.7 billion in the thirdsecond quarter and $7.4$5.2 billion in the first ninesix months of 2022,2023, representing decreasesincreases of $224$178 million (8.3(7.0 percent) and $280$289 million (3.6(5.8 percent), respectively, compared with the same periods of 2021.2022. The decreases fromincreases over the prior year reflected lower mortgage bankingstronger commercial products revenue, lower deposit service charges and lower gains on the sale of securities, partially offset by higher trust and investment management fees and payment services revenue. 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 lower performing loan sales. The decrease in mortgage banking revenue in the first nine months of 2022, compared with the first nine months of 2021, was partially offset by increases in mortgage servicing rights (“MSRs”) valuations, netlosses on the sale of hedging activities. Deposit service charges decreased primarilysecurities. Commercial products revenue increased due to higher trading revenue, corporate bond fees, commercial loan fees and the impactacquisition of the elimination of certain consumer
non-sufficient
funds fees beginning in the first quarter of 2022.MUB. Trust and investment management fees increased primarily due to lower money market fee waivers, activity related to the fourth quarter of 2021 acquisition of PFM Asset Management LLC (“PFM”)MUB and core business growth, partially offset by unfavorable market conditions.growth. Payment services revenue increased as a result of higher corporate payment products revenue due to improving business spending across all product groups, as well as increases inhigher card revenue and merchant processing services revenue driven by higher sales volume, and merchant fees. The increases in merchant processing servicesas well as higher corporate payment products revenue were partially offset by the impact of foreign currency rate changes, as the U.S. dollar has strengthened considerably compareddue to European currencies given recent uncertainties in Europe. Other noninterest incomeincreased spending. Mortgage banking revenue decreased in the first ninesix months of 2022,2023, compared with the first ninesix months of 2021,2022, primarily due to lower retail leasingapplication volume, given declining refinancing activities experienced in the mortgage industry, and losses related to balance sheet repositioning and capital management actions taken in the second quarter of 2023.
end-of-term
Noninterest Expense
residual gains.
Noninterest expense was $4.6 billion in the second quarter and $9.1 billion in the first six months of 2023, representing increases of $845 million (22.7 percent) and $1.9 billion (26.3 percent), respectively, over the same periods of 2022. The increases from the prior year reflected the impact of merger and integration charges, as well as operating expenses related to the MUB acquisition, higher compensation and employee benefits expense, higher other intangibles expense and higher other noninterest expense. Compensation and employee benefits expense
 
6
 U.S. Bancorp
Table of Contents
 Table 23
 
   Noninterest IncomeExpense
 
  Three Months Ended
September 30		   Nine Months Ended
September 30		 
(Dollars in Millions) 2022   2021   Percent
Change		   2022   2021   Percent
Change		 
Credit and debit card revenue
 $391   $393    (.5)%   $1,128   $1,125    .3% 
Corporate payment products revenue
  190    156    21.8    520    420    23.8 
Merchant processing services
  406    392    3.6    1,194    1,084    10.1 
Trust and investment management fees
  572    459    24.6    1,638    1,349    21.4 
Deposit service charges
  166    194    (14.4)    508    531    (4.3) 
Treasury management fees
  151    155    (2.6)    476    462    3.0 
Commercial products revenue
  285    277    2.9    841    837    .5 
Mortgage banking revenue
  81    418    (80.6)    423    1,063    (60.2) 
Investment products fees
  56    62    (9.7)    177    177    — 
Securities gains (losses), net
  1    20    (95.0)    38    88    (56.8) 
Other
  170    167    1.8    470    557    (15.6) 
Total noninterest income
 $2,469   $2,693    (8.3)%   $7,413   $7,693    (3.6)% 
  
Three Months Ended
June 30
       
Six Months Ended
June 30
 
(Dollars in Millions) 2023  2022  Percent
Change		       2023  2022  Percent
Change		 
Compensation and employee benefits
 $2,646  $2,246   17.8%     $5,292  $4,495   17.7% 
Net occupancy and equipment
  316   265   19.2      637   534   19.3 
Professional services
  141   111   27.0      275   225   22.2 
Marketing and business development
  122   106   15.1      244   186   31.2 
Technology and communications
  522   419   24.6      1,025   840   22.0 
Other intangibles
  159   40   *      319   87   * 
Other
  353   340   3.8        778   662   17.5 
Total before merger and integration charges
  4,259   3,527   20.8      8,570   7,029   21.9 
Merger and integration charges
  310   197   57.4        554   197   * 
Total noninterest expense
 $4,569  $3,724   22.7%     $9,124  $7,226   26.3% 
Efficiency ratio (a)
  63.7%   62.1%            63.5%   62.4%     
*
Not meaningful    
(a)
See
Non-GAAP
Financial Measures beginning on page 32.
 
Noninterest Expense
Noninterest expense was $3.6 billion in the third quarter and $10.9 billion in the first nine months of 2022, representing increases of $208 million (6.1 percent) and $668 million (6.6 percent), respectively, over the same periods of 2021. The increases from the prior year reflected higher compensation expense, employee benefits expense, marketing and business development expense, net occupancy and equipment expense, other noninterest expense and the impact of merger and integration-related charges associated with the planned acquisition of MUFG Union Bank. Compensation expense increased primarily due to MUB expense as well as merit increases and hiring to support business growth, partially offset by lower performance-based incentives and variable compensation. Employee benefitsgrowth. Other intangibles expense increased primarily driven by higher post-pandemic medical expenses. Marketing and business development expense increased due to the timingcore deposit intangible created as a result of marketing campaigns as well as increased travel and entertainment, while net occupancy and equipment expense increased to support business growth.the MUB acquisition. Other noninterest expense increased primarily due to accruals related to future delivery exposures for merchant and airline processing as processing volumes recover, higher Federal Deposit Insurance Corporation (“FDIC”) insurance expense driven by an increase in the assessment base and rate, and higherMUB expense. The increase in other accruals,noninterest expense in the second quarter of 2023, compared with the second quarter of 2022, was partially offset by lower other expensesaccruals related to future delivery exposures for merchant and airline processing and other liabilities.
On May 11, 2023, the declineFDIC released a proposed rule that would impose special assessments to recover the losses to the deposit insurance fund resulting from the recent failures of other banking institutions. The Company expects the special assessments would be tax deductible. Although the proposal could change and the timing of accounting recognition is still under consideration, if the final rule is issued as proposed, the Company estimates it would recognize additional noninterest expense of approximately $650 million ($500 million net-of-tax), representing a potential 10 basis point reduction in mortgage production.the Company’s common equity tier 1 capital ratio, upon finalization of the rule.
Income Tax Expense
The provision for income taxes was $481$382 million (an effective rate of 20.921.8 percent) for the thirdsecond quarter and $1.3 billion$837 million (an effective rate of 21.4 percent) for the first six months of 2023, compared with $414 million (an effective rate of 21.3 percent) and $811 million (an effective rate of 20.8 percent) for the first nine months of 2022, compared with $564 million (an effective rate of 21.7 percent) and $1.7 billion (an effective rate of 21.4 percent) for the same periods of 2021,2022, respectively. For further information on income taxes, refer to Note 12 of the Notes to Consolidated Financial Statements.
 Table 3
   Noninterest Expense
  Three Months Ended
September 30		       Nine Months Ended
September 30		 
(Dollars in Millions) 2022  2021  Percent
Change		       2022  2021  Percent
Change		 
Compensation
 $1,891  $1,847   2.4%     $5,616  $5,448   3.1% 
Employee benefits
  369   336   9.8      1,139   1,057   7.8 
Net occupancy and equipment
  272   259   5.0      806   780   3.3 
Professional services
  131   126   4.0      356   332   7.2 
Marketing and business development
  126   99   27.3      312   237   31.6 
Technology and communications
  355   361   (1.7)      1,054   1,082   (2.6) 
Postage, printing and supplies
  72   69   4.3      213   203   4.9 
Other intangibles
  43   41   4.9      130   119   9.2 
Other
  336   291   15.5        998   937   6.5 
Total before merger and integration charges
  3,595   3,429   4.8      10,624   10,195   4.2 
Merger and integration charges
  42   —   *        239   —   * 
Total noninterest expense
 $3,637  $3,429   6.1%       $10,863  $10,195   6.6% 
Efficiency ratio (a)
  57.5%   58.4%            60.7%   59.8%     
*
Not meaningful    
a)
See
Non-GAAP
Financial Measures beginning on page 32.    
U.S. Bancorp
7
Table of Contents
BALANCE SHEET ANALYSIS
Loans
The Company’s loan portfolio was $342.7$379.4 billion at SeptemberJune 30, 2022,2023, compared with $312.0$388.2 billion at December 31, 2021, an increase2022, a decrease of $30.7$8.8 billion (9.8(2.3 percent). The increasedecrease was driven by higher commerciallower other retail loans, residential mortgages credit card loans and commercial real estate loans, partially offset by lower other retailhigher commercial loans and credit card loans.
CommercialOther retail loans increased $19.7decreased $7.7 billion (17.6(14.0 percent) at SeptemberJune 30, 2022,2023, compared with December 31, 2021,2022, primarily due to higher utilizationdecreases in auto loans and retail leasing balances. The decrease in auto loans was primarily driven by workinga sale of indirect auto loans as part of balance sheet repositioning and capital needs of corporate customers and slower payoffs given higher volatilitymanagement actions taken in the capital markets, as well as core growth.second quarter of 2023.
Residential mortgages held in the loan portfolio increased $9.8decreased $1.4 billion (12.8(1.2 percent) at SeptemberJune 30, 2022,2023, compared with December 31, 2021, due to stronger
on-balance
2022, driven by a sale of residential mortgages as part of balance sheet loan activitiesrepositioning and slower refinance activity.capital management actions, partially offset by originations. Residential mortgages originated and placed in the Company’s loan portfolio include jumbo mortgages and branch-originated first lien home equity loans to borrowers with high credit quality.
Credit card loans increased $2.0 billion (9.1 percent) at September 30, 2022, compared with December 31, 2021, reflecting increased consumer spending and account growth.
Commercial real estate loans increased $1.3decreased $1.1 billion (3.3(2.0 percent) at SeptemberJune 30, 2022,2023, compared with December 31, 2021, primarily the result2022, due to payoffs exceeding a reduced level of new originations.
Other retailCommercial loans decreased $2.1increased $1.1 billion (3.4(0.8 percent) at SeptemberJune 30, 2022,2023, compared with December 31, 2021,2022, due to decreaseshigher utilization driven by corporate customers and slower payoffs given higher volatility in autothe capital markets, as well as core growth.
Credit card loans increased $331 million (1.3 percent) at June 30, 2023, compared with December 31, 2022, primarily driven by higher spend volumes and retail leasing balances, partially offset by an increase in home equity loans.account growth.
U.S. Bancorp
7
Table of Contents
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 $3.6$2.4 billion at SeptemberJune 30, 2022,2023, compared with $7.8$2.2 billion at December 31, 2021.2022. The decreaseincrease in loans held for sale was principally due to a lowerhigher level of mortgage loan closings in the thirdsecond quarter of 2022,2023, compared with the fourth quarter of 2021.2022. 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 $156.2 billion at June 30, 2023, compared with $161.7 billion at December 31, 2022. The $5.5 billion (3.4 percent) decrease was primarily due to $6.5 billion of net investment sales and maturities, partially offset by a $873 million favorable change in net unrealized gains (losses) on
available-for-sale
investment securities.
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 June 30, 2023, the Company’s net unrealized losses on
available-for-sale
investment securities were $7.7 billion ($5.7 billion
net-of-tax),
compared with $8.5 billion ($6.4 billion
net-of-tax)
at December 31, 2022. The favorable change in net unrealized gains (losses) was primarily due to increases in the fair value of mortgage-backed, U.S. Treasury and state and political securities as a result of changes in interest rates. Gross unrealized losses on
available-for-sale
investment securities totaled $7.7 billion at June 30, 2023, compared with $8.6 billion at December 31, 2022. When evaluating credit losses, the Company considers various factors such as the nature of the investment security, the credit ratings or financial condition of the issuer, the extent of the unrealized loss, expected cash flows of the underlying collateral, the existence of any government or agency guarantees, and market conditions. At June 30, 2023, the Company had no plans to sell securities with
 
 Table 4
 
   Investment Securities
 
 September 30, 2022   December 31, 2021  June 30, 2023   December 31, 2022 
(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 (e)		   Amortized
Cost		   Fair Value   Weighted-
Average
Maturity in
Years		   Weighted-
Average
Yield (e)		 
Held-to-maturity
                                      
U.S. Treasury and agencies
 $1,344   $1,288  3.5    2.85%   $—   $—   —    —%  $1,345   $1,287    2.8    2.85%   $1,344   $1,293    3.3    2.85% 
Mortgage-backed securities (a)
 84,230    72,840  9.7    2.01    41,858    41,812  7.4    1.45  85,593    74,998    9.2    2.20    87,396    76,581    9.3    2.17 
Total
held-to-maturity
 $85,574   $74,128  9.6    2.02%   $41,858   $41,812  7.4    1.45%  $86,938   $76,285    9.1    2.21%   $88,740   $77,874    9.2    2.18% 
Available-for-sale
                                      
U.S. Treasury and agencies
 $24,470   $21,586  6.8    2.18%   $36,648   $36,609  6.7    1.54%  $21,328   $18,968    6.4    2.35%   $24,801   $22,033    7.1    2.43% 
Mortgage-backed securities (a)
 42,144    37,748  6.7    2.44    85,394    85,564  4.9    1.58  36,979    32,854    6.6    2.90    40,803    36,423    6.6    2.83 
Asset-backed securities (a)
 25    25  6.1    5.52    62    66  5.2    1.53  7,487    7,451    1.8    5.12    4,356    4,323    1.3    4.59 
Obligations of state and political subdivisions (b) (c)
 11,105    9,158  15.8    3.66    10,130    10,717  6.6    3.67  11,091    9,944    11.9    3.79    11,484    10,125    13.6    3.76 
Other
 6    6  2.7    1.99    7    7  3.4    2.07  4    4    1.9    1.89    6    6    .1    1.99 
Total
available-for-sale(d)
 $77,750   $68,523  8.0    2.53%   $132,241   $132,963  5.5    1.73%  $76,889   $69,221    6.8    3.09%   $81,450   $72,910    7.4    2.94% 
 
(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)
Amortized cost excludes portfolio level basis adjustments of $(1) million.
(e)
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. Yields on investment securities are computed based on amortized cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair value from
available-for-sale
to
held-to-maturity.
 
8
 U.S. Bancorp
Table of Contents
Investment Securities
Investment securities totaled $154.1 billion at September 30, 2022, compared with $174.8 billion at December 31, 2021. The $20.7 billion (11.9 percent) decrease was primarily due to a $14.1 billion unfavorable change in net unrealized gains (losses) on
available-for-sale
investment securities and $5.6 billion of net investment paydowns, maturities and sales. During the first nine months of 2022, the Company transferred $45.1 billion amortized cost ($40.7 billion fair value) of
available-for-sale
investment securities to the
held-to-maturity
category to reflect its new intent for these securities.
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 September 30, 2022, the Company’s net unrealized losses on
available-for-sale
investment securities were $9.2 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, 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 $9.2 billion at September 30, 2022, compared with $812 million at December 31, 2021. At September 30, 2022, the Company had no plans to sell securities with unrealized losses, and 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 $471.1$521.6 billion at SeptemberJune 30, 2022,2023, compared with $456.1$525.0 billion at December 31, 2021.2022. The $15.0$3.4 billion (3.3(0.6 percent) increasedecrease in total deposits reflected a decrease in noninterest-bearing deposits, partially offset by increases in time deposits and total savings deposits. Noninterest-bearing deposits partially offset by a decrease in noninterest-bearing deposits. Time deposits increased $19.8decreased $32.7 billion (87.3(23.8 percent) at SeptemberJune 30, 2022,2023, compared with December 31, 2021,2022, primarily due to lower Consumer and Business Banking, and Corporate and Commercial Banking balances. The decrease in noninterest-bearing deposits was driven by a product change for certain MUB retail checking accounts at conversion to create a better customer experience and due to pricing pressures from rising interest rates. Time deposits increased $19.0 billion (57.7 percent) at June 30, 2023, compared with December 31, 2022, driven by higher CorporateConsumer and CommercialBusiness Banking balances, partially offset by lower ConsumerCorporate and BusinessCommercial 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. Money market deposit balances increased $11.6$26.1 billion (9.9 percent) at September 30, 2022, compared with December 31, 2021, primarily due to higher Wealth Management and Investment Services, and Corporate and Commercial Banking balances. Interest checking balances increased $2.1 billion (1.8(17.7 percent), primarily due to higher Corporate and Commercial Banking, and Consumer and Business Banking, and Wealth Management and Investment Services balances. Interest checking balances increased $2.2 billion (1.6 percent), primarily due to higher Consumer and Business Banking, and Corporate and Commercial Banking balances, partially offset by lower Wealth Management and Investment Services balances. Savings account balances increased $1.3decreased $18.0 billion (1.9(25.1 percent), driven by higherlower Consumer and Business Banking balances. Noninterest-bearing deposits decreased $19.7 billion (14.6 percent) at September 30, 2022, compared with December 31, 2021, primarily due to lower Corporate and Commercial Banking, and Wealth Management and Investment Services balances.
The Company maintains a diverse and stable funding base that includes a mix of both consumer and operational wholesale deposits and continues to actively manage the composition in the current environment. Consumer deposits account for more than 50 percent of total deposits, and a significant portion of the operational wholesale deposits are contractual or relationship based, not yield-seeking. At June 30, 2023, approximately 50 percent of deposits were insured through the FDIC insurance fund. Of the uninsured deposits, approximately 80 percent of these deposits were retail customers or operational in nature, which are generally more stable. In addition, at June 30, 2023 the Company had total available liquidity representing 120 percent of uninsured deposit balances. Refer to the “Liquidity Risk Management” section for further information on the Company’s liquidity management.
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 $25.1$32.3 billion at SeptemberJune 30, 2022,2023, compared with $11.8$31.2 billion at December 31, 2021.2022. The $13.3$1.1 billion (3.6 percent) increase in short-term borrowings was primarily due to increasesan increase in short-term Federal Home Loan Bank (“FHLB”) advances and commercial paperrepurchase agreement balances. Long-term debt was $32.2$45.3 billion at SeptemberJune 30, 2022,2023, compared with $32.1$39.8 billion at December 31, 2021.2022. The $103 million (0.3$5.5 billion (13.7 percent) increase was primarily due to $3.9$7.2 billion of medium-term note, $1.3 billion of subordinated note and $324 million of bank note issuances, partially offset by $2.6$1.6 billion of bank note repayments and maturities, $1.3 billion of subordinated note repayments and $1.0 billion of medium-term note repayments.maturities. Refer to the “Liquidity Risk Management” section for discussion of liquidity management of the Company.
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.
U.S. Bancorp
9
Table of Contents
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.
Upon closing of the MUB acquisition, the Company’s risk management framework applied to the legal entities acquired from MUFG, including MUB, up
U.S. Bancorp
9
Table of Contents
until its merger into USBNA. Updates were made to align the acquired entities with the Company’s risk appetite and connect the elements of their respective risk governance and reporting into the Company’s existing risk management framework. Upon completing the merger of MUB into USBNA, which occurred on May 26, 2023, the MUB risk governance and reporting framework is no longer applicable.
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”), MSRsmortgage servicing rights (“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 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, 2021,2022, 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 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;
 
10
 U.S. Bancorp
Table of Contents
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. The strategy also emphasizes diversification on a geographic, industry and customer level, regular credit examinations and management reviews of loans exhibiting deterioration of credit quality. 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, inflation, interest rates 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 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, 2021,2022, 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 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-
or
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-
or
15-year10-year
draw period during which a minimum payment is equivalent to the monthly interest, followed by a
20-
or
10-year20-year
amortization period, respectively. At SeptemberJune 30, 2022,2023, 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
 
U.S. Bancorp 
11
Table of Contents
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 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 SeptemberJune 30, 2022:2023:
 
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%
 $4,580  $72,204  $76,784  89.0%  $13,402  $80,336  $93,738  81.9% 
Over 80% through 90%
 2  2,193  2,195  2.5  725  10,237  10,962  9.6 
Over 90% through 100%
  —  130  130  .2  50  2,066  2,116  1.8 
Over 100%
  —  40  40  .1  12  628  640  .6 
No LTV available
  —  16  16   —  1  13  14   — 
Loans purchased from GNMA mortgage pools (a)
  —  7,109  7,109  8.2   —  6,979  6,979  6.1 
Total
 $4,582  $81,692  $86,274  100.0%  $14,190  $100,259  $114,449  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.
 
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%
 $9,755  $1,094  $10,849  95.4%  $10,213  $1,544  $11,757  91.9% 
Over 80% through 90%
 199  208  407  3.6  681  153  834  6.5 
Over 90% through 100%
 18  16  34  .3  102  18  120  .9 
Over 100%
 31  3  34  .3  44  9  53  .4 
No LTV/CLTV available
 42  1  43  .4  34  1  35  .3 
Total
 $10,045  $1,322  $11,367  100.0%  $11,074  $1,725  $12,799  100.0% 
Home equity and second mortgages were $11.4$12.8 billion at SeptemberJune 30, 2022,2023, compared with $10.4$12.9 billion at December 31, 2021,2022, and included $2.9$2.8 billion of home equity lines in a first lien position and $8.5$10.0 billion of home equity and second mortgage loans and lines in a junior lien position. Loans and lines in a junior lien position at SeptemberJune 30, 2022,2023, included approximately $2.8$3.0 billion of loans and lines for which the Company also serviced the related first lien loan, and approximately $5.7$7.0 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.
 
12
 U.S. Bancorp
Table of Contents
The following table provides a summary of delinquency statistics and other credit quality indicators
for the Company’s junior lien positions at SeptemberJune 30, 2022:2023:
 
 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
 $2,846  $5,652  $8,498  $3,023  $7,023  $10,046 
Percent 30—89 days past due
 .25%  .29%  .28% 
Percent 30 – 89 days past due
 .46%  .40%  .42% 
Percent 90 days or more past due
 .03%  .04%  .04%  .03%  .05%  .04% 
Weighted-average CLTV
 56%  55%  55%  71%  68%  69% 
Weighted-average credit score
 785  786  785  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 SeptemberJune 30, 2022:2023:
 
   Percent
of Total (a)		 
Credit score > 660
  8887% 
Credit score < 660
  1213 
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 $393 million at September 30, 2022, compared with $472 million at December 31, 2021. These balances excludeThe entire balance of a loan account is considered delinquent if the minimum payment contractually required to be made is not received by the date specified on the billing statement. Delinquent 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.Affairs, are excluded from delinquency statistics.
Accruing loans 90 days or more past due totaled $474 million at June 30, 2023, compared with $491 million at December 31, 2022. 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 0.110.12 percent at SeptemberJune 30, 20222023, compared with 0.150.13 percent at December 31, 2021.
2022.
 
U.S. Bancorp 
13
Table of Contents
 Table 5
    Delinquent Loan Ratios as a Percent of Ending Loan Balances
 
90 days or more past due
excluding
nonperforming loans		  September 30,
2022		 December 31,
2021		 
90 days or more past due June 30,
2023		 December 31,
2022		 
Commercial
       
Commercial
   .03%  .05%  .05%  .07% 
Lease financing
   —   —   —   — 
Total commercial
   .03  .04  .04  .07 
Commercial Real Estate
       
Commercial mortgages
   —   —   —   — 
Construction and development
   .19  .10  .01  .03 
Total commercial real estate
   .05  .03   —  .01 
Residential Mortgages (a)
   .10  .24  .08  .08 
Credit Card
   .74  .73  1.02  .88 
Other Retail
       
Retail leasing
   .03  .04  .04  .04 
Home equity and second mortgages
   .33  .35  .23  .28 
Other
   .06  .06  .08  .08 
Total other retail
   .11  .11  .12  .12 
Total loans
   .11%  .15%  .12%  .13% 
 
90 days or more past due
including
nonperforming loans		  September 30,
2022		 December 31,
2021		 
90 days or more past due and nonperforming loans June 30,
2023		 December 31,
2022		 
Commercial
   .12%  .20%  .21%  .19% 
Commercial real estate
   .46  .76  .87  .62 
Residential mortgages (a)
   .35  .53  .26  .36 
Credit card
   .74  .73  1.02  .88 
Other retail
   .32  .35  .39  .37 
Total loans
   .30%  .42%  .40%  .38% 
 
(a)
Delinquent loan ratios exclude $1.9$2.1 billion at SeptemberJune 30, 2022,2023, and $1.5$2.2 billion at December 31, 2021,2022, 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 alland nonperforming loansto total residential mortgages was 2.502.05 percent at SeptemberJune 30, 2022,2023, and 2.432.28 percent at December 31, 2021.2022.
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) September 30,
2022		   December 31,
2021		        September 30,
2022		 December 31,
2021		  June 30,
2023		   December 31,
2022		        June 30,
2023		 December 31,
2022		 
Residential Mortgages (a)
                       
30-89
days
 $87   $124       .10%  .15%  $128   $201        .11%  .17% 
90 days or more
 89    181       .10  .24  86    95        .08  .08 
Nonperforming
 211    226        .24  .30  207    325        .18  .28 
Total
 $387   $531       .45  .69  $421   $621        .37  .54 
Credit Card
                       
30-89
days
 $237   $193       .97  .86  $307   $283        1.15  1.08 
90 days or more
 181    165       .74  .73  271    231        1.02  .88 
Nonperforming
  —    —        —   —   —    1        —   — 
Total
 $418   $358       1.70  1.59  $578   $515        2.17  1.96 
Other Retail
                       
Retail Leasing
                       
30-89
days
 $24   $29       .40  .40  $22   $27        .47  .49 
90 days or more
 2    3       .03  .04  2    2        .04  .04 
Nonperforming
 8    10        .13  .14  8    8        .17  .14 
Total
 $34   $42       .56  .58  $32   $37        .69  .67 
Home Equity and Second Mortgages
                       
30-89
days
 $38   $55       .33  .53  $60   $65        .47  .51 
90 days or more
 37    37       .33  .35  29    36        .23  .28 
Nonperforming
 102    116        .90  1.11  104    110        .81  .86 
Total
 $177   $208       1.56  1.99  $193   $211        1.51  1.64 
Other (b)
                       
30-89
days
 $182   $191       .43  .43  $153   $217        .51  .59 
90 days or more
 24    26       .06  .06  24    28        .08  .08 
Nonperforming
 20    24        .05  .05  17    21        .06  .06 
Total
 $226   $241        .53  .54  $194   $266        .65  .73 
 
(a)
Excludes $638$556 million of loans
30-89
days past due and $1.9$2.1 billion of loans 90 days or more past due at SeptemberJune 30, 2022,2023, purchased and that could be purchased from GNMA mortgage pools under delinquent loan repurchase options that continue to accrue interest, compared with $791$647 million and $1.5$2.2 billion at December 31, 2021,2022, respectively.
(b)
Includes revolving credit, installment automobile and studentautomobile loans.
 
14
 U.S. Bancorp
Table of Contents
RestructuredModified 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. TDRsModified loans 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 September 30, 2022, performing TDRs were $3.2 billion, compared with $3.1 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 TDRsloan modifications 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 TDRsmodifications 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.modification programs. 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.payments. These concessionsmodifications 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 restructuringmodification 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 TDRsmodifications are generally part of distinct restructuringmodification 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       
At September 30, 2022
(Dollars in Millions)		 Performing
TDRs		   
30-89 Days

Past Due		  90 Days or More
Past Due		  Nonperforming
TDRs		  Total
TDRs		 
Commercial
 $149    9.0%   2.3%  $57(a)  $206 
Commercial real estate
  100    .3   —   103(b)   203 
Residential mortgages
  1,564    2.4   2.4   127   1,691(d) 
Credit card
  260    14.4   7.1   —   260 
Other retail
  182    8.6   4.3   32(c)   214(e) 
TDRs, excluding loans purchased from GNMA mortgage pools
  2,255    4.6   3.0   319   2,574 
Loans purchased from GNMA mortgage pools (g)
  982    —   —   —   982(f) 
Total
 $3,237    3.2%   2.1%  $319  $3,556 
(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 $207 million of residential mortgage loans to borrowers that have had debt discharged through bankruptcy and $19 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed.
(e)
Includes $ 56 million of other retail loans to borrowers that have had debt discharged through bankruptcy and $ 14 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed.
(f)
Includes $ 156 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 $ 116 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed.
(g)
Approximately 7.6 percent and 33.8 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.
U.S. Bancorp
15
Table of Contents
Short-term and Other Loan Modifications
The Company also 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 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, restructuredmodified loans not performing in accordance with modified terms and not accruing interest, restructuredmodified 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 SeptemberJune 30, 2022,2023, total nonperforming assets were $677 million,$1.1 billion, compared to $878 million$1.0 billion at December 31, 2021.2022. The $201$69 million (22.9(6.8 percent) decreaseincrease in nonperforming assets was drivenprimarily due to higher nonperforming commercial real estate loans, partially offset by a decrease in nonperforming commercial real estate and commercial loans.residential mortgages. The ratio of total nonperforming assets to total loans and other real estate was 0.200.29 percent at SeptemberJune 30, 2022,2023, compared with 0.280.26 percent at December 31, 2021.2022.
OREO was $24$25 million at SeptemberJune 30, 2022,2023, compared with $22$23 million at December 31, 2021,2022, 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.
 
16
U.S. Bancorp		 U.S. Bancorp
15
Table of Contents
 Table 6
 
   Nonperforming Assets (a)
 
(Dollars in Millions) September 30,
2022		 December 31,
2021		  
June 30,
2023
 December 31,
2022		 
Commercial
    
Commercial
         $92          $139          $204          $139 
Lease financing
 30  35  27  30 
Total commercial
 122  174  231  169 
Commercial Real Estate
    
Commercial mortgages
 110  213  361  251 
Construction and development
 57  71  113  87 
Total commercial real estate
 167  284  474  338 
Residential Mortgages (b)
 211  226  207  325 
Credit Card
  —   —   —  1 
Other Retail
    
Retail leasing
 8  10  8  8 
Home equity and second mortgages
 102  116  104  110 
Other
 20  24  17  21 
Total other retail
 130  150  129  139 
Total nonperforming loans (1)
 630  834  1,041  972 
Other Real Estate (c)
 24  22  25  23 
Other Assets
 23  22  19  21 
Total nonperforming assets
     $677          $878      $1,085          $1,016 
Accruing loans 90 days or more past due (b)
         $393          $472          $474          $491 
Period-end
loans (2)
         $342,708          $312,028              $379,428          $388,213 
Nonperforming loans to total loans (1)/(2)
 .18%  .27%  .27%  .25% 
Nonperforming assets to total loans plus other real estate (c)
 .20%  .28%  .29%  .26% 
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 
Balance December 31, 2022
 $509  $507  $1,016 
Additions to nonperforming assets
      
New nonaccrual loans and foreclosed properties
 222  159  381  507  87  594 
Advances on loans
 6  1  7  38  1  39 
Total additions
 228  160  388  545  88  633 
Reductions in nonperforming assets
      
Paydowns, payoffs
 (255)  (57)  (312)  (229)  (80)  (309) 
Net sales
 (6)  (16)  (22)  (4)  (12)  (16) 
Return to performing status
 (56)  (113)  (169)  (17)  (119)  (136) 
Charge-offs (d)
 (80)  (6)  (86)  (98)  (5)  (103) 
Total reductions
 (397)  (192)  (589)  (348)  (216)  (564) 
Net additions to (reductions in) nonperforming assets
 (169)  (32)  (201)  197  (128)  69 
Balance September 30, 2022
 $292  $385  $677 
Balance June 30, 2023
 $706  $379  $1,085 
 
(a)
Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due.
(b)
Excludes $1.9$2.1 billion at SeptemberJune 30, 2022,2023, and $1.5$2.2 billion at December 31, 2021,2022, 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 $46$56 million at SeptemberJune 30, 2022,2023, and $22$53 million at December 31, 2021,2022, 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.
 
U.S. Bancorp
16
 
17
U.S. Bancorp
Table of Contents
 
Table 7
 
   Net Charge-offs as a Percent of Average Loans Outstanding
 
  Three Months Ended September 30 
  2022       2021 
  Average             Average        
  Loan   Net         Loan   Net    
(Dollars in Millions) Balance   Charge-offs  Percent       Balance   Charge-offs  Percent 
Commercial
           
Commercial
 $123,745   $24   .08%     $96,673   $13   .05% 
Lease financing
  4,774    3   .25        5,159    1   .08 
Total commercial
  128,519    27   .08      101,832    14   .05 
Commercial real estate
           
Commercial mortgages
  30,002    (6)   (.08)      28,080    1   .01 
Construction
  10,008    —   —        10,841    12   .44 
Total commercial real estate
  40,010    (6)   (.06)      38,921    13   .13 
Residential mortgages
  84,018    (5)   (.02)      74,104    (10)   (.05) 
Credit card
  24,105    119   1.96      21,905    111   2.01 
Other retail
           
Retail leasing
  6,259    1   .06      7,643    1   .05 
Home equity and second mortgages
  11,142    (2)   (.07)      10,936    (3)   (.11) 
Other
  42,725    28   .26        41,398    21   .20 
Total other retail
  60,126    27   .18        59,977    19   .13 
Total loans
 $336,778   $162   .19%       $296,739   $147   .20% 
 Nine Months Ended September 30 
 2022      2021 
 Average           Average        Three Months Ended June 30 
 Loan   Net       Loan   Net    2023      2022 
(Dollars in Millions) Balance   Charge-offs Percent      Balance   Charge-offs Percent  Average
Loan
Balance		   Net
Charge-offs
 Percent      Average
Loan
Balance		   Net
Charge-offs
 Percent 
Commercial
                      
Commercial
 $115,832   $78  .09%     $97,047   $91  .13%  $133,697   $87  .26%     $115,758   $28  .10% 
Lease financing
 4,891    11  .30      5,251    6  .15  4,388    3  .27      4,899    2  .16 
Total commercial
 120,723    89  .10      102,298    97  .13  138,085    90  .26      120,657    30  .10 
Commercial real estate
                      
Commercial mortgages
 29,506    (8)  (.04)      27,923    (11)  (.05)  43,214    26  .24      29,676    (2)  (.03) 
Construction
 10,035    3  .04      10,834    17  .21 
Construction and development
 11,720    —   —      9,841    8  .33 
Total commercial real estate
 39,541    (5)  (.02)      38,757    6  .02  54,934    26  .19      39,517    6  .06 
Residential mortgages
 80,589    (20)  (.03)      74,215    (25)  (.05)  117,606    114  .39      80,228    (9)  (.04) 
Credit card
 22,907    349  2.04      21,391    403  2.52  26,046    199  3.06      22,748    118  2.08 
Other retail
                      
Retail leasing
 6,689    2  .04      7,829    1  .02  4,829    1  .08      6,708    —   — 
Home equity and second mortgages
 10,757    (7)  (.09)      11,451    (8)  (.09)  12,753    (1)  (.03)      10,726    (3)  (.11) 
Other
 43,525    77  .24      39,073    76  .26  34,564    220  2.55      43,603    19  .17 
Total other retail
 60,971    72  .16      58,353    69  .16  52,146    220  1.69      61,037    16  .11 
Total loans
 $324,731   $485  .20%     $295,014   $550  .25%  $388,817   $649  .67%     $324,187   $161  .20% 
 Six Months Ended June 30 
 2023      2022 
(Dollars in Millions) Average
Loan
Balance		   Net
Charge-offs		 Percent      Average
Loan
Balance		   Net
Charge-offs		 Percent 
Commercial
           
Commercial
 $132,469   $129  .20%     $111,810   $54  .10% 
Lease financing
 4,422    8  .36      4,951    8  .33 
Total commercial
 136,891    137  .20      116,761    62  .11 
Commercial real estate
           
Commercial mortgages
 43,420    141  .65      29,253    (2)  (.01) 
Construction and development
 11,843    2  .03      10,049    3  .06 
Total commercial real estate
 55,263    143  .52      39,302    1  .01 
Residential mortgages
 116,950    113  .19      78,847    (15)  (.04) 
Credit card
 25,809    374  2.92      22,297    230  2.08 
Other retail
           
Retail leasing
 5,034    2  .08      6,908    1  .03 
Home equity and second mortgages
 12,763    (2)  (.03)      10,561    (5)  (.10) 
Other
 35,079    255  1.47      43,932    49  .22 
Total other retail
 52,876    255  .97      61,401    45  .15 
Total loans
 $387,789   $1,022  .53%     $318,608   $323  .20% 
 
Analysis of Loan Net Charge-OffsCharge-offs
 Total loan net charge-offs were $162$649 million for the thirdsecond quarter and $1.0 billion for the first six months of 2023, compared with $161 million and $323 million, respectively, for the same periods of 2022. The year-over-year increases in net charge-offs reflected charge-offs related to balance sheet repositioning and capital management actions taken in the second quarter of 2022, compared2023, as well as higher charge-offs in most loan categories consistent with $147 million in the third quarter of 2021. The increase reflected higher commercial,normalizing credit card and other retail loan net charge-offs, partially offset by a decrease in commercial real estate loan charge-offs. Total loanconditions. In addition, net charge-offs were $485 million for the first nine months of 2022, compared with $550 millionhigher in the first ninesix months of 2021. The decrease was driven by lower credit card net2023, compared with the first six months of the prior year, due to charge-offs in the first nine monthsquarter of 2022.2023 related to the uncollectible amount of acquired loans, which were considered purchased credit deteriorated as of the date of the MUB acquisition. The ratio of total loan net charge-offs to average loans outstanding on an annualized basis for the thirdsecond quarter and first ninesix months of 20222023 was 0.190.67 percent and 0.200.53 percent, respectively, compared with 0.20 percent for both the second quarter and 0.25 percent, respectively,first six months of 2022. Excluding the impact of charge-offs related to the MUB acquisition and balance sheet repositioning and capital management actions, the ratio of total loan net charge-offs to average loans outstanding on an annualized basis for the same periodssecond quarter and first six months of 2021.2023 was 0.35 percent and 0.32 percent, respectively.
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
U.S. Bancorp
17
Table of Contents
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
18
U.S. Bancorp
Table of Contents
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 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, inflation, interest rates, 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 term of the loan, adjusted for expected prepayments. For each loan portfolio, including those loans modified under various loan modification programs, 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.collateral at fair value less selling costs. 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 SeptemberJune 30, 2022,2023, the Company serviced the first lien on 3430 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 $187$225 million or 1.61.8 percent of its total home equity portfolio at SeptemberJune 30, 2022,2023, 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
U.S. Bancorp
19
Table of Contents
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.
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 PCD. An allowance is established for each population and considers product mix, risk characteristics of the portfolio bankruptcy experience,and delinquency status and refreshed LTV ratios when possible. PCD loans also consider whether the loan has experienced a
charge-off,
bankruptcy or significant deterioration since origination. 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,
18
U.S. Bancorp
Table of Contents
with charge-offs charged to the allowance. The Company did not havehad a material amounttotal unpaid principal balance of $3.8 billion of PCD loans, primarily related to the MUB acquisition, included in its loan portfolio at SeptemberJune 30, 2022.2023.
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.
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 SeptemberJune 30, 2022,2023, the allowance for credit losses was $6.5$7.7 billion (1.88(2.03 percent of
period-end
loans), compared with an allowance of $6.2$7.4 billion (1.97(1.91 percent of
period-end
loans) at December 31, 2021.2022. The ratio of the allowance for credit losses at June 30, 2023 included a $62 million decrease due to nonperforming loans was 1,025 percent at September 30, 2022, compared with 738 percent at December 31, 2021. The ratioa change in accounting principle related to discontinuing the separate recognition and measurement of the allowance for credit losses to annualized loan net charge-offs was 1,004 percent at September 30, 2022, compared with 902 percent of full year 2021 net charge-offs at December 31, 2021.
troubled debt restructurings. The increase in the allowance for credit losses of $300 million (4.9 percent) at SeptemberJune 30, 2022,2023, compared with December 31, 2021,2022, was primarily driven by strong loan growthincreasing economic uncertainty and increased economic uncertainty.normalizing credit losses as well as adjustments made to the purchase accounting estimate for PCD loans. Economic uncertainty and recession risk hashave been increasing due to ongoing supply chain challenges, rising interest rates, and inflationary concerns, market volatility rising energy prices resulting from the Russia-Ukraine conflict and related pressure on corporate earnings.earnings related to these factors. In addition to these broad economic factors, expected loss estimates consider various factors including customer specific information impacting changes in risk ratings, projected delinquencies potential effects of inflationary pressures and the impact of rising interest rateseconomic deterioration on selected borrowers’ liquidity and ability to repay.
The ratio of the allowance for credit losses to nonperforming loans was 739 percent at June 30, 2023, compared with 762 percent at December 31, 2022. The ratio of the allowance for credit losses to annualized loan net charge-offs was 296 percent at June 30, 2023, compared with 697 percent of full year 2022 net charge- offs at December 31, 2022.
Economic conditions considered in estimating the allowance for credit losses at SeptemberJune 30, 20222023 included changes in projected gross domestic product and unemployment levels. These factors are evaluated through a combination of quantitative calculations using multiple economic scenarios and additional qualitative assessments that consider the high degree of economic uncertainty in the current environment. The projected unemployment rates for 2023 considered in the estimate range from 3.0 percent to 6.9 percent.
The following table summarizes the baseline forecast for key economic variables the Company used in its estimate of the allowance for credit losses at SeptemberJune 30, 20222023 and December 31, 2021:2022:
 
   
September 30,
2022
  
December 31,
2021
 
United States unemployment rate for the three months ending (a)
  
September 30, 2022
  3.7%   3.5% 
December 31, 2022
  3.7   3.5 
United States real gross domestic product for the three months ending (b)
  
September 30, 2022
  1.5%   4.5% 
December 31, 2022
  (.1)   3.4 
   
June 30,
2023
  
December 31,
2022
 
United States unemployment rate for the three months ending (a)
  
June 30, 2023
  3.4%   4.0% 
December 31, 2023
  3.8   4.2 
December 31, 2024
  4.2   3.9 
United States real gross domestic product for the three months ending (b)
  
June 30, 2023
  2.1%   1.1% 
December 31, 2023
  1.2   1.0 
December 31, 2024
  2.1   2.5 
 
(a)
Reflects quarterly average of forecasted reported United States unemployment rate.
(b)
Reflects year-over-year growth rates.
The allowance for credit losses related to commercial lending segment loans decreased $34increased $194 million during the first ninesix months of 2022,2023, reflecting the impact of increasing economic uncertainty, normalizing credit conditions and select commercial portfolios continuing to recover from the effects of the
COVID-19
pandemic, partially offset by the impacts ofreal estate loan growth and increasing economic uncertainty.deterioration.
The allowance for credit losses related to consumer lending segment loans increased $334$97 million during the first ninesix months of 2022, mainly2023, due to loan growth and increasingthe impact of economic uncertainty, along withnormalizing credit performance and the effects of higher interest rates on the life of the residential mortgage portfolios.portfolios, partially offset by a decrease related to a change in accounting principle.
U.S. Bancorp
19
Table of Contents
Table 8
   Summary of Allowance for Credit Losses
  Three Months Ended
June 30		       Six Months Ended
June 30		 
(Dollars in Millions) 2023  2022       2023  2022 
Balance at beginning of period
 $7,523  $6,105     $7,404  $6,155 
Change in accounting principle (a)
  —   —      (62)   — 
Allowance for acquired credit losses (b)
  —   —      127   — 
Charge-Offs
       
Commercial
       
Commercial
  103   48      159   95 
Lease financing
  7   5        14   13 
Total commercial
  110   53      173   108 
Commercial real estate
       
Commercial mortgages
  31   1      152   1 
Construction and development
  —   8        2   9 
Total commercial real estate
  31   9      154   10 
Residential mortgages
  121   2      125   7 
Credit card
  242   162      457   320 
Other retail
       
Retail leasing
  3   4      8   9 
Home equity and second mortgages
  3   2      5   5 
Other
  245   44        302   97 
Total other retail
  251   50        315   111 
Total charge-offs (c)
  755   276      1,224   556 
Recoveries
       
Commercial
       
Commercial
  16   20      30   41 
Lease financing
  4   3        6   5 
Total commercial
  20   23      36   46 
Commercial real estate
       
Commercial mortgages
  5   3      11   3 
Construction and development
  —   —        —   6 
Total commercial real estate
  5   3      11   9 
Residential mortgages
  7   11      12   22 
Credit card
  43   44      83   90 
Other retail
       
Retail leasing
  2   4      6   8 
Home equity and second mortgages
  4   5      7   10 
Other
  25   25        47   48 
Total other retail
  31   34        60   66 
Total recoveries
  106   115      202   233 
Net Charge-Offs
       
Commercial
       
Commercial
  87   28      129   54 
Lease financing
  3   2        8   8 
Total commercial
  90   30      137   62 
Commercial real estate
       
Commercial mortgages
  26   (2)      141   (2) 
Construction and development
  —   8        2   3 
Total commercial real estate
  26   6      143   1 
Residential mortgages
  114   (9)      113   (15) 
Credit card
  199   118      374   230 
Other retail
       
Retail leasing
  1   —      2   1 
Home equity and second mortgages
  (1)   (3)      (2)   (5) 
Other
  220   19        255   49 
Total other retail
  220   16        255   45 
Total net charge-offs
  649   161      1,022   323 
Provision for credit losses
  821   311        1,248   423 
Balance at end of period
 $7,695  $6,255       $7,695  $6,255 
Components
       
Allowance for loan losses
 $7,164  $5,832      
Liability for unfunded credit commitments
  531   423        
Total allowance for credit losses (1)
 $7,695  $6,255        
Period-end
loans (2)
 $379,428  $332,369      
Nonperforming loans (3)
  1,041   725      
Allowance for Credit Losses as a Percentage of
       
Period-end
loans (1)/(2)
  2.03%   1.88%      
Nonperforming loans (1)/(3)
  739   863      
Nonperforming and accruing loans 90 days or more past due
  508   545      
Nonperforming assets
  709   812      
Annualized net charge-offs
  296   969              
(a)
Effective January 1, 2023, the Company adopted accounting guidance which removed the separate recognition and measurement of troubled debt restructurings.
(b)
Allowance for purchased credit deteriorated and
charged-off
loans acquired from MUB.
(c)
Includes $91 million of commercial real estate charge-offs in the first quarter of 2023 related to uncollectible amounts on acquired loans. Includes $117 million of residential mortgage charge-offs and $192 million of other retail charge-offs in the second quarter of 2023 related to balance sheet repositioning and capital management actions.
 
20
 U.S. Bancorp
Table of Contents
Table 8
   Summary of Allowance for Credit Losses
  Three Months Ended      Nine Months Ended 
  September 30       September 30 
(Dollars in Millions) 2022  2021       2022  2021 
Balance at beginning of period
 $6,255  $6,610     $6,155  $8,010 
Charge-Offs
       
Commercial
       
Commercial
  51   37      146   171 
Lease financing
  5   3        18   13 
Total commercial
  56   40      164   184 
Commercial real estate
       
Commercial mortgages
  —   1      1   9 
Construction and development
  —   13        9   19 
Total commercial real estate
  —   14      10   28 
Residential mortgages
  2   3      9   13 
Credit card
  161   154      481   536 
Other retail
       
Retail leasing
  5   5      14   20 
Home equity and second mortgages
  2   3      7   9 
Other
  49   47        146   164 
Total other retail
  56   55        167   193 
Total charge-offs
  275   266      831   954 
Recoveries
       
Commercial
       
Commercial
  27   24      68   80 
Lease financing
  2   2        7   7 
Total commercial
  29   26      75   87 
Commercial real estate
       
Commercial mortgages
  6   —      9   20 
Construction and development
  —   1        6   2 
Total commercial real estate
  6   1      15   22 
Residential mortgages
  7   13      29   38 
Credit card
  42   43      132   133 
Other retail
       
Retail leasing
  4   4      12   19 
Home equity and second mortgages
  4   6      14   17 
Other
  21   26        69   88 
Total other retail
  29   36        95   124 
Total recoveries
  113   119      346   404 
Net Charge-Offs
       
Commercial
       
Commercial
  24   13      78   91 
Lease financing
  3   1        11   6 
Total commercial
  27   14      89   97 
Commercial real estate
       
Commercial mortgages
  (6)   1      (8)   (11) 
Construction and development
  —   12        3   17 
Total commercial real estate
  (6)   13      (5)   6 
Residential mortgages
  (5)   (10)      (20)   (25) 
Credit card
  119   111      349   403 
Other retail
       
Retail leasing
  1   1      2   1 
Home equity and second mortgages
  (2)   (3)      (7)   (8) 
Other
  28   21        77   76 
Total other retail
  27   19        72   69 
Total net charge-offs
  162   147      485   550 
Provision for credit losses
  362   (163)        785   (1,160) 
Balance at end of period
 $6,455  $6,300       $6,455  $6,300 
Components
       
Allowance for loan losses
 $6,017  $5,792      
Liability for unfunded credit commitments
  438   508        
Total allowance for credit losses (1)
 $6,455  $6,300        
Period-end
loans (2)
 $342,708  $297,608      
Nonperforming loans (3)
  630   906      
Allowance for Credit Losses as a Percentage of
       
Period-end
loans (1)/(2)
  1.88%   2.12%      
Nonperforming loans (1)/(3)
  1,025   695      
Nonperforming and accruing loans 90 days or more past due
  631   488      
Nonperforming assets
  953   667      
Annualized net charge-offs
  1,004   1,080              
U.S. Bancorp
21
Table of Contents
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 SeptemberJune 30, 2022,2023, no significant change in the amount of residual values or concentration of the portfolios had occurred since December 31, 2021.2022. 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, 2021,2022, 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, 2021,2022, 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, 2021,2022, 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 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. The Company also manages interest rate sensitivity by utilizing market value of equity modeling, which measures the degree to which the market values of the Company’s assets and liabilities and
off-balance
sheet instruments will change given a change in interest rates. Management measures the impact of changes in market values due to interest rates under a number of scenarios, including immediate and sustained parallel shifts, and flattening or steepening of the yield curve.
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
U.S. Bancorp
21
Table of Contents
Table 9
   Sensitivity of Net Interest Income
  June 30, 2023   December 31, 2022 
   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
  (.37)%   .50%   (.10)%   .90%    (.58)%   .95%   (2.02)%   1.44% 
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, 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.
22
U.S. Bancorp
Table of Contents
Table 9
   Sensitivity of Net Interest Income
  September 30, 2022       December 31, 2021 
   Down 50 bps  Up 50 bps
Immediate		  Down 200 bps
Gradual		  Up 200 bps
Gradual		       Down 50 bps  Up 50 bps
Immediate		  Down 200 bps
Gradual		   Up 200 bps
Gradual		 
Net interest income
  (.51)%   .52%   (1.86)%   .61%        (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 and commodity 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 September 30, 2022, the Company had $5.3 billion of forward commitments to sell, hedging $2.7 billion of MLHFS and $3.0 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. The Company may mitigate credit risk on loans or lending portfolios through the use of credit contracts.
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 provided or ceased to be representative after December 31, 2021. The Company holds financial instruments impacted by the discontinuance of LIBOR,
 
U.S. Bancorp
22
 
23
U.S. Bancorp
Table of Contents
the London InterBank Offered Rate (“LIBOR”) after 2021. As of July 3, 2023, all tenors of LIBOR have ceased to be published or representative. The Company holds financial instruments impacted by the discontinuance of LIBOR, including certain loans, investment securities, derivatives, 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, servicer, and servicer,asset manager, which involve financial instruments that will beare similarly impacted by the discontinuance of LIBOR.
The Company has transitionedimplemented its remediation strategy for its financial instruments associated towith all LIBOR currencies and tenors that ceased or became nonrepresentative on December 31, 2021and has established processes and procedures to alternative reference rates, with limited exceptions.address inquiries from customers and other third-parties regarding the LIBOR transition. 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 ofhas applied the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”), which was enacted on March 15, 2022. and the Regulations Implementing the Adjustable Interest Rate (LIBOR) Act (Regulation ZZ) (the “Final Rules”) to substantially all financial instruments that are eligible. The LIBOR Act establishesand Final Rules established a process for replacing LIBOR onin existing LIBOR contracts that dodid 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 replacereplaces LIBOR as the benchmark for such contracts. The final implementation of the LIBOR Act currently remains uncertain, as the Federal Reserve has not yet issued final 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 LIBORthose contracts as a reference rate in new contracts, with limited exceptions, and continuesmatter of law, without the need to increasebe amended by the usage of alternative reference rates such as SOFR. The Company has been undergoing an enterprise-wide effort to proactively reprice LIBOR loans with customersparties.
Because financial instruments will transition to an alternative reference rate. The Company has also adopted industry best practice guidelinesrate (“ARR”) at the first reset date LIBOR is unavailable, many products will continue to accrue interest on LIBOR for fallback language for new transactions, converted its cleared interest rate swaps discounting to SOFR discounting, and distributed communications related toa period of time after cessation, but these financial instruments all have a transition plan in place as of the transition to certain impacted parties, both inside and outside the Company. cessation of LIBOR.
Refer to “Risk Factors” in the Company’s Annual Report on Form
Form 10-K
for the year ended December 31, 2021,2022, 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, commodities 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. VaR amounts reflect MUB beginning December 1, 2022, the day the acquisition transaction closed.
24
U.S. Bancorp
Table of Contents
The average, high, low and
period-end
one-day
VaR amounts for the Company’s Covered Positions were as follows:
 
Nine Months Ended September 30
(Dollars in Millions)
 2022   2021 
Six Months Ended June 30
(Dollars in Millions)
 2023   2022 
Average
 $2   $2  $5   $1 
High
 4    4  7    2 
Low
 1    1  3    1 
Period-end
 3    2  4    2 
The Company did not experience any actual losses for its combined Covered Positions that exceeded VaR during the ninesix months ended SeptemberJune 30, 20222023 and 2021.2022. The Company stress tests its market risk measurements to provide management with perspectives on market
U.S. Bancorp
23
Table of Contents
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:
 
Nine Months Ended September 30
(Dollars in Millions)
 2022   2021 
Six Months Ended June 30
(Dollars in Millions)
 2023   2022 
Average
 $9   $7  $13   $5 
High
 18    9  16    9 
Low
 6    5  10    3 
Period-end
 17    7  11    9 
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 partythird-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:
 
Nine Months Ended September 30
(Dollars in Millions)
 2022   2021 
Six Months Ended June 30
(Dollars in Millions)
 2023   2022 
Residential Mortgage Loans Held For Sale and Related Hedges
      
Average
 $2   $10  $1   $2 
High
 5    19  2    5 
Low
 1    5   —    1 
Mortgage Servicing Rights and Related Hedges
      
Average
 $8   $4  $8   $7 
High
 20    11  12    13 
Low
 3    1  4    3 
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 credit ratings and 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 September 30, 2022,Window and new Bank Term Funding Program, created in 2023. Unencumbered liquid assets in the fair value of unencumberedCompany’s investment securities totaled $128.4 billion, compared with $144.0 billion at December 31, 2021.portfolio provides asset liquidity through the Company’s ability to sell the securities or pledge and borrow against them. Refer to Note 4 of the Notes to Consolidated Financial Statements and “Balance Sheet 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 Federal Reserve Bank. At September 30, 2022,
The following table summarizes the Company’s total available liquidity from
on-balance
sheet and
off-balance
sheet funding sources:
(Dollars in millions) June 30,
2023		   December 31,
2022		 
Cash held at the Federal Reserve Bank and other central banks
 $62,869   $45,171 
Available investment securities
  25,911    132,052 
Borrowing capacity from the Federal Reserve Bank and FHLB
  227,566    125,682 
Total available liquidity
 $316,346   $302,905 
 
U.S. Bancorp
24
 
25
U.S. Bancorp
Table of Contents
Company could have borrowed a total of an additional $101.2 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 $471.1$521.6 billion at SeptemberJune 30, 2022,2023, compared with $456.1$525.0 billion at December 31, 2021.2022. 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 $32.2$45.3 billion at SeptemberJune 30, 2022,2023, and is an important funding source because of its multi-year borrowing structure. Short-term borrowings were $25.1$32.3 billion at SeptemberJune 30, 2022,2023, 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 parent company’s routine funding requirements consist primarily of operating expenses, dividends paid to shareholders, debt service, repurchases of common stock and funds used for acquisitions. The parent company obtains funding to meet its obligations from dividends collected from its subsidiaries and the issuance of debt and capital securities. 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 SeptemberJune 30, 2022,2023, parent company long-term debt outstanding was $20.9$34.0 billion, compared with $18.9$27.0 billion at December 31, 2021.2022. The increase was primarily due to $3.9$7.2 billion of medium-term note and $1.3 billion of subordinated note issuances, partially offset by $1.3 billion of subordinated note and $1.0 billion of medium-term note repayments.issuances. As of SeptemberJune 30, 2022,2023, there was no parent company debt scheduled to mature in the remainder of 2022.2023. Future debt maturities may be met through medium-term note and capital security issuances and dividends from subsidiaries, as well as from parent company cash and cash equivalents.
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 SeptemberJune 30, 2022,2023, 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 SeptemberJune 30, 2022,2023, 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, 2021,2022, 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 ninesix months ended SeptemberJune 30, 2022.2023. 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 SeptemberJune 30, 2022,2023, the Company had an aggregate amount on deposit with European banks of approximately $6.5$7.0 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.
U.S. Bancorp
25
Table of Contents
 Table 10
   Regulatory Capital Ratios
(Dollars in Millions) June 30,
2023		  December 31,
2022		 
Basel III standardized approach:
  
Common equity tier 1 capital
 $42,944  $41,560 
Tier 1 capital
  50,187   48,813 
Total risk-based capital
  60,334   59,015 
Risk-weighted assets
  473,393   496,500 
Common equity tier 1 capital as a percent of risk-weighted assets (a)
  9.1%   8.4% 
Tier 1 capital as a percent of risk-weighted assets
  10.6   9.8 
Total risk-based capital as a percent of risk-weighted assets
  12.7   11.9 
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio)
  7.5   7.9 
Tier 1 capital as a percent of total
on-
and
off-balance
sheet leverage exposure (total leverage exposure ratio)
  6.2   6.4 
(a)
The Company’s common equity tier 1 capital to risk-weighted assets ratio, reflecting the full implementation of the CECL methodology, was 8.9 percent at June 30, 2023, compared with 8.1 percent at December 31, 2022.
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.
 
26
U.S. Bancorp
Table of Contents
Table 10
   Regulatory Capital Ratios
(Dollars in Millions)      September 30,
2022		  December 31,
2021		 
Basel III standardized approach:
    
Common equity tier 1 capital
   $44,094  $41,701 
Tier 1 capital
    51,346   48,516 
Total risk-based capital
    60,738   56,250 
Risk-weighted assets
    456,928   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
    11.2   11.6 
Total risk-based capital as a percent of risk-weighted assets
    13.3   13.4 
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio)
    8.7   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. To achieve its capital goals, the Company employs a variety of capital management tools, including dividends, common share repurchases, and the issuance of subordinated debt,
non-cumulative
perpetual preferred stock, common stock and other capital instruments. 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.during 2020 and 2021. This cumulative deferred impact will continue to be phased into the Company’s regulatory capital over the next threetwo 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 SeptemberJune 30, 20222023 and December 31, 2021.2022. All regulatory ratios exceeded regulatory “well-capitalized” requirements.
In connection with the Company’s acquisition of MUB, the Company committed to meet the requirements applicable to Category II institutions by December 31, 2024, if the Federal Reserve notifies the Company by January 1, 2024, that the Company must comply with such rules.
In July 2023, the U.S. federal bank regulatory authorities proposed a rule implementing the Basel Committee’s finalization of the post-crisis regulatory capital reforms. The proposal provides for a July 1, 2025 effective date, subject to a three-year transition period. The proposal includes the Fundamental Review of the Trading Book, which replaces the market risk rule, and introduces new standardized approaches for credit risk, operational risk and credit valuation adjustment (CVA) risk, which would replace the current models-based approaches. The Company is currently evaluating the impact of the proposed rule and expects that any final rule would result in the Company being required to maintain increased levels of regulatory capital.
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 5.24.8 percent and 6.76.8 percent, respectively, at SeptemberJune 30, 2022,2023, compared with 6.84.5 percent and 9.26.0 percent, respectively, at December 31, 2021.2022. In addition, the Company’s common equity tier 1 capital to risk-weighted assets ratio, reflecting the full implementation of the CECL methodology was 9.48.9 percent at SeptemberJune 30, 2022,2023, compared with 9.68.1 percent at December 31, 2021.2022. Refer to
“Non-GAAP
Financial Measures” beginning on page 32 for further information on these other capital ratios.
26
U.S. Bancorp
Table of Contents
Total U.S. Bancorp shareholders’ equity was $47.5$53.0 billion at SeptemberJune 30, 2022,2023, compared with $54.9$50.8 billion at December 31, 2021.2022. The decreaseincrease was primarily the result of corporate earnings and 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.dividends paid.
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.2021. 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.MUB. The Company’s target common equity tier 1Company will evaluate potential repurchases in connection with the potential capital ratio is 8.5 percentrequirements given the regulatory landscape. Capital distributions, including dividends and it expectsstock repurchases, are subject to operate at a common equity tier 1 capital ratio of approximately 8.3 percent at the time of closing the acquisition, given interest rates at the timeapproval of the Company’s third quarter 2022 earnings releaseBoard of October 13, 2022.Directors and compliance with regulatory requirements. On August 3, 2023, the Company issued 24 million shares of common stock of the Company to an affiliate of MUFG for a purchase price of $936 million. The proceeds of the issuance were used to repay a portion of the Company’s $3.5 billion debt obligation to MUFG. As a result, the Company’s common equity tier 1 capital ratio is expected towill increase toward 9.0 percent subsequent to the acquisition as a resultby approximately 20 basis points. See “MUFG Union Bank Acquisition” on page 5 of corporate earnings, which will include the impact of accretion of the purchase accounting valuation adjustments. 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.this Report for further information.
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 thirdsecond quarter of 2022:2023:
 
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)		 
July
  105,455(a)  $46.89   5,455  $1,389 
August
  2,311   47.88   2,311   1,389 
September
  3,107   45.78   3,107   1,389 
Total
  110,873(a)  $46.87   10,873  $1,389 
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
  371,038(a)  $34.31    6,038   $1,331 
May
  370,829(b)   30.17    829    1,331 
June
  70,173(c)   33.08    173    1,331 
Total
  812,040(d)  $32.31    7,040   $1,331 
 
(a)
Includes 100,000365,000 shares of common stock purchased, at an average price per share of $46.86,$34.31, in open-market transactions by U.S. Bank National Association, the Company’s primary 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.
U.S. Bancorp
(b)
27
Includes 370,000 shares of common stock purchased, at an average price per share of $30.15, 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 70,000 shares of common stock purchased, at an average price per share of $33.08, in open-market transactions by U.S. Bank National Association in its capacity as trustee of the U.S. Bank 401(k) Savings Plan.
(d)
Includes 805,000 shares of common stock purchased, at an average price per share of $32.29, in open-market transactions by U.S. Bank National Association in its capacity as trustee of the U.S. Bank 401(k) Savings Plan.
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 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, 2021,2022, 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 2022,2023, certain organization and methodology changes were made and, accordingly, 20212022 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 $502$435 million of the Company’s net income in the thirdsecond quarter and $1.3$1.0 billion in the first ninesix months of 2022,2023, or increases of $121$59 million (31.8(15.7 percent) and $39$258 million (3.1(32.9 percent), respectively, compared with the same periods of 2021.2022.
Net revenue increased $235$295 million (24.6(27.5 percent) in the thirdsecond quarter and $303$700 million (10.3(33.9 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021.2022. Net interest income, on a taxable-equivalent basis, increased $233$220 million (33.2(27.5 percent) in the thirdsecond quarter and $317$553 million (14.7(35.8 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021.2022. The increases were primarily due to higher loan and interest-bearing deposit balances and the impact of
U.S. Bancorp
27
Table of Contents
higher rates on the margin benefit from deposits partially offset by lower spreads on loans and lower noninterest-bearing deposits.the acquisition of MUB. Noninterest income increased $2$75 million (0.8(27.6 percent) in the thirdsecond quarter of 2022, compared with the third quarter of 2021, primarily due to stronger trust and investment management fees driven by lower money market fee waivers and core growth, and higher commercial products revenue due to higher capital markets revenue, partially offset by lower treasury management fees driven by the impact of rising interest rates on earnings credits. Noninterest income decreased $14$147 million (1.8(28.3 percent) in the first ninesix months of 2022, compared with the first nine months of 2021, primarily due to lower corporate bond fees within the capital markets business, partially offset by higher treasury management fees.
Noninterest expense increased $17 million (3.9 percent) in the third quarter and $47 million (3.6 percent) in the first nine months of 2022,2023, compared with the same periods of 2021,2022, primarily due to the MUB acquisition and higher commercial products revenue mainly due to higher trading revenue.
Noninterest expense increased $165 million (35.0 percent) in the second quarter and $334 million (36.5 percent) in the first six months of 2023, compared with the same periods of 2022, primarily due to higher FDIC insurance expense and higher compensation expense primarily due to merit increases and hiring to support business growth. Thedriven by an increase in noninterest expense for the first nine months of 2022, comparedassessment base and rate along with the first nine monthsinclusion of 2021, was partially offsetMUB in the current year, higher net shared services expense driven by lower performance-based incentives related to capital markets activity.investment in support of business growth and the impact of the MUB acquisition, including intangible amortization driven by the core deposit intangible. The provision for credit losses increased $56$52 million (53.1 percent) in the thirdsecond quarter and $204$22 million (21.2 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021,2022, primarily due to loan loss provisions supporting growthcredit downgrades in loan balances.commercial real estate and select commercial portfolios in the current year.
Consumer and Business Banking
 Consumer and Business Banking comprises consumer banking, small business banking and consumer lending. Products and services are delivered through banking offices, telephone servicing and sales,
on-line
services, direct mail, ATM processing, mobile devices, distributed mortgage loan officers, and intermediary relationships including auto dealerships, mortgage banks, and strategic business partners. Consumer and Business Banking contributed $467$598 million of the Company’s net income in the thirdsecond quarter and $1.3 billion in the first ninesix months of 2022,2023, or decreasesincreases of $198$115 million (29.8(23.8 percent) and $527$432 million (28.1(51.1 percent), respectively, compared with the same periods of 2021.2022.
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 Months Ended September 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)
 $934  $701   33.2%    $1,726  $1,558   10.8%    $477  $236   *%   
Noninterest income
  256   254   .8     336   714   (52.9)     652   558   16.8   
Total net revenue
  1,190   955   24.6     2,062   2,272   (9.2)     1,129   794   42.2   
Noninterest expense
  452   435   3.9     1,399   1,412   (.9)     592   520   13.8   
Income (loss) before provision and income taxes
  738   520   41.9     663   860   (22.9)     537   274   96.0   
Provision for credit losses
  68   12   *     40   (27)   *     3   2   50.0   
Income (loss) before income taxes
  670   508   31.9     623   887   (29.8)     534   272   96.3   
Income taxes and taxable-equivalent adjustment
  168   127   32.3     156   222   (29.7)     134   68   97.1   
Net income (loss)
  502   381   31.8     467   665   (29.8)     400   204   96.1   
Net (income) loss attributable to noncontrolling interests
  —   —   —     —   —   —     —   —   —   
Net income (loss) attributable to U.S. Bancorp
 $502  $381   31.8    $467  $665   (29.8)    $400  $204   96.1   
Average Balance Sheet
               
Loans
 $131,614  $102,800   28.0    $142,986  $140,468   1.8    $22,871  $18,452   23.9   
Goodwill
  1,912   1,650   15.9     3,241   3,506   (7.6)     1,700   1,618   5.1   
Other intangible assets
  3   5   (40.0)     3,726   2,755   35.2     311   80   *   
Assets
  147,671   115,033   28.4     158,439   160,515   (1.3)     26,439   21,633   22.2   
Noninterest-bearing deposits
  53,388   63,565   (16.0)     31,083   33,401   (6.9)     23,852   24,542   (2.8)   
Interest-bearing deposits
  100,433   69,304   44.9     166,196   159,475   4.2     73,229   72,255   1.3   
Total deposits
  153,821   132,869   15.8     197,279   192,876   2.3     97,081   96,797   .3   
Total U.S. Bancorp shareholders’ equity
  14,609   13,766   6.1       12,466   12,247   1.8       3,726   3,171   17.5     
  Payment
Services		  Treasury and
Corporate Support		      Consolidated
Company		     
Three Months Ended September 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)
 $627  $616   1.8%    $93  $86   8.1%    $3,857  $3,197   20.6%   
Noninterest income
  995   946   5.2     230   221   4.1     2,469   2,693   (8.3)   
Total net revenue
  1,622   1,562   3.8     323   307   5.2     6,326   5,890   7.4   
Noninterest expense
  897   862   4.1     297   200   48.5     3,637   3,429   6.1   
Income (loss) before provision and income taxes
  725   700   3.6     26   107   (75.7)     2,689   2,461   9.3   
Provision for credit losses
  285   166   71.7     (34)   (316)   89.2     362   (163)   *   
Income (loss) before income taxes
  440   534   (17.6)     60   423   (85.8)     2,327   2,624   (11.3)   
Income taxes and taxable-equivalent adjustment
  110   134   (17.9)     (57)   39   *     511   590   (13.4)   
Net income (loss)
  330   400   (17.5)     117   384   (69.5)     1,816   2,034   (10.7)   
Net (income) loss attributable to noncontrolling interests
  —   —   —     (4)   (6)   33.3     (4)   (6)   33.3   
Net income (loss) attributable to U.S. Bancorp
 $330  $400   (17.5)    $113  $378   (70.1)    $1,812  $2,028   (10.7)   
Average Balance Sheet
               
Loans
 $35,819  $31,378   14.2    $3,488  $3,641   (4.2)    $336,778  $296,739   13.5   
Goodwill
  3,292   3,168   3.9     —   —   —     10,145   9,942   2.0   
Other intangible assets
  405   495   (18.2)     —   —   —     4,445   3,335   33.3   
Assets
  42,090   37,170   13.2     214,125   219,095   (2.3)     588,764   553,446   6.4   
Noninterest-bearing deposits
  3,312   4,913   (32.6)     2,409   2,597   (7.2)     114,044   129,018   (11.6)   
Interest-bearing deposits
  171   150   14.0     2,696   1,285   *     342,725   302,469   13.3   
Total deposits
  3,483   5,063   (31.2)     5,105   3,882   31.5     456,769   431,487   5.9   
Total U.S. Bancorp shareholders’ equity
  8,257   7,561   9.2       10,762   17,528   (38.6)       49,820   54,273   (8.2)     
*
Not meaningful
U.S. Bancorp
29
Table of Contents
  Corporate and
Commercial Banking		      Consumer and
Business Banking		      Wealth Management and
Investment Services		     
Nine Months Ended September 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)
 $2,475  $2,158   14.7%    $4,835  $4,580   5.6%    $1,107  $752   47.2%   
Noninterest income
  774   788   (1.8)     1,191   1,915   (37.8)     1,900   1,639   15.9   
Total net revenue
  3,249   2,946   10.3     6,026   6,495   (7.2)     3,007   2,391   25.8   
Noninterest expense
  1,352   1,305   3.6     4,215   4,129   2.1     1,768   1,539   14.9   
Income (loss) before provision and income taxes
  1,897   1,641   15.6     1,811   2,366   (23.5)     1,239   852   45.4   
Provision for credit losses
  172   (32)   *     12   (136)   *     7   2   *   
Income (loss) before income taxes
  1,725   1,673   3.1     1,799   2,502   (28.1)     1,232   850   44.9   
Income taxes and taxable-equivalent adjustment
  432   419   3.1     450   626   (28.1)     309   213   45.1   
Net income (loss)
  1,293   1,254   3.1     1,349   1,876   (28.1)     923   637   44.9   
Net (income) loss attributable to noncontrolling interests
  —   —   —     —   —   —     —   —   —   
Net income (loss) attributable to U.S. Bancorp
 $1,293  $1,254   3.1    $1,349  $1,876   (28.1)    $923  $637   44.9   
Average Balance Sheet
               
Loans
 $123,644  $102,427   20.7    $141,637  $140,914   .5    $21,972  $17,582   25.0   
Goodwill
  1,912   1,648   16.0     3,248   3,487   (6.9)     1,726   1,618   6.7   
Other intangible assets
  4   5   (20.0)     3,514   2,693   30.5     292   69   *   
Assets
  137,874   114,525   20.4     157,311   162,013   (2.9)     25,563   20,743   23.2   
Noninterest-bearing deposits
  58,517   60,648   (3.5)     30,990   32,857   (5.7)     25,437   23,096   10.1   
Interest-bearing deposits
  93,762   70,406   33.2     166,806   156,052   6.9     71,852   76,464   (6.0)   
Total deposits
  152,279   131,054   16.2     197,796   188,909   4.7     97,289   99,560   (2.3)   
Total U.S. Bancorp shareholders’ equity
  14,114   13,984   .9       12,361   12,352   .1       3,647   3,099   17.7     
  Payment
Services		      Treasury and
Corporate Support		      Consolidated
Company		     
Nine Months Ended September 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)
 $1,868  $1,840   1.5%    $236  $120   96.7%    $10,521  $9,450   11.3%   
Noninterest income
  2,847   2,644   7.7     701   707   (.8)     7,413   7,693   (3.6)   
Total net revenue
  4,715   4,484   5.2     937   827   13.3     17,934   17,143   4.6   
Noninterest expense
  2,626   2,488   5.5     902   734   22.9     10,863   10,195   6.6   
Income (loss) before provision and income taxes
  2,089   1,996   4.7     35   93   (62.4)     7,071   6,948   1.8   
Provision for credit losses
  636   216   *     (42)   (1,210)   96.5     785   (1,160)   *   
Income (loss) before income taxes
  1,453   1,780   (18.4)     77   1,303   (94.1)     6,286   8,108   (22.5)   
Income taxes and taxable-equivalent adjustment
  364   446   (18.4)     (177)   97   *     1,378   1,801   (23.5)   
Net income (loss)
  1,089   1,334   (18.4)     254   1,206   (78.9)     4,908   6,307   (22.2)   
Net (income) loss attributable to noncontrolling interests
  —   —   —     (8)   (17)   52.9     (8)   (17)   52.9   
Net income (loss) attributable to U.S. Bancorp
 $1,089  $1,334   (18.4)    $246  $1,189   (79.3)    $4,900  $6,290   (22.1)   
Average Balance Sheet
               
Loans
 $33,820  $30,353   11.4    $3,658  $3,738   (2.1)    $324,731  $295,014   10.1   
Goodwill
  3,312   3,172   4.4     —   —   —     10,198   9,925   2.8   
Other intangible assets
  435   518   (16.0)     —   —   —     4,245   3,285   29.2   
Assets
  40,573   35,966   12.8     220,746   217,952   1.3     582,067   551,199   5.6   
Noninterest-bearing deposits
  3,459   5,068   (31.7)     2,490   2,593   (4.0)     120,893   124,262   (2.7)   
Interest-bearing deposits
  166   141   17.7     2,350   1,714   37.1     334,936   304,777   9.9   
Total deposits
  3,625   5,209   (30.4)     4,840   4,307   12.4     455,829   429,039   6.2   
Total U.S. Bancorp shareholders’ equity
  8,131   7,543   7.8       12,551   16,349   (23.2)       50,804   53,327   (4.7)     
*
Not meaningful
30
U.S. Bancorp
Table of Contents
Net revenue decreased $210increased $652 million (9.2(33.1 percent) in the thirdsecond quarter and $469$1.4 million (7.2(35.7 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021. Noninterest2022. Net interest income, decreased $378on a taxable-equivalent basis, increased $616 million (52.9(39.0 percent) in the thirdsecond quarter and $724 million (37.8$1.4 billion (46.3 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021,2022, due to the favorable impact of higher rates on the margin benefit from deposits and the acquisition of MUB. Noninterest income increased $36 million (9.2 percent) in the second quarter of 2023, compared with the second quarter of 2022, primarily due to the acquisition of MUB. Noninterest income decreased $21 million (2.5 percent) in the first six months of 2023, compared with the first six months of 2022, primarily due to lower mortgage banking revenue reflecting lower application volume, given declining refinancerefinancing activities experienced in the mortgage industry, lower related gain on sale margins and lower performing loan sales. The decrease in mortgage banking revenue in the first nine months of 2022, compared with the first nine months of 2021, was partially offset by an increase in the fair valueimpact of MSRs, net of hedging activities. Net interest income, on a taxable-equivalent basis,the MUB acquisition.
Noninterest expense increased $168$400 million (10.8(28.6 percent) in the thirdsecond quarter and $255$761 million (5.6(27.1 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021, reflecting the favorable impact of higher rates on the margin benefit from deposits and higher deposit balances, 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 decreased $13 million (0.9 percent) in the third quarter of 2022, compared with the third quarter of 2021,primarily due to lower compensation expense reflecting lower revenue-related compensation due to mortgage production and lower mortgage related loan expense, partially offset by increases in net shared services expense due to investments in digital capabilities. Noninterest expense increased $86 million (2.1 percent) incapabilities and the first nine monthsimpact of 2022, compared with the first nine months of 2021, primarily due to increases in net shared services expense, partially offsetMUB acquisition, including intangible amortization driven by lower compensation expense and mortgage related loan expense.the core deposit intangible. The provision for credit losses increased $67$98 million in the thirdsecond quarter and $148$57 million in the first ninesix months of 2022,2023, compared with the same periods of 2021,2022, due to loan balance growth and more favorablenormalizing credit trends in the prior year.conditions.
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 $400$403 million of the Company’s net income in the thirdsecond quarter and $923$820 million in the first ninesix months of 2022,2023, or increases of $196$38 million (96.1(10.4 percent) and $286$211 million (44.9(34.6 percent), respectively, compared with the same periods of 2021.2022.
Net revenue increased $335$188 million (42.2(18.4 percent) in the thirdsecond quarter and $616$519 million (25.8(27.2 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021.2022. Net interest income, on a taxable-equivalent basis, increased $241$112 million (30.3 percent) in the thirdsecond quarter and $355$337 million (47.2(50.9 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021,2022, primarily due to the favorable impact of higher rates on the margin benefit from deposits.deposits and the acquisition of MUB. Noninterest income increased $94$76 million (16.8(11.7 percent) in the thirdsecond quarter and $261$182 million (15.9(14.6 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021,2022, primarily driven bydue to higher trust and investment management fees reflecting lower money market fund fee waivers,driven by the impactacquisition of the PFM acquisitionMUB and core business growth, partially offset by the impact of unfavorable market conditions.growth.
Noninterest expense increased $72$131 million (13.8(24.3 percent) in the thirdsecond quarter and $229$243 million (14.9(22.3 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021,2022, reflecting higher compensation and employee benefits expense as a result of merit increases the PFM acquisition,and core business growth, and performance-based incentives, as well as higher net shared services expense driven by investment in support
28
U.S. Bancorp
Table of Contents
of business growth.growth and the impact of the MUB acquisition. The provision for credit losses increased $1$7 million (50.0 percent) in the thirdsecond quarter and $5decreased $4 million in the first ninesix months of 2022,2023, compared with the same periods of 2021.2022. The changes from the prior year were driven by ending loan balance growth in the current year compared to the prior year.
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 $330$350 million of the Company’s net income in the thirdsecond quarter and $1.1 billion$693 million in the first ninesix months of 2022,2023, or decreases of $70$44 million (17.5(11.2 percent) and $245$78 million (18.4(10.1 percent), respectively, compared with the same periods of 2021.2022.
Net revenue increased $60 million (3.8 percent) in the third quarter and $231$84 million (5.2 percent) in the second quarter and $196 million (6.3 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021. Noninterest2022. Net interest income, on a taxable-equivalent basis, increased $49$26 million (5.2(4.2 percent) in the thirdsecond quarter and $203$58 million (7.7(4.7 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021,2022, primarily due to higher loan yields driven by higher interest rates and customer revolve rates, higher loan balances and higher loan fees, mostly offset by higher funding costs. Noninterest income increased $58 million (5.8 percent) in the second quarter and $138 million (7.5 percent) in the first six months of 2023, compared with the same periods of 2022, mainly due to continued strengthening of consumer and business spending across most sectors. As a result, there was strong growth in card revenue and merchant processing services revenue driven by higher sales volume, as well as higher corporate payment products revenue driven by improving business spending across all productdue to increased spending.
U.S. Bancorp
31
Table of Contents
groups. In addition, merchant processing services revenueNoninterest expense increased due to higher sales volume and higher merchant fees, partially offset by the impact of foreign currency rate changes in Europe. Credit and debit card revenue was negatively impacted by declining prepaid processing fees as the beneficial impact of government stimulus programs dissipated year-over-year, offset by strong sales. Net interest income, on a taxable-equivalent basis, increased $11$50 million (1.8(5.8 percent) in the thirdsecond quarter and $28$117 million (1.5(6.8 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021, primarily due to higher loan balances and loan fees, partially offset by higher funding costs. Net interest income further increased in the third quarter of 2022, compared with the third quarter of 2021, due to higher loan yields driven by higher interest rates net of lower customer revolve rates.
Noninterest expense increased $35 million (4.1 percent) in the third quarter and $138 million (5.5 percent) in the first nine months of 2022, compared with the same periods of 2021, reflecting higher net shared services expense driven by investment in infrastructure and technology development, in addition to higher compensation and employee benefits expense as a result ofdue to merit increases and core business growth and variable compensation.growth. The provision for credit losses increased $119$93 million (71.7(42.1 percent) in the thirdsecond quarter and $420$183 million (52.1 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021,2022, primarily due to the impacts ofnormalizing credit conditions exhibited through increasing delinquency rates along with stronger growth in loan balances.and lower consumer liquidity.
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 net incomelosses of $113$425 million in the thirdsecond quarter and $246$774 million in the first ninesix months of 2022,2023, compared with a net loss of $87 million and net income of $378$78 million and $1.2 billion in the same periods of 2021,2022, respectively.
Net revenue increased $16decreased $56 million (5.2(16.6 percent) in the thirdsecond quarter and $110$69 million (13.3(10.8 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021.2022. Noninterest income decreased $67 million (27.8 percent) in the second quarter and $157 million (32.4 percent) in the first six months of 2023, compared with the same periods of 2022, primarily due to lower securities gains and commercial products revenue, along with the impact of balance sheet repositioning and capital management actions. Net interest income, on a taxable-equivalent basis, increased $7$11 million (8.1(11.5 percent) in the thirdsecond quarter and $116$88 million (96.7(57.9 percent) in the first ninesix months of 2022,2023, compared with the same periods of 2021,2022, primarily due to higher yields on the investment securities portfolio and interest-bearing deposits with banks, mostlyacquisition of MUB, partially offset by higher funding costs.
Noninterest incomeexpense increased $9$99 million (4.1(22.1 percent) in the thirdsecond quarter of 2022, compared with the third quarter of 2021, primarily due to higher
tax-advantaged
investment syndication revenue and gains on the sale of certain assets, partially offset by lower securities gains. Noninterest income decreased $6$443 million (0.8(63.2 percent) in the first ninesix months of 2022, compared with the first nine months of 2021, primarily due to lower securities gains, partially offset by higher
tax-advantaged
investment syndication revenue, gains on the sale of certain assets, and higher commercial products revenue.
Noninterest expense increased $97 million (48.5 percent) in the third quarter and $168 million (22.9 percent) in the first nine months of 2022,2023, compared with the same periods of 2021,2022, primarily due to merger and integration-relatedintegration charges associated withand operating expenses related to the planned acquisition of MUFG Union BankMUB, higher compensation and higher compensationemployee benefits expense reflecting merit increases and hiring to support business growth, and core business growth net of lower variable compensation, partially offset by lower net shared services expense. The provision for credit losses increased $282$260 million (89.2 percent) in the thirdsecond quarter and $1.2 billion (96.5 percent)$567 million in the first ninesix months of 2022,2023, compared with the same periods of 2021, reflecting the increase in the allowance for credit losses2022, primarily due to increasingbalance sheet repositioning and capital management actions and increased economic uncertainty in the current year, compared to the reduction in the allowance for credit losses associated with improving economic conditions in the prior year.uncertainty.
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.
U.S. Bancorp
29
Table of Contents
 Table 11
   Line of Business Financial Performance
  
Corporate and
Commercial Banking
      
Consumer and
Business Banking
      
Wealth Management and
Investment Services
     
Three Months Ended June 30
(Dollars in Millions)
 2023  2022  Percent
Change		      2023  2022  Percent
Change		      2023  2022  Percent
Change		     
Condensed Income Statement
               
Net interest income (taxable-equivalent basis)
 $1,019  $799   27.5%    $2,196  $1,580   39.0%    $482  $370   30.3%   
Noninterest income
  347   272   27.6     426   390   9.2     728   652   11.7   
Total net revenue
  1,366   1,071   27.5     2,622   1,970   33.1     1,210   1,022   18.4   
Noninterest expense
  636   471   35.0     1,801   1,401   28.6     670   539   24.3   
Income (loss) before provision and income taxes
  730   600   21.7     821   569   44.3     540   483   11.8   
Provision for credit losses
  150   98   53.1     24   (74)   *     3   (4)   *   
Income (loss) before income taxes
  580   502   15.5     797   643   24.0     537   487   10.3   
Income taxes and taxable-equivalent adjustment
  145   126   15.1     199   160   24.4     134   122   9.8   
Net income (loss)
  435   376   15.7     598   483   23.8     403   365   10.4   
Net (income) loss attributable to noncontrolling interests
  —   —   —     —   —   —     —   —   —   
Net income (loss) attributable to U.S. Bancorp
 $435  $376   15.7    $598  $483   23.8    $403  $365   10.4   
Average Balance Sheet
               
Loans
 $151,123  $123,245   22.6    $169,704  $140,747   20.6    $24,568  $22,285   10.2   
Goodwill
  2,859   1,912   49.5     4,531   3,244   39.7     1,792   1,718   4.3   
Other intangible assets
  537   4   *     5,393   3,635   48.4     426   300   42.0   
Assets
  173,101   137,809   25.6     187,507   155,700   20.4     29,008   25,728   12.7   
Noninterest-bearing deposits
  51,242   59,226   (13.5)     35,489   30,492   16.4     21,199   25,194   (15.9)   
Interest-bearing deposits
  107,724   93,830   14.8     187,793   164,269   14.3     80,061   75,824   5.6   
Total deposits
  158,966   153,056   3.9     223,282   194,761   14.6     101,260   101,018   .2   
Total U.S. Bancorp shareholders’ equity
  18,244   13,992   30.4       16,516   12,326   34.0       3,976   3,615   10.0     
  
Payment
Services
  
Treasury and
Corporate Support
      
Consolidated
Company
     
Three Months Ended June 30
(Dollars in Millions)
 2023  2022  Percent
Change		      2023  2022  Percent
Change		      2023  2022  Percent
Change		     
Condensed Income Statement
               
Net interest income (taxable-equivalent basis)
 $645  $619   4.2%    $107  $96   11.5%    $4,449  $3,464   28.4%   
Noninterest income
  1,051   993   5.8     174   241   (27.8)     2,726   2,548   7.0   
Total net revenue
  1,696   1,612   5.2     281   337   (16.6)     7,175   6,012   19.3   
Noninterest expense
  915   865   5.8     547   448   22.1     4,569   3,724   22.7   
Income (loss) before provision and income taxes
  781   747   4.6     (266)   (111)   *     2,606   2,288   13.9   
Provision for credit losses
  314   221   42.1     330   70   *     821   311   *   
Income (loss) before income taxes
  467   526   (11.2)     (596)   (181)   *     1,785   1,977   (9.7)   
Income taxes and taxable-equivalent adjustment
  117   132   (11.4)     (179)   (97)   (84.5)     416   443   (6.1)   
Net income (loss)
  350   394   (11.2)     (417)   (84)   *     1,369   1,534   (10.8)   
Net (income) loss attributable to noncontrolling interests
  —   —   —     (8)   (3)   *     (8)   (3)   *   
Net income (loss) attributable to U.S. Bancorp
 $350  $394   (11.2)    $(425)  $(87)   *    $1,361  $1,531   (11.1)   
Average Balance Sheet
               
Loans
 $37,913  $33,854   12.0    $5,509  $4,056   35.8    $388,817  $324,187   19.9   
Goodwill
  3,330   3,318   .4     —   —   —     12,512   10,192   22.8   
Other intangible assets
  359   437   (17.8)     9   —   *     6,724   4,376   53.7   
Assets
  44,127   41,014   7.6     239,269   219,660   8.9     673,012   579,911   16.1   
Noninterest-bearing deposits
  3,179   3,396   (6.4)     2,649   2,519   5.2     113,758   120,827   (5.9)   
Interest-bearing deposits
  104   167   (37.7)     7,825   1,599   *     383,507   335,689   14.2   
Total deposits
  3,283   3,563   (7.9)     10,474   4,118   *     497,265   456,516   8.9   
Total U.S. Bancorp shareholders’ equity
  9,127   8,113   12.5       5,959   11,120   (46.4)       53,822   49,166   9.5     
*
Not meaningful
30
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)
 2023  2022  Percent
Change		      2023  2022  Percent
Change		      2023  2022  Percent
Change		     
Condensed Income Statement
                                                
Net interest income (taxable-equivalent basis)
 $2,099  $1,546   35.8%      $4,480  $3,063   46.3%      $999  $662   50.9%     
Noninterest income
  666   519   28.3       823   844   (2.5)       1,429   1,247   14.6     
Total net revenue
  2,765   2,065   33.9       5,303   3,907   35.7       2,428   1,909   27.2     
Noninterest expense
  1,249   915   36.5       3,568   2,807   27.1       1,335   1,092   22.3     
Income (loss) before provision and income taxes
  1,516   1,150   31.8       1,735   1,100   57.7       1,093   817   33.8     
Provision for credit losses
  126   104   21.2       31   (26)   *       —   4   *     
Income (loss) before income taxes
  1,390   1,046   32.9       1,704   1,126   51.3       1,093   813   34.4     
Income taxes and taxable-equivalent adjustment
  348   262   32.8       426   280   52.1       273   204   33.8     
Net income (loss)
  1,042   784   32.9       1,278   846   51.1       820   609   34.6     
Net (income) loss attributable to noncontrolling interests
  —   —   —       —   —   —       —   —   —     
Net income (loss) attributable to U.S. Bancorp
 $1,042  $784   32.9      $1,278  $846   51.1      $820  $609   34.6     
Average Balance Sheet
                                                
Loans
 $150,455  $119,598   25.8      $169,898  $140,586   20.8      $24,441  $21,483   13.8     
Goodwill
  2,842   1,912   48.6       4,511   3,253   38.7       1,790   1,739   2.9     
Other intangible assets
  564   4   *       5,493   3,406   61.3       434   283   53.4     
Assets
  171,389   132,899   29.0       187,715   156,320   20.1       28,808   25,062   14.9     
Noninterest-bearing deposits
  54,808   61,195   (10.4)       39,331   30,721   28.0       21,619   26,378   (18.0)     
Interest-bearing deposits
  106,326   90,509   17.5       184,632   163,123   13.2       83,656   75,007   11.5     
Total deposits
  161,134   151,704   6.2       223,963   193,844   15.5       105,275   101,385   3.8     
Total U.S. Bancorp shareholders’ equity
  17,776   13,862   28.2       16,608   12,270   35.4       4,040   3,604   12.1     
  
Payment
Services
  
Treasury and
Corporate Support
      
Consolidated
Company
     
Six Months Ended June 30
(Dollars in Millions)
 2023  2022  Percent
Change		      2023  2022  Percent
Change		      2023  2022  Percent
Change		     
Condensed Income Statement
                                                
Net interest income (taxable-equivalent basis)
 $1,299  $1,241   4.7%      $240  $152   57.9%      $9,117  $6,664   36.8%     
Noninterest income
  1,988   1,850   7.5       327   484   (32.4)       5,233   4,944   5.8     
Total net revenue
  3,287   3,091   6.3       567   636   (10.8)       14,350   11,608   23.6     
Noninterest expense
  1,828   1,711   6.8       1,144   701   63.2       9,124   7,226   26.3     
Income (loss) before provision and income taxes
  1,459   1,380   5.7       (577)   (65)   *       5,226   4,382   19.3     
Provision for credit losses
  534   351   52.1       557   (10)   *       1,248   423   *     
Income (loss) before income taxes
  925   1,029   (10.1)       (1,134)   (55)   *       3,978   3,959   .5     
Income taxes and taxable-equivalent adjustment
  232   258   (10.1)       (374)   (137)   *       905   867   4.4     
Net income (loss)
  693   771   (10.1)       (760)   82   *       3,073   3,092   (.6)     
Net (income) loss attributable to noncontrolling interests
  —   —   —       (14)   (4)   *       (14)   (4)   *     
Net income (loss) attributable to U.S. Bancorp
 $693  $771   (10.1)      $(774)  $78   *      $3,059  $3,088   (.9)     
Average Balance Sheet
                                                
Loans
 $37,426  $32,802   14.1      $5,569  $4,139   34.5      $387,789  $318,608   21.7     
Goodwill
  3,325   3,321   .1       —   —   —       12,468   10,225   21.9     
Other intangible assets
  372   450   (17.3)       22   —   *       6,885   4,143   66.2     
Assets
  43,493   39,762   9.4       237,846   224,620   5.9       669,251   578,663   15.7     
Noninterest-bearing deposits
  3,181   3,534   (10.0)       2,766   2,547   8.6       121,705   124,375   (2.1)     
Interest-bearing deposits
  106   164   (35.4)       7,333   2,174   *       382,053   330,977   15.4     
Total deposits
  3,287   3,698   (11.1)       10,099   4,721   *       503,758   455,352   10.6     
Total U.S. Bancorp shareholders’ equity
  9,048   8,065   12.2       5,776   13,503   (57.2)       53,248   51,304   3.8     
*
Not meaningful
U.S. Bancorp
31
Table of Contents
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
32
U.S. Bancorp
Table of Contents
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.
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.
 
The following table shows the Company’s calculation of these
non-GAAP
financial measures:
 
(Dollars in Millions) September 30,
2022		 December 31,
2021		  June 30,
2023		 December 31,
2022		 
Total equity
 $47,978  $55,387  $53,484  $51,232 
Preferred stock
 (6,808)  (6,371)  (6,808)  (6,808) 
Noncontrolling interests
 (465)  (469)  (465)  (466) 
Goodwill (net of deferred tax liability) (1)
 (9,165)  (9,323)  (11,493)  (11,395) 
Intangible assets, other than mortgage servicing rights
 (735)  (785) 
Intangible assets (net of deferred tax liability), other than mortgage servicing rights
 (2,490)  (2,792) 
Tangible common equity (a)
 30,805  38,439  32,228  29,771 
Common equity tier 1 capital, determined in accordance with transitional regulatory capital requirements related to the CECL methodology implementation
 44,094  41,701  42,944  41,560 
Adjustments (2)
 (1,300)  (1,733)  (866)  (1,299) 
Common equity tier 1 capital, reflecting the full implementation of the CECL methodology (b)
 42,794  39,968  42,078  40,261 
Total assets
 600,973  573,284  680,825  674,805 
Goodwill (net of deferred tax liability) (1)
 (9,165)  (9,323)  (11,493)  (11,395) 
Intangible assets, other than mortgage servicing rights
 (735)  (785) 
Intangible assets (net of deferred tax liability), other than mortgage servicing rights
 (2,490)  (2,792) 
Tangible assets (c)
 591,073  563,176  666,842  660,618 
Risk-weighted assets, determined in accordance with prescribed regulatory capital requirements effective for the Company (d)
 456,928  418,571 
Risk-weighted assets, determined in accordance with transitional regulatory capital requirements related to the CECL methodology implementation (d)
 473,393  496,500 
Adjustments (3)
 (337)  (357)  (735)  (620) 
Risk-weighted assets, reflecting the full implementation of the CECL methodology (e)
 456,591  418,214  472,658  495,880 
Ratios
    
Tangible common equity to tangible assets (a)/(c)
 5.2%  6.8%  4.8%  4.5% 
Tangible common equity to risk-weighted assets (a)/(d)
 6.7  9.2  6.8  6.0 
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the CECL methodology (b)/(e)
 9.4  9.6  8.9  8.1 
 
  Three Months Ended
September 30		      Nine Months Ended
September 30		 
  2022  2021      2022  2021 
Net interest income
 $3,827  $3,171    $10,435  $9,371 
Taxable-equivalent adjustment (4)
  30   26       86   79 
Net interest income, on a taxable-equivalent basis
  3,857   3,197     10,521   9,450 
Net interest income, on a taxable-equivalent basis (as calculated above)
  3,857   3,197     10,521   9,450 
Noninterest income
  2,469   2,693     7,413   7,693 
Less: Securities gains (losses), net
  1   20       38   88 
Total net revenue, excluding net securities gains (losses) (f)
  6,325   5,870     17,896   17,055 
 
Noninterest expense (g)
  3,637   3,429     10,863   10,195 
 
Efficiency ratio (g)/(f)
  57.5%   58.4%       60.7%   59.8% 
32
U.S. Bancorp
Table of Contents
  Three Months Ended
June 30		        Six Months Ended
June 30		 
  2023  2022        2023  2022 
Net interest income
 $4,415  $3,435      $9,049  $6,608 
Taxable-equivalent adjustment (4)
  34   29         68   56 
Net interest income, on a taxable-equivalent basis
  4,449   3,464       9,117   6,664 
 
Net interest income, on a taxable-equivalent basis (as calculated above)
  4,449   3,464       9,117   6,664 
Noninterest income
  2,726   2,548       5,233   4,944 
Less: Securities gains (losses), net
  3   19         (29)   37 
Total net revenue, excluding net securities gains (losses) (f)
  7,172   5,993       14,379   11,571 
 
Noninterest expense (g)
  4,569   3,724       9,124   7,226 
 
Efficiency ratio (g)/(f)
  63.7%   62.1%         63.5%   62.4% 
Net charge-offs
 $649      $1,022  
Less: Notable items (5)
  309       400  
Net charge-offs, excluding notable items
  340       622  
Annualized net charge-offs, excluding notable items (h)
  1,364       1,254  
Average loan balances (i)
  388,817       387,789  
Net
charge-off
ratio, excluding notable items (h)/(i)
  .35%             .32%     
 
(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
(5)
33
Notable items for the three months ended June 30, 2023 included $309 million of net charge-offs related to balance sheet repositioning and capital management actions.
Table of Contents
Notable items for the six months ended June 30, 2023 included $309 million of net charge-offs related to balance sheet repositioning and capital management actions and $91 million of net charge-offs related to the uncollectible amount of acquired MUB loans, which were considered purchased credit deteriorated as of the date of acquisition.
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, 2021.2022.
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 wasthe Company completed the conversion of MUB into its overall internal control over financial reporting processes. There were no changeother changes 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 hashave materially affected, or isare reasonably likely to materially affect, the Company’s internal control over
financial
reporting.
 
34
U.S. Bancorp		 U.S. Bancorp
33
Table of Contents
U.S. Bancorp
Consolidated Balance Sheet
 
(Dollars in Millions) September 30,
2022		 December 31,
2021		  June 30,
2023		 December 31,
2022		 
 (Unaudited)    (Unaudited)   
 
Assets
      
Cash and due from banks $41,652  $28,905  $70,642  $53,542 
Investment securities     
Held-to-maturity
(fair value $74,128 and $41,812, respectively)
 85,574  41,858 
Available-for-sale
($858 and $557 pledged as collateral, respectively) (a)
 68,523  132,963 
Loans held for sale (including $3,483 and $6,623 of mortgage loans carried at fair value, respectively) 3,647  7,775 
Held-to-maturity
(fair value $76,285 and $77,874, respectively)
 86,938  88,740 
Available-for-sale
($327 and $858 pledged as collateral, respectively) (a)
 69,221  72,910 
Loans held for sale (including $2,280 and $1,849 of mortgage loans carried at fair value, respectively)
 2,361  2,200 
Loans     
Commercial 131,687  112,023  136,775  135,690 
Commercial real estate 40,329  39,053  54,357  55,487 
Residential mortgages 86,274  76,493  114,449  115,845 
Credit card 24,538  22,500  26,626  26,295 
Other retail 59,880  61,959  47,221  54,896 
Total loans 342,708  312,028  379,428  388,213 
Less allowance for loan losses (6,017)  (5,724)  (7,164)  (6,936) 
Net loans 336,691  306,304  372,264  381,277 
Premises and equipment 3,155  3,305  3,695  3,858 
Goodwill 10,125  10,262  12,486  12,373 
Other intangible assets 4,604  3,738  6,634  7,155 
Other assets (including $1,235 and $1,193 of trading securities at fair value pledged as collateral, respectively) (a) 47,002  38,174 
Other assets (including $2,422 and $702 of trading securities at fair value pledged as collateral, respectively) (a)
 56,584  52,750 
Total assets $600,973  $573,284  $680,825  $674,805 
  
Liabilities and Shareholders’ Equity
     
Deposits     
Noninterest-bearing $115,206  $134,901  $104,996  $137,743 
Interest-bearing 355,942  321,182  416,604  387,233 
Total deposits 471,148  456,083  521,600  524,976 
Short-term borrowings 25,066  11,796  32,334  31,216 
Long-term debt 32,228  32,125  45,283  39,829 
Other liabilities 24,553  17,893  28,124  27,552 
Total liabilities 552,995  517,897  627,341  623,573 
Shareholders’ equity     
Preferred stock 6,808  6,371  6,808  6,808 
Common stock, par value $0.01 a share—authorized: 4,000,000,000 shares; issued: 9/30/22 and 12/31/21—2,125,725,742 shares 21  21 
Common stock, par value $0.01 a share - authorized: 4,000,000,000 shares; issued: 6/30/23 and 12/31/22—2,125,725,742 shares
 21  21 
Capital surplus 8,590  8,539  8,742  8,712 
Retained earnings 71,782  69,201  73,355  71,901 
Less cost of common stock in treasury: 9/30/22—639,921,995 shares; 12/31/21—642,223,571 shares (27,188)  (27,271) 
Less cost of common stock in treasury: 6/30/23
—
592,774,984 shares; 12/31/22—594,747,484 shares
 (25,189)  (25,269) 
Accumulated other comprehensive income (loss) (12,500)  (1,943)  (10,718)  (11,407) 
Total U.S. Bancorp shareholders’ equity 47,513  54,918  53,019  50,766 
Noncontrolling interests 465  469  465  466 
Total equity 47,978  55,387  53,484  51,232 
Total liabilities and equity $600,973  $573,284  $680,825  $674,805 
(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.
34
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		 
 2023  2022          2023  2022 
Interest Income
      
Loans
 $5,605  $2,869    $10,882  $5,468 
Loans held for sale
  38   54     69   114 
Investment securities
  1,077   806     2,151   1,523 
Other interest income
  806   96           1,388   138 
Total interest income
  7,526   3,825     14,490   7,243 
Interest Expense
      
Deposits
  1,939   177     3,444   257 
Short-term borrowings
  740   57     1,189   78 
Long-term debt
  432   156           808   300 
Total interest expense
  3,111   390           5,441   635 
Net interest income
  4,415   3,435     9,049   6,608 
Provision for credit losses
  821   311           1,248   423 
Net interest income after provision for credit losses
  3,594   3,124     7,801   6,185 
Noninterest Income
      
Card revenue
  422   399     782   737 
Corporate payment products revenue
  190   172     379   330 
Merchant processing services
  436   425     823   788 
Trust and investment management fees
  621   566     1,211   1,066 
Service charges
  324   334     648   667 
Commercial products revenue
  358   290     692   556 
Mortgage banking revenue
  131   142     259   342 
Investment products fees
  68   59     136   121 
Securities gains (losses), net
  3   19     (29)   37 
Other
  173   142           332   300 
Total noninterest income
  2,726   2,548     5,233   4,944 
Noninterest Expense
      
Compensation and employee benefits
  2,646   2,246     5,292   4,495 
Net occupancy and equipment
  316   265     637   534 
Professional services
  141   111     275   225 
Marketing and business development
  122   106     244   186 
Technology and communications
  522   419     1,025   840 
Other intangibles
  159   40     319   87 
Merger and integration charges
  310   197     554   197 
Other
  353   340           778   662 
Total noninterest expense
  4,569   3,724           9,124   7,226 
Income before income taxes
  1,751   1,948     3,910   3,903 
Applicable income taxes
  382   414           837   811 
Net income
  1,369   1,534     3,073   3,092 
Net (income) loss attributable to noncontrolling interests
  (8)   (3)           (14)   (4) 
Net income attributable to U.S. Bancorp
 $1,361  $1,531          $3,059  $3,088 
Net income applicable to U.S. Bancorp common shareholders
 $1,281  $1,464          $2,873  $2,930 
Earnings per common share
 $.84  $.99    $1.87  $1.97 
Diluted earnings per common share
 $.84  $.99    $1.87  $1.97 
Average common shares outstanding
  1,533   1,486     1,532   1,485 
Average diluted common shares outstanding
  1,533   1,487           1,533   1,486 
See Notes to Consolidated Financial Statements.
U.S. Bancorp 
35
Table of Contents
U.S. Bancorp
Consolidated Statement of Comprehensive Income
 
(Dollars in Millions)
(Unaudited)
 Three Months Ended
June 30		      Six Months Ended
June 30		 
 2023  2022      2023  2022 
Net income
 $1,369  $1,534    $3,073  $3,092 
Other Comprehensive Income (Loss)
      
Changes in unrealized gains (losses) on investment securities
available-for-sale
  (460)   (4,761)     845   (11,515) 
Changes in unrealized gains (losses) on derivative hedges
  (465)   98     (261)   98 
Foreign currency translation
  19   (3)     18   (3) 
Changes in unrealized gains (losses) on retirement plans
  —   —     1   — 
Reclassification to earnings of realized (gains) losses
  147   84     305   151 
Income taxes related to other comprehensive income (loss)
  194   1,159       (219)   2,851 
Total other comprehensive income (loss)
  (565)   (3,423)       689   (8,418) 
Comprehensive income (loss)
  804   (1,889)     3,762   (5,326) 
Comprehensive (income) loss attributable to noncontrolling interests
  (8)   (3)       (14)   (4) 
 
Comprehensive income (loss) attributable to U.S. Bancorp
 $796  $(1,892)      $3,748  $(5,330) 
(Dollars and Shares in Millions, Except Per Share Data)
(Unaudited)
 Three Months Ended
September 30		      Nine Months Ended
September 30		 
 2022  2021      2022  2021 
Interest Income
      
Loans $3,603  $2,711      $9,071  $8,112 
Loans held for sale  49   54       163   176 
Investment securities  867   606       2,390   1,741 
Other interest income  209   38       347   103 
Total interest income  4,728   3,409       11,971   10,132 
Interest Expense
                    
Deposits  534   78       791   245 
Short-term borrowings  169   18       247   52 
Long-term debt  198   142       498   464 
Total interest expense  901   238       1,536   761 
Net interest income  3,827   3,171       10,435   9,371 
Provision for credit losses  362   (163)       785   (1,160) 
Net interest income after provision for credit losses  3,465   3,334       9,650   10,531 
Noninterest Income
                    
Credit and debit card revenue  391   393       1,128   1,125 
Corporate payment products revenue  190   156       520   420 
Merchant processing services  406   392       1,194   1,084 
Trust and investment management fees  572   459       1,638   1,349 
Deposit service charges  166   194       508   531 
Treasury management fees  151   155       476   462 
Commercial products revenue  285   277       841   837 
Mortgage banking revenue  81   418       423   1,063 
Investment products fees  56   62       177   177 
Securities gains (losses), net  1   20       38   88 
Other  170   167       470   557 
Total noninterest income  2,469   2,693       7,413   7,693 
Noninterest Expense
                    
Compensation  1,891   1,847       5,616   5,448 
Employee benefits  369   336       1,139   1,057 
Net occupancy and equipment  272   259       806   780 
Professional services  131   126       356   332 
Marketing and business development  126   99       312   237 
Technology and communications  355   361       1,054   1,082 
Postage, printing and supplies  72   69       213   203 
Other intangibles  43   41       130   119 
Merger and integration charges  42   —       239   — 
Other  336   291       998   937 
Total noninterest expense  3,637   3,429       10,863   10,195 
Income before income taxes  2,297   2,598       6,200   8,029 
Applicable income taxes  481   564       1,292   1,722 
Net income  1,816   2,034       4,908   6,307 
Net (income) loss attributable to noncontrolling interests  (4)   (6)       (8)   (17) 
Net income attributable to U.S. Bancorp $1,812  $2,028      $4,900  $6,290 
Net income applicable to U.S. Bancorp common shareholders $1,718  $1,934      $4,648  $6,023 
Earnings per common share $1.16  $1.30      $3.13  $4.04 
Diluted earnings per common share $1.16  $1.30      $3.13  $4.04 
Average common shares outstanding  1,486   1,483       1,485   1,491 
Average diluted common shares outstanding  1,486   1,484       1,486   1,492 
See Notes to Consolidated Financial Statements.
 
36
 U.S. Bancorp
Table of Contents
U.S. Bancorp
Consolidated Statement of Comprehensive Income
(Dollars in Millions)
(Unaudited)
 Three Months Ended
September 30		      Nine Months Ended
September 30		 
 2022  2021      2022  2021 
Net income $1,816  $2,034      $4,908  $6,307 
Other Comprehensive Income (Loss)
                    
Changes in unrealized gains (losses) on investment securities
available-for-sale
  (2,810)   (825)       (14,325)   (3,008) 
Changes in unrealized gains (losses) on derivative hedges  (232)   8       (134)   121 
Foreign currency translation  (8)   (1)       (11)   23 
Reclassification to earnings of realized (gains) losses  186   27       337   34 
Income taxes related to other comprehensive income (loss)  725   201       3,576   716 
Total other comprehensive income (loss)  (2,139)   (590)       (10,557)   (2,114) 
Comprehensive income (loss)  (323)   1,444       (5,649)   4,193 
Comprehensive (income) loss attributable to noncontrolling interests  (4)   (6)       (8)   (17) 
      
Comprehensive income (loss) attributable to U.S. Bancorp $(327)  $1,438      $(5,657)  $4,176 
See Notes to Consolidated Financial Statements.
U.S. Bancorp
37
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 June 30, 2021
  1,483  $5,968  $21  $8,518  $67,039  $(27,305)  $(1,202)  $53,039  $635  $53,674 
Net income (loss)                  2,028           2,028   6   2,034 
Other comprehensive income (loss)                          (590)   (590)       (590) 
Preferred stock dividends (a)                  (84)           (84)       (84) 
Common stock dividends ($.46 per share)                  (686)           (686)       (686) 
Issuance of common and treasury stock              (1)       4       3       3 
Distributions to noncontrolling interests                              —   (5)   (5) 
Net other changes in noncontrolling interests                              —   (1)   (1) 
Stock option and restricted stock grants              33               33       33 
           
Balance September 30, 2021
  1,483  $5,968  $21  $8,550  $68,297  $(27,301)  $(1,792)  $53,743  $635  $54,378 
           
Balance June 30, 2022
  1,486  $6,808  $21  $8,555  $70,772  $(27,190)  $(10,361)  $48,605  $464  $49,069 
Net income (loss)                  1,812           1,812   4   1,816 
Other comprehensive income (loss)                          (2,139)   (2,139)       (2,139) 
Preferred stock dividends (b)                  (85)           (85)       (85) 
Common stock dividends ($.48 per share)                  (717)           (717)       (717) 
Issuance of common and treasury stock              (1)       2       1       1 
Distributions to noncontrolling interests                              —   (4)   (4) 
Net other changes in noncontrolling interests                              —   1   1 
Stock option and restricted stock grants              36               36       36 
           
Balance September 30, 2022
  1,486  $6,808  $21  $8,590  $71,782  $(27,188)  $(12,500)  $47,513  $465  $47,978 
           
Balance December 31, 2020
  1,507  $5,983  $21  $8,511  $64,188  $(25,930)  $322  $53,095  $630  $53,725 
Net income (loss)                  6,290           6,290   17   6,307 
Other comprehensive income (loss)                          (2,114)   (2,114)       (2,114) 
Preferred stock dividends (c)                  (232)           (232)       (232) 
Common stock dividends ($1.30 per share)                  (1,944)           (1,944)       (1,944) 
Issuance of preferred stock      730                       730       730 
Redemption of preferred stock      (745)           (5)           (750)       (750) 
Issuance of common and treasury stock  4           (127)       166       39       39 
Purchase of treasury stock  (28)                   (1,537)       (1,537)       (1,537) 
Distributions to noncontrolling interests                              —   (16)   (16) 
Net other changes in noncontrolling interests                              —   4   4 
Stock option and restricted stock grants              166               166       166 
           
Balance September 30, 2021
  1,483  $5,968  $21  $8,550  $68,297  $(27,301)  $(1,792)  $53,743  $635  $54,378 
           
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)                  4,900           4,900   8   4,908 
Other comprehensive income (loss)                          (10,557)   (10,557)       (10,557) 
Preferred stock dividends (d)                  (228)           (228)       (228) 
Common stock dividends ($1.40 per share)                  (2,091)           (2,091)       (2,091) 
Issuance of preferred stock      437                       437       437 
Issuance of common and treasury stock  3           (120)       138       18       18 
Purchase of treasury stock  (1)                   (55)       (55)       (55) 
Distributions to noncontrolling interests                              —   (8)   (8) 
Net other changes in noncontrolling interests                              —   (4)   (4) 
Stock option and restricted stock grants              171               171       171 
           
Balance September 30, 2022
  1,486  $6,808  $21  $8,590  $71,782  $(27,188)  $(12,500)  $47,513  $465  $47,978 
  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 March 31, 2022
  1,486  $6,808  $21  $8,515  $69,987  $(27,193)  $(6,938)  $51,200  $468  $51,668 
Net income (loss)
      1,531     1,531   3   1,534 
Other comprehensive income (loss)
        (3,423)   (3,423)    (3,423) 
Preferred stock dividends (a)
      (59)     (59)    (59) 
Common stock divid
e
nds ($.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 March 31, 2023
  1,533  $6,808  $21  $8,699  $72,807  $(25,193)  $(10,153)  $52,989  $465  $53,454 
Net income (loss)
      1,361     1,361   8   1,369 
Other comprehensive income (loss)
        (565)   (565)    (565) 
Preferred stock dividends (b)
      (73)     (73)    (73) 
Common stock dividends ($.48 per share)
      (740)     (740)    (740) 
Issuance of common and treasury stock
     (2)    4    2    2 
Distributions to noncontrolling interests
         —   (7)   (7) 
Net other changes in noncontrolling interests                              —   (1)   (1) 
Stock option and restricted stock grants              45               
45

   
   45 
Balance June 30, 2023
  1,533  $6,808  $21  $8,742  $73,355  $(25,189)  $(10,718)  $53,019  $465  $53,484 
Balance December 31, 2021
  1,484  $6,371  $21  $8,539  $69,201  $(27,271)  $(1,943)  $54,918  $469  $55,387 
Net income (loss)
      3,088     3,088   4   3,092 
Other comprehensive income (loss)
        (8,418)   (8,418)    (8,418) 
Preferred stock dividends (c)
      (143)     (143)    (143) 
Common stock dividends ($.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 
Balance December 31, 2022
  1,531  $6,808  $21  $8,712  $71,901  $(25,269)  $(11,407)  $50,766  $466  $51,232 
Change in accounting principle (d)
      46     46    46 
Net income (loss)
      3,059     3,059   14   3,073 
Other comprehensive income (loss)
        689   689    689 
Preferred stock dividends (e)
      (171)     (171)    (171) 
Common stock dividends ($.96 per share)
      (1,480)     (1,480)    (1,480) 
Issuance of common and treasury stock
  3     (116)    124    8    8 
Purchase of treasury stock
  (1)       (44)    (44)    (44) 
Distributions to noncontrolling interests
         —   (14)   (14) 
Net other changes in noncontrolling interests     
      —  (1)   (1) 
Stock option and restricted stock grants               146               
146

   
   146 
Balance June 30, 2023
  1,533  $6,808  $21  $8,742  $73,355  $(25,189)  $(10,718)  $53,019  $465  $53,484 
(a)
Reflects dividends declared per share on the Company’s Series A, Series B, Series F, Series J, Series K, Series L, Series M, Series N and Series MO
Non-Cumulative
Perpetual Preferred Stock of $894.444, $223.611, $406.25, $662.50,$884.722, $221.181, $343.75, $234.375, $250.00, $231.25 and $250.00,$281.25, 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 $1,587.52, $370.338, $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 J, Series K, Series L, Series M, Series N and Series O
Non-Cumulative
Perpetual Preferred Stock of $902.622, $223.611,$1,759.722, $439.931, $662.50, $343.75, $234.375, $250.00, $231.25$687.50, $468.75, $500.00, $462.50 and $281.25$487.50, respectively.
(c)(d)
Reflects dividends declared per share onEffective January 1, 2023, the Company’s Series A, Series B, Series F, Series I, Series J, Series K, Series LCompany adopted accounting guidance which removed the separate recognition and Series M
Non-Cumulative
Perpetual Preferred Stockmeasurement of $2,654.166, $663.542, $1,218.75, $232.953, $1,325.00, $1,031.25, $703.125troubled debt restructurings. Upon adoption, the Company reduced its allowance for credit losses and $702.778, respectively.increased retained earnings net of deferred taxes through a cumulative-effect adjustment.
(d)(e)
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 $2,662.344, $663.542, $1,325.00, $1,031.25, $703.125, $750.00, $693.75$3,049.948, $709.695, $662.50, $687.50, $468.75, $500.00, $462.50 and $768.75$562.50, respectively.
See Notes to Consolidated Financial Statements.
38
U.S. Bancorp
Table of Contents
U.S. Bancorp
Consolidated Statement of Cash Flows
(Dollars in Millions)
(Unaudited)
 Nine Months Ended
September 30		 
 2022  2021 
Operating Activities
  
Net income attributable to U.S. Bancorp $4,900  $6,290 
Adjustments to reconcile net income to net cash provided by operating activities        
Provision for credit losses  785   (1,160) 
Depreciation and amortization of premises and equipment  255   253 
Amortization of intangibles  130   119 
(Gain) loss on sale of loans held for sale  136   (950) 
(Gain) loss on sale of securities and other assets  (173)   (297) 
Loans originated for sale, net of repayments  (26,357)   (56,256) 
Proceeds from sales of loans held for sale  28,701   58,517 
Other, net  5,854   2,651 
Net cash provided by operating activities  14,231   9,167 
Investing Activities
        
Proceeds from sales of
available-for-sale
investment securities
  15,392   13,383 
Proceeds from maturities of
held-to-maturity
investment securities
  4,148   — 
Proceeds from maturities of
available-for-sale
investment securities
  12,407   33,740 
Purchases of
held-to-maturity
investment securities
  (6,941)   — 
Purchases of
available-for-sale
investment securities
  (19,377)   (62,764) 
Net increase in loans outstanding  (30,380)   (1,157) 
Proceeds from sales of loans  3,050   4,228 
Purchases of loans  (1,932)   (3,278) 
Net increase in securities purchased under agreements to resell  (37)   (41) 
Other, net  (3,407)   120 
Net cash used in investing activities  (27,077)   (15,769) 
Financing Activities
        
Net increase in deposits  15,065   13,132 
Net increase in short-term borrowings  13,270   4,322 
Proceeds from issuance of long-term debt  5,631   1,211 
Principal payments or redemption of long-term debt  (5,398)   (6,603) 
Proceeds from issuance of preferred stock  437   730 
Proceeds from issuance of common stock  16   38 
Repurchase of preferred stock  (1,100)   (1,250) 
Repurchase of common stock  (55)   (1,537) 
Cash dividends paid on preferred stock  (213)   (223) 
Cash dividends paid on common stock  (2,060)   (1,894) 
Net cash provided by financing activities  25,593   7,926 
Change in cash and due from banks  12,747   1,324 
Cash and due from banks at beginning of period  28,905   62,580 
Cash and due from banks at end of period $41,652  $63,904 
See Notes to Consolidated Financial Statements.
U.S. Bancorp 
39
37
Table of Contents
U.S. Bancorp
Consolidated Statement of Cash Flows


(Dollars in Millions)
(Unaudited)
 
Six Months Ended
June 30
 
 
    2023
 
 
2022
 
Operating Activities
         
Net income attributable to U.S. Bancorp
 $3,059  $3,088 
Adjustments to reconcile net income to net cash provided by operating activities
        
Provision for credit losses
  1,248    423 
Depreciation and amortization of premises and equipment
  193   170 
Amortization of intangibles
  319    87 
(Gain) loss on sale of loans held for sale
  18    192 
(Gain) loss on sale of securities and other assets
  24    (67) 
Loans originated for sale, net of repayments
  (14,639)   (17,325) 
Proceeds from sales of loans held for sale
  14,244    20,564 
Other, net
  (308)   3,594 
Net cash provided by operating activities
  4,158    10,726 
Investing Activities
         
Proceeds from sales of
available-for-sale
investment securities
  8,135    14,797 
Proceeds from maturities of
held-to-maturity
investment securities
  2,995    2,407 
Proceeds from maturities of
available-for-sale
investment securities
  3,048    9,665 
Purchases of
held-to-maturity
investment securities
  (924)   (6,288) 
Purchases of
available-for-sale
investment securities
  (2,790)   (18,240) 
Net increase in loans outstanding  (613)   (20,072) 
Proceeds from sales of loans
  5,105    1,671 
Purchases of loans
  (608)   (1,698) 
Net increase in securities purchased under agreements to resell  (1,443)   (154) 
Other, net
  (1,416)   (1,604) 
Net cash provided by (used in) investing activities  11,489    (19,516) 
Financing Activities
         
Net (decrease) increase in deposits
  (3,002)   11,019 
Net increase in short-term borrowings
  551    13,167 
Proceeds from issuance of long-term debt
  7,230    2,206 
Principal payments or redemption of long-term debt
  (1,644)   (5,154) 
Proceeds from issuance of preferred stock
  —    437 
Proceeds from issuance of common stock
  6    16 
Repurchase of preferred stock
  —    (1,100) 
Repurchase of common stock
  (44)   (55) 
Cash dividends paid on preferred stock
  (165)   (154) 
Cash dividends paid on common stock
  (1,479)   (1,373) 
Net cash provided by financing activities
  1,453    19,009 
Change in cash and due from banks
  17,100    10,219 
Cash and due from banks at beginning of period
  53,542    28,905 
Cash and due from banks at end of period
 $70,642   $39,124 
See Notes to Consolidated Financial Statements.
38
U.S. Bancorp
Table of Contents
Notes to Consolidated Financial Statements
(Unaudited)
 
 Note 1
 
   Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form
10-Q
and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States. In the opinion of management of U.S. Bancorp (the “Company”), all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of results for the interim periods have been made. These financial statements and notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on
Form 10-K
for the year ended December 31, 2021.2022. Certain amounts in prior periods have been reclassified to conform to the current period presentation.
 
  Note 
2
 
   Accounting Changes
Reference Interest Rate Transition
In March 2020, the Financial Accounting Standards Board (“FASB”) issued accounting guidance, providing temporary optional expedients and exceptions to the guidance in United States generally accepted accounting principles on contract modifications and hedge accounting, to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. Under the guidance, a company can elect not to apply certain modification accounting requirements to contracts affected by reference rate transition, if certain criteria are met. A company that makes this election would not be required to remeasure the contracts at the modification date or reassess a previous accounting determination. This guidance also permits a company to elect various optional expedients that would allow it to continue applying hedge accounting for hedging relationships affected by reference rate transition, if certain criteria are met. The guidance is effective upon issuance and generally can be applied through December 31, 2022.2024. The Company is in the process of evaluating and applying as applicable, thecertain optional expedients and exceptions in accountingfor cash flow hedges and will continue to evaluate these for eligible contract modifications eligible existingand hedging relationships and new hedging relationships available through December 31, 2022. The adoption of this guidance has not had, and is expected to continue to not have, a material impact on the Company’s financial statements.relationships.
Fair Value Hedging – Portfolio Layer Method
In March 2022, the FASB issued accounting guidance, effective for the Company no later thanEffective January 1, 2023, the Company adopted accounting guidance, issued by the FASB in March 2022, related to fair value hedge accounting of portfolios of financial assets. This guidance expands the current
last-of-layer
hedging method that permits a company to apply fair value hedging to a stated amount of a closed portfolio of prepayable financial assets, by allowing it to designate multiple hedging relationships on a single closed portfolio, resulting in a larger portion of the interest rate risk associated with such a portfolio being eligible to be hedged. The guidance also expands the scope of the method to include
non-prepayable
financial assets and clarifies other technical questions from the original accounting guidance. The Company expects the adoption of this guidance willwas not be material to itsthe Company’s financial statements.
Financial Instruments – Troubled Debt Restructurings and Vintage Disclosures
In March 2022, the FASB issued accounting guidance, effective for the Company no later thanEffective January 1, 2023, the Company adopted accounting guidance on a modified retrospective basis, issued by the FASB in March 2022, related to the recognition and measurement of troubled debt restructurings (“TDRs”) by creditors. This guidance removes the separate recognition and measurement requirements for TDRs by replacing them with a requirement for a company to apply existing accounting guidance to determine whether a modification results in a new loan or a continuation of an existing loan. This guidance also replaces existing TDR disclosures with similar but more expansive disclosures for certain modifications of receivables made to borrowers experiencing financial difficulty. Further, this guidance also requires companies to disclose current-period gross write-offs by year of origination for financing receivables. The guidance can be adopted on a prospective or modified retrospective basis. The Company expects the adoption of this guidance willwas not be material to itsthe Company’s financial stastatements.
tements.
Accounting for Tax Credit Investments Using the Proportional Amortization Method
Effective January 1, 2023, the Company adopted accounting guidance on a modified retrospective basis, issued by the FASB in March 2023, related to the accounting for tax credit investments. This guidance allows the Company to elect to account for tax credit investments using the proportional amortization method on a
program-by-program
basis if certain conditions are met, regardless of the program from which the income tax credits are received. The adoption of this guidance was not material to the Company’s financial statements.
U.S. Bancorp
39
Table of Contents
  Note  3
   Business Combinations
MUFG Union Bank Acquisition
On December 1, 2022, the Company acquired MUB’s core regional banking franchise from
MUFG.
Pursuant to the terms of the Share Purchase Agreement, the Company acquired all of the issued and outstanding shares of common stock of MUB for a purchase price consisting of $5.5 billion in cash and approximately 44 million shares of common stock of the Company. Under the terms of the Share Purchase Agreement, the purchase price was based on MUB having a tangible book value of $6.25 billion at the closing of the acquisition. At the closing of the acquisition, MUB had $3.5 billion of tangible book value over the $6.25 billion target, consisting of additional cash. The additional cash received is required to be repaid to MUFG on or prior to the fifth anniversary date of the completion of the purchase, in accordance with the terms of the Share Purchase Agreement. As such, it is recognized as debt at the parent company.
On August 3, 2023, the
Company repaid $
936
million of
its debt obligation
from the proceeds of the issuance of 24 million shares of common stock of the Company to an affiliate of
MUFG.
The acquisition
has been accounted for as a business combination. Accordingly, the assets acquired and liabilities assumed from MUB were recorded at fair value as of the acquisition date. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. Fair value estimates related to the assets and liabilities from MUB are subject to adjustment for up to one year after the closing date of the acquisition as additional information becomes available. Valuations subject to adjustment include, but are not limited to, loans, certain deposits, certain other assets, customer relationships and the core deposit benefits intangible.
In connection with the transaction, the Company recorded within noninterest expense nonrecurring merger and integration charges of $310 million in the second quarter and $554 million in the first six months of 2023, compared with $197 million in both the second quarter and first six months of 2022. These expenses were primarily comprised of personnel, legal, advisory and technology related costs.
The following table includes the fair value of consideration transferred and the preliminary fair value of the identifiable tangible and intangible assets and liabilities from MUB:
December 1, 2022 (Dollars in Millions)
 
Acquisition consideration
    
Cash
 $5,500 
Market value of shares of common stock
  2,014 
  
 
 
 
Total consideration transferred at acquisition close date
  7,514 
Discounted liability to MUFG (a)
  2,944 
  
 
 
 
Total
 $10,458 
  
 
 
 
Fair Value of MUB assets and liabilities
    
Assets
    
Cash and due from banks
 $17,754 
Investment securities
  22,725 
Loans held for sale
  2,220 
Loans
  53,395 
Less allowance for loan losses
  (463) 
  
 
 
 
Net loans
  52,932 
Premises and equipment
  646 
Other intangible assets (excluding goodwill)
  2,808 
Other assets
  4,764 
  
 
 
 
Total assets
 $103,849 
  
 
 
 
Liabilities
    
Deposits
 $86,110 
Short-term borrowings
  4,773 
Long-term debt
  2,584 
Other liabilities
  2,248 
  
 
 
 
Total liabilities
  95,715 
  
 
 
 
Less: Net assets
 $8,134 
  
 
 
 
Goodwill
 $2,324 
(a)
Represents $3.5 billion of noninterest-bearing additional cash held by MUB upon close of the acquisition to be delivered to MUFG on or prior to December 1, 2027, discounted at the Company’s
5-year
unsecured borrowing rate as of the acquisition date, per authoritative accounting guidance.
Preliminary goodwill of $2.3 billion recorded in connection with the transaction resulted from the reputation, operating model and expertise of MUB. The amount of goodwill recorded reflects the increased market share and related synergies that are expected to result from the acquisition, and represents the excess purchase price over
the
 
40
 U.S. Bancorp
Table of Contents
  Note  3
   Business Combinations
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, Inc. (“MUFG”), for an expected purchase price of approximately $8.0 billion, including $5.5 billion in cash and approximately 44 million sharesestimated fair value of the Company’s common stock.net assets from MUB. 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 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 depositsgoodwill was allocated to the Company’s consolidatedbusiness segments on a preliminary basis and is not deductible for income tax purposes. Refer to Note 11 in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2022, for the amount of goodwill allocated to each business segment in connection with the transaction.
For further information on the fair value and unpaid principal balance sheet. On October 19, 2022,of loans from the MUB acquisition, as well as the methods used to determine the fair values of the significant assets acquired and liabilities assumed, refer to Note 3 in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2022.
During the first quarter of 2023, the Company announced that all requiredcompleted the divestiture of three MUB branches to HomeStreet Bank, a wholly owned subsidiary of HomeStreet, Inc., to satisfy regulatory approvalsrequirements related to complete the transaction have been received. The transaction is expected to close on December 1, 2022, pending satisfactionacquisition. There were approximately $400 million in deposits and $22 million in loans divested as part of customary closing conditions.
this transaction.
 Note 4
 
   Investment Securities
The Company’s
held-to-maturity
investment securities are carried at historical cost, adjusted for amortization of premiums and accretion of discounts. The Company’s
available-for-sale
investment securities are carried at fair value with unrealized net gains or losses reported within accumulated other comprehensive income (loss) in shareholders’ equity.
The amortized cost, gross unrealized holding gains and losses, and fair value of
held-to-maturity
and
available-for-sale
investment securities were as follows:
 
 September 30, 2022   December 31, 2021  June 30, 2023   December 31, 2022 
(Dollars in Millions) Amortized
Cost		   Unrealized
Gains		   Unrealized
Losses		 Fair
Value		   Amortized
Cost		   Unrealized
Gains		   Unrealized
Losses		 Fair
Value		  Amortized
Cost		 Unrealized
Gains		   Unrealized
Losses		 Fair Value   Amortized
Cost		   Unrealized
Gains		   Unrealized
Losses		 Fair Value 
Held-to-maturity
                                           
U.S. Treasury and agencies $1,344   $–   $(56)  $1,288   $–   $–   $–  $–  $1,345  $—   $(58)  $1,287   $1,344   $—   $(51)  $1,293 
Residential agency mortgage-backed securities 84,230    –    (11,390)  72,840    41,858    2    (48)  41,812 
Mortgage-backed securities
                     
Residential agency
 83,898   —    (10,578)  73,320    85,693    2    (10,810)  74,885 
Commercial agency
 1,695   —    (17)  1,678    1,703    1    (8)  1,696 
Total
held-to-maturity
 $85,574   $–   $(11,446)  $74,128   $41,858   $2   $(48)  $41,812  $86,938  $—   $(10,653)  $76,285   $88,740   $3   $(10,869)  $77,874 
Available-for-sale
                                      
U.S. Treasury and agencies $24,470   $–   $(2,884)  $21,586   $36,648   $205   $(244)  $36,609  $21,328  $1   $(2,361)  $18,968   $24,801   $1   $(2,769)  $22,033 
Mortgage-backed securities                                      
Residential agency 33,398    12    (2,753)  30,657    76,761    665    (347)  77,079  28,253  3    (2,595)  25,661    32,060    8    (2,797)  29,271 
Commercial agency 8,746    –    (1,655)  7,091    8,633    53    (201)  8,485 
Commercial
                     
Agency
 8,719   —    (1,532)  7,187    8,736    —    (1,591)  7,145 
Non-agency
 7   —    (1)  6    7    —    —  7 
Asset-backed securities 25    –    –  25    62    4    –  66  7,487  5    (41)  7,451    4,356    5    (38)  4,323 
Obligations of state and political subdivisions 11,105    2    (1,949)  9,158    10,130    607    (20)  10,717  11,091  6    (1,153)  9,944    11,484    12    (1,371)  10,125 
Other 6    –    –  6    7    –    –  7  4   —    —  4    6    —    —  6 
Total
available-for-sale,
excluding portfolio level basis adjustments
 76,889  15    (7,683)  69,221    81,450    26    (8,566)  72,910 
Portfolio level basis adjustments (a)
 (1)   —    1   —    —    —    —   — 
Total
available-for-sale
 $77,750   $14   $(9,241)  $68,523   $132,241   $1,534   $(812)  $132,963  $76,888  $15   $(7,682)  $69,221   $81,450   $26   $(8,566)  $72,910 
(a)
Represents fair value hedge basis adjustments related to active portfolio layer method hedges of
available-for-sale
investment securities, which are not allocated to individual securities in the portfolio. For additional information, refer to Note 13.
During the first nine months of 2022, the Company transferred $45.1 billion amortized cost ($40.7 billion fair value) of
available-for-sale
investment securities to the
held-to-maturity
category to reflect its new intent for these securities.
Investment securities with a fair value of $14.3$21.3 billion at SeptemberJune 30, 2022,2023, and $30.7$15.3 billion at December 31, 2021,2022, were pledged to secure public, private and trust deposits, repurchase agreements and for other purposes required by contractual obligation or law. Included in these amounts were securities where the Company and certain counterparties have agreements granting the counterparties the right to sell or pledge the securities. Investment securities securing these types of arrangements had a fair value of $858$327 million at SeptemberJune 30, 2022,2023, and $557$858 million at December 31, 2021.2022.
U.S. Bancorp
41
Table of Contents
The following table provides information about the amount of interest income from taxable and
non-taxable
investment securities:
 
 Three Months Ended
September 30		 Nine Months Ended
September 30		  Three Months Ended
June 30		          Six Months Ended
June 30		 
(Dollars in Millions)         2022           2021          2022           2021          2023           2022                2023           2022 
Taxable $793   $539  $2,171   $1,548  $999   $732       $1,993   $1,378 
Non-taxable
 74    67  219    193  78    74        158    145 
Total interest income from investment securities $867   $606  $2,390   $1,741  $1,077   $806       $2,151   $1,523 
 
U.S. Bancorp
41
Table of Contents
The following table provides information about the amount of gross gains and losses realized through the sales of
available-for-sale
investment
securities:
 
 Three Months Ended
September 30		 Nine Months Ended
September 30		  Three Months Ended
June 30		      Six Months Ended
June 30		 
(Dollars in Millions)         2022           2021          2022         2021          2023         2022              2023         2022 
Realized gains $1  $39  $78  $107  $5  $144      $65  $386 
Realized losses –  (19)  (40) (19)  (2)  (125)      (94)  (349) 
Net realized gains
 $1  $20  $
38  $88 
Income tax on net realized gains $–  $5  $9  $22 
Net realized gains (losses)
 $3  $19     $(29)  $37 
Income tax on net realized gains (losses) $1  $5     $(7)  $9 
The Company conducts a regular assessment of its
available-for-sale
investment securities with unrealized losses to determine whether all or some portion of a security’s unrealized loss is related to credit and an allowance for credit losses is necessary. If the Company intends to sell or it is more likely than not the Company will be required to sell an investment security, the amortized cost of the security is written down to fair value. When evaluating credit losses, the Company considers various factors such as the nature of the investment security, the credit ratings or financial condition of the issuer, the extent of the unrealized loss, expected cash flows of underlying collateral, the existence of any government or agency guarantees, and market conditions. The Company measures the allowance for credit losses using market information where available and discounting the cash flows at the original effective rate of the investment security. The allowance for credit losses is adjusted each period through earnings and can be subsequently recovered. The allowance for credit losses on the Company’s
available-for-sale
investment securities was immaterial at SeptemberJune 30, 20222023 and December 31, 2021.2022.     
At SeptemberJune 30, 2022,2023, certain investment securities had a fair value below amortized cost. The following table shows the gross unrealized losses and fair value of the Company’s
available-for-sale
investment securities with unrealized losses, aggregated by investment category and length of time the individual investment securities have been in continuous unrealized loss positions, at SeptemberJune 30, 2022:2023:    
 
  Less Than 12 Months   12 Months or Greater   Total 
(Dollars in Millions) Fair
Value		   Unrealized
Losses		   Fair Value   Unrealized
Losses		   Fair Value   Unrealized
Losses		 
U.S. Treasury and agencies
 $419   $(8)   $17,061   $(2,353)   $17,480   $(2,361) 
Mortgage-backed securities
                             
Residential agency
  2,932    (83)    22,463    (2,512)    25,395    (2,595) 
Commercial
                             
Agency
  —    —    7,186    (1,532)    7,186    (1,532) 
Non-agency
  6    (1)    —    —    6    (1) 
Asset-backed securities
  2,839    (41)    —    —    2,839    (41) 
Obligations of state and political subdivisions
  2,391    (34)    6,924    (1,119)    9,315    (1,153) 
Other
  —    —    4    —    4    — 
Total investment securities
 $8,587   $(167)   $53,638   $(7,516)   $62,225   $(7,683) 
  Less Than 12 Months   12 Months or Greater   Total 
(Dollars in Millions) Fair
Value		   Unrealized
Losses		   Fair
Value		   Unrealized
Losses		   Fair
Value		   Unrealized
Losses		 
U.S. Treasury and agencies $16,648   $(1,870)   $4,831           $(1,014)   $21,479   $(2,884) 
Residential agency mortgage-backed securities  24,355    (1,787)    5,377    (966)    29,732    (2,753) 
Commercial agency mortgage-backed securities  2,992    (559)    4,100    (1,096)    7,092    (1,655) 
Obligations of state and political subdivisions  8,006    (1,481)    960    (468)    8,966    (1,949) 
Other  2    –    4    –    6    – 
Total
investment securities
 $52,003   $(5,697)   $15,272           $(3,544)   $67,275   $(9,241) 
42
U.S. Bancorp
Table of Contents
These unrealized losses primarily relate to changes in interest rates and market spreads subsequent to purchase of these
available-for-sale
investment securities. U.S. Treasury and agencies securities and agency mortgage-backed securities are issued, guaranteed or otherwise supported by the United States government. The Company’s obligations of state and political subdivisions are generally high grade. Accordingly, the Company does not consider these unrealized losses to be credit-related and an allowance for credit losses is not necessary. In general, the issuers of the investment securities are contractually prohibited from prepayment at less than par, and the Company did not pay significant purchase premiums for these investment securities. At SeptemberJune 30, 2022,2023, the Company had no plans to sell investment securities with unrealized losses, and believes it is more likely than not it would not be required to sell such investment securities before recovery of their amortized cost.
During the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, the Company did not purchase any investment securities that had more-than-insignificant credit deterioration.
All of the Company’s
held-to-maturity
investment securities are
U.S. Treasury and agencies securities and
highly rated agency mortgage-backed securities that are guaranteed or otherwise supported by the United States government and have no history of credit losses. Accordingly
,
the Company does not expect to incur any credit losses on
held-to-maturity
investment securities and has no allowance for credit losses recorded for these securities.
42
U.S. Bancorp U.S. Bancorp
43
Table of Contents
The following table provides information about the amortized cost, fair value and yield by maturity date of the investment securities outstanding at SeptemberJune 30, 2022:2023:
 
(Dollars in Millions) Amortized
Cost		   Fair
Value		   Weighted-
Average
Maturity in
Years		   Weighted-
Average
Yield (e)		  Amortized
Cost		   
Fair
Value
   Weighted-
Average
Maturity in
Years		   Weighted-
Average
Yield (e)		 
Held-to-maturity
                  
U.S. Treasury and Agencies
                  
Maturing in one year or less $–   $–    –    –%  $50   $49    .8    2.67% 
Maturing after one year through five years 1,344    1,288    3.5    2.85  1,295    1,238    2.9    2.85 
Maturing after five years through ten years  –    –    –    –   —    —    —    — 
Maturing after ten years  –    –    –    –   —    —    —    — 
Total $1,344   $1,288    3.5    2.85%  $1,345   $1,287    2.8    2.85% 
Mortgage-Backed Securities (a)                 
Maturing in one year or less $–   $–    –    –%  $22   $22    .8    4.95% 
Maturing after one year through five years  –    –    –    –  1,436    1,419    2.6    4.60 
Maturing after five years through ten years 50,750    44,735    9.3    2.06  70,260    61,972    9.2    2.18 
Maturing after ten years 33,480    28,105    10.3    1.92  13,875    11,585    10.2    2.05 
Total $84,230   $72,840    9.7    2.01%  $85,593   $74,998    9.2    2.20% 
Total
held-to-maturity
(
b
)
 $85,574   $74,128    9.6    2.02% 
Total
held-to-maturity
(b)
 $86,938   $76,285    9.1    2.21% 
Available-for-sale
                 
U.S. Treasury and Agencies                 
Maturing in one year or less $1,172   $1,170    .2    2.05%  $13   $13    .2    4.72% 
Maturing after one year through five years 3,697    3,382    4.1    1.95  6,140    5,809    3.7    2.79 
Maturing after five years through ten years 16,944    15,024    7.1    2.27  12,981    11,462    6.8    2.20 
Maturing after ten years 2,657    2,010    11.6    1.99  2,194    1,684    11.1    2.00 
Total $24,470   $21,586    6.8    2.18%  $21,328   $18,968    6.4    2.35% 
Mortgage-Backed Securities (a)                 
Maturing in one year or less $34   $33    .8    2.84%  $134   $130    .9    2.45% 
Maturing after one year through five years 11,601    10,724    3.2    2.19  8,980    8,325    3.1    2.42 
Maturing after five years through ten years 28,896    25,569    7.8    2.52  26,491    23,211    7.6    3.02 
Maturing after ten years 1,613    1,422    11.3    2.77  1,374    1,188    11.1    3.65 
Total $42,144   $37,748    6.7    2.44%  $36,979   $32,854    6.6    2.90% 
Asset-Backed Securities(a)                 
Maturing in one year or less $–   $–    –    –%  $1   $1    .3    7.57% 
Maturing after one year through five years  –    –    –    –  7,104    7,068    1.6    5.02 
Maturing after five years through ten years 25    25    6.1    5.52  382    382    5.6    6.96 
Maturing after ten years  –    –    –    –   —    —    —    — 
Total $25   $25    6.1    5.52%  $7,487   $7,451    1.8    5.12% 
Obligations of State and Political                 
Subdivisions (c)
(d)
                 
Maturing in one year or less $102   $102    .3    4.73%  $149   $149    .3    5.76% 
Maturing after one year through five years 402    398    3.5    4.54  2,539    2,510    3.5    4.68 
Maturing after five years through ten years 442    411    8.4    4.01  1,542    1,470    7.8    3.99 
Maturing after ten years 10,159    8,247    16.7    3.60  6,861    5,815    16.2    3.37 
Total $11,105   $9,158    15.8    3.66%  $11,091   $9,944    11.9    3.79% 
Other                 
Maturing in one year or less $–   $–    –    –%  $—   $—    —    —% 
Maturing after one year through five years 6    6    2.7    1.99  4    4    1.9    1.89 
Maturing after five years through ten years  –    –    –    –   —    —    —    — 
Maturing after ten years  –    –    –    –   —    —    —    — 
Total $6   $6    2.7    1.99%  $4   $4    1.9    1.89% 
Total
available-for-sale
(
b
)(f)
 $77,750   $68,523    8.0    2.53%  $76,889   $69,221    6.8    3.09% 
(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)
The weighted-average maturity of total
held-to-maturity
investment securities was 7.49.2 years at December 31, 2021,2022, with a corresponding weighted-average yield of 1.452.18 percent. The weighted-average maturity of total
available-for-sale
investment securities was 5.57.4 years at December 31, 2021,2022, with a corresponding weighted-average yield of 1.732.94 percent.
(c)
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.
(d)
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.
(e)
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. Yields on investment securities are computed based on amortized cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair value from
available-for-sale
to
held-to-maturity.
(f)
Amortized cost excludes portfolio level basis adjustments of $(1) million.
44
U.S. Bancorp
43
Table of Contents
 Note 5
 
   Loans and Allowance for Credit Losses
The composition of the loan portfolio, disaggregated by class and underlying specific portfolio type, was as follows:
 
 September 30, 2022      December 31, 2021  June 30, 2023      December 31, 2022 
(Dollars in Millions) Amount   Percent
of Total		      Amount   Percent
of Total		  Amount   Percent
of Total		      Amount   Percent
of Total		 
Commercial
                       
Commercial $126,930    37.0%     $106,912    34.3%  $132,374    34.9%     $131,128    33.8% 
Lease financing 4,757    1.4      5,111    1.6  4,401    1.2      4,562    1.2 
Total commercial 131,687    38.4      112,023    35.9  136,775    36.1      135,690    35.0 
Commercial Real Estate
                    
Commercial mortgages 30,223    8.8      28,757    9.2  42,775    11.3      43,765    11.3 
Construction and development 10,106    2.9      10,296    3.3  11,582    3.0      11,722    3.0 
Total commercial real estate 40,329    11.7      39,053    12.5  54,357    14.3      55,487    14.3 
Residential Mortgages
                    
Residential mortgages 78,006    22.8      67,546    21.6  107,017    28.2      107,858    27.8 
Home equity loans, first liens 8,268    2.4      8,947    2.9  7,432    2.0      7,987    2.0 
Total residential mortgages 86,274    25.2      76,493    24.5  114,449    30.2      115,845    29.8 
Credit Card
 24,538    7.2      22,500    7.2  26,626    7.0      26,295    6.8 
Other Retail
                    
Retail leasing 6,037    1.8      7,256    2.3  4,637    1.2      5,519    1.4 
Home equity and second mortgages 11,367    3.3      10,446    3.4  12,799    3.4      12,863    3.3 
Revolving credit 2,721    .8      2,750    .9  3,797    1.0      3,983    1.0 
Installment 16,417    4.8      16,514    5.3  14,452    3.8      14,592    3.8 
Automobile 23,236    6.8      24,866    8.0  11,536    3.0      17,939    4.6 
Student 102    –      127    – 
Total other retail 59,880    17.5      61,959    19.9  47,221    12.4      54,896    14.1 
Total loans $342,708    100.0%     $312,028    100.0%  $379,428    100.0%     $388,213    100.0% 
The Company had loans of $98.2$124.6 billion at SeptemberJune 30, 2022,2023, and $92.1$134.6 billion at December 31, 2021,2022, pledged at the Federal Home Loan Bank, and loans of $84.0$87.9 billion at SeptemberJune 30, 2022,2023, and $76.9$85.8 billion at December 31, 2021,2022, pledged at the Federal Reserve Bank.
Originated loans are reported at the principal amount outstanding, net of unearned interest and deferred fees and costs, and any partial charge-offs recorded. Net unearned interest and deferred fees and costs amounted to $331 million at September 30, 2022 and $475 million at December 31, 2021. All purchasedPurchased loans are recorded at fair value at the date of purchase. Net unearned interest and deferred fees and costs on originated loans and unamortized premiums and discounts on purchased loans amounted to $2.9 billion at June 30, 2023 and $3.1 billion at December 31, 2022. The Company evaluates purchased loans for more-than-insignificant deterioration at the date of purchase in accordance with applicable authoritative accounting guidance. Purchased loans that have experienced more-than-insignificant deterioration from origination are considered purchased credit deteriorated loans. All other purchased loans are considered
non-purchased
credit deteriorated loans.
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 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.
U.S. Bancorp
45
Table of Contents
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
44
U.S. Bancorp
Table of Contents
unemployment rates, real estate prices, gross domestic product levels,
, inflation, interest rates
and corporate bonds 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 term of the loan, adjusted for expected prepayments. For each loan portfolio, including those loans modified under various loan modification programs, 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 would 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.collateral at fair value less selling costs. 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.
The allowance recorded for Troubled Debt Restructuring (“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 fair value of the collateral less costs to sell. 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 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 the 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 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.
The Company also assesses the credit risk associated with
off-balance
sheet loan commitments, letters of credit, investment securities and derivatives. Credit risk associated with derivatives is reflected in the fair values recorded for those positions. The liability for
off-balance
sheet credit exposure related to loan commitments and other credit guarantees is included in other liabilities. 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.
The results of the analysis are evaluated quarterly to confirm the estimates are appropriate for each specific loan portfolio, as well as the entire loan portfolio, as the entire allowance for credit losses is available for the entire loan portfolio.
 
46
U.S. Bancorp
45
Table of Contents
Activity in the allowance for credit losses by portfolio class was as follows:
 
Three Months Ended June 30
(Dollars in Millions)
 Commercial  Commercial
Real Estate		  Residential
Mortgages		  Credit
Card		  Other
Retail		  Total
Loans		 
2023
                        
Balance at beginning of period
  $2,180   $1,359   $947   $2,112   $925   $7,523 
Add
                        
Provision for credit losses
  119   140   66   272   224   821 
Deduct
                        
Loans
charged-off
  110   31   121   242   251   755 
Less recoveries of loans
charged-off
  (20)   (5)   (7)   (43)   (31)   (106) 
Net loan charge-offs (recoveries)
  90   26   114   199   220   649 
Balance at end of period
  $2,209   $1,473   $899   $2,185   $929   $7,695 
2022
                        
Balance at beginning of period
  $1,836   $1,074   $600   $1,639   $956   $6,105 
Add
                        
Provision for credit losses
  90   (95)   49   225   42   311 
Deduct
                        
Loans
charged-off
  53   9   2   162   50   276 
Less recoveries of loans
charged-off
  (23)   (3)   (11)   (44)   (34)   (115) 
Net loan charge-offs (recoveries)
  30   6   (9)   118   16   161 
Balance at end of period
  $1,896   $973   $658   $1,746   $982   $6,255 
 
Six Months Ended June 30
(Dollars in Millions)
 Commercial  Commercial
Real Estate		  Residential
Mortgages		  Credit
Card		  Other
Retail		  Total
Loans		 
2023
                        
Balance at beginning of period
  $2,163   $1,325   $926   $2,020   $970   $7,404 
Add
                        
Change in accounting principle (a)
  —   —   (31)   (27)   (4)   (62) 
Allowance for acquired credit losses (b)
  —   127   —   —   —   127 
Provision for credit losses
  183   164   117   566   218   1,248 
Deduct
                        
Loans
charged-off
  173   154   125   457   315   1,224 
Less recoveries of loans
charged-off
  (36)   (11)   (12)   (83)   (60)   (202) 
Net loan charge-offs (recoveries)
  137   143   113   374   255   1,022 
Balance at end of period
  $2,209   $1,473   $899   $2,185   $929   $7,695 
2022
                        
Balance at beginning of period
  $1,849   $1,123   $565   $1,673   $945   $6,155 
Add
                        
Provision for credit losses
  109   (149)   78   303   82   423 
Deduct
                        
Loans
charged-off
  108   10   7   320   111   556 
Less recoveries of loans
charged-off
  (46)   (9)   (22)   (90)   (66)   (233) 
Net loan charge-offs (recoveries)
  62   1   (15)   230   45   323 
Balance at end of period
  $1,896   $973   $658   $1,746   $982   $6,255 
(a)
Effective January 1, 2023, the Company adopted accounting guidance which removed the separate recognition and measurement of troubled debt restructurings.
(b)
Represents allowance for credit deteriorated and
charged-off
loans acquired from MUB.
Three Months Ended September 30
(Dollars in Millions)		 Commercial  Commercial
Real Estate		  Residential
Mortgages		  Credit
Card		  Other
Retail		  Total
Loans		 
2022
      
Balance at beginning of period  $1,896   $   973   $658   $1,746   $   982   $6,255 
Add                        
Provision for credit losses  97   (7)   38   222   12   362 
Deduct                        
Loans
charged-off
  56   –   2   161   56   275 
Less recoveries of loans
charged-off
  (29)   (6)   (7)   (42)   (29)   (113) 
Net loan charge-offs (recoveries)  27   (6)   (5)   119   27   162 
Balance at end of period  $1,966   $   972   $701   $1,849   $967   $6,455 
2021
                        
Balance at beginning of period  $1,838   $1,409   $478   $1,891   $994   $6,610 
Add                        
Provision for credit losses  (75)   (104)   3   (23)   36   (163) 
Deduct                        
Loans
charged-off
  40   14   3   154   55   266 
Less recoveries of loans
charged-off
  (26)   (1)   (13)   (43)   (36)   (119) 
Net loan charge-offs (recoveries)  14   13   (10)   111   19   147 
Balance at end of period  $1,749   $1,292   $491   $1,757   $1,011   $6,300 
Nine Months Ended September 30
(Dollars in Millions)		 Commercial  Commercial
Real Estate		  Residential
Mortgages		  Credit
Card		  Other
Retail		  Total
Loans		 
2022
      
Balance at beginning of period  $1,849   $1,123   $565   $1,673   $   945   $6,155 
Add                        
Provision for credit losses  206   (156)   116   525   94   785 
Deduct                        
Loans
charged-off
  164   10   9   481   167   831 
Less recoveries of loans
charged-off
  (75)   (15)   (29)   (132)   (95)   (346) 
Net loan charge-offs (recoveries)  89   (5)   (20)   349   72   485 
Balance at end of period  $1,966   $   972   $701   $1,849   $967   $6,455 
2021
                        
Balance at beginning of period  $2,423   $1,544   $573   $2,355   $1,115   $8,010 
Add                        
Provision for credit losses  (577)   (246)   (107)   (195)   (35)   (1,160) 
Deduct                        
Loans
charged-off
  184   28   13   536   193   954 
Less recoveries of loans
charged-off
  (87)   (22)   (38)   (133)   (124)   (404) 
Net loan charge-offs (recoveries)  97   6   (25)   403   69   550 
Balance at end of period  $1,749   $1,292   $491   $1,757   $1,011   $6,300 
The increase in the allowance for credit losses fromat June 30, 2023, compared with December 31, 20212022, was primarily driven by increasing economic uncertainty and normalizing credit losses as well as adjustments made to September 30, 2022 reflected strongthe purchase accounting estimate for certain acquired loans.
U.S. Bancorp
47
Table of Contents
The following table provides a summary of loans
charged-off
by portfolio class and year of origination:

(Dollars in Millions) Commercial   Commercial
Real Estate (a)		   Residential
Mortgages (b)		   Credit
Card		   Other
Retail (c)		   Total
Loans		 
Three Months Ended June 30, 2023
                             
Originated in 2023
  $ 7    $—    $—    $—    $ 46    $ 53 
Originated in 2022
  34    —    —    —    89    123 
Originated in 2021
  4    17    5    —    46    72 
Originated in 2020
  6    —    8    —    19    33 
Originated in 2019
  2    —    15    —    13    30 
Originated prior to 2019
  17    14    93    —    5    129 
Revolving
  40    —    —    242    5    287 
Revolving converted to term
  —    —    —    —    28    28 
Total charge-offs
  $110    $31    $121    $242    $251    $755 
       
Six Months Ended June 30, 2023
                             
Originated in 2023
  $7    $—    $—    $—    $46    $53 
Originated in 2022
  40    88    —    —    99    227 
Originated in 2021
  8    17    5    —    57    87 
Originated in 2020
  10    —    8    —    25    43 
Originated in 2019
  7    3    16    —    20    46 
Originated prior to 2019
  28    46    96    —    13    183 
Revolving
  73    —    —    457    27    557 
Revolving converted to term
  —    —    —    —    28    28 
Total charge-offs
  $173    $154    $125    $457    $315    $1,224 
Note: Year of origination is based on the origination date of a loan, growth and increased economic uncertainty.or for existing loans the date when the maturity date, pricing or commitment amount is amended.
(a)
Includes $91 million of charge-offs in the first quarter of 2023 related to uncollectible amounts on acquired loans.
(b)
Includes $117 million of charge-offs related to balance sheet repositioning and capital management actions taken in the second quarter of 2023.
(c)
Includes $192 million of charge-offs related to balance sheet repositioning and capital management actions taken in the second quarter of 2023.
Credit Quality
The creditcr
e
dit quality of the Company’s loan portfolios is assessed as a function of net credit losses, levels of nonperforming assets and delinquencies, and credit quality ratings as defined by the Company.
For all loan portfolio classes, loans are considered past due based on the number of days delinquent except for monthly amortizing loans which are classified delinquent based upon the number of contractually required payments not made (for example, two missed payments is considered 30 days delinquent). When a loan is placed on nonaccrual status, unpaid accrued interest is reversed, reducing interest income in the current period.
Commercial lending segment loans are generally placed on nonaccrual status when the collection of principal and interest has become 90 days past due or is otherwise considered doubtful. Commercial lending segment loans are generally fully charged down if unsecured by collateral or partially charged down to the fair value of the collateral securing the loan, less costs to sell, when the loan is placed on nonaccrual.
Consumer lending segment loans are generally
charged-off
at a specific number of days or payments past due. Residential mortgages and other retail loans secured by
1-4
family properties are generally charged down to the fair value of the collateral securing the loan, less costs to sell, at 180 days past due. Residential mortgage loans and lines in a first lien position are placed on nonaccrual status in instances where a partial
charge-off
occurs unless the loan is well
46
U.S. Bancorp
Table of Contents
secured and in the process of collection. Residential mortgage loans and lines in a junior lien position secured by
1-4
family
properties are placed on nonaccrual status at 120 days past due or when they are behind a first lien that has become 180 days or greater past due or placed on nonaccrual status. Any secured consumer lending segment loan whose borrower has had debt discharged through bankruptcy, for which the loan amount exceeds the fair value of the collateral, is charged down to the fair value of the related collateral and the remaining balance is placed on nonaccrual status. Credit card loans continue to accrue interest until the account is
charged-off.
Credit cards are
charged-off
at 180 days past due. Other retail loans not secured by
1-4
family properties are
charged-off
at 120 days past due; and revolving consumer lines are
charged-off
at 180 days past due. Similar to credit cards, other retail loans are generally not placed on nonaccrual status because of the relative short period of time to
charge-off.
Certain retail customers having financial difficulties may have the terms of their credit card and other loan agreements modified to require only principal payments and, as such, are reported as nonaccrual.
For all loan classes, interest payments received on nonaccrual loans are generally recorded as a reduction to a loan’s carrying amount while a loan is on nonaccrual and are recognized as interest income upon payoff of the loan. However, interest income may be recognized for interest payments if the remaining carrying amount of the loan is believed to be collectible. In certain circumstances, loans in any class may be restored to accrual status, such as when a loan has demonstrated sustained repayment performance or no amounts are past due and prospects for future payment are no longer in doubt; or when the loan becomes well secured and is in the process of collection. Loans where there
48
U.S. Bancorp
Table of Contents
has been a partial
charge-off
may be returned to accrual status if all principal and interest (including amounts previously
charged-off)
is expected to be collected and the loan is current.
The following table provides a summary of loans by portfolio class, including the delinquency status of those that continue to accrue interest, and those that are nonperforming:
 
  Accruing         
(Dollars in Millions) Current   
30-89 Days

Past Due		   90 Days or
More Past Due		   Nonperforming (b)   Total 
June 30, 2023
                        
Commercial
 $136,136    $   347    $  61    $   231    $136,775 
Commercial real estate
  53,810    72    1    474    54,357 
Residential mortgages (a)
  114,028    128    86    207    114,449 
Credit card
  26,048    307    271    —    26,626 
Other retail
  46,802    235    55    129    47,221 
Total loans
 $376,824    $1,089    $474    $1,041    $379,428 
December 31, 2022
                        
Commercial
 $135,077    $   350    $  94    $   169    $135,690 
Commercial real estate
  55,057    87    5    338    55,487 
Residential mortgages (a)
  115,224    201    95    325    115,845 
Credit card
  25,780    283    231    1    26,295 
Other retail
  54,382    309    66    139    54,896 
Total loans
 $385,520    $1,230    $491    $   972    $388,213 
 
  Accruing         
(Dollars in Millions) Current   
30-89 Days

Past Due
   90 Days or
More Past Due		   Nonperforming (b)   Total 
September 30, 2022
         
Commercial $131,189    $   335    $  41    $122    $131,687 
Commercial real estate  40,135    8    19    167    40,329 
Residential mortgages (a)  85,887    87    89    211    86,274 
Credit card  24,120    237    181    –    24,538 
Other retail  59,443    244    63    130    59,880 
Total loans $340,774    $   911    $393    $630    $342,708 
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 
(a)
At SeptemberJune 30, 2022, $6382023, $556 million of loans 30–89 days past due and $1.9$2.1 billion of loans 90 days or more past due purchased and that could be purchased from Government National Mortgage Association (“GNMA”) mortgage pools under delinquent loan repurchase options whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, were classified as current, compared with $791$647 million and $1.5$2.2 billion at December 31, 2021,2022, respectively.
(b)
Substantially all nonperforming loans at SeptemberJune 30, 20222023 and December 31, 2021,2022, had an associated allowance for credit losses. The Company recognized interest income on nonperforming loans
of
$4 
$3 million and $5 million for both the three months ended SeptemberJune 30, 2023 and 2022, respectively, and 2021,$7 million and $12 million 
and $11$8 million for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively.
At SeptemberJune 30, 2022,2023, the amount of foreclosed residential real estate held by the Company, and included in other real estate owned (“OREO”), was $24$25 million, compared with $22$23 million at December 31, 2021.2022. These amounts excluded $46$56 million and $22$54 million at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively, of foreclosed residential real estate related to mortgage loans whose payments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. In addition, the amount of residential mortgage loans secured by residential real estate in the process of foreclosure at SeptemberJune 30, 20222023 and December 31, 2021,2022, was
$928 million and $1.1 billion, and $696 million, respectively, of which $841$683 million and $555$830 million, respectively, related to loans purchased and that could be purchased from Government National Mortgage Association (“GNMA”) mortgage pools under delinquent loan repurchase options whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.
The Company classifies its loan portfolio classes using internal credit quality ratings on a quarterly basis. These ratings include pass, special mention and classified, and are an important part of the Company’s overall credit risk
U.S. Bancorp
47
Table of Contents
management process and evaluation of the 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. Special mention loans are those loans that have a potential weakness deserving management’s close attention. Classified loans 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
49
Table of Contents
The following table provides a summary of the Company’s internal credit quality rating of loans by portfolio class and the Company’s internal credit quality rating:year of origination:
 
  June 30, 2023        December 31, 2022 
     Criticized             Criticized    
(Dollars in Millions) Pass  Special
Mention		  Classified (a)  Total
Criticized		  Total        Pass  Special
Mention		  Classified (a)  Total
Criticized		  Total 
Commercial
                                              
Originated in 2023
  $  29,444   $     441   $   319   $     760   $  30,204         $          —   $       —   $       —   $         —   $          — 
Originated in 2022
  51,218   547   306   853   52,071           61,229   245   315   560   61,789 
Originated in 2021
  13,287   154   183   337   13,624         26,411   159   78   237   26,648 
Originated in 2020
  3,764   51   179   230   3,994         7,049   68   138   206   7,255 
Originated in 2019
  1,852   15   181   196   2,048         3,962   51   210   261   4,223 
Originated prior to 2019
  4,715   43   103   146   4,861         8,986   64   129   193   9,179 
Revolving (b)
  28,735   216   1,022   1,238   29,973         25,888   344   364   708   26,596 
Total commercial
  133,015   1,467   2,293   3,760   136,775         133,525   931   1,234   2,165   135,690 
            
Commercial real estate
                                              
Originated in 2023
  5,791   302   1,055   1,357   7,148         —   —   —   —   — 
Originated in 2022
  14,037   211   1,147   1,358   15,395         14,527   206   519   725   15,252 
Originated in 2021
  10,998   434   445   879   11,877         13,565   171   99   270   13,835 
Originated in 2020
  4,467   23   154   177   4,644         6,489   97   117   214   6,703 
Originated in 2019
  5,438   169   408   577   6,015         6,991   251   304   555   7,546 
Originated prior to 2019
  7,321   27   429   456   7,777         9,639   138   875   1,013   10,652 
Revolving
  1,467   —   34   34   1,501         1,489   —   10   10   1,499 
Total commercial real estate
  49,519   1,166   3,672   4,838   54,357         52,700   863   1,924   2,787   55,487 
            
Residential mortgages (c)
                                              
Originated in 2023
  6,040   —   —   —   6,040         —   —   —   —   — 
Originated in 2022
  29,081   —   7   7   29,088         28,452   —   —   —   28,452 
Originated in 2021
  37,015   —   9   9   37,024         39,527   —   7   7   39,534 
Originated in 2020
  15,276   —   10   10   15,286         16,556   —   8   8   16,564 
Originated in 2019
  6,106   —   18   18   6,124         7,222   —   18   18   7,240 
Originated prior to 2019
  20,626   —   261   261   20,887         23,658   —   397   397   24,055 
Total residential mortgages
  114,144   —   305   305   114,449         115,415   —   430   430   115,845 
            
Credit card (d)
  26,355   —   271   271   26,626         26,063   —   232   232   26,295 
            
Other retail
                                              
Originated in 2023
  2,700   —   1   1   2,701         —   —   —   —   — 
Originated in 2022
  6,419   —   8   8   6,427         9,563   —   6   6   9,569 
Originated in 2021
  12,281   —   11   11   12,292         15,352   —   12   12   15,364 
Originated in 2020
  5,999   —   9   9   6,008         7,828   —   11   11   7,839 
Originated in 2019
  2,300   —   8   8   2,308         3,418   —   13   13   3,431 
Originated prior to 2019
  2,689   —   14   14   2,703         3,689   —   31   31   3,720 
Revolving
  13,864   —   97   97   13,961         14,029   —   98   98   14,127 
Revolving converted to term
  773   —   48   48   821         800   —   46   46   846 
Total other retail
  47,025   —   196   196   47,221         54,679   —   217   217   54,896 
Total loans
  $370,058   $2,633   $6,737   $  9,370   $379,428         $382,382   $1,794   $4,037   $5,831   $388,213 
Total outstanding commitments
  $768,418   $3,811   $8,265   $12,076   $780,494         $772,804   $2,825   $5,041   $7,866   $780,670 
  September 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  $  51,614   $     166   $   209   $   375   $  51,989         $          –   $       –   $       –   $       –   $          – 
Originated in 2021  32,393   179   27   206   32,599         51,155   387   287   674   51,829 
Originated in 2020  7,634   35   81   116   7,750         14,091   304   133   437   14,528 
Originated in 2019  5,057   67   67   134   5,191         10,159   151   54   205   10,364 
Originated in 2018  2,569   5   20   25   2,594         5,122   3   36   39   5,161 
Originated prior to 2018  3,571   4   42   46   3,617         4,923   30   81   111   5,034 
Revolving (b)  27,263   397   287   684   27,947         24,722   268   117   385   25,107 
Total commercial  130,101   853   733   1,586   131,687         110,172   1,143   708   1,851   112,023 
            
Commercial real estate                                              
Originated in 2022  9,925   70   511   581   10,506         –   –   –   –   – 
Originated in 2021  11,746   44   256   300   12,046         13,364   6   990   996   14,360 
Originated in 2020  5,818   63   119   182   6,000         7,459   198   263   461   7,920 
Originated in 2019  4,469   110   182   292   4,761         6,368   251   610   861   7,229 
Originated in 2018  2,069   28   135   163   2,232         2,996   29   229   258   3,254 
Originated prior to 2018  3,122   23   82   105   3,227         4,473   55   224   279   4,752 
Revolving  1,553   –   4   4   1,557         1,494   1   43   44   1,538 
Total commercial real estate  38,702   338   1,289   1,627   40,329         36,154   540   2,359   2,899   39,053 
            
Residential mortgages (c)                                              
Originated in 2022  17,964   –   –   –   17,964         –   –   –   –   – 
Originated in 2021  29,224   –   2   2   29,226         29,882   –   3   3   29,885 
Originated in 2020  14,230   –   5   5   14,235         15,948   1   8   9   15,957 
Originated in 2019  5,649   –   18   18   5,667         6,938   –   36   36   6,974 
Originated in 2018  2,300   –   18   18   2,318         2,889   –   30   30   2,919 
Originated prior to 2018  16,580   –   257   257   16,837         20,415   –   342   342   20,757 
Revolving  24   –   3   3   27         1   –   –   –   1 
Total residential mortgages  85,971   –   303   303   86,274         76,073   1   419   420   76,493 
            
Credit card (d)  24,358   –   180   180   24,538         22,335   –   165   165   22,500 
            
Other retail                                              
Originated in 2022  10,211   –   3   3   10,214         –   –   –   –   – 
Originated in 2021  17,403   –   9   9   17,412         22,455   –   6   6   22,461 
Originated in 2020  9,133   –   10   10   9,143         12,071   –   9   9   12,080 
Originated in 2019  4,663   –   13   13   4,676         7,223   –   17   17   7,240 
Originated in 2018  1,887   –   9   9   1,896         3,285   –   14   14   3,299 
Originated prior to 2018  2,315   –   17   17   2,332         3,699   –   24   24   3,723 
Revolving  13,610   –   97   97   13,707         12,532   –   112   112   12,644 
Revolving converted to term  457   –   43   43   500         472   –   40   40   512 
Total other retail  59,679   –   201   201   59,880         61,737   –   222   222   61,959 
Total loans  $338,811   $1,191   $2,706   $3,897   $342,708         $306,471   $1,684   $3,873   $5,557   $312,028 
Total outstanding commitments  $713,989   $1,947   $4,034   $5,981   $719,970         $662,363   $3,372   $5,684   $9,056   $671,419 
Note:
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 SeptemberJune 30, 2022, $1.92023, $2.1 billion of GNMA loans 90 days or more past due and $982$579 million of restructuredmodified 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$2.2 billion and $1.1$1.0 billion at December 31, 2021,2022, respectively.
(d)
Predominately all credit card loans are considered revolving loans. Includes an immaterial amount of revolving converted to term loans.
Troubled Debt Restructurings
Loan Modifications
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 TDRsmodified loans if full collection of contractual principal and interest is expected. The effects of modifications on credit loss expectations, such as improved payment capacity, longer expected lives and other factors, are considered when measuring the borrower compliesallowance for credit losses. Modification performance, including redefault rates and how these compare to historical losses, are also considered. Modifications generally do not result in significant changes to the Company’s allowance for credit losses.
4850
 U.S. Bancorp
Table of Contents
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.
The following table provides a summary of loansloan balances at June 30, 2023, which were modified as TDRs forduring the periods presentedthree months and six months ended June 30, 2023, by portfolio class:
class and modification granted:
 
(Dollars in Millions) Interest Rate
Reduction		      Payment
Delay		      Term
Extension		      Multiple
Modifications (a)		      Total
Modifications		  Percent of
Class Total		 
Three Months Ended June 30, 2023
          
Commercial
 $13   $—   $136   $—   $149   .1% 
Commercial real estate
  —    —    101    —    101   .2 
Residential mortgages (b)
  —    79    6    4    89   .1 
Credit card
  91    —    —    —    91   .3 
Other retail
  2       14       39       1       56   .1 
Total loans, excluding loans purchased from GNMA mortgage pools
  106    93    282    5    486   .1 
Loans purchased from GNMA mortgage pools (b)
  —       453       86       98       637   .6 
Total loans
 $106      $546      $368      $103      $1,123   .3% 
Six Months Ended June 30, 2023
          
Commercial
 $159   $—   $159   $—   $318   .2% 
Commercial real estate
  —    —    109    —    109   .2 
Residential mortgages (b)
  —    202    15    16    233   .2 
Credit card
  174    —    —    —    174   .7 
Other retail
  4       18       81       3       106   .2 
Total loans, excluding loans purchased from GNMA mortgage pools
  337    220    364    19    940   .2 
Loans purchased from GNMA mortgage pools (b)
  —       649       147       143       939   .8 
Total loans
 $337      $869      $511      $162      $1,879   .5% 
 
(a)
Includes $100 million of total loans receiving a payment delay and term extension, $2 million of total loans receiving an interest rate reduction and term extension and $1 million of total loans receiving an interest rate reduction, payment delay and term extension for three months ended June 30, 2023. Includes $151 million of total loans receiving a payment delay and term extension, $5 million of total loans receiving an interest rate reduction and term extension and $6 million of total loans receiving an interest rate reduction, payment delay and term extension for six months ended June 30, 2023.
  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 September 30
                  
 
               
Commercial  552    $     34    $  35         506    $     46    $     47 
Commercial real estate  24    23    23         14    12    13 
Residential mortgages  283    84    85         171    54    54 
Credit card  11,632    63    64         6,656    38    38 
Other retail  479    14    13         382    9    9 
Total loans, excluding loans purchased from GNMA mortgage pools  12,970    218    220         7,729    159    161 
Loans purchased from GNMA mortgage pools  421    61    62         802    113    118 
Total loans  13,391    $   279    $282         8,531    $   272    $   279 
        
Nine Months Ended September 30
                                  
Commercial  1,567    $   122    $108         1,736    $   133    $   120 
Commercial real estate  61    45    42         100    136    125 
Residential mortgages  1,489    418    417         867    299    298 
Credit card  29,667    161    163         17,492    102    103 
Other retail  1,963    75    70         2,175    64    58 
Total loans, excluding loans purchased from GNMA mortgage pools  34,747    821    800         22,370    734    704 
Loans purchased from GNMA mortgage pools  1,164    163    167         1,839    267    276 
Total loans  35,911    $   984    $967         24,209    $1,001    $   980 
(b)
Percent of class total amounts expressed as a percent of total residential mortgage loan balances.
Residential mortgages, home equity and second mortgages, and loans purchased from GNMA mortgage poolsLoan modifications included in the table above includeexclude trial period arrangements offered to customers and secured loans to consumer borrowers that have had debt discharged through bankruptcy where the borrower has not reaffirmed the debt during the periods presented. At June 30, 2023, the balance of loans modified in trial period arrangements was $93 million, while the balance of secured loans to consumer borrowers that have had debt discharged through bankruptcy was not material.
The post-modification balancesfollowing table summarizes the effects of loan modifications made to borrowers on loans modified during the three months and six months ended June 30, 2023:
(Dollars in Millions) 
Weighted-Average

Interest Rate
Reduction		  
Weighted-Average

Months of Term
Extension		 
Three Months Ended June 30, 2023
  
Commercial
  21.3%   8 
Commercial real estate
  —   10 
Residential mortgages
  1.4   89 
Credit card
  16.4   — 
Other retail
  8.6   108 
Loans purchased from GNMA mortgage pools
  .7   87 
Six Months Ended June 30, 2023
  
Commercial
  3.3%   7 
Commercial real estate
  —   10 
Residential mortgages
  1.4   111 
Credit card
  16.2   — 
Other retail
  7.3   134 
Loans purchased from GNMA mortgage pools
  .7   79 
Note: The weighted-average payment deferral 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 September 30, 2022, 9 residential mortgages, 7 home equity and second mortgage loans and 64 loans purchased from GNMA mortgage pools with outstanding balances ofall portfolio classes was less than $1 million less than $1 millionfor both the three months and $8 million, respectively, were in a trial period and have estimated post-modification balances of $1 million, less than $1 million and $8 million, respectively, assuming permanent modification occurssix months ended June 30, 2023. Forbearance payments are required to be paid 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-caseoriginal term loan.
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.provide an interest rate reduction.
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
U.S. Bancorp
51
Table of Contents
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.payments. These concessionsmodifications 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
U.S. Bancorp
49
Table of Contents
restructuring modification 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 TDRsmodifications are generally part of distinct restructuringmodification 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.
In addition,
Loans that receive a forbearance plan generally remain in default until they are no longer delinquent as the Company considers secured loans to consumer borrowers that have debt discharged through bankruptcy whereresult of the payment of all past due amounts or the borrower hasreceiving a term extension or modification. Therefore, loans only receiving forbearance plans are not reaffirmedincluded in the debt to be TDRs.table below.
The following table provides a summary of TDRloan balances at June 30, 2023, which were modified during the six months ended June 30, 2023, by portfolio class and delinquency status:
(Dollars in Millions)         Current   
30-89 Days

Past Due		   90 Days or
More Past Due		   Total 
Commercial
 $287   $7   $24   $318 
Commercial real estate
  43    —    66    109 
Residential mortgages (a)
  668    11    13    692 
Credit card
  125    34    15    174 
Other retail
  68    3    4    75 
Total loans
 $1,191   $55   $122   $1,368 
(a)
At June 30, 2023, $95 million of loans
30-89
days past due and $20 million of loans 90 days or more past due purchased and that could be purchased from GNMA mortgage pools under delinquent loan repurchase options whose payments are insured by the Federal Housing administration or guaranteed by the United States Department of Veterans Affairs, were classified as current.
The following table provides a summary of loans that defaulted (fully or partially
charged-off
or became 90 days or more past due) that were modified during the six months ended June 30, 2023.
(Dollars in Millions) Interest Rate
Reduction		      Payment
Delay		      Term
Extension		      Multiple
Modifications (a)		 
Three Months Ended June 30, 2023
       
Commercial
 $1   $—   $—   $— 
Residential mortgages
  —    1    —    1 
Credit card
  5    —    —    — 
Other retail
  —       2       1       — 
Total loans, excluding loans purchased from GNMA mortgage pools
  6    3    1    1 
Loans purchased from GNMA mortgage pools
  —       6       1       2 
Total loans
 $6      $9      $2      $3 
Six Months Ended June 30, 2023
       
Commercial
 $1   $—   $—   $— 
Residential mortgages
  —    1    —    1 
Credit card
  5    —    —    — 
Other retail
  —       2       1       — 
Total loans, excluding loans purchased from GNMA mortgage pools
  6    3    1    1 
Loans purchased from GNMA mortgage pools
  —       6       1       2 
Total loans
 $6      $9      $2      $3 
(a)
Includes $2 million of total loans receiving a payment delay and term extension and $1 million of total loans receiving an interest rate reduction, payment delay and term extension for three and six months ended June 30, 2023.
As of June 30, 2023, the Company had $144 million of commitments to lend additional funds to borrowers whose terms of their outstanding owed balances have been modified.
52
U.S. Bancorp
Table of Contents
Prior Period Troubled Debt Restructuring Information
The following table provides a summary of loans modified as troubled debt restructurings for the periods presented by portfolio class:
(Dollars in Millions)         Number
of Loans		   
Pre-Modification

Outstanding
Loan
Balance
   
Post-Modification

Outstanding
Loan
Balance
 
Three Months Ended June 30, 2022
              
Commercial
  506   $50   $41 
Commercial real estate
  28    11    9 
Residential mortgages
  366    106    106 
Credit card
  8,696    48    49 
Other retail
  756    24    20 
Total loans, excluding loans purchased from GNMA mortgage pools
  10,352    239    225 
Loans purchased from GNMA mortgage pools
  353    47    50 
    
Total loans
  10,705   $286   $275 
Six Months Ended June 30, 2022
              
Commercial
  1,015   $88   $73 
Commercial real estate
  37    22    19 
Residential mortgages
  1,206    334    332 
Credit card
  18,035    98    99 
Other retail
  1,484    61    57 
Total loans, excluding loans purchased from GNMA mortgage pools
  21,777    603    580 
Loans purchased from GNMA mortgage pools
  743    102    105 
    
Total loans
  22,520   $705   $685 
The following table provides a summary of troubled debt restructured loans that defaulted (fully or partially
charged-off
or became 90 days or more past due) for the periods presented, that were modified as TDRstroubled debt restructurings within 12 months previous to default:
 
(Dollars in Millions)         Number
of Loans		   Amount
Defaulted		 
Three Months Ended June 30, 2022
         
Commercial
  175   $3 
Commercial real estate
  2    1 
Residential mortgages
  79    7 
Credit card
  1,727    9 
Other retail
  60    1 
Total loans, excluding loans purchased from GNMA mortgage pools
  2,043    21 
Loans purchased from GNMA mortgage pools
  120    17 
   
Total loans
  2,163   $38 
Six Months Ended June 30, 2022
         
Commercial
  389   $6 
Commercial real estate
  5    2 
Residential mortgages
  113    10 
Credit card
  3,361    18 
Other retail
  143    2 
Total loans, excluding loans purchased from GNMA mortgage pools
  4,011    38 
Loans purchased from GNMA mortgage pools
  169    25 
   
Total loans
  4,180   $63 
 
U.S. Bancorp
53
  2022        2021 
(Dollars in Millions)
 Number
of Loans		   Amount
Defaulted		        Number
of Loans		   Amount
Defaulted		 
Three Months Ended September 30
             
 
          
Commercial  186    $  15         244    $    5 
Commercial real estate  5    6         4    1 
Residential mortgages  67    8         20    2 
Credit card  2,117    11         2,069    12 
Other retail  73    1         124    2 
Total loans, excluding loans purchased from GNMA mortgage pools  2,448    41         2,461    22 
Loans purchased from GNMA mortgage pools  113    17         29    5 
Total loans  2,561    $  58         2,490    $  27 
      
Nine Months Ended September 30
                        
Commercial  575    $  21         856    $  29 
Commercial real estate  10    8         16    7 
Residential mortgages  180    18         47    5 
Credit card  5,478    29         5,638    32 
Other retail  216    3         595    10 
Total loans, excluding loans purchased from GNMA mortgage pools  6,459    79         7,152    83 
Loans purchased from GNMA mortgage pools  282    42         102    15 
Total loans  6,741    $121         7,254    $  98 
Table of Contents
In addition to the defaults in the table above, the Company had a total of 17 and 45 residential mortgage loans, home equity and second mortgage loans and loans purchased from GNMA mortgage pools for the three months and nine months ended September 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 $3 million and $7 million for the three months and nine months ended September 30, 2022, respectively.
As of September 30, 2022, the Company had $40 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
50
U.S. Bancorp
Table of Contents
the Company are initially recognized at fair value.
For further information on mortgage servicing rights (“MSRs”),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.
The Company previously provided 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 discontinued providing this support beginning in the third quarter of 2022 due to rising interest rates in the current year.rates. The Company provided $67$7 million and $65 million of support to the funds during the three months ended September 30, 2021, and $65 million and $184 million during the ninesix months ended SeptemberJune 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 $111$149 million and $113$112 million for the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively, and $336$287 million and $356$225 million for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively. The Company also recognized $117$72 million and $75$162 million of investment tax credits for the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively, and $292$236 million and $235$175 million for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively. The Company recognized $102$135 million and $101$106 million of expenses related to all of these investments for the three months ended SeptemberJune 30, 2023 and 2022, and 2021, respectively, of which $87 million and $83 million, respectively, were primarily included in tax expense and the remaining amounts were included in noninterest expense. The Company recognized $310$265 million and $333$208 million of expenses related to all of these investments for the ninesix months ended SeptemberJune 30, 2023 and 2022, and 2021, respectively, of which $270 million and $262 million, respectively, were primarily 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.
54
U.S. Bancorp
Table of Contents
The following table provides a summary of investments in community development and
tax-advantaged
VIEs that the Company has not consolidated:
 
(Dollars in Millions) 
September 30,
2022
   December 31,
2021		  
June 30,
2023
   December 31,
2022		 
Investment carrying amount $5,617   $4,484  $6,242   $5,452 
Unfunded capital and other commitments 2,842    1,890  3,013    2,416 
Maximum exposure to loss 9,922    9,899  9,830    9,761 
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
U.S. Bancorp
51
Table of Contents
other assets on the Consolidated Balance Sheet, was approximately $48$198 million at SeptemberJune 30, 20222023 and $40$177 million at December 31, 2021.2022. The maximum exposure to loss related to these VIEs was $87$318 million at SeptemberJune 30, 20222023 and $84$310 million at December 31, 2021,2022, representing the Company’s investment balance and its unfunded commitments to invest additional amounts.
The Company also held senior notes of $6.6 billion as
available-for-sale
investment securities at June 30, 2023, compared with $3.4 billion at December 31, 2022. These senior notes were issued by third-party securitization vehicles that held $7.7 billion at June 30, 2023 and $4.0 billion at December 31, 2022 of indirect auto loans that collateralize the senior notes. These VIEs are not consolidated by the Company.
The Company’s individual net investments in unconsolidated VIEs, which exclude any unfunded capital commitments, ranged from less than $1 million to $123$91 million at SeptemberJune 30, 2022,2023, compared with less than $1 million to $75$116 million at December 31, 2021.2022.
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 SeptemberJune 30, 2022,2023, approximately $5.2$5.9 billion of the Company’s assets and $3.7$4.4 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$5.9 billion and $3.4$4.2 billion, respectively, at December 31, 2021.2022. 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 SeptemberJune 30, 2022, $1.42023, $1.0 billion of
available-for-sale
investment securities and $1.5$1.0 billion of short-term borrowings on the Consolidated Balance Sheet were related to the tender option bond program, compared with $1.7$1.5 billion of
available-for-sale
investment securities and $1.2$1.0 billion of short-term borrowings at December 31, 2021.2022.
 
U.S. Bancorp
55
Table of Contents
 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 $229.0$251.6 billion of residential mortgage loans for others at SeptemberJune 30, 2022,2023, and $222.4$243.6 billion at December 31, 2021,2022, 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 net losses of $19$31 million and $21net gains of $13 million for the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively, and net losses of $35$42 million and $168$16 million for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively. Loan servicing and ancillary fees, not including valuation changes, included in mortgage banking revenue were $190$187 million and $183$186 million for the three months ended SeptemberJune 30, 20222023 and 20212022 respectively, and $561$377 million and $536$371 million for the ninesix months ended SeptemberJune 30, 2023 and 2022, and 2021, respectively.
Changes in fair value of capitalized MSRs are summarized as follows:
 
 Three Months Ended
September 30		      Nine Months Ended
September 30		  Three Months
Ended June 30		      Six Months
Ended June 30		 
(Dollars in Millions) 2022 2021      2022 2021  2023 2022      2023 2022 
Balance at beginning of period $3,707  $2,713    $2,953  $2,210  $3,724  $3,432      $3,755  $2,953 
Rights purchased 1  9     7  36  1  3       2  6 
Rights capitalized 134  284     473  896  99  102       195  339 
Rights sold (a)  —   —     1  1  (149)   —       (148)  1 
Changes in fair value of MSRs                
Due to fluctuations in market interest rates (b) 153  53     810  307  84  289       46  657 
Due to revised assumptions or models (c) (5)  (30)     (26)  (169)  (21) 6       (16)  (21) 
Other changes in fair value (d) (121)  (119)     (349)  (371)  (105) (125)      (201)  (228) 
Balance at end of period $3,869  $2,910    $3,869  $2,910  $3,633  $3,707     $3,633  $3,707 
(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.
52
U.S. Bancorp
Table of Contents
The estimated sensitivity to changes in interest rates of the fair value of the MSR portfolio and the related derivative instruments was as follows:
 
                                                     
  September 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 $(289)  $(131)  $(62)  $55  $104  $184      $(636)  $(324)  $(160)  $150  $287  $511 
Derivative instrument hedges  303   131   61   (53)   (100)   (179)       614   309   152   (142)   (278)   (536) 
Net sensitivity $14  $—  $(1)  $2  $4  $5      $(22)  $(15)  $(8)  $8  $9  $(25) 
  June 30, 2023      December 31, 2022 
(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
 $(346)  $(161)  $(77)  $71  $136  $249      $(334)  $(153)  $(73)  $66  $125  $224 
Derivative instrument hedges
  361   164   78   (71)   (135)   (248)       337   153   73   (67)   (127)   (236) 
Net sensitivity
 $15  $3  $1  $—  $1  $1      $3  $—  $—  $(1)  $(2)  $(12) 
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.
A
56
U.S. Bancorp
Table of Contents
The following table provides a summary of the Company’s MSRs and related characteristics by portfolio was as follows:portfolio:
 
                                     
  September 30, 2022      December 31, 2021 
(Dollars in Millions) HFA  Government  Conventional (d)  Total      HFA  Government  Conventional (d)  Total 
Servicing portfolio (a) $42,952  $21,800  $160,433  $225,185      $40,652  $21,919  $156,382  $218,953 
Fair value $731  $440  $2,698  $3,869      $527  $308  $2,118  $2,953 
Value (bps) (b)  170   202   168   172       130   141   135   135 
Weighted-average servicing fees (bps)  36   42   31   33       36   41   30   32 
Multiple (value/servicing fees)  4.73   4.80   5.51   5.26       3.63   3.43   4.50   4.18 
Weighted-average note rate  4.08%   3.73%   3.45%   3.60%       4.07%   3.70%   3.41%   3.56% 
Weighted-average age (in years)  4.0   6.0   3.5   3.8       3.8   5.9   3.3   3.7 
Weighted-average expected prepayment (constant prepayment rate)  7.1%   8.0%   6.5%   6.8%       11.5%   13.2%   9.6%   10.3% 
Weighted-average expected life (in years)  8.9   7.7   8.2   8.3       6.5   5.6   6.9   6.7 
Weighted-average option adjusted spread (c)  6.9%   6.5%   5.6%   5.9%       7.3%   7.3%   6.3%   6.6% 
  June 30, 2023      December 31, 2022 
(Dollars in Millions) HFA  Government  Conventional (d)  Total      HFA  Government  Conventional (d)  Total 
Servicing portfolio (a)
 $45,368  $24,312  $173,746  $243,426    $44,071  $23,141  $172,541  $239,753 
Fair value
 $729  $476  $2,428  $3,633    $725  $454  $2,576  $3,755 
Value (bps) (b)
  161   196   140   149     165   196   149   157 
Weighted-average servicing fees (bps)
  36   43   26   29     36   42   27   30 
Multiple (value/servicing fees)
  4.46   4.53   5.47   5.10     4.56   4.69   5.52   5.20 
Weighted-average note rate
  4.32%   4.01%   3.65%   3.81%     4.16%   3.81%   3.52%   3.67% 
Weighted-average age (in years)
  4.2   5.5   4.0   4.2     4.0   5.7   3.7   3.9 
Weighted-average expected prepayment (constant prepayment rate)
  7.8%   9.4%   8.3%   8.3%     7.4%   8.5%   7.8%   7.8% 
Weighted-average expected life (in years)
  8.6   7.3   7.3   7.5     8.8   7.6   7.5   7.7 
Weighted-average option adjusted spread (c)
  7.6%   6.9%   4.9%   5.7%       7.6%   6.9%   5.1%   5.8% 
 
(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 SeptemberJune 30, 20222023 and December 31, 2021,2022, 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:
 
                                     
  September 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 
  June 30, 2023        December 31, 2022 
(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         18,000    450    13    437 
Total preferred stock (a)
  243,510   $7,026   $218   $6,808         243,510   $7,026   $218   $6,808 
 
(a)
The par value of all shares issued and outstanding at SeptemberJune 30, 20222023 and December 31, 2021,2022, was $1.00 per share.
During the first nine 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
U.S. Bancorp 
5357
Table of Contents
share (the “Series O Preferred Stock”). The Series O Preferred Stock has no stated maturity and will not be subject to 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 a
llo
w 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.
 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 is as follows:
 
                         
Three Months Ended September 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 $(7,058)  $(1,890)  $4  $(1,378)  $(39)  $(10,361) 
Changes in unrealized gains (losses)  (2,810)   —   (232)   —   —   (3,042) 
Transfer of securities from
available-for-sale
to
held-to-maturity
  3,032   (3,032)   —   —   —   — 
Foreign currency translation adjustment (a)  —   —   —   —   (8)   (8) 
Reclassification to earnings of realized (gains) losses  (1)   147   8   32   —   186 
Applicable income taxes  (56)   730   57   (8)   2   725 
Balance at end of period $(6,893)  $(4,045)  $(163)  $(1,354)  $(45)  $(12,500) 
2021
                        
Balance at beginning of period $735  $—  $(107)  $(1,783)  $(47)  $(1,202) 
Changes in unrealized gains (losses)  (825)   —   8   —   —   (817) 
Foreign currency translation adjustment (a)  —   —   —   —   (1)   (1) 
Reclassification to earnings of realized (gains) losses  (20)   —   8   39   —   27 
Applicable income taxes  215   —   (4)   (10)   —   201 
Balance at end of period $105  $—  $(95)  $(1,754)  $(48)  $(1,792) 
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 
2023
      
Balance at beginning of period
 $(5,369)  $(3,843)  $43  $(940)  $(44)  $(10,153) 
Changes in unrealized gains (losses)
  (460)   —   (465)   —   —   (925) 
Foreign currency translation adjustment (a)
  —   —   —   —   19   19 
Reclassification to earnings of realized (gains) losses
  (3)   141   11   (2)   —   147 
Applicable income taxes
 
116   (35)   117  
1   (5)  
194 
Balance at end of period
 $(5,716)  $(3,737)  $(294)  $(941)  $(30)  $(10,718) 
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) 
 
(a)
Represents the impact of changes in foreign currency exchange rates on the Company’s investment in foreign operations and related hedges.
                         
Nine Months Ende
d
September 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)  (14,325)   —   (134)   —   —   (14,459) 
Transfer of securities from
available-for-sale
to
held-to-maturity
  4,413   (4,413)   —   —   —   — 
Foreign currency translation adjustment (a)  —   —   —   —   (11)   (11) 
Reclassification to earnings of realized (gains) losses  (38)   250   29   96   —   337 
Applicable income taxes  2,517   1,053   27   (24)   3   3,576 
Balance at end of period $(6,893)  $(4,045)  $(163)  $(1,354)  $(45)  $(12,500) 
2021
                        
Balance at beginning of period $2,417  $—  $(189)  $(1,842)  $(64)  $322 
Changes in unrealized gains (losses)  (3,008)   —   121   —   —   (2,887) 
Foreign currency translation adjustment (a)  —   —   —   —   23   23 
Reclassification to earnings of realized (gains) losses  (88)   —   4   118   —   34 
Applicable income taxes  784   —   (31)   (30)   (7)   716 
Balance at end of period $105  $—  $(95)  $(1,754)  $(48)  $(1,792) 

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 
2023
      
Balance at beginning of period
 $(6,378)  $(3,933)  $(114)  $(939)  $(43)  $(11,407) 
Changes in unrealized gains (losses)
  845   —   (261)   1   —   585 
Foreign currency translation adjustment (a)
  —   —   —   —   18   18 
Reclassification to earnings of realized (gains) losses
  29   262   18   (4)   —   305 
Applicable income taxes
  (212)   (66)   63   1   (5)   (219) 
Balance at end of period
 $(5,716)  $(3,737)  $(294)  $(941)  $(30)  $(10,718) 
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) 
(a)
Represents the impact of changes in foreignfor
e
ign currency exchange rates on the Company’s investment in foreign operations and related hedges.
5458
 U.S. Bancorp
Table of Contents
Additional detail about the impact to net income for items reclassified out of accumulated other comprehensive income (loss) and into earnings is as follows:
 
                   
  Impact to Net Income  Affected Line Item in the
Consolidated Statement of Income
  Three Months Ended
September 30		   Nine Months Ended
September 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 $1  $20   $38  $88  Securities gains (losses), net
   —   (5)    (9)   (22)  Applicable income taxes
   1   15    29   66  
Net-of-tax
Unrealized gains (losses) on investment securities transferred from
available-for-sale
to
held-to-maturity
                   
Amortization of unrealized gains  (147)   —    (250)   —  Interest income
   37   —    63   —  Applicable income taxes
   (110)   —    (187)   —  
Net-of-tax
Unrealized gains (losses) on derivative hedges                   
Realized gains (losses) on derivative hedges  (8)   (8)    (29)   (4)  Interest expense
   2   2    7   1  Applicable income taxes
   (6)   (6)    (22)   (3)  
Net-of-tax
Unrealized gains (losses) on retirement plans                   
Actuarial gains (losses) and prior service cost (credit) amortization  (32)   (39)    (96)   (118)  Other noninterest expense
   8   10    24   30  Applicable income taxes
   (24)   (29)    (72)   (88)  
Net-of-tax
Total impact to net income $(139)  $(20)   $(252)  $(25)   
   Impact to Net Income    
   Three Months
Ended June 30		       Six Months
Ended June 30		   Affected Line Item in the
Consolidated Statement of Income
(Dollars in Millions)  2023  2022       2023  2022 
Unrealized gains (losses) on investment securities
available-for-sale
          
Realized gains (losses) on sale of investment securities
  $3  $19     $(29)  $37   Securities gains (losses), net
   (1)   (5)        7   (9)   Applicable income taxes
   2   14      (22)   28   
Net-of-tax
Unrealized gains (losses) on investment securities transferred from
available-for-sale
to
held-to-maturity
          
Amortization of unrealized gains (losses)
   (141)   (61)      (262)   (103)   Interest income
   35   16        66   26   Applicable income taxes
   (106)   (45)      (196)   (77)   
Net-of-tax
Unrealized gains (losses) on derivative hedges
          
Realized gains (losses) on derivative hedges
   (11)   (10)      (18)   (21)   Interest expense
   3   2        4   5   Applicable income taxes
   (8)   (8)      (14)   (16)   
Net-of-tax
Unrealized gains (losses) on retirement plans
          
Actuarial gains (losses) and prior service cost (credit) amortization
   2   (32)      4   (64)   Other noninterest expense
   (1)   8        (1)   16   Applicable income taxes
   1   (24)      3   (48)   
Net-of-tax
Total impact to net income
  $(111)  $(63)       $(229)  $(113)    
 
 Note 10
 
   Earnings Per Share
The components of earnings per share were:
 
                 
  Three Months Ended
September 30		   Nine Months Ended
September 30		 
(Dollars and Shares in Millions, Except Per Share Data)     2022      2021       2022      2021 
Net income attributable to U.S. Bancorp $1,812  $2,028   $4,900  $6,290 
Preferred dividends  (85)   (84)    (228)   (232) 
Impact of preferred stock call (a)  —   —    —   (5) 
Earnings allocated to participating stock awards  (9)   (10)    (24)   (30) 
Net income applicable to U.S. Bancorp common shareholders $1,718  $1,934   $4,648  $6,023 
Average common shares outstanding  1,486   1,483    1,485   1,491 
Net effect of the exercise and assumed purchase of stock awards  —   1    1   1 
Average diluted common shares outstanding  1,486   1,484    1,486   1,492 
Earnings per common share $1.16  $1.30   $3.13  $4.04 
Diluted earnings per common share $1.16  $1.30   $3.13  $4.04 
   Three Months
Ended June 30		       Six Months Ended
June 30		 
(Dollars and Shares in Millions, Except Per Share Data)  2023  2022       2023  2022 
Net income attributable to U.S. Bancorp
  $1,361  $1,531     $3,059  $3,088 
Preferred dividends
   (73)   (59)      (171)   (143) 
Earnings allocated to participating stock awards
   (7)   (8)        (15)   (15) 
Net income applicable to U.S. Bancorp common shareholders
  $1,281  $1,464       $2,873  $2,930 
Average common shares outstanding
   1,533   1,486      1,532   1,485 
Net effect of the exercise and assumed purchase of stock awards
   —   1        1   1 
Average diluted common shares outstanding
   1,533   1,487        1,533   1,486 
Earnings per common share
  $.84  $.99     $1.87  $1.97 
Diluted earnings per common share
  $.84  $.99       $1.87  $1.97 
(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 SeptemberJune 30, 2023 to purchase 3 million common shares for the three months and six months ended June 30, 2023, respectively, and outstanding at June 30, 2022 to purchase 1 million common shares for the three months and ninesix months ended SeptemberJune 30, 2022 were not included in the computation of diluted earnings per share 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 September 30      Nine Months Ended September 30 
  Pension Plans  Postretirement
Welfare Plan		      Pension Plans  Postretirement
Welfare Plan		 
(Dollars in Millions) 2022  2021  2022  2021      2022  2021  2022  2021 
Service cost $69  $66  $—  $—      $206  $198  $—  $— 
Interest cost  62   54   —   1       185   164   —   1 
Expected return on plan assets  (119)   (112)   —   —       (358)   (337)   —   — 
Prior service cost (credit) amortization  (1)   —   —   (1)       (2)   (1)   (2)   (3) 
Actuarial loss (gain) amortization  35   42   (2)   (2)       105   127   (5)   (5) 
Net periodic benefit cost (a) $46  $50  $(2)  $(2)      $136  $151  $(7)  $(7) 
  Three Months Ended June 30       Six Months Ended June 30 
  Pension Plans  Postretirement
Welfare Plans		       Pension Plans  Postretirement
Welfare Plans		 
(Dollars in Millions) 2023  2022  2023  2022       2023  2022  2023  2022 
Service cost
 $56  $68  $—  $—     $112  $137  $—  $— 
Interest cost
  93   62   1   —      185   123   1   — 
Expected return on plan assets
  (137)   (120)   (1)   —      (273)   (239)   (1)   — 
Prior service cost (credit) amortization
  —   —   (1)   (2)      (1)   (1)   (1)   (2) 
Actuarial loss (gain) amortization
  1   35   (2)   (1)        2   70   (4)   (3) 
Net periodic benefit cost (a)
 $13  $45  $(3)  $(3)       $25  $90  $(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.
U.S. Bancorp 
5559
Table of Contents
Note 12
 
   Income Taxes
The components of income tax expense were:
 
                     
  Three Months Ended
September 30		   Nine Months Ended
September 30		 
(Dollars in Millions)     2022      2021            2022      2021 
Federal
                      
Current $427  $354        $1,052  $1,057 
      
Deferred  (51)   99         (46)   305 
Federal income tax  376   453         1,006   1,362 
State
                      
Current  150   94         328   297 
      
Deferred  (45)   17         (42)   63 
      
State income tax  105   111         286   360 
Total income tax provision $481  $564        $1,292  $1,722 
   Three Months Ended
June 30		       Six Months Ended
June 30		 
(Dollars in Millions)  2023  2022       2023  2022 
Federal
        
Current
  $263  $221     $660  $625 
 
Deferred
   33   107        1   5 
Federal income tax
   296   328      661   630 
State
        
Current
   119   89      215   178 
 
Deferred
   (33)   (3)        (39)   3 
 
State income tax
   86   86        176   181 
Total income tax provision
  $382  $414       $837  $811 
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
September 30		   Nine Months Ended
September 30		 
(Dollars in Millions)     2022      2021           2022      2021 
Tax at statutory rate $482  $546       $1,302  $1,686 
State income tax, at statutory rates, net of federal tax benefit  91   108        259   327 
Tax effect of                     
Tax credits and benefits, net of related expenses  (79)   (91)        (231)   (267) 
Tax-exempt
income
  (30)   (28)        (87)   (85) 
Other items  17   29        49   61 
Applicable income taxes $481  $564       $1,292  $1,722 
   Three Months Ended
June 30		       Six Months Ended
June 30		 
(Dollars in Millions)  2023  2022       2023  2022 
Tax at statutory rate
  $368  $409     $821  $820 
State income tax, at statutory rates, net of federal tax benefit
   83   84      185   168 
Tax effect of
        
Tax credits and benefits, net of related expenses
   (63)   (46)      (140)   (152) 
Tax-exempt
income
   (41)   (29)      (75)   (57) 
Other items
   35   (4)        46   32 
Applicable income taxes
  $382  $414       $837  $811 
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 SeptemberJune 30, 2022,2023, 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 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 $4.4$6.1 billion at SeptemberJune 30, 20222023 and $785 million$6.3 billion at December 31, 2021.2022.
60
 U.S. Bancorp
Table of Contents
 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
56
U.S. Bancorp
Table of Contents
amortized to earnings over the period the forecasted hedged transactions impact earnings. If a hedged 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 SeptemberJune 30, 2022,2023, the Company had $163$294 million
(net-of-tax)
of realized and unrealized
losses
on derivatives classified as cash flow hedges recorded in other comprehensive income (loss), compared with $85$114 million
(net-of-tax)
of realized and unrealized losses at December 31, 2021.2022. The estimated amount to be reclassified from other comprehensive income (loss) into earnings during the next 12 months is a loss of $11$104 million
(net-of-tax).
All cash flow hedges were highly effective for the three months ended SeptemberJune 30, 2022. There were no derivatives held as cash flow hedges at December 31, 2021.2023.
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 $1.1 billion at September 30, 2022, compared with $1.3 billion at June 30, 2023 and December 31, 2021.2022.
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, derivativesforeign exchange and foreign exchangecommodity 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 Company may use credit derivatives economically to hedge credit risk.
U.S. Bancorp
61
Table of Contents
The following table summarizes the asset and liability management derivative positions of the Company:
 
 September 30, 2022        December 31, 2021  June 30, 2023        December 31, 2022 
 Notional
Value		   Fair Value        Notional
Value		   Fair Value  
Notional
Value
   Fair Value        
Notional
Value
   Fair Value 
(Dollars in Millions)  Assets   Liabilities        Assets   Liabilities   Assets   Liabilities        Assets   Liabilities 
Fair value hedges
           
 
                              
Interest rate contracts
           
 
                              
Receive fixed/pay floating swaps $17,400   $—   $—       $12,350   $—   $—  $19,650   $—   $3       $17,400   $—   $9 
Pay fixed/receive floating swaps 3,820    —    —        16,650    —    —  16,514    —    —        5,542    —    — 
Cash flow hedges                                         
Interest rate contracts                                         
Receive fixed/pay floating swaps 10,800    —    24        —    —    —  26,700    —    —        14,300    —    — 
Net investment hedges                                         
Foreign exchange forward contracts 782    25    —        793    —    4  824    —    4        778    —    — 
Other economic hedges                                         
Interest rate contracts                                         
Futures and forwards                                         
Buy 7,211    42    160        9,322    10    16  4,943    4    8        3,546    10    18 
Sell 16,777    341    102        29,348    25    27  5,966    25    5        7,522    20    38 
Options                                         
Purchased 11,350    357    2        18,570    256    —  8,815    249    —        11,434    346    — 
Written 9,443    4    127        9,662    52    231  6,451    19    129        7,849    7    148 
Receive fixed/pay floating swaps 10,570    —    1        9,653    —    —  5,105    —    —        9,215    —    3 
Pay fixed/receive floating swaps 12,154    —    —        7,033    —    —  5,117    —    —        9,616    —    — 
Foreign exchange forward contracts 665    9    4        735    2    6  687    1    2        962    2    6 
Equity contracts 181    —    14        209    5    —  207    2    1        361    —    10 
Credit contracts
 625    1    —        330    —    — 
Other (a) 2,289    13    188        1,792    —    125  2,273    11    146        1,908    11    190 
Total $  103,442   $   791   $   622       $116,117   $   350   $409  $  103,877   $   312   $   298       $90,763   $   396   $422 
 
(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$2.0 billion and $186$146 million at SeptemberJune 30, 2022,2023, respectively, compared to $1.8 billion and $125$190 million at December 31, 2021,2022, respectively. In addition, includes short-term underwriting purchase and sale commitments with total notional values of $465$192 million at SeptemberJune 30, 2022,2023, and $8$13 million at December 31, 2021.2022.
U.S. Bancorp
57
Table of Contents
The following table summarizes the customer-related derivative positions of the Company:
 

 September 30, 2022        December 31, 2021  June 30, 2023        December 31, 2022 
 Notional
Value		   Fair Value        Notional
Value		   Fair Value  Notional
Value		   Fair Value        Notional
Value		   Fair Value 
(Dollars in Millions)  Assets   Liabilities        Assets   Liabilities   Assets   Liabilities        Assets   Liabilities 
Interest rate contracts
           
 
                              
Receive fixed/pay floating swaps $225,353   $303   $5,251       $178,701   $2,007   $438  $626,975   $287   $6,063       $301,690   $309   $5,689 
Pay fixed/receive floating swaps 211,261    2,219    131        174,176    134    670  618,184    2,358    217        316,133    2,323    206 
Other (a) 23,258    1    4        16,267    1    2  83,116    21    55        40,261    3    16 
Options                                         
Purchased 98,660    1,648    —        89,679    194    36  116,596    1,837    
1

        103,489    1,794    5 
Written 95,636    —    1,640        85,211    36    176  113,163    1    1,831        99,923    6    1,779 
Futures                                         
Buy 736    —    —        3,607    —    —   —    —    —        3,623    —    4 
Sell 2,085    —    —        3,941    —    —   —    —    —        2,376    8    — 
Foreign exchange rate contracts                                         
Forwards, spots and swaps 96,952    3,883    3,874        89,321    1,145    1,143  128,711    2,508    2,107        134,666    3,010    2,548 
Options                                         
Purchased 746    54    —        805    19    —  1,027    27    —        954    22    — 
Written 746    —    54        805    —    19  1,027    —    27        954    —    22 
Commodity contracts
                     
Swaps
 378    8    7        —    —    — 
Options
                     
Purchased
 894    36    35        —    —    — 
Credit contracts 9,068    2    7        9,331    1    5  13,581    1    8        10,765    1    8 
Total $764,501   $8,110   $10,961       $651,844   $3,537   $2,489  $1,703,652   $7,084   $10,351       $1,014,834   $7,476   $10,277 
(a)
Primarily represents floating rate interest rate swaps that pay based on differentials between specified interest rate indexes.
62
U.S. Bancorp
Table of Contents
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):
 
 Three Months Ended September 30      Nine Months Ended September 30  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		  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  2023 2022   2023 2022      2023 2022   2023 2022 
Asset and Liability Management Positions
           
 
                       
Cash flow hedges
           
 
                       
Interest rate contracts $(173)  $6   $(6)  $(6)     $(100)  $91   $(22)  $(3)  $(345)  $73   $(8)  $(8)     $(194)  $73   $(14)  $(16) 
Net investment hedges                        
Foreign exchange forward contracts 37  17    —   —      63  16    —   —  (6)  27    —   —      (9)  26    —   — 
Non-derivative
debt instruments
 56  27    —   —      139  61    —   —  1  63    —   —      (17)  83    —   — 
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:
 
  Three Months Ended June 30       Six Months Ended June 30 
  Interest Income  Interest Expense       Interest Income  Interest Expense 
(Dollars in Millions) 2023  2022  2023  2022       2023  2022  2023  2022 
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
 $7,526  $3,825  $3,111  $390     $14,490  $7,243  $5,441  $635 
 
Asset and Liability Management Positions
           
Fair value hedges
           
Interest rate contract derivatives
  334   (186)   243   (38)      156   331   129   34 
Hedged items
  (332)   187   (241)   36      (158)   (331)   (127)   (35) 
Cash flow hedges
           
Interest rate contract derivatives
  —   —   11   10        —   —   18   21 
  Three Months Ended September 30       Nine Months Ended September 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 $4,728  $3,409  $901  $238       $11,971  $10,132  $1,536  $761 
          
Asset and Liability Management Positions
                                     
Fair value hedges                                     
Interest rate contract derivatives  180   45   457   112        511   14   491   185 
Hedged items  (179)   (45)   (460)   (113)        (510)   (15)   (495)   (185) 
Cash flow hedges                                     
Interest rate contract derivatives  —   —   8   8        —   —   29   4 
 
Note:
The Company does not exclude components from effectiveness testing for fair value and cashflow hedges. The Company reclassified losses of $8 $11
million and $29 $18
million into earnings during the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, as a result of realized cash flows on discontinued cashflow hedges, compared with $13$10 million and $40$21 million during the three and ninesix months ended SeptemberJune 30, 2021,2022, 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.
58
U.S. Bancorp
Table of Contents
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)  Carrying Amount of the Hedged Assets
and Liabilities		        Cumulative Hedging Adjustment (a) 
(Dollars in Millions) September 30, 2022   December 31, 2021        September 30, 2022 December 31, 2021  June 30, 2023   December 31, 2022        June 30, 2023 December 31, 2022 
Line Item in the Consolidated Balance Sheet
     
 
            
Available-for-sale
investment securities(b)
 $2,902   $16,445       $(937)  $(26)  $10,541   $4,937      $(695)  $(552) 
Long-term debt 16,831    12,278        (116)  585  16,431    17,190        (335)  (142) 
(a)
The cumulative hedging adjustment related to discontinued hedging relationships on
available-for-sale
investment securities and long-term debt was $(406)$(377) million and $434$333 million, respectively, at SeptemberJune 30, 2022,2023, compared with $(6)$(392) million and $640$399 million at December 31, 2021,2022, respectively.
(b)
Includes amounts related to
available-for-sale
investment securities currently designated as the hedged item in a fair value hedge using the portfolio layer method. At June 30, 2023, the amortized cost of the closed portfolios used in these hedging relationships was $
119
million, of which $50 million was designated as hedged. At June 30, 2023, the cumulative amount of basis adjustments associated with these hedging relationships was $(1
) million.
U.S. Bancorp
63
Table of Contents
The table below shows the gains (losses) recognized in earnings for other economic hedges and the customer-related positions:
 
 Location of Gains (Losses)
Recognized in Earnings		   Three Months Ended
September 30		      Nine Months Ended
September 30		  
Location of Gains (Losses)
Recognized in Earnings
   Three Months
Ended June 30		      Six Months
Ended June 30		 
(Dollars in Millions)      2022     2021          2022     2021   2023 2022      2023 2022 
Asset and Liability Management Positions
     
 
            
Other economic hedges
     
 
            
Interest rate contracts
     
 
            
Futures and forwards  Mortgage banking revenue   $142  $101     $439  $432  Mortgage banking revenue   $31  $74     $38  $297 
Purchased and written options Mortgage banking revenue    (28)  171      (69)  436  Mortgage banking revenue    17  6      15  (41) 
Swaps Mortgage banking revenue    (118)  (39)      (569)  (236)  Mortgage banking revenue/Other noninterest income    (38)  (247)      20  (451) 
Foreign exchange forward contracts Other noninterest income    12  9      13  (1)  Other noninterest income    (8)  4      (13)  1 
Equity contracts  Compensation expense    (1)   1      (4)   6  Compensation expense    —  (1)      (3)  (3) 
Other Other noninterest income    (154)  2      (154)  3  Other noninterest income    1  1      (1)   — 
Customer-Related Positions
                 
Interest rate contracts                 
Swaps  Commercial products revenue    26   26      73   78  Commercial products revenue    58  3      95  47 
Purchased and written options Commercial products revenue    6  (1)      10  (4)  Commercial products revenue    (1)   —      —  4 
Futures Commercial products revenue    7   —      31   —  Commercial products revenue    —  8      (1)  24 
Foreign exchange rate contracts                 
Forwards, spots and swaps Commercial products revenue    40  23      75  69  Commercial products revenue    44  20      99  35 
Purchased and written options Commercial products revenue    —  1      1  1  Commercial products revenue    —  1      —  1 
Commodity contracts
         
Swaps
 Commercial products revenue    2   —      2   — 
Credit contracts Commercial products revenue    (1)  (1)      21  (3)  Commercial products revenue    (1)  17      (1)  22 
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 SeptemberJune 30, 2022,2023, was $2.8$2.9 billion. At SeptemberJune 30, 2022,2023, the Company had $2.1$2.4 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
U.S. Bancorp
59
Table of Contents
Company’s $867.9 billion$1.8 trillion total notional amount of derivative positions at SeptemberJune 30, 2022, $441.92023, $575.5 billion related to bilateral
over-the-counter
trades, $420.0 billion$1.2 trillion related to those centrally cleared through clearinghouses and $6.0$1.6 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
64
U.S. Bancorp
Table of Contents
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.
60
U.S. Bancorp
Table of Contents
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 
September 30, 2022
                        
Repurchase agreements                        
U.S. Treasury and agencies $321   $–   $–   $–   $321 
Residential agency mortgage-backed securities  849    –    –    –    849 
Corporate debt securities  732    –    –    –    732 
Total repurchase agreements  1,902    –    –    –    1,902 
Securities loaned                        
Corporate debt securities  188    –    –    –    188 
Total securities loaned  188    –    –    –    188 
Gross amount of recognized liabilities $2,090   $–   $–   $–   $2,090 
December 31, 2021
                        
Repurchase agreements                        
U.S. Treasury and agencies $378   $–   $–   $–   $378 
Residential agency mortgage-backed securities  551    –    –    –    551 
Corporate debt securities  646    –    –    –    646 
Total repurchase agreements  1,575    –    –    –    1,575 
Securities loaned                        
Corporate debt securities  169    –    –    –    169 
Total securities loaned  169    –    –    –    169 
Gross amount of recognized liabilities $1,744   $–   $–   $–   $1,744 
(Dollars in Millions) Overnight and
Continuous		   Less Than
30 Days		   
30-89

Days		   Greater Than
90 Days		   Total 
June 30, 2023
         
Repurchase agreements
         
U.S. Treasury and agencies
 $1,560    $—    $—    $—   $1,560 
Residential agency mortgage-backed securities
  327    —    —    —    327 
Corporate debt securities
  672    —    —    —    672 
Total repurchase agreements
  2,559    —    —    —    2,559 
Securities loaned
         
Corporate debt securities
  182    —    —    —    182 
Total securities loaned
  182    —    —    —    182 
Gross amount of recognized liabilities
 $2,741    $—    $—    $—   $2,741 
December 31, 2022
         
Repurchase agreements
         
U.S. Treasury and agencies
 $147    $—    $—    $—   $147 
Residential agency mortgage-backed securities
  846    —    —    —    846 
Corporate debt securities
  439    —    —    —    439 
Total repurchase agreements
  1,432    —    —    —    1,432 
Securities loaned
         
Corporate debt securities
  120    —    —    —    120 
Total securities loaned
  120    —    —    —    120 
Gross amount of recognized liabilities
 $1,552    $—    $—    $—   $1,552 
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
U.S. Bancorp
65
Table of Contents
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)
 
September 30, 2022
                          
Derivative assets (d) $8,884   $(6,174)  $2,710   $(101)  $(101)  $2,508 
Reverse repurchase agreements  396    –   396    (305)   (89)   2 
Securities borrowed  1,699    –   1,699    –   (1,642)   57 
Total $10,979   $(6,174)  $4,805   $(406)  $(1,832)  $2,567 
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 
  Financial
Instruments (b)		  Collateral
Received (c)		 
June 30, 2023
        
Derivative assets (d)
 $7,365   $(3,295) $4,070   $(204)  $—  $3,866 
Reverse repurchase agreements
  1,557    —   1,557    (303)   (1,236)   18 
Securities borrowed
  1,726    —   1,726    —   (1,670)   56 
Total
 $10,648   $(3,295) $7,353   $(507)  $(2,906)  $3,940 
December 31, 2022
        
Derivative assets (d)
 $7,852   $(5,427)  $2,425   $(231)  $(80)  $2,114 
Reverse repurchase agreements
  107    —   107    (102)   (5)   — 
Securities borrowed
  1,606    —   1,606    —   (1,548)   58 
Total
 $9,565   $(5,427)  $4,138   $(333)  $(1,633)  $2,172 
 
(a)
Includes $3.5$2.7 billion and $528 million$3.0 billion of cash collateral related payables that were netted against derivative assets at SeptemberJune 30, 20222023 and December 31, 2021,2022, 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 $17$31 million and $57$20 million at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively, of derivative assets not subject to netting arrangements.
U.S. Bancorp
61
Table of Contents
(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		  Net Amount 
  Financial
Instruments (b)		  Collateral
Pledged (c)		 
June 30, 2023
        
Derivative liabilities (d)
 $10,501   $(3,037) $7,464   $(204)  $—  $7,260 
Repurchase agreements
  2,559    —   2,559    (303)   (2,256)   — 
Securities loaned
  182    —   182    —   (178)   4 
Total
 $13,242   $(3,037) $10,205   $(507)  $(2,434)  $7,264 
December 31, 2022
        
Derivative liabilities (d)
 $10,506   $(4,551)  $5,955   $(231)  $—  $5,724 
Repurchase agreements
  1,432    —   1,432    (102)   (1,325)   5 
Securities loaned
  120    —   120    —   (118)   2 
Total
 $12,058   $(4,551)  $7,507   $(333)  $(1,443)  $5,731 
                         
(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		  Net Amount 
  
Financial
Instruments (b)
  
Collateral
Pledged (c)
 
September 30, 2022
                          
Derivative liabilities (d) $11,313   $(4,768)  $6,545   $(101)  $–  $6,444 
Repurchase agreements  1,902    –   1,902    (305)   (1,595)   2 
Securities loaned  188    –   188    –   (185)   3 
Total $13,403   $(4,768)  $8,635   $(406)  $(1,780)  $6,449 
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 $2.1$2.4 billion and $508 million$2.1 billion of cash collateral related receivables that were netted against derivative liabilities at SeptemberJune 30, 20222023 and December 31, 2021,2022, 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 $270
$148 million and $137$193 million at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively, of derivative liabilities not subject to netting arrangements.
66
 U.S. Bancorp
Table of Contents
 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. Other financial instruments, such as
held-to-maturity
investment securities, loans, time deposits, short-term borrowings and long-term debt, are accounted for at amortized cost. See “Fair Value of Financial Instruments” in this Note for further information on the estimated fair value of these other financial instruments. In accordance with disclosure guidance, certain financial instruments, such as deposits with no defined or contractual maturity, receivables and payables due in one year or less, insurance contracts and equity investments not accounted for at fair value, are excluded from this Note.
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.
62
U.S. Bancorp
Table of Contents
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 assets or liabilities are classified. Where appropriate, the descriptions include information about the valuation models and key inputs to those models. During the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, 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.
U.S. Bancorp
67
Table of Contents
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 net losses of $144$30 million and $18$64 million for the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively, and net losses of $442$33 million and $135$298 million for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, 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.
U.S. Bancorp
63
Table of Contents
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 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.
68
U.S. Bancorp
Table of Contents
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 SeptemberJune 30, 2022:2023:
 
             
   Minimum  Maximum  Weighted-
Average (a)		 
Expected prepayment  5%   11%   7% 
Option adjusted spread  5   11   6 
   Minimum  Maximum  Weighted-
Average (a)		 
Expected prepayment
  6%   19%   8% 
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 SeptemberJune 30, 2022:2023:
 
             
   Minimum  Maximum  Weighted-
Average (a)		 
Expected loan close rate  19%   100%   84% 
Inherent MSR value (basis points per loan)  41   194   112 
   Minimum  Maximum  Weighted-
Average (a)		 
Expected loan close rate
  34%   100%   79% 
Inherent MSR value (basis points per loan)
  63   188   105 
 
(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.
64
U.S. Bancorp
Table of Contents
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 SeptemberJune 30, 2022,2023, 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, 2346,423 percent and 15 percent, respectively.
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 loss estimate or an acceleration of the resolution of the related litigation would have resulted in a decrease in the derivative liability.
U.S. Bancorp
69
Table of Contents
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 
September 30, 2022
                       
Available-for-sale
securities
                       
U.S. Treasury and agencies $16,737   $4,849   $–   $–  $21,586 
Mortgage-backed securities                       
Residential agency  –    30,657    –    –   30,657 
Commercial agency  –    7,091    –    –   7,091 
Asset-backed securities  –    25    –    –   25 
Obligations of state and political subdivisions  –    9,157    1    –   9,158 
Other  –    6    –    –   6 
Total
available-for-sale
  16,737    51,785    1    –   68,523 
Mortgage loans held for sale  –    3,483    –    –   3,483 
Mortgage servicing rights  –    –    3,869    –   3,869 
Derivative assets  –    7,793    1,108    (6,174)   2,727 
Other assets  322    1,990    –    –   2,312 
Total $17,059   $65,051   $4,978   $(6,174)  $80,914 
Derivative liabilities $–   $6,599   $4,984   $(4,768)  $6,815 
Short-term borrowings and other liabilities (a)  245    1,661    –    –   1,906 
Total $245   $8,260   $4,984   $(4,768)  $8,721 
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 
(Dollars in Millions) Level 1   Level 2   Level 3   Netting  Total 
June 30, 2023
        
Available-for-sale
securities
        
U.S. Treasury and agencies
 $14,112   $4,856   $—   $—  $18,968 
Mortgage-backed securities
                       
Residential agency
  —    25,661    —    —   25,661 
Commercial
                       
Agency
  —    7,187    —    —   7,187 
Non-agency
  —    6    —    —   6 
Asset-backed securities
  —    7,451    —    —   7,451 
Obligations of state and political subdivisions
  —    9,944    —    —   9,944 
Other
  —    4    —    —   4 
Total
available-for-sale
  14,112    55,109    —    —   69,221 
Mortgage loans held for sale
  —    2,280    —    —   2,280 
Mortgage servicing rights
  —    —    3,633    —   3,633 
Derivative assets
  2    6,051    1,343    (3,295)  4,101 
Other assets
  470    1,776    —    —   2,246 
Total
 $14,584   $65,216   $4,976   $(3,295) $81,481 
Derivative liabilities
 $—   $5,887   $4,762   $(3,037) $7,612 
Short-term borrowings and other liabilities (a)
  202    1,743    —    —   1,945 
Total
 $202   $7,630   $4,762   $(3,037) $9,557 
December 31, 2022
                       
Available-for-sale
securities
                       
U.S. Treasury and agencies
 $13,723   $8,310   $—   $—  $22,033 
Mortgage-backed securities
                       
Residential agency
  —    29,271    —    —   29,271 
Commercial
                       
Agency
  —    7,145    —    —   7,145 
Non-agency
  —    7    —    —   7 
Asset-backed securities
  —    4,323    —    —   4,323 
Obligations of state and political subdivisions
  —    10,124    1    —   10,125 
Other
  —    6    —    —   6 
Total
available-for-sale
  13,723    59,186    1    —   72,910 
Mortgage loans held for sale
  —    1,849    —    —   1,849 
Mortgage servicing rights
  —    —    3,755    —   3,755 
Derivative assets
  9    6,608    1,255    (5,427)   2,445 
Other assets
  248    1,756    —    —   2,004 
Total
 $13,980   $69,399   $5,011   $(5,427)  $82,963 
Derivative liabilities
 $4   $6,241   $4,454   $(4,551)  $6,148 
Short-term borrowings and other liabilities (a)
  125    1,564    —    —   1,689 
Total
 $129   $7,805   $4,454   $(4,551)  $7,837 
 
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 $78$110 million and $79$104 million at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively. The Company recorded a $5 million impairment on these equity investments during the first six months ended 2023, and the cumulative impairment on these equity investments is $5 million. The Company has not recorded impairments or adjustments for observable price changes on these equity investments during the first ninesix months of 2022 and 2021,2023, 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.
70
 
U.S. Bancorp
65
Table of Contents
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 June 30:
(Dollars in Millions) Beginning
of Period
Balance		  Net Gains
(Losses)
Included in
Net Income		  Purchases  Sales  Principal
Payments		  Issuances  Settlements  End
of Period
Balance		  Net Change
in Unrealized
Gains (Losses)
Relating to
Assets and
Liabilities
Held at End
of Period		 
2023
         
Available-for-sale
securities
         
Obligations of state and political subdivisions
 $1  $—  $—  $—  $(1)  $—  $—  $—  $— 
Total
available-for-sale
  1   —   —   —   (1)   —   —   —   — 
Mortgage servicing rights
  3,724   (42) (a)   1   (149)   —   99 (c)   —   3,633   (42) (a) 
Net derivative assets and liabilities
  (2,265)   (1,927) (b)   (18)   (7)   —   —   798   (3,419)   (1,631) (d) 
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) (e)   81   —   —   —   249   (2,175)   (1,259) (f) 
(a)
Included in mortgage banking revenue.
(b)
Approximately $46 million, $(2.0) billion and $1 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(c)
Represents MSRs capitalized during the period.
(d)
Approximately $18 million, $(1.7) billion and $1 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(e)
Approximately $(20) million, $(1.5) billion and $1 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(f)
Approximately $(3) million, $(1.3) billion and $1 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
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 threesix months ended SeptemberJune 30:
 
                                     
(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
                                      
Obligations of state and political subdivisions 
$

1  
$

–  
$

–   
$

–   
$

–  
$

–  
$

–  
$

1  
$

– 
Total
available-for-sale
  1   –   –    –    –   –   –   1   – 
Mortgage servicing rights  3,707   27  (a)   –    1    –   134 (c)   –   3,869   27  (a) 
Net derivative assets and liabilities  (2,175)   (2,398) (b)   –    259    (29)   
11

   456   (3,876)   (1,978) (d) 
          
2021
                                      
Available-for-sale
securities
                                      
Asset-backed securities $8  $–  $–   $–   $–  $–  $–  $8  $– 
Obligations of state and political subdivisions  1   –   –    –    –   –   –   1   – 
Total
available-for-sale
  9   –   –    –    –   –   –   9   – 
Mortgage servicing rights  2,713   (96) (a)   –    9    –   284 (c)   –   2,910   (96) (a) 
Net derivative assets and liabilities  1,500   (225) (e)   –    106    (1)   –   (262)   1,118   (203) (f) 
(Dollars in Millions) Beginning
of Period
Balance		  Net Gains
(Losses)
Included in
Net Income		  Purchases  Sales  Principal
Payments		  Issuances  Settlements  End
of Period
Balance		  Net Change
in Unrealized
Gains (Losses)
Relating to
Assets and
Liabilities
Held at End
of Period		 
2023
         
Available-for-sale
securities
         
Obligations of state and political subdivisions
 $1  $—  $—  $—  $(1)  $—  $—  $—  $— 
Total
available-for-sale
  1   —   —   —   (1)   —   —   —   — 
Mortgage servicing rights
  3,755   (171) (a)   2   (148)   —   195 (c)   —   3,633   (171) (a) 
Net derivative assets and liabilities
  (3,199)   (2,243) (b)   405   (19)   —   —   1,637   (3,419)   (1,242) (d) 
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) (e)   92   (1)   —   —   296   (2,175)   (2,739) (f) 
 
(a)
Included in mortgage banking revenue.
(b)
Approximately $(95)$98 million, $(2.1)$(2.3) billion and $(154)$(1) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(c)
Represents MSRs capitalized during the period.
(d)
Approximately $(78)$18 million, $(1.7)$(1.3) billion and $(154)$(1) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(e)
Approximately $208 million, $(434)$(103) million and $1 million$(3.3) billion included in mortgage banking revenue and commercial products revenue, and other noninterest income, respectively.
(f)
Approximately $57 million, $(261) million and $1 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
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 nine months ended September 30:
                                     
(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    435  (a)   –   7    1   473 (c)   –   3,869   435  (a) 
Net derivative assets and liabilities  799    (5,759) (b)   –   351    (30)   11
   752   (3,876)   (4,240) (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    (233) (a)   –   36    1   896 (c)   –   2,910   (233) (a) 
Net derivative assets and liabilities  2,326    (604) (e)   –   166    (2)   –   (768)   1,118   (761) (f) 
(a)
Included in mortgage banking revenue.
(b)
Approximately $(198) million, $(5.4) billion and $(154)
million
included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(c)(f)
Represents MSRs capitalized during the period.
(d)
Approximately $(78)$(3) million $(4.0)and $(2.7) billion and $(154)
m
illion included in mortgage banking revenue and commercial products revenue, and other noninterest income, respectively.
(e)
U.S. Bancorp
Approximately $544 million, $(1.2) billion and $2 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.71
Table of Contents
(f)
Approximately $57 million, $(820) million and $2 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.
66
U.S. Bancorp
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:
 
                                 
  September 30, 2022   December 31, 2021 
(Dollars in Millions) Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total 
         
Loans (a) $–   $–   $80   $80   $–   $–   $59   $59 
         
Other assets (b)  –    –    30    30    –    –    77    77 
  June 30, 2023   December 31, 2022 
(Dollars in Millions) Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total 
         
Loans (a)
 $—   $—   $156   $156   $—   $—   $97   $97 
         
Other assets (b)
  —    —    19    19    —    —    21    21 
 
(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:
 
 Three Months Ended
September 30		   Nine Months Ended
September 30		  Three Months Ended
June 30		   Six Months Ended
June 30		 
(Dollars in Millions) 2022   2021   2022   2021  2023   2022   2023   2022 
   
Loans (a) $2   $15   $35   $58  $68   $22   $210   $33 
      
Other assets (b) 1    1    12    7   —    10    1    11 
(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.
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:
 
 September 30, 2022      December 31, 2021  June 30, 2023        December 31, 2022 
(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		  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 $3,483   $3,584   $(101)     $6,623   $6,453   $170  $2,280   $2,277   $3       $1,849   $1,848   $1 
Nonaccrual loans 1    1    –      1    1    –  1    1    —        1    1    — 
Loans 90 days or more past due 1    1    –      2    2    –  3    3    —        1    1    — 
Fair Value of Financial Instruments
The following section summarizes the estimated fair value for financial instruments accounted for at amortized cost as of SeptemberJune 30, 20222023 and December 31, 2021.2022. 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.
 
72
 
U.S.U
.
S. Bancorp
67
Table of Contents
The estimated fair values of the Company’s financial instruments are shown in the table below:
 
 September 30, 2022 December 31, 2021  June 30, 2023 December 31, 2022 
 
Carrying
Amount
     Fair Value     
Carrying
Amount
     Fair Value  
Carrying
Amount
     Fair Value     
Carrying
Amount
     Fair Value 
(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 
Financial Assets
                
 
                           
Cash and due from banks $41,652    $41,652  $–  $–  $41,652     $28,905    $28,905  $–  $–  $28,905  $70,642   $70,642  $—  $—  $70,642    $53,542   $53,542  $—  $—  $53,542 
Federal funds sold and securities purchased under resale agreements  440     –   440   –   440      359     –   359   –   359  1,606    —  1,606   —  1,606    356    —  356   —  356 
Investment securities
held-to-maturity
  85,574     1,288   72,840   –   74,128      41,858     –   41,812   –  $41,812  86,938   1,287  74,998   —  76,285    88,740   1,293  76,581   —  77,874 
Loans held for sale (a)  164     –   –   164   164      1,152     –   –   1,152   1,152  81    —   —  81  81    351    —   —  351  351 
Loans  336,691     –   –   326,896   326,896      306,304     –   –   312,724   312,724  372,264    —   —  364,104  364,104    381,277    —   —  368,874  368,874 
Other (b)  2,199     –   1,491   708   2,199      1,521     –   630   891   1,521  3,158    —  2,459  699  3,158    2,962    —  2,224  738  2,962 
Financial Liabilities
                                            
Time deposits  42,459     –   41,643   –   41,643      22,665     –   22,644   –   22,644  51,969    —  51,664   —  51,664    32,946    —  32,338   —  32,338 
Short-term borrowings (c)  23,160     –   22,662   –   22,662      9,750     –   9,646   –   9,646  30,389    —  30,077   —  30,077    29,527    —  29,145   —  29,145 
Long-term debt  32,228     –   30,624   –   30,624      32,125     –   32,547   –   32,547  45,283    —  43,007   —  43,007    39,829    —  37,622   —  37,622 
Other (d)  4,219     –   1,132   3,087   4,219      3,862     –   1,170   2,692   3,862  5,238   —  1,416  3,822  5,238    5,137   —  1,500  3,637  5,137 
(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 $499$564 million and $495$498 million at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively. The carrying value of other guarantees was $233 $207
million and $245$241 million at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively.
 Note  16
 
   Guarantees
and
Contingent Liabilities
Visa Restructuring and Card Association Litigation
 The Company’s payment servicesPayment 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 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 
6873
U.S. Bancorp
Table of Contents
Other Guarantees and Contingent Liabilities
The following table is a summary of other guarantees and contingent liabilities of the Company at SeptemberJune 30, 2022:2023:
 
             
(Dollars in Millions) Collateral
Held		   Carrying
Amount		   Maximum
Potential
Future
Payments		 
Standby letters of credit $—   $53   $9,974 
Third party borrowing arrangements  —    —    10 
Securities lending indemnifications  6,869    —    6,625 
Asset sales  —    89    7,616 (a) 
Merchant processing  727    123    139,808 
Tender option bond program guarantee  1,418    —    1,497 
Other  —    21    2,081 
(Dollars in Millions) Collateral
Held		   Carrying
Amount		   Maximum
Potential
Future
Payments		 
Standby letters of credit
 $—   $23   $10,705 
Third party borrowing arrangements
  —    —    11 
Securities lending indemnifications
  9,026    —    8,859 
Asset sales
  —    96    8,396 
Merchant processing
  1,231    90    151,227 
Tender option bond program guarantee
  1,025    —    1,009 
Other
  —    21    1,907 
 
(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 SeptemberJune 30, 2022,2023, the value of airline tickets purchased to be delivered at a future date through card transactions processed by the Company was $9.3 $
12.5
billion. The Company held collateral of $536 $
1.1
billion
million 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 SeptemberJune 30, 2022,2023, the liability was $105$69 million primarily related to these airline processing arrangements.
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 SeptemberJune 30, 2022,2023, the Company had reserved $13$14 million for potential losses from representation and warranty obligations, compared with $18$17 million at December 31, 2021.2022. 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 SeptemberJune 30, 20222023 and December 31, 2021,2022, the Company had $39$28 million and $19$39 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.
U.S. Bancorp
69
Table of Contents
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
74
U.S. Bancorp
Table of Contents
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.trusts for losses arising out of the 2008 financial crisis. In the lawsuits brought against the Company, the investors and a monoline insurer allege that the Company’s banking subsidiary, U.S. Bank National Association (“U.S. Bank”USBNA”), 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, as part of an industry-wide inquiry, the Company’s broker-dealer and registered investment advisor subsidiaries received from the Securities and Exchange Commission a request for information concerning compliance with record retention requirements relating to electronic business communications. Also, the Consumer Financial Protection Bureau is(“CFPB”) and another federal regulator have been investigating the Company’s administration of unemployment insurance benefit prepaid debit cards during the pandemic timeframe.timeframe and are considering potential enforcement actions. 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).
MUFG Union Bank Consent Order
The Company acquired MUB on December 1, 2022. Prior to the acquisition, on September 20, 2021, MUB entered into a consent order with the Office of the Comptroller of the Currency (the “OCC”) relating to deficiencies in MUB’s technology and operational risk management (the “MUB Consent Order”). Under the MUB Consent Order, the OCC found MUB to be in noncompliance with the Interagency Guidelines Establishing Information Security Standards and to have engaged in unsafe and unsound practices regarding technology and operational risk management.
In connection with the May 2023 merger of MUB with and into USBNA (the “Bank Merger”), USBNA succeeded to the terms and obligations of the MUB Consent Order and is required to comply with the other conditions described therein. The Company’s losses, costs, expenses and damages relating to or resulting from the MUB Consent Order are indemnifiable by the seller, subject to the terms of the Share Purchase Agreement for the MUB acquisition.
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.
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
U.S. Bancorp
75
Table of Contents
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 comprises consumer banking, small business banking and consumer lending. Products and services are delivered through banking offices, telephone servicing and sales,
on-line
services, direct mail, ATM processing, mobile devices, distributed mortgage loan officers, and intermediary relationships including auto dealerships, mortgage banks, and strategic business partners.
70
U.S. Bancorp
Table of Contents
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.
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, including 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.
76
U.S. Bancorp
Table of Contents
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 2022,2023, certain organization and methodology changes were made and, accordingly, 20212022 results were restated and presented on a comparable basis.
U.S. Bancorp
71
Table of Contents
Business segment results for the three months ended SeptemberJune 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) $934  $701       $1,726  $1,558       $477   $236 
Noninterest income  256   254        336   714        652    558 
Total net revenue  1,190   955        2,062   2,272        1,129    794 
Nointerest expense  452   435        1,399   1,412        592    520 
Income (loss) before provision and income taxes  738   520        663   860        537    274 
Provision for credit losses  68   12        40   (27)        3    2 
Income (loss) before income taxes  670   508        623   887        534    272 
Income taxes and taxable-equivalent adjustment  168   127        156   222        134    68 
Net income (loss)  502   381        467   665        400    204 
Net (income) loss attributable to noncontrolling interests  —   —        —   —        —    — 
Net income (loss) attributable to U.S. Bancorp $502  $381       $467  $665       $400   $204 
         
Average Balance Sheet
                                   
Loans $131,614  $102,800       $142,986  $140,468       $22,871   $18,452 
Other earning assets  4,506   4,722        3,043   7,645        249    225 
Goodwill  1,912   1,650        3,241   3,506        1,700    1,618 
Other intangible assets  3   5        3,726   2,755        311    80 
Assets  147,671   115,033        158,439   160,515        26,439    21,633 
         
Noninterest-bearing deposits  53,388   63,565        31,083   33,401        23,852    24,542 
Interest-bearing deposits  100,433   69,304        166,196   159,475        73,229    72,255 
Total deposits  153,821   132,869        197,279   192,876        97,081    96,797 
         
Total U.S. Bancorp shareholders’ equity  14,609   13,766        12,466   12,247        3,726    3,171 
      
  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) $627  $616       $93  $86       $3,857   $3,197 
Noninterest income  995 (a)   946 (a)        230   221        2,469 (b)    2,693 (b) 
Total net revenue  1,622   1,562        323   307        6,326 (c)    5,890 (c) 
Noninterest expense  897   862        297   200        3,637    3,429 
Income (loss) before provision and income taxes  725   700        26   107        2,689    2,461 
Provision for credit losses  285   166        (34)   (316)        362    (163) 
Income (loss) before income taxes  440   534        60   423        2,327    2,624 
Income taxes and taxable-equivalent adjustment  110   134        (57)   39        511    590 
Net income (loss)  330   400        117   384        1,816    2,034 
Net (income) loss attributable to noncontrolling interests  —   —        (4)   (6)        (4)    (6) 
Net income (loss) attributable to U.S. Bancorp $330  $400       $113  $378       $1,812   $2,028 
         
Average Balance Sheet
                                   
Loans $35,819  $31,378       $3,488  $3,641       $336,778   $296,739 
Other earning assets  392   5        196,698   193,989        204,888    206,586 
Goodwill  3,292   3,168        —   —        10,145    9,942 
Other intangible assets  405   495        —   —        4,445    3,335 
Assets  42,090   37,170        214,125   219,095        588,764    553,446 
         
Noninterest-bearing deposits  3,312   4,913        2,409   2,597        114,044    129,018 
Interest-bearing deposits  171   150        2,696   1,285        342,725    302,469 
Total deposits  3,483   5,063        5,105   3,882        456,769    431,487 
         
Total U.S. Bancorp shareholders’ equity  8,257   7,561        10,762   17,528        49,820    54,273 
  Corporate and Commercial
Banking		       
Consumer and
Business Banking
       Wealth Management and
Investment Services		 
(Dollars in Millions) 2023  2022       2023  2022       2023   2022 
Condensed Income Statement
              
Net interest income (taxable-equivalent basis)
 $1,019  $799     $2,196  $1,580     $482   $370 
Noninterest income
  347   272        426   390        728    652 
Total net revenue
  1,366   1,071      2,622   1,970      1,210    1,022 
Noninterest expense
  636   471        1,801   1,401        670    539 
Income (loss) before provision and income taxes
  730   600      821   569      540    483 
Provision for credit losses
  150   98        24   (74)        3    (4) 
Income (loss) before income taxes
  580   502      797   643      537    487 
Income taxes and taxable-equivalent adjustment
  145   126        199   160        134    122 
Net income (loss)
  435   376      598   483      403    365 
Net (income) loss attributable to noncontrolling interests
  –   –      –   –      –    – 
Net income (loss) attributable to U.S. Bancorp
 $435  $376       $598  $483       $403   $365 
   
Average Balance Sheet
              
Loans
 $151,123  $123,245     $169,704  $140,747     $24,568   $22,285 
Other earning assets
  6,250   4,161      2,512   2,576      421    233 
Goodwill
  2,859   1,912      4,531   3,244      1,792    1,718 
Other intangible assets
  537   4      5,393   3,635      426    300 
Assets
  173,101   137,809      187,507   155,700      29,008    25,728 
   
Noninterest-bearing deposits
  51,242   59,226      35,489   30,492      21,199    25,194 
Interest-bearing deposits
  107,724   93,830        187,793   164,269        80,061    75,824 
Total deposits
  158,966   153,056      223,282   194,761      101,260    101,018 
   
Total U.S. Bancorp shareholders’ equity
  18,244   13,992        16,516   12,326        3,976    3,615 
  
Payment
Services
       
Treasury and
Corporate Support
       
Consolidated
Company
 
(Dollars in Millions) 2023  2022       2023  2022       2023   2022 
Condensed Income Statement
              
Net interest income (taxable-equivalent basis)
 $645  $619     $107  $96     $4,449   $3,464 
Noninterest income
  1,051 (a)   993 (a)        174   241        2,726 (b)    2,548 (b) 
Total net revenue
  1,696   1,612      281   337      7,175 (c)    6,012 (c) 
Noninterest expense
  915   865        547   448        4,569    3,724 
Income (loss) before provision and income taxes
  781   747      (266)   (111)      2,606    2,288 
Provision for credit losses
  314   221        330   70        821    311 
Income (loss) before income taxes
  467   526      (596)   (181)      1,785    1,977 
Income taxes and taxable-equivalent adjustment
  117   132        (179)   (97)        416    443 
Net income (loss)
  350   394      (417)   (84)      1,369    1,534 
Net (income) loss attributable to noncontrolling interests
  –   –      (8)   (3)      (8)    (3) 
Net income (loss) attributable to U.S. Bancorp
 $350  $394       $(425)  $(87)       $1,361   $1,531 
   
Average Balance Sheet
              
Loans
 $37,913  $33,854     $5,509  $4,056     $388,817   $324,187 
Other earning assets
  74   1,023      215,765   204,581      225,022    212,574 
Goodwill
  3,330   3,318      –   –      12,512    10,192 
Other intangible assets
  359   437      9   –      6,724    4,376 
Assets
  44,127   41,014      239,269   219,660      673,012    579,911 
   
Noninterest-bearing deposits
  3,179   3,396      2,649   2,519      113,758    120,827 
Interest-bearing deposits
  104   167        7,825   1,599        383,507    335,689 
Total deposits
  3,283   3,563      10,474   4,118      497,265    456,516 
   
Total U.S. Bancorp shareholders’ equity
  9,127   8,113        5,959   11,120        53,822    49,166 
 
(a)
Presented net of related rewards and rebate costs and certain partner payments of $754$760 million and $652$772 million for the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively.
(b)
Includes revenue generated from certain contracts with customers of $2.1$2.2 billion and $2.0 billion for the three months ended SeptemberJune 30, 20222023 and 2021,2022, 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,arrangements, the Company recorded $190$186 million and $220$188 million of revenue for the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively, primarily consisting of interest income on sales-type and direct financing leases.
U.S. Bancorp 
7277
U.S. Bancorp
Table of Contents
Business segment results for the ninesix months ended SeptemberJune 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) $2,475  $2,158       $4,835  $4,580       $1,107   $752 
Noninterest income  774   788        1,191   1,915        1,900    1,639 
Total net revenue  3,249   2,946        6,026   6,495        3,007    2,391 
Nointerest expense  1,352   1,305        4,215   4,129        1,768    1,539 
Income (loss) before provision and income taxes  1,897   1,641        1,811   2,366        1,239    852 
Provision for credit losses  172   (32)        12   (136)        7    2 
Income (loss) before income taxes  1,725   1,673        1,799   2,502        1,232    850 
Income taxes and taxable-equivalent adjustment  432   419        450   626        309    213 
Net income (loss)  1,293   1,254        1,349   1,876        923    637 
Net (income) loss attributable to noncontrolling interests  —   —        —   —        —    — 
Net income (loss) attributable to U.S. Bancorp $1,293  $1,254       $1,349  $1,876       $923   $637 
         
Average Balance Sheet
                                   
Loans $123,644  $102,427       $141,637  $140,914       $21,972   $17,582 
Other earning assets  4,447   4,485        3,330   8,606        253    247 
Goodwill  1,912   1,648        3,248   3,487        1,726    1,618 
Other intangible assets  4   5        3,514   2,693        292    69 
Assets  137,874   114,525        157,311   162,013        25,563    20,743 
         
Noninterest-bearing deposits  58,517   60,648        30,990   32,857        25,437    23,096 
Interest-bearing deposits  93,762   70,406        166,806   156,052        71,852    76,464 
Total deposits  152,279   131,054        197,796   188,909        97,289    99,560 
         
Total U.S. Bancorp shareholders’ equity  14,114   13,984        12,361   12,352        3,647    3,099 
      
  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) $1,868  $1,840       $236  $120       $10,521   $9,450 
Noninterest income  2,847 (a)   2,644 (a)        701   707        7,413 (b)    7,693 (b) 
Total net revenue  4,715   4,484        937   827        17,934 (c)    17,143 (c) 
Noninterest expense  2,626   2,488        902   734        10,863    10,195 
Income (loss) before provision and income taxes  2,089   1,996        35   93        7,071    6,948 
Provision for credit losses  636   216        (42)   (1,210)        785    (1,160) 
Income (loss) before income taxes  1,453   1,780        77   1,303        6,286    8,108 
Income taxes and taxable-equivalent adjustment  364   446        (177)   97        1,378    1,801 
Net income (loss)  1,089   1,334        254   1,206        4,908    6,307 
Net (income) loss attributable to noncontrolling interests  —   —        (8)   (17)        (8)    (17) 
Net income (loss) attributable to U.S. Bancorp $1,089  $1,334       $246  $1,189       $4,900   $6,290 
         
Average Balance Sheet
                                   
Loans $33,820  $30,353       $3,658  $3,738       $324,731   $295,014 
Other earning assets  810   5        202,560   192,259        211,400    205,602 
Goodwill  3,312   3,172        —   —        10,198    9,925 
Other intangible assets  435   518        —   —        4,245    3,285 
Assets  40,573   35,966        220,746   217,952        582,067    551,199 
         
Noninterest-bearing deposits  3,459   5,068        2,490   2,593        120,893    124,262 
Interest-bearing deposits  166   141        2,350   1,714        334,936    304,777 
Total deposits  3,625   5,209        4,840   4,307        455,829    429,039 
         
Total U.S. Bancorp shareholders’ equity  8,131   7,543        12,551   16,349        50,804    53,327 
  Corporate and Commercial
Banking		       
Consumer and
Business Banking
       
Wealth Management and
Investment Services
 
(Dollars in Millions) 2023  2022       2023  2022       2023   2022 
Condensed Income Statement
              
Net interest income (taxable-equivalent basis)
 $2,099  $1,546     $4,480  $3,063     $999   $662 
Noninterest income
  666   519        823   844        1,429    1,247 
Total net revenue
  2,765   2,065      5,303   3,907      2,428    1,909 
Noninterest expense
  1,249   915        3,568   2,807        1,335    1,092 
Income (loss) before provision and income taxes
  1,516   1,150      1,735   1,100      1,093    817 
Provision for credit losses
  126   104        31   (26)        –    4 
Income (loss) before income taxes
  1,390   1,046      1,704   1,126      1,093    813 
Income taxes and taxable-equivalent adjustment
  348   262        426   280        273    204 
Net income (loss)
  1,042   784      1,278   846      820    609 
Net (income) loss attributable to noncontrolling interests
  –   –      –   –      –    – 
Net income (loss) attributable to U.S. Bancorp
 $1,042  $784       $1,278  $846       $820   $609 
   
Average Balance Sheet
              
Loans
 $150,455  $119,598     $169,898  $140,586     $24,441   $21,483 
Other earning assets
  5,949   4,417      2,346   3,475      401    237 
Goodwill
  2,842   1,912      4,511   3,253      1,790    1,739 
Other intangible assets
  564   4      5,493   3,406      434    283 
Assets
  171,389   132,899      187,715   156,320      28,808    25,062 
   
Noninterest-bearing deposits
  54,808   61,195      39,331   30,721      21,619    26,378 
Interest-bearing deposits
  106,326   90,509        184,632   163,123        83,656    75,007 
Total deposits
  161,134   151,704      223,963   193,844      105,275    101,385 
   
Total U.S. Bancorp shareholders’ equity
  17,776   13,862        16,608   12,270        4,040    3,604 
  
Payment
Services
       
Treasury and
Corporate Support
       
Consolidated
Company
 
(Dollars in Millions) 2023  2022       2023  2022       2023   2022 
Condensed Income Statement
              
Net interest income (taxable-equivalent basis)
 $1,299  $1,241     $240  $152     $9,117   $6,664 
Noninterest income
  1,988 (a)   1,850 (a)        327   484        5,233 (b)    4,944 (b) 
Total net revenue
  3,287   3,091      567   636      14,350 (c)    11,608 (c) 
Noninterest expense
  1,828   1,711        1,144   701        9,124    7,226 
Income (loss) before provision and income taxes
  1,459   1,380      (577)   (65)      5,226    4,382 
Provision for credit losses
  534   351        557   (10)        1,248    423 
Income (loss) before income taxes
  925   1,029      (1,134)   (55)      3,978    3,959 
Income taxes and taxable-equivalent adjustment
  232   258        (374)   (137)        905    867 
Net income (loss)
  693   771      (760)   82      3,073    3,092 
Net (income) loss attributable to noncontrolling interests
  –   –      (14)   (4)      (14)    (4) 
Net income (loss) attributable to U.S. Bancorp
 $693  $771       $(774)  $78       $3,059   $3,088 
   
Average Balance Sheet
              
Loans
 $37,426  $32,802     $5,569  $4,139     $387,789   $318,608 
Other earning assets
  187   1,023      214,072   205,558      222,955    214,710 
Goodwill
  3,325   3,321      –   –      12,468    10,225 
Other intangible assets
  372   450      22   –      6,885    4,143 
Assets
  43,493   39,762      237,846   224,620      669,251    578,663 
   
Noninterest-bearing deposits
  3,181   3,534      2,766   2,547      121,705    124,375 
Interest-bearing deposits
  106   164        7,333   2,174        382,053    330,977 
Total deposits
  3,287   3,698      10,099   4,721      503,758    455,352 
   
Total U.S. Bancorp shareholders’ equity
  9,048   8,065        5,776   13,503        53,248    51,304 
 
(a)
Presented net of related rewards and rebate costs and certain partner payments of $2.2$1.5 billion and $1.8$1.4 billion for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively.
(b)
Includes revenue generated from certain contracts with customers of $6.0$4.3 billion and $5.6$3.9 billion for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, 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,arrangements, the Company recorded $582$369 million and $686$392 million of revenue for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively, primarily consisting of interest income on sales-type and direct financing leases.
78
 
U.S. Bancorp
73
Table of Contents
 Note 18
 
   Subsequent Events
The Company has evaluated the impact of events that have occurred subsequent to SeptemberJune 30, 20222023 through the date the consolidated financial statements were filed with the United States Securities and Exchange Commission. Based on this evaluation, the Company has determined none of these events, except as disclosed in Note 3, were required to be recognized or disclosed in the consolidated financial statements and related notes.
 
74
U.S. Bancorp		 U.S. Bancorp
79
Table of Contents
U.S. Bancorp
Consolidated Daily Average Balance Sheet and Related Yields and Rates (a)
 
 For the Three Months Ended September 30    For the Three Months Ended June 30   
    2022                        2021                       2023 2022         2023 v 2022 
(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
 $164,851  $888      2.15%     $151,755    $624      1.64%      8.6%  $159,824  $1,098     2.75%     $171,296    $825     1.93%        (6.7)% 
Loans held for sale
 3,499  49      5.61      7,438     54      2.92      (53.0)  2,569  38     5.90     3,688    54     5.89        (30.3) 
Loans (b)
                                                       
Commercial
 128,519  1,230      3.80      101,832     711      2.77      26.2  138,085  2,201     6.39     120,657    794     2.64        14.4 
Commercial real estate
 40,010  428      4.25      38,921     303      3.09      2.8  54,934  847     6.18     39,517    330     3.35        39.0 
Residential mortgages
 84,018  687      3.27      74,104     604      3.25      13.4  117,606  1,087     3.70     80,228    638     3.18        46.6 
Credit card
 24,105  676      11.13      21,905     569      10.30      10.0  26,046  822     12.67     22,748    589     10.38        14.5 
Other retail
 60,126  592      3.91      59,977     532      3.52      .2  52,146  663     5.10     61,037  528     3.47        (14.6) 
Total loans
 336,778  3,613      4.26      296,739     2,719      3.64      13.5  388,817  5,620     5.79     324,187    2,879     3.56        19.9 
Interest-bearing deposits with banks
 29,130  151      2.05      40,710     12      .12      (28.4)  51,972  674     5.20     31,116    57     .74        67.0 
Other earning assets
 7,408  58      3.16      6,683     26      1.50      10.8  10,657  132     4.99     6,474  39     2.36        64.6 
Total earning assets
 541,666  4,759      3.50      503,325     3,435      2.72      7.6  613,839  7,562     4.94     536,761    3,854     2.88        14.4 
Allowance for loan losses
 (5,885)           (5,972)             1.5  (7,068)            (5,710)                 (23.8) 
Unrealized gain (loss) on investment securities
 (6,862)           1,231             *  (7,356)            (9,226)                 20.3 
Other assets
 59,845           54,862             9.1  73,597            58,086                 26.7 
Total assets
 $588,764          $553,446             6.4  $673,012            $579,911                 16.1 
Liabilities and Shareholders’ Equity
                                                       
Noninterest-bearing deposits
 $114,044          $129,018             (11.6)%  $113,758            $120,827                 (5.9)% 
Interest-bearing deposits
                                                       
Interest checking
 113,364  54      .19      103,036     5      .02      10.0  127,994  312     .98     116,878    20     .07        9.5 
Money market savings
 125,389  350      1.11      112,543     50      .17      11.4  152,893  1,224     3.21     123,788    121     .39        23.5 
Savings accounts
 67,782  2      .01      63,387     2      .01      6.9  58,993  23     .16     68,127    2     .01        (13.4) 
Time deposits
 36,190  128      1.41      23,503     21      .35      54.0  43,627  380     3.49     26,896  34     .51        62.2 
Total interest-bearing deposits
 342,725  534      .62      302,469     78      .10      13.3  383,507  1,939     2.03     335,689    177     .21        14.2 
Short-term borrowings
                                                       
Federal funds purchased
 442  2      2.01      1,198     —      .13      (63.1)  250  3     4.81     641    1     .17        (61.0) 
Securities sold under agreements to repurchase
 2,130  7      1.25      1,877     1      .10      13.5  3,212  33     4.12     2,078    2     .10        54.6 
Commercial paper
 7,301  18      .99      8,008     —      .01      (8.8)  7,840  65     3.32     6,289    4     .06        24.7 
Other short-term borrowings
 19,161  143      2.96      3,605     17      1.86      *  42,870  641     5.99     14,286  50     .35        * 
Total short- term borrowings
 29,034  170      2.33      14,688     18      .49      97.7 
Total short-term borrowings
 54,172  742     5.49     23,294    57     .98        * 
Long-term debt
 31,814  198      2.47      35,972     142      1.57      (11.6)  42,771  432     4.05     31,390  156     1.99        36.3 
Total interest-bearing liabilities
 403,573  902      .89      353,129     238      .27      14.3  480,450  3,113     2.60     390,373    390     .40        23.1 
Other liabilities
 20,863           16,391             27.3  24,517            19,078                 28.5 
Shareholders’ equity
                                                       
Preferred equity
 6,808           5,968             14.1  6,808            6,808                  — 
Common equity
 43,012           48,305             (11.0)  47,014            42,358                 11.0 
Total U.S. Bancorp shareholders’ equity
 49,820           54,273             (8.2)  53,822            49,166                 9.5 
Noncontrolling interests
 464           635             (26.9)  465            467                 (.4) 
Total equity
 50,284           54,908             (8.4)  54,287            49,633                 9.4 
Total liabilities and equity
 $588,764          $553,446             6.4  $673,012            $579,911                 16.1 
Net interest income
  $3,857            $3,197             $4,449              $3,464              
Gross interest margin
       2.61%             2.45%              2.34%             2.48%        
Gross interest margin without taxable-equivalent increments
       2.59%             2.43%              2.32%             2.46%        
Percent of Earning Assets
                                                     
Interest income
       3.50%             2.72%              4.94%              2.88%         
Interest expense
       .67             .19              2.04             .29        
Net interest margin
       2.83%             2.53%              2.90%             2.59%        
Net interest margin without taxable-equivalent increments
       2.81%               2.51%           2.88%        2.57%        
*
Not meaningful
(a)
Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent.
(b)
Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances.
80
U.S. Bancorp
Table of Contents
U.S. Bancorp
Consolidated Daily Average Balance Sheet and Related Yields and Rates (a)
  For the Six Months Ended June 30    
  2023  2022           2023 v 2022 
(Dollars in Millions) (Unaudited) Average
Balances		  Interest       Yields and
Rates		      Average
Balances		      Interest       Yields and
Rates		           % Change
Average
Balances		 
Assets
                   
Investment securities
 $162,957  $2,192     2.69%    $173,019   $1,561     1.80%       (5.8)% 
Loans held for sale
  2,516   69     5.51     4,579    114     5.00       (45.1) 
Loans (b)
                   
Commercial
  136,891   4,198     6.18     116,761    1,423     2.46       17.2 
Commercial real estate
  55,263   1,650     6.02     39,302    625     3.21       40.6 
Residential mortgages
  116,950   2,137     3.66     78,847    1,250     3.17       48.3 
Credit card
  25,809   1,622     12.68     22,297    1,151     10.41       15.8 
Other retail
  52,876   1,305     4.98     61,401       1,037     3.41       (13.9) 
Total loans
  387,789   10,912     5.67     318,608    5,486     3.47       21.7 
Interest-bearing deposits with banks
  47,662   1,162     4.91     30,487    71     .47       56.3 
Other earning assets
  9,820   226     4.64     6,625       67     2.02       48.2 
Total earning assets
  610,744   14,561     4.80     533,318    7,299     2.75       14.5 
Allowance for loan losses
  (7,006)         (5,706)            (22.8) 
Unrealized gain (loss) on investment securities
  (7,437)         (5,907)            (25.9) 
Other assets
  72,950         56,958            28.1 
Total assets
 $669,251        $578,663            15.7 
Liabilities and Shareholders’ Equity
                   
Noninterest-bearing deposits
 $121,705        $124,375            (2.1)% 
Interest-bearing deposits
                   
Interest checking
  128,668   595     .93     115,975    29     .05       10.9 
Money market savings
  149,948   2,203     2.96     121,700    173     .29       23.2 
Savings accounts
  63,883   36     .11     67,555    4     .01       (5.4) 
Time deposits
  39,554   610     3.11     25,747       51     .40       53.6 
Total interest-bearing deposits
  382,053   3,444     1.82     330,977    257     .16       15.4 
Short-term borrowings
                   
Federal funds purchased
  575   13     4.52     937    1     .16       (38.6) 
Securities sold under agreements to repurchase
  2,849   52     3.68     1,987    3     .14       43.4 
Commercial paper
  8,045   119     2.99     6,381    4     .06       26.1 
Other short-term borrowings
  33,900   1,008     6.00     11,873       70     .59       * 
Total short-term borrowings
  45,369   1,192     5.30     21,178    78     .75       * 
Long-term debt
  41,902   808     3.88     32,177       300     1.88       30.2 
Total interest-bearing liabilities
  469,324   5,444     2.34     384,332    635     .33       22.1 
Other liabilities
  24,509         18,184            34.8 
Shareholders’ equity
                   
Preferred equity
  6,808         6,714            1.4 
Common equity
  46,440         44,590            4.1 
Total U.S. Bancorp shareholders’ equity
  53,248         51,304            3.8 
Noncontrolling interests
  465         468            (.6) 
Total equity
  53,713         51,772            3.7 
Total liabilities and equity
 $669,251        $578,663            15.7 
Net interest income
  $9,117         $6,664         
Gross interest margin
      2.46%            2.42%        
Gross interest margin without taxable-equivalent increments
      2.44%            2.40%        
Percent of Earning Assets
                  
Interest income
      4.80%          2.75%      
Interest expense
      1.80            .24        
Net interest margin
      3.00%            2.51%        
Net interest margin without taxable-equivalent increments
               2.98%                        2.49%        
 
*
Not meaningful
(a)
Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent.
(b)
Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances.
 
U.S. Bancorp 
7581
Table of Contents
U.S. Bancorp
Consolidated Daily Average Balance Sheet and Related Yields and Rates (a)
  For the Nine Months Ended September 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 $170,267  $2,449      1.92%     $152,653    $1,793      1.57%       11.5% 
Loans held for sale  4,214   163      5.17      8,422     176      2.79       (50.0) 
Loans (b)                       
Commercial  120,723   2,653      2.94      102,298     2,060      2.69       18.0 
Commercial real estate  39,541   1,053      3.56      38,757     914      3.15       2.0 
Residential mortgages  80,589   1,937      3.21      74,215     1,870      3.36       8.6 
Credit card  22,907   1,827      10.66      21,391     1,701      10.63       7.1 
Other retail  60,971   1,629      3.57      58,353        1,594      3.65       4.5 
Total loans  324,731   9,099      3.74      295,014     8,139      3.69       10.1 
Interest-bearing deposits with banks  30,030   222      .99      37,947     27      .09       (20.9) 
Other earning assets  6,889   125      2.43      6,580        76      1.55       4.7 
Total earning assets  536,131   12,058      3.00      500,616     10,211      2.72       7.1 
Allowance for loan losses  (5,766)           (6,513)              11.5 
Unrealized gain (loss) on investment securities  (6,229)           1,304              * 
Other assets  57,931           55,792              3.8 
Total assets $582,067          $551,199              5.6 
Liabilities and Shareholders’ Equity
                       
Noninterest-bearing deposits $120,893          $124,262              (2.7)% 
Interest-bearing deposits                       
Interest checking  115,095   83      .10      101,280     18      .02       13.6 
Money market savings  122,943   523      .57      116,968     150      .17       5.1 
Savings accounts  67,632   6      .01      61,462     5      .01       10.0 
Time deposits  29,266   179      .82      25,067        72      .38       16.8 
Total interest-bearing deposits  334,936   791      .32      304,777     245      .11       9.9 
Short-term borrowings                       
Federal funds purchased  770   4      .65      1,623     1      .10       (52.6) 
Securities sold under agreements to repurchase  2,035   10      .62      1,737     2      .13       17.2 
Commercial paper  6,691   22      .44      6,894     —      .01       (2.9) 
Other short-term borrowings  14,329   213      1.99      4,504        49      1.45       * 
Total short- term borrowings  23,825   249      1.40      14,758     52      .47       61.4 
Long-term debt  32,055   498      2.07      37,196        464      1.67       (13.8) 
Total interest-bearing liabilities  390,816   1,538      .53      356,731     761      .28       9.6 
Other liabilities  19,088           16,247              17.5 
Shareholders’ equity                       
Preferred equity  6,746           6,049              11.5 
Common equity  44,058           47,278              (6.8) 
Total U.S. Bancorp shareholders’ equity  50,804           53,327              (4.7) 
Noncontrolling interests  466           632              (26.3) 
Total equity  51,270           53,959              (5.0) 
Total liabilities and equity $582,067          $551,199              5.6 
Net interest income  $10,520            $9,450          
Gross interest margin       2.47%               2.44%        
Gross interest margin without taxable-equivalent increments       2.45%               2.42%        
Percent of Earning Assets
                      
Interest income       3.00%             2.72%      
Interest expense       .38               .20        
Net interest margin       2.62%               2.52%        
Net interest margin without taxable-equivalent increments                2.60%                           2.50%        
*
Not meaningful
(a)
Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent.
(b)
Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances.
76
U.S. Bancorp
Table of Contents
Part II — Other Information
Item 1. Legal Proceedings
— See the information set forth in “Litigation and Regulatory Matters” in Note 16 in the Notes to Consolidated Financial Statements on page 7074 of this Report, which is incorporated herein by reference.
Item 1A. Risk Factors
— There are a number of factors that may adversely affect the Company’s business, financial results or stock price. Refer to “Risk Factors” in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2021,2022, for discussion of these risks.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
— See the information set forth in the “Capital Management” section on page 27 of this Report for information regarding shares repurchased by the Company during the thirdsecond quarter of 2022,2023, which is incorporated herein by reference.
On August 3, 2023, the Company issued 24 million shares of common stock of the Company to an affiliate of MUFG for a purchase price of $936 million. The proceeds of the issuance were used to repay a portion of the Company’s $3.5 billion debt obligation to MUFG. See “MUFG Union Bank Acquisition” on page 5 of this Report for further information.
Item 6. Exhibits
 
     3.1  Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.4 to the Company’s FormForm 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 SeptemberJune 30, 2022,2023, 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).
 
U.S. Bancorp
82
 
77
U.S. Bancorp
Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
  U.S. BANCORP
  By: /s/     L
ISA
R. S
TARK
  
 
Dated: November 1, 2022August 4, 2023   
Lisa R. Stark
Controller
(Principal Accounting Officer and Duly Authorized Officer)
 
78
U.S. Bancorp		 U.S. Bancorp
83
Table of Contents
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Andrew Cecere, certify that:
 
(1)
I have reviewed this Quarterly Report on Form
10-Q
of U.S. Bancorp;
 
(2)
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
(3)
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
(4)
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f)
and
15d-15(f))
for the registrant and have:
 
 (a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 (b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 (c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 (d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
(5)
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 (a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 (b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
/s/
S
/ A
NDREW
C
ECERE
Andrew Cecere
Chief Executive Officer
Dated: November 1, 2022August 4, 2023
 
U.S. Bancorp
84
 
79
U.S. Bancorp
Table of Contents
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Terrance R. Dolan, certify that:
 
(1)
I have reviewed this Quarterly Report on Form
10-Q
of U.S. Bancorp;
 
(2)
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
(3)
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
(4)
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f)
and
15d-15(f))
for the registrant and have:
 
 (a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 (b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 (c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 (d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
(5)
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 (a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 (b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
/s/
S
/    T
ERRANCE
R. D
OLAN
Terrance R. Dolan
Chief Financial Officer
Dated: November 1, 2022August 4, 2023
 
80
U.S. Bancorp		 U.S. Bancorp
85
Table of Contents
EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002200
2
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Chief Executive Officer and Chief Financial Officer of U.S. Bancorp, a Delaware corporation (the “Company”), do hereby certify that:
 
(1)
The Quarterly ReportR
ep
ort on Form
10-Q
for the quarter ended SeptemberJune 30, 20222023 (the “Form
10-Q”)
of the Company
Co
mpany fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2)
The information contained in the Form
10-Q
fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/    A
NDREW
C
ECERE
 
 
  /s/     T
ERRANCE
R. D
OLAN
Andrew Cecere
Chief Executive Officer
 
Dated: November 1, 2022August 4, 2023
   
Terrance R. Dolan
Chief Financial Officer
 
U.S. Bancorp
86
 
81
U.S. Bancorp
Table of Contents
Corporate Information
Executive Offices
U.S. Bancorp
800 Nicollet Mall
Minneapolis, MN 55402
Common Stock Transfer Agent and Registrar
Computershare acts as our transfer agent and registrar, dividend paying agent and dividend reinvestment plan administrator, and maintains all shareholder records for the Company. Inquiries related to shareholder records, stock transfers, changes of ownership, lost stock certificates, changes of address and dividend payment should be directed to the transfer agent at:
Computershare
P.O. Box 505000
Louisville, KY 40233
Phone:
888-778-1311 or 201-680-6578 (international calls)
or
201-680-6578
(international calls)
Internet: www.computershare.com/computershare.com/investor
Registered or Certified Mail:
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
Telephone representatives are available weekdays from 8 a.m. to 6 p.m., Central Time, and automated support is available 24 hours a day, seven days a week. Specific information about your account is available on Computershare’s Investor Center website.
Independent Auditor
Ernst & Young LLP serves as the independent auditor for U.S. Bancorp’s financial statements.
Common Stock Listing and Trading
U.S. Bancorp common stock is listed and traded on the New York Stock Exchange under the ticker symbol USB.
Dividends and Reinvestment Plan
U.S. Bancorp currently pays quarterly dividends on our common stock on or about the 15th day of January, April, July and October, subject to approval by our Board of Directors. U.S. Bancorp shareholders can choose to participate in a plan that provides automatic reinvestment of dividends and/or optional cash purchase of additional shares of U.S. Bancorp common stock. For more information, please contact our transfer agent, Computershare.
Investor Relations Contact
George Andersen
Senior Vice President, Director of Investor Relations
george.andersen@usbank.com
Phone: 612-303-4288 or 866-775-9668612-303-3620
Financial Information
U.S. Bancorp news and financial results are available through our website and by mail.
Website
For information about U.S. Bancorp, including news, financial results, annual reports and other documents filed with the Securities and Exchange Commission, visit usbank.com and click on
About Us
.
Mail
At your request, we will mail to you our quarterly earnings, news releases, quarterly financial data reported on Form
10-Q,
Form
10-K
and additional copies of our annual reports. Please contact:
U.S. Bancorp Investor Relations
800 Nicollet Mall
Minneapolis, MN 55402
investorrelations@usbank.com
Phone:
866-775-9668
Media Requests
David R. Palombi
Global Chief Communications Officer
Public Affairs and Communications
david.palombi@usbank.com
Phone:
612-303-3167
Privacy
U.S. Bancorp is committed to respecting the privacy of our customers and safeguarding the financial and personal information provided to us. To learn more about the U.S. Bancorp commitment to protecting privacy, visit usbank.com and click on
Privacy.Privacy
.
Code of Ethics
At U.S. Bancorp, our commitment to high ethical standards guides everything we do. Demonstrating this commitment through our words and actions is how each of us does the right thing every day for our customers, shareholders, communities and each other. Our ethical culture has been recognized by the Ethisphere Institute, which again named us to its World’s Most Ethical Companies
®
list.
For details about our Code of Ethics and Business Conduct, visit usbank.com and click on
About Us
and then
Investor Relations
then
Corporate Governance
, and then
Governance Documents
.
Diversity, Equity and Inclusion
At U.S. Bancorp, embracing diversity, championing equity and fostering inclusion are business imperatives. We view everything we do through a diversity, equity and inclusion lens to deepen our relationships with our stakeholders: our employees, customers, shareholders and communities.
Our employees bring their whole selves to work. We respect and value each other’s differences, strengths and perspectives, and we strive to reflect the communities we serve. This makes us stronger, more innovative and more responsive to our diverse customers’ needs.
Equal Opportunity and Affirmative Action
U.S. Bancorp and our subsidiaries are committed to providing Equal Employment Opportunity to all employees and applicants for employment. In keeping with this commitment, employment decisions are made based on abilities, not race, color, religion, creed, citizenship, national origin or ancestry, gender, age, disability, veteran status, sexual orientation, marital status, gender identity or expression, genetic information or any other factors protected by law. The Company complies with municipal, state and federal fair employment laws, including regulations applying to federal contractors.
U.S. Bancorp, including each of our subsidiaries, is an equal opportunity employer committed to creating a diverse workforce.
Accessibility
U.S. Bancorp is committed to providing ready access to our products and services so all of our customers, including people with disabilities, can succeed financially. To learn more, visit usbank.com and click on
Accessibility
.
 
 
 
 This report has been produced on recycled paper.