8-K
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 15, 2021

U.S. BANCORP

(Exact name of registrant as specified in its charter)

1-6880

(Commission File Number)

 

DELAWARE   41-0255900
(State or other jurisdiction   (I.R.S. Employer Identification
of incorporation)   Number)

 

800 Nicollet Mall
Minneapolis, Minnesota 55402
(Address of principal executive offices and zip code)

(651) 466-3000

(Registrant’s telephone number, including area code)

(not applicable)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 Under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

 

Title of each class

 

Trading
symbol

 

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 F Non-Cumulative Perpetual Preferred Stock, par value $1.00)   USB PrM   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
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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule l2b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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 l3(a) of the Exchange Act.  ☐

 

 

 


ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On April 15, 2021, U.S. Bancorp (the “Company”) issued a press release reporting quarter-ended March 31, 2021 results, and posted on its website its 1Q21 Earnings Conference Call Presentation, which contains certain additional historical and forward-looking information relating to the Company. The press release is included as Exhibit 99.1 hereto and is incorporated herein by reference. The information included in the press release is considered to be “filed” under the Securities Exchange Act of 1934. The 1Q21 Earnings Conference Call Presentation is included as Exhibit 99.2 hereto and is incorporated herein by reference. The information included in the 1Q21 Earnings Conference Call Presentation is considered to be “furnished” under the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference in any filings under the Securities Act of 1933. The press release and 1Q21 Earnings Conference Call Presentation contain forward-looking statements regarding the Company and each includes a cautionary statement identifying important factors that could cause actual results to differ materially from those anticipated.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits.

 

  99.1

Press Release issued by U.S. Bancorp on April 15, 2021, deemed “filed” under the Securities Exchange Act of 1934.

 

  99.2

1Q21 Earnings Conference Call Presentation, deemed “furnished” under the Securities Exchange Act of 1934.

 

   104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

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 hereunto duly authorized.

 

U.S. BANCORP
By /s/    Lisa R. Stark
Lisa R. Stark
Executive Vice President and
Controller

DATE: April 15, 2021

EX-99.1

Exhibit 99.1

 

    

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U.S. Bancorp Reports First Quarter 2021 Results

 

 Net revenue of $5.5 billion and net income of $2.3 billion

 Return on average assets of 1.69% and return on average common equity of 19.0%

 Common Equity Tier 1 capital ratio of 9.9% and strong levels of liquidity

 

 

    1Q21 Key Financial Data

 

 

1Q21 Highlights

                                   

 PROFITABILITY METRICS

    1Q21        4Q20        1Q20     

 

 

 

 

 

 

 

 

     

 

 

  Net income of $2,280 million and diluted earnings per common share of $1.45

 

  Return on average assets of 1.69% and return on average common equity of 19.0%

 

  Net revenue of $5,470 million, including $3,089 million of net interest income and $2,381 million of noninterest income

 

  Average total earning assets growth of 11.2% year-over-year

 

  Average total deposits growth of 17.5% year-over-year

 

  Net charge-off ratio of 0.31% in 1Q21 compared with 0.58% in 4Q20 and 0.53% in the 1Q20

 

  Allowance for credit losses declined $1,050 million during the quarter given improving economic outlook and credit trends

 

  Nonperforming assets decreased 7.4% on a linked quarter basis and increased 27.1% year-over year

 

  CET1 capital ratio increased to 9.9% at March 31, 2021, compared with 9.7% at December 31, 2020

 

 Return on average assets (%)

    1.69        1.10        .95   

 Return on average common equity (%)

    19.0        12.1        9.7   

 Return on tangible common

 equity (%) (a)

    24.3        15.6        12.6   

 Net interest margin (%)

    2.50        2.57        2.91   

 Efficiency ratio (%) (a)

    62.1        58.8        58.0   

 INCOME STATEMENT (b)

    1Q21        4Q20        1Q20   

 Net interest income (taxable-equivalent basis)

    $3,089        $3,201        $3,247   

 Noninterest income

    $2,381        $2,550        $2,525   

 Net income attributable to U.S. Bancorp

    $2,280        $1,519        $1,171   

 Diluted earnings per common share

    $1.45        $.95        $.72   

 Dividends declared per common share

    $.42        $.42        $.42   

 BALANCE SHEET (b)

    1Q21        4Q20        1Q20   

 Average total loans

    $293,989        $302,308        $297,657   

 Average total deposits

    $426,364        $422,413        $362,804   

 Net charge-off ratio

    .31%        .58%        .53%   

 Book value per common share (period end)

    $30.53        $31.26        $30.24   

 Basel III standardized CET1 (c)

    9.9%        9.7%        9.0%   

 

   

 

(a) See Non-GAAP Financial Measures reconciliation on page 16

 

 

 

(b) Dollars in millions, except per share data

 

 

 

(c) CET1 = Common equity tier 1 capital ratio

 

 

 

CEO Commentary

 

“A lot has changed in the last year, and our first quarter results were reflective of improving economic conditions and increasing consumer confidence and spending activity. Credit quality continues to perform better than we had expected – in fact, we incurred the bank’s lowest net charge-off ratio in recent decades – and an improved outlook for future performance allowed us to release over a billion dollars in reserves for credit losses. Our payments businesses are well-positioned to take advantage of the cyclical recovery and renewed business and consumer activity. In a similar fashion, we will continue to invest in capabilities to create growth, as evidenced by our advances in digital, our alliance with State Farm and our acquisition of talech, an important small business payments capability. These investments will drive revenue growth and further efficiencies that will create value for our business, customers and shareholders. Although the pandemic has disrupted most aspects of personal and professional life for more than a year, our employees have dedicated themselves to service and our company’s success. I appreciate their hard work and everything they continue to do to position us for better days ahead.”

— Andy Cecere, Chairman, President and CEO, U.S. Bancorp                    

 

In the Spotlight

 

U.S. Bank Access Commitment

U.S. Bank’s Access Commitment is a long-term approach bringing the strengths of the Company to help build wealth while redefining how the bank serves diverse communities and provides more opportunities for diverse employees. The focus is on supporting businesses owned by people of color, helping individuals and communities of color advance economically and enhancing career opportunities for employees and prospective employees. This includes a new fund focused on businesses owned by women of color, a mortgage program focused on homeownership education, a focus on building sustained wealth, financial inclusion partnerships, supply chain financing focused on diverse businesses, customized employee leadership development, and a change to how U.S. Bank fills open positions.

Most Ethical

For the seventh consecutive year, U.S. Bank has been named one of the World’s Most Ethical Companies by the Ethisphere Institute, a global leader in defining and advancing the standards of ethical business practices.

Best in Class Mobile Banking

The mobile check deposit feature of the U.S. Bank Mobile App has been recognized as best in class by Cornerstone Advisors in its 2021 Mobile Deposit Benchmark report. It was rated No. 1 in the industry for customer experience based on factors including deposit limits, real-time status updates, auto-capture functionality and more.

Most Admired

U.S. Bancorp was ranked No. 1 in the Superregional Banks category for the eleventh straight year in Fortune magazine’s annual World’s Most Admired Companies list. Fortune highlighted the following key U.S. Bancorp attributes that render success: Quality of Leadership, Value as a Long-term Investment, Soundness of Financial Position, and Wise Use of Corporate Assets.

 

 

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        Investor contact: Jennifer Thompson, 612.303.0778 | Media contact: Jeff Shelman, 612.422.1423


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   U.S. Bancorp First Quarter 2021 Results
      

 

  INCOME STATEMENT HIGHLIGHTS  
  ($ in millions, except per-share data)                         Percent Change    
      1Q 
2021 
     4Q 
2020 
     1Q 
2020 
     1Q21 vs 
4Q20 
     1Q21 vs 
1Q20 
 

Net interest income

     $3,063         $3,175         $3,223         (3.5)        (5.0)  

Taxable-equivalent adjustment

     26         26         24         --          8.3   

Net interest income (taxable-equivalent basis)

     3,089         3,201         3,247         (3.5)        (4.9)  

Noninterest income

     2,381         2,550         2,525         (6.6)        (5.7)  

Total net revenue

     5,470         5,751         5,772         (4.9)        (5.2)  

Noninterest expense

     3,379         3,364         3,316         .4         1.9   

Income before provision and income taxes

     2,091         2,387         2,456         (12.4)        (14.9)  

Provision for credit losses

     (827)        441         993         nm         nm   

Income before taxes

     2,918         1,946         1,463         49.9         99.5   

Income taxes and taxable-equivalent adjustment

     633         421         284         50.4         nm   

Net income

     2,285         1,525         1,179         49.8         93.8   

Net (income) loss attributable to noncontrolling interests

     (5)        (6)        (8)        16.7         37.5   

Net income attributable to U.S. Bancorp

     $2,280         $1,519         $1,171         50.1         94.7   

Net income applicable to U.S. Bancorp common shareholders

     $2,175         $1,425         $1,088         52.6         99.9   

Diluted earnings per common share

     $1.45         $.95         $.72         52.6         nm   
                                              

Net income attributable to U.S. Bancorp was $2,280 million for the first quarter of 2021, which was 94.7 percent higher than the $1,171 million for the first quarter of 2020, and 50.1 percent higher than the $1,519 million for the fourth quarter of 2020. Diluted earnings per common share were $1.45 in the first quarter of 2021, compared with $0.72 in the first quarter of 2020 and $0.95 in the fourth quarter of 2020.

The increase in net income year-over-year was primarily due to lower provision for credit losses, partially offset by lower net interest income and noninterest income in addition to higher noninterest expense. Net interest income decreased 4.9 percent on a year-over-year tax-equivalent basis, primarily due to the impact of lower rates compared with a year ago and higher premium amortization in the investment portfolio related to mortgage refinancing activities, partially offset by the benefit of deposit and funding mix as well as higher loan fees related to the Small Business Administration (“SBA”) Paycheck Protection Program. Net interest margin declined from a year ago to 2.50 percent in the first quarter of 2021 primarily due to the impact of a lower yield curve on earning assets, higher levels of liquidity and higher premium amortization within the investment portfolio, partially offset by the net benefit of deposit repricing and funding composition and higher loan fees. Noninterest income decreased 5.7 percent compared with a year ago, driven by lower mortgage banking revenue, deposit service charges, securities gains and other noninterest income, partially offset by improvement in trust and investment management fees and commercial products revenue. Noninterest expense increased 1.9 percent reflecting increases in personnel expense, primarily related to performance-based incentive compensation, as well as technology and communications expense, partially offset by lower net occupancy and equipment expense, marketing and business development expense, and other noninterest expense.

Net income increased on a linked quarter basis primarily due to lower provision for credit losses, partially offset by lower net interest income and noninterest income. Net interest income decreased 3.5 percent primarily due to lower average loan balances, the yield impact of prepayments, and two less days in the quarter, partially offset by the benefit of deposit and funding mix as well as higher loan fees. The net interest margin decreased on a linked quarter basis primarily reflecting the dilutive impact of investment portfolio reinvestment rates, premium amortization and mortgage prepayments, partially offset by lower cash balances. Noninterest income decreased 6.6 percent compared with the fourth quarter of 2020 driven by a decline in mortgage banking revenue, credit and debit card revenue, and other noninterest income, partially offset by higher commercial product revenue. Noninterest expense was relatively flat, reflecting higher personnel expense related to incentive compensation and the seasonal impact of payroll taxes, partially offset by lower professional services expense, marketing and business development expense and other noninterest expense.

 

 

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   U.S. Bancorp First Quarter 2021 Results
      

 

 NET INTEREST INCOME  
 (Taxable-equivalent basis; $ in millions)                         Change  
     

1Q

2021

    

4Q

2020

    

1Q

2020

     1Q21 vs
4Q20
     1Q21 vs
1Q20
 

Components of net interest income

              

Income on earning assets

     $3,367         $3,505         $4,142         $(138)         $(775)   

Expense on interest-bearing liabilities

     278         304         895         (26)         (617)   

Net interest income

     $3,089         $3,201         $3,247         $(112)         $(158)   

Average yields and rates paid

              

Earning assets yield

     2.73%         2.81%         3.71%         (.08)%         (.98)%   

Rate paid on interest-bearing liabilities

     .31            .33            1.02            (.02)            (.71)      

Gross interest margin

     2.42%         2.48%         2.69%         (.06)%         (.27)%   

Net interest margin

     2.50%         2.57%         2.91%         (.07)%         (.41)%   

Average balances

              

Investment securities (a)

     $145,520         $133,430         $120,843         $12,090         $24,677   

Loans

     293,989         302,308         297,657         (8,319)         (3,668)   

Earning assets

     497,711         497,437         447,722         274         49,989   

Interest-bearing liabilities

     360,582         362,445         352,761         (1,863)         7,821   

(a) Excludes unrealized gain (loss)

 

 

 

Net interest income on a taxable-equivalent basis in the first quarter of 2021 was $3,089 million, a decrease of $158 million (4.9 percent) compared with the first quarter of 2020. The decrease was primarily due to the impact of lower rates compared with a year ago and higher premium amortization related to securities prepayments, partially offset by the benefit of deposit and funding mix as well as higher loan fees. Average earning assets were $50.0 billion (11.2 percent) higher than the first quarter of 2020, reflecting increases of $24.7 billion (20.4 percent) in average investment securities and $23.7 billion (96.8 percent) in average other earning assets, including cash balances being maintained for liquidity given the current economic environment, while average total loans decreased $3.7 billion (1.2 percent) due to continued paydowns by corporate customers that accessed the capital markets last year.

Net interest income on a taxable-equivalent basis decreased $112 million (3.5 percent) on a linked quarter basis primarily due to a decline in average loan balances, the yield impact of prepayments on mortgage loans and securities and two less days in the quarter, partially offset by the benefit of deposit and funding mix as well as higher loan fees. Average earning assets were flat on a linked quarter basis, reflecting increases of $12.1 billion (9.1 percent) in average investment securities, partially offset by a decrease of $8.3 billion (2.8 percent) in average total loans, primarily due to continued paydowns by corporate customers, as well as a decrease of $4.7 billion (8.8 percent) in average other earning assets driven by lower cash balances on a linked quarter basis.

Net interest margin in the first quarter of 2021 was 2.50 percent, compared with 2.91 percent in the first quarter of 2020 and 2.57 percent in the fourth quarter of 2020. The decrease in the net interest margin from the prior year was primarily due to the impact of a lower yield curve on earning assets, higher premium amortization within the investment portfolio and decisions to maintain higher levels of liquidity, partially offset by the net benefit of deposit repricing and funding composition and higher loan fees. The decrease in net interest margin on a linked quarter basis reflects the dilutive impact of investment portfolio reinvestment rates, premium amortization and mortgage prepayments, partially offset by lower cash balances.

Given the current interest rates, we believe the first quarter will be the low point for net interest income with opportunity for growth in future quarters.

The increase in average investment securities on a linked quarter and year-over-year basis was due to purchases of mortgage-backed, U.S. Treasury and state and political securities net of prepayments and maturities.

 

 

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   U.S. Bancorp First Quarter 2021 Results
      

 

 AVERAGE LOANS  
 ($ in millions)                         Percent Change  
     

1Q

2021

    

4Q

2020

    

1Q

2020

     1Q21 vs
4Q20
    1Q21 vs
1Q20
 

Commercial

     $96,757         $100,863         $100,329         (4.1     (3.6

Lease financing

     5,334         5,558         5,658         (4.0     (5.7

Total commercial

     102,091         106,421         105,987         (4.1     (3.7

Commercial mortgages

     27,968         29,004         29,523         (3.6     (5.3

Construction and development

     10,818         11,094         10,555         (2.5     2.5  

Total commercial real estate

     38,786         40,098         40,078         (3.3     (3.2

Residential mortgages

     75,201         76,809         70,892         (2.1     6.1  

Credit card

     21,144         21,937         23,836         (3.6     (11.3

Retail leasing

     7,975         8,299         8,474         (3.9     (5.9

Home equity and second mortgages

     12,062         12,816         14,838         (5.9     (18.7

Other

     36,730         35,928         33,552         2.2       9.5  

Total other retail

     56,767         57,043         56,864         (.5     (.2

Total loans

     $293,989         $302,308         $297,657         (2.8     (1.2

 

 

 

Average total loans for the first quarter of 2021 were $3.7 billion (1.2 percent) lower than the first quarter of 2020. The decrease was primarily due to lower total commercial loans (3.7 percent) driven by continued paydowns by corporate customers that accessed the capital markets last year, lower credit card loans (11.3 percent) driven by higher customer payment rates given their excess liquidity from the government stimulus, and lower home equity and second mortgages (18.7 percent) as more customers chose to refinance their existing first lien residential mortgage balances during the prior year due to the low interest rate environment. These decreases were partially offset by growth in residential mortgages (6.1 percent) driven by loan repurchases from the Government National Mortgage Association (“GNMA”), as well as growth in other retail loans (9.5 percent) driven by growth in installment loans due to the impact of COVID-19 on recreational vehicle sales.

Average total loans were $8.3 billion (2.8 percent) lower than the fourth quarter of 2020 primarily driven by lower total commercial loans (4.1 percent), lower residential mortgages (2.1 percent), and lower home equity and second mortgages (5.9 percent), all as a result of customer paydowns.

 

 

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   U.S. Bancorp First Quarter 2021 Results
      

 

 AVERAGE DEPOSITS

 

 ($ in millions)                         Percent Change    
    

1Q 

2021 

    

4Q 

2020 

    

1Q 

2020 

     1Q21 vs
4Q20
    1Q21 vs
1Q20
 

Noninterest-bearing deposits

   $ 118,352       $ 115,148       $ 74,142         2.8       59.6  

Interest-bearing savings deposits

             

Interest checking

     97,385         91,384         77,359         6.6       25.9  

Money market savings

     124,825         127,390         121,946         (2.0     2.4  

Savings accounts

     58,848         55,730         48,048         5.6       22.5  

Total savings deposits

     281,058         274,504         247,353         2.4       13.6  

Time deposits

     26,954         32,761         41,309         (17.7     (34.8)  

Total interest-bearing deposits

     308,012         307,265         288,662         .2       6.7  

Total deposits

   $ 426,364       $ 422,413       $ 362,804         .9       17.5  

 

 

Average total deposits for the first quarter of 2021 were $63.6 billion (17.5 percent) higher than the first quarter of 2020, including approximately $10 billion related to the acquisition of deposit balances from State Farm Bank in the fourth quarter of 2020. Average noninterest-bearing deposits increased $44.2 billion (59.6 percent) across all business lines. Average total savings deposits were $33.7 billion (13.6 percent) higher year-over-year driven by Consumer and Business Banking and Wealth Management and Investment Services. Average time deposits were $14.4 billion (34.8 percent) lower than the prior year quarter primarily within Corporate and Commercial Banking. Changes in time deposits are largely related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.

Average total deposits increased $4.0 billion (0.9 percent) from the fourth quarter of 2020. On a linked quarter basis, average noninterest-bearing deposits increased $3.2 billion (2.8 percent) driven by Corporate and Commercial Banking and Wealth Management and Investment Services. Average total savings deposits increased $6.6 billion (2.4 percent) compared with the fourth quarter of 2020 primarily due to increases in Consumer and Business Banking and Wealth Management and Investment Services. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, decreased $5.8 billion (17.7 percent) on a linked quarter basis across all business lines.

The growth in average noninterest-bearing deposits and total average savings deposits year-over-year was primarily a result of the actions by the federal government to increase liquidity in the financial system, customers maintaining balance sheet liquidity by utilizing existing credit facilities and government stimulus programs.

 

 

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   U.S. Bancorp First Quarter 2021 Results
      

 

 NONINTEREST INCOME                                       
 ($ in millions)                         Percent Change    
     

1Q

2021

     4Q
2020
    

1Q

2020

    

1Q21 vs

4Q20

   

1Q21 vs

1Q20

 

Credit and debit card revenue

     $336         $362         $304         (7.2     10.5  

Corporate payment products revenue

     126         126         145         --        (13.1

Merchant processing services

     318         311         337         2.3       (5.6

Trust and investment management fees

     444         441         427         .7       4.0  

Deposit service charges

     161         165         209         (2.4     (23.0

Treasury management fees

     147         143         143         2.8       2.8  

Commercial products revenue

     280         239         246         17.2       13.8  

Mortgage banking revenue

     299         468         395         (36.1     (24.3

Investment products fees

     55         50         49         10.0       12.2  

Securities gains (losses), net

     25         34         50         (26.5     (50.0

Other

     190         211         220         (10.0     (13.6

Total noninterest income

     $2,381         $2,550         $2,525         (6.6     (5.7

 

 

First quarter noninterest income of $2,381 million was $144 million (5.7 percent) lower than the first quarter of 2020 primarily reflecting lower mortgage banking revenue, including a $145 million reduction in the fair value of mortgage servicing rights, net of hedging activities driven by the impact of prepayments on the servicing portfolio partially offset by higher production volume and related gain on sale margins compared with a year ago. During the past year, payment services revenue has been adversely affected by the impact of the pandemic on consumer spending, particularly related to travel and entertainment activities. However, consumer spending continues to strengthen across most sectors driven by government stimulus, local jurisdictions reducing restrictions and consumer behaviors normalizing. As a result, payments revenues are essentially flat compared with the first quarter of 2020. The components of payments revenue included higher credit and debit card revenue of $32 million (10.5 percent) driven by higher net interchange revenue related to sales volumes and higher prepaid fees as a result of government stimulus programs, more than offset by lower corporate payment products revenue of $19 million (13.1 percent) primarily due to lower business spending related to travel and entertainment and lower merchant processing services revenue of $19 million (5.6 percent) driven by lower sales volume and merchant fees. Deposit service charges decreased $48 million (23.0 percent) primarily due to lower consumer spending activities and higher consumer deposit levels related to government stimulus. Other noninterest income decreased $30 million (13.6 percent) primarily due to lower gains on sale of certain businesses and tax-advantaged investment syndication revenue in the first quarter of 2021, partially offset by higher retail leasing end of term residual gains. Partially offsetting the unfavorable impact of these fee categories, trust and investment management fees increased $17 million (4.0 percent) driven by business growth and favorable market conditions, while commercial products revenue increased $34 million (13.8 percent) primarily due to better market conditions and higher non-yield loan fees on unused commitments.

Noninterest income was $169 million (6.6 percent) lower in the first quarter of 2021 compared with the fourth quarter of 2020, reflecting lower mortgage banking revenue, payment services revenue and other noninterest income, partially offset by higher commercial product revenue. Mortgage banking revenue decreased $169 million (36.1 percent) due to the unfavorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities, and lower production volume and related gain on sale margins. Payment services revenue decreased $19 million (2.4 percent) compared with the fourth quarter of 2020 primarily driven by lower credit and debit card revenue of $26 million (7.2 percent) due to seasonally lower sales volume and lower prepaid fees related to the timing of government stimulus. Other noninterest income decreased $21 million (10.0 percent) primarily due to lower tax-advantaged investment syndication revenue, partially offset by a gain on sale of a business. These decreases were partially offset by higher commercial products revenue of $41 million (17.2 percent) primarily due to higher corporate bond fees and trading revenue.

 

 

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   U.S. Bancorp First Quarter 2021 Results
      

 

 NONINTEREST EXPENSE                                        
 ($ in millions)                         Percent Change  
     

1Q

2021

    

4Q

2020

    

1Q

2020

    

1Q21 vs

4Q20

    

1Q21 vs

1Q20

 

Compensation

   $ 1,803       $ 1,643       $ 1,620         9.7        11.3  

Employee benefits

     384         302         352         27.2        9.1  

Net occupancy and equipment

     263         269         276         (2.2      (4.7

Professional services

     98         123         99         (20.3      (1.0

Marketing and business development

     48         105         74         (54.3      (35.1

Technology and communications

     359         362         289         (.8      24.2  

Postage, printing and supplies

     69         74         72         (6.8      (4.2

Other intangibles

     38         47         42         (19.1      (9.5

Other

     317         439         492         (27.8      (35.6

Total noninterest expense

   $ 3,379       $ 3,364       $ 3,316         .4        1.9  
                                              

First quarter noninterest expense of $3,379 million was $63 million (1.9 percent) higher than the first quarter of 2020 reflecting increases in compensation expense, employee benefits expense, and technology and communications expense, partially offset by lower net occupancy and equipment expense, marketing and business development expense, and other noninterest expense. Compensation expense increased $183 million (11.3 percent) compared with the first quarter of 2020 due to merit, revenue-related compensation driven by business production in mortgage banking, performance-based incentives, and stock-based compensation. Employee benefits expense increased $32 million (9.1 percent) primarily due to payroll taxes and related benefits, as well as higher medical claims expense compared with the first quarter of 2020. Technology and communications expense increased $70 million (24.2 percent) primarily due to higher call center volume related to prepaid cards and capital expenditures supporting business technology investments. These increases were partially offset by lower net occupancy and equipment expense of $13 million (4.7 percent) primarily due to branch optimization initiatives and lower marketing and business development expense of $26 million (35.1 percent) due to a reduction in travel as a result of COVID-19. In addition, other noninterest expense decreased $175 million (35.6 percent) primarily due to higher COVID-19 related accruals in the first quarter of 2020 including recognizing liabilities related to future delivery exposures related to merchant and airline processing.

Noninterest expense increased $15 million (0.4 percent) on a linked quarter basis reflecting higher compensation and employee benefits expense, mostly offset by lower professional services expense, marketing and business development expense and other noninterest expense. Compensation expense increased $160 million (9.7 percent) primarily due to higher performance-based incentives and seasonally higher stock-based compensation as well as seasonally higher employee benefits of $82 million (27.2 percent) related to payroll taxes and medical claims expense. Partially offsetting these increases, professional services expense decreased $25 million (20.3 percent) and marketing and business development expense decreased $57 million (54.3 percent) primarily due to a seasonal reduction in spending. Other noninterest expense decreased $122 million (27.8 percent) due to higher COVID-19 related accruals in the fourth quarter of 2020, including liabilities related to future delivery exposures associated with merchant and airline processing as well as lower costs related to tax-advantaged projects in the first quarter of 2021.

Provision for Income Taxes

The provision for income taxes for the first quarter of 2021 resulted in a tax rate of 21.7 percent on a taxable-equivalent basis (effective tax rate of 21.0 percent), compared with 19.4 percent on a taxable-equivalent basis (effective tax rate of 18.1 percent) in the first quarter of 2020, and a tax rate of 21.6 percent on a taxable-equivalent basis (effective tax rate of 20.6 percent) in the fourth quarter of 2020. The increase in the tax rate, on a taxable-equivalent basis, is due to the marginal impact of providing taxes on higher pretax earnings in the first quarter of 2021.

 

 

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   U.S. Bancorp First Quarter 2021 Results
      

 

 

 ALLOWANCE FOR CREDIT LOSSES  
 ($ in millions)  

1Q

2021

    % (a)    

4Q

2020

    % (a)    

3Q

2020

    % (a)    

2Q

2020

    % (a)    

1Q

2020

    % (a)  

 

Balance, beginning of period

  $ 8,010       $ 8,010       $ 7,890       $ 6,590       $ 4,491    

Change in accounting principle (b)

    --          --          --          --          1,499    

Net charge-offs

                   

Commercial

    52       .22       142       .56       167       .60       105       .34       69       .28  

Lease financing

    4       .30       8       .57       11       .78       6       .43       5       .36  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total commercial

    56       .22       150       .56       178       .61       111       .35       74       .28  

Commercial mortgages

    (12     (.17     82       1.12       85       1.13       19       .25       (1     (.01

Construction and development

    5       .19       2       .07       (2     (.07     3       .11       (1     (.04
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total commercial real estate

    (7     (.07     84       .83       83       .81       22       .22       (2     (.02

Residential mortgages

    (5     (.03     (7     (.04     (3     (.02     (3     (.02     1       .01  

Credit card

    144       2.76       165       2.99       201       3.63       229       4.28       234       3.95  

Retail leasing

    1       .05       9       .43       20       .94       33       1.58       19       .90  

Home equity and second mortgages

    (2     (.07     (3     (.09     (2     (.06     --        --        1       .03  

Other

    36       .40       43       .48       38       .43       45       .54       66       .79  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total other retail

    35       .25       49       .34       56       .39       78       .56       86       .61  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total net charge-offs

    223       .31       441       .58       515       .66       437       .55       393       .53  

Provision for credit losses

    (827       441         635         1,737         993    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Balance, end of period

  $ 6,960       $ 8,010       $ 8,010       $ 7,890       $ 6,590    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Components

                   

Allowance for loan losses

  $ 6,343       $ 7,314       $ 7,407       $ 7,383       $ 6,216    

Liability for unfunded credit commitments

    617         696         603         507         374    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total allowance for credit losses

  $ 6,960       $ 8,010       $ 8,010       $ 7,890       $ 6,590    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Gross charge-offs

  $ 374       $ 556       $ 611       $ 522       $ 491    

Gross recoveries

  $ 151       $ 115       $ 96       $ 85       $ 98    

Allowance for credit losses as a percentage of Period-end loans

    2.36         2.69         2.61         2.54         2.07    

Nonperforming loans

    617         654         678         737         809    

Nonperforming assets

    579         617         631         673         697    

(a)  Annualized and calculated on average loan balances

 

   

(b)  Effective January 1, 2020, the Company adopted accounting guidance which changed impairment recognition of financial instruments to a model that is based on expected losses rather than incurred losses

 

   

 

 

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   U.S. Bancorp First Quarter 2021 Results
      

 

The Company’s provision for credit losses for the first quarter of 2021 was a benefit of $827 million, which was $1,268 million lower than the prior quarter and $1,820 million lower than the first quarter of 2020. During the first quarter of 2021, factors affecting economic conditions, including passing of additional government stimulus, widespread vaccine availability in the U.S. and reduced levels of new virus cases, have shifted to a clear improving trend not present in the fourth quarter of 2020 or a year ago. In addition to these factors, expected loss estimates considered various factors including customer specific information impacting changes in risk ratings, projected delinquencies and the impact of industry-wide loan modification efforts designed to limit long term effects of the pandemic. Currently, consumer credit trends continue to perform better than expected, although select commercial portfolios continue to be monitored for structural shifts associated with the pandemic.

Total net charge-offs in the first quarter of 2021 were $223 million, compared with $441 million in the fourth quarter of 2020, and $393 million in the first quarter of 2020. The net charge-off ratio was 0.31 percent in the first quarter of 2021, compared with 0.58 percent in the fourth quarter of 2020 and 0.53 percent in the first quarter of 2020. Net charge-offs decreased $218 million (49.4 percent) compared with the fourth quarter of 2020 mainly due to lower total commercial and total commercial real estate net charge-offs. Net charge-offs decreased $170 million (43.3 percent) compared with the first quarter of 2020 primarily due to lower total commercial, credit card and total other retail net charge-offs.

Nonperforming assets were $1,202 million at March 31, 2021, compared with $1,298 million at December 31, 2020, and $946 million at March 31, 2020. The ratio of nonperforming assets to loans and other real estate was 0.41 percent at March 31, 2021, compared with 0.44 percent at December 31, 2020, and 0.30 percent at March 31, 2020. The year-over-year increase in nonperforming assets was primarily due to increases in total commercial and total commercial real estate nonperforming loans. Accruing loans 90 days or more past due were $476 million at March 31, 2021, compared with $477 million at December 31, 2020, and $579 million at March 31, 2020. The Company expects credit quality to return to more normalized levels throughout the remainder of the year as the economy rebounds and consumer spending resumes. However, some manageable levels of elevated nonperforming assets in certain industries and loan categories yet to recover from pandemic related impacts are expected.

The allowance for credit losses was $6,960 million at March 31, 2021, compared with $8,010 million at December 31, 2020, and $6,590 million at March 31, 2020. The decrease on a linked quarter basis was driven by improvement in the global economy combined with government stimulus programs and vaccine availability compared with the reserve build during 2020 driven by the concerns associated with the economic impact of COVID-19. The ratio of the allowance for credit losses to period-end loans was 2.36 percent at March 31, 2021, compared with 2.69 percent at December 31, 2020, and 2.07 percent at March 31, 2020. The ratio of the allowance for credit losses to nonperforming loans was 617 percent at March 31, 2021, compared with 654 percent at December 31, 2020, and 809 percent at March 31, 2020.

 

 

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   U.S. Bancorp First Quarter 2021 Results
      

 

 

 DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES                  
 (Percent)   

Mar 31

2021

    

Dec 31

2020

    

Sep 30

2020

    

Jun 30

2020

    

Mar 31

2020

 

Delinquent loan ratios - 90 days or more past due excluding nonperforming loans

 

     

Commercial

     .06        .05        .06        .07        .06  

Commercial real estate

     .01        .01        --          --          --    

Residential mortgages

     .19        .18        .15        .16        .15  

Credit card

     .95        .88        .91        1.22        1.29  

Other retail

     .12        .15        .14        .16        .17  

Total loans

     .16        .16        .15        .18        .18  

Delinquent loan ratios - 90 days or more past due including nonperforming loans

 

     

Commercial

     .39        .42        .48        .45        .31  

Commercial real estate

     .94        1.15        .82        .48        .25  

Residential mortgages

     .54        .50        .46        .50        .49  

Credit card

     .95        .88        .91        1.22        1.29  

Other retail

     .42        .42        .40        .48        .45  

Total loans

     .54        .57        .53        .52        .44  
                                              

 

ASSET QUALITY (a)                                        
($ in millions)                                   
     

Mar 31

2021

    

Dec 31

2020

    

Sep 30

2020

    

Jun 30

2020

    

Mar 31

2020

 

Nonperforming loans

              

Commercial

     $298         $321         $403         $403         $276   

Lease financing

     49         54         56         53         33   

Total commercial

     347         375         459         456         309   

Commercial mortgages

     266         411         323         188         89   

Construction and development

     90         39                       12   

Total commercial real estate

     356         450         330         195         101   

Residential mortgages

     253         245         240         242         243   

Credit card

     --         --         --         --         --   

Other retail

     172         154         152         178         162   

Total nonperforming loans

     1,128         1,224         1,181         1,071         815   

Other real estate

     19         24         35         52         70   

Other nonperforming assets

     55         50         54         50         61   

Total nonperforming assets

     $1,202         $1,298         $1,270         $1,173         $946   

Accruing loans 90 days or more past due

     $476         $477         $461         $556         $579   

Nonperforming assets to loans plus ORE (%)

     .41         .44         .41         .38         .30   

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

 

 

 

 

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   U.S. Bancorp First Quarter 2021 Results
      

 

COMMON SHARES                                        
(Millions)    1Q      4Q      3Q      2Q      1Q  
      2021      2020      2020      2020      2020  

Beginning shares outstanding

     1,507         1,506         1,506         1,506         1,534   

Shares issued for stock incentive plans, acquisitions and other corporate purposes

                   --         --          

Shares repurchased

     (13      --         --         --         (31
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ending shares outstanding

     1,497         1,507         1,506         1,506         1,506   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
                                              

 

CAPITAL POSITION                                    
($ in millions)    Mar 31     Dec 31     Sep 30     Jun 30     Mar 31  
      2021     2020     2020     2020     2020  

Total U.S. Bancorp shareholders’ equity

   $ 51,678      $ 53,095      $ 52,565      $ 51,850      $ 51,532   

Basel III Standardized Approach (a)

          

Common equity tier 1 capital

   $ 39,103      $ 38,045      $ 37,485      $ 36,351      $ 36,224   

Tier 1 capital

     45,517        44,474        43,916        42,781        42,651   

Total risk-based capital

     53,625        52,602        52,086        51,457        51,277   

Common equity tier 1 capital ratio

     9.9      9.7      9.4      9.0      9.0 

Tier 1 capital ratio

     11.5        11.3        11.0        10.6        10.5   

Total risk-based capital ratio

     13.5        13.4        13.1        12.8        12.7   

Leverage ratio

     8.4        8.3        8.3        8.0        8.8   

Tangible common equity to tangible assets (b)

     6.6        6.9        7.0        6.7        6.7   

Tangible common equity to risk-weighted assets (b)

     9.1        9.5        9.3        9.0        8.9   

Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (b)

     9.5        9.3        9.0        8.7        8.6   

(a) Amounts and ratios calculated in accordance with transitional regulatory requirements related to the current expected credit losses methodology

 

(b) See Non-GAAP Financial Measures reconciliation on page 16

 

       

 

 

Total U.S. Bancorp shareholders’ equity was $51.7 billion at March 31, 2021, compared with $53.1 billion at December 31, 2020, and $51.5 billion at March 31, 2020. Beginning in March of 2020 and continuing through the remainder of 2020, the Company suspended all common stock repurchases except for those done exclusively in connection with its stock-based compensation programs. This action was initially taken to maintain strong capital levels given the impact and uncertainties of COVID-19 on the economy and global markets. Due to continued economic uncertainty, the Federal Reserve Board implemented measures beginning in the fourth quarter of 2020 and extending through the first quarter of 2021, restricting capital distributions of all large bank holding companies, including U.S. Bancorp. These restrictions include capping common stock dividends at existing rates and limiting the aggregate amount of common stock dividends and share repurchases to an amount not exceeding the average net income of the four preceding calendar quarters. Based on the results of the December 2020 Federal Reserve Stress Test, the Company announced its Board of Directors had approved an authorization to repurchase up to $3.0 billion of its common stock beginning January 1, 2021.

All regulatory ratios continue to be in excess of “well-capitalized” requirements. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III standardized approach was 9.9 percent at March 31, 2021, compared with 9.7 percent at December 31, 2020, and 9.0 percent at March 31, 2020. The Company’s common equity tier 1 capital to risk-weighted assets ratio, reflecting the full implementation of the current expected credit losses methodology was 9.5 percent at March 31, 2021, compared with 9.3 percent at December 31, 2020, and 8.6 percent at March 31, 2020.

 

 

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   U.S. Bancorp First Quarter 2021 Results
      

 

 

 

  Investor Conference Call

On Thursday, April 15, 2021, at 10 a.m. CT, Chairman, President and Chief Executive Officer Andy Cecere and Vice Chair and Chief Financial Officer Terry Dolan will host a conference call to review the financial results. The conference call will be available online or by telephone. To access the webcast and presentation, visit U.S. Bancorp’s website at usbank.com and click on “About Us,” “Investor Relations” and “Webcasts & Presentations.” To access the conference call from locations within the United States and Canada, please dial 866.316.1409. Participants calling from outside the United States and Canada, please dial 706.634.9086. The conference ID number for all participants is 2351343. For those unable to participate during the live call, a recording will be available at approximately 1 p.m. CT on Thursday, April 15 and will be accessible until Thursday, April 22 at 10:59 p.m. CT. To access the recorded message within the United States and Canada, please dial 855.859.2056. If calling from outside the United States and Canada, please dial 404.537.3406 to access the recording. The conference ID is 2351343.

 

 

  About U.S. Bancorp

U.S. Bancorp, with nearly 70,000 employees and $553 billion in assets as of March 31, 2021, is the parent company of U.S. Bank National Association, the fifth-largest commercial bank in the United States. The Minneapolis-based bank blends its relationship teams, branches and ATM network with digital tools that allow customers to bank when, where and how they prefer. U.S. Bank is committed to serving its millions of retail, business, wealth management, payment, commercial, corporate, and investment customers across the country and around the world as a trusted and responsible financial partner. This commitment continues to earn a spot on the Ethisphere Institute’s World’s Most Ethical Companies list and puts U.S. Bank in the top 5% of global companies assessed on the CDP A List for climate change action. Visit usbank.com for more.

 

 

 

  Forward-looking Statements

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

This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. The COVID-19 pandemic is adversely affecting U.S. Bancorp, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; further increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; civil unrest; changes in customer behavior and preferences; breaches in data security; failures to safeguard personal information; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk.

For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2020, 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. 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.

 

 

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   U.S. Bancorp First Quarter 2021 Results
      

 

 

 

  Non-GAAP Financial Measures

 

In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:

 

   

Tangible common equity to tangible assets

 
   

Tangible common equity to risk-weighted assets

 
   

Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology, and

 
   

Return on tangible common equity.

 

These capital measures are viewed by management as useful additional methods of evaluating the Company’s utilization of its capital held and the level of capital available to withstand unexpected negative market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Company’s capital position relative to other financial services companies. These capital measures are not defined in generally accepted accounting principles (“GAAP”), or are not currently effective or defined in banking regulations. In addition, certain of these measures differ from currently effective capital ratios defined by banking regulations principally in that the currently effective ratios, which are subject to certain transitional provisions, temporarily exclude the impact of the 2020 adoption of accounting guidance related to impairment of financial instruments based on the current expected credit losses 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 press release in their entirety, and not to rely on any single financial measure. A table follows that shows the Company’s calculation of these non-GAAP financial measures.

 

 

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   U.S. Bancorp First Quarter 2021 Results
      

 

CONSOLIDATED STATEMENT OF INCOME  
         Three Months Ended      
(Dollars and Shares in Millions, Except Per Share Data)    March 31,  
(Unaudited)    2021      2020  

Interest Income

     

Loans

     $2,724        $3,311  

Loans held for sale

     67        44  

Investment securities

     517        692  

Other interest income

     33        69  

Total interest income

     3,341        4,116  

Interest Expense

     

Deposits

     85        525  

Short-term borrowings

     16        71  

Long-term debt

     177        297  

Total interest expense

     278        893  

Net interest income

     3,063        3,223  

Provision for credit losses

     (827      993  

Net interest income after provision for credit losses

     3,890        2,230  

Noninterest Income

     

Credit and debit card revenue

     336        304  

Corporate payment products revenue

     126        145  

Merchant processing services

     318        337  

Trust and investment management fees

     444        427  

Deposit service charges

     161        209  

Treasury management fees

     147        143  

Commercial products revenue

     280        246  

Mortgage banking revenue

     299        395  

Investment products fees

     55        49  

Securities gains (losses), net

     25        50  

Other

     190        220  

Total noninterest income

     2,381        2,525  

Noninterest Expense

     

Compensation

     1,803        1,620  

Employee benefits

     384        352  

Net occupancy and equipment

     263        276  

Professional services

     98        99  

Marketing and business development

     48        74  

Technology and communications

     359        289  

Postage, printing and supplies

     69        72  

Other intangibles

     38        42  

Other

     317        492  

Total noninterest expense

     3,379        3,316  

Income before income taxes

     2,892        1,439  

Applicable income taxes

     607        260  

Net income

     2,285        1,179  

Net (income) loss attributable to noncontrolling interests

     (5      (8

Net income attributable to U.S. Bancorp

     $2,280        $1,171  

Net income applicable to U.S. Bancorp common shareholders

     $2,175        $1,088  

Earnings per common share

     $1.45        $.72  

Diluted earnings per common share

     $1.45        $.72  

Dividends declared per common share

     $.42        $.42  

Average common shares outstanding

     1,502        1,518  

Average diluted common shares outstanding

     1,503        1,519  

 

 

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 CONSOLIDATED ENDING BALANCE SHEET

 

  
 (Dollars in Millions)   

March 31,

2021

    

December 31,

2020

     March 31,
2020
 

Assets

     (Unaudited)           (Unaudited)  

Cash and due from banks

     $43,501        $62,580        $46,805  

Available-for-sale investment securities

     156,003        136,840        123,681  

Loans held for sale

     8,991        8,761        4,623  

Loans

        

Commercial

     104,158        102,871        126,317  

Commercial real estate

     38,432        39,311        40,980  

Residential mortgages

     73,624        76,155        71,175  

Credit card

     20,872        22,346        22,781  

Other retail

     57,341        57,024        57,052  

Total loans

     294,427        297,707        318,305  

Less allowance for loan losses

     (6,343      (7,314      (6,216

Net loans

     288,084        290,393        312,089  

Premises and equipment

     3,388        3,468        3,660  

Goodwill

     9,905        9,918        9,836  

Other intangible assets

     3,462        2,864        2,629  

Other assets

     40,041        39,081        39,586  

Total assets

     $553,375        $553,905        $542,909  

Liabilities and Shareholders’ Equity

        

Deposits

        

Noninterest-bearing

     126,754        $118,089        $91,432  

Interest-bearing

     307,007        311,681        303,422  

Total deposits

     433,761        429,770        394,854  

Short-term borrowings

     12,098        11,766        26,344  

Long-term debt

     37,419        41,297        52,298  

Other liabilities

     17,789        17,347        17,251  

Total liabilities

     501,067        500,180        490,747  

Shareholders’ equity

        

Preferred stock

     5,968        5,983        5,984  

Common stock

     21        21        21  

Capital surplus

     8,487        8,511        8,452  

Retained earnings

     65,740        64,188        62,544  

Less treasury stock

     (26,443      (25,930      (25,972

Accumulated other comprehensive income (loss)

     (2,095      322        503  

Total U.S. Bancorp shareholders’ equity

     51,678        53,095        51,532  

Noncontrolling interests

     630        630        630  

Total equity

     52,308        53,725        52,162  

Total liabilities and equity

     $553,375        $553,905        $542,909  

 

 

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 NON-GAAP FINANCIAL MEASURES

 

     March 31,     December 31,     September 30,     June 30,     March 31,  
(Dollars in Millions, Unaudited)    2021     2020     2020     2020     2020  

Total equity

     $52,308       $53,725       $53,195       $52,480       $52,162  

Preferred stock

     (5,968     (5,983     (5,984     (5,984     (5,984

Noncontrolling interests

     (630     (630     (630     (630     (630

Goodwill (net of deferred tax liability) (1)

     (8,992     (9,014     (8,992     (8,954     (8,958

Intangible assets, other than mortgage servicing rights

     (675     (654     (676     (678     (742

Tangible common equity (a)

     36,043       37,444       36,913       36,234       35,848  

Common equity tier 1 capital, determined in accordance with transitional regulatory capital requirements related to the current expected credit losses methodology implementation

     39,103       38,045       37,485       36,351       36,224  

Adjustments (2)

     (1,732     (1,733     (1,733     (1,702     (1,377

Common equity tier 1 capital, reflecting the full implementation of the current expected credit losses methodology (b)

     37,371       36,312       35,752       34,649       34,847  

Total assets

     553,375       553,905       540,455       546,652       542,909  

Goodwill (net of deferred tax liability) (1)

     (8,992     (9,014     (8,992     (8,954     (8,958

Intangible assets, other than mortgage servicing rights

     (675     (654     (676     (678     (742

Tangible assets (c)

     543,708       544,237       530,787       537,020       533,209  

Risk-weighted assets, determined in accordance with prescribed regulatory capital requirements effective for the Company (d)

     396,351     393,648       397,657       401,832       404,627  

Adjustments (3)

     (1,440)     (1,471     (1,449     (1,394     (958

Risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (e)

     394,911     392,177       396,208       400,438       403,669  

Ratios *

          

Tangible common equity to tangible assets (a)/(c)

     6.6       6.9       7.0       6.7       6.7  

Tangible common equity to risk-weighted assets (a)/(d)

     9.1       9.5       9.3       9.0       8.9  

Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (b)/(e)

     9.5       9.3       9.0       8.7       8.6  
          
     Three Months Ended  
     March 31,     December 31,     September 30,     June 30,     March 31,  
     2021     2020     2020     2020     2020  

Net income applicable to U.S. Bancorp common shareholders

     $2,175       $1,425       $1,494       $614       $1,088  

Intangibles amortization (net-of-tax)

     30       37       35       34       33  

Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization

     2,205       1,462       1,529       648       1,121  

Annualized net income applicable to U.S. Bancorp common shareholders, excluding intangible amortization (f)

     8,943       5,816       6,083       2,606       4,509  

Average total equity

     53,359       53,801       53,046       52,871       51,776  

Average preferred stock

     (6,213)       (6,217)       (5,984)       (5,984)       (5,984)  

Average noncontrolling interests

     (630)       (630)       (630)       (630)       (630)  

Average goodwill (net of deferred tax liability) (1)

     (9,010)       (9,003)       (8,975)       (8,960)       (8,825)  

Average intangible assets, other than mortgage servicing rights

     (649)       (673)       (711)       (706)       (688)  

Average tangible common equity (g)

     36,857       37,278       36,746       36,591       35,649  

Return on tangible common equity (f)/(g)

     24.3       15.6       16.6       7.1       12.6  

Net interest income

     $3,063       $3,175       $3,227       $3,200       $3,223  

Taxable-equivalent adjustment (4)

     26       26       25       24       24  

Net interest income, on a taxable-equivalent basis

     3,089       3,201       3,252       3,224       3,247  

Net interest income, on a taxable-equivalent basis (as calculated above)

     3,089       3,201       3,252       3,224       3,247  

Noninterest income

     2,381       2,550       2,712       2,614       2,525  

Less: Securities gains (losses), net

     25       34       12       81       50  

Total net revenue, excluding net securities gains (losses) (h)

     5,445       5,717       5,952       5,757       5,722  

Noninterest expense (i)

     3,379       3,364       3,371       3,318       3,316  

Efficiency ratio (i)/(h)

     62.1%       58.8%       56.6%       57.6%       58.0%  

 

*

Preliminary data. Subject to change prior to filings with applicable regulatory agencies.

(1)

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

(2)

Includes the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses 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 current expected credit losses 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.

 

 

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LINE OF BUSINESS FINANCIAL PERFORMANCE (a)  
($ in millions)    Net Income Attributable               
      to U.S. Bancorp      Percent Change  
Business Line    1Q
2021
     4Q
2020
    1Q  
2020  
     1Q21 vs
4Q20
    1Q21 vs
1Q20
 

Corporate and Commercial Banking

     $419        $381       $141          10.0       nm  

Consumer and Business Banking

     671        730       619          (8.1     8.4  

Wealth Management and Investment Services

     171        151       206          13.2       (17.0

Payment Services

     479        282       303          69.9       58.1  

Treasury and Corporate Support

     540        (25     (98)         nm       nm  
   

Consolidated Company

     $ 2,280      $ 1,519     $ 1,171          50.1       94.7  
   

(a) preliminary data

 

                                          

Lines of Business

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

 

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CORPORATE AND COMMERCIAL BANKING (a)  
($ in millions)                       Percent Change  
     

1Q

2021

   

4Q

2020

    

1Q  

2020  

    1Q21 vs
4Q20
    1Q21 vs
1Q20
 

Condensed Income Statement

                    

Net interest income (taxable-equivalent basis)

     $666       $731        $784         (8.9     (15.1

Noninterest income

     259       208        271         24.5       (4.4

Securities gains (losses), net

     --         --          --           --         --    

Total net revenue

     925       939        1,055         (1.5     (12.3

Noninterest expense

     406       392        443         3.6       (8.4

Other intangibles

     --         --          --           --         --    

Total noninterest expense

     406       392        443         3.6       (8.4

Income before provision and taxes

     519       547        612         (5.1     (15.2

Provision for credit losses

     (40     39        424         nm       nm  

Income before income taxes

     559       508        188         10.0       nm  

Income taxes and taxable-equivalent adjustment

     140       127        47         10.2       nm  

Net income

     419       381        141         10.0       nm  

Net (income) loss attributable to noncontrolling interests

     --         --          --           --         --    

Net income attributable to U.S. Bancorp

     $419       $381        $141         10.0       nm  
   

Average Balance Sheet Data

                    

Loans

     $94,872       $98,919        $103,368         (4.1     (8.2

Other earning assets

     4,308       4,141        4,555         4.0       (5.4

Goodwill

     1,647       1,647        1,647         --         --    

Other intangible assets

     5       6        7         (16.7     (28.6

Assets

     107,022       111,599        115,308         (4.1     (7.2
   

Noninterest-bearing deposits

     51,020       48,889        29,370         4.4       73.7  

Interest-bearing deposits

     67,750       76,357        80,657         (11.3     (16.0

Total deposits

     118,770       125,246        110,027         (5.2     7.9  
   

Total U.S. Bancorp shareholders’ equity

     13,074       14,146        14,182         (7.6     (7.8
   

(a) preliminary data

 

                                         

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 $419 million of the Company’s net income in the first quarter of 2021, compared with $141 million in the first quarter of 2020. Total net revenue decreased $130 million (12.3 percent) due to a decrease of $118 million (15.1 percent) in net interest income and a decrease of $12 million (4.4 percent) in total noninterest income. Net interest income decreased primarily due to the impact of declining interest rates on the margin benefit from deposits and lower loan balances, partially offset by favorable deposit mix with higher noninterest-bearing balances and higher loan fees. Total noninterest income decreased year-over-year primarily driven by lower capital markets activities, including trading revenue, and commercial leasing fees, partially offset by higher non-yield loan fees on unused commitments. Total noninterest expense declined $37 million (8.4 percent) compared with a year ago primarily due to lower net shared services expense and production incentives as well as lower marketing and business development expense driven by a reduction in travel as a result of COVID-19. The provision for credit losses decreased $464 million primarily due to a favorable change in the reserve allocation driven by improving credit risk ratings.

 

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CONSUMER AND BUSINESS BANKING (a)  
($ in millions)                       Percent Change  
     

1Q

2021

   

4Q

2020

    

1Q  

2020  

    1Q21 vs
4Q20
    1Q21 vs
1Q20
 

Condensed Income Statement

             

Net interest income (taxable-equivalent basis)

     $1,625       $1,634        $1,531         (.6     6.1  

Noninterest income

     617       791        757         (22.0     (18.5

Securities gains (losses), net

     --         --          --           --         --    

Total net revenue

     2,242       2,425        2,288         (7.5     (2.0

Noninterest expense

     1,388       1,431        1,336         (3.0     3.9  

Other intangibles

     3       4        4         (25.0     (25.0

Total noninterest expense

     1,391       1,435        1,340         (3.1     3.8  

Income before provision and taxes

     851       990        948         (14.0     (10.2

Provision for credit losses

     (44     16        123         nm       nm  

Income before income taxes

     895       974        825         (8.1     8.5  

Income taxes and taxable-equivalent adjustment

     224       244        206         (8.2     8.7  

Net income

     671       730        619         (8.1     8.4  

Net (income) loss attributable to noncontrolling interests

     --         --          --           --         --    

Net income attributable to U.S. Bancorp

     $671       $730        $619         (8.1     8.4  
   

Average Balance Sheet Data

                    

Loans

     $153,177       $156,729        $146,718         (2.3     4.4  

Other earning assets

     10,203       8,966        4,967         13.8       nm  

Goodwill

     3,475       3,475        3,574         --         (2.8

Other intangible assets

     2,491       2,137        2,411         16.6       3.3  

Assets

     175,541       176,811        161,886         (.7     8.4  
   

Noninterest-bearing deposits

     39,186       39,623        27,866         (1.1     40.6  

Interest-bearing deposits

     166,876       161,298        133,718         3.5       24.8  

Total deposits

     206,062       200,921        161,584         2.6       27.5  
   

Total U.S. Bancorp shareholders’ equity

     13,453       13,462        13,422         (.1     .2  
   

(a) preliminary data

 

                                         

Consumer and Business Banking delivers products and services through banking offices, telephone servicing and sales, on-line services, direct mail, ATM processing and mobile devices. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking.

Consumer and Business Banking contributed $671 million of the Company’s net income in the first quarter of 2021, compared with $619 million in the first quarter of 2020. Total net revenue decreased $46 million (2.0 percent) due to a decrease of $140 million (18.5 percent) in total noninterest income, partially offset by an increase in net interest income of $94 million (6.1 percent). Net interest income reflected continued strong growth in deposit balances and loan growth, driven by mortgage and indirect lending as well as by loans made under the SBA’s Paycheck Protection Program and GNMA buybacks. The increase in net interest income also reflected higher loan fees and favorable loan spreads, partially offset by the impact of declining interest rates on deposit spreads. Total noninterest income decreased primarily due to lower mortgage banking revenue reflecting a reduction in the fair value of mortgage servicing rights, net of hedging activities, partially offset by higher production volume and related gain of sale margins compared with a year ago as well as lower deposit service charges. Total noninterest expense increased $51 million (3.8 percent) primarily due to an increase in net shared services expense due to investments in digital capabilities and higher variable compensation related to mortgage banking origination activities. The provision for credit losses decreased $167 million due to a favorable change in the reserve allocation primarily reflecting lower delinquency rates in consumer portfolios and a reduction in end of period outstanding balances in the first quarter of 2021 compared with growth in the first quarter of 2020.

 

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WEALTH MANAGEMENT AND INVESTMENT SERVICES (a)  
($ in millions)                     Percent Change  
    

1Q

2021

   

4Q

2020

   

1Q  

2020  

    1Q21 vs
4Q20
    1Q21 vs
1Q20
 

Condensed Income Statement

                  

Net interest income (taxable-equivalent basis)

    $204       $222       $284         (8.1     (28.2

Noninterest income

    492       478       466         2.9       5.6  

Securities gains (losses), net

    --         --         --           --         --    

Total net revenue

    696       700       750         (.6     (7.2

Noninterest expense

    459       490       449         (6.3     2.2  

Other intangibles

    2       3       3         (33.3     (33.3

Total noninterest expense

    461       493       452         (6.5     2.0  

Income before provision and taxes

    235       207       298         13.5       (21.1

Provision for credit losses

    7       5       23         40.0       (69.6

Income before income taxes

    228       202       275         12.9       (17.1

Income taxes and taxable-equivalent adjustment

    57       51       69         11.8       (17.4

Net income

    171       151       206         13.2       (17.0

Net (income) loss attributable to noncontrolling interests

    --         --         --           --         --    

Net income attributable to U.S. Bancorp

    $171       $151       $206         13.2       (17.0
   

Average Balance Sheet Data

                  

Loans

    $12,443       $12,043       $10,608         3.3       17.3  

Other earning assets

    279       292       281         (4.5     (.7

Goodwill

    1,619       1,618       1,617         .1       .1  

Other intangible assets

    42       34       44         23.5       (4.5

Assets

    15,662       14,968       13,950         4.6       12.3  
   

Noninterest-bearing deposits

    20,277       18,699       13,232         8.4       53.2  

Interest-bearing deposits

    71,629       68,328       68,842         4.8       4.0  

Total deposits

    91,906       87,027       82,074         5.6       12.0  
   

Total U.S. Bancorp shareholders’ equity

    2,634       2,597       2,571         1.4       2.5  
   

(a) preliminary data

 

                                       

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 $171 million of the Company’s net income in the first quarter of 2021, compared with $206 million in the first quarter of 2020. Total net revenue decreased $54 million (7.2 percent) year-over-year reflecting a decrease in net interest income of $80 million (28.2 percent), partially offset by an increase of $26 million (5.6 percent) in noninterest income. Net interest income decreased year-over-year primarily due to the declining margin benefit of deposits given lower interest rates, partially offset by higher noninterest-bearing deposits and favorable deposit mix. Total noninterest income increased primarily due to the impact of core business growth on trust and investment management fees and favorable market conditions, partially offset by higher fee waivers related to money market funds. Total noninterest expense increased $9 million (2.0 percent) compared with the first quarter of 2020 reflecting increased other noninterest expense and higher salary expense due to merit in the current year quarter. The provision for credit losses decreased $16 million (69.6 percent) reflecting a favorable change in the reserve allocation primarily driven by stable credit quality relative to credit quality deterioration in the first quarter of 2020.

 

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PAYMENT SERVICES (a)  
($ in millions)                     Percent Change  
    

1Q

2021

   

4Q

2020

   

1Q  

2020  

    1Q21 vs
4Q20
    1Q21 vs
1Q20
 

Condensed Income Statement

                  

Net interest income (taxable-equivalent basis)

    $628       $651       $661         (3.5     (5.0

Noninterest income

    785       805       794         (2.5     (1.1

Securities gains (losses), net

    --         --         --           --         --    

Total net revenue

    1,413       1,456       1,455         (3.0     (2.9

Noninterest expense

    782       836       754         (6.5     3.7  

Other intangibles

    33       40       35         (17.5     (5.7

Total noninterest expense

    815       876       789         (7.0     3.3  

Income before provision and taxes

    598       580       666         3.1       (10.2

Provision for credit losses

    (41     204       262         nm       nm  

Income before income taxes

    639       376       404         69.9       58.2  

Income taxes and taxable-equivalent adjustment

    160       94       101         70.2       58.4  

Net income

    479       282       303         69.9       58.1  

Net (income) loss attributable to noncontrolling interests

    --         --         --           --         --    

Net income attributable to U.S. Bancorp

    $479       $282       $303         69.9       58.1  
   

Average Balance Sheet Data

                  

Loans

    $29,630       $30,992       $33,688         (4.4     (12.0

Other earning assets

    5       5       6         --         (16.7

Goodwill

    3,173       3,160       2,856         .4       11.1  

Other intangible assets

    544       572       557         (4.9     (2.3

Assets

    35,095       36,508       38,285         (3.9     (8.3
   

Noninterest-bearing deposits

    5,264       5,836       1,471         (9.8     nm  

Interest-bearing deposits

    132       130       114         1.5       15.8  

Total deposits

    5,396       5,966       1,585         (9.6     nm  
   

Total U.S. Bancorp shareholders’ equity

    7,480       7,700       7,619         (2.9     (1.8
   

(a) preliminary data

 

                                       

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 $479 million of the Company’s net income in the first quarter of 2021, compared with $303 million in the first quarter of 2020. Total net revenue decreased $42 million (2.9 percent) primarily due to lower net interest income of $33 million (5.0 percent) and slightly lower noninterest income of $9 million (1.1 percent). Net interest income decreased primarily due to lower loan balances, related to higher credit card payment rates, and loan fees, mostly offset by higher deposit balances as a result of state unemployment programs utilizing prepaid debit cards. Total noninterest income decreased year-over-year mainly due to the impact of COVID-19 on consumer spending, particularly related to travel and entertainment activities. However, consumer spending continues to strengthen across most sectors driven by government stimulus, local jurisdictions reducing restrictions and consumer behaviors normalizing resulting in payments revenues being essentially flat. Payments revenue included higher credit and debit card revenue driven by higher net interchange revenue related to sales volumes and higher prepaid fees as a result of government stimulus programs, offset by lower corporate payment products revenue primarily due to lower business spending related to travel and entertainment and lower merchant processing services revenue driven by lower sales volume and merchant fees. Total noninterest expense increased $26 million (3.3 percent) reflecting incremental costs related to the prepaid card business. The provision for credit losses decreased $303 million primarily due to lower delinquency rates in the first quarter of 2021.

 

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TREASURY AND CORPORATE SUPPORT (a)  
($ in millions)                     Percent Change  
    

1Q

2021

   

4Q

2020

   

1Q

2020

   

1Q21 vs

4Q20

    1Q21 vs
1Q20
 

Condensed Income Statement

           

Net interest income (taxable-equivalent basis)

    $(34)       $(37)       $(13)        8.1       nm  

Noninterest income

    203       234       187         (13.2     8.6  

Securities gains (losses), net

    25       34       50         (26.5     (50.0

Total net revenue

    194       231       224         (16.0     (13.4

Noninterest expense

    306       168       292         82.1       4.8  

Other intangibles

    --         --         --           --         --    

Total noninterest expense

    306       168       292         82.1       4.8  

Income (loss) before provision and taxes

    (112     63       (68)        nm       (64.7

Provision for credit losses

    (709     177       161         nm       nm  

Income (loss) before income taxes

    597       (114     (229)        nm       nm  

Income taxes and taxable-equivalent adjustment

    52       (95     (139)        nm       nm  

Net income (loss)

    545       (19     (90)        nm       nm  

Net (income) loss attributable to noncontrolling interests

    (5     (6     (8)        16.7       37.5  

Net income (loss) attributable to U.S. Bancorp

    $540       $(25     $(98)        nm       nm  
   

Average Balance Sheet Data

                  

Loans

    $3,867       $3,625       $3,275         6.7       18.1  

Other earning assets

    188,927       181,725       140,256         4.0       34.7  

Goodwill

    --         --         --           --         --    

Other intangible assets

    --         --         --           --         --    

Assets

    215,414       208,675       165,378         3.2       30.3  
   

Noninterest-bearing deposits

    2,605       2,101       2,203         24.0       18.2  

Interest-bearing deposits

    1,625       1,152       5,331         41.1       (69.5

Total deposits

    4,230       3,253       7,534         30.0       (43.9
   

Total U.S. Bancorp shareholders’ equity

    16,088       15,266       13,352         5.4       20.5  
   

(a) preliminary data

 

                                       

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 contributed $540 million of the Company’s net income in the first quarter of 2021, compared with a net loss of $98 million in the first quarter of 2020. Total net revenue decreased $30 million (13.4 percent) year-over-year due to decrease of $21 million in net interest income and a decrease in noninterest income of $9 million (3.8 percent). Net interest income decreased primarily due to higher premium amortization and lower reinvestment yields within the investment portfolio compared with a year ago. Total noninterest income decreased primarily due to lower other noninterest income driven by lower gains on sales of businesses and tax-advantaged investment syndication revenue, mostly offset by the impact of favorable market conditions. Total noninterest expense increased $14 million (4.8 percent) primarily due to higher compensation expense as a result of merit, performance-based incentives and stock-based compensation as well as related payroll taxes and benefits, mostly offset by lower COVID-19 related accruals compared with the first quarter of 2020 including recognizing liabilities related to future delivery exposures for merchant and airline processing and lower net shared services expense. The provision for credit losses decreased $870 million reflecting the residual impact of changes in the allowance for credit losses being impacted by improving economic conditions. 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.

 

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EX-99.2

Slide 1

U.S. Bancorp 1Q21 Earnings Conference Call April 15, 2021 Exhibit 99.2


Slide 2

Forward-looking Statements and Additional Information The following information appears in accordance with the Private Securities Litigation Reform Act of 1995: This presentation contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. The COVID-19 pandemic is adversely affecting U.S. Bancorp, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; further increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; civil unrest; changes in customer behavior and preferences; breaches in data security; failures to safeguard personal information; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk. For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2020, on file with the Securities and Exchange Commission, including the sections entitled “Risk Factors” and “Corporate Risk Profile” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. 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. 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. This presentation includes non-GAAP financial measures to describe U.S. Bancorp’s performance. The calculations of these measures are provided in the Appendix. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.


Slide 3

1Q21 Highlights * Taxable-equivalent basis; see slide 29 for calculation ** Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology was 9.5% as of 3/31/21. *** Earnings returned (millions) = total common dividends paid and aggregate value of common shares repurchased


Slide 4

Performance Ratios Efficiency Ratio* & Net Interest Margin** Return on Average Common Equity Return on Tangible Common Equity* Return on Average Assets * Non-GAAP; see slides 29 and 30 for calculations ** Net interest margin on a taxable-equivalent basis


Slide 5

Digital Engagement Trends Three months ended Three months ended * Represents core Consumer Banking customers active in at least one channel in the previous 90 days Total Digital includes both online and mobile platforms


Slide 6

Average Loans -2.8% linked quarter -1.2% year-over-year On a linked quarter basis, average total loans were lower primarily driven by a decline in total commercial loans, lower residential mortgages, and lower home equity and second mortgages, all as a result of customer paydowns. On a year-over-year basis, average total loans were lower primarily driven by a decline in total commercial loans, lower credit card loans, and lower home equity and second mortgages, partially offset by growth in residential mortgages (6.1 percent) driven by GNMA buybacks. $ in billions


Slide 7

Average Deposits +0.9% linked quarter +17.5% year-over-year Interest-bearing Deposits Average noninterest-bearing (NIB) deposits increased on both a linked quarter and year-over-year basis. On a linked quarter basis, the increase was primarily driven by Corporate and Commercial Banking and Wealth Management and Investment Services, while increases across all business lines drove year-over-year growth. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, were lower on both a linked quarter and year-over-year basis. The growth in average NIB deposits and total average savings deposits year-over-year was primarily a result of the actions by the federal government to increase liquidity in the financial system, customers maintaining balance sheet liquidity by utilizing existing credit facilities and government stimulus programs. $ in billions


Slide 8

Credit Quality NCO Ratio -27 bps QoQ -22 bps YoY NPAs -7.4% QoQ +27.1% YoY $ in millions


Slide 9

Credit Risk Management – Consistent Underwriting Allowance for Credit Losses by Loan Class, 1Q21 Key Points Prime-based lender for retail portfolios Investment grade equivalent in commercial portfolios with limited leveraged lending Commercial Real Estate lending is relationship-based with consistent underwriting Disciplined Credit Underwriting, 1Q21   Wtd Avg FICO/Bond rating equivalent* Avg LTV* Residential mortgage 773 69% Home equity 796 63% Auto loan 792 96% Auto lease 782 97% Credit card 775 N/A Commercial Baa3/BBB- N/A Commercial real estate Ba1/BB+ 58%   Amount ($B) Loans and Leases Outstanding (%) Commercial $1.9 1.9% Commercial Real Estate $1.5 4.0% Residential Mortgage $0.5 0.7% Credit Card $2.0 9.4% Other Retail $1.0 1.8% Total $7.0 2.4% Debt rating agencies: Moody’s and S&P * FICO and LTV at origination


Slide 10

Segments Outstanding Balances ($B) Segment Loans (%) Outstanding Balances ($B) Segment Loans (%) Commercial $0.1 0.1% $0.0 0.0% Commercial Real Estate $0.3 0.8% $0.2 0.6% Residential Mortgages** $2.8 4.2% $1.9 3.0% Credit Cards $0.1 0.4% $0.0 0.2% Other Retail $0.6 1.0% $0.4 0.6% Total $3.8 1.4% $2.5 0.9% Credit Risk Management – COVID-19 Impacted Industries Loans (%) Commitments (%) Loans (%) Commitments (%) Retail 3.8% 5.2% 3.6% 5.0% Malls (Secured & REITs) 0.4% 0.3% 0.3% 0.3% Energy 0.9% 2.2% 0.9% 2.2% Media & Entertainment 2.0% 2.2% 1.9% 2.2% Lodging 1.3% 1.0% 1.2% 0.9% Airline 0.3% 0.5% 0.3% 0.5% Payment Relief* Commitments for impacted industries were generally stable to slightly lower from the prior quarter Volume of new payment relief has reached a steady state since peaking in April 2020 Initial payment performance as borrowers exit payment relief is in line with expectations Commercial/Commercial Real Estate Exposures by Impacted Industries*** Key Points As of 12/31/20 As of 3/31/21 As of 12/31/20 As of 3/31/21 * Payment relief generally includes payment deferrals, forbearances, extensions and re-ages, and excludes loans made under the Small Business Administration’s (“SBA’s”) Paycheck Protection Program, as amounts due under that program are expected to be fully forgiven by the SBA. ** Residential mortgages are on balance sheet only and exclude GNMA Buybacks, which are government guaranteed. As of December 31, 2020, and March 31, 2021, 55.7% and 42.1%, respectively, of the GNMA Buybacks were in payment relief. *** Excludes operating leases and discretionary unfunded commitments


Slide 11

Earnings Summary


Slide 12

Net Interest Income Linked Quarter Net interest income decreased, primarily driven by a decline in average loan balances, the yield impact of prepayments on mortgage loans and securities and two fewer days in the quarter, partially offset by the benefit of deposit and funding mix as well as higher loan fees. The net interest margin decreased, reflecting the dilutive impact of investment portfolio reinvestment rates, premium amortization and mortgage prepayments, partially offset by lower cash balances. Year-over-Year Net interest income decreased, principally driven by the impact of lower rates from a year ago, and higher premium amortization related to securities prepayments, partially offset by the benefit of deposit and funding mix as well as higher loan fees. The net interest margin decreased, primarily due to the impact of a lower yield curve, higher premium amortization within the investment portfolio, and decisions to maintain higher cash balances for liquidity, partially offset by deposit repricing and funding mix and higher loan fees. -3.5% linked quarter -4.9% year-over-year $ in millions Net interest income on a taxable-equivalent basis; see slide 29 for calculation


Slide 13

Noninterest Income -6.6% linked quarter -5.7% year-over-year Linked Quarter Mortgage banking revenue decreased, due to lower production volume and related gain on sale margins, as well as the unfavorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities. Payment services revenue declined, driven by lower credit and debit card revenue due to seasonally lower sales volume and lower prepaid fees related to the timing of government stimulus. Other noninterest income decreased, primarily due to lower tax-advantaged investment syndication revenue, partially offset by a gain on sale of a business. Year-over-Year Payment services revenues are essentially flat compared with the first quarter of 2020, driven by higher credit and debit card revenue due to higher net interchange revenue and higher prepaid fees as a result of government stimulus programs, offset by lower corporate payment products and merchant processing services revenue. Deposit service charges decreased, primarily due to lower consumer spending activities and higher consumer deposit levels. Other noninterest income decreased, primarily due to lower gains on sale of certain businesses and tax-advantaged investment syndication revenue, partially offset by higher retail leasing end-of-term residual gains. $ in millions Payments = credit and debit card, corporate payment products and merchant processing Service charges = deposit service charges and treasury management All other = commercial products, investment products fees, securities gains (losses) and other


Slide 14

Payment Services Payment Fees as a % of Net Revenue 2019 1Q21 Merchant Acquiring Retail Payment Solutions Corporate Payment Solutions All Other Revenue Total payments revenue, which includes net interest income and fee revenue, accounted for 27% of FY19 net revenue and 26% of 1Q21 net revenue Merchant Acquiring Travel & Hospitality* 22% 16% Airline 15% 5% All Other 63% 79% CPS Travel & Entertainment 18% 5% All Other 82% 95% RPS** Travel*** (Credit & Debit) 7% 3% All Other 93% 97% % of Merchant Acquiring Volume 2019 1Q21 % of CPS Volume 2019 1Q21 % of RPS Volume 2019 1Q21 * Travel & Hospitality includes hotels, restaurants, entertainment & travel ** RPS includes credit, debit, and prepaid *** Travel includes airlines, auto rental, hotel/motel, other transportation, travel agencies Segment Volume as a % of Total Category Volume Payments fee revenues are essentially flat compared with the first quarter of 2020 Payments sales volumes have rebounded since bottoming in April 2020 Travel & hospitality, airline, and travel & entertainment may take longer to recover, but the revenue impact is mitigated by our broad product set


Slide 15

Payment Services Volume Growth * Travel & Hospitality includes hotels, restaurants, entertainment & travel ** RPS includes credit, debit, and prepaid *** Travel includes airlines, auto rental, hotel/motel, other transportation, travel agencies **** Monthly data ranging from January 2020 – March 2021 Merchant Sales Volume Growth**** 0% CPS Sales Volume Growth**** 0% RPS** Sales Volume Growth**** 0% Travel & Hospitality* All Other Total Airline Travel & Entertainment Total All Other Travel*** (Credit & Debit) All Other Total Volume Growth vs. 2019 Comparable Period Merchant Sales Volume Growth**** 0% CPS Sales Volume Growth**** 0% RPS** Sales Volume Growth**** 0% Travel & Hospitality* All Other Total Airline Travel & Entertainment Total All Other Travel*** (Credit & Debit) All Other Total Volume Growth YoY


Slide 16

Noninterest Expense +0.4% linked quarter +1.9% year-over-year Linked Quarter Compensation increased, primarily due to higher performance-based incentives and the first quarter impact of stock-based compensation. Employee benefits expense increased, driven by seasonally higher payroll taxes and medical claims expense. Other noninterest expense decreased, primarily due to higher COVID-19 related accruals in the fourth quarter of 2020, including liabilities related to future delivery exposures associated with merchant and airline processing as well as lower costs related to tax-advantaged projects in the first quarter of 2021. Year-over-Year Compensation expense increased, due to merit and variable compensation related to business production in mortgage banking and stock-based compensation. Technology and communications expense increased, primarily due to the impact of increased call center volume related to prepaid cards and capital expenditures supporting business growth. Other noninterest expense decreased, primarily due to higher COVID-19 related accruals in the first quarter of 2020 including recognizing liabilities related to future delivery exposures related to merchant and airline processing. $ in millions PPS = postage, printing and supplies


Slide 17

Capital Position * Ratios calculated in accordance with transitional regulatory requirements related to the current expected credit losses methodology ** Non-GAAP; see slide 31 for calculations


Slide 18

Appendix


Slide 19

Average Loans vs. 1Q20 Average total loans decreased by $3.7 billion, or 1.2% Average residential mortgage loans increased by $4.3 billion, or 6.1% Average commercial loans decreased by $3.9 billion, or 3.7% Average credit card loans decreased by $2.7 billion, or 11.3% vs. 4Q20 Average total loans decreased by $8.3 billion, or 2.8% Average commercial loans decreased by $4.3 billion, or 4.1% Average residential mortgage loans decreased by $1.6 billion, or 2.1% Key Points Year-over-Year Growth 4.0% 10.0% 6.4% 2.5% (1.2%) Commercial CRE Res Mtg Retail Credit Card Average Loans ($bn)


Slide 20

Year-over-Year Growth 8.2% 16.8% 15.9% 18.5% 17.5% Time Money Market Checking and Savings Noninterest-bearing Average Deposits Key Points Average Deposits ($bn) vs. 1Q20 Average total deposits increased by $63.6 billion, or 17.5% Average low-cost deposits (NIB, interest checking, savings and money market) increased by $77.9 billion, or 24.2% vs. 4Q20 Average total deposits increased by $4.0 billion, or 0.9% Average low-cost deposits (NIB, interest checking, savings and money market) increased by $9.8 billion, or 2.5%


Slide 21

Credit Quality – Commercial Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm1Q20 4Q20 1Q21 Average Loans$105,987 $106,421 $102,091 30-89 Delinquencies0.28% 0.31% 0.19% 90+ Delinquencies0.06% 0.05% 0.06% Nonperforming Loans0.24% 0.36% 0.33% Linked Quarter Growth 2.0% 20.8% (9.8%) (7.9%) (4.1%) Linked quarter loan decline of 4.1% was driven by lower revolving line utilization – utilization rates have continued to decline as corporate customers continue to pay down loans Net charge-offs declined due to lower gross charge-offs and higher recoveries linked quarter


Slide 22

A&D Const $203 Multi-family $4,040 Retail $221 Residential Construction $2,032 Office $1,049 Other $2,746 Residential Land $527 $mm1Q20 4Q20 1Q21 Average Loans$40,078 $40,098 $38,786 30-89 Delinquencies0.20% 0.47%0.31% 90+ Delinquencies0.00%0.01%0.01% Nonperforming Loans0.25% 1.14% 0.93% Credit Quality – Commercial Real Estate Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points Linked Quarter Growth 0.9% 2.5% (0.4%) (2.0%) (3.3%) Average loans decreased by 3.3% on a linked quarter basis Net charge-offs declined due to lower gross charge-offs and higher recoveries linked quarter


Slide 23

Credit Quality – Residential Mortgage Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm1Q204Q201Q21 Average Loans$70,892 $76,809 $75,201 30-89 Delinquencies0.23%0.32%0.28% 90+ Delinquencies0.15% 0.18% 0.19% Nonperforming Loans0.34%0.32%0.34% Linked Quarter Growth 1.4% 0.3% 6.6% 1.3% (2.1%) Originations continued to be high credit quality (weighted average FICO of 773, weighted average LTV of 69%) Customers in payment relief have continued to decline since peak in 2Q20 at 7.6% * Represents residential mortgage loan balances in forbearance; excludes GNMA loans, whose repayments are insured by the FHA or guaranteed by the Department of VA ($4.8 billion or 42.1% of loans in 1Q21)


Slide 24

Credit Quality – Credit Card Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm1Q204Q201Q21 Average Loans$23,836 $21,937$21,144 30-89 Delinquencies1.29% 1.04%0.90% 90+ Delinquencies1.29%0.88%0.95% Nonperforming Loans0.00%0.00%0.00% Linked Quarter Growth (1.1%) (9.8%) 2.5% (0.5%) (3.6%) Year over year decrease in average loans was driven by lower consumer spending and reduced marketing during the pandemic. Linked quarter decrease reflects seasonality and government stimulus payments used to pay down debt Credit quality of new originations remains strong Net charge-off rates decreased linked quarter driven by strong recoveries of previously charged off loans


Slide 25

Credit Quality – Home Equity Average Loans ($mm) and Net Charge-offs Ratio Key Points Linked Quarter Growth (2.5%) (3.0%) (5.8%) (5.4%) (5.9%) Key Statistics Key Statistics $mm1Q204Q201Q21 Average Loans$14,838 $12,816 $12,062 30-89 Delinquencies0.53%0.54%0.37% 90+ Delinquencies0.30%0.36%0.36% Nonperforming Loans0.75%0.86%1.09% Loans: 9% Wtd Avg LTV*: 75% Wtd Avg FICO*: 752 Lines: 91% Wtd Avg LTV*: 69% Wtd Avg FICO*: 758 *LTV and FICO at origination High-quality originations (weighted average FICO on commitments of 796, weighted average CLTV of 63%) driven primarily through the retail branch network to existing bank customers on their primary residences Net charge-offs continue to remain at low levels Nonperforming loans continue to increase due to foreclosure moratoria


Slide 26

Credit Quality – Retail Leasing Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm1Q204Q201Q21 Average Loans$8,474 $8,299 $7,975 30-89 Delinquencies0.52%0.43%0.34% 90+ Delinquencies0.04%0.05%0.01% Nonperforming Loans0.18%0.16%0.18% Linked Quarter Growth (0.1%) (0.7%) 0.3% (1.6%) (3.9%) Continued high-quality originations during 1Q21 (weighted average FICO of 782) Delinquencies remained at low levels and were favorably impacted by government stimulus payments in 1Q21 Charge-offs were lower driven by the favorable impact of higher vehicle values on both residual and credit losses * Manheim Used Vehicle Value Index source: www.manheimconsulting.com, January 1995 = 100, quarter value = average monthly ending values


Slide 27

Credit Quality – Other Retail Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm1Q204Q201Q21 Average Loans$33,552 $35,928 $36,730 30-89 Delinquencies0.79%0.60%0.40% 90+ Delinquencies0.14%0.10%0.07% Nonperforming Loans0.10%0.09%0.08% Linked Quarter Growth 0.1% 0.0% 3.6% 3.3% 2.2% Average loans increased linked quarter due to strong volume in auto loans and recreational vehicle and boat loans Delinquency and charge-offs remained at low levels driven by government stimulus payments to customers during the first quarter and generally lower consumer debt levels coming out of the pandemic


Slide 28

Credit Quality – Auto Loans Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm1Q204Q201Q21 Average Loans$19,276 $19,390 $19,881 30-89 Delinquencies1.08%0.83%0.55% 90+ Delinquencies0.12%0.11%0.06% Nonperforming Loans0.15%0.13%0.11% Direct: 4% Wtd Avg FICO: 761 NCO: 0.32% Indirect: 96% Wtd Avg FICO: 784 NCO: 0.24% Linked Quarter Growth (0.8%) (2.7%) 0.3% 3.0% 2.5% High quality originations reflect focus on prime credits (weighted average FICO of 792) Delinquency and charge-offs remained at low levels and were favorably impacted in 1Q21 by government stimulus payments Auto loans are included in Other Retail category


Slide 29

Non-GAAP Financial Measures (4) – see slide 32 for corresponding notes


Slide 30

Non-GAAP Financial Measures (1) – see slide 32 for corresponding notes


Slide 31

Non-GAAP Financial Measures * Preliminary data. Subject to change prior to filings with applicable regulatory agencies. (1), (2), (3) – see slide 32 for corresponding notes


Slide 32

Notes Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements. Includes the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology net of deferred taxes. Includes the impact of the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology. 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.


Slide 33

U.S. Bancorp 1Q21 Earnings Conference Call April 15, 2021

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