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 14, 2022

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 K Non-Cumulative Perpetual Preferred Stock, par value $1.00)   USB PrP   New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series L Non-Cumulative Perpetual Preferred Stock, par value $1.00)   USB PrQ   New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series M Non-Cumulative Perpetual Preferred Stock, par value $1.00)   USB PrR   New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series O Non-Cumulative Perpetual Preferred Stock, par value $1.00)   USB PrS   New York Stock Exchange
0.850% Medium-Term Notes, Series X (Senior), due June 7, 2024   USB/24B   New York Stock Exchange

Indicate by check mark whether the registrant 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 14, 2022, U.S. Bancorp (the “Company”) issued a press release reporting quarter-ended March 31, 2022 results, and posted on its website its 1Q22 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 “furnished” under the Securities Exchange Act of 1934. The 1Q22 Earnings Conference Call Presentation is included as Exhibit 99.2 hereto and is incorporated herein by reference. The information included in the 1Q22 Earnings Conference Call Presentation is considered to be “furnished” under the Securities Exchange Act of 1934. The press release and 1Q22 Earnings Conference Call Presentation shall not be deemed incorporated by reference in any filings under the Securities Act of 1933. The press release and 1Q22 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 14, 2022, deemed “furnished” under the Securities Exchange Act of 1934.

 

  99.2

1Q22 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 14, 2022

EX-99.1

Exhibit 99.1

 

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U.S. Bancorp Reports First Quarter 2022 Results

 

 Net income of $1.6 billion and net revenue of $5.6 billion

 Return on average assets of 1.09% and return on average common equity of 12.7%

 Common Equity Tier 1 capital ratio of 9.8% and strong levels of liquidity

 

 

    1Q22 Key Financial Data

  

 

1Q22 Highlights

    

     

 PROFITABILITY METRICS

    1Q22       4Q21       1Q21  

Return on average assets (%)

 

 

 

 

1.09

 

 

    1.16       1.69  

Return on average common equity (%)

    12.7       13.0       19.0  

Return on tangible common equity (%) (a)

    16.6       16.6       24.3  

Net interest margin (%)

    2.44       2.40       2.50  

Efficiency ratio (%) (a)

 

 

 

 

 

62.8

 

 

    62.3       62.1  

 INCOME STATEMENT (b)

    1Q22       4Q21       1Q21  

Net interest income (taxable-equivalent basis)

 

 

 

 

$3,200

 

 

    $3,150       $3,089  

Noninterest income

    $2,396       $2,534       $2,381  

Net income attributable to U.S. Bancorp

    $1,557       $1,673       $2,280  

Diluted earnings per common share

    $.99       $1.07       $1.45  

Dividends declared per common share

 

 

 

 

 

$.46

 

 

    $.46       $.42  

 BALANCE SHEET (b)

    1Q22       4Q21       1Q21  

Average total loans

 

 

 

 

$312,966

 

 

    $302,755       $293,989  

Average total deposits

    $454,176       $449,838       $426,364  

Net charge-off ratio

    .21%       .17%       .31%  

Book value per common share (period end)

    $29.87       $32.71       $30.53  

Basel III standardized CET1 (c)

 

 

 

 

 

9.8%

 

  

    10.0%        9.9%   

 

(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

 

 

  Net income of $1,557 million and diluted earnings per common share of $0.99

 

  Return on average assets of 1.09% and return on average common equity of 12.7%

 

  Net revenue of $5,596 million including $3,200 million of net interest income and $2,396 million of noninterest income

 

  Average total loans and earning assets growth of 6.5% year-over-year. Average total loans grew 3.4% on a linked quarter basis

 

  Average total deposits growth of 6.5% year-over-year and 1.0% linked quarter

 

  Net charge-off ratio of 0.21% in 1Q22 compared with 0.17% in 4Q21 and 0.31% in 1Q21

 

  Nonperforming assets decreased 7.6% on a linked quarter basis and 32.5% year-over-year

 

  CET1 capital ratio of 9.8% at March 31, 2022, compared with 10.0% at December 31, 2021, driven by strong loan growth

    

 

 

CEO Commentary

 

“In the first quarter, we reported earnings per share of $0.99 and a return on tangible common equity of 16.6%. Our results benefitted from healthy trends in consumer and business activity. We saw very strong loan growth, which drove solid growth in net interest income. Our fee revenue growth was supported by improving business activity and new business wins. Notably, we continued to see good momentum in our payments businesses reflecting both continued cyclical recovery in pandemic impacted industries, particularly travel and entertainment sectors, as well as the benefit from previous investments. We continue to manage our operating expenses prudently, even as we invest for the future, and we continue to benefit from the progress we are making on initiatives aimed at advancing our digital offerings, expanding our payment services capabilities and enhancing our core technology. We continue to work on integration activities related to our planned acquisition of Union Bank and we remain confident the strategic and financial merits of this deal will meaningfully enhance shareholder value and the combination will benefit our customers, our communities and our employees for years to come. Our credit quality remains strong, and we continue to approach credit decisions with a through the cycle lens. In summary, the year is off to a good start, and I would like to thank our employees for their hard work and dedication to serving all our constituents.”

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

 

In the Spotlight

 

Most Ethical

For the eighth 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. Ethisphere recognized 136 honorees spanning 22 countries and 45 industries. U.S. Bank is one of five honorees in the banking category. The award recognizes companies’ dedication to integrity, sustainability, governance and community.

U.S. Bank Partners with Microsoft as its Primary Cloud Provider

U.S. Bank announced plans for modernizing its technology foundation through the selection of Microsoft Azure as its primary cloud provider for the future. Powering the majority of its infrastructure and application portfolio with cloud computing will enable U.S. Bank to work more effectively in an increasingly digital world – including the ability to rapidly access and analyze data, expediting time to market while more quickly scaling innovative products to customers and partners, and empowering its increasingly agile workforce.

U.S. Bank and Driveway

U.S. Bank showcases its real-time payments capabilities collaborating with Driveway to pay car sellers immediately, with Driveway becoming the first online car dealership to pay customers over the RTP (real-time payments) network. Customers selling a car on Driveway.com can now have the payment deposited instantly into their bank account after a sale is complete and before the vehicle even leaves their driveway.

U.S. Bank to Provide ESG Data Solutions

U.S. Bank recently announced it will leverage Sustainalytics, a Morningstar Company and a leading global provider of ESG research and ratings, to offer environmental, social and governance (ESG) data solutions to U.S. Bank Global Fund Services clients where independent ESG analytics and reporting services are required.

 

 

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        Investor contact: Jennifer Thompson, 612.303.0778 | Media contact: Jeff Shelman, 612.303.9933


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   U.S. Bancorp First Quarter 2022 Results
      

 

  INCOME STATEMENT HIGHLIGHTS
  ($ in millions, except per-share data)                         Percent Change  
     

1Q

2022

    

4Q

2021

    

1Q

2021

    

1Q22 vs

4Q21

    

1Q22 vs 

1Q21 

 

Net interest income

     $3,173        $3,123        $3,063        1.6        3.6   

Taxable-equivalent adjustment

     27        27        26        --        3.8   

Net interest income (taxable-equivalent basis)

     3,200        3,150        3,089        1.6        3.6   

Noninterest income

     2,396        2,534        2,381        (5.4      .6   

Total net revenue

     5,596        5,684        5,470        (1.5      2.3   

Noninterest expense

     3,502        3,533        3,379        (.9      3.6   

Income before provision and income taxes

     2,094        2,151        2,091        (2.6      .1   

Provision for credit losses

     112        (13      (827      nm        nm   

Income before taxes

     1,982        2,164        2,918        (8.4      (32.1)  

Income taxes and taxable-equivalent adjustment

     424        486        633        (12.8      (33.0)  

Net income

     1,558        1,678        2,285        (7.2      (31.8)  

Net (income) loss attributable to noncontrolling interests

     (1      (5      (5      80.0        80.0   

Net income attributable to U.S. Bancorp

     $1,557        $1,673        $2,280        (6.9      (31.7)  

Net income applicable to U.S. Bancorp common shareholders

     $1,466        $1,582        $2,175        (7.3      (32.6)  

Diluted earnings per common share

     $.99        $1.07        $1.45        (7.5      (31.7)  
                                              

Net income attributable to U.S. Bancorp was $1,557 million for the first quarter of 2022, which was $723 million lower than the $2,280 million for the first quarter of 2021, and $116 million lower than the $1,673 million for the fourth quarter of 2021. Diluted earnings per common share were $0.99 in the first quarter of 2022, compared with $1.45 in the first quarter of 2021 and $1.07 in the fourth quarter of 2021.

The decrease in net income year-over-year was primarily due to a higher provision for credit losses. Pretax income before the provision for credit losses was essentially flat compared to a year ago. Net interest income increased 3.6 percent on a year-over-year taxable-equivalent basis due to higher loan and investment securities balances and favorable deposit and funding mix due in part to higher noninterest-bearing deposits, partially offset by lower loan yields and mix as well as lower loan fees driven by the impact of loan forgiveness related to the SBA Paycheck Protection Program (“PPP”) in the first quarter of 2021. The net interest margin declined from 2.50 percent in the first quarter of 2021 to 2.44 percent in the current quarter primarily due to changes in loan mix and lower loan spreads within fixed-rate portfolios from a year ago, partially offset by funding and yield curve favorability. Noninterest income increased 0.6 percent compared with a year ago primarily reflecting stronger payment services revenue, trust and investment management fees, deposit service charges and treasury management fees, mostly offset by lower commercial products revenue related to capital markets activities, mortgage banking revenue as refinancing activities decline, and other noninterest income. Noninterest expense increased 3.6 percent reflecting increases in compensation expense, professional services expense and marketing and business development expense. Provision for credit losses was higher due to reductions in the allowance for credit losses in the first quarter of 2021.

Net income decreased on a linked quarter basis due to higher provision for credit losses and seasonally lower noninterest income, partially offset by growth in net interest income and lower noninterest expense. Net interest income increased 1.6 percent on a taxable-equivalent basis primarily due to higher loan and investment portfolio balances as well as higher yields in the investment portfolio, partially offset by lower loan fees primarily driven by lower PPP loan forgiveness, loan mix, and two fewer days in the quarter. The net interest margin increased four basis points on a linked quarter basis reflecting the changing yield curve and lower cash balances, partially offset by the impact of loan mix. Noninterest income decreased 5.4 percent compared with the fourth quarter of 2021 driven by seasonally lower credit and debit card revenue, deposit service charges and mortgage banking revenue, partially offset by growth in trust and investment management fees. Noninterest expense decreased 0.9 percent on a linked quarter basis reflecting lower professional services expense, marketing and business development expense and technology and communications expense, partially offset by increases in employee benefits expense and other noninterest expense.

 

 

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   U.S. Bancorp First Quarter 2022 Results
      

 

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

1Q

2022

    

4Q

2021

    

1Q

2021

     1Q22 vs
4Q21
     1Q22 vs
1Q21
 

Components of net interest income

              

Income on earning assets

     $3,445         $3,382         $3,367         $63         $78   

Expense on interest-bearing liabilities

     245         232         278         13         (33)   

Net interest income

     $3,200         $3,150         $3,089         $50         $111   

Average yields and rates paid

              

Earning assets yield

     2.62%         2.58%         2.73%         .04%         (.11)%   

Rate paid on interest-bearing liabilities

     .26            .25            .31            .01            (.05)      

Gross interest margin

     2.36%         2.33%         2.42%         .03%         (.06)%   

Net interest margin

     2.44%         2.40%         2.50%         .04%         (.06)%   

Average balances

              

Investment securities (a)

     $174,762         $160,784         $145,520         $13,978         $29,242   

Loans

     312,966         302,755         293,989         10,211         18,977   

Interest-bearing deposits with banks

     29,851         45,751         41,784         (15,900)         (11,933)   

Earning assets

     529,837         522,535         497,711         7,302         32,126   

Interest-bearing liabilities

     378,223         363,880         360,582         14,343         17,641   
(a) Excludes unrealized gain (loss)               

 

 

 

Net interest income on a taxable-equivalent basis in the first quarter of 2022 was $3,200 million, an increase of $111 million (3.6 percent) compared with the first quarter of 2021. The increase was primarily due to higher loan and investment securities balances and favorable deposit and funding mix due in part to higher noninterest-bearing deposits, partially offset by lower loan yields and mix as well as lower loan fees, driven by the impact of loan forgiveness related to PPP in the first quarter of 2021. Average earning assets were $32.1 billion (6.5 percent) higher than the first quarter of 2021, reflecting an increase of $29.2 billion (20.1 percent) in average investment securities and an increase of $19.0 billion (6.5 percent) in average total loans, while average interest-bearing deposits with banks decreased $11.9 billion (28.6 percent).

Net interest income on a taxable-equivalent basis increased $50 million (1.6 percent) on a linked quarter basis primarily due to higher loan and investment portfolio balances as well as higher yields in the investment portfolio, partially offset by lower loan fees primarily driven by lower PPP loan forgiveness, loan mix, and two fewer days in the quarter. Average earning assets were $7.3 billion (1.4 percent) higher on a linked quarter basis, reflecting increases of $14.0 billion (8.7 percent) in average investment securities and $10.2 billion (3.4 percent) in average loans, while average interest-bearing deposits with banks decreased $15.9 billion (34.8 percent).

The net interest margin in the first quarter of 2022 was 2.44 percent, compared with 2.50 percent in the first quarter of 2021 and 2.40 percent in the fourth quarter of 2021. The decrease in the net interest margin from the prior year was primarily due to the mix of loans and lower loan spreads within fixed-rate portfolios, partially offset by funding and yield curve favorability. The increase in interest margin on a linked quarter basis reflected the changing yield curve and lower cash balances, partially offset by the impact of loan mix. The increase in average investment securities year-over-year and on a linked quarter basis was due to purchases of mortgage-backed and U.S. Treasury securities, net of prepayments, sales and maturities.

 

 

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   U.S. Bancorp First Quarter 2022 Results
      

 

 AVERAGE LOANS
 ($ in millions)                         Percent Change  
      1Q
2022
     4Q
2021
     1Q
2021
     1Q22 vs
4Q21
    1Q22 vs
1Q21
 

Commercial

     $107,819         $99,433         $96,757         8.4       11.4  

Lease financing

     5,003         5,075         5,334         (1.4     (6.2

Total commercial

     112,822         104,508         102,091         8.0       10.5  

Commercial mortgages

     28,826         28,216         27,968         2.2       3.1  

Construction and development

     10,258         10,635         10,818         (3.5     (5.2

Total commercial real estate

     39,084         38,851         38,786         .6       .8  

Residential mortgages

     77,449         75,858         75,201         2.1       3.0  

Credit card

     21,842         22,399         21,144         (2.5     3.3  

Retail leasing

     7,110         7,354         7,975         (3.3     (10.8

Home equity and second mortgages

     10,394         10,568         12,062         (1.6     (13.8

Other

     44,265         43,217         36,730         2.4       20.5  

Total other retail

     61,769         61,139         56,767         1.0       8.8  

Total loans

     $312,966         $302,755         $293,989         3.4       6.5  

 

 

 

Average total loans for the first quarter of 2022 were $19.0 billion (6.5 percent) higher than the first quarter of 2021. The increase was primarily due to growth in commercial loans (11.4 percent), residential mortgages (3.0 percent) and other retail loans (20.5 percent), partially offset by lower home equity and second mortgages (13.8 percent). The strong growth in other retail loans was driven by auto and recreational vehicle lending during 2021. The increase in commercial loans was due to higher utilization driven by working capital needs of corporate customers, slower pay-offs given higher volatility in the capital markets and core growth, partly offset by expected reductions related to the forgiveness of loans in the SBA Paycheck Protection Program. The increase in residential mortgages was driven by stronger on-balance sheet loan activities and slower refinance activity. In addition, credit card loans increased 7.9 percent on a year-over-year basis, adjusting for the impact of a card portfolio transferred to loans held-for-sale during the fourth quarter of 2021.

Average total loans were $10.2 billion (3.4 percent) higher than the fourth quarter of 2021 primarily due to higher commercial loans (8.4 percent) driven by continued strong new business and higher utilization, residential mortgages (2.1 percent) and other retail loans (2.4 percent). Adjusting for the impact of the card portfolio transferred to loans held-for sale in the fourth quarter of 2021, credit card loans were 0.5 percent higher on a linked quarter basis.

 

 

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   U.S. Bancorp First Quarter 2022 Results
      

 

 AVERAGE DEPOSITS
 ($ in millions)                         Percent Change    
     1Q       4Q       1Q       1Q22 vs     1Q22 vs  
      2022       2021       2021       4Q21     1Q21  

Noninterest-bearing deposits

   $ 127,963       $ 135,936       $ 118,352         (5.9     8.1  

Interest-bearing savings deposits

             

Interest checking

     115,062         108,889         97,385         5.7       18.2  

Money market savings

     119,588         117,462         124,825         1.8       (4.2

Savings accounts

     66,978         64,763         58,848         3.4       13.8  

Total savings deposits

     301,628         291,114         281,058         3.6       7.3  

Time deposits

     24,585         22,788         26,954         7.9       (8.8

Total interest-bearing deposits

     326,213         313,902         308,012         3.9       5.9  

Total deposits

   $ 454,176       $ 449,838       $ 426,364         1.0       6.5  

 

 

Average total deposits for the first quarter of 2022 were $27.8 billion (6.5 percent) higher than the first quarter of 2021. Average noninterest-bearing deposits increased $9.6 billion (8.1 percent) primarily within Corporate and Commercial Banking and Wealth Management and Investment Services. Average total savings deposits were $20.6 billion (7.3 percent) higher year-over-year driven by Consumer and Business Banking and Corporate and Commercial Banking, partially offset by a decrease in Wealth Management and Investment Services. Average time deposits were $2.4 billion (8.8 percent) lower than the prior year primarily within Consumer and Business Banking and Wealth Management and Investment Services, partially offset by an increase in Corporate and Commercial Banking. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.

Average total deposits grew $4.3 billion (1.0 percent) from the fourth quarter of 2021. On a linked quarter basis, average noninterest-bearing deposits were lower by $8.0 billion (5.9 percent) with seasonal decreases across all business lines. Average total savings deposits increased $10.5 billion (3.6 percent) compared with the fourth quarter of 2021 driven by increases in Corporate and Commercial Banking and Consumer and Business Banking, partially offset by a decrease in Wealth Management and Investment Services. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, were $1.8 billion (7.9 percent) higher on a linked quarter basis primarily within Corporate and Commercial Banking.

 

 

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   U.S. Bancorp First Quarter 2022 Results
      

 

NONINTEREST INCOME                          
($ in millions)                         Percent Change    
     1Q      4Q      1Q      1Q22 vs      1Q22 vs  
      2022      2021      2021      4Q21      1Q21  

Credit and debit card revenue

     $338         $382         $336         (11.5      .6  

Corporate payment products revenue

     158         155         126         1.9        25.4  

Merchant processing services

     363         365         318         (.5      14.2  

Trust and investment management fees

     500         483         444         3.5        12.6  

Deposit service charges

     177         193         161         (8.3      9.9  

Treasury management fees

     156         152         147         2.6        6.1  

Commercial products revenue

     266         265         280         .4        (5.0

Mortgage banking revenue

     200         298         299         (32.9      (33.1

Investment products fees

     62         62         55         --        12.7  

Securities gains (losses), net

     18         15         25         20.0        (28.0

Other

     158         164         190         (3.7      (16.8

Total noninterest income

   $ 2,396       $ 2,534       $ 2,381         (5.4      .6  

 

 

First quarter noninterest income of $2,396 million was $15 million (0.6 percent) higher than the first quarter of 2021 reflecting strong payment services revenue, growth in trust and investment management fees, and improving deposit service charges, and treasury management fees, mostly offset by lower commercial products revenue, mortgage banking revenue, and other noninterest income. Payment services revenue increased $79 million (10.1 percent) compared with the first quarter of 2021 as corporate payment products revenue increased $32 million (25.4 percent) primarily due to higher sales volume and merchant processing services revenue increased $45 million (14.2 percent) driven by higher sales volumes and merchant fees. Trust and investment management fees increased $56 million (12.6 percent) driven by business growth, favorable market conditions and activity related to the fourth quarter of 2021 acquisition of PFM Asset Management LLC (“PFM”), partially offset by higher fee waivers. Deposit service charges increased $16 million (9.9 percent) primarily due to higher customer spend activity, net of the impact of the elimination of certain consumer NSF fees in the first quarter of 2022. Treasury management fees increased $9 million (6.1 percent) primarily due to core growth given the continued recovery in the economy. Partially offsetting these increases, commercial products revenue decreased $14 million (5.0 percent) primarily due to lower corporate bond fees and trading revenue within the capital markets business. Mortgage banking revenue decreased $99 million (33.1 percent) compared with the first quarter of 2021 due to lower application volumes, given declining refinance activities, and lower related gain on sale margins, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities, as well as higher performing loan sales. Other noninterest income decreased $32 million (16.8 percent) driven by the impact of prior year asset sales and lower retail leasing end-of-term residual gains in the first quarter of 2022.

Noninterest income was $138 million (5.4 percent) lower in the first quarter of 2022 compared with the fourth quarter of 2021 reflecting lower credit and debit card revenue, deposit service charges and mortgage banking revenue, partially offset by higher trust and investment management fees. Credit and debit card revenue decreased $44 million (11.5 percent) due to seasonally lower sales volume and rate as well as lower prepaid card processing fees. Deposit service charges decreased $16 million (8.3 percent) on a linked quarter basis primarily due to seasonally lower volumes and the impact of the elimination of certain consumer NSF fees in the first quarter of 2022 net of higher customer activity. Mortgage banking revenue decreased $98 million (32.9 percent) driven by lower application volume and related gain on sale margins as well as lower performing loan sales, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities. Partially offsetting these decreases, trust and investment management fees increased $17 million (3.5 percent) driven by the PFM acquisition, partially offset by unfavorable market conditions and lower fees.

 

 

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   U.S. Bancorp First Quarter 2022 Results
      

 

 NONINTEREST EXPENSE                                        
 ($ in millions)                         Percent Change  
      1Q
2022
     4Q
2021
     1Q
2021
     1Q22 vs
4Q21
     1Q22 vs
1Q21
 

Compensation

   $ 1,853       $ 1,851       $ 1,803         .1        2.8  

Employee benefits

     396         372         384         6.5        3.1  

Net occupancy and equipment

     269         268         263         .4        2.3  

Professional services

     114         160         98         (28.8      16.3  

Marketing and business development

     80         129         48         (38.0      66.7  

Technology and communications

     349         372         359         (6.2      (2.8

Postage, printing and supplies

     72         71         69         1.4        4.3  

Other intangibles

     47         40         38         17.5        23.7  

Other

     322         270         317         19.3        1.6  

Total noninterest expense

   $ 3,502       $ 3,533       $ 3,379         (.9      3.6  
                                              

First quarter noninterest expense of $3,502 million was $123 million (3.6 percent) higher than the first quarter of 2021 reflecting increases in compensation expense, professional services expense and marketing and business development expense. Compensation expense increased $50 million (2.8 percent) compared with the first quarter of 2021 primarily due to merit and hiring to support business growth, partially offset by lower performance-based incentives. Professional services expense increased $16 million (16.3 percent) primarily due to an increase in business investment and related initiatives. Marketing and business development expense increased $32 million (66.7 percent) due to the timing of marketing campaigns as well as increased travel and entertainment.

Noninterest expense decreased $31 million (0.9 percent) on a linked quarter basis reflecting lower professional services expense, and marketing and business development expense, partially offset by a seasonal increase in employee benefits expense and higher other noninterest expense. Professional services expense decreased $46 million (28.8 percent) primarily due to timing of certain initiatives in the fourth quarter of 2021. Marketing and business development expense decreased $49 million (38.0 percent) due to the timing of marketing campaigns. Partially offsetting these decreases, employee benefits expense increased $24 million (6.5 percent) mainly driven by seasonally higher payroll taxes. Other noninterest expense increased $52 million (19.3 percent) primarily due to higher FDIC insurance costs as well as other accruals, mostly offset by seasonally lower costs related to tax-advantaged investments.

Provision for Income Taxes

The provision for income taxes for the first quarter of 2022 resulted in a tax rate of 21.4 percent on a taxable-equivalent basis (effective tax rate of 20.3 percent), compared with 21.7 percent on a taxable-equivalent basis (effective tax rate of 21.0 percent) in the first quarter of 2021, and a tax rate of 22.5 percent on a taxable-equivalent basis (effective tax rate of 21.5 percent) in the fourth quarter of 2021.

 

 

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   U.S. Bancorp First Quarter 2022 Results
      

 

 ALLOWANCE FOR CREDIT LOSSES  
 ($ in millions)   1Q
2022
    % (a)     4Q
2021
    % (a)     3Q
2021
    % (a)     2Q
2021
    % (a)     1Q
2021
    % (a)  

Balance, beginning of period

  $ 6,155       $ 6,300       $ 6,610       $ 6,960       $ 8,010    

Net charge-offs

                   

Commercial

    26       .10       6       .02       13       .05       26       .11       52       .22  

Lease financing

    6       .49       --        --        1       .08       1       .08       4       .30  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total commercial

    32       .12       6       .02       14       .05       27       .11       56       .22  

Commercial mortgages

    --        --        (3     (.04     1       .01       --        --        (12     (.17

Construction and development

    (5     (.20     (1     (.04     12       .44       --        --        5       .19  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total commercial real estate

    (5     (.05     (4     (.04     13       .13       --        --        (7     (.07

Residential mortgages

    (6     (.03     (7     (.04     (10     (.05     (10     (.05     (5     (.03

Credit card

    112       2.08       109       1.93       111       2.01       148       2.81       144       2.76  

Retail leasing

    1       .06       1       .05       1       .05       (1     (.05     1       .05  

Home equity and second mortgages

    (2     (.08     (2     (.08     (3     (.11     (3     (.11     (2     (.07

Other

    30       .27       29       .27       21       .20       19       .20       36       .40  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total other retail

    29       .19       28       .18       19       .13       15       .10       35       .25  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total net charge-offs

    162       .21       132       .17       147       .20       180       .25       223       .31  

Provision for credit losses

    112         (13       (163       (170       (827  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Balance, end of period

  $ 6,105       $ 6,155       $ 6,300       $ 6,610       $ 6,960    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Components

                   

Allowance for loan losses

  $ 5,664       $ 5,724       $ 5,792       $ 6,026       $ 6,343    

Liability for unfunded credit commitments

    441         431         508         584         617    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total allowance for credit losses

  $ 6,105       $ 6,155       $ 6,300       $ 6,610       $ 6,960    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Gross charge-offs

  $ 280       $ 254       $ 266       $ 314       $ 374    

Gross recoveries

  $ 118       $ 122       $ 119       $ 134       $ 151    

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

    1.91         1.97         2.12         2.23         2.36    

Nonperforming loans

    798         738         695         649         617    

Nonperforming assets

    753         701         667         624         579    

(a)  Annualized and calculated on average loan balances

   

 

 

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   U.S. Bancorp First Quarter 2022 Results
      

 

The Company’s provision for credit losses for the first quarter of 2022 was $112 million, compared with a benefit of $13 million in the fourth quarter of 2021 and a benefit of $827 million in the first quarter of 2021. During 2021, factors affecting economic conditions, including passing of additional government stimulus and widespread vaccine availability in the U.S., contributed to economic improvement and related reserve releases. The consumer portfolio performance continues to be supported by strong credit quality and asset values, while select commercial portfolios continue to recover from the effects of the pandemic. Economic uncertainty remains high associated with supply chain concerns, rising inflationary concerns, market volatility, rising oil prices from the Russia-Ukraine conflict and additional virus variants. In addition to these factors, expected loss estimates consider various factors including customer specific information impacting changes in risk ratings, projected delinquencies and potential effects of diminishing liquidity without the support of mortgage forbearance and direct federal stimulus.

Total net charge-offs in the first quarter of 2022 were $162 million, compared with $132 million in the fourth quarter of 2021 and $223 million in the first quarter of 2021. The net charge-off ratio was 0.21 percent in the first quarter of 2022, compared with 0.17 percent in the fourth quarter of 2021 and 0.31 percent in the first quarter of 2021. Net charge-offs increased $30 million (22.7 percent) compared with the fourth quarter of 2021 reflecting limited commercial credit losses in the prior period. Net charge-offs decreased $61 million (27.4 percent) compared with the first quarter of 2021 reflecting improvement across most loan categories. Improvements from the prior year reflect borrower liquidity and strong asset prices in the market supporting repayment and recovery of problem loans.

The allowance for credit losses was $6,105 million at March 31, 2022, compared with $6,155 million at December 31, 2021, and $6,960 million at March 31, 2021. The decrease on a linked quarter basis was driven by continued strong credit quality and collateral performance, partially offset by loan growth. The ratio of the allowance for credit losses to period-end loans was 1.91 percent at March 31, 2022, compared with 1.97 percent at December 31, 2021, and 2.36 percent at March 31, 2021. The ratio of the allowance for credit losses to nonperforming loans was 798 percent at March 31, 2022, compared with 738 percent at December 31, 2021, and 617 percent at March 31, 2021.

Nonperforming assets were $811 million at March 31, 2022, compared with $878 million at December 31, 2021, and $1,202 million at March 31, 2021. The ratio of nonperforming assets to loans and other real estate was 0.25 percent at March 31, 2022, compared with 0.28 percent at December 31, 2021, and 0.41 percent at March 31, 2021. The year-over-year decrease in nonperforming assets was primarily due to decreases in total commercial nonperforming loans, total commercial real estate nonperforming loans and residential mortgages, while the decrease on a linked quarter basis was primarily due to decreases in total commercial real estate nonperforming loans. Accruing loans 90 days or more past due were $450 million at March 31, 2022, compared with $472 million at December 31, 2021, and $476 million at March 31, 2021.

 

 

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 DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES                  
 (Percent)    Mar 31
2022
     Dec 31
2021
     Sep 30
2021
     Jun 30
2021
     Mar 31
2021
 

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

 

     

Commercial

     .06        .04        .04        .04        .06  

Commercial real estate

     --        .03        .05        .01        .01  

Residential mortgages

     .18        .24        .15        .16        .19  

Credit card

     .74        .73        .66        .70        .95  

Other retail

     .11        .11        .11        .10        .12  

Total loans

     .14        .15        .13        .13        .16  

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

 

     

Commercial

     .21        .20        .25        .32        .39  

Commercial real estate

     .55        .76        .82        .81        .94  

Residential mortgages

     .45        .53        .47        .49        .54  

Credit card

     .74        .73        .66        .70        .95  

Other retail

     .37        .35        .36        .39        .42  

Total loans

     .38        .42        .43        .47        .54  
                                              

 

 ASSET QUALITY (a)  
 ($ in millions)                                   
      Mar 31
2022
     Dec 31
2021
     Sep 30
2021
     Jun 30
2021
     Mar 31
2021
 

Nonperforming loans

              

Commercial

     $139         $139         $179         $247         $298   

Lease financing

     35         35         37         44         49   

Total commercial

     174         174         216         291         347   

Commercial mortgages

     178         213         215         224         266   

Construction and development

     38         71         81         88         90   

Total commercial real estate

     216         284         296         312         356   

Residential mortgages

     214         226         237         244         253   

Credit card

     --         --         --         --         --   

Other retail

     161         150         157         171         172   

Total nonperforming loans

     765         834         906         1,018         1,128   

Other real estate

     23         22         17         17         19   

Other nonperforming assets

     23         22         21         24         55   

Total nonperforming assets

     $811         $878         $944         $1,059         $1,202   

Accruing loans 90 days or more past due

     $450         $472         $385         $376         $476   

Nonperforming assets to loans plus ORE (%)

     .25         .28         .32         .36         .41   

(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 2022 Results
      

 

COMMON SHARES  
(Millions)    1Q
2022
     4Q
2021
     3Q
2021
     2Q
2021
     1Q
2021
 

Beginning shares outstanding

     1,484         1,483         1,483         1,497         1,507   

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

                   --                 

Shares repurchased

     (1      --         --         (15      (13
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ending shares outstanding

     1,486         1,484         1,483         1,483         1,497   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
                                              

 

CAPITAL POSITION                                    
($ in millions)    Mar 31     Dec 31     Sep 30     Jun 30     Mar 31  
      2022     2021     2021     2021     2021  

Total U.S. Bancorp shareholders’ equity

   $ 51,200      $ 54,918      $ 53,743      $ 53,039      $ 51,678   

Basel III Standardized Approach (a)

          

Common equity tier 1 capital

   $ 41,950      $ 41,701      $ 41,014      $ 39,691      $ 39,103   

Tier 1 capital

     49,198        48,516        47,426        46,103        45,517   

Total risk-based capital

     57,403        56,250        54,178        53,625        53,625   

Common equity tier 1 capital ratio

     9.8      10.0      10.2      9.9      9.9 

Tier 1 capital ratio

     11.5        11.6        11.7        11.5        11.5   

Total risk-based capital ratio

     13.4        13.4        13.4        13.4        13.5   

Leverage ratio

     8.6        8.6        8.7        8.5        8.4   

Tangible common equity to tangible assets (b)

     6.0        6.8        6.8        6.8        6.6   

Tangible common equity to risk-weighted assets (b)

     8.0        9.2        9.4        9.3        9.1   

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

     9.5        9.6        9.7        9.5        9.5   

(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 $51.2 billion at March 31, 2022, compared with $54.9 billion at December 31, 2021, and $51.7 billion at March 31, 2021. The Company suspended all common stock repurchases at the beginning of the third quarter of 2021, except for those done exclusively in connection with its stock-based compensation programs, due to its pending acquisition of MUFG Union Bank’s core regional banking franchise. The Company expects to operate at a CET1 capital ratio between our target ratio and 9.0 percent after closing of the acquisition. The Company does not expect to commence repurchasing its common stock until after the acquisition closes and the CET1 ratio approximates 9.0 percent.

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 9.8 percent at March 31, 2022, compared with 10.0 percent at December 31, 2021, and 9.9 percent at March 31, 2021. 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, 2022, compared with 9.6 percent at December 31, 2021, and 9.5 percent at March 31, 2021.

 

 

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  Investor Conference Call

On Thursday, April 14, 2022 at 8 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 1698510. For those unable to participate during the live call, a recording will be available at approximately 11 a.m. CT on Thursday, April 14, 2022 and will be accessible until Thursday, April 21, 2022 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 698510.

 

 

  About U.S. Bancorp

U.S. Bancorp, with nearly 70,000 employees and $587 billion in assets as of March 31, 2022, is the parent company of U.S. Bank National Association. The Minneapolis-based company serves millions of customers locally, nationally and globally through a diversified mix of businesses: Consumer and Business Banking; Payment Services; Corporate & Commercial Banking; and Wealth Management and Investment Services. The company has been recognized for its approach to digital innovation, social responsibility, and customer service, including being named one of the 2022 World’s Most Ethical Companies and Fortune’s most admired superregional bank. Learn more at usbank.com/about.

 

 

  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 often use words such as “anticipates,” “targets,” “expects,” “hopes,” “estimates,” “projects,” “forecasts,” “intends,” “plans,” “goals,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.”

Forward-looking statements involve inherent risks and uncertainties, including the following risks and uncertainties and the risks and uncertainties more fully discussed in the section entitled “Risk Factors” of Exhibit 13 to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2021, which could cause actual results to differ materially from those anticipated. The COVID-19 pandemic is adversely affecting U.S. Bancorp, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; civil unrest; the effects of climate change; changes in customer behavior and preferences; breaches in data security, including as a result of work-from-home arrangements; failures to safeguard personal information; the impacts of international hostilities or geopolitical events; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk. In addition, U.S. Bancorp’s proposed acquisition of MUFG Union Bank presents risks and uncertainties, including, among others: the risk that the cost savings, any revenue synergies and other anticipated benefits of the proposed acquisition may not be realized or may take longer than anticipated to be realized; the risk that U.S. Bancorp’s business could be disrupted as a result of the announcement and pendency of the proposed acquisition and diversion of management’s attention from ongoing business operations and opportunities; the possibility that the proposed

 

 

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   U.S. Bancorp First Quarter 2022 Results
      

 

acquisition, including the integration of MUFG Union Bank, may be more costly or difficult to complete than anticipated; delays in closing the proposed acquisition; and the failure of required governmental approvals to be obtained or any other closing conditions in the definitive purchase agreement to be satisfied.

For discussion of these and other risks that may cause actual results to differ from those described in forward-looking statements, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2021, on file with the Securities and Exchange Commission, including the sections entitled “Corporate Risk Profile” and “Risk Factors” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. In addition, factors other than these risks also could adversely affect U.S. Bancorp’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.

 

 

  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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CONSOLIDATED STATEMENT OF INCOME
(Dollars and Shares in Millions, Except Per Share Data)        Three Months Ended     
March 31,
 
(Unaudited)    2022     2021  

Interest Income

    

Loans

     $2,599       $2,724  

Loans held for sale

     60       67  

Investment securities

     717       517  

Other interest income

     42       33  

Total interest income

     3,418       3,341  

Interest Expense

    

Deposits

     80       85  

Short-term borrowings

     21       16  

Long-term debt

     144       177  

Total interest expense

     245       278  

Net interest income

     3,173       3,063  

Provision for credit losses

     112       (827

Net interest income after provision for credit losses

     3,061       3,890  

Noninterest Income

    

Credit and debit card revenue

     338       336  

Corporate payment products revenue

     158       126  

Merchant processing services

     363       318  

Trust and investment management fees

     500       444  

Deposit service charges

     177       161  

Treasury management fees

     156       147  

Commercial products revenue

     266       280  

Mortgage banking revenue

     200       299  

Investment products fees

     62       55  

Securities gains (losses), net

     18       25  

Other

     158       190  

Total noninterest income

     2,396       2,381  

Noninterest Expense

    

Compensation

     1,853       1,803  

Employee benefits

     396       384  

Net occupancy and equipment

     269       263  

Professional services

     114       98  

Marketing and business development

     80       48  

Technology and communications

     349       359  

Postage, printing and supplies

     72       69  

Other intangibles

     47       38  

Other

     322       317  

Total noninterest expense

     3,502       3,379  

Income before income taxes

     1,955       2,892  

Applicable income taxes

     397       607  

Net income

     1,558       2,285  

Net (income) loss attributable to noncontrolling interests

     (1     (5

Net income attributable to U.S. Bancorp

     $1,557       $2,280  

Net income applicable to U.S. Bancorp common shareholders

     $1,466       $2,175  

Earnings per common share

     $.99       $1.45  

Diluted earnings per common share

     $.99       $1.45  

Dividends declared per common share

     $.46       $.42  

Average common shares outstanding

     1,485       1,502  

Average diluted common shares outstanding

     1,486       1,503  

 

 

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 CONSOLIDATED ENDING BALANCE SHEET

 

 
(Dollars in Millions)    March 31,
2022
    December 31,
2021
    March 31,
2021
 

Assets

     (Unaudited       (Unaudited

Cash and due from banks

     $44,303       $28,905       $43,501  

Investment securities

      

Held-to-maturity

     43,654       41,858       --  

Available-for-sale

     123,593       132,963       156,003  

Loans held for sale

     3,321       7,775       8,991  

Loans

      

Commercial

     117,470       112,023       104,158  

Commercial real estate

     39,191       39,053       38,432  

Residential mortgages

     78,487       76,493       73,624  

Credit card

     22,163       22,500       20,872  

Other retail

     61,623       61,959       57,341  

Total loans

     318,934       312,028       294,427  

Less allowance for loan losses

     (5,664     (5,724     (6,343

Net loans

     313,270       306,304       288,084  

Premises and equipment

     3,207       3,305       3,388  

Goodwill

     10,250       10,262       9,905  

Other intangible assets

     4,194       3,738       3,462  

Other assets

     40,725       38,174       40,041  

Total assets

     $586,517       $573,284       $553,375  

Liabilities and Shareholders’ Equity

      

Deposits

      

Noninterest-bearing

     $129,793       $134,901       $126,754  

Interest-bearing

     331,753       321,182       307,007  

Total deposits

     461,546       456,083       433,761  

Short-term borrowings

     21,042       11,796       12,098  

Long-term debt

     32,931       32,125       37,419  

Other liabilities

     19,330       17,893       17,789  

Total liabilities

     534,849       517,897       501,067  

Shareholders’ equity

      

Preferred stock

     6,808       6,371       5,968  

Common stock

     21       21       21  

Capital surplus

     8,515       8,539       8,487  

Retained earnings

     69,987       69,201       65,740  

Less treasury stock

     (27,193     (27,271     (26,443

Accumulated other comprehensive income (loss)

     (6,938     (1,943     (2,095

Total U.S. Bancorp shareholders’ equity

     51,200       54,918       51,678  

Noncontrolling interests

     468       469       630  

Total equity

     51,668       55,387       52,308  

Total liabilities and equity

     $586,517       $573,284       $553,375  

 

 

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 NON-GAAP FINANCIAL MEASURES

 

(Dollars in Millions, Unaudited)   

March 31,

2022

   

December 31,

2021

    September 30,
2021
    June 30,
2021
    March 31,
2021
 

Total equity

     $51,668       $55,387       $54,378       $53,674       $52,308  

Preferred stock

     (6,808     (6,371     (5,968     (5,968     (5,968

Noncontrolling interests

     (468     (469     (635     (635     (630

Goodwill (net of deferred tax liability) (1)

     (9,304     (9,323     (9,063     (8,987     (8,992

Intangible assets, other than mortgage servicing rights

     (762     (785     (618     (650     (675

Tangible common equity (a)

     34,326       38,439       38,094       37,434       36,043  

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

     41,950       41,701       41,014       39,691       39,103  

Adjustments (2)

     (1,298     (1,733     (1,733     (1,732     (1,732

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

     40,652       39,968       39,281       37,959       37,371  

Total assets

     586,517       573,284       567,495       558,886       553,375  

Goodwill (net of deferred tax liability) (1)

     (9,304     (9,323     (9,063     (8,987     (8,992

Intangible assets, other than mortgage servicing rights

     (762     (785     (618     (650     (675

Tangible assets (c)

     576,451       563,176       557,814       549,249       543,708  

Risk-weighted assets, determined in accordance with transitional regulatory capital requirements related to the current expected credit losses methodology implementation (d)

     426,932     418,571       404,021       401,301       396,351  

Adjustments (3)

     (354 )*      (357     (684     (1,027     (1,440

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

     426,578     418,214       403,337       400,274       394,911  

Ratios*

          

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

     6.0       6.8       6.8       6.8       6.6  

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

     8.0       9.2       9.4       9.3       9.1  

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

     9.5       9.6       9.7       9.5       9.5  
          
          
     Three Months Ended  
     March 31,
2022
    December 31,
2021
    September 30,
2021
    June 30,
2021
    March 31,
2021
 

Net income applicable to U.S. Bancorp common shareholders

     $1,466       $1,582       $1,934       $1,914       $2,175  

Intangibles amortization (net-of-tax)

     37       32       32       32       30  

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

     1,503       1,614       1,966       1,946       2,205  

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

     6,096       6,403       7,800       7,805       8,943  

Average total equity

     53,934       55,875       54,908       53,593       53,359  

Average preferred stock

     (6,619     (6,865     (5,968     (5,968     (6,213

Average noncontrolling interests

     (468     (633     (635     (631     (630

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

     (9,320     (9,115     (9,019     (9,003     (9,010

Average intangible assets, other than mortgage servicing rights

     (779     (656     (632     (662     (649

Average tangible common equity (g)

     36,748       38,606       38,654       37,329       36,857  

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

     16.6       16.6       20.2       20.9       24.3  

Net interest income

     $3,173       $3,123       $3,171       $3,137       $3,063  

Taxable-equivalent adjustment (4)

     27       27       26       27       26  

Net interest income, on a taxable-equivalent basis

     3,200       3,150       3,197       3,164       3,089  

Net interest income, on a taxable-equivalent basis

          

(as calculated above)

     3,200       3,150       3,197       3,164       3,089  

Noninterest income

     2,396       2,534       2,693       2,619       2,381  

Less: Securities gains (losses), net

     18       15       20       43       25  

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

     5,578       5,669       5,870       5,740       5,445  

Noninterest expense (i)

     3,502       3,533       3,429       3,387       3,379  

Efficiency ratio (i)/(h)

     62.8     62.3     58.4     59.0     62.1
*

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
2022
     4Q
2021
     1Q  
2021  
     1Q22 vs
4Q21
    1Q22 vs
1Q21
     

Corporate and Commercial Banking

     $418        $313        $469          33.5       (10.9    

Consumer and Business Banking

     393        485        575          (19.0     (31.7    

Wealth Management and Investment Services

     206        202        225          2.0       (8.4    

Payment Services

     372        371        487          .3       (23.6    

Treasury and Corporate Support

     168        302        524          (44.4     (67.9    
   

Consolidated Company

     $1,557        $1,673        $2,280          (6.9     (31.7    
   

(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 2022, 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

2022

    

4Q

2021

    

1Q  

2021  

     1Q22 vs
4Q21
    1Q22 vs
1Q21
 

Condensed Income Statement

               

Net interest income (taxable-equivalent basis)

     $735        $684        $719          7.5       2.2  

Noninterest income

     245        249        268          (1.6     (8.6

Securities gains (losses), net

     --          --          --            --         --    

Total net revenue

     980        933        987          5.0       (.7

Noninterest expense

     419        418        409          .2       2.4  

Other intangibles

     --          --          --            --         --    

Total noninterest expense

     419        418        409          .2       2.4  

Income before provision and taxes

     561        515        578          8.9       (2.9

Provision for credit losses

     3        98        (48)         (96.9     nm  

Income before income taxes

     558        417        626          33.8       (10.9

Income taxes and taxable-equivalent adjustment

     140        104        157          34.6       (10.8

Net income

     418        313        469          33.5       (10.9

Net (income) loss attributable to noncontrolling interests

     --          --          --            --         --    

Net income attributable to U.S. Bancorp

     $418        $313        $469          33.5       (10.9
   

Average Balance Sheet Data

               

Loans

     $115,634        $106,262        $101,927          8.8       13.4  

Other earning assets

     4,676        4,690        4,321          (.3     8.2  

Goodwill

     1,912        1,912        1,647          --         16.1  

Other intangible assets

     4        4        5          --         (20.0

Assets

     127,651        118,035        114,069          8.1       11.9  
   

Noninterest-bearing deposits

     62,285        65,450        56,281          (4.8     10.7  

Interest-bearing deposits

     86,618        75,243        71,377          15.1       21.4  

Total deposits

     148,903        140,693        127,658          5.8       16.6  
   

Total U.S. Bancorp shareholders’ equity

     13,710        13,666        14,354          .3       (4.5
   

(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 $418 million of the Company’s net income in the first quarter of 2022, compared with $469 million in the first quarter of 2021. Total net revenue was $7 million (0.7 percent) lower due to a decrease of $23 million (8.6 percent) in total noninterest income, partially offset by an increase of $16 million (2.2 percent) in net interest income. Net interest income increased primarily due to higher loan and deposit balances, partially offset by the impact of loan mix and related yields as well as unfavorable changes in deposit rates. Total noninterest income decreased primarily due to lower corporate bond fees and trading revenue within the capital markets business, partially offset by stronger treasury management fees due to core growth driven by the economic recovery. Total noninterest expense increased $10 million (2.4 percent) compared with a year ago primarily due to an increase in net shared services expense driven by investment in infrastructure and technology development as well as higher compensation expense primarily due to merit and hiring to support business growth, partially offset by lower performance-based incentives related to capital markets activity. The provision for credit losses increased $51 million compared with the first quarter of 2021 primarily due to loan loss provisions supporting stronger growth in loan balances in the current year linked quarter, partially offset by improving portfolio credit quality in the current year.

 

 

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

1Q

2022

    

4Q

2021

   

1Q  

2021  

     1Q22 vs
4Q21
    1Q22 vs
1Q21
 

Condensed Income Statement

              

Net interest income (taxable-equivalent basis)

     $1,517        $1,517       $1,505          --         .8  

Noninterest income

     461        583       569          (20.9     (19.0

Securities gains (losses), net

     --          --         --            --         --    

Total net revenue

     1,978        2,100       2,074          (5.8     (4.6

Noninterest expense

     1,402        1,451       1,341          (3.4     4.5  

Other intangibles

     3        3       3          --         --    

Total noninterest expense

     1,405        1,454       1,344          (3.4     4.5  

Income before provision and taxes

     573        646       730          (11.3     (21.5

Provision for credit losses

     49        (1     (37)         nm       nm  

Income before income taxes

     524        647       767          (19.0     (31.7

Income taxes and taxable-equivalent adjustment

     131        162       192          (19.1     (31.8

Net income

     393        485       575          (19.0     (31.7

Net (income) loss attributable to noncontrolling interests

     --          --         --            --         --    

Net income attributable to U.S. Bancorp

     $393        $485       $575          (19.0     (31.7
   

Average Balance Sheet Data

                     

Loans

     $141,106        $140,865       $141,719          .2       (.4

Other earning assets

     4,381        6,569       10,177          (33.3     (57.0

Goodwill

     3,261        3,262       3,475          --         (6.2

Other intangible assets

     3,176        2,966       2,493          7.1       27.4  

Assets

     157,696        159,578       164,131          (1.2     (3.9
   

Noninterest-bearing deposits

     32,094        34,294       32,861          (6.4     (2.3

Interest-bearing deposits

     166,765        162,934       151,406          2.4       10.1  

Total deposits

     198,859        197,228       184,267          .8       7.9  
   

Total U.S. Bancorp shareholders’ equity

     12,275        12,231       12,496          .4       (1.8
   

(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 $393 million of the Company’s net income in the first quarter of 2022, compared with $575 million in the first quarter of 2021. Total net revenue was lower by $96 million (4.6 percent) due to a decrease in total noninterest income of $108 million (19.0 percent), partially offset by higher net interest income of $12 million (0.8 percent). Net interest income reflected strong growth in interest-bearing deposit balances and favorable funding mix, partially offset by lower loan fees related to the Paycheck Protection Program (PPP). Total noninterest income decreased primarily due to lower mortgage banking revenue reflecting lower application volumes, given declining refinance activities, and lower related gain on sale margins, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities, as well as higher performing loan sales. Additionally, other noninterest income decreased due to lower retail leasing end-of-term residual gains. Offsetting these decreases, deposit service charges increased driven by higher customer spend activity, net of the impact of the elimination of certain consumer NSF fees in the first quarter of 2022. Total noninterest expense increased $61 million (4.5 percent) primarily due to increases in net shared services expense due to investments in digital capabilities and higher compensation expense from merit and core business growth. The provision for credit losses increased $86 million due to higher loan loss provisions reflecting relatively stable ending balances and credit quality in the current quarter, compared with balance reductions and credit quality improvement in the prior year linked quarter.

 

 

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

1Q

2022

    

4Q

2021

    

1Q  

2021  

     1Q22 vs
4Q21
    1Q22 vs
1Q21
 

Condensed Income Statement

               

Net interest income (taxable-equivalent basis)

     $274        $246        $268          11.4       2.2  

Noninterest income

     596        583        531          2.2       12.2  

Securities gains (losses), net

     --          --          --          --         --    

Total net revenue

     870        829        799          4.9       8.9  

Noninterest expense

     577        550        492          4.9       17.3  

Other intangibles

     10        4        2          nm       nm  

Total noninterest expense

     587        554        494          6.0       18.8  

Income before provision and taxes

     283        275        305          2.9       (7.2

Provision for credit losses

     8        5        5          60.0       60.0  

Income before income taxes

     275        270        300          1.9       (8.3

Income taxes and taxable-equivalent adjustment

     69        68        75          1.5       (8.0

Net income

     206        202        225          2.0       (8.4

Net (income) loss attributable to noncontrolling interests

     --          --          --          --         --    

Net income attributable to U.S. Bancorp

     $206        $202        $225          2.0       (8.4
   

Average Balance Sheet Data

               

Loans

     $20,666        $19,614        $16,846          5.4       22.7  

Other earning assets

     259        229        279          13.1       (7.2

Goodwill

     1,761        1,656        1,619          6.3       8.8  

Other intangible assets

     265        130        42          nm       nm  

Assets

     24,446        22,963        20,120          6.5       21.5  
   

Noninterest-bearing deposits

     27,350        29,220        21,338          (6.4     28.2  

Interest-bearing deposits

     69,909        74,192        83,474          (5.8     (16.3

Total deposits

     97,259        103,412        104,812          (5.9     (7.2
   

Total U.S. Bancorp shareholders’ equity

     3,595        3,318        3,034          8.3       18.5  
   

(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 $206 million of the Company’s net income in the first quarter of 2022, compared with $225 million in the first quarter of 2021. Total net revenue increased $71 million (8.9 percent) year-over-year reflecting an increase of $6 million (2.2 percent) in net interest income and an increase of $65 million (12.2 percent) in total noninterest income. Net interest income increased slightly year-over-year primarily due to higher average noninterest-bearing deposits as well as higher average loan balances. Total noninterest income increased primarily due to core business growth in trust and investment management fees and investment products fees both driven by favorable market conditions as well as the impact of the PFM acquisition on trust and investment fees, partially offset by higher fee waivers related to money market funds. Total noninterest expense increased $93 million (18.8 percent) compared with the first quarter of 2021 reflecting the PFM acquisition, compensation expense as a result of merit and performance-based incentives, litigation settlements, fraud related losses and core business growth. The provision for credit losses increased $3 million (60.0 percent) due to increased loan loss provisions supporting stronger growth in ending loans and a modest shift in credit quality in the current period compared with the prior year quarter.

 

 

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PAYMENT SERVICES (a)         
($ in millions)                         Percent Change  
      1Q
2022
     4Q
2021
     1Q  
2021  
     1Q22 vs
4Q21
    1Q22 vs
1Q21
 

Condensed Income Statement

                      

Net interest income (taxable-equivalent basis)

     $622        $617        $629          .8       (1.1

Noninterest income

     858        906        785          (5.3     9.3  

Securities gains (losses), net

     --          --          --          --         --    

Total net revenue

     1,480        1,523        1,414          (2.8     4.7  

Noninterest expense

     820        862        772          (4.9     6.2  

Other intangibles

     34        33        33          3.0       3.0  

Total noninterest expense

     854        895        805          (4.6     6.1  

Income before provision and taxes

     626        628        609          (.3     2.8  

Provision for credit losses

     130        133        (41)          (2.3     nm  

Income before income taxes

     496        495        650          .2       (23.7

Income taxes and taxable-equivalent adjustment

     124        124        163          --         (23.9

Net income

     372        371        487          .3       (23.6

Net (income) loss attributable to noncontrolling interests

     --          --          --          --         --    

Net income attributable to U.S. Bancorp

     $372        $371        $487          .3       (23.6
   

Average Balance Sheet Data

               

Loans

     $31,740        $32,351        $29,630          (1.9     7.1  

Other earning assets

     1,023        356        5          nm       nm  

Goodwill

     3,325        3,219        3,173          3.3       4.8  

Other intangible assets

     464        473        542          (1.9     (14.4

Assets

     38,540        38,282        35,091          .7       9.8  
   

Noninterest-bearing deposits

     3,673        4,247        5,264          (13.5     (30.2

Interest-bearing deposits

     160        155        132          3.2       21.2  

Total deposits

     3,833        4,402        5,396          (12.9     (29.0
   

Total U.S. Bancorp shareholders’ equity

     8,019        7,936        7,658          1.0       4.7  
   

(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 $372 million of the Company’s net income in the first quarter of 2022, compared with $487 million in the first quarter of 2021. Total net revenue increased $66 million (4.7 percent) primarily due to higher total noninterest income of $73 million (9.3 percent), partially offset by lower net interest income of $7 million (1.1 percent). Net interest income decreased slightly primarily due to lower loan yields driven by declining customer revolve rates, mostly offset by higher loan balances due to investment in customer acquisition. Total noninterest income increased year-over-year mainly due to continued strengthening of consumer and business spending across most sectors as local jurisdictions reduce pandemic related restrictions and consumer behaviors normalize. As a result, there was strong growth in merchant processing services revenue driven by higher sales volume and higher merchant fees, partially offset by higher rebates. There was also solid growth in corporate payment products revenue driven by improving business spending across nearly all product groups. Strong sales also drove an increase in credit and debit card revenue, mostly offset by declining prepaid processing fees as the beneficial impact of government stimulus programs continues to dissipate. Total noninterest expense increased $49 million (6.1 percent) reflecting higher net shared services expense driven by investment in infrastructure and technology development in addition to higher compensation expense as a result of merit, performance-based incentives and core business growth. The provision for credit losses increased $171 million primarily due to ending loan balance growth and relatively stable credit quality in the current period compared with a reduction in loan balances and delinquencies in the prior year quarter.

 

 

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

1Q

2022

   

4Q

2021

   

1Q  

2021  

     1Q22 vs
4Q21
    1Q22 vs
1Q21
 

Condensed Income Statement

             

Net interest income (taxable-equivalent basis)

     $52       $86       $(32)         (39.5     nm  

Noninterest income

     218       198       203          10.1       7.4  

Securities gains (losses), net

     18       15       25          20.0       (28.0

Total net revenue

     288       299       196          (3.7     46.9  

Noninterest expense

     237       212       327          11.8       (27.5

Other intangibles

     --         --         --          --         --    

Total noninterest expense

     237       212       327          11.8       (27.5

Income (loss) before provision and taxes

     51       87       (131)         (41.4     nm  

Provision for credit losses

     (78     (248     (706)         68.5       89.0  

Income (loss) before income taxes

     129       335       575          (61.5     (77.6

Income taxes and taxable-equivalent adjustment

     (40     28       46          nm       nm  

Net income (loss)

     169       307       529          (45.0     (68.1

Net (income) loss attributable to noncontrolling interests

     (1     (5     (5)         80.0       80.0  

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

     $168       $302       $524          (44.4     (67.9
   

Average Balance Sheet Data

             

Loans

     $3,820       $3,663       $3,867          4.3       (1.2

Other earning assets

     206,532       207,936       188,940          (.7     9.3  

Goodwill

     --         --         --          --         --    

Other intangible assets

     --         --         --          --         --    

Assets

     229,069       233,501       215,323          (1.9     6.4  
   

Noninterest-bearing deposits

     2,561       2,725       2,608          (6.0     (1.8

Interest-bearing deposits

     2,761       1,378       1,623          nm       70.1  

Total deposits

     5,322       4,103       4,231          29.7       25.8  
   

Total U.S. Bancorp shareholders’ equity

     15,867       18,091       15,187          (12.3     4.5  
   

(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 $168 million of the Company’s net income in the first quarter of 2022, compared with $524 million in the first quarter of 2021. Total net revenue was higher by $92 million (46.9 percent) due to an increase of $84 million in net interest income and an increase in total noninterest income of $8 million (3.5 percent). Net interest income increased primarily due to higher investment portfolio balances. The increase in total noninterest income was primarily due to the impact of COVID-related deposit service charges refunds in the first quarter of 2021. Total noninterest expense decreased $90 million (27.5 percent) primarily due to lower performance-based incentives and lower costs related to tax-advantaged investments, partially offset by higher costs of capital investments to support business growth and compensation expense as a result of merit. The provision for credit losses increased $628 million (89.0 percent) reflecting the residual impact of changes in the allowance for credit losses being impacted by the relatively stable economic conditions relative to the more substantial impact to the allowance for credit losses associated with improving economic conditions in the first quarter of 2021. 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 1Q22 Earnings Conference Call April 14, 2022 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 often use words such as “anticipates,” “targets,” “expects,” “hopes,” “estimates,” “projects,” “forecasts,” “intends,” “plans,” “goals,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Forward-looking statements involve inherent risks and uncertainties, including the following risks and uncertainties and the risks and uncertainties more fully discussed in the section entitled “Risk Factors” of Exhibit 13 to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2021, which could cause actual results to differ materially from those anticipated. The COVID-19 pandemic is adversely affecting U.S. Bancorp, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; civil unrest; the effects of climate change; changes in customer behavior and preferences; breaches in data security, including as a result of work-from-home arrangements; failures to safeguard personal information; the impacts of international hostilities or geopolitical events; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk. In addition, U.S. Bancorp’s proposed acquisition of MUFG Union Bank presents risks and uncertainties, including, among others: the risk that the cost savings, any revenue synergies and other anticipated benefits of the proposed acquisition may not be realized or may take longer than anticipated to be realized; the risk that U.S. Bancorp’s business could be disrupted as a result of the announcement and pendency of the proposed acquisition and diversion of management’s attention from ongoing business operations and opportunities; the possibility that the proposed acquisition, including the integration of MUFG Union Bank, may be more costly or difficult to complete than anticipated; delays in closing the proposed acquisition; and the failure of required governmental approvals to be obtained or any other closing conditions in the definitive purchase agreement to be satisfied. For discussion of these and other risks that may cause actual results to differ from those described in forward-looking statements, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2021, on file with the Securities and Exchange Commission, including the sections entitled “Corporate Risk Profile” and “Risk Factors” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. In addition, factors other than these risks also could adversely affect U.S. Bancorp’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events. 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

1Q22 Highlights 1Taxable-equivalent basis; see slide 26 for calculation 2 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 3/31/22. 3 Earnings returned (millions) = total common dividends paid and aggregate value of common shares repurchased


Slide 4

Performance Ratios Efficiency Ratio1 & Net Interest Margin2 Return on Average Common Equity Return on Tangible Common Equity1 Return on Average Assets 1 Non-GAAP; see slides 26 and 27 for calculations 2 Net interest margin on a taxable-equivalent basis


Slide 5

Digital Engagement Trends Three months ended 1 Represents core Consumer Banking customers active in at least one channel in the previous 90 days 2 Interactive Voice Response Total Digital includes both online and mobile platforms 2/28/22


Slide 6

With 1.1 million business1 banking relationships, there is a significant opportunity for us to deepen current relationships and acquire new customers. talech is a great example of how we are capitalizing on this opportunity. Banking and Payments2 Relationships Business Banking only Business Banking & Payments Payments only Business Banking & Payments 1 Defined as businesses with under $25M in revenue 2 Payments includes Merchant Acquiring and card relationships within Retail Payment Solutions 3 Data as of 2/28/22 Business Banking and Payments Trends New talech Customers talech helps small businesses tackle accounts receivable and operational tasks >5x ~1.5x FY20


Slide 7

Average Loans +3.4% linked quarter +6.5% year-over-year On a linked quarter basis, average total loans were higher primarily due to higher commercial loans, higher residential mortgages, and higher other retail loans. On a year-over-year basis, average total loans were higher primarily due to growth in commercial loans, residential mortgages, and other retail loans. The increase in other retail loans was driven by strong auto and recreational vehicle lending during 2021. $ in billions


Slide 8

Average Deposits +1.0% linked quarter +6.5% year-over-year Interest-bearing Deposits Average noninterest-bearing (NIB) deposits decreased on a linked quarter basis and increased on a year-over-year basis. On a linked quarter basis, the decrease was driven by seasonal decreases across all business lines, while the year-over-year increase was primarily driven by Corporate and Commercial Banking and Wealth Management and Investment Services. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, were higher on a linked quarter basis and lower on a year-over-year basis. $ in billions


Slide 9

Credit Quality NCO Ratio +4 bps QoQ -10 bps YoY NPAs -7.6% QoQ -32.5% YoY $ in millions, except allowance for credit losses in billions Allowance for Credit Losses by Loan Class, 1Q22   Amount ($B) Loans and Leases Outstanding (%) Commercial $1.8 1.6% Commercial Real Estate 1.1 2.7% Residential Mortgage 0.6 0.8% Credit Card 1.6 7.4% Other Retail 1.0 1.5% Total $6.1 1.9%


Slide 10

Earnings Summary


Slide 11

Net Interest Income +1.6% linked quarter +3.6% year-over-year 1 Includes PPP interest income and PPP loan fees $ in millions Net interest income on a taxable-equivalent basis; see slide 26 for calculation Including PPP Excluding PPP +2.4% linked quarter +5.9% year-over-year $3,089 $3,150 $3,200 Linked Quarter Net interest income increased, primarily due to higher loan and investment portfolio balances as well as higher yields in the investment portfolio, partially offset by lower loan fees. The net interest margin increased, reflecting the changing yield curve and lower cash balances, partially offset by the impact of loan mix. Year-over-Year Net interest income increased, primarily due to higher loan and investment securities balances and favorable deposit and funding mix, partially offset by lower loan yields and mix as well as lower loan fees. The net interest margin decreased, primarily due to the mix of loans and lower loan spreads, partially offset by funding and yield curve favorability. PPP Impact 1


Slide 12

Noninterest Income -5.4% linked quarter +0.6% year-over-year Linked Quarter Mortgage banking revenue decreased, driven by lower application volume and related gain on sale margins as well as lower performing loan sales, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities. Payment services revenue decreased, as credit card revenue decreased due to lower sales volume and rate as well as lower prepaid card fees. Deposit service charges decreased, primarily due to seasonally lower volumes and the impact of the elimination of certain consumer NSF fees in the first quarter of 2022 net of higher customer activity. Year-over-Year Payment services revenue increased, due to growth in corporate payment products revenue driven by higher sales volume and growth in merchant processing services revenue driven by higher sales volume as well as higher merchant fees. Trust and Investment Management fees increased, driven by business growth, favorable market conditions and activity related to the 2021 acquisition of PFM Asset Management LLC, partially offset by higher fee waivers. Mortgage banking revenue decreased, driven by lower application volume, given declining refinancing activity, and related gain on sale margins, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities, as well as higher performing loan sales. $ 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 13

Payment Services Payments Revenue Breakdown Merchant Processing Credit and Debit Card1 Corporate Payments All Other Revenue Total payments revenue, which includes net interest income and fee revenue, accounted for 26% of 1Q22 net revenue Total payment fee revenue grew 10% year-over-year on the back of the cyclical recovery leading to increased sales volumes, and secular growth materializing as our investments pay-off Seasonal Considerations COVID-19 Impacted Industries Continue to Recover Historical Linked Quarter Seasonal Trends for Payment Fees Revenue2 0% Airline -Merchant Processing Travel4 - Credit and Debit Card Travel & Entertainment - Corporate Payments In 1Q22, total sales volumes in each of our three payments businesses exceeded 1Q19 levels despite the lagging travel recovery Volume Growth vs. 2019 Comparable Period3 1 Includes prepaid card 2 Linked quarter change based on trends from 2015 – 2019 3 Monthly data ranging from January 2020 – March 2022 4 Travel includes airlines, auto rental, hotel, other transportation, and travel agencies Payment Fees as a % of Net Revenue (1Q22) 1Q payments fee revenue is typically seasonally down on a linked quarter basis reflecting lower post-holiday sales activity Payments fee revenue growth, on a linked quarter basis, is typically seasonally strongest in 2Q


Slide 14

Payment Services Fee Revenue Growth In 1Q22, prepaid card related fee revenue was 12% of total credit and debit card fee revenue (compared to 11% in FY 19). 1 Includes prepaid card


Slide 15

Noninterest Expense -0.9% linked quarter +3.6% year-over-year Linked Quarter Professional services expense decreased, primarily due to the timing of certain initiatives in the fourth quarter of 2021. Marketing and business development expense decreased due to the timing of marketing campaigns. Employee benefits expense increased, driven by seasonally higher payroll taxes. Year-over-Year Compensation expense increased, primarily due to merit and hiring to support business growth, partially offset by lower performance-based incentives. Professional services expense increased, primarily due to an increase in business investment and related initiatives. Marketing and business development expense increased, due to the timing of marketing campaigns as well as increased travel and entertainment. $ in millions PPS = postage, printing and supplies


Slide 16

Capital Position 1Ratios calculated in accordance with transitional regulatory requirements related to the current expected credit losses methodology 2 Non-GAAP; see slide 28 for calculations


Slide 17

Strategic and Financial Thesis Intact and Compelling Progress What’s Next Financial Impact1 EPS Accretion2 ~6% / ~8% Synergies realized 75% / 100% Cost Synergies ~$900MM / ~40% Internal Rate of Return ~20% TBVPS Impact3 Dilution ~1% Capitalized Value of Net Cost Synergies4 $7.1 B Working on integration activities including technology and business line operations Participated in numerous stakeholder town-hall meetings Continuing to work with regulators in the normal course of action Strategic and financial thesis intact and remains compelling Participated in a joint public meeting with the Fed and OCC Targeting transaction closing in 1H22, subject to regulatory approval Finalizing integration and conversion plans across all business and corporate functions Conversion anticipated in 2H22 Execute conversion and integration plan Disclosed with deal announcement: 1 Metrics do not include revenue synergies. 2 2023E GAAP EPS accretion with synergies illustratively realized 75% and 100% in 2023. 3 Tangible book value per share dilution at close inclusive of one-time restructuring charges and non-purchase credit deteriorated CECL provision. 4 Pre tax cost synergies of $900MM ($666MM after tax), multiplied by 12x P/E multiple, net of restructuring charges of $1.2B pre-tax ($888MM after tax). Assumes 26% tax rate. Union Bank Acquisition Update


Slide 18

Appendix


Slide 19

Average Loans Linked Quarter Average total loans increased by $10.2 billion, or 3.4% Average commercial loans increased by $8.3 billion, or 8.0% Average residential mortgage loans increased by $1.6 billion, or 2.1% Average other retail loans increased by $0.6 billion, or 1.0% Year-over-Year Average total loans increased by $19.0 billion, or 6.5% Average commercial loans increased by $10.7 billion, or 10.5% Average other retail loans increased $5.0 billion, or 8.8% Average residential mortgage loans increased by $2.2 billion, or 3.0% Key Points Year-over-Year Growth (1.2%) (7.5%) (4.6%) 0.1% 6.5% Commercial CRE Res Mtg Other Retail Credit Card Average Loans ($bn)


Slide 20

Year-over-Year Growth 17.5% 6.4% 6.4% 6.5% 6.5% Time Money Market Checking and Savings Noninterest-bearing Average Deposits Key Points Average Deposits ($bn) Linked Quarter Average total deposits increased by $4.4 billion, or 1.0% Average low-cost deposits (NIB, interest checking, savings and money market) increased by $2.5 billion, or 0.6% Year-over-Year Average total deposits increased by $27.8 billion, or 6.5% Average low-cost deposits (NIB, interest checking, savings and money market) increased by $30.2 billion, or 7.6% $454.2


Slide 21

Credit Quality – Commercial Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm1Q21 4Q21 1Q22 Average Loans$102,091 $104,508 $112,822 30-89 Delinquencies0.19% 0.47% 0.20% 90+ Delinquencies0.06% 0.04% 0.06% Nonperforming Loans0.33% 0.16% 0.15% Linked Quarter Growth, including PPP (4.1%) 0.9% (1.1%) 2.6% 8.0% Average loans increased 8% on a linked quarter basis and excluding the runoff of the Paycheck Protection Program (PPP) loans, average loan growth was 8.8%. Average PPP loans represented 0.9% of total average commercial loans in 1Q22 compared to 6% in 1Q21  Net charge-offs ratio remained low at 0.12%, while 30-89 day delinquencies decreased during the quarter $102,091 $102,974 $101,832 $104,508 $112,822 Linked Quarter Growth, excluding PPP (3.7%) 0.7% 1.7% 4.6% 8.8%


Slide 22

$mm1Q21 4Q21 1Q22 Average Loans$38,786 $38,851 $39,084 30-89 Delinquencies0.31% 0.20%0.22% 90+ Delinquencies0.01%0.03%- % Nonperforming Loans0.93% 0.73% 0.55% Credit Quality – Commercial Real Estate Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points Linked Quarter Growth (3.3%) (0.6%) 0.9% (0.2%) 0.6% Average loans increased by 0.6% on a linked quarter basis  Net recoveries during the quarter and performance continued to reflect the sustained general economic recovery


Slide 23

Credit Quality – Residential Mortgage Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm1Q214Q211Q22 Average Loans$75,201 $75,858 $77,449 30-89 Delinquencies0.28%0.15%0.13% 90+ Delinquencies0.19% 0.24% 0.18% Nonperforming Loans0.34%0.30%0.27% Linked Quarter Growth (2.1%) (2.5%) 1.0% 2.4% 2.1% Originations continued to be high credit quality (weighted average FICO of 768, weighted average LTV of 66%) Net recovery performance continued to reflect overall portfolio credit quality and strength in housing values


Slide 24

Credit Quality – Credit Card Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm1Q214Q211Q22 Average Loans$21,144 $22,399$21,842 30-89 Delinquencies0.90% 0.86%0.88% 90+ Delinquencies0.95%0.73%0.74% Nonperforming Loans- %- %- % Linked Quarter Growth (3.6%) (0.1%) 3.7% 2.3% (2.5%) Linked quarter average loans impacted by movement of a small portfolio moved to held for sale at 12/31/21 Net charge-off ratio remained low during the quarter driven by sustained borrower liquidity


Slide 25

Credit Quality – Other Retail Average Loans ($mm) and Net Charge-offs Ratio Key Points Linked Quarter Growth Key Statistics Key Statistics $mm1Q214Q211Q22 Average Loans$56,767 $61,139$61,769 30-89 Delinquencies0.39%0.44%0.38% 90+ Delinquencies0.12%0.11%0.11% Nonperforming Loans0.30%0.24%0.26% Continued relative low net charge-offs were supported by strong portfolio credit quality and collateral values in housing and used autos Stable credit performance on a linked quarter basis included low net charge-offs, delinquencies, and nonperforming loan levels (0.5%) 2.7% 2.9% 1.9% 1.0%


Slide 26

Non-GAAP Financial Measures (1) – see slide 29 for corresponding notes


Slide 27

Non-GAAP Financial Measures (1) – see slide 29 for corresponding notes


Slide 28

Non-GAAP Financial Measures * Preliminary data. Subject to change prior to filings with applicable regulatory agencies. (1), (2), (3) – see slide 29 for corresponding notes


Slide 29

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 30

U.S. Bancorp 1Q22 Earnings Conference Call April 14, 2022

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