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): July 15, 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 July 15, 2022, U.S. Bancorp (the “Company”) issued a press release reporting quarter-ended June 30, 2022 results, and posted on its website its 2Q22 Earnings Conference Call Presentation, which contains certain additional historical and forward-looking information relating to the Company. The press release is included as Exhibit 99.1 hereto and is incorporated herein by reference. The information included in the press release is considered to be “filed” under the Securities Exchange Act of 1934. The 2Q22 Earnings Conference Call Presentation is included as Exhibit 99.2 hereto and is incorporated herein by reference. The information included in the 2Q22 Earnings Conference Call Presentation is considered to be “furnished” under the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference in any filings under the Securities Act of 1933. The press release and 2Q22 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 July 15, 2022, deemed “filed” under the Securities Exchange Act of 1934.

 

  99.2

2Q22 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: July 15, 2022

EX-99.1

Exhibit 99.1

 

 

 

U.S. Bancorp Reports Second Quarter 2022 Results

       LOGO  

 

 Net income of $1.5 billion and record net revenue of $6.0 billion

 Return on average assets of 1.16% and return on average common equity of 15.3%, excluding merger and integration charges

 Common Equity Tier 1 capital ratio of 9.7% and strong levels of liquidity

 

 

    2Q22 Key Financial Data

  

 

2Q22 Highlights

    

     

 PROFITABILITY METRICS

    2Q22       1Q22       2Q21  

Return on average assets (%)

    1.06       1.09       1.44  

Return on average common equity (%)

    13.9       12.7       16.3  

Return on tangible common equity (%) (a)

    18.6       16.6       20.9  

Net interest margin (%)

    2.59       2.44       2.53  

Efficiency ratio (%) (a)

 

   

 

62.1

 

 

 

   

 

62.8

 

 

 

   

 

59.0

 

 

 

 INCOME STATEMENT (b)

    2Q22       1Q22       2Q21  

Net interest income (taxable-equivalent basis)

    $3,464       $3,200       $3,164  

Noninterest income

    $2,548       $2,396       $2,619  

Net income attributable to U.S. Bancorp

    $1,531       $1,557       $1,982  

Diluted earnings per common share

    $.99       $.99       $1.28  

Dividends declared per common share

 

   

 

$.46

 

 

 

   

 

$.46

 

 

 

   

 

$.42

 

 

 

 BALANCE SHEET (b)

    2Q22       1Q22       2Q21  

Average total loans

    $324,187       $312,966       $294,284  

Average total deposits

    $456,516       $454,176       $429,210  

Net charge-off ratio

    .20%       .21%       .25%  

Book value per common share (period end)

    $28.13       $29.87       $31.74  

Basel III standardized CET1 (c)

 

   

 

9.7%

 

 

 

   

 

9.8%

 

 

 

   

 

9.9%

 

 

 

 

(a) See Non-GAAP Financial Measures reconciliation on page 17
(b) Dollars in millions, except per share data
(c) CET1 = Common equity tier 1 capital ratio

 

 

  Net revenue of $6,012 million including $3,464 million of net interest income and $2,548 million of noninterest income

 

  Net income of $1,531 million and diluted earnings per common share of $0.99, including merger and integration charges

 

  Merger and integration-related charges of $197 million ($153 million net of tax or $(0.10) per diluted common share) related to the planned acquisition of MUFG Union Bank

 

  Return on average assets of 1.06% and return on average common equity of 13.9%. Excluding merger and integration-related charges, net income of $1,684 million, return on average assets of 1.16% and return on average common equity of 15.3%

 

  Noninterest income growth of 6.3% linked quarter driven by payment services revenue and trust and investment management fees

 

  Average total loans growth of 10.2% year-over-year and 3.6% on a linked quarter basis

 

  Average total deposits growth of 6.4% year-over-year and 0.5% on a linked quarter basis

 

  Net charge-off ratio of 0.20% in 2Q22 compared with 0.21% in 1Q22 and 0.25% in 2Q21

 

  CET1 capital ratio of 9.7% at June 30, 2022, compared with 9.8% at March 31, 2022

 

 

CEO Commentary

 

“In the second quarter, we achieved record net revenue totaling $6.0 billion, supported by strong growth in both net interest income and fee revenue. We posted diluted earnings per share of $0.99 including merger and integration-related charges of $(0.10) related to the planned acquisition of MUFG Union Bank. Loan growth was robust, we saw good momentum in our payments businesses reflecting strong business activity and our expense growth was well managed. This quarter our return on tangible common equity was 20.5%, excluding merger and integration-related charges. Credit quality remains strong and our net charge-off ratio improved modestly in the quarter. Given strong loan growth and increased uncertainty surrounding the macro-economic outlook, we increased our loan loss reserve reflecting our through-the-cycle risk management approach. As we head into the second half of the year we face an uncertain economic environment. However, we are well positioned for the range of possible outcomes given strong liquidity and capital ratios, our diversified business mix, and our well-established risk management track record.”

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

 

 

In the Spotlight

 

 

Community Benefits Plan

U.S. Bancorp announced a $100 billion, five-year community benefits plan (CBP) as part of the planned acquisition of MUFG Union Bank. The CBP, which will be effective once the acquisition closes, is intended to continue and expand the important work underway by both organizations to build and support equitable access to capital for the communities we serve. A majority of the commitments, 60% of the total, will support efforts in California, the state most impacted by the acquisition.

U.S. Bank Collaborates to Simplify, Accelerate Supply-Chain Financing

U.S. Bank entered into a collaboration agreement with trade-finance fintech LiquidX® to help expedite and simplify supply-chain transactions between suppliers and buyers. Suppliers and buyers will be able to connect their supply-chain systems directly to U.S. Bank and transact through LiquidX’s easy-to-use platform which is expected to reduce supply-chain-finance friction and cash-flow challenges facing many companies. This collaboration will enable suppliers to be paid nearly immediately and buyers to receive extended payment terms.

Managing Finances and Operations for Small Businesses

U.S. Bank recently launched Business Essentials, a unified platform that provides a one-stop shop in a seamless digital experience. It’s a holistic banking, payments, and software offering for small businesses. Business Essentials is backed by expert human support from bankers who specialize in small business. The platform makes it easy for clients to take care of their financial needs today and provides insights and support to help them make smart decisions for tomorrow.

Spanish-Language Voice Assistant

U.S. Bank is the first financial institution in the United States to offer a Spanish-speaking virtual voice assistant for banking. The Spanish-language version of our best-in-class Smart Assistant in the U.S. Bank Mobile App has the same features and functionality as the popular English-language version. This new technology demonstrates U.S. Bank’s continued emphasis on putting customer experience first, by creating new digital tools that enable them to bank however, whenever and wherever is best for them.

 

 

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


LOGO

   U.S. Bancorp Second Quarter 2022 Results
      

 

  INCOME STATEMENT HIGHLIGHTS
  ($ in millions, except per-share data)                         Percent Change                       
      2Q
2022
     1Q
2022
     2Q
2021
     2Q22 vs
1Q22
     2Q22 vs
2Q21
     YTD
2022
     YTD
2021
     Percent 
Change 
 

Net interest income

     $3,435      $ 3,173      $ 3,137        8.3        9.5      $ 6,608      $ 6,200        6.6   

Taxable-equivalent adjustment

     29        27        27        7.4        7.4        56        53        5.7   

Net interest income (taxable-equivalent basis)

     3,464        3,200        3,164        8.3        9.5        6,664        6,253        6.6   

Noninterest income

     2,548        2,396        2,619        6.3        (2.7      4,944        5,000        (1.1)  

Total net revenue

     6,012        5,596        5,783        7.4        4.0        11,608        11,253        3.2   

Noninterest expense before merger and integration

     3,527        3,502        3,387        .7        4.1        7,029        6,766        3.9   

Merger and integration charges

     197        --        --        nm        nm        197        --        nm   

Total noninterest expense

     3,724        3,502        3,387        6.3        9.9        7,226        6,766        6.8   

Income before provision and income taxes

     2,288        2,094        2,396        9.3        (4.5      4,382        4,487        (2.3)  

Provision for credit losses

     311        112        (170      nm        nm        423        (997      nm   

Income before taxes

     1,977        1,982        2,566        (.3      (23.0      3,959        5,484        (27.8)  

Income taxes and taxable-equivalent adjustment

     443        424        578        4.5        (23.4      867     

 

1,211

 

     (28.4)  

Net income

     1,534        1,558        1,988        (1.5      (22.8      3,092        4,273        (27.6)  

Net (income) loss attributable to noncontrolling interests

     (3      (1      (6      nm        50.0        (4      (11      63.6   

Net income attributable to U.S. Bancorp

     $1,531      $ 1,557      $ 1,982        (1.7      (22.8    $ 3,088      $ 4,262        (27.5)  

Net income applicable to U.S. Bancorp common shareholders

     $1,464      $ 1,466      $ 1,914        (.1      (23.5    $ 2,930      $ 4,089        (28.3)  

Diluted earnings per common share

     $.99      $ .99      $ 1.28        --        (22.7    $ 1.97      $ 2.73        (27.8)  
                                                                         

Net income attributable to U.S. Bancorp was $1,531 million for the second quarter of 2022, which was $451 million lower than the $1,982 million for the second quarter of 2021, and $26 million lower than the $1,557 million for the first quarter of 2022. Diluted earnings per common share were $0.99 in the second quarter of 2022, compared with $1.28 in the second quarter of 2021 and $0.99 in the first quarter of 2022. The second quarter of 2022 included $(0.10) per diluted common share of merger and integration-related charges related to the planned acquisition of MUFG Union Bank.

The decrease in net income year-over-year was primarily due to a higher provision for credit losses primarily driven by strong loan growth and merger and integration-related charges linked to the planned acquisition of MUFG Union Bank. Pretax income before the provision for credit losses and excluding merger and integration-related charges increased 3.7 percent compared with a year ago. Net interest income increased 9.5 percent on a year-over-year taxable-equivalent basis due to higher average loans and investment securities balances as well as rising interest rates and the impact of a favorable yield curve on earning assets, partially offset by deposit pricing and lower loan fees driven by the impact of loan forgiveness related to the SBA Paycheck Protection Program (“PPP”) in the prior year quarter. The net interest margin increased to 2.59 percent in the current quarter from 2.53 percent in the second quarter of 2021 primarily due to the impact of rising interest rates and higher yields on investment securities, partially offset by deposit pricing and lower noninterest-bearing deposits. Noninterest income decreased 2.7 percent compared with a year ago reflecting lower mortgage banking revenue as refinancing activities decline, lower other noninterest income and lower gains on the sale of securities, mostly offset by stronger payment services revenue and trust and investment management fees. Excluding the merger and integration-related charges, noninterest expense increased 4.1 percent reflecting increases in compensation expense, employee benefits expense, and marketing and business development expense. Provision for credit losses reflected a reserve build in the second quarter of 2022 as compared with a reserve release in the second quarter of 2021 driven by a combination of loan growth and economic uncertainty.

 

 

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        2


LOGO

   U.S. Bancorp Second Quarter 2022 Results
      

 

Net income decreased on a linked quarter basis driven by higher provision for credit losses and merger and integration-related charges, mostly offset by higher total net revenue. Net interest income increased 8.3 percent on a taxable-equivalent basis primarily due to higher average loans, the impact of rising interest rates on loans and investment securities and one more day in the quarter, partially offset by deposit pricing. The net interest margin increased on a linked quarter basis reflecting the impact of rising interest rates and reinvestment yields on investment securities, partially offset by deposit pricing and lower noninterest-bearing deposits. Noninterest income increased 6.3 percent compared with the first quarter of 2022 driven by stronger payment services revenue, trust and investment management fees and commercial products revenue, partially offset by lower mortgage banking revenue. Excluding the merger and integration-related charges, noninterest expense increased 0.7 percent on a linked quarter basis reflecting seasonally higher compensation expense, marketing and business development expense and other noninterest expense, partially offset by lower employee benefits expense. Provision for credit losses reflected a reserve build in the second quarter of 2022 as compared with a reserve release in the first quarter of 2022 driven by a combination of loan growth and increased economic uncertainty, partially offset by stabilizing credit quality.

 

 

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        3


LOGO

   U.S. Bancorp Second Quarter 2022 Results
      

 

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

2Q

2022

    

1Q

2022

    

2Q

2021

     2Q22 vs
1Q22
     2Q22 vs
2Q21
    

YTD

2022

    

YTD

2021

     Change  

Components of net interest income

                       

Income on earning assets

     $3,854         $3,445         $3,409         $409         $445         $7,299         $6,776         $523   

Expense on interest-bearing liabilities

     390         245         245         145         145         635         523         112   

Net interest income

     $3,464         $3,200         $3,164         $264         $300         $6,664         $6,253         $411   

Average yields and rates paid

                       

Earning assets yield

     2.88%         2.62%         2.73%         .26%         .15%         2.75%         2.73%         .02%   

Rate paid on interest-bearing liabilities

     .40            .26            .28            .14            .12            .33            .29            .04       

Gross interest margin

     2.48%         2.36%         2.45%         .12%         .03%         2.42%         2.44%         (.02)%   

Net interest margin

     2.59%         2.44%         2.53%         .15%         .06%         2.51%         2.52%         (.01)%   

Average balances

                             

Investment securities (a)

     $171,296         $174,762         $160,615         $(3,466)         $10,681         $173,019         $153,109         $19,910   

Loans

     324,187         312,966         294,284         11,221         29,903         318,608         294,138         24,470   

Interest-bearing deposits with banks

     31,116         29,851         31,358         1,265         (242)         30,487         36,542         (6,055)   

Earning assets

     536,761         529,837         500,751         6,924         36,010         533,318         499,239         34,079   

Interest-bearing liabilities

     390,373         378,223         356,565         12,150         33,808         384,332         358,562         25,770   
(a) Excludes unrealized gain (loss)                        

 

 

 

Net interest income on a taxable-equivalent basis in the second quarter of 2022 was $3,464 million, an increase of $300 million (9.5 percent) over the second quarter of 2021. The increase was primarily due to higher average loans and investment securities balances in addition to rising interest rates and a favorable yield curve impacting earning assets, partially offset by deposit pricing and lower loan fees driven by the impact of loan forgiveness related to PPP in the second quarter of 2021. Average earning assets were $36.0 billion (7.2 percent) higher than the second quarter of 2021, reflecting increases of $10.7 billion (6.7 percent) in average investment securities and $29.9 billion (10.2 percent) in average total loans, while average interest-bearing deposits with banks decreased $242 million (0.8 percent). The increase in average investment securities year-over-year was primarily due to purchases of mortgage-backed and U.S. Treasury securities, net of prepayments, sales and maturities.

Net interest income on a taxable-equivalent basis increased $264 million (8.3 percent) on a linked quarter basis primarily due to higher average loans, the impact of rising interest rates in the loan and the investment portfolios and one more day in the quarter, partially offset by deposit pricing. Average earning assets were $6.9 billion (1.3 percent) higher on a linked quarter basis, reflecting an increase of $11.2 billion (3.6 percent) in average loans and a decrease of $3.5 billion (2.0 percent) in average investment securities, while average interest-bearing deposits with banks increased $1.3 billion (4.2 percent).

The net interest margin in the second quarter of 2022 was 2.59 percent, compared with 2.53 percent in the second quarter of 2021 and 2.44 percent in the first quarter of 2022. The increase in the net interest margin from the prior year was primarily due to the impact of rising interest rates and higher yields in the investment portfolio, partially offset by deposit pricing and lower noninterest-bearing deposits. The increase in interest margin on a linked quarter basis reflected the impact of rising interest rates and reinvestment yields on investment securities, partially offset by higher deposit rates paid and lower noninterest-bearing deposits.

 

 

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   U.S. Bancorp Second Quarter 2022 Results
      

 

 AVERAGE LOANS
 ($ in millions)                         Percent Change                      
     

2Q

2022

    

1Q

2022

    

2Q

2021

     2Q22 vs
1Q22
    2Q22 vs
2Q21
   

YTD

2022

    

YTD

2021

     Percent
Change
 

Commercial

     $115,758         $107,819         $97,713         7.4       18.5     $ 111,810       $ 97,237         15.0  

Lease financing

     4,899         5,003         5,261         (2.1     (6.9     4,951         5,298         (6.5

Total commercial

     120,657        112,822         102,974         6.9       17.2       116,761         102,535         13.9  

Commercial mortgages

     29,676         28,826         27,721         2.9       7.1       29,253         27,844         5.1  

Construction and development

     9,841         10,258         10,843         (4.1     (9.2     10,049         10,831         (7.2

Total commercial real estate

     39,517         39,084         38,564         1.1       2.5       39,302         38,675         1.6  

Residential mortgages

     80,228         77,449         73,351         3.6       9.4       78,847         74,271         6.2  

Credit card

     22,748         21,842         21,116         4.1       7.7       22,297         21,130         5.5  

Retail leasing

     6,708         7,110         7,873         (5.7     (14.8     6,908         7,924         (12.8

Home equity and second mortgages

     10,726         10,394         11,368         3.2       (5.6     10,561         11,713         (9.8

Other

     43,603         44,265         39,038        (1.5     11.7       43,932         37,890         15.9  

Total other retail

     61,037         61,769          58,279         (1.2     4.7       61,401         57,527         6.7  

Total loans

     $324,187         $312,966        $294,284         3.6       10.2     $ 318,608       $ 294,138         8.3  

 

 

 

Average total loans for the second quarter of 2022 were $29.9 billion (10.2 percent) higher than the second quarter of 2021. The increase was primarily due to strong growth in commercial loans (18.5 percent), residential mortgages (9.4 percent) and other retail loans (11.7 percent), partially offset by lower retail leasing balances (14.8 percent) and construction and development loans (9.2 percent). 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 reductions related to the forgiveness of PPP loans. The increase in residential mortgages was driven by stronger on-balance sheet loan activities and slower refinance activity.

Average total loans were $11.2 billion (3.6 percent) higher than the first quarter of 2022 primarily due to higher commercial loans (7.4 percent) driven by continued strong new business and higher utilization, as well as higher residential mortgages (3.6 percent).

 

 

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   U.S. Bancorp Second Quarter 2022 Results
      

 

AVERAGE DEPOSITS
($ in millions)                         Percent Change                      
     2Q       1Q       2Q       2Q22 vs     2Q22 vs     YTD       YTD       Percent  
      2022       2022       2021       1Q22     2Q21     2022       2021       Change  

Noninterest-bearing deposits

   $ 120,827       $ 127,963       $ 125,297         (5.6     (3.6   $ 124,375       $ 121,844         2.1  

Interest-bearing savings deposits

                                                   

Interest checking

     116,878         115,062         103,356         1.6       13.1       115,975         100,387         15.5  

Money market savings

     123,788         119,588         113,673         3.5       8.9       121,700         119,218         2.1  

Savings accounts

     68,127         66,978         62,102         1.7       9.7       67,555         60,484         11.7  

Total savings deposits

     308,793         301,628         279,131         2.4       10.6       305,230         280,089         9.0  

Time deposits

     26,896         24,585         24,782         9.4       8.5       25,747         25,862         (.4

Total interest-bearing deposits

     335,689         326,213         303,913         2.9       10.5       330,977         305,951         8.2  

Total deposits

   $ 456,516       $ 454,176       $ 429,210         .5       6.4     $ 455,352       $ 427,795         6.4  

 

 

Average total deposits for the second quarter of 2022 were $27.3 billion (6.4 percent) higher than the second quarter of 2021. Average noninterest-bearing deposits decreased $4.5 billion (3.6 percent) driven by Corporate and Commercial Banking, Consumer and Business Banking and Payment Services. Average total savings deposits were $29.7 billion (10.6 percent) higher year-over-year driven by Corporate and Commercial Banking and Consumer and Business Banking. Average time deposits were $2.1 billion (8.5 percent) higher than the prior year primarily within Corporate and Commercial Banking, partially offset by a decrease in Consumer and Business 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 $2.3 billion (0.5 percent) from the first quarter of 2022. On a linked quarter basis, average noninterest-bearing deposits were lower by $7.1 billion (5.6 percent) driven by Corporate and Commercial Banking and Wealth Management and Investment Services. Average total savings deposits increased $7.2 billion (2.4 percent) across all business lines. Average time deposits were $2.3 billion (9.4 percent) higher linked quarter primarily within 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.

 

 

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   U.S. Bancorp Second Quarter 2022 Results
      

 

 NONINTEREST INCOME                                                                
 ($ in millions)                         Percent Change                         
     

2Q

2022

    

1Q

2022

    

2Q

2021

    

2Q22 vs

1Q22

    

2Q22 vs

2Q21

    

YTD

2022

    

YTD

2021

     Percent
Change
 

Credit and debit card revenue

     $399         $338         $396         18.0        .8        $737         $732         .7  

Corporate payment products revenue

     172         158         138         8.9        24.6        330         264         25.0  

Merchant processing services

     425         363         374         17.1        13.6        788         692         13.9  

Trust and investment management fees

     566         500         446         13.2        26.9        1,066         890         19.8  

Deposit service charges

     165         177         176         (6.8      (6.3      342         337         1.5  

Treasury management fees

     169         156         160         8.3        5.6        325         307         5.9  

Commercial products revenue

     290         266         280         9.0        3.6        556         560         (.7

Mortgage banking revenue

     142         200         346         (29.0      (59.0      342         645         (47.0

Investment products fees

     59         62         60         (4.8      (1.7      121         115         5.2  

Securities gains (losses), net

     19         18         43         5.6        (55.8      37         68         (45.6
Other      142         158         200         (10.1      (29.0      300         390         (23.1
Total noninterest income    $ 2,548       $ 2,396       $ 2,619         6.3        (2.7    $ 4,944       $ 5,000         (1.1

 

 

Second quarter noninterest income of $2,548 million was $71 million (2.7 percent) lower than the second quarter of 2021 reflecting lower mortgage banking revenue, other noninterest income and lower gains on the sale of securities, mostly offset by stronger payment services revenue and trust and investment management fees. Mortgage banking revenue decreased $204 million (59.0 percent) due to lower application volumes, given declining refinance activities experienced in the mortgage industry, lower related gain on sale margins and 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. Other noninterest income decreased $58 million (29.0 percent) primarily due to lower retail leasing end-of-term residual gains, lower gain on sale of certain assets and lower tax-advantaged investment syndication revenue. Partially offsetting these decreases, payment services revenue increased $88 million (9.7 percent) compared with the second quarter of 2021 as corporate payment products revenue increased $34 million (24.6 percent) primarily due to higher sales volume and merchant processing services revenue increased $51 million (13.6 percent) driven by higher sales volumes and merchant fees. Trust and investment management fees increased $120 million (26.9 percent) driven by business growth, activity related to the fourth quarter of 2021 acquisition of PFM Asset Management LLC (“PFM”) and lower money market fund fee waivers.

Noninterest income was $152 million (6.3 percent) higher in the second quarter of 2022 compared with the first quarter of 2022 reflecting stronger payment services revenue, trust and investment management fees and commercial products revenue, partially offset by lower mortgage banking revenue. Payment services revenue increased $137 million (15.9 percent) as credit and debit card revenue increased $61 million (18.0 percent) driven by seasonally higher sales volume and rate, corporate payment products revenue increased $14 million (8.9 percent) primarily due to higher sales volume and merchant processing services revenue increased $62 million (17.1 percent) driven by higher sales volumes and merchant fees. Trust and investment management fees increased $66 million (13.2 percent) driven by higher fees, activity related to the acquisition of PFM, billing cycle timing and lower money market fund fee waivers, partially offset by unfavorable market conditions. Partially offsetting these increases, mortgage banking revenue decreased $58 million (29.0 percent) driven by lower application volume and related gain on sale margins, and 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.

 

 

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   U.S. Bancorp Second Quarter 2022 Results
      

 

 NONINTEREST EXPENSE                                                                
 ($ in millions)                         Percent Change                       
      2Q
2022
     1Q
2022
     2Q
2021
     2Q22 vs
1Q22
     2Q22 vs
2Q21
     YTD
2022
     YTD
2021
     Percent
Change
 

Compensation

   $ 1,872       $ 1,853       $ 1,798         1.0        4.1      $ 3,725       $ 3,601         3.4  

Employee benefits

     374         396         337         (5.6      11.0        770         721         6.8  

Net occupancy and equipment

     265         269         258         (1.5      2.7        534         521         2.5  

Professional services

     111         114         108         (2.6      2.8        225         206         9.2  

Marketing and business development

     106         80         90         32.5        17.8        186         138         34.8  

Technology and communications

     350         349         362         .3        (3.3      699         721         (3.1

Postage, printing and supplies

     69         72         65         (4.2      6.2        141         134         5.2  

Other intangibles

     40         47         40         (14.9      --        87         78         11.5  

Other

     340         322         329         5.6        3.3        662         646         2.5  

Total before merger and integration

     3,527         3,502         3,387         .7        4.1        7,029         6,766         3.9  

Merger and integration charges

     197         --         --         nm        nm        197         --         nm  

Total noninterest expense

   $ 3,724       $ 3,502       $ 3,387         6.3        9.9      $ 7,226       $ 6,766         6.8  
   

Second quarter noninterest expense of $3,724 million was $337 million (9.9 percent) higher than the second quarter of 2021. Included in the second quarter of 2022 were merger and integration-related charges associated with the planned acquisition of MUFG Union Bank of $197 million. Excluding the merger and integration-related charges, second quarter noninterest expense increased $140 million (4.1 percent) compared with the second quarter of 2021 reflecting increases in compensation expense, employee benefits expense, and marketing and business development expense. Compensation expense increased $74 million (4.1 percent) compared with the second quarter of 2021 primarily due to merit and hiring to support business growth, partially offset by lower performance-based incentives. Employee benefits expense increased $37 million (11.0 percent) driven by higher medical expenses. Marketing and business development expense increased $16 million (17.8 percent) due to increased travel and entertainment.

Noninterest expense increased $222 million (6.3 percent) on a linked quarter basis. Excluding merger and integration-related charges, second quarter noninterest expense increased $25 million (0.7 percent) reflecting higher compensation expense, marketing and business development expense and other noninterest expense, partially offset by lower employee benefits expense. Compensation expense increased $19 million (1.0 percent) driven by the impact of seasonal merit increases, one additional day in the second quarter, and higher variable compensation, partially offset by the impact of seasonally higher stock-based compensation in the first quarter. Marketing and business development expense increased $26 million (32.5 percent) due to the timing of marketing campaigns and higher travel and entertainment. Other noninterest expense increased $18 million (5.6 percent), excluding merger and integration-related charges, primarily due to higher liabilities related to future delivery exposures for merchant and airline processing. Partially offsetting these increases, employee benefits expense decreased $22 million (5.6 percent) mainly due to seasonally higher payroll taxes in the first quarter of 2022.

Provision for Income Taxes

The provision for income taxes for the second quarter of 2022 resulted in a tax rate of 22.4 percent on a taxable-equivalent basis (effective tax rate of 21.3 percent), compared with 22.5 percent on a taxable-equivalent basis (effective tax rate of 21.7 percent) in the second quarter of 2021, and a tax rate of 21.4 percent on a taxable-equivalent basis (effective tax rate of 20.3 percent) in the first quarter of 2022.

 

 

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   U.S. Bancorp Second Quarter 2022 Results
      

 

 ALLOWANCE FOR CREDIT LOSSES                                     
 ($ in millions)  

2Q

2022

    % (a)    

1Q

2022

    % (a)    

4Q

2021

    % (a)    

3Q

2021

    % (a)    

2Q

2021

    % (a)  

Balance, beginning of period

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

Net charge-offs Commercial

    28       .10       26       .10       6       .02       13       .05       26       .11  

Lease financing

    2       .16       6       .49       --        --        1       .08       1       .08  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total commercial

    30       .10       32       .12       6       .02       14       .05       27       .11  

Commercial mortgages

    (2     (.03     --        --        (3     (.04     1       .01       --        --   

Construction and development

    8       .33       (5     (.20     (1     (.04     12       .44       --        --   
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total commercial real estate

    6       .06       (5     (.05     (4     (.04     13       .13       --        --   

Residential mortgages

    (9     (.04     (6     (.03     (7     (.04     (10     (.05     (10     (.05

Credit card

    118       2.08       112       2.08       109       1.93       111       2.01       148       2.81  

Retail leasing

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

Home equity and second mortgages

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

Other

    19       .17       30       .27       29       .27       21       .20       19       .20  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total other retail

    16       .11       29       .19       28       .18       19       .13       15       .10  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total net charge-offs

    161       .20       162       .21       132       .17       147       .20       180       .25  

Provision for credit losses

    311         112         (13       (163       (170  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Balance, end of period

  $ 6,255       $ 6,105       $ 6,155       $ 6,300       $ 6,610    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Components

                   

Allowance for loan losses

  $ 5,832       $ 5,664       $ 5,724       $ 5,792       $ 6,026    

Liability for unfunded credit commitments

    423         441         431         508         584    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total allowance for credit losses

  $ 6,255       $ 6,105       $ 6,155       $ 6,300       $ 6,610    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Gross charge-offs

  $ 276       $ 280       $ 254       $ 266       $ 314    

Gross recoveries

  $ 115       $ 118       $ 122       $ 119       $ 134    

Allowance for credit losses as a percentage of

 

                 

Period-end loans

    1.88         1.91         1.97         2.12         2.23    

Nonperforming loans

    863         798         738         695         649    

Nonperforming assets

    812         753         701         667         624    

(a)  Annualized and calculated on average loan balances

   

 

 

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   U.S. Bancorp Second Quarter 2022 Results
      

 

The Company’s provision for credit losses for the second quarter of 2022 was $311 million, compared with a provision of $112 million in the first quarter of 2022 and a benefit of $170 million in the second quarter of 2021. The level of the provision is driven by strong loan growth from a year ago and changing economic conditions. 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. In 2022, economic uncertainty and recession risk has been increasing due to ongoing supply chain challenges, rising inflationary concerns, market volatility, rising oil prices from the Russia-Ukraine conflict and, to a lesser extent, 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, potential effects of inflationary pressures and the impact of rising interest rates on borrowers’ liquidity and ability to repay. Generally, these credit quality factors continue to be relatively strong despite the changing economic outlook.

Total net charge-offs in the second quarter of 2022 were $161 million, compared with $162 million in the first quarter of 2022 and $180 million in the second quarter of 2021. The net charge-off ratio was 0.20 percent in the second quarter of 2022, compared with 0.21 percent in the first quarter of 2022 and 0.25 percent in the second quarter of 2021. Net charge-offs decreased $1 million (0.6 percent) compared with the first quarter of 2022. Net charge-offs decreased $19 million (10.6 percent) compared with the second quarter of 2021 primarily reflecting improvement in credit cards.

The allowance for credit losses was $6,255 million at June 30, 2022, compared with $6,105 million at March 31, 2022, and $6,610 million at June 30, 2021. The increase on a linked quarter basis was driven by continued strong loan growth and increased economic uncertainty, partially offset by stabilizing credit quality. The ratio of the allowance for credit losses to period-end loans was 1.88 percent at June 30, 2022, compared with 1.91 percent at March 31, 2022, and 2.23 percent at June 30, 2021. The ratio of the allowance for credit losses to nonperforming loans was 863 percent at June 30, 2022, compared with 798 percent at March 31, 2022, and 649 percent at June 30, 2021.

Nonperforming assets were $770 million at June 30, 2022, compared with $811 million at March 31, 2022, and $1,059 million at June 30, 2021. The ratio of nonperforming assets to loans and other real estate was 0.23 percent at June 30, 2022, compared with 0.25 percent at March 31, 2022, and 0.36 percent at June 30, 2021. The year-over-year decrease in nonperforming assets reflected decreases across all loan categories with the largest drivers in total commercial and total commercial real estate nonperforming loans, while the decrease on a linked quarter basis was primarily due to a decrease in total commercial nonperforming loans. Accruing loans 90 days or more past due were $423 million at June 30, 2022, compared with $450 million at March 31, 2022, and $376 million at June 30, 2021.

 

 

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   U.S. Bancorp Second Quarter 2022 Results
      

 

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

Jun 30

2022

    

Mar 31

2022

    

Dec 31

2021

    

Sep 30

2021

     Jun 30
2021
 

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

 

  

Commercial

     .07        .06        .04        .04        .04  

Commercial real estate

     .01        --        .03        .05        .01  

Residential mortgages

     .12        .18        .24        .15        .16  

Credit card

     .69        .74        .73        .66        .70  

Other retail

     .10        .11        .11        .11        .10  

Total loans

     .13        .14        .15        .13        .13  

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

 

  

Commercial

     .19        .21        .20        .25        .32  

Commercial real estate

     .53        .55        .76        .82        .81  

Residential mortgages

     .40        .45        .53        .47        .49  

Credit card

     .69        .74        .73        .66        .70  

Other retail

     .35        .37        .35        .36        .39  

Total loans

     .35        .38        .42        .43        .47  
   

 

 ASSET QUALITY (a)  
 ($ in millions)                                   
     

Jun 30

2022

    

Mar 31

2022

    

Dec 31

2021

    

Sep 30

2021

    

Jun 30

2021

 

Nonperforming loans

              

Commercial

     $116         $139         $139         $179         $247   

Lease financing

     32         35         35         37         44   

Total commercial

     148         174         174         216         291   

Commercial mortgages

     147         178         213         215         224   

Construction and development

     59         38         71         81         88   

Total commercial real estate

     206         216         284         296         312   

Residential mortgages

     223         214         226         237         244   

Credit card

     --         --         --         --         --   

Other retail

     148         161         150         157         171   

Total nonperforming loans

     725         765         834         906         1,018   

Other real estate

     23         23         22         17         17   

Other nonperforming assets

     22         23         22         21         24   

Total nonperforming assets

     $770         $811         $878         $944         $1,059   

Accruing loans 90 days or more past due

     $423         $450         $472         $385         $376   

Nonperforming assets to loans plus ORE (%)

     .23         .25         .28         .32         .36   

(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 Second Quarter 2022 Results
      

 

COMMON SHARES  
(Millions)   

2Q

2022

    

1Q

2022

    

4Q

2021

    

3Q

2021

    

2Q

2021

 

Beginning shares outstanding

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

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

     --                       --          

Shares repurchased

     --         (1      --         --         (15
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ending shares outstanding

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
                                              

 

CAPITAL POSITION                                    
($ in millions)   

Jun 30

2022

   

Mar 31

2022

    Dec 31
2021
    Sep 30
2021
    Jun 30
2021
 

Total U.S. Bancorp shareholders’ equity

   $ 48,605      $ 51,200      $ 54,918      $ 53,743      $ 53,039   

Basel III Standardized Approach (a)

          

Common equity tier 1 capital

   $ 42,944      $ 41,950      $ 41,701      $ 41,014      $ 39,691   

Tier 1 capital

     50,195        49,198        48,516        47,426        46,103   

Total risk-based capital

     58,307        57,403        56,250        54,178        53,625   

Common equity tier 1 capital ratio

     9.7      9.8      10.0      10.2      9.9 

Tier 1 capital ratio

     11.4        11.5        11.6        11.7        11.5   

Total risk-based capital ratio

     13.2        13.4        13.4        13.4        13.4   

Leverage ratio

     8.6        8.6        8.6        8.7        8.5   

Tangible common equity to tangible assets (b)

     5.5        6.0        6.8        6.8        6.8   

Tangible common equity to risk-weighted assets (b)

     7.2        8.0        9.2        9.4        9.3   

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

     9.4        9.5        9.6        9.7        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 17

 

 

 

Total U.S. Bancorp shareholders’ equity was $48.6 billion at June 30, 2022, compared with $51.2 billion at March 31, 2022, and $53.0 billion at June 30, 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 near its target ratio of 8.5 percent at the time of closing the acquisition and increasing toward 9.0 percent after closing of the acquisition. The Company does not expect to commence repurchasing its common stock until after the acquisition closes and 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 9.7 percent at June 30, 2022, compared with 9.8 percent at March 31, 2022, and 9.9 percent at June 30, 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 9.4 percent at June 30, 2022, compared with 9.5 percent at March 31, 2022, and at June 30, 2021.

 

 

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   U.S. Bancorp Second Quarter 2022 Results
      

 

  MUFG Union Bank Acquisition

In September 2021, U.S. Bancorp announced that it had entered into a definitive acquisition agreement to acquire the core regional banking franchise of MUFG Union Bank, N.A. Closing of the transaction is subject to customary closing conditions, including regulatory approvals which are not within U.S. Bancorp’s control. The parties continue to make significant progress in planning for closing and integration while awaiting regulatory approvals. At this time, U.S. Bancorp continues to expect to receive U.S. regulatory approvals in time for closing to occur in the second half of 2022. However, U.S. Bancorp no longer expects that system integration will be able to occur in 2022 and currently expects it will occur in the first half of 2023.

 

 

  Investor Conference Call

On Friday, July 15, 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 live conference call will be available online or by telephone. To access the webcast and presentation, visit the U.S. Bancorp 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 866-374-5140. Participants calling from outside the United States and Canada, please dial 404-400-0571. The PIN code for all participants is 56931119#. For those unable to participate during the live call, a replay will be available at approximately 11 a.m. CT on Friday, July 15, 2022. To access the replay, please visit the U.S. Bancorp website at usbank.com and click on “About Us”, “Investor Relations” and “Webcasts & Presentations.”

 

 

  About U.S. Bancorp

U.S. Bancorp, with approximately 70,000 employees and $591 billion in assets as of June 30, 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. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; the impacts of the COVID-19 pandemic on its business, financial position, results of operations, liquidity and prospects; increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; civil unrest; the effects of climate change; changes in customer behavior and preferences; breaches in data security, including as a result of work-from-home arrangements; failures to safeguard personal information; the impacts of international hostilities or geopolitical events; impacts of supply chain disruptions and rising inflation; effects of mergers and acquisitions and related integration; effects of critical

 

 

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   U.S. Bancorp Second Quarter 2022 Results
      

 

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.

 

 

  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.

The adjusted return on average assets, return on average common equity and return on tangible common equity exclude merger and integration-related charges. Management uses these measures in their analysis of the Company’s performance and believes these measures provide a greater understanding of ongoing operations and enhances comparability of results with prior periods.

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  
         Three Months Ended     Six Months Ended      
(Dollars and Shares in Millions, Except Per Share Data)    June 30,     June 30,  
(Unaudited)    2022     2021     2022     2021  

Interest Income

        

Loans

     $2,869       $2,677       $5,468       $5,401  

Loans held for sale

     54       55       114       122  

Investment securities

     806       618       1,523       1,135  

Other interest income

     96       32       138       65  

Total interest income

     3,825       3,382       7,243       6,723  

Interest Expense

        

Deposits

     177       82       257       167  

Short-term borrowings

     57       18       78       34  

Long-term debt

     156       145       300       322  

Total interest expense

     390       245       635       523  

Net interest income

     3,435       3,137       6,608       6,200  

Provision for credit losses

     311       (170     423       (997

Net interest income after provision for credit losses

     3,124       3,307       6,185       7,197  

Noninterest Income

        

Credit and debit card revenue

     399       396       737       732  

Corporate payment products revenue

     172       138       330       264  

Merchant processing services

     425       374       788       692  

Trust and investment management fees

     566       446       1,066       890  

Deposit service charges

     165       176       342       337  

Treasury management fees

     169       160       325       307  

Commercial products revenue

     290       280       556       560  

Mortgage banking revenue

     142       346       342       645  

Investment products fees

     59       60       121       115  

Securities gains (losses), net

     19       43       37       68  

Other

     142       200       300       390  

Total noninterest income

     2,548       2,619       4,944       5,000  

Noninterest Expense

        

Compensation

     1,872       1,798       3,725       3,601  

Employee benefits

     374       337       770       721  

Net occupancy and equipment

     265       258       534       521  

Professional services

     111       108       225       206  

Marketing and business development

     106       90       186       138  

Technology and communications

     350       362       699       721  

Postage, printing and supplies

     69       65       141       134  

Other intangibles

     40       40       87       78  

Merger and integration charges

     197       --       197       --  

Other

     340       329       662       646  

Total noninterest expense

     3,724       3,387       7,226       6,766  

Income before income taxes

     1,948           2,539       3,903       5,431  

Applicable income taxes

     414       551       811       1,158  

Net income

     1,534       1,988       3,092       4,273  

Net (income) loss attributable to noncontrolling interests

     (3     (6     (4     (11

Net income attributable to U.S. Bancorp

     $1,531       $1,982           $3,088       $4,262  

Net income applicable to U.S. Bancorp common shareholders

     $1,464       $1,914       $2,930           $4,089  

Earnings per common share

     $.99       $1.29       $1.97       $2.73  

Diluted earnings per common share

     $.99       $1.28       $1.97       $2.73  

Dividends declared per common share

     $.46       $.42       $.92       $.84  

Average common shares outstanding

     1,486       1,489       1,485       1,495  

Average diluted common shares outstanding

     1,487       1,490       1,486       1,497  

 

 

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 CONSOLIDATED ENDING BALANCE SHEET  
(Dollars in Millions)   

June 30,

2022

   

December 31,

2021

   

June 30,

2021

 

Assets

     (Unaudited       (Unaudited

Cash and due from banks

     $39,124       $28,905       $44,573  

Investment securities

      

Held-to-maturity

     61,503       41,858       --  

Available-for-sale

     98,806       132,963       160,288  

Loans held for sale

     3,943       7,775       5,856  

Loans

      

Commercial

     125,983       112,023       103,521  

Commercial real estate

     39,753       39,053       38,770  

Residential mortgages

     82,114       76,493       73,366  

Credit card

     23,697       22,500       21,816  

Other retail

     60,822       61,959       59,439  

Total loans

     332,369       312,028       296,912  

Less allowance for loan losses

     (5,832     (5,724     (6,026

Net loans

     326,537       306,304       290,886  

Premises and equipment

     3,177       3,305       3,295  

Goodwill

     10,157       10,262       9,911  

Other intangible assets

     4,487       3,738       3,363  

Other assets

     43,647       38,174       40,714  

Total assets

     $591,381       $573,284       $558,886  

Liabilities and Shareholders’ Equity

      

Deposits

      

Noninterest-bearing

     $129,130       $134,901       $135,143  

Interest-bearing

     337,972       321,182       302,039  

Total deposits

     467,102       456,083       437,182  

Short-term borrowings

     24,963       11,796       13,413  

Long-term debt

     29,408       32,125       36,360  

Other liabilities

     20,839       17,893       18,257  

Total liabilities

     542,312       517,897       505,212  

Shareholders’ equity

      

Preferred stock

     6,808       6,371       5,968  

Common stock

     21       21       21  

Capital surplus

     8,555       8,539       8,518  

Retained earnings

     70,772       69,201       67,039  

Less treasury stock

     (27,190     (27,271     (27,305

Accumulated other comprehensive income (loss)

     (10,361     (1,943     (1,202

Total U.S. Bancorp shareholders’ equity

     48,605       54,918       53,039  

Noncontrolling interests

     464       469       635  

Total equity

     49,069       55,387       53,674  

Total liabilities and equity

     $591,381       $573,284       $558,886  

 

 

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 NON-GAAP FINANCIAL MEASURES  
(Dollars in Millions, Unaudited)   

June 30,

2022

   

March 31,

2022

   

December 31,

2021

   

September 30,

2021

   

June 30,

2021

 

Total equity

     $49,069       $51,668       $55,387       $54,378       $53,674  

Preferred stock

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

Noncontrolling interests

     (464     (468     (469     (635     (635

Goodwill (net of deferred tax liability) (1)

     (9,204     (9,304     (9,323     (9,063     (8,987

Intangible assets, other than mortgage servicing rights

     (780     (762     (785     (618     (650

Tangible common equity (a)

     31,813       34,326       38,439       38,094       37,434  

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

     42,944       41,950       41,701       41,014       39,691  

Adjustments (2)

     (1,300     (1,298     (1,733     (1,733     (1,732

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

     41,644       40,652       39,968       39,281       37,959  

Total assets

     591,381       586,517       573,284       567,495       558,886  

Goodwill (net of deferred tax liability) (1)

     (9,204     (9,304     (9,323     (9,063     (8,987

Intangible assets, other than mortgage servicing rights

     (780     (762     (785     (618     (650

Tangible assets (c)

     581,397       576,451       563,176       557,814       549,249  

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

     441,804     427,174       418,571       404,021       401,301  

Adjustments (3)

     (317 )*      (351     (357     (684     (1,027

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

     441,487     426,823       418,214       403,337       400,274  

Ratios*

          

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

     5.5     6.0     6.8     6.8     6.8

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

     7.2       8.0       9.2       9.4       9.3  

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

     9.4       9.5       9.6       9.7       9.5  
          
          
     Three Months Ended  
    

June 30,

2022

   

March 31,

2022

   

December 31,

2021

   

September 30,

2021

   

June 30,

2021

 

Net income applicable to U.S. Bancorp common shareholders

     $1,464       $1,466       $1,582       $1,934       $1,914  

Intangibles amortization (net-of-tax)

     32       37       32       32       32  

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

     1,496       1,503       1,614       1,966       1,946  

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

     6,000       6,096       6,403       7,800       7,805  

Average total equity

     49,633       53,934       55,875       54,908       53,593  

Average preferred stock

     (6,808     (6,619     (6,865     (5,968     (5,968

Average noncontrolling interests

     (467     (468     (633     (635     (631

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

     (9,246     (9,320     (9,115     (9,019     (9,003

Average intangible assets, other than mortgage servicing rights

     (783     (779     (656     (632     (662

Average tangible common equity (g)

     32,329       36,748       38,606       38,654       37,329  

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

     18.6       16.6       16.6       20.2       20.9  

Net interest income

     $3,435       $3,173       $3,123       $3,171       $3,137  

Taxable-equivalent adjustment (4)

     29       27       27       26       27  

Net interest income, on a taxable-equivalent basis

     3,464       3,200       3,150       3,197       3,164  

Net interest income, on a taxable-equivalent basis

          

(as calculated above)

     3,464       3,200       3,150       3,197       3,164  

Noninterest income

     2,548       2,396       2,534       2,693       2,619  

Less: Securities gains (losses), net

     19       18       15       20       43  

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

     5,993       5,578       5,669       5,870       5,740  

Noninterest expense (i)

     3,724       3,502       3,533       3,429       3,387  

Efficiency ratio (i)/(h)

     62.1     62.8     62.3     58.4     59.0
*

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

(1)

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

(2)

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

(3)

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

(4)

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

 

 

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 NON-GAAP FINANCIAL MEASURES  
(Dollars in Millions, Unaudited)   

Three Months Ended
June 30,

2022

 

Net income attributable to U.S. Bancorp

     $1,531  

Less: Notable items (1)

     (153

Net income attributable to U.S. Bancorp, excluding notable items

     1,684  

Annualized net income attributable to U.S. Bancorp, excluding notable items (a)

     6,755  

Average assets (b)

     579,911  

Return on average assets, excluding notable items (a)/(b)

     1.16

Net income applicable to U.S. Bancorp common shareholders

     $1,464  

Less: Notable items (1)

     (153

Net income applicable to U.S. Bancorp common shareholders, excluding notable items

     1,617  

Annualized net income applicable to U.S. Bancorp common shareholders, excluding notable items (c)

     6,486  

Average common equity (d)

     42,358  

Return on average common equity, excluding notable items (c)/(d)

     15.3

Net income applicable to U.S. Bancorp common shareholders

     $1,464  

Intangibles amortization (net-of-tax)

     32  

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

     1,496  

Less: Notable items (1)

     (153

Net income applicable to U.S. Bancorp, excluding intangibles amortization and notable items

     1,649  

Annualized net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization and notable items (e)

     6,614  

Average total equity

     49,633  

Average preferred stock

     (6,808

Average noncontrolling interests

     (467

Average goodwill (net of deferred tax liability) (2)

     (9,246

Average intangible assets, other than mortgage servicing rights

     (783

Average tangible common equity (f)

     32,329  

Return on tangible common equity, excluding notable items (e)/(f)

     20.5
(1)

Notable items for the three months ended June 30, 2022 include $153 million (after-tax) of merger and integration charges.

(2)

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

 

 

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LINE OF BUSINESS FINANCIAL PERFORMANCE (a)       
($ in millions)    Net Income Attributable
to U.S. Bancorp
     Percent Change     Net Income Attributable
to U.S. Bancorp
             
Business Line   

2Q

2022

   

1Q

2022

    

2Q  

2021  

    

2Q22 vs

1Q22

   

2Q22 vs

2Q21

   

YTD

2022

    

YTD  

2021  

    

Percent

Change

      

Corporate and Commercial Banking

     $377       $416        $418          (9.4     (9.8     $793        $880          (9.9    

Consumer and Business Banking

     501       379        646          32.2       (22.4     880        1,211          (27.3    

Wealth Management and Investment Services

     320       202        208          58.4       53.8       522        429          21.7      

Payment Services

     391       371        441          5.4       (11.3     762        934          (18.4    

Treasury and Corporate Support

     (58     189        269          nm       nm       131        808          (83.8    
   

Consolidated Company

     $1,531       $1,557        $1,982          (1.7     (22.8     $3,088        $4,262          (27.5    
                          
      Income Before Provision
and Taxes
     Percent Change     Income Before Provision
and Taxes
              
     

2Q

2022

   

1Q

2022

    

2Q  

2021  

    

2Q22 vs

1Q22

   

2Q22 vs

2Q21

   

YTD

2022

    

YTD  

2021  

    

Percent

Change

      

Corporate and Commercial Banking

     $603       $559        $558          7.9       8.1       $1,162        $1,128          3.0      

Consumer and Business Banking

     593       553        793          7.2       (25.2     1,146        1,507          (24.0    

Wealth Management and Investment Services

     423       278        274          52.2       54.4       701        574          22.1      

Payment Services

     742       625        679          18.7       9.3       1,367        1,295          5.6      

Treasury and Corporate Support

     (73     79        92          nm       nm       6        (17)         nm      
   

Consolidated Company

     $2,288       $2,094        $2,396          9.3       (4.5     $4,382        $4,487          (2.3    
   

(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                      
     

2Q

2022

    

1Q

2022

    

2Q  

2021  

    

2Q22 vs

1Q22

   

2Q22 vs

2Q21

   

YTD

2022

    

YTD  

2021  

    

Percent

Change

 

Condensed Income Statement

                       

Net interest income (taxable-equivalent basis)

     $784        $739        $726          6.1       8.0       $1,523        $1,448          5.2  

Noninterest income

     272        245        265          11.0       2.6       517        533          (3.0

Securities gains (losses), net

     --          --          --            --         --         --          --            --    

Total net revenue

     1,056        984        991          7.3       6.6       2,040        1,981          3.0  

Noninterest expense

     453        425        433          6.6       4.6       878        853          2.9  

Other intangibles

     --          --          --            --         --         --          --            --    

Total noninterest expense

     453        425        433          6.6       4.6       878        853          2.9  

Income before provision and taxes

     603        559        558          7.9       8.1       1,162        1,128          3.0  

Provision for credit losses

     100        4        --            nm       nm       104        (46)         nm  

Income before income taxes

     503        555        558          (9.4     (9.9     1,058        1,174          (9.9

Income taxes and taxable-equivalent adjustment

     126        139        140          (9.4     (10.0     265        294          (9.9

Net income

     377        416        418          (9.4     (9.8     793        880          (9.9

Net (income) loss attributable to noncontrolling interests

     --          --          --            --         --         --          --            --    

Net income attributable to U.S. Bancorp

     $377        $416        $418          (9.4     (9.8     $793        $880          (9.9
   

Average Balance Sheet Data

                       

Loans

     $123,210        $115,865        $102,275          6.3       20.5       $119,557        $102,201          17.0  

Other earning assets

     4,161        4,676        4,409          (11.0     (5.6     4,416        4,364          1.2  

Goodwill

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

Other intangible assets

     4        4        5          --         (20.0     4        5          (20.0

Assets

     137,773        127,889        114,186          7.7       20.7       132,856        114,229          16.3  
   

Noninterest-bearing deposits

     58,266        62,353        60,696          (6.6     (4.0     60,298        58,524          3.0  

Interest-bearing deposits

     93,678        86,957        70,019          7.7       33.8       90,336        70,943          27.3  

Total deposits

     151,944        149,310        130,715          1.8       16.2       150,634        129,467          16.3  
   

Total U.S. Bancorp shareholders’ equity

     13,989        13,728        13,816          1.9       1.3       13,859        14,092          (1.7
   

(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 generated $603 million of income before provision and taxes in the second quarter of 2022, compared with $558 million in the second quarter of 2021, and contributed $377 million of the Company’s net income in the second quarter of 2022. The provision for credit losses increased $100 million compared with the second 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. Total net revenue was $65 million (6.6 percent) higher due to an increase of $58 million (8.0 percent) in net interest income and an increase of $7 million (2.6 percent) in total noninterest income. Net interest income increased primarily due to higher loan and interest-bearing deposit balances, partially offset by lower spreads on loans and unfavorable changes in deposit rates. Total noninterest income increased primarily due to stronger treasury management fees driven by core growth and increased federal government volume. Total noninterest expense increased $20 million (4.6 percent) compared with a year ago primarily due to higher FDIC insurance expense and higher compensation expense primarily due to merit, variable compensation and hiring to support business growth, partially offset by lower performance-based incentives related to capital markets activity.

 

 

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

2Q

2022

   

1Q

2022

    

2Q  

2021  

    

2Q22 vs

1Q22

   

2Q22 vs

2Q21

   

YTD

2022

   

YTD  

2021  

    

Percent

Change

 

Condensed Income Statement

                     

Net interest income (taxable-equivalent basis)

     $1,617       $1,512        $1,534          6.9       5.4       $3,129       $3,035          3.1  

Noninterest income

     395       461        634          (14.3     (37.7     856       1,203          (28.8

Securities gains (losses), net

     --         --          --            --         --         --         --            --    

Total net revenue

     2,012       1,973        2,168          2.0       (7.2     3,985       4,238          (6.0

Noninterest expense

     1,416       1,417        1,372          (.1     3.2       2,833       2,725          4.0  

Other intangibles

     3       3        3          --         --         6       6          --    

Total noninterest expense

     1,419       1,420        1,375          (.1     3.2       2,839       2,731          4.0  

Income before provision and taxes

     593       553        793          7.2       (25.2     1,146       1,507          (24.0

Provision for credit losses

     (75     47        (68)         nm       (10.3     (28     (108)         74.1  

Income before income taxes

     668       506        861          32.0       (22.4     1,174       1,615          (27.3

Income taxes and taxable-equivalent adjustment

     167       127        215          31.5       (22.3     294       404          (27.2

Net income

     501       379        646          32.2       (22.4     880       1,211          (27.3

Net (income) loss attributable to noncontrolling interests

     --         --          --            --         --         --         --            --    

Net income attributable to U.S. Bancorp

     $501       $379        $646          32.2       (22.4     $880       $1,211          (27.3
   

Average Balance Sheet Data

                     

Loans

     $141,135       $140,828        $140,826          .2       .2       $140,984       $141,170          (.1

Other earning assets

     2,579       4,381        8,018          (41.1     (67.8     3,475       9,092          (61.8

Goodwill

     3,244       3,261        3,476          (.5     (6.7     3,252       3,476          (6.4

Other intangible assets

     3,634       3,176        2,828          14.4       28.5       3,406       2,661          28.0  

Assets

     156,132       157,411        161,695          (.8     (3.4     156,770       162,803          (3.7
   

Noninterest-bearing deposits

     31,642       31,975        33,702          (1.0     (6.1     31,807       33,244          (4.3

Interest-bearing deposits

     168,486       166,059        158,164          1.5       6.5       167,279       154,450          8.3  

Total deposits

     200,128       198,034        191,866          1.1       4.3       199,086       187,694          6.1  
   

Total U.S. Bancorp shareholders’ equity

     12,366       12,255        12,337          .9       .2       12,311       12,407          (.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 generated $593 million of income before provision and taxes in the second quarter of 2022, compared with $793 million in the second quarter of 2021, and contributed $501 million of the Company’s net income in the second quarter of 2022. The provision for credit losses decreased $7 million (10.3 percent) due to balance reductions and stronger improvements in credit quality in the current quarter compared with the prior year linked quarter. Total net revenue was lower by $156 million (7.2 percent) due to a decrease in total noninterest income of $239 million (37.7 percent), partially offset by an increase of $83 million (5.4 percent) in net interest income. Net interest income reflected strong growth in average interest-bearing deposits and favorable funding mix, partially offset by lower spreads on loans and lower loan fees driven by the impact of loan forgiveness related to PPP in the second quarter of 2021. Total noninterest income decreased primarily due to lower mortgage banking revenue reflecting lower application volumes, given declining refinance activities, lower related gain on sale margins and 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. Total noninterest expense increased $44 million (3.2 percent) primarily due to increases in net shared services expense due to investments in digital capabilities, partially offset by lower compensation expense reflecting lower revenue-related compensation due to mortgage production net of higher salaries as a result of merit and core business growth.

 

 

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

2Q

2022

   

1Q

2022

    

2Q  

2021  

    

2Q22 vs

1Q22

   

2Q22 vs

2Q21

   

YTD

2022

    

YTD  

2021  

    

Percent

Change

 

Condensed Income Statement

                      

Net interest income (taxable-equivalent basis)

     $352       $275        $246          28.0       43.1       $627        $514          22.0  

Noninterest income

     652       596        549          9.4       18.8       1,248        1,080          15.6  

Securities gains (losses), net

     --         --          --            --         --         --          --            --    

Total net revenue

     1,004       871        795          15.3       26.3       1,875        1,594          17.6  

Noninterest expense

     578       583        517          (.9     11.8       1,161        1,013          14.6  

Other intangibles

     3       10        4          (70.0     (25.0     13        7          85.7  

Total noninterest expense

     581       593        521          (2.0     11.5       1,174        1,020          15.1  

Income before provision and taxes

     423       278        274          52.2       54.4       701        574          22.1  

Provision for credit losses

     (4     8        (4)         nm       --         4        1          nm  

Income before income taxes

     427       270        278          58.1       53.6       697        573          21.6  

Income taxes and taxable-equivalent adjustment

     107       68        70          57.4       52.9       175        144          21.5  

Net income

     320       202        208          58.4       53.8       522        429          21.7  

Net (income) loss attributable to noncontrolling interests

     --         --          --            --         --         --          --            --    

Net income attributable to U.S. Bancorp

     $320       $202        $208          58.4       53.8       $522        $429          21.7  
   

Average Balance Sheet Data

                      

Loans

     $22,320       $20,713        $17,442          7.8       28.0       $21,521        $17,147          25.5  

Other earning assets

     251       259        237          (3.1     5.9       255        258          (1.2

Goodwill

     1,718       1,761        1,618          (2.4     6.2       1,739        1,618          7.5  

Other intangible assets

     300       265        84          13.2       nm       283        63          nm  

Assets

     25,786       24,455        20,470          5.4       26.0       25,124        20,297          23.8  
   

Noninterest-bearing deposits

     25,019       27,402        23,288          (8.7     7.4       26,204        22,339          17.3  

Interest-bearing deposits

     71,759       70,281        73,347          2.1       (2.2     71,024        78,489          (9.5

Total deposits

     96,778       97,683        96,635          (.9     .1       97,228        100,828          (3.6
   

Total U.S. Bancorp shareholders’ equity

     3,618       3,595        3,089          .6       17.1       3,607        3,062          17.8  
   

(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 generated $423 million of income before provision and taxes in the second quarter of 2022, compared with $274 million in the second quarter of 2021, and contributed $320 million of the Company’s net income in the second quarter of 2022. The provision for credit losses was unchanged compared with the prior year quarter. Total net revenue increased $209 million (26.3 percent) year-over-year reflecting an increase of $106 million (43.1 percent) in net interest income and an increase of $103 million (18.8 percent) in total noninterest income. Net interest income increased primarily due to favorable funding mix, higher average noninterest-bearing deposits and higher average loan balances. Total noninterest income increased primarily due to lower money market fund fee waivers, the impact of the PFM acquisition and core business growth in trust and investment management fees. Total noninterest expense increased $60 million (11.5 percent) compared with the second quarter of 2021 reflecting higher compensation expense as a result of merit, the PFM acquisition, core business growth and performance-based incentives, as well as higher net shared services expense driven by investment in support of business growth.

 

 

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

2Q

2022

    

1Q

2022

    

2Q  

2021  

    

2Q22 vs

1Q22

   

2Q22 vs

2Q21

   

YTD

2022

    

YTD  

2021  

    

Percent

Change

 

Condensed Income Statement

                       

Net interest income (taxable-equivalent basis)

     $619        $622        $595          (.5     4.0       $1,241        $1,224          1.4  

Noninterest income

     994        858        913          15.9       8.9       1,852        1,698          9.1  

Securities gains (losses), net

     --          --          --            --         --         --          --            --    

Total net revenue

     1,613        1,480        1,508          9.0       7.0       3,093        2,922          5.9  

Noninterest expense

     837        821        796          1.9       5.2       1,658        1,562          6.1  

Other intangibles

     34        34        33          --         3.0       68        65          4.6  

Total noninterest expense

     871        855        829          1.9       5.1       1,726        1,627          6.1  

Income before provision and taxes

     742        625        679          18.7       9.3       1,367        1,295          5.6  

Provision for credit losses

     221        130        91          70.0       nm       351        50          nm  

Income before income taxes

     521        495        588          5.3       (11.4     1,016        1,245          (18.4

Income taxes and taxable-equivalent adjustment

     130        124        147          4.8       (11.6     254        311          (18.3

Net income

     391        371        441          5.4       (11.3     762        934          (18.4

Net (income) loss attributable to noncontrolling interests

     --          --          --            --         --         --          --            --    

Net income attributable to U.S. Bancorp

     $391        $371        $441          5.4       (11.3     $762        $934          (18.4
   

Average Balance Sheet Data

                       

Loans

     $33,854        $31,740        $30,030          6.7       12.7       $32,802        $29,831          10.0  

Other earning assets

     1,023        1,023        5          --         nm       1,023        5          nm  

Goodwill

     3,318        3,325        3,176          (.2     4.5       3,322        3,175          4.6  

Other intangible assets

     438        464        518          (5.6     (15.4     450        530          (15.1

Assets

     41,054        38,540        35,618          6.5       15.3       39,803        35,356          12.6  
   

Noninterest-bearing deposits

     3,396        3,673        5,030          (7.5     (32.5     3,534        5,146          (31.3

Interest-bearing deposits

     167        160        141          4.4       18.4       164        137          19.7  

Total deposits

     3,563        3,833        5,171          (7.0     (31.1     3,698        5,283          (30.0
   

Total U.S. Bancorp shareholders’ equity

     8,115        8,019        7,413          1.2       9.5       8,067        7,535          7.1  
   

(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 generated $742 million of income before provision and taxes in the second quarter of 2022, compared with $679 million in the second quarter of 2021, and contributed $391 million of the Company’s net income in the second quarter of 2022. The provision for credit losses increased $130 million primarily due to stronger growth in loan balances in the current year linked quarter and relatively stable credit quality in the current period compared with a stronger reduction in delinquencies in the prior year quarter. Total net revenue increased $105 million (7.0 percent) due to higher net interest income of $24 million (4.0 percent) and higher total noninterest income of $81 million (8.9 percent). Net interest income increased primarily due to higher loan balances and loan fees, partially offset by lower loan yields driven by declining customer revolve rates. Total noninterest income increased year-over-year mainly due to continued strengthening of consumer and business spending across most sectors. As a result, there was strong growth in merchant processing services revenue driven by higher sales volume and higher merchant fees, partially offset by higher rebates, as well as solid growth in corporate payment products revenue driven by improving business spending across 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 dissipated year-over-year. Total noninterest expense increased $42 million (5.1 percent) reflecting higher net shared services expense driven by investment in infrastructure and technology development, in addition to higher compensation expense due to merit, core business growth and variable compensation.

 

 

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        6


LOGO

  
      

 

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

2Q

2022

   

1Q

2022

   

2Q  

2021  

    

2Q22 vs

1Q22

   

2Q22 vs

2Q21

   

YTD

2022

   

YTD  

2021  

    

Percent

Change

 

Condensed Income Statement

                    

Net interest income (taxable-equivalent basis)

     $92       $52       $63          76.9       46.0       $144       $32          nm  

Noninterest income

     216       218       215          (.9     .5       434       418          3.8  

Securities gains (losses), net

     19       18       43          5.6       (55.8     37       68          (45.6

Total net revenue

     327       288       321          13.5       1.9       615       518          18.7  

Noninterest expense

     400       209       229          91.4       74.7       609       535          13.8  

Other intangibles

     --         --         --            --         --         --         --            --    

Total noninterest expense

     400       209       229          91.4       74.7       609       535          13.8  

Income (loss) before provision and taxes

     (73     79       92          nm       nm       6       (17)         nm  

Provision for credit losses

     69       (77     (189)         nm       nm       (8     (894)         99.1  

Income (loss) before income taxes

     (142     156       281          nm       nm       14       877          (98.4

Income taxes and taxable-equivalent adjustment

     (87     (34     6          nm       nm       (121     58          nm  

Net income (loss)

     (55     190       275          nm       nm       135       819          (83.5

Net (income) loss attributable to noncontrolling interests

     (3     (1     (6)         nm       50.0       (4     (11)         63.6  

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

     $(58     $189       $269          nm       nm       $131       $808          (83.8
   

Average Balance Sheet Data

                    

Loans

     $3,668       $3,820       $3,711          (4.0     (1.2     $3,744       $3,789          (1.2

Other earning assets

     204,560       206,532       193,798          (1.0     5.6       205,541       191,382          7.4  

Goodwill

     --         --         --            --         --         --         --            --    

Other intangible assets

     --         --         --            --         --         --         --            --    

Assets

     219,166       229,107       219,396          (4.3     (.1     224,110       217,372          3.1  
   

Noninterest-bearing deposits

     2,504       2,560       2,581          (2.2     (3.0     2,532       2,591          (2.3

Interest-bearing deposits

     1,599       2,756       2,242          (42.0     (28.7     2,174       1,932          12.5  

Total deposits

     4,103       5,316       4,823          (22.8     (14.9     4,706       4,523          4.0  
   

Total U.S. Bancorp shareholders’ equity

     11,078       15,869       16,307          (30.2     (32.1     13,460       15,750          (14.5
   

(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 generated a $73 million loss before provision and taxes in the second quarter of 2022, compared with $92 million of income before provision and taxes in the second quarter of 2021, and recorded a net loss of $58 million in the second quarter of 2022. The provision for credit losses increased $258 million reflecting the increase in allowance for credit losses due to increasing economic uncertainty in the current quarter relative to the reduction in the allowance for credit losses associated with improving economic conditions in the second quarter of 2021. Total net revenue was higher by $6 million (1.9 percent) due to an increase of $29 million (46.0 percent) in net interest income, mostly offset by a decrease of $23 million (8.9 percent) in total noninterest income. Net interest income increased primarily due to higher investment portfolio and cash balances. The decrease in total noninterest income was primarily due to lower securities gains and lower gains on the disposition of assets, partially offset by higher commercial products revenue. Total noninterest expense increased $171 million (74.7 percent) primarily due to merger and integration-related charges related to the acquisition of MUFG Union Bank and higher compensation expense reflecting merit, hiring to support business growth and core business growth net of lower variable compensation, partially offset by lower net shared services costs. 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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        7

EX-99.2

Slide 1

U.S. Bancorp 2Q22 Earnings Conference Call July 15, 2022 Exhibit 99.2


Slide 2

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. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; the impacts of the COVID-19 pandemic on its business, financial position, results of operations, liquidity and prospects; increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; civil unrest; the effects of climate change; changes in customer behavior and preferences; breaches in data security, including as a result of work-from-home arrangements; failures to safeguard personal information; the impacts of international hostilities or geopolitical events; impacts of supply chain disruptions and rising inflation; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk. In addition, U.S. Bancorp’s proposed acquisition of MUFG Union Bank presents risks and uncertainties, including, among others: the risk that the cost savings, any revenue synergies and other anticipated benefits of the proposed acquisition may not be realized or may take longer than anticipated to be realized; the risk that U.S. Bancorp’s business could be disrupted as a result of the announcement and pendency of the proposed acquisition and diversion of management’s attention from ongoing business operations and opportunities; the possibility that the proposed acquisition, including the integration of MUFG Union Bank, may be more costly or difficult to complete than anticipated; delays in closing the proposed acquisition; and the failure of required governmental approvals to be obtained or any other closing conditions in the definitive purchase agreement to be satisfied. For discussion of these and other risks that may cause actual results to differ from those described in forward-looking statements, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2021, on file with the Securities and Exchange Commission, including the sections entitled “Corporate Risk Profile” and “Risk Factors” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. In addition, factors other than these risks also could adversely affect U.S. Bancorp’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events. 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. Forward-looking Statements and Additional Information


Slide 3

2Q22 Highlights 1 Taxable-equivalent basis; see slide 28 for calculation 2 Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology was 9.4% as of 6/30/22. 3 Earnings returned (millions) = total common dividends paid and aggregate value of common shares repurchased


Slide 4

Performance Ratios Return on Average Assets Efficiency Ratio1 & Net Interest Margin2 Return on Average Common Equity Return on Tangible Common Equity1 1 Non-GAAP; see slides 28 and 29 for calculations 2 Net interest margin on a taxable-equivalent basis 3 Non-GAAP; Excluding merger and integration charges; see slides 28 and 29 for calculations 1.16%3 15.3%3 20.5%3 62.1% 58.9%3


Slide 5

Digital Engagement Trends 5/31/22 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


Slide 6

Digital and payments initiatives across our businesses Commercial and Large Corporate Business Banking Consumer Banking ~6x >10x FY20 RTP Transactions at U.S. Bank First in market to send RTP4 Transaction Multiple ways to integrate RTP products #1 are out of U.S. Bank’s footprint ~55% New State Farm Deposit Accounts3 are new customers to U.S. Bank ~80% + Deposit growth is equivalent to one large MSA2 Credit Card production is equivalent to four large MSAs1 >5x ~3.4x FY20 talech helps small businesses tackle accounts receivable and operational tasks 1 Data from December 2020 to present 2 Data from April 2021 to present 3 Data as of 6/30/2022 4 Real Time Payments Note: State Farm and logo are trademarks of State Farm Mutual Automobile Company New talech Customers


Slide 7

Business Banking and Payments Trends With 1.1 million business1 banking relationships, there is a significant opportunity for us to deepen current relationships and acquire new customers. Banking and Payments2 Relationships Business Banking only Business Banking & Payments Payments only Payments & Business Banking 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 5/31/22 4 Data indexed to 100 as of 3/31/21 Relationship Growth4 Relationships with both a Banking & Payments Product Total Relationships 5/31/22


Slide 8

Average Loans +3.6% linked quarter +10.2% year-over-year On a linked quarter basis, average total loans were higher primarily due to growth in commercial loans and higher residential mortgages. On a year-over-year basis, average total loans were higher primarily due to higher commercial loans, higher residential mortgages, and higher other retail loans, partially offset by lower retail leasing balances and construction and development loans. $ in billions


Slide 9

Average Deposits +0.5% linked quarter +6.4% year-over-year Interest-bearing Deposits Average noninterest-bearing (NIB) deposits decreased on a linked quarter basis and on a year-over-year basis. On a linked quarter basis, the decrease was driven by Corporate and Commercial Banking and Wealth Management and Investment Services, while the year-over-year decrease was primarily driven by Corporate and Commercial Banking, Consumer and Business Banking and Payments Services. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, were higher on a linked quarter basis and on a year-over-year basis. $ in billions


Slide 10

NCO Ratio -1 bps QoQ -5 bps YoY NPAs -5.1% QoQ -27.3% YoY $ in millions, except allowance for credit losses in billions Allowance for Credit Losses by Loan Class, 2Q22   Amount ($B) Loans and Leases Outstanding (%) Commercial $1.9 1.5% Commercial Real Estate 1.0 2.4% Residential Mortgage 0.7 0.8% Credit Card 1.7 7.4% Other Retail 1.0 1.6% Total $6.3 1.9% Credit Quality


Slide 11

Earnings Summary 1 Merger and integration-related charges associated with the planned acquisition of MUFG Union Bank.


Slide 12

Net Interest Income +8.3% linked quarter +9.5% year-over-year $ in millions 1 Includes PPP interest income and PPP loan fees Net interest income on a taxable-equivalent basis; see slide 28 for calculation Including PPP Excluding PPP +8.7% linked quarter +12.5% year-over-year $3,164 $3,200 $3,464 Linked Quarter Net interest income increased, primarily due to higher loan balances, the impact of rising interest rates in the loan and investment portfolios and one more day in the quarter, partially offset by deposit pricing. The net interest margin increased, reflecting the impact of rising interest rates and reinvestment yields on investment securities, partially offset by higher deposit rates paid and lower noninterest-bearing deposits. Year-over-Year Net interest income increased, primarily due to higher loan and investment securities balances in addition to rising interest rates and a favorable yield curve impacting earning assets, partially offset by deposit pricing. The net interest margin increased, primarily due to the impact of rising interest rates and higher yields in the investment portfolio, partially offset by deposit pricing and lower noninterest-bearing deposits. PPP Impact 1


Slide 13

Noninterest Income +6.3% linked quarter -2.7% year-over-year Linked Quarter Payment services revenue increased, as credit card revenue increased due to seasonally higher sales volume and rate. Merchant processing services revenue increased due to higher sales volumes and merchant fees. Trust and Investment Management Services revenue increased, primarily due to higher fees, activity related to the acquisition of PFM, billing cycle timing and lower money market fund fee waivers, partially offset by unfavorable market conditions. 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. Year-over-Year Mortgage banking revenue decreased, driven by lower application volume, given declining refinancing activity, lower gain on sale margins, and 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. Other noninterest income decreased, driven by lower retail leasing end-of-term residual gains, lower gain on sale of certain assets and lower tax-advantaged investment syndication revenue. Trust and Investment Management fees increased, due to business growth, activity related to the fourth quarter of 2021 acquisition of PFM Asset Management LLC and lower money market fund fees waivers. $ in millions Payments = credit and debit card, corporate payment products and merchant processing Service charges = deposit service charges and treasury management All other = commercial products, investment products fees, securities gains (losses) and other


Slide 14

Payment Services Fee Revenue Growth 1 Includes prepaid card


Slide 15

Merchant Processing Credit and Debit Card1 Corporate Payments All Other Revenue Payment Services Payments Revenue Breakdown Total payments revenue, which includes net interest income and fee revenue, accounted for 27% of 2Q22 net revenue. Total payment fee revenue grew nearly 9.7% year-over-year due to the continued cyclical recovery and increased sales volumes reflecting underlying business momentum as our investments pay off. Seasonal Considerations A Shift to Tech-led3 Revenue Historical Linked Quarter Seasonal Trends for Payment Fees Revenue2 1 Includes prepaid card 2 Linked quarter change based on trends from 2015 – 2019 3 Tech-led includes digital, omni-commerce and e-commerce as well as investments in integrated software providers Payment Fees as a % of Net Revenue (2Q22) Payments fee revenue growth, on a linked quarter basis, is typically seasonally strongest in 2Q Our multiyear investments in e-commerce and tech-led will continue to drive growth Tech-led3 Merchant Processing Fee Revenue Growth ~1.6x FY19 New Tech-led3 Partnerships


Slide 16

Noninterest Expense +6.3% linked quarter +9.9% year-over-year Linked Quarter Compensation expense increased, due to seasonal merit increases, one additional day in the second quarter, and higher variable compensation, partially offset by the impact of seasonally higher stock-based compensation in the first quarter. Marketing and business development expense increased due to the timing of marketing campaigns and higher travel and entertainment. Other noninterest expense in 2Q22 included merger and integration charges of $197 million associated with the planned acquisition of Union Bank. Year-over-Year Compensation expense increased, primarily due to merit and hiring to support business growth, partially offset by lower performance-based incentives. Employee benefits expense increased, primarily due to higher medical expenses. Marketing and business development expense increased, due to increased travel and entertainment. $ in millions PPS = postage, printing and supplies 1 $197 million of merger and integration charges Reported Excluding Notable Items1 +0.7% linked quarter +4.1% year-over-year


Slide 17

Capital Position 1 Ratios calculated in accordance with transitional regulatory requirements related to the current expected credit losses methodology 2 Non-GAAP; see slide 30 for calculations


Slide 18

1 All guidance for stand alone USB 2 Core guidance excludes notable items for merger and integration charges associated with the planned acquisition of MUFG Union Bank 3 Excludes $197 million of merger and integration-related charges associated with the planned acquisition of MUFG Union Bank Outlook1 3Q 2022 Guidance Revenue Up 3 – 5% Compared to 2Q 2022 of $6,012 ($ in millions) Core2 Expenses Full Year 2022 Guidance Up 5 – 6% Compared to FY 2021 of $22,827 Positive operating leverage of at least 200 basis points Core2 Operating Leverage Revenue Up 2 – 3% Compared to 2Q 2022 of $3,5273


Slide 19

Progress What’s Next Integration planning including technology and business line operations largely complete $100 billion community benefits plan announced Participated in numerous stakeholder town-hall meetings Participated in a joint public meeting with the Fed and OCC Continuing to work with regulators in the normal course of action Targeting transaction closing in 2H’22, subject to regulatory approval Finalizing integration and conversion plans across all business and corporate functions Conversion anticipated in 1H’23 Execute conversion and integration plan Union Bank Acquisition Update


Slide 20

Appendix


Slide 21

Average Loans Linked Quarter Average total loans increased by $11.2 billion, or 3.6% Average commercial loans increased by $7.8 billion, or 6.9% Average residential mortgage loans increased by $2.8 billion, or 3.6% Average credit card loans increased by $0.9 billion, or 4.1% Year-over-Year Average total loans increased by $29.9 billion, or 10.2% Average commercial loans increased by $17.7 billion, or 17.2% Average residential mortgage loans increased by $6.9 billion, or 9.4% Average other retail loans increased $2.8 billion, or 4.7% Key Points Year-over-Year Growth (7.5%) (4.6%) 0.1% 6.5% 10.2% Commercial CRE Res Mtg Other Retail Credit Card Average Loans ($bn)


Slide 22

Key Points Year-over-Year Growth 6.4% 6.4% 6.5% 6.5% 6.4% Time Money Market Checking and Savings Noninterest-bearing Average Deposits Average Deposits ($bn) Linked Quarter Average total deposits increased by $2.3 billion, or 0.5% Average low-cost deposits (NIB, interest checking, savings and money market) remained flat Year-over-Year Average total deposits increased by $27.3 billion, or 6.4% Average low-cost deposits (NIB, interest checking, savings and money market) increased by $25.2 billion, or 6.2%


Slide 23

Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm2Q21 1Q22 2Q22 Average Loans$102,974 $112,822 $120,657 30-89 Delinquencies0.17% 0.20% 0.20% 90+ Delinquencies0.04% 0.06% 0.07% Nonperforming Loans0.28% 0.15% 0.12% 0.9% (1.1%) 2.6% 8.0% 6.9% Average loans increased by 6.9% on a linked quarter basis Net charge-offs ratio remained low at 0.10%, while 30-89 day delinquency was flat from the previous quarter Utilization increased quarter over quarter from 22.7% to 23.7% Credit Quality – Commercial Linked Quarter Growth


Slide 24

$mm2Q21 1Q22 2Q22 Average Loans$38,564 $39,084 $39,517 30-89 Delinquencies0.08% 0.22%0.06% 90+ Delinquencies0.01%- %0.01% Nonperforming Loans0.80% 0.55% 0.52% Linked Quarter Growth (0.6%) 0.9% (0.2%) 0.6% 1.1% Average loans increased by 1.1% on a linked quarter basis  Net charge offs during the quarter continued to reflect relatively low losses during the quarter Key Points Credit Quality – Commercial Real Estate Average Loans ($mm) and Net Charge-offs Ratio Key Statistics


Slide 25

Credit Quality – Residential Mortgage $mm2Q211Q222Q22 Average Loans$73,351 $77,449 $80,228 30-89 Delinquencies0.24%0.13% 0.12% 90+ Delinquencies0.16% 0.18% 0.12% Nonperforming Loans0.33%0.27%0.27% (2.5%) 1.0% 2.4% 2.1% 3.6% Key Points Average loans increased by 3.6% on a linked quarter basis reflecting a combination of home purchases and slow down of payoffs on existing mortgages Net recovery performance continued to reflect overall portfolio credit quality and strength in housing values Originations continued to be high credit quality (weighted average credit score of 769, weighted average LTV of 71%) Linked Quarter Growth Average Loans ($mm) and Net Charge-offs Ratio Key Statistics


Slide 26

Credit Quality – Credit Card $mm2Q211Q222Q22 Average Loans$21,116 $21,842 $22,748 30-89 Delinquencies0.72% 0.88% 0.84% 90+ Delinquencies0.70%0.74% 0.69% Nonperforming Loans - %- %- % (0.1%) 3.7% 2.3% (2.5%) 4.1% Key Points Linked Quarter Growth Average loans increased by 4.1% on a linked quarter basis  Net charge-off ratio remained low during the quarter driven by sustained borrower liquidity Average Loans ($mm) and Net Charge-offs Ratio Key Statistics


Slide 27

$mm2Q211Q222Q22 Average Loans$58,279 $61,769$61,037 30-89 Delinquencies0.34%0.38% 0.39% 90+ Delinquencies0.10%0.11% 0.10% Nonperforming Loans0.29%0.26% 0.24% 2.7% 2.9% 1.9% 1.0% (1.2%) Credit Quality – Other Retail Key Points Linked Quarter Growth Average loans decreased by 1.2% on a linked quarter basis  Continued relative low net charge-offs were supported by strong portfolio credit quality and collateral values in housing and used autos Average Loans ($mm) and Net Charge-offs Ratio Key Statistics


Slide 28

Non-GAAP Financial Measures (1), (2) – see slide 31 for corresponding notes


Slide 29

Non-GAAP Financial Measures (2), (3) – see slide 31 for corresponding notes


Slide 30

Non-GAAP Financial Measures * Preliminary data. Subject to change prior to filings with applicable regulatory agencies. (3), (4), (5) – see slide 31 for corresponding notes


Slide 31

Notes 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. Notable items for the three months ended June 30, 2022 include $197 million ($153 million after-tax) of merger and integration charges. 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.


Slide 32

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