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10-Q

Table of Contents

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


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

For the quarterly period ended March 31, 2023


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

For the transition period from (not applicable)

Commission file number 1-6880

U.S. BANCORP

(Exact name of registrant as specified in its charter)


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

800 Nicollet Mall

Minneapolis, Minnesota 55402

(Address of principal executive offices, including zip code)

651-466-3000

(Registrant’s telephone number, including area code)

(not applicable)

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

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


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

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

YES ☑ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES ☑ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ☑

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


Class		Outstanding as of April 30, 2023
Common Stock, $0.01 Par Value		1,532,920,691 shares

Table of Contents

Table of Contents and Form 10-Q Cross Reference Index


Part I — Financial Information

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

a) Overview			4

b) Statement of Income Analysis			5

c) Balance Sheet Analysis			7

d) Non-GAAP Financial Measures			31

e) Critical Accounting Policies			33

f) Controls and Procedures (Item 4)			33

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

a) Overview			9

b) Credit Risk Management			10

c) Residual Value Risk Management			21

d) Operational Risk Management			21

e) Compliance Risk Management			21

f) Interest Rate Risk Management			21

g) Market Risk Management			23

h) Liquidity Risk Management			25

i) Capital Management			27

3) Line of Business Financial Review			28

4) Financial Statements (Item 1)			34

Part II — Other Information

1) Legal Proceedings (Item 1)			75

2) Risk Factors (Item 1A)			75

3) Unregistered Sales of Equity Securities and Use of Proceeds (Item 2)			75

4) Exhibits (Item 6)			75

5) Signature			76

6) Exhibits			77

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

This quarterly report on Form 10-Q contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, future economic conditions and the anticipated future revenue, expenses, financial condition, asset quality, capital and liquidity levels, plans, prospects and operations 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 that could cause actual results to differ materially from those set forth in forward-looking statements, including the following risks and uncertainties:

•

Deterioration in general business and economic conditions or turbulence in domestic or global financial markets, which could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility;

•

Turmoil and volatility in the financial services industry, including failures or rumors of failures of other depository institutions, which could affect the ability of depository institutions, including U.S. Bank National Association and MUFG Union Bank, N.A. (“MUB”), to attract and retain depositors, and could affect the ability of financial services providers, including U.S. Bancorp, to borrow or raise capital;

•

Increases in Federal Deposit Insurance Corporation (“FDIC”) assessments due to bank failures;

•

Actions taken by governmental agencies to stabilize the financial system and the effectiveness of such actions;

•

Changes to regulatory capital, liquidity and resolution-related requirements applicable to large banking organizations in response to recent developments affecting the banking sector;

•

Changes to statutes, regulations, or regulatory policies or practices, including capital and liquidity requirements, and the enforcement and interpretation of such laws and regulations, and U.S. Bancorp’s ability to address or satisfy those requirements and other requirements or conditions imposed by regulatory entities;

•

Changes in interest rates;

•

Increases in unemployment rates;


U.S. Bancorp		1

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•

Deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans;

•

Risks related to originating and selling mortgages, including repurchase and indemnity demands, and related to U.S. Bancorp’s role as a loan servicer;

•

Impacts of current, pending or future litigation and governmental proceedings;

•

Increased competition from both banks and non-banks;

•

Effects of climate change and related physical and transition risks;

•

Changes in customer behavior and preferences and the ability to implement technological changes to respond to customer needs and meet competitive demands;

•

Breaches in data security;

•

Failures or disruptions in or breaches of U.S. Bancorp’s operational, technology or security systems or infrastructure, or those of third parties;

•

Failures to safeguard personal information;

•

Impacts of pandemics, including the COVID-19 pandemic, natural disasters, terrorist activities, civil unrest, international hostilities and geopolitical events;

•

Impacts of supply chain disruptions, rising inflation, slower growth or a recession;

•

Failure to execute on strategic or operational plans;

•

Effects of mergers and acquisitions and related integration;

•

Effects of critical accounting policies and judgments;

•

Effects of changes in or interpretations of tax laws and regulations;

•

Management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk; and

•

The risks and uncertainties more fully discussed in the section entitled “Risk Factors” of U.S. Bancorp’s Form 10-K for the year ended December 31, 2022, and subsequent filings with the Securities and Exchange Commission.

In addition, U.S. Bancorp’s acquisition of MUB presents risks and uncertainties, including, among others: the risk that the cost savings, any revenue synergies and other anticipated benefits of the acquisition may not be realized or may take longer than anticipated to be realized; and the possibility that the combination of MUB with U.S. Bancorp, including the integration of MUB, may be more costly or difficult to complete than anticipated or have unanticipated adverse results.

In addition, factors other than these risks also could adversely affect U.S. Bancorp’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.


2		U.S. Bancorp

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Table 1		Selected Financial Data


	Three Months Ended March 31
(Dollars and Shares in Millions, Except Per Share Data)	2023			2022			Percent Change
Condensed Income Statement
Net interest income	$	4,634		$	3,173			46.0	%
Taxable-equivalent adjustment (a)		34			27			25.9
Net interest income (taxable-equivalent basis) (b)		4,668			3,200			45.9
Noninterest income		2,507			2,396			4.6
Total net revenue		7,175			5,596			28.2
Noninterest expense		4,555			3,502			30.1
Provision for credit losses		427			112			*
Income before taxes		2,193			1,982			10.6
Income taxes and taxable-equivalent adjustment		489			424			15.3
Net income		1,704			1,558			9.4
Net (income) loss attributable to noncontrolling interests		(6	)		(1	)		*
Net income attributable to U.S. Bancorp	$	1,698		$	1,557			9.1
Net income applicable to U.S. Bancorp common shareholders	$	1,592		$	1,466			8.6
Per Common Share
Earnings per share	$	1.04		$	.99			5.1	%
Diluted earnings per share		1.04			.99			5.1
Dividends declared per share		.48			.46			4.3
Book value per share (c)		30.12			29.87			.8
Market value per share		36.05			53.15			(32.2	)
Average common shares outstanding		1,532			1,485			3.2
Average diluted common shares outstanding		1,532			1,486			3.1
Financial Ratios
Return on average assets		1.03	%		1.09	%
Return on average common equity		14.1			12.7
Net interest margin (taxable-equivalent basis) (a)		3.10			2.44
Efficiency ratio (b)		63.2			62.8
Net charge-offs as a percent of average loans outstanding		.39			.21
Average Balances
Loans	$	386,750		$	312,966			23.6	%
Loans held for sale		2,461			5,479			(55.1	)
Investment securities (d)		166,125			174,762			(4.9	)
Earning assets		607,614			529,837			14.7
Assets		665,447			577,402			15.2
Noninterest-bearing deposits		129,741			127,963			1.4
Deposits		510,324			454,176			12.4
Short-term borrowings		36,467			19,038			91.5
Long-term debt		41,024			32,972			24.4
Total U.S. Bancorp shareholders’ equity		52,667			53,466			(1.5	)

	March 31, 2023			December 31, 2022
Period End Balances
Loans	$	387,866		$	388,213			(.1	)%
Investment securities		153,953			161,650			(4.8	)
Assets		682,377			674,805			1.1
Deposits		505,339			524,976			(3.7	)
Long-term debt		42,045			39,829			5.6
Total U.S. Bancorp shareholders’ equity		52,989			50,766			4.4
Asset Quality
Nonperforming assets	$	1,181		$	1,016			10.2	%
Allowance for credit losses		7,523			7,404			1.6
Allowance for credit losses as a percentage of period-end loans		1.94	%		1.91	%
Capital Ratios
Common equity tier 1 capital		8.5	%		8.4	%
Tier 1 capital		10.0			9.8
Total risk-based capital		12.1			11.9
Leverage		7.5			7.9
Total leverage exposure		6.1			6.4
Tangible common equity to tangible assets (b)		4.8			4.5
Tangible common equity to risk-weighted assets (b)		6.5			6.0
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (b)		8.3			8.1

*	Not meaningful

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

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

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

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


U.S. Bancorp		3

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Management’s Discussion and Analysis

OVERVIEW

Earnings Summary

U.S. Bancorp and its subsidiaries (the “Company”) reported net income attributable to U.S. Bancorp of $1.7 billion for the first quarter of 2023, or $1.04 per diluted common share, compared with $1.6 billion, or $0.99 per diluted common share, for the first quarter of 2022. Return on average assets and return on average common equity were 1.03 percent and 14.1 percent, respectively, for the first quarter of 2023, compared with 1.09 percent and 12.7 percent, respectively, for the first quarter of 2022. The results for the first quarter of 2023 included the impact of $244 million ($183 million net-of-tax) of merger and integration-related charges associated with the acquisition of MUFG Union Bank, N.A. (“MUB”), which decreased diluted earnings per common share by $0.12.

Total net revenue for the first quarter of 2023 was $1.6 billion (28.2 percent) higher than the first quarter of 2022, reflecting a 46.0 percent increase in net interest income (45.9 percent on a taxable-equivalent basis) and a 4.6 percent increase in noninterest income. The increase in net interest income from the first quarter of 2022 was due to the impact of rising interest rates on earning assets and the impacts of the MUB acquisition. The increase in noninterest income reflected higher payment services revenue, trust and investment management fees, and commercial products revenue, partially offset by lower mortgage banking revenue and losses on securities.

Noninterest expense in the first quarter of 2023 was $1.1 billion (30.1 percent) higher than the first quarter of 2022, reflecting merger and integration charges and operating expenses related to the MUB acquisition, including core deposit intangible amortization expense, as well as increases in legacy compensation and employee benefits expense to support business growth.

The provision for credit losses for the first quarter of 2023 of $427 million was $315 million higher than the first quarter of 2022, driven by the acquisition of MUB, normalizing credit losses and continued economic uncertainty. Net charge-offs in the first quarter of 2023 were $373 million, compared with $162 million in the first quarter of 2022. Refer to “Corporate Risk Profile” for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.

Recent Industry Events

Disruption in the banking industry in early March of 2023 resulted in significant deposit run-off at certain banking institutions and reinforced the importance of maintaining a well-diversified business with an appropriate risk profile. The Company’s resilient and diversified deposit base, ample liquidity levels and strong credit quality, supported by disciplined underwriting standards, are all aspects of the Company’s approach to strong risk management. Key highlights included:

•

From the beginning of the industry disruption on March 8, 2023, through the end of the first quarter, total deposit balances were relatively stable, decreasing only 0.6 percent.

•

Subsequent to March 31, 2023 and through April 30, 2023, total deposit balances decreased approximately $17 billion, of which $10 billion was related to seasonal corporate trust fluctuations, and $3 billion was related to transitional MUB deposits.

•

At March 31, 2023, the Company’s percent of insured deposits to total deposits was approximately 51 percent, with approximately 80 percent of uninsured deposits comprised of operational wholesale trust and retail deposits, which tend to be more stable as customers are contractually bound or tied to treasury management services and trust activities provided to corporate and institutional clients.

•

At March 31, 2023, the Company’s total available liquidity was approximately $315 billion, representing approximately 126 percent of uninsured deposits.

•

Over the last five quarters, and well ahead of the recent banking industry disruption, the Company reduced its investment securities portfolio from approximately 30 percent to 25 percent of total assets, while increasing cash levels.

MUFG Union Bank Acquisition

On December 1, 2022, the Company acquired MUB’s core regional banking franchise from Mitsubishi UFJ Financial Group, Inc. Pursuant to the terms of the Share Purchase Agreement, the Company acquired all of the issued and outstanding shares of common stock of MUB for a purchase price consisting of $5.5 billion in cash and approximately 44 million shares of the Company’s common stock. The Company also received additional MUB cash of $3.5 billion upon completion of the acquisition. The additional cash received is held at the MUB subsidiary and required to be repaid to Mitsubishi UFJ Financial


4		U.S. Bancorp

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Group, Inc. on or prior to the fifth anniversary date of the completion of the purchase. As such, it is recognized as debt at the parent company. The transaction excluded the purchase of substantially all of MUB’s Global Corporate & Investment Bank (other than certain deposits), certain middle and back-office functions, and other assets. MUB operates approximately 300 branches in California, Washington and Oregon. The Company’s first quarter of 2023 results reflect the full benefit of the acquisition into the reported results. As of the date of acquisition, MUB is a wholly-owned subsidiary of the Company and an affiliate of U.S. Bank National Association (“USBNA”), the Company’s primary banking subsidiary. The Company expects to merge MUB into USBNA in connection with the conversion of MUB customers and systems to the USBNA platform over Memorial Day weekend in 2023.

STATEMENT OF INCOME ANALYSIS

Net Interest Income

Net interest income, on a taxable-equivalent basis, was $4.7 billion in the first quarter of 2023, representing an increase of $1.5 billion (45.9 percent) compared with the first quarter of 2022. The increase was primarily due to the impact of rising interest rates on earning assets and the acquisition of MUB. Average earning assets were $77.8 billion (14.7 percent) higher than the first quarter of 2022, reflecting increases in loans and interest-bearing deposits with banks, partially offset by a decrease in investment securities. The net interest margin, on a taxable-equivalent basis, in the first quarter of 2023 was 3.10 percent, compared with 2.44 percent in the first quarter of 2022. The increase in net interest margin from the first quarter of 2022 was primarily due to the impact of higher rates on earning assets and the acquisition of MUB. Refer to the “Consolidated Daily Average Balance Sheet and Related Yields and Rates” table for further information on net interest income.

Average total loans in the first quarter of 2023 were $73.8 billion (23.6 percent) higher than the first quarter of 2022. The increase was driven by growth in the Company’s legacy loan portfolio as well as $52.8 billion in average loan balances from the MUB acquisition. Increases in residential mortgages (50.1 percent), commercial loans (21.7 percent), commercial real estate loans (42.2 percent) and credit card loans (17.1 percent) were partially offset by lower other retail loans (13.2 percent). The increase in residential mortgages was driven by the impact related to the MUB acquisition, along with on-balance sheet loan activities and slower refinancing activity. The increase in commercial loans was due to higher utilization driven by working capital needs of corporate customers, slower payoffs given higher volatility in the capital markets, as well as core growth and the impact related to the MUB acquisition. The increase in commercial real estate loans was driven by the impact of the MUB acquisition, while the increase in credit cards loans was primarily driven by higher spend volumes, account growth and lower payment rates. The decrease in other retail loans was driven by lower auto and installment loans and lower retail leasing balances, partially offset by higher home equity and second mortgages.

Average investment securities in the first quarter of 2023 were $8.6 billion (4.9 percent) lower than the first quarter of 2022, driven by balance sheet repositioning and liquidity management in connection with the acquisition of MUB. The decrease from the first quarter of 2022 reflected sales of investments securities, partially offset by the impact of acquired MUB investment securities.

Average total deposits for the first quarter of 2023 were $56.1 billion (12.4 percent) higher than the first quarter of 2022. Average total savings deposits for the first quarter of 2023 were $43.5 billion (14.4 percent) higher than the first quarter of 2022, driven by the acquisition of MUB and increases in Corporate and Commercial Banking, and Wealth Management and Investment Services balances, partially offset by a decrease in Consumer and Business Banking balances. Average time deposits were $10.9 billion (44.1 percent) higher than the prior year, mainly due to the acquisition of MUB and an increase in Consumer and Business Banking balances. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics. Average noninterest-bearing deposits were $1.8 billion (1.4 percent) higher than the prior year, driven by the impact of the MUB acquisition, partially offset by a decrease across all legacy business lines.

Provision for Credit Losses

The provision for credit losses was $427 million in the first quarter of 2023, compared with $112 million in the first quarter of 2022. The increase of $315 million was driven by the acquisition of MUB, normalizing credit losses and continued economic uncertainty. Net charge-offs increased $211 million in the first quarter of 2023, compared with the first quarter of 2022, reflecting $91 million of charge-offs related to the uncollectible amount of acquired loans, which were considered purchased credit deteriorated as of the date of the MUB acquisition, as well as higher charge-offs in most loan categories consistent with normalizing credit conditions. Refer to “Corporate Risk Profile” for further information on the provision for credit losses, net charge- offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.


U.S. Bancorp		5

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Table 2		Noninterest Income


	Three Months Ended March 31
(Dollars in Millions)	2023			2022		Percent Change
Card revenue	$	360		$	338		6.5	%
Corporate payment products revenue		189			158		19.6
Merchant processing services		387			363		6.6
Trust and investment management fees		590			500		18.0
Service charges		324			333		(2.7	)
Commercial products revenue		334			266		25.6
Mortgage banking revenue		128			200		(36.0	)
Investment products fees		68			62		9.7
Securities gains (losses), net		(32	)		18		*
Other		159			158		.6
Total noninterest income	$	2,507		$	2,396		4.6	%

*	Not meaningful

Noninterest Income

Noninterest income was $2.5 billion in the first quarter of 2023, representing an increase of $111 million (4.6 percent) compared with the first quarter of 2022. The increase over the prior year reflected stronger trust and investment management fees, payment services revenue and commercial products revenue, partially offset by lower mortgage banking revenue and losses on the sale of securities. Trust and investment management fees increased $90 million (18.0 percent) driven by lower money market fee waivers and core business growth, partially offset by unfavorable market conditions. Payment services revenue increased $77 million (9.0 percent), as card revenue increased $22 million (6.5 percent) driven by higher sales volume and the acquisition of MUB, corporate payment products revenue increased $31 million (19.6 percent) due to higher business spending across all product groups and merchant processing services revenue increased $24 million (6.6 percent) driven by higher sales volume and merchant fees. Commercial products revenue increased $68 million (25.6 percent) driven by higher trading revenue and the acquisition of MUB. Mortgage banking revenue decreased $72 million (36.0 percent) reflecting lower application volume, given declining refinancing activities experienced in the mortgage industry, lower related gain on sale margins and fewer sales of performing loans, partially offset by increases in mortgage servicing rights (“MSRs”) valuations, net of hedging activities.

Noninterest Expense

Noninterest expense was $4.6 billion in the first quarter 2023, representing an increase of $1.1 billion (30.1 percent) over the first quarter of 2022. The increase from the prior year reflected the impact of $244 million of merger and integration charges, as well as operating expenses related to the MUB acquisition, higher compensation and employee benefits expense, higher other intangibles expense and higher other noninterest expense. Compensation and employee benefits expense increased $397 million (17.7 percent) primarily due to MUB expense as well as merit increases and hiring to support business growth and lower capitalized loan costs driven by lower mortgage production, partially offset by lower performance-based incentives. Other intangibles expense increased $113 million driven by the core deposit intangible created as a result of the MUB acquisition. Other noninterest expense increased $103 million (32.0 percent) due to lower prior year accruals related to future delivery exposures for merchant and airline processing and other liabilities, higher Federal Deposit Insurance Corporation (“FDIC”) insurance expense driven by an increase in the assessment base and rate, and MUB expense. Although the timing is unknown, the Company expects that FDIC insurance assessments in future periods may be elevated due to recent failures by other banking institutions.

Income Tax Expense

The provision for income taxes was $455 million (an effective rate of 21.1 percent) for the first quarter of 2023, compared with $397 million (an effective rate of 20.3 percent) for the first quarter of 2022. For further information on income taxes, refer to Note 12 of the Notes to Consolidated Financial Statements.


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Table 3		Noninterest Expense


	Three Months Ended March 31
(Dollars in Millions)	2023			2022			Percent Change
Compensation and employee benefits	$	2,646		$	2,249			17.7	%
Net occupancy and equipment		321			269			19.3
Professional services		134			114			17.5
Marketing and business development		122			80			52.5
Technology and communications		503			421			19.5
Other intangibles		160			47			*
Other		425			322			32.0
Total before merger and integration charges		4,311			3,502			23.1
Merger and integration charges		244			—			*
Total noninterest expense	$	4,555		$	3,502			30.1	%
Efficiency ratio (a)		63.2	%		62.8	%

*	Not meaningful

(a)	See Non-GAAP Financial Measures beginning on page 31.

BALANCE SHEET ANALYSIS

Loans

The Company’s loan portfolio was $387.9 billion at March 31, 2023, compared with $388.2 billion at December 31, 2022, a decrease of $347 million (0.1 percent). The decrease was driven by lower other retail loans, credit card loans and commercial real estate loans, partially offset by higher commercial loans and residential mortgages.

Other retail loans decreased $2.0 billion (3.6 percent) at March 31, 2023, compared with December 31, 2022, primarily due to decreases in auto loans, retail leasing balances, revolving credit balances and installment loans.

Credit card loans decreased $806 million (3.1 percent) at March 31, 2023, compared with December 31, 2022, primarily the result of customers seasonally paying down balances.

Commercial real estate loans decreased $329 million (0.6 percent) at March 31, 2023, compared with December 31, 2022, due to payoffs exceeding a reduced level of new originations.

Commercial loans increased $1.6 billion (1.2 percent) at March 31, 2023, compared with December 31, 2022, due to higher utilization driven by working capital needs of corporate customers and slower payoffs given higher volatility in the capital markets, as well as core growth.

Residential mortgages held in the loan portfolio increased $1.1 billion (1.0 percent) at March 31, 2023, compared with December 31, 2022, due to stronger on-balance sheet loan activities and slower refinance activity. Residential mortgages originated and placed in the Company’s loan portfolio include jumbo mortgages and branch-originated first lien home equity loans to borrowers with high credit quality.

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

Loans Held for Sale

Loans held for sale, consisting primarily of residential mortgages to be sold in the secondary market, were $2.4 billion at March 31, 2023, compared with $2.2 billion at December 31, 2022. The increase in loans held for sale was principally due to a higher level of mortgage loan closings in the first quarter of 2023, compared with the fourth quarter of 2022. Almost all of the residential mortgage loans the Company originates or purchases for sale follow guidelines that allow the loans to be sold into existing, highly liquid secondary markets, in particular in government agency transactions and to government-sponsored enterprises (“GSEs”).


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Table 4		Investment Securities


	March 31, 2023									December 31, 2022
(Dollars in Millions)	Amortized Cost		Fair Value		Weighted- Average Maturity in Years		Weighted- Average Yield (d)			Amortized Cost		Fair Value		Weighted- Average Maturity in Years		Weighted- Average Yield (d)
Held-to-maturity
U.S. Treasury and agencies	$	1,344	$	1,307		3.0		2.85	%	$	1,344	$	1,293		3.3		2.85	%
Mortgage-backed securities (a)		87,118		77,569		9.0		2.23			87,396		76,581		9.3		2.17
Total held-to-maturity	$	88,462	$	78,876		8.9		2.24	%	$	88,740	$	77,874		9.2		2.18	%
Available-for-sale
U.S. Treasury and agencies	$	20,421	$	18,054		6.7		1.92	%	$	24,801	$	22,033		7.1		2.43	%
Mortgage-backed securities (a)		37,201		33,452		6.5		2.83			40,803		36,423		6.6		2.83
Asset-backed securities (a)		3,836		3,807		1.2		4.72			4,356		4,323		1.3		4.59
Obligations of state and political subdivisions (b) (c)		11,234		10,174		10.8		3.74			11,484		10,125		13.6		3.76
Other		4		4		2.2		1.89			6		6		.1		1.99
Total available-for-sale	$	72,696	$	65,491		7.0		2.82	%	$	81,450	$	72,910		7.4		2.94	%

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

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

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

(d)

Weighted-average yields for obligations of state and political subdivisions are presented on a fully-taxable equivalent basis based on a federal income tax rate of 21 percent. Yields on investment securities are computed based on amortized cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity.

Investment Securities

Investment securities totaled $154.0 billion at March 31, 2023, compared with $161.7 billion at December 31, 2022. The $7.7 billion (4.8 percent) decrease was primarily due to $9.3 billion of net investment sales and maturities, partially offset by a $1.3 billion favorable change in net unrealized gains (losses) on available-for-sale investment securities.

The Company’s available-for-sale investment securities are carried at fair value with changes in fair value reflected in other comprehensive income (loss) unless a portion of a security’s unrealized loss is related to credit and an allowance for credit losses is necessary. At March 31, 2023, the Company’s net unrealized losses on available-for-sale investment securities were $7.2 billion ($5.4 billion net-of-tax), compared with $8.5 billion ($6.4 billion net-of-tax) at December 31, 2022. The favorable change in net unrealized gains (losses) was primarily due to increases in the fair value of mortgage-backed, U.S. Treasury and state and political securities as a result of changes in interest rates. Gross unrealized losses on available-for-sale investment securities totaled $7.2 billion at March 31, 2023, compared with $8.6 billion at December 31, 2022. When evaluating credit losses, the Company considers various factors such as the nature of the investment security, the credit ratings or financial condition of the issuer, the extent of the unrealized loss, expected cash flows of the underlying collateral, the existence of any government or agency guarantees, and market conditions. At March 31, 2023, the Company had no plans to sell securities with unrealized losses, and believed it is more likely than not that it would not be required to sell such securities before recovery of their amortized cost.

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

Deposits

Total deposits were $505.3 billion at March 31, 2023, compared with $525.0 billion at December 31, 2022. The first quarter of 2023 banking industry disruption, beginning on March 8, did not meaningfully impact the Company’s overall deposit balances or composition. The Company’s total deposits were approximately $508 billion on March 8, 2023, compared with $505 billion on March 31, 2023. The Company maintains a diverse and stable funding base that includes a mix of both consumer and operational wholesale deposits. Consumer deposits account for more than 50 percent of total deposits. A significant portion of the wholesale and trust deposits are collateralized, contractual or relationship based. At March 31, 2023, approximately 51 percent of deposits were insured through the FDIC insurance fund and an additional 3 percent of deposits were fully collateralized. Of the uninsured deposits, approximately 80 percent of these deposits were retail customers or operational in nature, creating greater stability to these deposits. In addition, at March 31, 2023 the Company had total available liquidity representing 126 percent of uninsured balances.

The $19.6 billion (3.7 percent) decrease in total deposits reflected decreases in noninterest-bearing deposits and total savings deposits, partially offset by an increase in time deposits. Noninterest-bearing deposits decreased $13.1 billion (9.5 percent) at March 31, 2023, compared with December 31, 2022, primarily due to lower Corporate and Commercial Banking, Wealth Management and


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Investment Services, and Consumer and Business Banking balances. Savings account balances decreased $6.8 billion (9.4 percent), driven by lower Consumer and Business Banking balances. Interest checking balances decreased $5.4 billion (4.0 percent), primarily due to lower Wealth Management and Investment Services, Consumer and Business Banking, and Corporate and Commercial Banking balances. Money market deposit balances increased $1.1 billion (0.7 percent), primarily due to higher Corporate and Commercial Banking balances, partially offset by lower Wealth Management and Investment Services balances. Time deposits increased $4.6 billion (13.9 percent) at March 31, 2023, compared with December 31, 2022, driven by higher Consumer and Business Banking balances, partially offset by lower Corporate and Commercial Banking balances. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.

Borrowings

The Company utilizes both short-term and long-term borrowings as part of its asset/liability management and funding strategies. Short-term borrowings, which include federal funds purchased, commercial paper, repurchase agreements, borrowings secured by high-grade assets and other short-term borrowings, were $56.9 billion at March 31, 2023, compared with $31.2 billion at December 31, 2022. The $25.7 billion (82.2 percent) increase in short-term borrowings was primarily due to increases in short-term Federal Home Loan Bank (“FHLB”) advances. Long-term debt was $42.0 billion at March 31, 2023, compared with $39.8 billion at December 31, 2022. The $2.2 billion (5.6 percent) increase was primarily due to $3.7 billion of medium-term note issuances, partially offset by $1.6 billion of bank note repayments and maturities. Refer to the “Liquidity Risk Management” section for discussion of liquidity management of the Company.

CORPORATE RISK PROFILE

Overview

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

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

Upon closing of the MUB acquisition, the Company’s risk management framework applies to the legal entities acquired from Mitsubishi UFJ Financial Group, Inc., including MUB. Prior to closing, the Company evaluated the frameworks, policies and procedures of the acquired entities as necessary. Updates were made to align the acquired entities with the Company’s risk appetite and connect the elements of their respective risk governance and reporting into the Company’s existing risk management framework. Connecting the existing MUB risk governance and reporting framework into the Company’s existing risk management framework allows separate risk profiles, governance, and reporting for the Company and the acquired entities, during the period from acquisition through bank merger, while also providing the ability to consolidate reporting for the Company. Upon completing the merger of MUB into USBNA, which is expected to occur in connection with the conversion of MUB customers and systems to the USBNA platform over Memorial Day weekend in 2023, the MUB risk governance and reporting framework will no longer be applicable.

The Company’s most prominent risk exposures are credit, interest rate, market, liquidity, operational, compliance, strategic, and reputation. Credit risk is the risk of loss associated with a change in the credit profile or the failure of a borrower or counterparty to meet its contractual obligations. Interest rate risk is the current or prospective risk to earnings and capital, or market valuations, arising from the impact of changes in interest rates. Market risk arises from fluctuations in interest rates, foreign exchange rates, and security prices that may result in changes in the values of financial instruments, such as trading and available-for-sale securities, mortgage loans held for sale (“MLHFS”), MSRs and derivatives that are accounted for on a fair value basis. Liquidity risk is the risk that financial condition or overall safety and soundness is adversely affected by the Company’s inability, or perceived inability, to meet its cash flow obligations in a timely and


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complete manner in either normal or stressed conditions. Operational risk is the risk to current or projected financial condition and resilience arising from inadequate or failed internal processes or systems, people (including human errors or misconduct), or adverse external events, including the risk of loss resulting from breaches in data security. Operational risk can also include the risk of loss due to failures by third parties with which the Company does business. Compliance risk is the risk that the Company may suffer legal or regulatory sanctions, financial losses, and reputational damage if it fails to adhere to compliance requirements and the Company’s compliance policies. Strategic risk is the risk to current or projected financial condition and resilience arising from adverse business decisions, poor implementation of business decisions, or lack of responsiveness to changes in the banking industry and operating environment. Reputation risk is the risk to current or anticipated earnings, capital, or franchise or enterprise value arising from negative public opinion. This risk may impair the Company’s competitiveness by affecting its ability to establish new relationships or services, or continue serving existing relationships. In addition to the risks identified above, other risk factors exist that may impact the Company. Refer to “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, for a detailed discussion of these factors.

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

Management regularly provides reports to the Risk Management Committee of the Board of Directors. The Risk Management Committee discusses with management the Company’s risk management performance, and provides a summary of key risks to the entire Board of Directors, covering the status of existing matters, areas of potential future concern and specific information on certain types of loss events. The Risk Management Committee considers quarterly reports by management assessing the Company’s performance relative to the risk appetite statements and the associated risk limits, including:

•

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

•

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

•

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

•

Liquidity risk, including funding projections under various stressed scenarios;

•

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

•

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

•

Strategic and reputation risk considerations, impacts and responses.

Credit Risk Management

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

In addition, credit quality ratings, as defined by the Company, are an important part of the Company’s overall credit risk management and evaluation of its


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allowance for credit losses. Loans with a pass rating represent those loans not classified on the Company’s rating scale for problem credits, as minimal credit risk has been identified. Loans with a special mention or classified rating, including consumer lending and small business loans that are 90 days or more past due and still accruing, nonaccrual loans and loans in a junior lien position that are current but are behind a first lien position on nonaccrual, encompass all loans held by the Company that it considers to have a potential or well-defined weakness that may put full collection of contractual cash flows at risk. The Company’s internal credit quality ratings for consumer loans are primarily based on delinquency and nonperforming status, except for a limited population of larger loans within those portfolios that are individually evaluated. For this limited population, the determination of the internal credit quality rating may also consider collateral value and customer cash flows. Refer to Note 5 in the Notes to Consolidated Financial Statements for further discussion of the Company’s loan portfolios including internal credit quality ratings. In addition, refer to “Management’s Discussion and Analysis — Credit Risk Management” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, for a more detailed discussion on credit risk management processes.

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

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

The consumer lending segment represents loans and leases made to consumer customers, including residential mortgages, credit card loans, and other retail loans such as revolving consumer lines, auto loans and leases, home equity loans and lines, and student loans, a run-off portfolio. Home equity or second mortgage loans are junior lien closed-end accounts fully disbursed at origination. These loans typically are fixed rate loans, secured by residential real estate, with a 10- or 15-year fixed payment amortization schedule. Home equity lines are revolving accounts giving the borrower the ability to draw and repay balances repeatedly, up to a maximum commitment, and are secured by residential real estate. These include accounts in either a first or junior lien position. Typical terms on home equity lines in the portfolio are variable rates benchmarked to the prime rate, with a 10-year draw period during which a minimum payment is equivalent to the monthly interest, followed by a 20-year amortization period, respectively. At March 31, 2023, substantially all of the Company’s home equity lines were in the draw period. Key risk characteristics relevant to consumer lending segment loans primarily relate to the borrowers’ capacity and willingness to repay and include unemployment rates, consumer bankruptcy filings and other macroeconomic factors, customer payment history and credit scores, and in some cases, updated loan-to-value (“LTV”) information reflecting current market conditions on real estate-based loans. These and other risk characteristics are reflected in forecasts of delinquency levels, bankruptcies and losses which are the primary factors in determining the allowance for credit losses for the consumer lending segment.

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

The Company’s consumer lending segment utilizes several distinct business processes and channels to originate consumer credit, including traditional branch lending, mobile and on-line banking, indirect lending, alliance partnerships and correspondent banks. Each distinct underwriting and origination activity manages unique credit risk characteristics and prices its loan production commensurate with the differing risk profiles.


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Residential mortgage originations are generally limited to prime borrowers and are performed through the Company’s branches, loan production offices, mobile and on-line services, and a wholesale network of originators. The Company may retain residential mortgage loans it originates on its balance sheet or sell the loans into the secondary market while retaining the servicing rights and customer relationships. Utilizing the secondary markets enables the Company to effectively reduce its credit and other asset/liability risks. For residential mortgages that are retained in the Company’s portfolio and for home equity and second mortgages, credit risk is managed by adherence to LTV and borrower credit criteria during the underwriting process.

The Company estimates updated LTV information on its outstanding residential mortgages quarterly, based on a method that combines automated valuation model updates and relevant home price indices. LTV is the ratio of the loan’s outstanding principal balance to the current estimate of property value. For home equity and second mortgages, combined loan-to-value (“CLTV”) is the combination of the first mortgage original principal balance and the second lien outstanding principal balance, relative to the current estimate of property value. Certain loans do not have an LTV or CLTV, primarily due to lack of availability of relevant automated valuation model and/or home price indices values, or lack of necessary valuation data on acquired loans.

The following tables provide summary information of residential mortgages and home equity and second mortgages by LTV at March 31, 2023:


Residential Mortgages (Dollars in Millions)	Interest Only		Amortizing		Total		Percent of Total
Loan-to-Value
Less than or equal to 80%	$	14,674	$	79,946	$	94,620		80.9	%
Over 80% through 90%		772		10,873		11,645		10.0
Over 90% through 100%		116		2,063		2,179		1.9
Over 100%		177		1,112		1,289		1.1
No LTV available		—		10		10		—
Loans purchased from GNMA mortgage pools (a)		—		7,205		7,205		6.1
Total	$	15,739	$	101,209	$	116,948		100.0	%

(a)

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


Home Equity and Second Mortgages (Dollars in Millions)	Lines		Loans		Total		Percent of Total
Loan-to-Value / Combined Loan-to-Value
Less than or equal to 80%	$	10,156	$	1,420	$	11,576		91.0	%
Over 80% through 90%		796		114		910		7.2
Over 90% through 100%		108		18		126		1.0
Over 100%		50		13		63		.5
No LTV/CLTV available		43		2		45		.3
Total	$	11,153	$	1,567	$	12,720		100.0	%

Home equity and second mortgages were $12.7 billion at March 31, 2023, compared with $12.9 billion at December 31, 2022, and included $2.6 billion of home equity lines in a first lien position and $10.1 billion of home equity and second mortgage loans and lines in a junior lien position. Loans and lines in a junior lien position at March 31, 2023, included approximately $3.3 billion of loans and lines for which the Company also serviced the related first lien loan, and approximately $6.8 billion where the Company did not service the related first lien loan. The Company was able to determine the status of the related first liens using information the Company has as the servicer of the first lien or information reported on customer credit bureau files. The Company also evaluates other indicators of credit risk for these junior lien loans and lines including delinquency, estimated average CLTV ratios and updated weighted-average credit scores in making its assessment of credit risk, related loss estimates and determining the allowance for credit losses.

The following table provides a summary of delinquency statistics and other credit quality indicators for the Company’s junior lien positions at March 31, 2023:


	Junior Liens Behind
(Dollars in Millions)	Company Owned or Serviced` First Lien			Third Party First Lien			Total
Total	$	3,305		$	6,795		$	10,100
Percent 30 — 89 days past due		.50	%		.44	%		.46	%
Percent 90 days or more past due		.02	%		.07	%		.05	%
Weighted-average CLTV		70	%		68	%		69	%
Weighted-average credit score		781			782			781

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

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

The following table provides a summary of the Company’s credit card loan balances disaggregated based upon updated credit score at March 31, 2023:


	Percent of Total (a)
Credit score > 660		86	%
Credit score < 660		14
No credit score		—

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


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Loan Delinquencies

Trends in delinquency ratios are an indicator, among other considerations, of credit risk within the Company’s loan portfolios. The entire balance of a loan account is considered delinquent if the minimum payment contractually required to be made is not received by the date specified on the billing statement. Delinquent loans purchased and loans that could be purchased from GNMA mortgage pools under delinquent loan repurchase options, whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, are excluded from delinquency statistics.

Accruing loans 90 days or more past due totaled $494 million at March 31, 2023, compared with $491 million at December 31, 2022. Accruing loans 90 days or more past due are not included in nonperforming assets and continue to accrue interest because they are adequately secured by collateral, are in the process of collection and are reasonably expected to result in repayment or restoration to current status, or are managed in homogeneous portfolios with specified charge-off timeframes adhering to regulatory guidelines. The ratio of accruing loans 90 days or more past due to total loans was 0.13 percent at March 31, 2023 and December 31, 2022.


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


90 days or more past due	March 31, 2023			December 31, 2022
Commercial
Commercial		.05	%		.07	%
Lease financing		—			—
Total commercial		.05			.07
Commercial Real Estate
Commercial mortgages		.01			—
Construction and development		.01			.03
Total commercial real estate		.01			.01
Residential Mortgages (a)		.08			.08
Credit Card		1.00			.88
Other Retail
Retail leasing		.04			.04
Home equity and second mortgages		.29			.28
Other		.07			.08
Total other retail		.12			.12
Total loans		.13	%		.13	%

90 days or more past due and nonperforming loans	March 31, 2023			December 31, 2022
Commercial		.18	%		.19	%
Commercial real estate		.98			.62
Residential mortgages (a)		.33			.36
Credit card		1.01			.88
Other retail		.37			.37
Total loans		.42	%		.38	%

(a)

Delinquent loan ratios exclude $2.2 billion at March 31, 2023, and at December 31, 2022, of loans purchased and loans that could be purchased from GNMA mortgage pools under delinquent loan repurchase options whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. Including these loans, the ratio of residential mortgages 90 days or more past due and nonperforming to total residential mortgages was 2.24 percent at March 31, 2023, and 2.28 percent at December 31, 2022.


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


	Amount				As a Percent of Ending Loan Balances
(Dollars in Millions)	March 31, 2023		December 31, 2022		March 31, 2023			December 31, 2022
Residential Mortgages (a)
30-89 days	$	148	$	201		.13	%		.17	%
90 days or more		97		95		.08			.08
Nonperforming		292		325		.25			.28
Total	$	537	$	621		.46			.54
Credit Card
30-89 days	$	280	$	283		1.10			1.08
90 days or more		256		231		1.00			.88
Nonperforming		1		1		—			—
Total	$	537	$	515		2.11			1.96
Other Retail
Retail Leasing
30-89 days	$	22	$	27		.44			.49
90 days or more		2		2		.04			.04
Nonperforming		8		8		.16			.14
Total	$	32	$	37		.64			.67
Home Equity and Second Mortgages