0001193125-23-137980 | 10-Q | XBRL Viewer

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Cover Page - shares	3 Months Ended
Cover Page - shares	Mar. 31, 2023	Apr. 30, 2023
Document Information [Line Items]
Entity Registrant Name	US BANCORP \DE\
Document Type	10-Q
Document Period End Date	Mar. 31, 2023
Entity Filer Category	Large Accelerated Filer
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity Smaller Reporting Company	false
Entity Emerging Growth Company	false
Document Transition Report	false
Document Quarterly Report	true
Entity File Number	1-6880
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	41-0255900
Entity Interactive Data Current	Yes
Entity Address, Postal Zip Code	55402
Entity Address, City or Town	Minneapolis
Entity Address, State or Province	MN
Entity Address, Address Line One	800 Nicollet Mall
City Area Code	651
Local Phone Number	466-3000
Entity Common Stock, Shares Outstanding		1,532,920,691
Amendment Flag	false
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Entity Central Index Key	0000036104
Current Fiscal Year End Date	--12-31
Common Stock [Member]
Document Information [Line Items]
Trading Symbol	USB
Title of 12(b) Security	Common Stock
Security Exchange Name	NYSE
Series A Preferred Stock [Member]
Document Information [Line Items]
Trading Symbol	USB PrA
Title of 12(b) Security	Depositary Shares
Security Exchange Name	NYSE
Series B Preferred Stock [Member]
Document Information [Line Items]
Trading Symbol	USB PrH
Title of 12(b) Security	Depositary Shares
Security Exchange Name	NYSE
Series K Preferred Stock [Member]
Document Information [Line Items]
Trading Symbol	USB PrP
Title of 12(b) Security	Depositary Shares
Security Exchange Name	NYSE
Series L Preferred Stock [Member]
Document Information [Line Items]
Trading Symbol	USB PrQ
Title of 12(b) Security	Depositary Shares
Security Exchange Name	NYSE
Series M Preferred Stock [Member]
Document Information [Line Items]
Trading Symbol	USB PrR
Title of 12(b) Security	Depositary Shares
Security Exchange Name	NYSE
Series O Preferred Stock [Member]
Document Information [Line Items]
Trading Symbol	USB PrS
Title of 12(b) Security	Depositary Shares
Security Exchange Name	NYSE
Series X [Member]
Document Information [Line Items]
Trading Symbol	USB/24B
Title of 12(b) Security	Medium-Term Notes
Security Exchange Name	NYSE

Consolidated Balance Sheet - USD ($)
$ in Millions

Mar. 31, 2023

Dec. 31, 2022

Assets

Cash and due from banks

$ 67,228

$ 53,542

Held-to-maturity (fair value $78,876 and $77,874, respectively)

88,462

^[1]

88,740

Available-for-sale ($600 and $858 pledged as collateral, respectively)

^[2]

65,491

^[1]

72,910

Loans held for sale (including $1,990 and $1,849 of mortgage loans carried at fair value, respectively)

2,381

2,200

Loans

Total loans

387,866

388,213

Less allowance for loan losses

(7,020)

(6,936)

Net loans

380,846

381,277

Premises and equipment

3,735

3,858

Goodwill

12,560

12,373

Other intangible assets

6,883

7,155

Other assets (including $2,773 and $702 of trading securities at fair value pledged as collateral, respectively)

^[2]

54,791

52,750

Total assets

682,377

674,805

Deposits

Noninterest-bearing

124,595

137,743

Interest-bearing

380,744

387,233

Total deposits

505,339

524,976

Short-term borrowings

56,875

31,216

Long-term debt

42,045

39,829

Other liabilities

24,664

27,552

Total liabilities

628,923

623,573

Shareholders' equity

Preferred stock

^[3]

6,808

Common stock, par value $0.01 a share—authorized: 4,000,000,000 shares; issued: 3/31/23 and 12/31/22—2,125,725,742 shares

Capital surplus

8,699

8,712

Retained earnings

72,807

71,901

Less cost of common stock in treasury: 3/31/23—592,852,310 shares; 12/31/22—594,747,484 shares

(25,193)

(25,269)

Accumulated other comprehensive income (loss)

(10,153)

(11,407)

Total U.S. Bancorp shareholders' equity

52,989

50,766

Noncontrolling interests

465

466

Total equity

53,454

51,232

Total liabilities and equity

682,377

674,805

Commercial

Loans

Total loans

137,326

135,690

Commercial real estate

Loans

Total loans

55,158

55,487

Residential mortgages

Loans

Total loans

^[4]

116,948

115,845

Credit card

Loans

Total loans

25,489

26,295

Other retail

Loans

Total loans

$ 52,945

$ 54,896

[1]	The weighted-average maturity of total held-to-maturity investment securities was 9.2 years at December 31, 2022, with a corresponding weighted-average yield of 2.18 percent. The weighted-average maturity of total available-for-sale investment securities was 7.4 years at December 31, 2022, with a corresponding weighted-average yield of 2.94 percent.
[2]	Includes only collateral pledged by the Company where counterparties have the right to sell or pledge the collateral.
[3]	The par value of all shares issued and outstanding at March 31, 2023 and December 31, 2022, was $1.00 per share.
[4]	At March 31, 2023, $542 million of loans 30–89 days past due and $2.2 billion of loans 90 days or more past due purchased and that could be purchased from Government National Mortgage Association (“GNMA”) mortgage pools under delinquent loan repurchase options whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, were classified as current, compared with $647 million and $2.2 billion at December 31, 2022, respectively.

Consolidated Balance Sheet (Parenthetical) - USD ($)
$ in Millions

Mar. 31, 2023

Dec. 31, 2022

Held-to-maturity securities, Fair Value

$ 78,876

^[1]

$ 77,874

Mortgage loans, carried at fair value

$ 1,990

$ 1,849

Common stock, par value

$ 0.01

Common stock, share-authorized (actual number of shares)

4,000,000,000

Common stock, shares issued (actual number of shares)

2,125,725,742

Treasury stock, shares (actual number of shares)

592,852,310

594,747,484

Available-for-Sale Securities [Member] | Asset Pledged as Collateral with Right [Member]

Securities, pledged as collateral

$ 600

$ 858

Trading Assets, Excluding Debt and Equity Securities [Member] | Asset Pledged as Collateral with Right [Member]

Securities, pledged as collateral

$ 2,773

$ 702

[1]

The weighted-average maturity of total held-to-maturity investment securities was 9.2 years at December 31, 2022, with a corresponding weighted-average yield of 2.18 percent. The weighted-average maturity of total available-for-sale investment securities was 7.4 years at December 31, 2022, with a corresponding weighted-average yield of 2.94 percent.

Consolidated Statement of Income - USD ($) shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Interest Income
Loans	$ 5,277	$ 2,599
Loans held for sale	31	60
Investment securities	1,074	717
Other interest income	582	42
Total interest income	6,964	3,418
Interest Expense
Deposits	1,505	80
Short-term borrowings	449	21
Long-term debt	376	144
Total interest expense	2,330	245
Net interest income	4,634	3,173
Provision for credit losses	427	112
Net interest income after provision for credit losses	4,207	3,061
Noninterest Income
Card revenue	360	338
Corporate payment products revenue	189	158
Merchant processing services	387	363
Trust and investment management fees	590	500
Service charges	324	333
Commercial products revenue	334	266
Mortgage banking revenue	128	200
Investment products fees	68	62
Securities gains (losses), net	(32)	18
Other	159	158
Total noninterest income	2,507	2,396
Noninterest Expense
Compensation and employee benefits	2,646	2,249
Net occupancy and equipment	321	269
Professional services	134	114
Marketing and business development	122	80
Technology and communications	503	421
Other intangibles	160	47
Merger and integration charges	244
Other	425	322
Total noninterest expense	4,555	3,502
Income before income taxes	2,159	1,955
Applicable income taxes	455	397
Net income (loss)	1,704	1,558
Net (income) loss attributable to noncontrolling interests	(6)	(1)
Net income (loss) attributable to U.S. Bancorp	1,698	1,557
Net income applicable to U.S. Bancorp common shareholders	$ 1,592	$ 1,466
Earnings per common share	$ 1.04	$ 0.99
Diluted earnings per common share	$ 1.04	$ 0.99
Average common shares outstanding	1,532	1,485
Average diluted common shares outstanding	1,532	1,486

Consolidated Statement of Comprehensive Income - USD ($)
$ in Millions

3 Months Ended

Mar. 31, 2023

Mar. 31, 2022

Statement of Comprehensive Income [Abstract]

Net income

$ 1,704

$ 1,558

Other Comprehensive Income (Loss)

Changes in unrealized gains (losses) on investment securities available-for-sale

1,305

(6,754)

Changes in unrealized gains (losses) on derivative hedges

204

Foreign currency translation

^[1]

(1)

Changes in unrealized gains (losses) on retirement plans

Reclassification to earnings of realized (gains) losses

158

(413)

1,692

Total other comprehensive income (loss)

1,254

(4,995)

Comprehensive income (loss)

2,958

(3,437)

Comprehensive (income) loss attributable to noncontrolling interests

(6)

(1)

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

$ 2,952

$ (3,438)

[1]	Represents the impact of changes in foreign currency exchange rates on the Company’s investment in foreign operations and related hedges.

Consolidated Statement of Shareholders' Equity - USD ($)
shares in Millions, $ in Millions

Total

Cumulative Effect, Period of Adoption, Adjustment [Member]

^[2]

Common Stock [Member]

Preferred Stock [Member]

Capital Surplus [Member]

Retained Earnings [Member]

Cumulative Effect, Period of Adoption, Adjustment [Member]

^[2]

Treasury Stock [Member]

Accumulated Other Comprehensive Income (Loss) [Member]

Total U.S. Bancorp Shareholders' Equity [Member]

Cumulative Effect, Period of Adoption, Adjustment [Member]

^[2]

Noncontrolling Interests [Member]

Beginning Balance at Dec. 31, 2021

$ 55,387

$ 21

$ 6,371

$ 8,539

$ 69,201

$ (27,271)

$ (1,943)

$ 54,918

$ 469

Shares, Beginning Balance at Dec. 31, 2021

1,484

Net income (loss)

1,558

1,557

Other comprehensive income (loss)

(4,995)

Preferred stock dividends

^[1]

(84)

Common stock dividends

(687)

Issuance of preferred stock

437

Issuance of common and treasury stock

(116)

132

Issuance of common and treasury stock, shares

Purchase of treasury stock

(54)

Purchase of treasury stock, shares

(1)

Distributions to noncontrolling interests

(2)

Stock option and restricted stock grants

Shares, Ending Balance at Mar. 31, 2022

1,486

Ending Balance at Mar. 31, 2022

51,668

$ 21

6,808

8,515

69,987

(27,193)

(6,938)

51,200

468

Beginning Balance at Dec. 31, 2022

51,232

$ 46

$ 21

6,808

8,712

71,901

$ 46

(25,269)

(11,407)

50,766

$ 46

466

Shares, Beginning Balance at Dec. 31, 2022

1,531

Net income (loss)

1,704

1,698

Other comprehensive income (loss)

1,254

Preferred stock dividends

^[3]

(98)

Common stock dividends

(740)

Issuance of common and treasury stock

(114)

120

Issuance of common and treasury stock, shares

Purchase of treasury stock

(44)

Purchase of treasury stock, shares

(1)

Distributions to noncontrolling interests

(7)

Stock option and restricted stock grants

101

Shares, Ending Balance at Mar. 31, 2023

1,533

Ending Balance at Mar. 31, 2023

$ 53,454

$ 21

$ 6,808

$ 8,699

$ 72,807

$ (25,193)

$ (10,153)

$ 52,989

$ 465

[1]	Reflects dividends declared per share on the Company’s Series A, Series B, Series J, Series K, Series L, Series M, Series N and Series O Non-Cumulative Perpetual Preferred Stock of $875.00, $218.75, $662.50, $343.75, $234.375, $250.00, $231.25 and $206.25 respectively.
[2]	Effective January 1, 2023, the Company adopted accounting guidance which removed the separate recognition and measurement of troubled debt restructurings. Upon adoption, the Company reduced its allowance for credit losses and increased retained earnings net of deferred taxes through a cumulative-effect adjustment.
[3]	Reflects dividends declared per share on the Company’s Series A, Series B, Series J, Series K, Series L, Series M, Series N and Series O Non-Cumulative Perpetual Preferred Stock of $1,462.428, $339.357, $662.50, $343.750, $234.375, $250.00, $231.25 and $281.25 respectively.

Consolidated Statement of Shareholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Common stock dividends, share	$ 0.48	$ 0.46
Series A [Member]
Preferred stock dividends declared per share	1,462.428	875
Series B [Member]
Preferred stock dividends declared per share	339.357	218.75
Series J [Member]
Preferred stock dividends declared per share	662.5	662.5
Series K [Member]
Preferred stock dividends declared per share	343.75	343.75
Series L [Member]
Preferred stock dividends declared per share	234.375	234.375
Series M [Member]
Preferred stock dividends declared per share	250	250
Series N [Member]
Preferred stock dividends declared per share	231.25	231.25
Series O [Member]
Preferred stock dividends declared per share	$ 281.25	$ 206.25

Consolidated Statement of Cash Flows - USD ($)
$ in Millions

3 Months Ended

Mar. 31, 2023

Mar. 31, 2022

Operating Activities

Net income attributable to U.S. Bancorp

$ 1,698

$ 1,557

Adjustments to reconcile net income to net cash provided by operating activities

Provision for credit losses

427

112

Depreciation and amortization of premises and equipment

Amortization of intangibles

160

(Gain) loss on sale of loans held for sale

(Gain) loss on sale of securities and other assets

(42)

Loans originated for sale, net of repayments

(7,024)

(9,827)

Proceeds from sales of loans held for sale

6,728

13,874

Other, net

(1,283)

2,609

Net cash provided by operating activities

842

8,477

Investing Activities

Proceeds from sales of available-for-sale investment securities

7,720

12,527

Proceeds from maturities of held-to-maturity investment securities

1,317

1,173

Proceeds from maturities of available-for-sale investment securities

1,407

5,498

Purchases of held-to-maturity investment securities

(924)

(2,932)

Purchases of available-for-sale investment securities

(217)

(15,989)

Net decrease (increase) in loans outstanding

165

(7,278)

Proceeds from sales of loans

257

1,309

Purchases of loans

(339)

(1,073)

Net increase in securities purchased under agreements to resell

(1,531)

(147)

Other, net

(2,912)

(452)

Net cash provided by (used in) investing activities

4,943

(7,364)

Financing Activities

Net (decrease) increase in deposits

(19,237)

5,463

Net increase in short-term borrowings

24,876

9,246

Proceeds from issuance of long-term debt

3,701

2,153

Principal payments or redemption of long-term debt

(1,594)

(1,118)

Proceeds from issuance of preferred stock

437

Proceeds from issuance of common stock

Repurchase of preferred stock

(1,100)

Repurchase of common stock

(44)

(54)

Cash dividends paid on preferred stock

(67)

(70)

Cash dividends paid on common stock

(740)

(687)

Net cash provided by financing activities

6,901

14,285

Change in cash and due from banks

12,686

15,398

Cash and due from banks at beginning of period

53,542

28,905

Cash and due from banks at end of period

^[1]

$ 66,228

$ 44,303

[1]	Excludes a $1.0 billion interest-bearing due from bank balance with a term greater than 90 days.

Consolidated Statement of Cash Flows (Parenthetical) $ in Billions	3 Months Ended
	Mar. 31, 2023 USD ($)
Statement of Cash Flows [Abstract]
Interest-bearing deposits in banks	$ 1.0
Maturity of interest-bearing due from bank balance	90 days

Basis of Presentation

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation


Note 1		Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required

accordance with accounting principles generally accepted in the United States. In the opinion of management of U.S. Bancorp (the “Company”), all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of results for the interim periods have been made. These financial statements and notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Certain amounts in prior periods have been reclassified to conform to the current period presentation.

Accounting Changes

3 Months Ended

Mar. 31, 2023

Accounting Changes and Error Corrections [Abstract]

Accounting Changes


Note 2		Accounting Changes

Reference Interest Rate Transition

In March 2020, the Financial Accounting Standards Board (“FASB”) issued accounting guidance, providing temporary optional expedients and exceptions to the guidance in United States generally accepted accounting principles on contract modifications and hedge accounting, to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. Under the guidance, a company can elect not to apply certain modification accounting requirements to contracts affected by reference rate transition, if certain criteria are met. A company that makes this election would not be required to remeasure the contracts at the modification date or reassess a previous accounting determination. This guidance also permits a company to elect various optional expedients that would allow it to continue applying hedge accounting for hedging relationships affected by reference rate transition, if certain criteria are met. The guidance is effective upon issuance and generally can be applied through December 31, 2024. The Company is applying certain optional expedients and exceptions for cash flow hedges and will continue to evaluate these for eligible contract modifications and hedging relationships.

Fair Value Hedging – Portfolio Layer Method

Effective January 1, 2023, the Company adopted accounting guidance, issued by the FASB in March 2022, related to fair value hedge accounting of portfolios of financial assets. This guidance permits a company to designate multiple hedging relationships on a single closed portfolio, resulting in a larger portion of the interest rate risk associated with such a portfolio being eligible to be hedged. The guidance also expands the scope of the method to include non-prepayable financial assets and clarifies other technical questions from the original accounting guidance. The adoption of this guidance was not material to the Company’s financial statements.

Financial Instruments – Troubled Debt Restructurings and Vintage Disclosures

Effective January 1, 2023, the Company adopted accounting guidance on a modified retrospective basis, issued by the FASB in March 2022, related to the recognition and measurement of troubled debt restructurings (“TDRs”) by creditors. This guidance removes the separate recognition and measurement requirements for TDRs by replacing them with a requirement for a company to apply existing accounting guidance to determine whether a modification results in a new loan or a continuation of an existing loan. This guidance also replaces existing TDR disclosures with similar but more expansive disclosures for certain modifications of receivables made to borrowers experiencing financial difficulty. Further, this guidance also requires companies to disclose current-period gross write-offs by year of origination for financing receivables. The adoption of this guidance was not material to the Company’s financial statements.

Accounting for Tax Credit Investments Using the Proportional Amortization Method

Effective January 1, 2023, the Company adopted accounting guidance on a modified retrospective basis, issued by the FASB in March 2023, related to the accounting for tax credit investments. This guidance allows the Company to elect to account for tax credit investments using the proportional amortization method on a program-by-program basis if certain conditions are met, regardless of the program from which the income tax credits are received. The adoption of this guidance was not material to the Company’s financial statements.

- Definition

The entire disclosure for change in accounting principle. Includes, but is not limited to, nature, reason, and method of adopting amendment to accounting standards or other change in accounting principle.

+ References

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+ Details

Business Combinations

3 Months Ended

Mar. 31, 2023

Business Combinations [Abstract]

Business Combinations


Note 3		Business Combinations

MUFG Union Bank Acquisition

On December 1, 2022, the Company acquired MUB’s core regional banking franchise from Mitsubishi UFJ Financial Group, Inc. (“MUFG”). Pursuant to the terms of

the

Share Purchase Agreement, the Company acquired all of the issued and outstanding shares of common stock of MUB for a purchase price consisting of $5.5 billion in cash and approximately 44 million shares of common stock of the Company. Under the terms of the Share Purchase Agreement, the purchase price was based on MUB having a tangible book value of $6.25 billion at the closing of the acquisition. At the closing of the acquisition, MUB had $3.5

billion of tangible book value over the $

6.25

billion target, consisting of additional cash. The additional cash received is held at the MUB subsidiary and is required to be repaid to MUFG on or prior to the fifth anniversary date of the completion of the purchase, in accordance with the terms of the Share Purchase Agreement. As such, it is recognized as debt at the parent company. The transaction excludes 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 that were transferred by MUB to MUFG prior to the acquisition. This transaction has been accounted for as a business combination. Accordingly, the assets acquired and liabilities assumed from MUB were recorded at fair value as of the acquisition date. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. Fair value estimates related to the assets and liabilities from MUB are subject to adjustment for up to one year after the closing date of the acquisition as additional information becomes available. Valuations subject to adjustment include, but are not limited to, loans, certain deposits, certain other assets, customer relationships and the core deposit benefits intangible.

In connection with the transaction, the Company incurred $244 million of nonrecurring merger and integration charges during the three months ended March 31, 2023 recorded within noninterest expense. These expenses are primarily comprised of personnel, legal, advisory and technology related costs.

The following table includes the fair value of consideration transferred and the preliminary fair value of the identifiable tangible and intangible assets and liabilities from MUB:


December 1, 2022 (Dollars in Millions)
Acquisition consideration
Cash	$	5,500
Market value of shares of common stock		2,014

Total consideration transferred at acquisition close date		7,514
Discounted liability to MUFG (a)		2,944

Total	$	10,458

Fair Value of MUB assets and liabilities
Assets
Cash and due from banks	$	17,754
Investment securities		22,725
Loans held for sale		2,220
Loans		53,395
Less allowance for loan losses		(463	)

Net loans		52,932
Premises and equipment		646
Other intangible assets (excluding goodwill)		2,808
Other assets		4,700

Total assets	$	103,785

Liabilities
Deposits	$	86,110
Short-term borrowings		4,773
Long-term debt		2,584
Other liabilities		2,267

Total liabilities		95,734

Less: Net assets	$	8,051

Goodwill	$	2,407

(a)	Represents $3.5 billion of noninterest-bearing additional cash held by MUB upon close of the acquisition to be delivered to MUFG on or prior to December 1, 2027, discounted at the Company’s 5-year unsecured borrowing rate as of the acquisition date, per authoritative accounting guidance.

Preliminary goodwill of $2.4 billion recorded in connection with the transaction resulted from the reputation, operating model and expertise of MUB. The amount of goodwill recorded reflects the increased market share and related synergies that are expected to result from the acquisition, and represents the excess purchase price over the estimated fair value of the net assets from MUB. The goodwill was allocated to the Company’s business segments on a preliminary basis and is not deductible for income tax purposes. Refer to Note 11 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, for the amount of goodwill allocated to each business segment in connection with the transaction.

For further information on the fair value and unpaid principal balance of loans from the MUB acquisition, as well as the methods used to determine the fair values of the significant assets acquired and liabilities assumed, refer to Note 3 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

During the first quarter of 2023, the Company completed the divestiture of three MUB branches to HomeStreet Bank, a wholly owned subsidiary of HomeStreet, Inc., to satisfy regulatory requirements related to the acquisition. There were approximately $400 million in deposits and $22 million in loans divested as part of this transaction.

Investment Securities

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Investment Securities


Note 4		Investment Securities

The Company’s held-to-maturity investment securities are carried at historical cost, adjusted for amortization of premiums and accretion of discounts. The Company’s available-for-sale investment securities are carried at fair value with unrealized net gains or losses reported within accumulated other comprehensive income (loss) in shareholders’ equity.

The amortized cost, gross unrealized holding gains and losses, and fair value of held-to-maturity and available-for-sale investment securities were as follows:


	March 31, 2023									December 31, 2022
(Dollars in Millions)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Held-to-maturity
U.S. Treasury and agencies	$	1,344	$	—	$	(37	)	$	1,307	$	1,344	$	—	$	(51	)	$	1,293
Mortgage-backed securities
Residential agency		85,419		23		(9,589	)		75,853		85,693		2		(10,810	)		74,885
Commercial agency		1,699		18		(1	)		1,716		1,703		1		(8	)		1,696
Total held-to-maturity	$	88,462	$	41	$	(9,627	)	$	78,876	$	88,740	$	3	$	(10,869	)	$	77,874
Available-for-sale
U.S. Treasury and agencies	$	20,421	$	3	$	(2,370	)	$	18,054	$	24,801	$	1	$	(2,769	)	$	22,033
Mortgage-backed securities
Residential agency		28,467		7		(2,329	)		26,145		32,060		8		(2,797	)		29,271
Commercial
Agency		8,727		—		(1,427	)		7,300		8,736		—		(1,591	)		7,145
Non-agency		7		—		—			7		7		—		—			7
Asset-backed securities		3,836		4		(33	)		3,807		4,356		5		(38	)		4,323
Obligations of state and political subdivisions		11,234		16		(1,076	)		10,174		11,484		12		(1,371	)		10,125
Other		4		—		—			4		6		—		—			6
Total available-for-sale	$	72,696	$	30	$	(7,235	)	$	65,491	$	81,450	$	26	$	(8,566	)	$	72,910

Investment securities with a fair value of $13.9 billion at March 31, 2023, and $15.3 billion at December 31, 2022, were pledged to secure public, private and trust deposits, repurchase agreements and for other purposes required by contractual obligation or law. Included in these amounts were securities where the Company and certain counterparties have agreements granting the counterparties the right to sell or pledge the securities. Investment securities securing these types of arrangements had a fair value of $600 million at March 31, 2023, and $858 million at December 31, 2022.

The following table provides information about the amount of interest income from taxable and non-taxable investment securities:


	Three Months Ended March 31
(Dollars in Millions)	2023		2022
Taxable	$	994	$	646
Non-taxable		80		71
Total interest income from investment securities	$	1,074	$	717

The following table provides information about the amount of gross gains and losses realized through the sales of available-for-sale investment securities:


	Three Months Ended March 31
(Dollars in Millions)	2023			2022
Realized gains	$	60		$	242
Realized losses		(92	)		(224	)
Net realized gains (losses)	$	(32	)	$	18
Income tax on net realized gains (losses)	$	(8	)	$	4

The Company conducts a regular assessment of its available-for-sale investment securities with unrealized losses to determine whether all or some portion of a security’s unrealized loss is related to credit and an allowance for credit losses is necessary. If the Company intends to sell or it is more likely than not the Company will be required to sell an investment security, the amortized cost of the security is written down to fair value. When evaluating credit losses, the Company considers various factors such as the nature of the investment security, the credit ratings or financial condition of the issuer, the extent of the unrealized loss, expected cash flows of underlying collateral, the existence of any government or agency guarantees, and market conditions. The Company measures the allowance for credit losses using market information where available and discounting the cash flows at the original effective rate of the investment security. The allowance for credit losses is adjusted each period through earnings and can be subsequently recovered. The allowance for credit losses on the Company’s available-for-sale investment securities was immaterial at March 31, 2023 and December 31, 2022.

At March 31, 2023, certain investment securities had a fair value below amortized cost. The following table shows the gross unrealized losses and fair value of the Company’s available-for-sale investment securities with unrealized losses, aggregated by investment category and length of time the individual investment securities have been in continuous unrealized loss positions, at March 31, 2023:


	Less Than 12 Months					12 Months or Greater					Total
(Dollars in Millions)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury and agencies	$	359	$	(11	)	$	17,134	$	(2,359	)	$	17,493	$	(2,370	)
Mortgage-backed securities
Residential agency		6,121		(252	)		19,435		(2,077	)		25,556		(2,329	)
Commercial
Agency		—		—			7,300		(1,427	)		7,300		(1,427	)
Non-agency		7		—			—		—			7		—
Asset-backed securities		3,140		(33	)		—		—			3,140		(33	)
Obligations of state and political subdivisions		4,550		(126	)		4,198		(950	)		8,748		(1,076	)
Other		—		—			4		—			4		—
Total investment securities	$	14,177	$	(422	)	$	48,071	$	(6,813	)	$	62,248	$	(7,235	)

These unrealized losses primarily relate to changes in interest rates and market spreads subsequent to purchase of these available-for-sale investment securities. U.S. Treasury and agencies securities and agency mortgage-backed securities are issued, guaranteed or otherwise supported by the United States government. The Company’s obligations of state and political subdivisions are generally high grade. Accordingly, the Company does not consider these unrealized losses to be credit-related and an allowance for credit losses is not necessary. In general, the issuers of the investment securities are contractually prohibited from prepayment at less than par, and the Company did not pay significant purchase premiums for these investment securities. At March 31, 2023, the Company had no plans to sell investment securities with unrealized losses, and believes it is more likely than not it would not be required to sell such investment securities before recovery of their amortized cost.

During the three months ended March 31, 2023 and 2022, the Company did not purchase any investment securities that had more-than-insignificant credit deterioration.

All of the Company’s held-to-maturity investment securities are U.S. Treasury and agencies securities and highly rated agency mortgage-backed securities that are guaranteed or otherwise supported by the United States government and have no history of credit losses. Accordingly the Company does not expect to incur any credit losses on held-to-maturity investment securities and has no allowance for credit losses recorded for these securities.

The following table provides information about the amortized cost, fair value and yield by maturity date of the investment securities outstanding at March 31, 2023:


(Dollars in Millions)	Amortized Cost		Fair Value		Weighted- Average Maturity in Years		Weighted- Average Yield (e)
Held-to-maturity
U.S. Treasury and Agencies
Maturing in one year or less	$	—	$	—		—		—	%
Maturing after one year through five years		1,344		1,307		3.0		2.85
Maturing after five years through ten years		—		—		—		—
Maturing after ten years		—		—		—		—
Total	$	1,344	$	1,307		3.0		2.85	%
Mortgage-Backed Securities (a)
Maturing in one year or less	$	22	$	21		.8		5.09	%
Maturing after one year through five years		1,531		1,536		2.7		4.58
Maturing after five years through ten years		79,376		70,881		9.0		2.20
Maturing after ten years		6,189		5,131		10.2		1.93
Total	$	87,118	$	77,569		9.0		2.23	%
Total held-to-maturity (b)	$	88,462	$	78,876		8.9		2.24	%
Available-for-sale
U.S. Treasury and Agencies
Maturing in one year or less	$	261	$	261		.2		4.75	%
Maturing after one year through five years		4,452		4,114		3.9		1.70
Maturing after five years through ten years		13,339		11,829		7.0		1.93
Maturing after ten years		2,369		1,850		11.2		2.00
Total	$	20,421	$	18,054		6.7		1.92	%
Mortgage-Backed Securities (a)
Maturing in one year or less	$	71	$	70		.8		2.44	%
Maturing after one year through five years		9,603		9,020		3.1		2.44
Maturing after five years through ten years		26,252		23,248		7.5		2.94
Maturing after ten years		1,275		1,114		11.1		3.55
Total	$	37,201	$	33,452		6.5		2.83	%
Asset-Backed Securities
Maturing in one year or less	$	3,054	$	3,021		.4		4.25	%
Maturing after one year through five years		506		509		3.2		6.94
Maturing after five years through ten years		276		277		5.7		5.77
Maturing after ten years		—		—		—		—
Total	$	3,836	$	3,807		1.2		4.72	%
Obligations of State and Political
Subdivisions (c) (d)
Maturing in one year or less	$	152	$	153		.3		5.12	%
Maturing after one year through five years		3,579		3,550		3.7		4.51
Maturing after five years through ten years		1,556		1,488		7.8		3.89
Maturing after ten years		5,947		4,983		16.2		3.21
Total	$	11,234	$	10,174		10.8		3.74	%
Other
Maturing in one year or less	$	—	$	—		—		—	%
Maturing after one year through five years		4		4		2.2		1.89
Maturing after five years through ten years		—		—		—		—
Maturing after ten years		—		—		—		—
Total	$	4	$	4		2.2		1.89	%
Total available-for-sale (b)	$	72,696	$	65,491		7.0		2.82	%

(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)

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

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

(e)

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

Loans and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Loans and Allowance for Credit Losses


Note 5		Loans and Allowance for Credit Losses

The composition of the loan portfolio, by class and underlying specific portfolio type, was as follows:


	March 31, 2023					December 31, 2022
(Dollars in Millions)	Amount		Percent of Total			Amount		Percent of Total
Commercial
Commercial	$	132,894		34.3	%	$	131,128		33.8	%
Lease financing		4,432		1.1			4,562		1.2
Total commercial		137,326		35.4			135,690		35.0
Commercial Real Estate
Commercial mortgages		43,549		11.2			43,765		11.3
Construction and development		11,609		3.0			11,722		3.0
Total commercial real estate		55,158		14.2			55,487		14.3
Residential Mortgages
Residential mortgages		109,246		28.2			107,858		27.8
Home equity loans, first liens		7,702		2.0			7,987		2.0
Total residential mortgages		116,948		30.2			115,845		29.8
Credit Card		25,489		6.6			26,295		6.8
Other Retail
Retail leasing		5,017		1.3			5,519		1.4
Home equity and second mortgages		12,720		3.3			12,863		3.3
Revolving credit		3,720		.9			3,983		1.0
Installment		14,357		3.7			14,592		3.8
Automobile		17,131		4.4			17,939		4.6
Total other retail		52,945		13.6			54,896		14.1
Total loans	$	387,866		100.0	%	$	388,213		100.0	%

The Company had loans of $134.8 billion at March 31, 2023, and $134.6 billion at December 31, 2022, pledged at the Federal Home Loan Bank, and loans of $81.2 billion at March 31, 2023, and $85.8 billion at December 31, 2022, pledged at the Federal Reserve Bank.

Originated loans are reported at the principal amount outstanding, net of unearned interest and deferred fees and costs, and any partial charge-offs recorded. Purchased loans are recorded at fair value at the date of purchase. Net unearned interest and deferred fees and costs on originated loans and unamortized premiums and discounts on purchased loans amounted to $2.5 billion at March 31, 2023 and $3.1 billion at December 31, 2022. The Company evaluates purchased loans for more-than-insignificant deterioration at the date of purchase in accordance with applicable authoritative accounting guidance. Purchased loans that have experienced more-than-insignificant deterioration from origination are considered purchased credit deteriorated loans. All other purchased loans are considered non-purchased credit deteriorated loans.

Allowance for Credit Losses

The allowance for credit losses is established for current expected credit losses on the Company’s loan and lease portfolio, including unfunded credit commitments. The allowance considers expected losses for the remaining lives of the applicable assets, inclusive of expected recoveries. The allowance for credit losses is increased through provisions charged to earnings and reduced by net charge-offs. Management evaluates the appropriateness of the allowance for credit losses on a quarterly basis.

Multiple economic scenarios are considered over a three-year reasonable and supportable forecast period, which includes increasing consideration of historical loss experience over years two and three. These economic scenarios are constructed with interrelated projections of multiple economic variables, and loss estimates are produced that consider the historical correlation of those economic variables with credit losses. After the forecast period, the Company fully reverts to long-term historical loss experience, adjusted for prepayments and characteristics of the current loan and lease portfolio, to estimate losses over the remaining life of the portfolio. The economic scenarios are updated at least quarterly and are designed to provide a range of reasonable estimates, from better to worse than current expectations. Scenarios are weighted based on the Company’s expectation of economic conditions for the foreseeable future and reflect significant judgment and consideration of economic forecast uncertainty. Final loss estimates also consider factors affecting credit losses not reflected in the scenarios, due to the unique aspects of current conditions and expectations. These factors may include, but are not limited to, loan servicing practices, regulatory guidance, and/or fiscal and monetary policy actions.

The allowance recorded for credit losses utilizes forward-looking expected loss models to consider a variety of factors affecting lifetime credit losses. These factors include, but are not limited to, macroeconomic variables such as unemployment rates, real estate prices, gross domestic product levels, inflation, interest rates and corporate bonds spreads, as well as loan and borrower characteristics, such as internal risk ratings on commercial loans and consumer credit scores, delinquency status, collateral type and available valuation information, consideration of end-of-term losses on lease residuals, and the remaining term of the loan, adjusted for expected prepayments. For each loan portfolio, including those loans modified under various loan modification programs, model estimates are adjusted as necessary to consider any relevant changes in portfolio composition, lending policies, underwriting standards, risk management practices, economic conditions or other factors that would affect the accuracy of the model. Expected credit loss estimates also include consideration of expected cash recoveries on loans previously charged-off or expected recoveries on collateral dependent loans where recovery is expected through sale of the collateral at fair value less selling costs. Where loans do not exhibit similar risk characteristics, an individual analysis is performed to consider expected credit losses. The allowance recorded for individually evaluated loans greater than $

million in the commercial lending segment is based on an analysis utilizing expected cash flows discounted using the original effective interest rate, the observable market price of the loan, or the fair value of the collateral, less selling costs, for collateral-dependent loans as appropriate. For smaller commercial loans collectively evaluated for impairment, historical loss experience is also incorporated into the allowance methodology applied to this category of loans.

The Company’s methodology for determining the appropriate allowance for credit losses also considers the imprecision inherent in the methodologies used and allocated to the various loan portfolios. As a result, amounts determined under the methodologies described above, are adjusted by management to consider the potential impact of other qualitative factors not captured in the quantitative model adjustments which include, but are not limited to the following: model imprecision, imprecision in economic scenario assumptions, and emerging risks related to either changes in the environment that are affecting specific portfolios, or changes in portfolio concentrations over time that may affect model performance. The consideration of these items results in adjustments to allowance amounts included in the Company’s allowance for credit losses for each loan portfolio.

The Company also assesses the credit risk associated with off-balance sheet loan commitments, letters of credit, investment securities and derivatives. Credit risk associated with derivatives is reflected in the fair values recorded for those positions. The liability for off-balance sheet credit exposure related to loan commitments and other credit guarantees is included in other liabilities. Because business processes and credit risks associated with unfunded credit commitments are essentially the same as for loans, the Company utilizes similar processes to estimate its liability for unfunded credit commitments.

The results of the analysis are evaluated quarterly to confirm the estimates are appropriate for each specific loan portfolio, as well as the entire loan portfolio, as the entire allowance for credit losses is available for the entire loan portfolio.

Activity in the allowance for credit losses by portfolio class was as follows:


(Dollars in Millions)	Commercial			Commercial Real Estate			Residential Mortgages			Credit Card			Other Retail			Total Loans
Balance at December 31, 2022		$2,163			$1,325			$926			$2,020			$ 970			$7,404
Add
Change in accounting principle (a)		—			—			(31	)		(27	)		(4	)		(62	)
Allowance for acquired credit losses (b)		—			127			—			—			—			127
Provision for credit losses		64			24			51			294			(6	)		427
Deduct
Loans charged-off		63			123			4			215			64			469
Less recoveries of loans charged-off		(16	)		(6	)		(5	)		(40	)		(29	)		(96	)
Net loan charge-offs (recoveries)		47			117			(1	)		175			35			373
Balance at March 31, 2023		$2,180			$1,359			$947			$2,112			$925			$7,523
Balance at December 31, 2021		$1,849			$1,123			$565			$1,673			$945			$6,155
Add
Provision for credit losses		19			(54	)		29			78			40			112
Deduct
Loans charged-off		55			1			5			158			61			280
Less recoveries of loans charged-off		(23	)		(6	)		(11	)		(46	)		(32	)		(118	)
Net loan charge-offs (recoveries)		32			(5	)		(6	)		112			29			162
Balance at March 31, 2022		$1,836			$1,074			$600			$1,639			$956			$6,105

(a)	Effective January 1, 2023, the Company adopted accounting guidance which removed the separate recognition and measurement of troubled debt restructurings.

(b)	Represents allowance for credit deteriorated and charged-off loans acquired from MUB.

The increase in the allowance for credit losses at March 31, 2023, compared with December 31, 2022, was primarily driven by increasing economic uncertainty and normalizing credit losses.

The following table provides a summary of loans charged-off by portfolio class and year of origination:


Three Months Ended March 31, 2023 (Dollars in Millions)	Commercial		Commercial Real Estate (a)		Residential Mortgages		Credit Card		Other Retail		Total Loans

Originated in 2023		$—		$—		$—		$—		$—		$—
Originated in 2022		6		88		—		—		10		104
Originated in 2021		4		—		—		—		11		15
Originated in 2020		4		—		—		—		6		10
Originated in 2019		5		3		1		—		7		16
Originated prior to 2019		11		32		3		—		8		54
Revolving		33		—		—		215		22		270
Total charge-offs	$	63	$	123	$	4	$	215	$	64	$	469

Note: Year of origination is based on the origination date of a loan, or for existing loans the date when the maturity date, pricing or commitment amount is

amended.

(a)	Primarily related to uncollectible amounts on acquired loans.

Credit Quality

The credit quality of the Company’s loan portfolios is assessed as a function of net credit losses, levels of nonperforming assets and delinquencies, and credit quality ratings as defined by the Company

For all loan portfolio classes, loans are considered past due based on the number of days delinquent except for monthly amortizing loans which are classified delinquent based upon the number of contractually required payments not made (for example, two missed payments is considered 30 days delinquent). When a loan is placed on nonaccrual status, unpaid accrued interest is reversed, reducing interest income in the current period.

Commercial lending segment loans are generally placed on nonaccrual status when the collection of principal and interest has become 90 days past due or is otherwise considered doubtful. Commercial lending segment loans are generally fully charged down if unsecured by collateral or partially charged down to the fair value of the collateral securing the loan, less costs to sell, when the loan is placed on nonaccrual.

Consumer lending segment loans are generally charged-off at a specific number of days or payments past due. Residential mortgages and other retail loans secured by 1-4 family properties are generally charged down to the fair value of the collateral securing the loan, less costs to sell, at 180 days past due. Residential mortgage loans and lines in a first lien position are placed on nonaccrual status in instances where a partial charge-off occurs unless the loan is well secured and in the process of collection. Residential mortgage loans and lines in a junior lien position secured by 1-4 family properties are placed on nonaccrual status at 120 days past due or when they are behind a first lien that has become 180 days or greater past due or placed on nonaccrual status. Any secured consumer lending segment loan whose borrower has had debt discharged through bankruptcy, for which the loan amount exceeds the fair value of the collateral, is charged down to the fair value of the related collateral and the remaining balance is placed on nonaccrual status. Credit card loans continue to accrue interest until the account is charged-off. Credit cards are charged-off at 180 days past due. Other retail loans not secured by 1-4 family properties are charged-off at 120 days past due; and revolving consumer lines are charged-off at 180 days past due. Similar to credit cards, other retail loans are generally not placed on nonaccrual status because of the relative short period of time to charge-off. Certain retail customers having financial difficulties may have the terms of their credit card and other loan agreements modified to require only principal payments and, as such, are reported as nonaccrual.

For all loan classes, interest payments received on nonaccrual loans are generally recorded as a reduction to a loan’s carrying amount while a loan is on nonaccrual and are recognized as interest income upon payoff of the loan. However, interest income may be recognized for interest payments if the remaining carrying amount of the loan is believed to be collectible. In certain circumstances, loans in any class may be restored to accrual status, such as when a loan has demonstrated sustained repayment performance or no amounts are past due and prospects for future payment are no longer in doubt; or when the loan becomes well secured and is in the process of collection. Loans where there has been a partial charge-off may be returned to accrual status if all principal and interest (including amounts previously charged-off) is expected to be collected and the loan is current.

The following table provides a summary of loans by portfolio class, including the delinquency status of those that continue to accrue interest, and those that are nonperforming:


	Accruing
(Dollars in Millions)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonperforming (b)		Total
March 31, 2023
Commercial	$	136,619		$ 457		$ 72		$ 178		$137,326
Commercial real estate		54,544		74		5		535		55,158
Residential mortgages (a)		116,411		148		97		292		116,948
Credit card		24,952		280		256		1		25,489
Other retail		52,494		254		64		133		52,945
Total loans	$	385,020		$1,213		$494		$1,139		$387,866
December 31, 2022
Commercial	$	135,077		$350		$94		$ 169		$135,690
Commercial real estate		55,057		87		5		338		55,487
Residential mortgages (a)		115,224		201		95		325		115,845
Credit card		25,780		283		231		1		26,295
Other retail		54,382		309		66		139		54,896
Total loans	$	385,520		$1,230		$491		$ 972		$388,213

(a)

At March 31, 2023, $542 million of loans 30–89 days past due and $2.2 billion of loans 90 days or more past due purchased and that could be purchased from Government National Mortgage Association (“GNMA”) mortgage pools under delinquent loan repurchase options whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, were classified as current, compared with $647 million and $2.2 billion at December 31, 2022, respectively.

(b)	Substantially all nonperforming loans at March 31, 2023 and December 31, 2022, had an associated allowance for credit losses. The Company recognized interest income on nonperforming loans of $4 million and $3 million for the three months ended March 31, 2023 and 2022, respectively.

At March 31, 2023 and December 31, 2022, the amount of foreclosed residential real estate held by the Company, and included in other real estate owned (“OREO”), was $23 million. These amounts excluded $57 million and $54 million at March 31, 2023 and December 31, 2022, respectively, of foreclosed residential real estate related to mortgage loans whose payments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. In addition, the amount of residential mortgage loans secured by residential real estate in the process of foreclosure at March 31, 2023 and December 31, 2022, was $1.1 billion, of which $861 million and $830 million, respectively, related to loans purchased and that could be purchased from Government National Mortgage Association (“GNMA”) mortgage pools under delinquent loan repurchase options whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.

The Company classifies its loan portfolio classes using internal credit quality ratings on a quarterly basis. These ratings include pass, special mention and classified, and are an important part of the Company’s overall credit risk management process and evaluation of the allowance for credit losses. Loans with a pass rating represent those loans not classified on the Company’s rating scale for problem credits, as minimal credit risk has been identified. Special mention loans are those loans that have a potential weakness deserving management’s close attention. Classified loans are those loans where a well-defined weakness has been identified that may put full collection of contractual cash flows at risk. It is possible that others, given the same information, may reach different reasonable conclusions regarding the credit quality rating classification of specific loans.

The following table provides a summary of the Company’s internal credit quality rating of loans by portfolio class and year of origination:


	March 31, 2023										December 31, 2022
			Criticized										Criticized
(Dollars in Millions)	Pass		Special Mention		Classified (a)		Total Criticized		Total		Pass		Special Mention		Classified (a)		Total Criticized		Total
Commercial
Originated in 2023		$ 14,029		$ 74		$ 135		$ 209		$ 14,238		$ —		$ —		$ —		$ —		$ —
Originated in 2022		58,723		334		433		767		59,490		61,229		245		315		560		61,789
Originated in 2021		21,541		480		254		734		22,275		26,411		159		78		237		26,648
Originated in 2020		5,226		66		123		189		5,415		7,049		68		138		206		7,255
Originated in 2019		2,859		26		203		229		3,088		3,962		51		210		261		4,223
Originated prior to 2019		5,201		44		48		92		5,293		8,986		64		129		193		9,179
Revolving (b)		26,919		147		461		608		27,527		25,888		344		364		708