Welcome to U.S. Bancorp's Third Quarter 2021 Earnings Conference Call. Following a review of the results by Andy Cecere, Chairman, President, and Chief Executive Officer; and Terry Dolan, Vice Chair and Chief Financial Officer, there will be a formal question-and-answer session. Operator Instructions: This call will be recorded and available for replay beginning today at approximately 10 AM Central Time through Thursday, October 21, 2021 at 10:59 PM Central Time. I will now turn the conference call over to Jen Thompson, Director of Investor Relations and Economic Analysis for U.S. Bancorp.

Thank you, Erica, and good morning, everyone. With me today are Andy Cecere, our Chairman, President and CEO; and Terry Dolan, our Chief Financial Officer. During their prepared remarks, Andy and Terry will be referencing a slide presentation. A copy of the slide presentation as well as our earnings release and supplemental analyst schedules are available on our website at usbank.com. I'd like to remind you that any forward looking statements made during today's call are subject to risk and uncertainty. Factors that could materially change our current forward-looking assumptions are described on Page 2 of today's presentation, in our press release and in our Form 10-K and subsequent reports on file with the SEC. I'll now turn the call over to Andy.

Thanks, Jen. Good morning, everyone. And thank you for joining our call. Following our prepared remarks, Terry and I will take any questions you have. I'll begin on slide 3. In the third quarter, we reported earnings per share of $1.30 and generated total revenue of $5.9 billion. Our linked-quarter pretax pre-provision net revenue growth of 2.7% was driven by continued momentum across our fee businesses, growth in average loan balances, and continued focus on expense management resulting in positive operating leverage. We released $310 million of loan loss reserves this quarter, supported by our outlook on the economy and better-than-expected credit quality metrics. Turning to capital; our book value per share totaled $32.22 at September 30th which was 1.5% higher than June 30th. Our CET1 ratio was 10.2% at September 30th. Slide 4 provides key third quarter performance metrics including a return on tangible common equity of over 20%. Slide 5 highlights strong trends in digital engagement. On Slide 6, we are providing initial information about our business banking and payment relationships which we plan to update every quarter. Our complete payments ecosystem is a competitive advantage for us and provides a number of cyclical and secular growth opportunities. Over the next few years, we believe there is a significant potential to expand and deepen relationships within this ecosystem. Our starting point is that we have about 1.1 million business banking relationships, which we define as businesses with under $25 million in revenue. Currently, about half of our payments customers of this size have a business banking product, and just under one third of our business banking customers have a payments product. The opportunity is to both increase the number of business banking relationships and to deepen these relationships by connecting our banking customers with our payments products and services, and connecting our payments customers with our banking products and services. As we discussed previously, we believe we can grow our small business relationships by 15% to 20% and related revenue by 25% to 30% over the next few years. Now let me turn the call over to Terry who will provide more detail on the quarter.

Thanks, Andy. If you turn on Slide 7, I'll start with a balance sheet review followed by a discussion of third quarter earnings trends. Average loans increased 0.8% compared with the second quarter driven by growth in other retail loans, primarily installment loans as well as growth in credit card and residential mortgages. This growth was partially offset by lower commercial loan balances which were impacted by lower levels of PPP loans. At September 30, PPP loan balances totaled $2.4 billion compared to $4.9 billion at June 30. Excluding PPP loans, third quarter average loans grew by 1.8% on a linked-quarter basis. Turning to Slide 8, average deposits increased 0.5% compared with the second quarter and 6.4% compared with a year ago. On both a linked-quarter and year-over-year basis, we continued to benefit from favorable mix shift as average non-interest bearing deposits increased while higher cost time deposits declined. Slide 9 shows credit quality trends. Non-performing assets declined on both a linked-quarter and year-over-year basis, and our net charge-off ratio hit a record low of 20 basis points. Our reserve release was $310 million this quarter, primarily reflecting strong credit quality metrics. Our allowance for credit losses as of September 30 totaled $6.3 billion or 2.1% of loans. The allowance level reflected our best estimate of the economic outlook and trajectory of credit quality within the portfolios. Slide 10 provides an earnings summary. In the third quarter of 2021, we earned $1.30 per diluted share. These results include a reserve release of $310 million. Turning to Slide 11, net interest income on a fully taxable equivalent basis of $3.2 billion increased by 1.0% compared with the second quarter. The growth was primarily driven by higher loan fees associated with the Paycheck Protection Program. Excluding PPP-related fees, net interest income would have been stable, reflecting lower loan yields and the impact of change in loan mix offset by the beneficial impact of core loan growth, lower premium amortization, and an additional day in the quarter. Our net interest margin was stable compared with the second quarter. Slide 12 highlights trends in non-interest income. Compared with a year ago, noninterest income declined 0.7% as decreases in mortgage revenue and commercial products revenue more than offset strong growth in payments revenue, trust and investment management fees, deposit service charges, and treasury management fees. On a linked-quarter basis, noninterest income increased 2.8%, reflecting higher-than-expected payments revenue and a 20% increase in mortgage revenue driven by growth in production volume and related gain on sale margins, as well as higher loan sales. Slide 13 provides information on our payment services business. Our payments business continues to benefit from improving economic conditions and spend activity. In the third quarter, sales volumes for both our credit card and our merchant processing businesses exceeded the pandemic-comparable period in 2019, while CPS volume was about in line. As expected, prepaid card volume declined in the third quarter as the impact of government-related stimulus continues to diminish. The reduced prepaid volume resulted in a slight decline in credit and debit card revenue on a linked-quarter basis. However, corporate payment revenues increased by 13%, which was better than expected driven by improving business spend activity. Merchant processing revenue increased by 4.8% due to higher merchant and equipment fees as well as higher sales volumes. Turning to slide 14, non-interest expense increased 1.2% compared to the second quarter. This increase primarily reflected higher revenue-related compensation and performance-based incentives. Slide 15 highlights our capital position. Our common equity Tier 1 capital ratio at September 30 was 10.2%, which increased slightly compared to June 30. At the beginning of the third quarter, we suspended our share buyback program due to our recent announcement that we have agreed to acquire MUFG’s Union Bank. We expect that our share repurchase program will be deferred until the second quarter of 2022. After the closing of the acquisition, we expect to operate at a CET1 capital ratio between our target ratio and 9.0%. I will now provide some forward-looking guidance. As PPP winds down and we approach the end of the forgiveness period, we expect PPP fees to decline $60 million to $70 million in the fourth quarter compared with the third quarter. Excluding the impact of PPP fees, we expect fully taxable equivalent net interest income to be relatively stable on a linked-quarter basis. We expect PPP to be immaterial to both net interest income and the net interest margin in 2022. In the fourth quarter, we expect total payments revenue trends to continue to strengthen driven by improving sales volumes. However, the fourth quarter is typically seasonally lower than the third quarter, which affects lead-quarter comparisons. In the fourth quarter, we expect to see a seasonal increase in amortization of tax advantaged investments of approximately $60 million, as well as some seasonal impacts in marketing and business investments. Credit quality remains strong. Over the next few quarters, we expect the net charge-off ratio to remain lower than normal. For the full year of 2021, we expect our taxable equivalent tax rate to be approximately 22%. I'll hand it back to Andy for closing remarks.

Thanks Terry. To summarize, our third quarter results were positive on several fronts, highlighted by solid growth in core loans, good fee revenue momentum and strong credit quality. We're finishing off the year in a strong position heading into 2022. And we're excited about the many organic growth opportunities we see across the franchise supported by our continued investment in people, digital technology and data analytics. Our three payments businesses will continue to benefit from the improved spend activity, particularly as consumer and business travel recovers towards pre-pandemic levels. More importantly, we believe our secular growth initiatives aimed at connecting payments with banking provide a meaningful potential for market share gains over the medium and longer term. Our business banking initiatives are still in the early innings, but we're gaining traction. And our partnership with State Farm continues to evolve and grow. We are encouraged by the results we're seeing. Aside from our organic growth opportunities, our recently announced acquisition of Union Bank provides a platform to achieve cost synergies, expand our distribution network and demographically attractive West Coast markets and leverage our broad product set and leading digital capabilities across a loyal but under-penetrated customer base. All of this will enable us to accelerate revenue and earnings growth and continue to deliver the industry-leading returns on equity that our shareholders have come to expect. In closing, I'd like to thank our employees for all they've done throughout the year. We'll now open up the call for Q&A.

Operator Instructions: Your first question comes from the line of Gerard Cassidy from RBC.

Good morning, Andy, and good morning, Terry. Andy, slide 6 is very interesting, and as you pointed out, it's a new slide. Two questions on this slide. You talked about the growth you are anticipating in the business banking area to convert customers who are business banking only to using both banking and payments. What percentage can you get it to, the 50% shown on the other circle for the payments area? Can you reach that level, and how long would it take? And second, if you include the Union Bank customers, how large will that 1.1 million grow?

So, Gerard, Union Bank has about 190,000 comparable customers. So that would be added to the 1.1 million. And I do believe we can get to your first question, that left-hand side to the 50:50 at least. Again, the way we're thinking about this product set is really a combination, a dashboard, if you will, that helps these customers manage their business, payables, receivables, travel activity, payroll, and so forth in one comprehensive viewpoint. And I think that will allow us to both deepen the relationships as well as expand, so I do believe we can get to that 50:50 as well.

Very good. And then as a follow up you guys are well regarded on your credit through the full cycle. And you pointed out, Terry, that I think that 20 basis points is a record low on net charge-offs. What do you anticipate – when will things kind of normalize and I hate that word, because there's no such thing as normal credit card charge-offs, but it seems like how sustainable are these record low levels do you think as we look out over the next 12 to 24 months?

Yes, that's a great question. And your point about it being really difficult to predict is right on. When we end up looking at and kind of looking at forecasts, we do expect it's probably going to stay at these lower levels for a few quarters, and that's going to start to normalize. It probably doesn't get back to what we would kind of define as normal, which is kind of 45 basis points to 50 basis points overall, until at least the end of 2022 and probably sometime in 2023, but it is very hard to predict.

Your next question comes from the line of Betsy Graseck with Morgan Stanley.

Hi, good morning. I had a couple of questions. One was on just loan growth in general. And I wanted to understand where you see some signs of life that might be accelerating as we move into 4Q and into next year. I asked because I saw a nice uptick in the consumer side, but commercial seemed to be a little bit weaker, I am wondering what you're seeing there. Thanks.

Yes, so when we ended up looking, first of all, maybe the fourth quarter, we would expect probably modest growth going into the fourth quarter on a linked-quarter basis. And if you just kind of look at the puts and takes, and I think that this will play out over time, as well, the puts and takes at least in the near term are that we would continue to expect to see reasonably good growth in our auto lending business, which has been very strong of late. And we would also expect that our credit card balances would start to strengthen, and a big part of that is both consumer spend, but we've also been investing in terms of account growth and various promotional activities, so that will help to drive it. And then, as government stimulus starts to dissipate, which has been slowly doing, we do expect that the payment rate will start to come down. It's really kind of at a historic high right now. And as that comes down, credit card balances should strengthen. So, certainly on the consumer side, we expect growth in the near term. The C&I as you said, is a little more challenging. The principal challenge there is that we continue to see a fair amount of payoffs and then PPP forgiveness is also dampening the C&I growth in that particular space. Where we are seeing nice areas of opportunity in C&I is in asset-backed securitization type of lending, mortgage warehouse lines, some supply chain finance activities; those are all areas that have been of particular strength. When we end up looking at the middle market space, we are seeing lots of confidence in terms of customers and relatively strong pipelines. And so, we do expect that is an area of opportunity once we get beyond the drag of PPP. So, hopefully that gives you some perspective in terms of some of the puts and takes.

And the PPP in the fourth quarter, I think you indicated it would be down obviously Q-on-Q. But is it sizable in the fourth quarter?

Yes, it ends up coming down, and you saw we talked a little bit about the decline this quarter. I think it's going to come down probably half of that again in the fourth quarter, and then it's hard to tell in terms of does it stabilize at that level or does it come down a little bit further. But our expectation, at least right now, Betsy, is that by the end of the fourth quarter, the vast majority of PPP has been forgiven. And the impact to, for example, balances and net interest income and margin will be really immaterial when we think about 2022.

And in the fourth quarter, is the PPP contribution to NII in the fourth quarter—how would you size that?

I think it's modest, Betsy. The peak quarter certainly was the third quarter and becomes very modest in the fourth quarter.

Okay. All right. And then just lastly, as you think about the forward look here on integrating MUFG Union Bank into your operation. How should we be thinking about the trajectory of the efficiencies here? Because when you announced that deal, and we had that conference call, we obviously heard a lot about the cost savings that you're anticipating getting from the MUFG USA side, but I'm wondering, is there a tech angle as well, on your legacy platform that will also be enhanced, and is this one plus one equal two and a half, for example?

So I think, just to remind you of the timeframes, we did actually submit our application for the transaction on October 6, so our expectation is a close sometime late first quarter, early second quarter, with a conversion integration in the third into the fourth quarter of 2022. As we talked about on the call, we would expect about 75% of the savings, the efficiencies, to occur in that first year 2023. And as we also talked about, Betsy, the real benefit here is we have the platform and it's a lift and shift from what they do to our platform, which allows for the majority of the cost savings. The second enhancement is our platform has more capabilities and, in my view, more opportunities, a better customer experience and more products and services. So there's also a revenue component as well. So in that view, yes, it is more than just one plus one.

Your next question comes from the line of John Pancari with Evercore ISI.

Good morning. I want to see if you can elaborate a little bit more on the trends you're seeing in your payments business. I know you had mentioned the increased spend activity; I want to see if you can give us a little bit more color on how that breaks out. And then separately, maybe if you can elaborate a little bit on what you're pointing to for '22 expectation at this time, based upon the trends you're beginning to see in the payments side. Thanks.

Yes, maybe let me take the first part and then Andy can kind of pipe in with respect to what we're seeing as we go into 2022. So, maybe as a comparable to 2019, first of all, as we said the merchant and the card businesses now above 2019 levels. In the third quarter, merchant processing sales were almost 5% higher than 2019. If you look at credit and debit card, it's 20+% above where it was in 2019. So those have made really nice recoveries. Also keep in mind that when you look at merchant as an example, airline travel and entertainment is still down quite a bit. And probably, I would say, flattened a bit in the third quarter simply because of the Delta variant. But as we think about going forward, and as you know, the Delta variant subsides, we would expect that to start to accelerate again. If you look at the card business, credit card and debit card sales volumes have been quite strong relative to 2019, driven by consumer spend. The one thing that will impact card revenue is that prepaid continues to come down as government stimulus dissipates, but by the end of the year going into 2022, the quarter-over-quarter impact will be relatively immaterial. And then the last thing I would mention is on the corporate payments side, that business is pretty much at 2019 levels. But travel and entertainment spend is still about 50% to 55% below 2019. We would expect that to continue to normalize and see opportunity there to strengthen. We have seen other commercial spend strengthening quarter-over-quarter, and we would expect that to continue as well.

I think that's exactly right, Terry. Just to summarize what Terry said, ex travel, airlines, and entertainment activity spend is up versus pre-pandemic levels in that 20% range or so. I would expect that to continue to increase into 2022. I think the real opportunities are in the travel category; merchant or card activity is down in the 35% to 40% range and as that recovers, that's where a lot of opportunity exists, as well as in corporate travel and entertainment which is down closer to 50%.

Okay, great, thank you. And then I know you mentioned on the expense side some marketing and business investments, at least for the fourth quarter. Is there anything there that is going to carry through into 2022 as you're putting money into the business? I know you recently launched the buy now pay later product. So just curious if there's ongoing marketing and business investment that we should consider as we build in expense expectations for 2022?

I think as we think about 2022, the level of investment probably doesn't go up significantly from here.

Your next question comes from the line of Ebrahim Poonawala with Bank of America.

Good morning. I just want to follow up with you on comments around loan growth. If you can specifically address two things. One is the outlook for CRE lending as you think about next year, given potential disruption from changing work-from-home patterns. How are you approaching CRE lending? And on the consumer side, do you expect we need to see a big drawdown in the U.S. savings rate before you actually see consumer lending pick up substantially? Or, as you pointed out, the government's stimulus program fading away is enough to see that growth?

So with respect to CRE, we actually saw some growth on a linked-quarter basis in CRE this quarter. The project-level pipeline and activity are reasonably strong. As we think about the next couple of quarters, though, we are seeing pretty strong competition in the marketplace. We'll have to watch paydowns related to return-to-office and other impacts. In terms of areas to watch, as return-to-office occurs, we are starting to see collateral valuations improving, and we're starting to see some trends improving as well. That would be a positive thing for CRE investment by developers and financiers. But for right now we're monitoring paydowns and competitive dynamics.

On the consumer side, we're actually seeing and expect that credit card balances from here will start to grow, possibly accelerate as we get into 2022. For customers that revolve, with government stimulus dissipating they are more likely to use credit products to support consumer spend. We've continued to see relatively strong growth in auto lending and I would anticipate that will continue depending upon supply chain impacts associated with chips and things like that. Overall, we're fairly bullish on consumer lending.

It's helpful color. Thank you. And just on a separate note, regarding the stickiness of deposit growth over the last 18 months, could you discuss your outlook in terms of whether you expect deposit balances to continue to grow? And do you at any point in the next year or two expect deposit growth to actually turn negative in any meaningful way?

Our deposit growth has been reasonably strong. If you peel back the onion, it's been particularly strong in the consumer and business banking areas with year-over-year growth of about 16% and linked-quarter growth of about 1% in the third quarter. I would fully expect a lot of that to stick, dependent upon the excess savings rate. We're also seeing growth in the wealth management businesses and expect a fair amount of that to stick as well. So we've been growing what I would call core balances quite a bit. As liquidity does come out of the system, though, I would expect some runoff where investors start to invest those deposits in products like money market funds or other investment structures. Within our wealth management investment services business, we would expect to see some runoff.

Your next question comes from the line of Scott Siefers with Piper Sandler.

Good morning, guys. Thanks for taking the question. I was hoping you might address the durability of mortgage revenues at the current level; it was a pretty solid quarter, a little better than I anticipated. Just hoping you can address some of the puts and takes on margin, origination levels and overall durability of this business line.

In the third quarter, we saw an uptick in applications because of refinancing activity when interest rates came down. Over the last several years, we've invested significantly in a strong focus on purchase-money originations, and a fair amount of our volume is on the purchase-money side. So if home sales continue to grow, that should allow us to hold up really well. We've invested in the retail channel and our digital capabilities, and we're taking market share in the mortgage banking space. While mortgage banking revenue will trend with the industry, we have the opportunity to perform well within the industry.

All right, perfect, thank you. And then a little more color on expenses, particularly that comment about the $60 million seasonal increase in amortization of tax-advantaged investments in the fourth quarter. Does that just go up and then come back down or is there a headwind that emerges in 2022? And presumably it's kind of a wash from an earnings standpoint given a corresponding tax impact? How should we think about that as we go through fourth quarter and then into next year?

What happens is about 60% of the overall production for the year happens in the fourth quarter. Historically, we always see a blip in the fourth quarter, then it comes back down in the first quarter, and then it slowly builds through the year, with another blip in the fourth quarter the following year. So it's a seasonal effect in the fourth quarter.

Your next question comes from the line of Ken Usdin with Jefferies.

Hey, thanks a lot. Good morning, guys. Terry, can you make sure we understand the offset to that $60 million in expenses—where do we see that in the income statement?

Where that ends up flowing through is in the tax rate. Usually what happens is on a lag basis you'll start to see the tax rate improving in 2022 as a result of the investments we're making today.

In the fourth quarter, do you see that offset to the $60 million in the tax rate as well?

Very limited in the tax rate in the fourth quarter. That's why we guided that it's really more forward-looking.

Okay, got it. Thank you. Secondly, you mentioned in the press release that fee waivers were down a little bit; can you give us an update on what they were in the quarter, and also what you need from rates to get rid of the fee waivers?

They were about just about $70 million in the third quarter, down just a couple million dollars versus the second quarter principally due to the repo rate. We get about 50% of it back with the first 25 basis points and about 95% of it back with the second 25 basis points.

Okay, great. And then just last one: in terms of the payments businesses, when we see growth in merchant volumes, can you compare and contrast how that correlates to merchant revenue growth? I know it's mix dependent, but with your mix of business, what is the correlation between increases and improvements in merchant volumes vis-à-vis improvements in sales volumes?

Typically what's happening right now is an exchange. Some of what's coming back are areas with a thinner margin, which is causing the differential where sales are up about 5% and fees are down about 5% versus 2019. Versus 2020, sales are up about 30% and fees are up about 13%. There will be a bit of a gap partly because of the mix of what's coming back. Going forward, I'd expect revenue growth to be slightly below sales growth on a go-forward basis.

Okay, thanks. Sorry, can I ask one more? The expense you had on the airline and travel—was that a one-time item? Was it meaningful? Can you tell us how much that was?

Are you referring to the investment we're making on our credit card business or the merchant airline reserve?

The merchant airline reserve, exactly.

That has been relatively stable over the last couple of quarters because people are starting to fly more. So that has not been material.

Your next question comes from Matt O'Connor with Deutsche Bank.

Good morning. Can you give us an update on your rate sensitivity, the flexibility to add to interest rate swaps and how the Union Bank deal might impact that?

The Union Bank portfolio is a little more asset sensitive than we are. We would expect it to add to our asset sensitivity, roughly in the 30 to 40 basis points range relative to where we're at today. In the first half of the year, we were about 2.8% asset sensitive to a 50 basis point shock. We've been expanding that position in a couple of different ways: holding more cash and looking for a better investment entry point, and also using different hedge strategies. So today we're probably about 3.5% asset sensitivity. We expect rates to start moving up at the long end, and we're trying to be patient and opportunistic when rates are in the right spot.

Okay, that's helpful. And then separately, clarification on payments seasonality in 4Q—remind us what that is. I thought corporate payments may not be as seasonal this year as normal, but elaborate on that. Last quarter you said payments would be flat and it ended up being a little better than expected; it seems you might be conservative again for 4Q.

Usually merchant is flat to down a little bit in the fourth quarter; card performs a bit better in the fourth quarter because of holiday sales. CPS is the business that comes down because you have a significant amount of government spending in the third quarter that doesn't repeat.

Your next question comes from Mike Mayo with Wells Fargo Securities.

Hi. We got a new slide, slide 6, talking about combining banking with payments. Could you elaborate—are we looking at many business banking customers who don't use payments and you want to get them to use it, and similarly payments customers who don't use banking? You said you seek to grow the small business relationships by 15% to 20% and related revenues by 25% to 30%. Over what time frame is that, and how are you going to do that? When are you rolling out the new products that will enable that?

You got the numbers correct. We start at 1.1 million customers and would add about another 190,000 with Union Bank. The timeframe is the next few years. We'll continue to update the slide each quarter to give more specifics, including progress on these numbers and the thinking about revenue. The approach is a combined dashboard and product offering that has payments and banking together to help businesses run payables, receivables, travel, payroll, as well as banking products and services. We have been rolling out that dashboard, making enhancements each month and each quarter.

Okay, so how do you think about profit margins on these relationships? One-stop shopping should be better service for customers and yield higher profitability. Should we expect earnings to increase by more than the 25% to 30% revenue growth you cited?

Yes, I was quoting a revenue number. I would expect earnings to be higher than that because the marginal cost of many of these products and services is not as high since they go on platforms we already have established.

Okay, and then since we're on the topic of tech, it's been six years since U.S. Bancorp showed positive operating leverage. You have two quarters in a row on a linked-quarter basis where you showed it. Maybe you won't show that in the fourth quarter. Can you commit to 2022 having positive operating leverage? There'll be some noise with Union Bank, but are you on that trajectory now, and if so, why?

There will be some noise with Union, as you mentioned. It's always our goal. We've made a lot of investments in the company, and those investments will drive revenue growth and create more efficiency in our operations. The technology stack modernization in particular creates a less expensive operating environment. Those are positives. Looking to 2022, that's always our objective; 2022 depends a bit upon the yield curve and what happens with rates, but that's our objective.

Your next question comes from the line of Vivek Juneja with JPMorgan.

Good morning, Andy. Good morning, Terry. A couple of questions. On investment securities, they shrank—any color on the outlook?

Our expectation is that longer-term rates will move up given inflationary pressures and other economic growth factors. We've been holding off on reinvestment of maturities and building cash balances to improve our asset sensitivity. We'll look for opportunities to reinvest as rates start to move.

Thanks. Another one, different topic. Did I hear you say that you expected revenue growth in payments fees to be better than sales trends? If so, can you elaborate?

No, Vivek, the other way around. Sales will be a bit higher than revenue growth partly because of mix and partly because of investments we're making. For example, in card as sales growth occurs, some investments in new business generation impact revenue growth.

Your next question comes from the line of Bill Carcache with Wolfe Research.

Good morning. I wanted to follow up on the relatively softer commercial loan growth you're seeing. Are you hearing anything from your commercial customers that suggests depressed line utilization rates are an extension of supply chain problems? If so, does that suggest line utilization is unlikely to improve until supply chain problems are resolved? Any color would be great.

The supply chain is impacting customers' ability to offer products and services, but it hasn't necessarily come up frequently in conversations with them. Certainly, as supply chain challenges resolve, that will create opportunity for us in terms of line utilization and bank financing. For now, it's something we are watching, but it hasn't been a dominant topic raised by clients.

Understood, that's helpful. Separately, on the merchant acquiring business, Elavon puts you in a unique position to turn on buy now pay later solutions for merchant partners in a way other banks can't. Are you considering offering buy now pay later to your merchant customers? More broadly, how do you think about BNPL? Does it pose disintermediation risks to your card business, or is BNPL likely used by customers who wouldn't qualify for a credit card and thus is additive? Any thoughts around how you're thinking about it and the opportunity?

It's a bit of both. We have a number of tests underway. We already offer buy now pay later on a credit card product, where a customer might choose a planned set of payments for a large purchase. Other times BNPL can allow a customer who otherwise wouldn't have a credit card to make a purchase using a BNPL capability, partnering with merchants to increase sales. We're working on all those fronts.

Got it. On a separate topic, you recently announced you'll provide cryptocurrency custody services for institutional clients. Could you frame the revenue opportunity and discuss what's different about how U.S. Bancorp is approaching custody versus banks that have been reluctant to provide those services?

Institutional investors are looking to participate in digital currency as an asset class. We have a large fund services business providing fund services, transfer agency and administration to those clients. If a fund chooses cryptocurrency as an asset class, we need to provide that service. We'll offer cryptocurrency custody for those fund managers and selected NYDIG to help us as a sub-custodian. A number of other banks use sub-custodians as well. This is about offering the same full set of services for that asset class to our existing clients.

Got it. Any high-level color on the revenue opportunity?

We haven't defined the revenue opportunity yet. It's early innings of this capability; it's about providing a full set of services to those customers.

You have a follow-up question from the line of Ken Usdin with Jefferies.

Hey, sorry for the follow-up. You gave the $60 million to $70 million expected decline in PPP in the fourth quarter. That's the first time you've given a number. Do you have the base of what PPP-related net interest income was in 3Q?

Yes, it was about $120 million.

At this time, there are no further questions. I'll turn the call back to the speakers for any closing remarks.

Maybe one comment. Jen asked me to clarify something in the transcript. Earlier I mentioned that the share buyback program would be deferred until the second quarter. Actually it will be the second half of 2022, starting about a quarter after we finish the closing.

Great. Thank you everyone for listening to our earnings call. Please contact the Investor Relations department if you have any follow-up questions.

Thank you for participating. You may disconnect at this time.