8-K
US Bancorp \De\ (USB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 15, 2022
U.S. BANCORP
(Exact name of registrant as specified in its charter)
1-6880
(Commission File Number)
| Delaware | 41-0255900 |
|---|---|
| (State or other jurisdiction | (I.R.S. Employer Identification |
| of incorporation) | Number) |
| 800 Nicollet Mall | |
| --- | |
| Minneapolis, Minnesota 55402 | |
| (Address of principal executive offices and zip code) |
(651) 466-3000
(Registrant’s telephone number, including area code)
(not applicable)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 Under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br>symbol | Name of each exchange<br>on which registered |
|---|---|---|
| Common Stock, $.01 par value per share | USB | New York Stock Exchange |
| Depositary Shares (each representing 1/100th interest in a share of Series A Non-Cumulative Perpetual Preferred Stock, par value $1.00) | USB PrA | New York Stock Exchange |
| Depositary Shares (each representing 1/1,000th interest in a share of Series B Non-Cumulative Perpetual Preferred Stock, par value $1.00) | USB PrH | New York Stock Exchange |
| Depositary Shares (each representing 1/1,000th interest in a share of Series K Non-Cumulative Perpetual Preferred Stock, par value $1.00) | USB PrP | New York Stock Exchange |
| Depositary Shares (each representing 1/1,000th interest in a share of Series L Non-Cumulative Perpetual Preferred Stock, par value $1.00) | USB PrQ | New York Stock Exchange |
| Depositary Shares (each representing 1/1,000th interest in a share of Series M Non-Cumulative Perpetual Preferred Stock, par value $1.00) | USB PrR | New York Stock Exchange |
| Depositary Shares (each representing 1/1,000th interest in a share of Series O Non-Cumulative Perpetual Preferred Stock, par value $1.00) | USB PrS | New York Stock Exchange |
| 0.850% Medium-Term Notes, Series X (Senior), due June 7, 2024 | USB/24B | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule l2b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section l3(a) of the Exchange Act. ☐
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On July 15, 2022, U.S. Bancorp (the “Company”) issued a press release reporting quarter-ended June 30, 2022 results, and posted on its website its 2Q22 Earnings Conference Call Presentation, which contains certain additional historical and forward-looking information relating to the Company. The press release is included as Exhibit 99.1 hereto and is incorporated herein by reference. The information included in the press release is considered to be “filed” under the Securities Exchange Act of 1934. The 2Q22 Earnings Conference Call Presentation is included as Exhibit 99.2 hereto and is incorporated herein by reference. The information included in the 2Q22 Earnings Conference Call Presentation is considered to be “furnished” under the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference in any filings under the Securities Act of 1933. The press release and 2Q22 Earnings Conference Call Presentation contain forward-looking statements regarding the Company and each includes a cautionary statement identifying important factors that could cause actual results to differ materially from those anticipated.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
| 99.1 | Press Release issued by U.S. Bancorp on July 15, 2022, deemed “filed” under the Securities Exchange Act of 1934. |
|---|---|
| 99.2 | 2Q22 Earnings Conference Call Presentation, deemed “furnished” under the Securities Exchange Act of 1934. |
| --- | --- |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| --- | --- |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| U.S. BANCORP |
|---|
| By /s/ Lisa R. Stark |
| Lisa R. Stark |
| Executive Vice President and<br>Controller |
DATE: July 15, 2022
EX-99.1
Exhibit 99.1
| U.S. Bancorp Reports Second Quarter2022 Results | |||
|---|---|---|---|
| • Net income of $1.5 billion and record net revenue of $6.0 billion<br><br><br>• Return on average assets of 1.16% and<br>return on average common equity of 15.3%, excluding merger and integration charges<br> <br>• Common Equity Tier 1 capital ratio of 9.7% and strong levels of liquidity | |||
| 2Q22 Key Financial Data | 2Q22 Highlights | ||
| --- | --- | ||
| PROFITABILITYMETRICS | 2Q22 | 1Q22 | 2Q21 |
| --- | --- | --- | --- |
| Return on average assets (%) | 1.06 | 1.09 | 1.44 |
| Return on average common equity (%) | 13.9 | 12.7 | 16.3 |
| Return on tangible common equity (%) (a) | 18.6 | 16.6 | 20.9 |
| Net interest margin (%) | 2.59 | 2.44 | 2.53 |
| Efficiency ratio (%) (a) | 62.1 | 62.8 | 59.0 |
| INCOME STATEMENT (b) | 2Q22 | 1Q22 | 2Q21 |
| Net interest income (taxable-equivalent basis) | $3,464 | $3,200 | $3,164 |
| Noninterest income | $2,548 | $2,396 | $2,619 |
| Net income attributable to U.S. Bancorp | $1,531 | $1,557 | $1,982 |
| Diluted earnings per common share | $.99 | $.99 | $1.28 |
| Dividends declared per common share | $.46 | $.46 | $.42 |
| BALANCE SHEET (b) | 2Q22 | 1Q22 | 2Q21 |
| Average total loans | $324,187 | $312,966 | $294,284 |
| Average total deposits | $456,516 | $454,176 | $429,210 |
| Net charge-off ratio | .20% | .21% | .25% |
| Book value per common share (period end) | $28.13 | $29.87 | $31.74 |
| Basel III standardized CET1 (c) | 9.7% | 9.8% | 9.9% |
| (a) See Non-GAAP Financial Measures reconciliation on page 17 | |||
| --- | |||
| (b) Dollars in millions, except per share data | |||
| (c) CET1 = Common equity tier 1 capital ratio | |||
| • Net revenue of $6,012 million including $3,464 million of net interest income and $2,548 million of noninterest income<br><br><br><br><br><br>• Net income of $1,531 million and diluted earnings per<br>common share of $0.99, including merger and integration charges<br> <br><br><br><br>• Merger and integration-related charges of $197 million<br>($153 million net of tax or $(0.10) per diluted common share) related to the planned acquisition of MUFG Union Bank<br> <br><br><br><br>• Return on average assets of 1.06% and return on average<br>common equity of 13.9%. Excluding merger and integration-related charges, net income of $1,684 million, return on average assets of 1.16% and return on average common equity of 15.3%<br><br><br><br><br><br>• Noninterest income growth of 6.3% linked quarter driven<br>by payment services revenue and trust and investment management fees<br> <br><br><br><br>• Average total loans growth of 10.2% year-over-year and<br>3.6% on a linked quarter basis<br> <br><br> <br>• Average total deposits growth of 6.4% year-over-year and 0.5% on a linked quarter basis<br> <br><br><br><br>• Net charge-off ratio of 0.20% in 2Q22 compared with<br>0.21% in 1Q22 and 0.25% in 2Q21<br> <br><br> <br>• CET1 capital ratio of 9.7% at June 30, 2022, compared with 9.8% at March 31, 2022 | |||
| --- | |||
| CEOCommentary | |||
| --- |
“In the second quarter, we achieved record net revenue totaling $6.0 billion, supported by strong growth in both net interest income and fee revenue. We posted diluted earnings per share of $0.99 including merger and integration-related charges of $(0.10) related to the planned acquisition of MUFG Union Bank. Loan growth was robust, we saw good momentum in our payments businesses reflecting strong business activity and our expense growth was well managed. This quarter our return on tangible common equity was 20.5%, excluding merger and integration-related charges. Credit quality remains strong and our net charge-off ratio improved modestly in the quarter. Given strong loan growth and increased uncertainty surrounding the macro-economic outlook, we increased our loan loss reserve reflecting our through-the-cycle risk management approach. As we head into the second half of the year we face an uncertain economic environment. However, we are well positioned for the range of possible outcomes given strong liquidity and capital ratios, our diversified business mix, and our well-established risk management track record.”
— Andy Cecere, Chairman, President and CEO, U.S.Bancorp
| In theSpotlight |
|---|
Community Benefits Plan
U.S. Bancorp announced a $100 billion, five-year community benefits plan (CBP) as part of the planned acquisition of MUFG Union Bank. The CBP, which will be effective once the acquisition closes, is intended to continue and expand the important work underway by both organizations to build and support equitable access to capital for the communities we serve. A majority of the commitments, 60% of the total, will support efforts in California, the state most impacted by the acquisition.
U.S. Bank Collaborates to Simplify,Accelerate Supply-Chain Financing
U.S. Bank entered into a collaboration agreement with trade-finance fintech LiquidX^®^ to help expedite and simplify supply-chain transactions between suppliers and buyers. Suppliers and buyers will be able to connect their supply-chain systems directly to U.S. Bank and transact through LiquidX’s easy-to-use platform which is expected to reduce supply-chain-finance friction and cash-flow challenges facing many companies. This collaboration will enable suppliers to be paid nearly immediately and buyers to receive extended payment terms.
Managing Finances and Operations for Small Businesses
U.S. Bank recently launched Business Essentials, a unified platform that provides a one-stop shop in a seamless digital experience. It’s a holistic banking, payments, and software offering for small businesses. Business Essentials is backed by expert human support from bankers who specialize in small business. The platform makes it easy for clients to take care of their financial needs today and provides insights and support to help them make smart decisions for tomorrow.
Spanish-Language Voice Assistant
U.S. Bank is the first financial institution in the United States to offer a Spanish-speaking virtual voice assistant for banking. The Spanish-language version of our best-in-class Smart Assistant in the U.S. Bank Mobile App has the same features and functionality as the popular English-language version. This new technology demonstrates U.S. Bank’s continued emphasis on putting customer experience first, by creating new digital tools that enable them to bank however, whenever and wherever is best for them.
Investor contact: Jennifer Thompson, 612.303.0778 | Media contact: Jeff Shelman, 612.303.9933
| U.S. Bancorp Second Quarter 2022 Results | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| INCOME STATEMENT HIGHLIGHTS | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ( in millions, except per-share data) | Percent Change | ||||||||||||||||||||
| 1Q2022 | 2Q2021 | 2Q22 vs1Q22 | 2Q22 vs2Q21 | YTD2022 | YTD2021 | Percent Change | |||||||||||||||
| Net interest income | 3,435 | $ | 3,173 | $ | 3,137 | 8.3 | 9.5 | $ | 6,608 | $ | 6,200 | 6.6 | |||||||||
| Taxable-equivalent adjustment | 29 | 27 | 27 | 7.4 | 7.4 | 56 | 53 | 5.7 | |||||||||||||
| Net interest income (taxable-equivalent basis) | 3,464 | 3,200 | 3,164 | 8.3 | 9.5 | 6,664 | 6,253 | 6.6 | |||||||||||||
| Noninterest income | 2,548 | 2,396 | 2,619 | 6.3 | (2.7 | ) | 4,944 | 5,000 | (1.1) | ||||||||||||
| Total net revenue | 6,012 | 5,596 | 5,783 | 7.4 | 4.0 | 11,608 | 11,253 | 3.2 | |||||||||||||
| Noninterest expense before merger and integration | 3,527 | 3,502 | 3,387 | .7 | 4.1 | 7,029 | 6,766 | 3.9 | |||||||||||||
| Merger and integration charges | 197 | -- | -- | nm | nm | 197 | -- | nm | |||||||||||||
| Total noninterest expense | 3,724 | 3,502 | 3,387 | 6.3 | 9.9 | 7,226 | 6,766 | 6.8 | |||||||||||||
| Income before provision and income taxes | 2,288 | 2,094 | 2,396 | 9.3 | (4.5 | ) | 4,382 | 4,487 | (2.3) | ||||||||||||
| Provision for credit losses | 311 | 112 | (170 | ) | nm | nm | 423 | (997 | ) | nm | |||||||||||
| Income before taxes | 1,977 | 1,982 | 2,566 | (.3 | ) | (23.0 | ) | 3,959 | 5,484 | (27.8) | |||||||||||
| Income taxes and taxable-equivalent adjustment | 443 | 424 | 578 | 4.5 | (23.4 | ) | 867 | 1,211 | (28.4) | ||||||||||||
| Net income | 1,534 | 1,558 | 1,988 | (1.5 | ) | (22.8 | ) | 3,092 | 4,273 | (27.6) | |||||||||||
| Net (income) loss attributable to noncontrolling interests | (3 | (1 | ) | (6 | ) | nm | 50.0 | (4 | ) | (11 | ) | 63.6 | |||||||||
| Net income attributable to U.S. Bancorp | 1,531 | $ | 1,557 | $ | 1,982 | (1.7 | ) | (22.8 | ) | $ | 3,088 | $ | 4,262 | (27.5) | |||||||
| Net income applicable to U.S. Bancorp common shareholders | 1,464 | $ | 1,466 | $ | 1,914 | (.1 | ) | (23.5 | ) | $ | 2,930 | $ | 4,089 | (28.3) | |||||||
| Diluted earnings per common share | .99 | $ | .99 | $ | 1.28 | -- | (22.7 | ) | $ | 1.97 | $ | 2.73 | (27.8) |
All values are in US Dollars.
Net income attributable to U.S. Bancorp was $1,531 million for the second quarter of 2022, which was $451 million lower than the $1,982 million for the second quarter of 2021, and $26 million lower than the $1,557 million for the first quarter of 2022. Diluted earnings per common share were $0.99 in the second quarter of 2022, compared with $1.28 in the second quarter of 2021 and $0.99 in the first quarter of 2022. The second quarter of 2022 included $(0.10) per diluted common share of merger and integration-related charges related to the planned acquisition of MUFG Union Bank.
The decrease in net income year-over-year was primarily due to a higher provision for credit losses primarily driven by strong loan growth and merger and integration-related charges linked to the planned acquisition of MUFG Union Bank. Pretax income before the provision for credit losses and excluding merger and integration-related charges increased 3.7 percent compared with a year ago. Net interest income increased 9.5 percent on a year-over-year taxable-equivalent basis due to higher average loans and investment securities balances as well as rising interest rates and the impact of a favorable yield curve on earning assets, partially offset by deposit pricing and lower loan fees driven by the impact of loan forgiveness related to the SBA Paycheck Protection Program (“PPP”) in the prior year quarter. The net interest margin increased to 2.59 percent in the current quarter from 2.53 percent in the second quarter of 2021 primarily due to the impact of rising interest rates and higher yields on investment securities, partially offset by deposit pricing and lower noninterest-bearing deposits. Noninterest income decreased 2.7 percent compared with a year ago reflecting lower mortgage banking revenue as refinancing activities decline, lower other noninterest income and lower gains on the sale of securities, mostly offset by stronger payment services revenue and trust and investment management fees. Excluding the merger and integration-related charges, noninterest expense increased 4.1 percent reflecting increases in compensation expense, employee benefits expense, and marketing and business development expense. Provision for credit losses reflected a reserve build in the second quarter of 2022 as compared with a reserve release in the second quarter of 2021 driven by a combination of loan growth and economic uncertainty.
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| U.S. Bancorp Second Quarter 2022 Results |
|---|
Net income decreased on a linked quarter basis driven by higher provision for credit losses and merger and integration-related charges, mostly offset by higher total net revenue. Net interest income increased 8.3 percent on a taxable-equivalent basis primarily due to higher average loans, the impact of rising interest rates on loans and investment securities and one more day in the quarter, partially offset by deposit pricing. The net interest margin increased on a linked quarter basis reflecting the impact of rising interest rates and reinvestment yields on investment securities, partially offset by deposit pricing and lower noninterest-bearing deposits. Noninterest income increased 6.3 percent compared with the first quarter of 2022 driven by stronger payment services revenue, trust and investment management fees and commercial products revenue, partially offset by lower mortgage banking revenue. Excluding the merger and integration-related charges, noninterest expense increased 0.7 percent on a linked quarter basis reflecting seasonally higher compensation expense, marketing and business development expense and other noninterest expense, partially offset by lower employee benefits expense. Provision for credit losses reflected a reserve build in the second quarter of 2022 as compared with a reserve release in the first quarter of 2022 driven by a combination of loan growth and increased economic uncertainty, partially offset by stabilizing credit quality.
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| U.S. Bancorp Second Quarter 2022 Results | ||||||||
|---|---|---|---|---|---|---|---|---|
| NET INTEREST INCOME | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Taxable-equivalent basis; in millions) | ||||||||
| Components of net interest income | ||||||||
| Income on earning assets | 3,854 | 3,445 | 3,409 | 409 | 445 | 7,299 | 6,776 | $523 |
| Expense on interest-bearing liabilities | 390 | 245 | 245 | 145 | 145 | 635 | 523 | 112 |
| Net interest income | 3,464 | 3,200 | 3,164 | 264 | 300 | 6,664 | 6,253 | $411 |
| Average yields and rates paid | ||||||||
| Earning assets yield | 2.88% | 2.62% | 2.73% | .26% | .15% | 2.75% | 2.73% | .02% |
| Rate paid on interest-bearing liabilities | .40 | .26 | .28 | .14 | .12 | .33 | .29 | .04 |
| Gross interest margin | 2.48% | 2.36% | 2.45% | .12% | .03% | 2.42% | 2.44% | (.02)% |
| Net interest margin | 2.59% | 2.44% | 2.53% | .15% | .06% | 2.51% | 2.52% | (.01)% |
| Average balances | ||||||||
| Investment securities (a) | 171,296 | 174,762 | 160,615 | (3,466) | 10,681 | 173,019 | 153,109 | $19,910 |
| Loans | 324,187 | 312,966 | 294,284 | 11,221 | 29,903 | 318,608 | 294,138 | 24,470 |
| Interest-bearing deposits with banks | 31,116 | 29,851 | 31,358 | 1,265 | (242) | 30,487 | 36,542 | (6,055) |
| Earning assets | 536,761 | 529,837 | 500,751 | 6,924 | 36,010 | 533,318 | 499,239 | 34,079 |
| Interest-bearing liabilities | 390,373 | 378,223 | 356,565 | 12,150 | 33,808 | 384,332 | 358,562 | 25,770 |
| (a) Excludes unrealized gain (loss) |
All values are in US Dollars.
Net interest income on a taxable-equivalent basis in the second quarter of 2022 was $3,464 million, an increase of $300 million (9.5 percent) over the second quarter of 2021. The increase was primarily due to higher average loans and investment securities balances in addition to rising interest rates and a favorable yield curve impacting earning assets, partially offset by deposit pricing and lower loan fees driven by the impact of loan forgiveness related to PPP in the second quarter of 2021. Average earning assets were $36.0 billion (7.2 percent) higher than the second quarter of 2021, reflecting increases of $10.7 billion (6.7 percent) in average investment securities and $29.9 billion (10.2 percent) in average total loans, while average interest-bearing deposits with banks decreased $242 million (0.8 percent). The increase in average investment securities year-over-year was primarily due to purchases of mortgage-backed and U.S. Treasury securities, net of prepayments, sales and maturities.
Net interest income on a taxable-equivalent basis increased $264 million (8.3 percent) on a linked quarter basis primarily due to higher average loans, the impact of rising interest rates in the loan and the investment portfolios and one more day in the quarter, partially offset by deposit pricing. Average earning assets were $6.9 billion (1.3 percent) higher on a linked quarter basis, reflecting an increase of $11.2 billion (3.6 percent) in average loans and a decrease of $3.5 billion (2.0 percent) in average investment securities, while average interest-bearing deposits with banks increased $1.3 billion (4.2 percent).
The net interest margin in the second quarter of 2022 was 2.59 percent, compared with 2.53 percent in the second quarter of 2021 and 2.44 percent in the first quarter of 2022. The increase in the net interest margin from the prior year was primarily due to the impact of rising interest rates and higher yields in the investment portfolio, partially offset by deposit pricing and lower noninterest-bearing deposits. The increase in interest margin on a linked quarter basis reflected the impact of rising interest rates and reinvestment yields on investment securities, partially offset by higher deposit rates paid and lower noninterest-bearing deposits.
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| U.S. Bancorp Second Quarter 2022 Results | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AVERAGE LOANS | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ( in millions) | |||||||||||||||
| 2Q22 vs2Q21 | YTD<br><br><br>2022 | YTD<br><br><br>2021 | PercentChange | ||||||||||||
| Commercial | 115,758 | 107,819 | 97,713 | 7.4 | 18.5 | $ | 111,810 | $ | 97,237 | 15.0 | |||||
| Lease financing | 4,899 | 5,003 | 5,261 | (2.1 | ) | (6.9 | ) | 4,951 | 5,298 | (6.5 | ) | ||||
| Total commercial | 120,657 | 112,822 | 102,974 | 6.9 | 17.2 | 116,761 | 102,535 | 13.9 | |||||||
| Commercial mortgages | 29,676 | 28,826 | 27,721 | 2.9 | 7.1 | 29,253 | 27,844 | 5.1 | |||||||
| Construction and development | 9,841 | 10,258 | 10,843 | (4.1 | ) | (9.2 | ) | 10,049 | 10,831 | (7.2 | ) | ||||
| Total commercial real estate | 39,517 | 39,084 | 38,564 | 1.1 | 2.5 | 39,302 | 38,675 | 1.6 | |||||||
| Residential mortgages | 80,228 | 77,449 | 73,351 | 3.6 | 9.4 | 78,847 | 74,271 | 6.2 | |||||||
| Credit card | 22,748 | 21,842 | 21,116 | 4.1 | 7.7 | 22,297 | 21,130 | 5.5 | |||||||
| Retail leasing | 6,708 | 7,110 | 7,873 | (5.7 | ) | (14.8 | ) | 6,908 | 7,924 | (12.8 | ) | ||||
| Home equity and second mortgages | 10,726 | 10,394 | 11,368 | 3.2 | (5.6 | ) | 10,561 | 11,713 | (9.8 | ) | |||||
| Other | 43,603 | 44,265 | 39,038 | (1.5 | ) | 11.7 | 43,932 | 37,890 | 15.9 | ||||||
| Total other retail | 61,037 | 61,769 | 58,279 | (1.2 | ) | 4.7 | 61,401 | 57,527 | 6.7 | ||||||
| Total loans | 324,187 | 312,966 | 294,284 | 3.6 | 10.2 | $ | 318,608 | $ | 294,138 | 8.3 |
All values are in US Dollars.
Average total loans for the second quarter of 2022 were $29.9 billion (10.2 percent) higher than the second quarter of 2021. The increase was primarily due to strong growth in commercial loans (18.5 percent), residential mortgages (9.4 percent) and other retail loans (11.7 percent), partially offset by lower retail leasing balances (14.8 percent) and construction and development loans (9.2 percent). The increase in commercial loans was due to higher utilization driven by working capital needs of corporate customers, slower pay-offs given higher volatility in the capital markets and core growth, partly offset by reductions related to the forgiveness of PPP loans. The increase in residential mortgages was driven by stronger on-balance sheet loan activities and slower refinance activity.
Average total loans were $11.2 billion (3.6 percent) higher than the first quarter of 2022 primarily due to higher commercial loans (7.4 percent) driven by continued strong new business and higher utilization, as well as higher residential mortgages (3.6 percent).
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| U.S. Bancorp Second Quarter 2022 Results | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AVERAGE DEPOSITS | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ( in millions) | Percent Change | |||||||||||||||||
| 1Q | 2Q | 2Q22 vs | 2Q22 vs | YTD | YTD | Percent | ||||||||||||
| 2022 | 2021 | 1Q22 | 2Q21 | 2022 | 2021 | Change | ||||||||||||
| Noninterest-bearing deposits | 120,827 | $ | 127,963 | $ | 125,297 | (5.6 | ) | (3.6 | ) | $ | 124,375 | $ | 121,844 | 2.1 | ||||
| Interest-bearing savings deposits | ||||||||||||||||||
| Interest checking | 116,878 | 115,062 | 103,356 | 1.6 | 13.1 | 115,975 | 100,387 | 15.5 | ||||||||||
| Money market savings | 123,788 | 119,588 | 113,673 | 3.5 | 8.9 | 121,700 | 119,218 | 2.1 | ||||||||||
| Savings accounts | 68,127 | 66,978 | 62,102 | 1.7 | 9.7 | 67,555 | 60,484 | 11.7 | ||||||||||
| Total savings deposits | 308,793 | 301,628 | 279,131 | 2.4 | 10.6 | 305,230 | 280,089 | 9.0 | ||||||||||
| Time deposits | 26,896 | 24,585 | 24,782 | 9.4 | 8.5 | 25,747 | 25,862 | (.4 | ) | |||||||||
| Total interest-bearing deposits | 335,689 | 326,213 | 303,913 | 2.9 | 10.5 | 330,977 | 305,951 | 8.2 | ||||||||||
| Total deposits | 456,516 | $ | 454,176 | $ | 429,210 | .5 | 6.4 | $ | 455,352 | $ | 427,795 | 6.4 |
All values are in US Dollars.
Average total deposits for the second quarter of 2022 were $27.3 billion (6.4 percent) higher than the second quarter of 2021. Average noninterest-bearing deposits decreased $4.5 billion (3.6 percent) driven by Corporate and Commercial Banking, Consumer and Business Banking and Payment Services. Average total savings deposits were $29.7 billion (10.6 percent) higher year-over-year driven by Corporate and Commercial Banking and Consumer and Business Banking. Average time deposits were $2.1 billion (8.5 percent) higher than the prior year primarily within Corporate and Commercial Banking, partially offset by a decrease in Consumer and Business Banking. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.
Average total deposits grew $2.3 billion (0.5 percent) from the first quarter of 2022. On a linked quarter basis, average noninterest-bearing deposits were lower by $7.1 billion (5.6 percent) driven by Corporate and Commercial Banking and Wealth Management and Investment Services. Average total savings deposits increased $7.2 billion (2.4 percent) across all business lines. Average time deposits were $2.3 billion (9.4 percent) higher linked quarter primarily within Corporate and Commercial Banking. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.
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| U.S. Bancorp Second Quarter 2022 Results | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| NONINTEREST INCOME | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ( in millions) | |||||||||||||
| 2Q22 vs<br><br><br>2Q21 | YTD<br><br><br>2022 | ||||||||||||
| Credit and debit card revenue | 399 | 338 | 396 | 18.0 | .8 | 737 | 732 | .7 | |||||
| Corporate payment products revenue | 172 | 158 | 138 | 8.9 | 24.6 | 330 | 264 | 25.0 | |||||
| Merchant processing services | 425 | 363 | 374 | 17.1 | 13.6 | 788 | 692 | 13.9 | |||||
| Trust and investment management fees | 566 | 500 | 446 | 13.2 | 26.9 | 1,066 | 890 | 19.8 | |||||
| Deposit service charges | 165 | 177 | 176 | (6.8 | ) | (6.3 | ) | 342 | 337 | 1.5 | |||
| Treasury management fees | 169 | 156 | 160 | 8.3 | 5.6 | 325 | 307 | 5.9 | |||||
| Commercial products revenue | 290 | 266 | 280 | 9.0 | 3.6 | 556 | 560 | (.7 | ) | ||||
| Mortgage banking revenue | 142 | 200 | 346 | (29.0 | ) | (59.0 | ) | 342 | 645 | (47.0 | ) | ||
| Investment products fees | 59 | 62 | 60 | (4.8 | ) | (1.7 | ) | 121 | 115 | 5.2 | |||
| Securities gains (losses), net | 19 | 18 | 43 | 5.6 | (55.8 | ) | 37 | 68 | (45.6 | ) | |||
| Other | 142 | 158 | 200 | (10.1 | ) | (29.0 | ) | 300 | 390 | (23.1 | ) | ||
| Total noninterest income | 2,548 | 2,396 | 2,619 | 6.3 | (2.7 | ) | $ | 4,944 | 5,000 | (1.1 | ) |
All values are in US Dollars.
Second quarter noninterest income of $2,548 million was $71 million (2.7 percent) lower than the second quarter of 2021 reflecting lower mortgage banking revenue, other noninterest income and lower gains on the sale of securities, mostly offset by stronger payment services revenue and trust and investment management fees. Mortgage banking revenue decreased $204 million (59.0 percent) due to lower application volumes, given declining refinance activities experienced in the mortgage industry, lower related gain on sale margins and lower performing loan sales, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities. Other noninterest income decreased $58 million (29.0 percent) primarily due to lower retail leasing end-of-term residual gains, lower gain on sale of certain assets and lower tax-advantaged investment syndication revenue. Partially offsetting these decreases, payment services revenue increased $88 million (9.7 percent) compared with the second quarter of 2021 as corporate payment products revenue increased $34 million (24.6 percent) primarily due to higher sales volume and merchant processing services revenue increased $51 million (13.6 percent) driven by higher sales volumes and merchant fees. Trust and investment management fees increased $120 million (26.9 percent) driven by business growth, activity related to the fourth quarter of 2021 acquisition of PFM Asset Management LLC (“PFM”) and lower money market fund fee waivers.
Noninterest income was $152 million (6.3 percent) higher in the second quarter of 2022 compared with the first quarter of 2022 reflecting stronger payment services revenue, trust and investment management fees and commercial products revenue, partially offset by lower mortgage banking revenue. Payment services revenue increased $137 million (15.9 percent) as credit and debit card revenue increased $61 million (18.0 percent) driven by seasonally higher sales volume and rate, corporate payment products revenue increased $14 million (8.9 percent) primarily due to higher sales volume and merchant processing services revenue increased $62 million (17.1 percent) driven by higher sales volumes and merchant fees. Trust and investment management fees increased $66 million (13.2 percent) driven by higher fees, activity related to the acquisition of PFM, billing cycle timing and lower money market fund fee waivers, partially offset by unfavorable market conditions. Partially offsetting these increases, mortgage banking revenue decreased $58 million (29.0 percent) driven by lower application volume and related gain on sale margins, and lower performing loan sales, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities.
7
| U.S. Bancorp Second Quarter 2022 Results | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| NONINTEREST EXPENSE | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ( in millions) | Percent Change | |||||||||||||||||
| 1Q2022 | 2Q2021 | 2Q22 vs1Q22 | 2Q22 vs2Q21 | YTD2022 | YTD2021 | PercentChange | ||||||||||||
| Compensation | 1,872 | $ | 1,853 | $ | 1,798 | 1.0 | 4.1 | $ | 3,725 | $ | 3,601 | 3.4 | ||||||
| Employee benefits | 374 | 396 | 337 | (5.6 | ) | 11.0 | 770 | 721 | 6.8 | |||||||||
| Net occupancy and equipment | 265 | 269 | 258 | (1.5 | ) | 2.7 | 534 | 521 | 2.5 | |||||||||
| Professional services | 111 | 114 | 108 | (2.6 | ) | 2.8 | 225 | 206 | 9.2 | |||||||||
| Marketing and business development | 106 | 80 | 90 | 32.5 | 17.8 | 186 | 138 | 34.8 | ||||||||||
| Technology and communications | 350 | 349 | 362 | .3 | (3.3 | ) | 699 | 721 | (3.1 | ) | ||||||||
| Postage, printing and supplies | 69 | 72 | 65 | (4.2 | ) | 6.2 | 141 | 134 | 5.2 | |||||||||
| Other intangibles | 40 | 47 | 40 | (14.9 | ) | -- | 87 | 78 | 11.5 | |||||||||
| Other | 340 | 322 | 329 | 5.6 | 3.3 | 662 | 646 | 2.5 | ||||||||||
| Total before merger and integration | 3,527 | 3,502 | 3,387 | .7 | 4.1 | 7,029 | 6,766 | 3.9 | ||||||||||
| Merger and integration charges | 197 | -- | -- | nm | nm | 197 | -- | nm | ||||||||||
| Total noninterest expense | 3,724 | $ | 3,502 | $ | 3,387 | 6.3 | 9.9 | $ | 7,226 | $ | 6,766 | 6.8 |
All values are in US Dollars.
Second quarter noninterest expense of $3,724 million was $337 million (9.9 percent) higher than the second quarter of 2021. Included in the second quarter of 2022 were merger and integration-related charges associated with the planned acquisition of MUFG Union Bank of $197 million. Excluding the merger and integration-related charges, second quarter noninterest expense increased $140 million (4.1 percent) compared with the second quarter of 2021 reflecting increases in compensation expense, employee benefits expense, and marketing and business development expense. Compensation expense increased $74 million (4.1 percent) compared with the second quarter of 2021 primarily due to merit and hiring to support business growth, partially offset by lower performance-based incentives. Employee benefits expense increased $37 million (11.0 percent) driven by higher medical expenses. Marketing and business development expense increased $16 million (17.8 percent) due to increased travel and entertainment.
Noninterest expense increased $222 million (6.3 percent) on a linked quarter basis. Excluding merger and integration-related charges, second quarter noninterest expense increased $25 million (0.7 percent) reflecting higher compensation expense, marketing and business development expense and other noninterest expense, partially offset by lower employee benefits expense. Compensation expense increased $19 million (1.0 percent) driven by the impact of seasonal merit increases, one additional day in the second quarter, and higher variable compensation, partially offset by the impact of seasonally higher stock-based compensation in the first quarter. Marketing and business development expense increased $26 million (32.5 percent) due to the timing of marketing campaigns and higher travel and entertainment. Other noninterest expense increased $18 million (5.6 percent), excluding merger and integration-related charges, primarily due to higher liabilities related to future delivery exposures for merchant and airline processing. Partially offsetting these increases, employee benefits expense decreased $22 million (5.6 percent) mainly due to seasonally higher payroll taxes in the first quarter of 2022.
Provision for Income Taxes
The provision for income taxes for the second quarter of 2022 resulted in a tax rate of 22.4 percent on a taxable-equivalent basis (effective tax rate of 21.3 percent), compared with 22.5 percent on a taxable-equivalent basis (effective tax rate of 21.7 percent) in the second quarter of 2021, and a tax rate of 21.4 percent on a taxable-equivalent basis (effective tax rate of 20.3 percent) in the first quarter of 2022.
8
| U.S. Bancorp Second Quarter 2022 Results | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ALLOWANCE FOR CREDIT LOSSES | ||||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ($ in millions) | 2Q<br><br><br>2022 | % (a) | 1Q<br><br><br>2022 | % (a) | 4Q<br><br><br>2021 | % (a) | 3Q<br><br><br>2021 | % (a) | 2Q<br><br><br>2021 | % (a) | ||||||||||||||||||||
| Balance, beginning of period | $ | 6,105 | $ | 6,155 | $ | 6,300 | $ | 6,610 | $ | 6,960 | ||||||||||||||||||||
| Net charge-offs Commercial | 28 | .10 | 26 | .10 | 6 | .02 | 13 | .05 | 26 | .11 | ||||||||||||||||||||
| Lease financing | 2 | .16 | 6 | .49 | -- | -- | 1 | .08 | 1 | .08 | ||||||||||||||||||||
| Total commercial | 30 | .10 | 32 | .12 | 6 | .02 | 14 | .05 | 27 | .11 | ||||||||||||||||||||
| Commercial mortgages | (2 | ) | (.03 | ) | -- | -- | (3 | ) | (.04 | ) | 1 | .01 | -- | -- | ||||||||||||||||
| Construction and development | 8 | .33 | (5 | ) | (.20 | ) | (1 | ) | (.04 | ) | 12 | .44 | -- | -- | ||||||||||||||||
| Total commercial real estate | 6 | .06 | (5 | ) | (.05 | ) | (4 | ) | (.04 | ) | 13 | .13 | -- | -- | ||||||||||||||||
| Residential mortgages | (9 | ) | (.04 | ) | (6 | ) | (.03 | ) | (7 | ) | (.04 | ) | (10 | ) | (.05 | ) | (10 | ) | (.05 | ) | ||||||||||
| Credit card | 118 | 2.08 | 112 | 2.08 | 109 | 1.93 | 111 | 2.01 | 148 | 2.81 | ||||||||||||||||||||
| Retail leasing | -- | -- | 1 | .06 | 1 | .05 | 1 | .05 | (1 | ) | (.05 | ) | ||||||||||||||||||
| Home equity and second mortgages | (3 | ) | (.11 | ) | (2 | ) | (.08 | ) | (2 | ) | (.08 | ) | (3 | ) | (.11 | ) | (3 | ) | (.11 | ) | ||||||||||
| Other | 19 | .17 | 30 | .27 | 29 | .27 | 21 | .20 | 19 | .20 | ||||||||||||||||||||
| Total other retail | 16 | .11 | 29 | .19 | 28 | .18 | 19 | .13 | 15 | .10 | ||||||||||||||||||||
| Total net charge-offs | 161 | .20 | 162 | .21 | 132 | .17 | 147 | .20 | 180 | .25 | ||||||||||||||||||||
| Provision for credit losses | 311 | 112 | (13 | ) | (163 | ) | (170 | ) | ||||||||||||||||||||||
| Balance, end of period | $ | 6,255 | $ | 6,105 | $ | 6,155 | $ | 6,300 | $ | 6,610 | ||||||||||||||||||||
| Components | ||||||||||||||||||||||||||||||
| Allowance for loan losses | $ | 5,832 | $ | 5,664 | $ | 5,724 | $ | 5,792 | $ | 6,026 | ||||||||||||||||||||
| Liability for unfunded credit commitments | 423 | 441 | 431 | 508 | 584 | |||||||||||||||||||||||||
| Total allowance for credit losses | $ | 6,255 | $ | 6,105 | $ | 6,155 | $ | 6,300 | $ | 6,610 | ||||||||||||||||||||
| Gross charge-offs | $ | 276 | $ | 280 | $ | 254 | $ | 266 | $ | 314 | ||||||||||||||||||||
| Gross recoveries | $ | 115 | $ | 118 | $ | 122 | $ | 119 | $ | 134 | ||||||||||||||||||||
| Allowance for credit losses as a percentage of | ||||||||||||||||||||||||||||||
| Period-end loans | 1.88 | 1.91 | 1.97 | 2.12 | 2.23 | |||||||||||||||||||||||||
| Nonperforming loans | 863 | 798 | 738 | 695 | 649 | |||||||||||||||||||||||||
| Nonperforming assets | 812 | 753 | 701 | 667 | 624 | |||||||||||||||||||||||||
| (a) Annualized and calculated on average<br>loan balances |
9
| U.S. Bancorp Second Quarter 2022 Results |
|---|
The Company’s provision for credit losses for the second quarter of 2022 was $311 million, compared with a provision of $112 million in the first quarter of 2022 and a benefit of $170 million in the second quarter of 2021. The level of the provision is driven by strong loan growth from a year ago and changing economic conditions. During 2021, factors affecting economic conditions, including passing of additional government stimulus and widespread vaccine availability in the U.S., contributed to economic improvement and related reserve releases. The consumer portfolio performance continues to be supported by strong credit quality and asset values, while select commercial portfolios continue to recover from the effects of the pandemic. In 2022, economic uncertainty and recession risk has been increasing due to ongoing supply chain challenges, rising inflationary concerns, market volatility, rising oil prices from the Russia-Ukraine conflict and, to a lesser extent, additional virus variants. In addition to these factors, expected loss estimates consider various factors including customer specific information impacting changes in risk ratings, projected delinquencies, potential effects of inflationary pressures and the impact of rising interest rates on borrowers’ liquidity and ability to repay. Generally, these credit quality factors continue to be relatively strong despite the changing economic outlook.
Total net charge-offs in the second quarter of 2022 were $161 million, compared with $162 million in the first quarter of 2022 and $180 million in the second quarter of 2021. The net charge-off ratio was 0.20 percent in the second quarter of 2022, compared with 0.21 percent in the first quarter of 2022 and 0.25 percent in the second quarter of 2021. Net charge-offs decreased $1 million (0.6 percent) compared with the first quarter of 2022. Net charge-offs decreased $19 million (10.6 percent) compared with the second quarter of 2021 primarily reflecting improvement in credit cards.
The allowance for credit losses was $6,255 million at June 30, 2022, compared with $6,105 million at March 31, 2022, and $6,610 million at June 30, 2021. The increase on a linked quarter basis was driven by continued strong loan growth and increased economic uncertainty, partially offset by stabilizing credit quality. The ratio of the allowance for credit losses to period-end loans was 1.88 percent at June 30, 2022, compared with 1.91 percent at March 31, 2022, and 2.23 percent at June 30, 2021. The ratio of the allowance for credit losses to nonperforming loans was 863 percent at June 30, 2022, compared with 798 percent at March 31, 2022, and 649 percent at June 30, 2021.
Nonperforming assets were $770 million at June 30, 2022, compared with $811 million at March 31, 2022, and $1,059 million at June 30, 2021. The ratio of nonperforming assets to loans and other real estate was 0.23 percent at June 30, 2022, compared with 0.25 percent at March 31, 2022, and 0.36 percent at June 30, 2021. The year-over-year decrease in nonperforming assets reflected decreases across all loan categories with the largest drivers in total commercial and total commercial real estate nonperforming loans, while the decrease on a linked quarter basis was primarily due to a decrease in total commercial nonperforming loans. Accruing loans 90 days or more past due were $423 million at June 30, 2022, compared with $450 million at March 31, 2022, and $376 million at June 30, 2021.
10
| U.S. Bancorp Second Quarter 2022 Results | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Percent) | Jun 30<br><br><br>2022 | Mar 31<br><br><br>2022 | Dec 31<br><br><br>2021 | Sep 30<br><br><br>2021 | Jun 302021 | |||||
| Delinquent loan ratios - 90 days or more past due excluding nonperforming loans | ||||||||||
| Commercial | .07 | .06 | .04 | .04 | .04 | |||||
| Commercial real estate | .01 | -- | .03 | .05 | .01 | |||||
| Residential mortgages | .12 | .18 | .24 | .15 | .16 | |||||
| Credit card | .69 | .74 | .73 | .66 | .70 | |||||
| Other retail | .10 | .11 | .11 | .11 | .10 | |||||
| Total loans | .13 | .14 | .15 | .13 | .13 | |||||
| Delinquent loan ratios - 90 days or more past due including nonperforming loans | ||||||||||
| Commercial | .19 | .21 | .20 | .25 | .32 | |||||
| Commercial real estate | .53 | .55 | .76 | .82 | .81 | |||||
| Residential mortgages | .40 | .45 | .53 | .47 | .49 | |||||
| Credit card | .69 | .74 | .73 | .66 | .70 | |||||
| Other retail | .35 | .37 | .35 | .36 | .39 | |||||
| Total loans | .35 | .38 | .42 | .43 | .47 | |||||
| ASSET QUALITY (a) | ||||||||||
| --- | --- | --- | --- | --- | --- | |||||
| ( in millions) | ||||||||||
| Nonperforming loans | ||||||||||
| Commercial | 116 | 139 | 139 | 179 | $247 | |||||
| Lease financing | 32 | 35 | 35 | 37 | 44 | |||||
| Total commercial | 148 | 174 | 174 | 216 | 291 | |||||
| Commercial mortgages | 147 | 178 | 213 | 215 | 224 | |||||
| Construction and development | 59 | 38 | 71 | 81 | 88 | |||||
| Total commercial real estate | 206 | 216 | 284 | 296 | 312 | |||||
| Residential mortgages | 223 | 214 | 226 | 237 | 244 | |||||
| Credit card | -- | -- | -- | -- | -- | |||||
| Other retail | 148 | 161 | 150 | 157 | 171 | |||||
| Total nonperforming loans | 725 | 765 | 834 | 906 | 1,018 | |||||
| Other real estate | 23 | 23 | 22 | 17 | 17 | |||||
| Other nonperforming assets | 22 | 23 | 22 | 21 | 24 | |||||
| Total nonperforming assets | 770 | 811 | 878 | 944 | $1,059 | |||||
| Accruing loans 90 days or more past due | 423 | 450 | 472 | 385 | $376 | |||||
| Nonperforming assets to loans plus ORE (%) | .23 | .25 | .28 | .32 | .36 | |||||
| (a) Throughout this document, nonperforming assets and related<br>ratios do not include accruing loans 90 days or more past due |
All values are in US Dollars.
11
| U.S. Bancorp Second Quarter 2022 Results | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| COMMON SHARES | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| (Millions) | 2Q<br><br><br>2022 | 1Q<br><br><br>2022 | 4Q<br><br><br>2021 | 3Q<br><br><br>2021 | 2Q<br><br><br>2021 | ||||||||||
| Beginning shares outstanding | 1,486 | 1,484 | 1,483 | 1,483 | 1,497 | ||||||||||
| Shares issued for stock incentive plans, acquisitions and other corporate purposes | -- | 3 | 1 | -- | 1 | ||||||||||
| Shares repurchased | -- | (1 | ) | -- | -- | (15 | ) | ||||||||
| Ending shares outstanding | 1,486 | 1,486 | 1,484 | 1,483 | 1,483 | ||||||||||
| CAPITAL POSITION | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ($ in millions) | Jun 30<br><br><br>2022 | Mar 31<br><br><br>2022 | Dec 312021 | Sep 302021 | Jun 302021 | ||||||||||
| Total U.S. Bancorp shareholders’ equity | $ | 48,605 | $ | 51,200 | $ | 54,918 | $ | 53,743 | $ | 53,039 | |||||
| Basel III Standardized Approach (a) | |||||||||||||||
| Common equity tier 1 capital | $ | 42,944 | $ | 41,950 | $ | 41,701 | $ | 41,014 | $ | 39,691 | |||||
| Tier 1 capital | 50,195 | 49,198 | 48,516 | 47,426 | 46,103 | ||||||||||
| Total risk-based capital | 58,307 | 57,403 | 56,250 | 54,178 | 53,625 | ||||||||||
| Common equity tier 1 capital ratio | 9.7 | % | 9.8 | % | 10.0 | % | 10.2 | % | 9.9 | % | |||||
| Tier 1 capital ratio | 11.4 | 11.5 | 11.6 | 11.7 | 11.5 | ||||||||||
| Total risk-based capital ratio | 13.2 | 13.4 | 13.4 | 13.4 | 13.4 | ||||||||||
| Leverage ratio | 8.6 | 8.6 | 8.6 | 8.7 | 8.5 | ||||||||||
| Tangible common equity to tangible assets (b) | 5.5 | 6.0 | 6.8 | 6.8 | 6.8 | ||||||||||
| Tangible common equity to risk-weighted assets (b) | 7.2 | 8.0 | 9.2 | 9.4 | 9.3 | ||||||||||
| Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the currentexpected credit losses methodology (b) | 9.4 | 9.5 | 9.6 | 9.7 | 9.5 | ||||||||||
| (a) Amounts and ratios calculated in accordance with transitional regulatory requirements<br>related to the current expected credit losses methodology | |||||||||||||||
| (b) See Non-GAAP Financial Measures reconciliation on<br>page 17 |
Total U.S. Bancorp shareholders’ equity was $48.6 billion at June 30, 2022, compared with $51.2 billion at March 31, 2022, and $53.0 billion at June 30, 2021. The Company suspended all common stock repurchases at the beginning of the third quarter of 2021, except for those done exclusively in connection with its stock-based compensation programs, due to its pending acquisition of MUFG Union Bank’s core regional banking franchise. The Company expects to operate at a CET1 capital ratio near its target ratio of 8.5 percent at the time of closing the acquisition and increasing toward 9.0 percent after closing of the acquisition. The Company does not expect to commence repurchasing its common stock until after the acquisition closes and the CET1 ratio approximates 9.0 percent.
All regulatory ratios continue to be in excess of “well-capitalized” requirements. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III standardized approach was 9.7 percent at June 30, 2022, compared with 9.8 percent at March 31, 2022, and 9.9 percent at June 30, 2021. The Company’s common equity tier 1 capital to risk-weighted assets ratio, reflecting the full implementation of the current expected credit losses methodology was 9.4 percent at June 30, 2022, compared with 9.5 percent at March 31, 2022, and at June 30, 2021.
12
| U.S. Bancorp Second Quarter 2022 Results |
|---|
| MUFG Union Bank Acquisition |
| --- |
In September 2021, U.S. Bancorp announced that it had entered into a definitive acquisition agreement to acquire the core regional banking franchise of MUFG Union Bank, N.A. Closing of the transaction is subject to customary closing conditions, including regulatory approvals which are not within U.S. Bancorp’s control. The parties continue to make significant progress in planning for closing and integration while awaiting regulatory approvals. At this time, U.S. Bancorp continues to expect to receive U.S. regulatory approvals in time for closing to occur in the second half of 2022. However, U.S. Bancorp no longer expects that system integration will be able to occur in 2022 and currently expects it will occur in the first half of 2023.
| Investor Conference Call |
|---|
On Friday, July 15, 2022 at 8 a.m. CT, Chairman, President and Chief Executive Officer Andy Cecere and Vice Chair and Chief Financial Officer Terry Dolan will host a conference call to review the financial results. The live conference call will be available online or by telephone. To access the webcast and presentation, visit the U.S. Bancorp website at usbank.com and click on “About Us”, “Investor Relations” and “Webcasts & Presentations.” To access the conference call from locations within the United States and Canada, please dial 866-374-5140. Participants calling from outside the United States and Canada, please dial 404-400-0571. The PIN code for all participants is 56931119#. For those unable to participate during the live call, a replay will be available at approximately 11 a.m. CT on Friday, July 15, 2022. To access the replay, please visit the U.S. Bancorp website at usbank.com and click on “About Us”, “Investor Relations” and “Webcasts & Presentations.”
| About U.S. Bancorp |
|---|
U.S. Bancorp, with approximately 70,000 employees and $591 billion in assets as of June 30, 2022, is the parent company of U.S. Bank National Association. The Minneapolis-based company serves millions of customers locally, nationally and globally through a diversified mix of businesses: Consumer and Business Banking; Payment Services; Corporate & Commercial Banking; and Wealth Management and Investment Services. The company has been recognized for its approach to digital innovation, social responsibility, and customer service, including being named one of the 2022 World’s Most Ethical Companies and Fortune’s most admired superregional bank. Learn more at usbank.com/about.
| Forward-looking Statements |
|---|
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:
This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements often use words such as “anticipates,” “targets,” “expects,” “hopes,” “estimates,” “projects,” “forecasts,” “intends,” “plans,” “goals,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.”
Forward-looking statements involve inherent risks and uncertainties, including the following risks and uncertainties and the risks and uncertainties more fully discussed in the section entitled “Risk Factors” of Exhibit 13 to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2021, which could cause actual results to differ materially from those anticipated. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; the impacts of the COVID-19 pandemic on its business, financial position, results of operations, liquidity and prospects; increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; civil unrest; the effects of climate change; changes in customer behavior and preferences; breaches in data security, including as a result of work-from-home arrangements; failures to safeguard personal information; the impacts of international hostilities or geopolitical events; impacts of supply chain disruptions and rising inflation; effects of mergers and acquisitions and related integration; effects of critical
13
| U.S. Bancorp Second Quarter 2022 Results |
|---|
accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk. In addition, U.S. Bancorp’s proposed acquisition of MUFG Union Bank presents risks and uncertainties, including, among others: the risk that the cost savings, any revenue synergies and other anticipated benefits of the proposed acquisition may not be realized or may take longer than anticipated to be realized; the risk that U.S. Bancorp’s business could be disrupted as a result of the announcement and pendency of the proposed acquisition and diversion of management’s attention from ongoing business operations and opportunities; the possibility that the proposed acquisition, including the integration of MUFG Union Bank, may be more costly or difficult to complete than anticipated; delays in closing the proposed acquisition; and the failure of required governmental approvals to be obtained or any other closing conditions in the definitive purchase agreement to be satisfied.
For discussion of these and other risks that may cause actual results to differ from those described in forward-looking statements, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2021, on file with the Securities and Exchange Commission, including the sections entitled “Corporate Risk Profile” and “Risk Factors” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. In addition, factors other than these risks also could adversely affect U.S. Bancorp’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.
| Non-GAAP FinancialMeasures |
|---|
In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:
| • | Tangible common equity to tangible assets |
|---|---|
| • | Tangible common equity to risk-weighted assets |
| --- | --- |
| • | Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the<br>current expected credit losses methodology, and |
| --- | --- |
| • | Return on tangible common equity. |
| --- | --- |
These capital measures are viewed by management as useful additional methods of evaluating the Company’s utilization of its capital held and the level of capital available to withstand unexpected negative market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Company’s capital position relative to other financial services companies. These capital measures are not defined in generally accepted accounting principles (“GAAP”), or are not currently effective or defined in banking regulations. In addition, certain of these measures differ from currently effective capital ratios defined by banking regulations principally in that the currently effective ratios, which are subject to certain transitional provisions, temporarily exclude the impact of the 2020 adoption of accounting guidance related to impairment of financial instruments based on the current expected credit losses methodology. As a result, these capital measures disclosed by the Company may be considered non-GAAP financial measures. Management believes this information helps investors assess trends in the Company’s capital adequacy.
The Company also discloses net interest income and related ratios and analysis on a taxable-equivalent basis, which may also be considered non-GAAP financial measures. The Company believes this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable and tax-exempt sources. In addition, certain performance measures, including the efficiency ratio and net interest margin utilize net interest income on a taxable-equivalent basis.
The adjusted return on average assets, return on average common equity and return on tangible common equity exclude merger and integration-related charges. Management uses these measures in their analysis of the Company’s performance and believes these measures provide a greater understanding of ongoing operations and enhances comparability of results with prior periods.
There may be limits in the usefulness of these measures to investors. As a result, the Company encourages readers to consider the consolidated financial statements and other financial information contained in this press release in their entirety, and not to rely on any single financial measure. A table follows that shows the Company’s calculation of these non-GAAP financial measures.
14
| CONSOLIDATED STATEMENT OF INCOME | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended | Six Months Ended | |||||||
| (Dollars and Shares in Millions, Except Per Share Data) | June 30, | June 30, | ||||||
| (Unaudited) | 2022 | 2021 | 2022 | 2021 | ||||
| Interest Income | ||||||||
| Loans | 2,869 | 2,677 | 5,468 | 5,401 | ||||
| Loans held for sale | 54 | 55 | 114 | 122 | ||||
| Investment securities | 806 | 618 | 1,523 | 1,135 | ||||
| Other interest income | 96 | 32 | 138 | 65 | ||||
| Total interest income | 3,825 | 3,382 | 7,243 | 6,723 | ||||
| Interest Expense | ||||||||
| Deposits | 177 | 82 | 257 | 167 | ||||
| Short-term borrowings | 57 | 18 | 78 | 34 | ||||
| Long-term debt | 156 | 145 | 300 | 322 | ||||
| Total interest expense | 390 | 245 | 635 | 523 | ||||
| Net interest income | 3,435 | 3,137 | 6,608 | 6,200 | ||||
| Provision for credit losses | 311 | (170 | 423 | (997 | ||||
| Net interest income after provision for credit losses | 3,124 | 3,307 | 6,185 | 7,197 | ||||
| Noninterest Income | ||||||||
| Credit and debit card revenue | 399 | 396 | 737 | 732 | ||||
| Corporate payment products revenue | 172 | 138 | 330 | 264 | ||||
| Merchant processing services | 425 | 374 | 788 | 692 | ||||
| Trust and investment management fees | 566 | 446 | 1,066 | 890 | ||||
| Deposit service charges | 165 | 176 | 342 | 337 | ||||
| Treasury management fees | 169 | 160 | 325 | 307 | ||||
| Commercial products revenue | 290 | 280 | 556 | 560 | ||||
| Mortgage banking revenue | 142 | 346 | 342 | 645 | ||||
| Investment products fees | 59 | 60 | 121 | 115 | ||||
| Securities gains (losses), net | 19 | 43 | 37 | 68 | ||||
| Other | 142 | 200 | 300 | 390 | ||||
| Total noninterest income | 2,548 | 2,619 | 4,944 | 5,000 | ||||
| Noninterest Expense | ||||||||
| Compensation | 1,872 | 1,798 | 3,725 | 3,601 | ||||
| Employee benefits | 374 | 337 | 770 | 721 | ||||
| Net occupancy and equipment | 265 | 258 | 534 | 521 | ||||
| Professional services | 111 | 108 | 225 | 206 | ||||
| Marketing and business development | 106 | 90 | 186 | 138 | ||||
| Technology and communications | 350 | 362 | 699 | 721 | ||||
| Postage, printing and supplies | 69 | 65 | 141 | 134 | ||||
| Other intangibles | 40 | 40 | 87 | 78 | ||||
| Merger and integration charges | 197 | -- | 197 | -- | ||||
| Other | 340 | 329 | 662 | 646 | ||||
| Total noninterest expense | 3,724 | 3,387 | 7,226 | 6,766 | ||||
| Income before income taxes | 1,948 | 2,539 | 3,903 | 5,431 | ||||
| Applicable income taxes | 414 | 551 | 811 | 1,158 | ||||
| Net income | 1,534 | 1,988 | 3,092 | 4,273 | ||||
| Net (income) loss attributable to noncontrolling interests | (3 | (6 | (4 | (11 | ||||
| Net income attributable to U.S. Bancorp | 1,531 | 1,982 | 3,088 | 4,262 | ||||
| Net income applicable to U.S. Bancorp common shareholders | 1,464 | 1,914 | 2,930 | 4,089 | ||||
| Earnings per common share | .99 | 1.29 | 1.97 | 2.73 | ||||
| Diluted earnings per common share | .99 | 1.28 | 1.97 | 2.73 | ||||
| Dividends declared per common share | .46 | .42 | .92 | .84 | ||||
| Average common shares outstanding | 1,486 | 1,489 | 1,485 | 1,495 | ||||
| Average diluted common shares outstanding | 1,487 | 1,490 | 1,486 | 1,497 |
All values are in US Dollars.
15
| CONSOLIDATED ENDING BALANCE SHEET | ||||||
|---|---|---|---|---|---|---|
| (Dollars in Millions) | June 30,<br><br><br>2022 | December 31,<br><br><br>2021 | June 30,<br><br><br>2021 | |||
| Assets | (Unaudited | (Unaudited | ||||
| Cash and due from banks | 39,124 | 28,905 | 44,573 | |||
| Investment securities | ||||||
| Held-to-maturity | 61,503 | 41,858 | -- | |||
| Available-for-sale | 98,806 | 132,963 | 160,288 | |||
| Loans held for sale | 3,943 | 7,775 | 5,856 | |||
| Loans | ||||||
| Commercial | 125,983 | 112,023 | 103,521 | |||
| Commercial real estate | 39,753 | 39,053 | 38,770 | |||
| Residential mortgages | 82,114 | 76,493 | 73,366 | |||
| Credit card | 23,697 | 22,500 | 21,816 | |||
| Other retail | 60,822 | 61,959 | 59,439 | |||
| Total loans | 332,369 | 312,028 | 296,912 | |||
| Less allowance for loan losses | (5,832 | (5,724 | (6,026 | |||
| Net loans | 326,537 | 306,304 | 290,886 | |||
| Premises and equipment | 3,177 | 3,305 | 3,295 | |||
| Goodwill | 10,157 | 10,262 | 9,911 | |||
| Other intangible assets | 4,487 | 3,738 | 3,363 | |||
| Other assets | 43,647 | 38,174 | 40,714 | |||
| Total assets | 591,381 | 573,284 | 558,886 | |||
| Liabilities and Shareholders’ Equity | ||||||
| Deposits | ||||||
| Noninterest-bearing | 129,130 | 134,901 | 135,143 | |||
| Interest-bearing | 337,972 | 321,182 | 302,039 | |||
| Total deposits | 467,102 | 456,083 | 437,182 | |||
| Short-term borrowings | 24,963 | 11,796 | 13,413 | |||
| Long-term debt | 29,408 | 32,125 | 36,360 | |||
| Other liabilities | 20,839 | 17,893 | 18,257 | |||
| Total liabilities | 542,312 | 517,897 | 505,212 | |||
| Shareholders’ equity | ||||||
| Preferred stock | 6,808 | 6,371 | 5,968 | |||
| Common stock | 21 | 21 | 21 | |||
| Capital surplus | 8,555 | 8,539 | 8,518 | |||
| Retained earnings | 70,772 | 69,201 | 67,039 | |||
| Less treasury stock | (27,190 | (27,271 | (27,305 | |||
| Accumulated other comprehensive income (loss) | (10,361 | (1,943 | (1,202 | |||
| Total U.S. Bancorp shareholders’ equity | 48,605 | 54,918 | 53,039 | |||
| Noncontrolling interests | 464 | 469 | 635 | |||
| Total equity | 49,069 | 55,387 | 53,674 | |||
| Total liabilities and equity | 591,381 | 573,284 | 558,886 |
All values are in US Dollars.
16
| NON-GAAP FINANCIAL MEASURES | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Millions, Unaudited) | June 30,<br><br><br>2022 | March 31,<br><br><br>2022 | December 31,<br><br><br>2021 | September 30,<br><br><br>2021 | June 30,<br><br><br>2021 | |||||
| Total equity | 49,069 | 51,668 | 55,387 | 54,378 | 53,674 | |||||
| Preferred stock | (6,808 | (6,808 | (6,371 | (5,968 | (5,968 | |||||
| Noncontrolling interests | (464 | (468 | (469 | (635 | (635 | |||||
| Goodwill (net of deferred tax liability) (1) | (9,204 | (9,304 | (9,323 | (9,063 | (8,987 | |||||
| Intangible assets, other than mortgage servicing rights | (780 | (762 | (785 | (618 | (650 | |||||
| Tangible common equity (a) | 31,813 | 34,326 | 38,439 | 38,094 | 37,434 | |||||
| Common equity tier 1 capital, determined in accordance with transitional regulatory capital requirements<br>related to the current expected credit losses methodology implementation | 42,944 | 41,950 | 41,701 | 41,014 | 39,691 | |||||
| Adjustments (2) | (1,300 | (1,298 | (1,733 | (1,733 | (1,732 | |||||
| Common equity tier 1 capital, reflecting the full implementation of the current expected credit<br>losses<br>methodology (b) | 41,644 | 40,652 | 39,968 | 39,281 | 37,959 | |||||
| Total assets | 591,381 | 586,517 | 573,284 | 567,495 | 558,886 | |||||
| Goodwill (net of deferred tax liability) (1) | (9,204 | (9,304 | (9,323 | (9,063 | (8,987 | |||||
| Intangible assets, other than mortgage servicing rights | (780 | (762 | (785 | (618 | (650 | |||||
| Tangible assets (c) | 581,397 | 576,451 | 563,176 | 557,814 | 549,249 | |||||
| Risk-weighted assets, determined in accordance with transitional regulatory capital requirements related to<br>the current expected credit losses methodology implementation (d) | 441,804 | 427,174 | 418,571 | 404,021 | 401,301 | |||||
| Adjustments (3) | (317 | (351 | (357 | (684 | (1,027 | |||||
| Risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology<br>(e) | 441,487 | 426,823 | 418,214 | 403,337 | 400,274 | |||||
| Ratios* | ||||||||||
| Tangible common equity to tangible assets (a)/(c) | 5.5 | 6.0 | 6.8 | 6.8 | 6.8 | |||||
| Tangible common equity to risk-weighted assets (a)/(d) | 7.2 | 8.0 | 9.2 | 9.4 | 9.3 | |||||
| Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current<br>expected credit losses methodology (b)/(e) | 9.4 | 9.5 | 9.6 | 9.7 | 9.5 | |||||
| Three Months Ended | ||||||||||
| June 30,<br><br><br>2022 | March 31,<br><br><br>2022 | December 31,<br><br><br>2021 | September 30,<br><br><br>2021 | June 30,<br><br><br>2021 | ||||||
| Net income applicable to U.S. Bancorp common shareholders | 1,464 | 1,466 | 1,582 | 1,934 | 1,914 | |||||
| Intangibles amortization<br>(net-of-tax) | 32 | 37 | 32 | 32 | 32 | |||||
| Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization | 1,496 | 1,503 | 1,614 | 1,966 | 1,946 | |||||
| Annualized net income applicable to U.S. Bancorp common shareholders, excluding intangible amortization<br>(f) | 6,000 | 6,096 | 6,403 | 7,800 | 7,805 | |||||
| Average total equity | 49,633 | 53,934 | 55,875 | 54,908 | 53,593 | |||||
| Average preferred stock | (6,808 | (6,619 | (6,865 | (5,968 | (5,968 | |||||
| Average noncontrolling interests | (467 | (468 | (633 | (635 | (631 | |||||
| Average goodwill (net of deferred tax liability) (1) | (9,246 | (9,320 | (9,115 | (9,019 | (9,003 | |||||
| Average intangible assets, other than mortgage servicing rights | (783 | (779 | (656 | (632 | (662 | |||||
| Average tangible common equity (g) | 32,329 | 36,748 | 38,606 | 38,654 | 37,329 | |||||
| Return on tangible common equity (f)/(g) | 18.6 | 16.6 | 16.6 | 20.2 | 20.9 | |||||
| Net interest income | 3,435 | 3,173 | 3,123 | 3,171 | 3,137 | |||||
| Taxable-equivalent adjustment (4) | 29 | 27 | 27 | 26 | 27 | |||||
| Net interest income, on a taxable-equivalent basis | 3,464 | 3,200 | 3,150 | 3,197 | 3,164 | |||||
| Net interest income, on a taxable-equivalent basis | ||||||||||
| (as calculated above) | 3,464 | 3,200 | 3,150 | 3,197 | 3,164 | |||||
| Noninterest income | 2,548 | 2,396 | 2,534 | 2,693 | 2,619 | |||||
| Less: Securities gains (losses), net | 19 | 18 | 15 | 20 | 43 | |||||
| Total net revenue, excluding net securities gains (losses) (h) | 5,993 | 5,578 | 5,669 | 5,870 | 5,740 | |||||
| Noninterest expense (i) | 3,724 | 3,502 | 3,533 | 3,429 | 3,387 | |||||
| Efficiency ratio (i)/(h) | 62.1 | 62.8 | 62.3 | 58.4 | 59.0 |
All values are in US Dollars.
| * | Preliminary data. Subject to change prior to filings with applicable regulatory agencies. |
|---|---|
| (1) | Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory<br>requirements. |
| --- | --- |
| (2) | Includes the estimated increase in the allowance for credit losses related to the adoption of the current expected<br>credit losses methodology net of deferred taxes. |
| --- | --- |
| (3) | Includes the impact of the estimated increase in the allowance for credit losses related to the adoption of the current<br>expected credit losses methodology. |
| --- | --- |
| (4) | Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not<br>included for federal income tax purposes. |
| --- | --- |
17
| NON-GAAP FINANCIAL MEASURES | ||
|---|---|---|
| (Dollars in Millions, Unaudited) | Three Months Ended<br>June 30,<br><br><br>2022 | |
| Net income attributable to U.S. Bancorp | 1,531 | |
| Less: Notable items (1) | (153 | |
| Net income attributable to U.S. Bancorp, excluding notable items | 1,684 | |
| Annualized net income attributable to U.S. Bancorp, excluding notable items (a) | 6,755 | |
| Average assets (b) | 579,911 | |
| Return on average assets, excluding notable items (a)/(b) | 1.16 | |
| Net income applicable to U.S. Bancorp common shareholders | 1,464 | |
| Less: Notable items (1) | (153 | |
| Net income applicable to U.S. Bancorp common shareholders, excluding notable items | 1,617 | |
| Annualized net income applicable to U.S. Bancorp common shareholders, excluding notable items (c) | 6,486 | |
| Average common equity (d) | 42,358 | |
| Return on average common equity, excluding notable items (c)/(d) | 15.3 | |
| Net income applicable to U.S. Bancorp common shareholders | 1,464 | |
| Intangibles amortization<br>(net-of-tax) | 32 | |
| Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization | 1,496 | |
| Less: Notable items (1) | (153 | |
| Net income applicable to U.S. Bancorp, excluding intangibles amortization and notable items | 1,649 | |
| Annualized net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization<br>and notable items (e) | 6,614 | |
| Average total equity | 49,633 | |
| Average preferred stock | (6,808 | |
| Average noncontrolling interests | (467 | |
| Average goodwill (net of deferred tax liability) (2) | (9,246 | |
| Average intangible assets, other than mortgage servicing rights | (783 | |
| Average tangible common equity (f) | 32,329 | |
| Return on tangible common equity, excluding notable items<br>(e)/(f) | 20.5 |
All values are in US Dollars.
| (1) | Notable items for the three months ended June 30, 2022 include $153 million<br>(after-tax) of merger and integration charges. |
|---|---|
| (2) | Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory<br>requirements. |
| --- | --- |
18
| LINE OF BUSINESS FINANCIAL PERFORMANCE (a) | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in millions) | Net Income Attributable<br>to U.S. Bancorp | Net Income Attributable<br>to U.S. Bancorp | |||||||||||||
| Business Line | 2Q<br><br><br>2022 | 1Q<br><br><br>2022 | 2Q22 vs<br><br><br>2Q21 | YTD<br><br><br>2022 | |||||||||||
| Corporate and Commercial Banking | 377 | 416 | 418 | (9.4 | ) | (9.8 | ) | 793 | 880 | (9.9 | ) | ||||
| Consumer and Business Banking | 501 | 379 | 646 | 32.2 | (22.4 | ) | 880 | 1,211 | (27.3 | ) | |||||
| Wealth Management and Investment Services | 320 | 202 | 208 | 58.4 | 53.8 | 522 | 429 | 21.7 | |||||||
| Payment Services | 391 | 371 | 441 | 5.4 | (11.3 | ) | 762 | 934 | (18.4 | ) | |||||
| Treasury and Corporate Support | (58 | 189 | 269 | nm | nm | 131 | 808 | (83.8 | ) | ||||||
| Consolidated Company | 1,531 | 1,557 | 1,982 | (1.7 | ) | (22.8 | ) | 3,088 | 4,262 | (27.5 | ) | ||||
| Income Before Provision<br>and Taxes | Income Before Provision<br>and Taxes | ||||||||||||||
| 2Q<br><br><br>2022 | 1Q<br><br><br>2022 | 2Q22 vs<br><br><br>2Q21 | YTD<br><br><br>2022 | ||||||||||||
| Corporate and Commercial Banking | 603 | 559 | 558 | 7.9 | 8.1 | 1,162 | 1,128 | 3.0 | |||||||
| Consumer and Business Banking | 593 | 553 | 793 | 7.2 | (25.2 | ) | 1,146 | 1,507 | (24.0 | ) | |||||
| Wealth Management and Investment Services | 423 | 278 | 274 | 52.2 | 54.4 | 701 | 574 | 22.1 | |||||||
| Payment Services | 742 | 625 | 679 | 18.7 | 9.3 | 1,367 | 1,295 | 5.6 | |||||||
| Treasury and Corporate Support | (73 | 79 | 92 | nm | nm | 6 | (17) | nm | |||||||
| Consolidated Company | 2,288 | 2,094 | 2,396 | 9.3 | (4.5 | ) | 4,382 | 4,487 | (2.3 | ) | |||||
| (a) preliminary data |
All values are in US Dollars.
Lines of Business
The Company’s major lines of business are Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate resources and assess performance. Business line results are derived from the Company’s business unit profitability reporting systems by specifically attributing managed balance sheet assets, deposits and other liabilities and their related income or expense. Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Company’s diverse customer base. During 2022, certain organization and methodology changes were made and, accordingly, prior period results were restated and presented on a comparable basis.
2
| CORPORATE AND COMMERCIAL BANKING<br>(a) | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( in millions) | |||||||||||||
| 2Q22 vs<br><br><br>2Q21 | YTD<br><br><br>2022 | ||||||||||||
| Condensed Income Statement | |||||||||||||
| Net interest income (taxable-equivalent<br>basis) | 784 | 739 | 726 | 6.1 | 8.0 | 1,523 | 1,448 | 5.2 | |||||
| Noninterest income | 272 | 245 | 265 | 11.0 | 2.6 | 517 | 533 | (3.0 | ) | ||||
| Securities gains (losses), net | -- | -- | -- | -- | -- | -- | -- | -- | |||||
| Total net revenue | 1,056 | 984 | 991 | 7.3 | 6.6 | 2,040 | 1,981 | 3.0 | |||||
| Noninterest expense | 453 | 425 | 433 | 6.6 | 4.6 | 878 | 853 | 2.9 | |||||
| Other intangibles | -- | -- | -- | -- | -- | -- | -- | -- | |||||
| Total noninterest expense | 453 | 425 | 433 | 6.6 | 4.6 | 878 | 853 | 2.9 | |||||
| Income before provision and taxes | 603 | 559 | 558 | 7.9 | 8.1 | 1,162 | 1,128 | 3.0 | |||||
| Provision for credit losses | 100 | 4 | -- | nm | nm | 104 | (46) | nm | |||||
| Income before income taxes | 503 | 555 | 558 | (9.4 | ) | (9.9 | ) | 1,058 | 1,174 | (9.9 | ) | ||
| Income taxes and taxable-equivalent<br>adjustment | 126 | 139 | 140 | (9.4 | ) | (10.0 | ) | 265 | 294 | (9.9 | ) | ||
| Net income | 377 | 416 | 418 | (9.4 | ) | (9.8 | ) | 793 | 880 | (9.9 | ) | ||
| Net (income) loss attributable to noncontrolling<br>interests | -- | -- | -- | -- | -- | -- | -- | -- | |||||
| Net income attributable to U.S. Bancorp | 377 | 416 | 418 | (9.4 | ) | (9.8 | ) | 793 | 880 | (9.9 | ) | ||
| Average Balance Sheet Data | |||||||||||||
| Loans | 123,210 | 115,865 | 102,275 | 6.3 | 20.5 | 119,557 | 102,201 | 17.0 | |||||
| Other earning assets | 4,161 | 4,676 | 4,409 | (11.0 | ) | (5.6 | ) | 4,416 | 4,364 | 1.2 | |||
| Goodwill | 1,912 | 1,912 | 1,647 | -- | 16.1 | 1,912 | 1,647 | 16.1 | |||||
| Other intangible assets | 4 | 4 | 5 | -- | (20.0 | ) | 4 | 5 | (20.0 | ) | |||
| Assets | 137,773 | 127,889 | 114,186 | 7.7 | 20.7 | 132,856 | 114,229 | 16.3 | |||||
| Noninterest-bearing deposits | 58,266 | 62,353 | 60,696 | (6.6 | ) | (4.0 | ) | 60,298 | 58,524 | 3.0 | |||
| Interest-bearing deposits | 93,678 | 86,957 | 70,019 | 7.7 | 33.8 | 90,336 | 70,943 | 27.3 | |||||
| Total deposits | 151,944 | 149,310 | 130,715 | 1.8 | 16.2 | 150,634 | 129,467 | 16.3 | |||||
| Total U.S. Bancorp shareholders’<br>equity | 13,989 | 13,728 | 13,816 | 1.9 | 1.3 | 13,859 | 14,092 | (1.7 | ) | ||||
| (a) preliminary data |
All values are in US Dollars.
Corporate and Commercial Banking offers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets services, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution, non-profit and public sector clients.
Corporate and Commercial Banking generated $603 million of income before provision and taxes in the second quarter of 2022, compared with $558 million in the second quarter of 2021, and contributed $377 million of the Company’s net income in the second quarter of 2022. The provision for credit losses increased $100 million compared with the second quarter of 2021 primarily due to loan loss provisions supporting stronger growth in loan balances in the current year linked quarter, partially offset by improving portfolio credit quality in the current year. Total net revenue was $65 million (6.6 percent) higher due to an increase of $58 million (8.0 percent) in net interest income and an increase of $7 million (2.6 percent) in total noninterest income. Net interest income increased primarily due to higher loan and interest-bearing deposit balances, partially offset by lower spreads on loans and unfavorable changes in deposit rates. Total noninterest income increased primarily due to stronger treasury management fees driven by core growth and increased federal government volume. Total noninterest expense increased $20 million (4.6 percent) compared with a year ago primarily due to higher FDIC insurance expense and higher compensation expense primarily due to merit, variable compensation and hiring to support business growth, partially offset by lower performance-based incentives related to capital markets activity.
3
| CONSUMER AND BUSINESS BANKING<br>(a) | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( in millions) | |||||||||||||||
| 1Q<br><br><br>2022 | 2Q22 vs<br><br><br>2Q21 | YTD<br><br><br>2022 | YTD<br><br><br>2021 | ||||||||||||
| Condensed Income Statement | |||||||||||||||
| Net interest income (taxable-equivalent<br>basis) | 1,617 | 1,512 | 1,534 | 6.9 | 5.4 | 3,129 | 3,035 | 3.1 | |||||||
| Noninterest income | 395 | 461 | 634 | (14.3 | ) | (37.7 | ) | 856 | 1,203 | (28.8 | ) | ||||
| Securities gains (losses), net | -- | -- | -- | -- | -- | -- | -- | -- | |||||||
| Total net revenue | 2,012 | 1,973 | 2,168 | 2.0 | (7.2 | ) | 3,985 | 4,238 | (6.0 | ) | |||||
| Noninterest expense | 1,416 | 1,417 | 1,372 | (.1 | ) | 3.2 | 2,833 | 2,725 | 4.0 | ||||||
| Other intangibles | 3 | 3 | 3 | -- | -- | 6 | 6 | -- | |||||||
| Total noninterest expense | 1,419 | 1,420 | 1,375 | (.1 | ) | 3.2 | 2,839 | 2,731 | 4.0 | ||||||
| Income before provision and taxes | 593 | 553 | 793 | 7.2 | (25.2 | ) | 1,146 | 1,507 | (24.0 | ) | |||||
| Provision for credit losses | (75 | 47 | (68) | nm | (10.3 | ) | (28 | (108) | 74.1 | ||||||
| Income before income taxes | 668 | 506 | 861 | 32.0 | (22.4 | ) | 1,174 | 1,615 | (27.3 | ) | |||||
| Income taxes and taxable-equivalent<br>adjustment | 167 | 127 | 215 | 31.5 | (22.3 | ) | 294 | 404 | (27.2 | ) | |||||
| Net income | 501 | 379 | 646 | 32.2 | (22.4 | ) | 880 | 1,211 | (27.3 | ) | |||||
| Net (income) loss attributable to noncontrolling<br>interests | -- | -- | -- | -- | -- | -- | -- | -- | |||||||
| Net income attributable to U.S. Bancorp | 501 | 379 | 646 | 32.2 | (22.4 | ) | 880 | 1,211 | (27.3 | ) | |||||
| Average Balance Sheet Data | |||||||||||||||
| Loans | 141,135 | 140,828 | 140,826 | .2 | .2 | 140,984 | 141,170 | (.1 | ) | ||||||
| Other earning assets | 2,579 | 4,381 | 8,018 | (41.1 | ) | (67.8 | ) | 3,475 | 9,092 | (61.8 | ) | ||||
| Goodwill | 3,244 | 3,261 | 3,476 | (.5 | ) | (6.7 | ) | 3,252 | 3,476 | (6.4 | ) | ||||
| Other intangible assets | 3,634 | 3,176 | 2,828 | 14.4 | 28.5 | 3,406 | 2,661 | 28.0 | |||||||
| Assets | 156,132 | 157,411 | 161,695 | (.8 | ) | (3.4 | ) | 156,770 | 162,803 | (3.7 | ) | ||||
| Noninterest-bearing deposits | 31,642 | 31,975 | 33,702 | (1.0 | ) | (6.1 | ) | 31,807 | 33,244 | (4.3 | ) | ||||
| Interest-bearing deposits | 168,486 | 166,059 | 158,164 | 1.5 | 6.5 | 167,279 | 154,450 | 8.3 | |||||||
| Total deposits | 200,128 | 198,034 | 191,866 | 1.1 | 4.3 | 199,086 | 187,694 | 6.1 | |||||||
| Total U.S. Bancorp shareholders’ equity | 12,366 | 12,255 | 12,337 | .9 | .2 | 12,311 | 12,407 | (.8 | ) | ||||||
| (a) preliminary<br>data |
All values are in US Dollars.
Consumer and Business Banking delivers products and services through banking offices, telephone servicing and sales, on-line services, direct mail, ATM processing and mobile devices. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking.
Consumer and Business Banking generated $593 million of income before provision and taxes in the second quarter of 2022, compared with $793 million in the second quarter of 2021, and contributed $501 million of the Company’s net income in the second quarter of 2022. The provision for credit losses decreased $7 million (10.3 percent) due to balance reductions and stronger improvements in credit quality in the current quarter compared with the prior year linked quarter. Total net revenue was lower by $156 million (7.2 percent) due to a decrease in total noninterest income of $239 million (37.7 percent), partially offset by an increase of $83 million (5.4 percent) in net interest income. Net interest income reflected strong growth in average interest-bearing deposits and favorable funding mix, partially offset by lower spreads on loans and lower loan fees driven by the impact of loan forgiveness related to PPP in the second quarter of 2021. Total noninterest income decreased primarily due to lower mortgage banking revenue reflecting lower application volumes, given declining refinance activities, lower related gain on sale margins and lower performing loan sales, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities. Total noninterest expense increased $44 million (3.2 percent) primarily due to increases in net shared services expense due to investments in digital capabilities, partially offset by lower compensation expense reflecting lower revenue-related compensation due to mortgage production net of higher salaries as a result of merit and core business growth.
4
| WEALTH MANAGEMENT AND INVESTMENT<br>SERVICES (a) | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( in millions) | ||||||||||||||
| 1Q<br><br><br>2022 | 2Q22 vs<br><br><br>2Q21 | YTD<br><br><br>2022 | ||||||||||||
| Condensed Income Statement | ||||||||||||||
| Net interest income (taxable-equivalent<br>basis) | 352 | 275 | 246 | 28.0 | 43.1 | 627 | 514 | 22.0 | ||||||
| Noninterest income | 652 | 596 | 549 | 9.4 | 18.8 | 1,248 | 1,080 | 15.6 | ||||||
| Securities gains (losses), net | -- | -- | -- | -- | -- | -- | -- | -- | ||||||
| Total net revenue | 1,004 | 871 | 795 | 15.3 | 26.3 | 1,875 | 1,594 | 17.6 | ||||||
| Noninterest expense | 578 | 583 | 517 | (.9 | ) | 11.8 | 1,161 | 1,013 | 14.6 | |||||
| Other intangibles | 3 | 10 | 4 | (70.0 | ) | (25.0 | ) | 13 | 7 | 85.7 | ||||
| Total noninterest expense | 581 | 593 | 521 | (2.0 | ) | 11.5 | 1,174 | 1,020 | 15.1 | |||||
| Income before provision and taxes | 423 | 278 | 274 | 52.2 | 54.4 | 701 | 574 | 22.1 | ||||||
| Provision for credit losses | (4 | 8 | (4) | nm | -- | 4 | 1 | nm | ||||||
| Income before income taxes | 427 | 270 | 278 | 58.1 | 53.6 | 697 | 573 | 21.6 | ||||||
| Income taxes and taxable-equivalent<br>adjustment | 107 | 68 | 70 | 57.4 | 52.9 | 175 | 144 | 21.5 | ||||||
| Net income | 320 | 202 | 208 | 58.4 | 53.8 | 522 | 429 | 21.7 | ||||||
| Net (income) loss attributable to noncontrolling<br>interests | -- | -- | -- | -- | -- | -- | -- | -- | ||||||
| Net income attributable to U.S. Bancorp | 320 | 202 | 208 | 58.4 | 53.8 | 522 | 429 | 21.7 | ||||||
| Average Balance Sheet Data | ||||||||||||||
| Loans | 22,320 | 20,713 | 17,442 | 7.8 | 28.0 | 21,521 | 17,147 | 25.5 | ||||||
| Other earning assets | 251 | 259 | 237 | (3.1 | ) | 5.9 | 255 | 258 | (1.2 | ) | ||||
| Goodwill | 1,718 | 1,761 | 1,618 | (2.4 | ) | 6.2 | 1,739 | 1,618 | 7.5 | |||||
| Other intangible assets | 300 | 265 | 84 | 13.2 | nm | 283 | 63 | nm | ||||||
| Assets | 25,786 | 24,455 | 20,470 | 5.4 | 26.0 | 25,124 | 20,297 | 23.8 | ||||||
| Noninterest-bearing deposits | 25,019 | 27,402 | 23,288 | (8.7 | ) | 7.4 | 26,204 | 22,339 | 17.3 | |||||
| Interest-bearing deposits | 71,759 | 70,281 | 73,347 | 2.1 | (2.2 | ) | 71,024 | 78,489 | (9.5 | ) | ||||
| Total deposits | 96,778 | 97,683 | 96,635 | (.9 | ) | .1 | 97,228 | 100,828 | (3.6 | ) | ||||
| Total U.S. Bancorp shareholders’<br>equity | 3,618 | 3,595 | 3,089 | .6 | 17.1 | 3,607 | 3,062 | 17.8 | ||||||
| (a) preliminary data |
All values are in US Dollars.
Wealth Management and Investment Services provides private banking, financial advisory services, investment management, retail brokerage services, insurance, trust, custody and fund servicing through four businesses: Wealth Management, Global Corporate Trust & Custody, U.S. Bancorp Asset Management and Fund Services.
Wealth Management and Investment Services generated $423 million of income before provision and taxes in the second quarter of 2022, compared with $274 million in the second quarter of 2021, and contributed $320 million of the Company’s net income in the second quarter of 2022. The provision for credit losses was unchanged compared with the prior year quarter. Total net revenue increased $209 million (26.3 percent) year-over-year reflecting an increase of $106 million (43.1 percent) in net interest income and an increase of $103 million (18.8 percent) in total noninterest income. Net interest income increased primarily due to favorable funding mix, higher average noninterest-bearing deposits and higher average loan balances. Total noninterest income increased primarily due to lower money market fund fee waivers, the impact of the PFM acquisition and core business growth in trust and investment management fees. Total noninterest expense increased $60 million (11.5 percent) compared with the second quarter of 2021 reflecting higher compensation expense as a result of merit, the PFM acquisition, core business growth and performance-based incentives, as well as higher net shared services expense driven by investment in support of business growth.
5
| PAYMENT SERVICES<br>(a) | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( in millions) | |||||||||||||
| 2Q22 vs<br><br><br>2Q21 | YTD<br><br><br>2022 | ||||||||||||
| Condensed Income Statement | |||||||||||||
| Net interest income (taxable-equivalent<br>basis) | 619 | 622 | 595 | (.5 | ) | 4.0 | 1,241 | 1,224 | 1.4 | ||||
| Noninterest income | 994 | 858 | 913 | 15.9 | 8.9 | 1,852 | 1,698 | 9.1 | |||||
| Securities gains (losses), net | -- | -- | -- | -- | -- | -- | -- | -- | |||||
| Total net revenue | 1,613 | 1,480 | 1,508 | 9.0 | 7.0 | 3,093 | 2,922 | 5.9 | |||||
| Noninterest expense | 837 | 821 | 796 | 1.9 | 5.2 | 1,658 | 1,562 | 6.1 | |||||
| Other intangibles | 34 | 34 | 33 | -- | 3.0 | 68 | 65 | 4.6 | |||||
| Total noninterest expense | 871 | 855 | 829 | 1.9 | 5.1 | 1,726 | 1,627 | 6.1 | |||||
| Income before provision and taxes | 742 | 625 | 679 | 18.7 | 9.3 | 1,367 | 1,295 | 5.6 | |||||
| Provision for credit losses | 221 | 130 | 91 | 70.0 | nm | 351 | 50 | nm | |||||
| Income before income taxes | 521 | 495 | 588 | 5.3 | (11.4 | ) | 1,016 | 1,245 | (18.4 | ) | |||
| Income taxes and taxable-equivalent<br>adjustment | 130 | 124 | 147 | 4.8 | (11.6 | ) | 254 | 311 | (18.3 | ) | |||
| Net income | 391 | 371 | 441 | 5.4 | (11.3 | ) | 762 | 934 | (18.4 | ) | |||
| Net (income) loss attributable to noncontrolling<br>interests | -- | -- | -- | -- | -- | -- | -- | -- | |||||
| Net income attributable to U.S. Bancorp | 391 | 371 | 441 | 5.4 | (11.3 | ) | 762 | 934 | (18.4 | ) | |||
| Average Balance Sheet Data | |||||||||||||
| Loans | 33,854 | 31,740 | 30,030 | 6.7 | 12.7 | 32,802 | 29,831 | 10.0 | |||||
| Other earning assets | 1,023 | 1,023 | 5 | -- | nm | 1,023 | 5 | nm | |||||
| Goodwill | 3,318 | 3,325 | 3,176 | (.2 | ) | 4.5 | 3,322 | 3,175 | 4.6 | ||||
| Other intangible assets | 438 | 464 | 518 | (5.6 | ) | (15.4 | ) | 450 | 530 | (15.1 | ) | ||
| Assets | 41,054 | 38,540 | 35,618 | 6.5 | 15.3 | 39,803 | 35,356 | 12.6 | |||||
| Noninterest-bearing deposits | 3,396 | 3,673 | 5,030 | (7.5 | ) | (32.5 | ) | 3,534 | 5,146 | (31.3 | ) | ||
| Interest-bearing deposits | 167 | 160 | 141 | 4.4 | 18.4 | 164 | 137 | 19.7 | |||||
| Total deposits | 3,563 | 3,833 | 5,171 | (7.0 | ) | (31.1 | ) | 3,698 | 5,283 | (30.0 | ) | ||
| Total U.S. Bancorp shareholders’<br>equity | 8,115 | 8,019 | 7,413 | 1.2 | 9.5 | 8,067 | 7,535 | 7.1 | |||||
| (a) preliminary data |
All values are in US Dollars.
Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services, consumer lines of credit and merchant processing.
Payment Services generated $742 million of income before provision and taxes in the second quarter of 2022, compared with $679 million in the second quarter of 2021, and contributed $391 million of the Company’s net income in the second quarter of 2022. The provision for credit losses increased $130 million primarily due to stronger growth in loan balances in the current year linked quarter and relatively stable credit quality in the current period compared with a stronger reduction in delinquencies in the prior year quarter. Total net revenue increased $105 million (7.0 percent) due to higher net interest income of $24 million (4.0 percent) and higher total noninterest income of $81 million (8.9 percent). Net interest income increased primarily due to higher loan balances and loan fees, partially offset by lower loan yields driven by declining customer revolve rates. Total noninterest income increased year-over-year mainly due to continued strengthening of consumer and business spending across most sectors. As a result, there was strong growth in merchant processing services revenue driven by higher sales volume and higher merchant fees, partially offset by higher rebates, as well as solid growth in corporate payment products revenue driven by improving business spending across all product groups. Strong sales also drove an increase in credit and debit card revenue, mostly offset by declining prepaid processing fees as the beneficial impact of government stimulus programs dissipated year-over-year. Total noninterest expense increased $42 million (5.1 percent) reflecting higher net shared services expense driven by investment in infrastructure and technology development, in addition to higher compensation expense due to merit, core business growth and variable compensation.
6
| TREASURY AND CORPORATE SUPPORT<br>(a) | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( in millions) | ||||||||||||||||
| 1Q<br><br><br>2022 | 2Q<br><br><br>2021 | 2Q22 vs<br><br><br>2Q21 | YTD<br><br><br>2022 | YTD<br><br><br>2021 | ||||||||||||
| Condensed Income Statement | ||||||||||||||||
| Net interest income (taxable-equivalent<br>basis) | 92 | 52 | 63 | 76.9 | 46.0 | 144 | 32 | nm | ||||||||
| Noninterest income | 216 | 218 | 215 | (.9 | ) | .5 | 434 | 418 | 3.8 | |||||||
| Securities gains (losses), net | 19 | 18 | 43 | 5.6 | (55.8 | ) | 37 | 68 | (45.6 | ) | ||||||
| Total net revenue | 327 | 288 | 321 | 13.5 | 1.9 | 615 | 518 | 18.7 | ||||||||
| Noninterest expense | 400 | 209 | 229 | 91.4 | 74.7 | 609 | 535 | 13.8 | ||||||||
| Other intangibles | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||
| Total noninterest expense | 400 | 209 | 229 | 91.4 | 74.7 | 609 | 535 | 13.8 | ||||||||
| Income (loss) before provision and taxes | (73 | 79 | 92 | nm | nm | 6 | (17) | nm | ||||||||
| Provision for credit losses | 69 | (77 | (189) | nm | nm | (8 | (894) | 99.1 | ||||||||
| Income (loss) before income taxes | (142 | 156 | 281 | nm | nm | 14 | 877 | (98.4 | ) | |||||||
| Income taxes and taxable-equivalent<br>adjustment | (87 | (34 | 6 | nm | nm | (121 | 58 | nm | ||||||||
| Net income (loss) | (55 | 190 | 275 | nm | nm | 135 | 819 | (83.5 | ) | |||||||
| Net (income) loss attributable to noncontrolling<br>interests | (3 | (1 | (6) | nm | 50.0 | (4 | (11) | 63.6 | ||||||||
| Net income (loss) attributable to U.S.<br>Bancorp | (58 | 189 | 269 | nm | nm | 131 | 808 | (83.8 | ) | |||||||
| Average Balance Sheet Data | ||||||||||||||||
| Loans | 3,668 | 3,820 | 3,711 | (4.0 | ) | (1.2 | ) | 3,744 | 3,789 | (1.2 | ) | |||||
| Other earning assets | 204,560 | 206,532 | 193,798 | (1.0 | ) | 5.6 | 205,541 | 191,382 | 7.4 | |||||||
| Goodwill | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||
| Other intangible assets | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||
| Assets | 219,166 | 229,107 | 219,396 | (4.3 | ) | (.1 | ) | 224,110 | 217,372 | 3.1 | ||||||
| Noninterest-bearing deposits | 2,504 | 2,560 | 2,581 | (2.2 | ) | (3.0 | ) | 2,532 | 2,591 | (2.3 | ) | |||||
| Interest-bearing deposits | 1,599 | 2,756 | 2,242 | (42.0 | ) | (28.7 | ) | 2,174 | 1,932 | 12.5 | ||||||
| Total deposits | 4,103 | 5,316 | 4,823 | (22.8 | ) | (14.9 | ) | 4,706 | 4,523 | 4.0 | ||||||
| Total U.S. Bancorp shareholders’<br>equity | 11,078 | 15,869 | 16,307 | (30.2 | ) | (32.1 | ) | 13,460 | 15,750 | (14.5 | ) | |||||
| (a) preliminary data |
All values are in US Dollars.
Treasury and Corporate Support includes the Company’s investment portfolios, funding, capital management, interest rate risk management, income taxes not allocated to the business lines, including most investments in tax-advantaged projects, and the residual aggregate of those expenses associated with corporate activities that are managed on a consolidated basis.
Treasury and Corporate Support generated a $73 million loss before provision and taxes in the second quarter of 2022, compared with $92 million of income before provision and taxes in the second quarter of 2021, and recorded a net loss of $58 million in the second quarter of 2022. The provision for credit losses increased $258 million reflecting the increase in allowance for credit losses due to increasing economic uncertainty in the current quarter relative to the reduction in the allowance for credit losses associated with improving economic conditions in the second quarter of 2021. Total net revenue was higher by $6 million (1.9 percent) due to an increase of $29 million (46.0 percent) in net interest income, mostly offset by a decrease of $23 million (8.9 percent) in total noninterest income. Net interest income increased primarily due to higher investment portfolio and cash balances. The decrease in total noninterest income was primarily due to lower securities gains and lower gains on the disposition of assets, partially offset by higher commercial products revenue. Total noninterest expense increased $171 million (74.7 percent) primarily due to merger and integration-related charges related to the acquisition of MUFG Union Bank and higher compensation expense reflecting merit, hiring to support business growth and core business growth net of lower variable compensation, partially offset by lower net shared services costs. Income taxes are assessed to each line of business at a managerial tax rate of 25.0 percent with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in Treasury and Corporate Support.
7
EX-99.2
U.S. Bancorp 2Q22 Earnings Conference Call July 15, 2022 Exhibit 99.2
The following information appears in accordance with the Private Securities Litigation Reform Act of 1995: This presentation contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements often use words such as “anticipates,” “targets,” “expects,” “hopes,” “estimates,” “projects,” “forecasts,” “intends,” “plans,” “goals,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Forward-looking statements involve inherent risks and uncertainties, including the following risks and uncertainties and the risks and uncertainties more fully discussed in the section entitled “Risk Factors” of Exhibit 13 to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2021, which could cause actual results to differ materially from those anticipated. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; the impacts of the COVID-19 pandemic on its business, financial position, results of operations, liquidity and prospects; increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; civil unrest; the effects of climate change; changes in customer behavior and preferences; breaches in data security, including as a result of work-from-home arrangements; failures to safeguard personal information; the impacts of international hostilities or geopolitical events; impacts of supply chain disruptions and rising inflation; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk. In addition, U.S. Bancorp’s proposed acquisition of MUFG Union Bank presents risks and uncertainties, including, among others: the risk that the cost savings, any revenue synergies and other anticipated benefits of the proposed acquisition may not be realized or may take longer than anticipated to be realized; the risk that U.S. Bancorp’s business could be disrupted as a result of the announcement and pendency of the proposed acquisition and diversion of management’s attention from ongoing business operations and opportunities; the possibility that the proposed acquisition, including the integration of MUFG Union Bank, may be more costly or difficult to complete than anticipated; delays in closing the proposed acquisition; and the failure of required governmental approvals to be obtained or any other closing conditions in the definitive purchase agreement to be satisfied. For discussion of these and other risks that may cause actual results to differ from those described in forward-looking statements, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2021, on file with the Securities and Exchange Commission, including the sections entitled “Corporate Risk Profile” and “Risk Factors” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. In addition, factors other than these risks also could adversely affect U.S. Bancorp’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events. This presentation includes non-GAAP financial measures to describe U.S. Bancorp’s performance. The calculations of these measures are provided in the Appendix. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Forward-looking Statements and Additional Information
2Q22 Highlights 1 Taxable-equivalent basis; see slide 28 for calculation 2 Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology was 9.4% as of 6/30/22. 3 Earnings returned (millions) = total common dividends paid and aggregate value of common shares repurchased
Performance Ratios Return on Average Assets Efficiency Ratio1 & Net Interest Margin2 Return on Average Common Equity Return on Tangible Common Equity1 1 Non-GAAP; see slides 28 and 29 for calculations 2 Net interest margin on a taxable-equivalent basis 3 Non-GAAP; Excluding merger and integration charges; see slides 28 and 29 for calculations 1.16%3 15.3%3 20.5%3 62.1% 58.9%3
Digital Engagement Trends 5/31/22 1 Represents core Consumer Banking customers active in at least one channel in the previous 90 days 2 Interactive Voice Response Total Digital includes both online and mobile platforms
Digital and payments initiatives across our businesses Commercial and Large Corporate Business Banking Consumer Banking ~6x >10x FY20 RTP Transactions at U.S. Bank First in market to send RTP4 Transaction Multiple ways to integrate RTP products #1 are out of U.S. Bank’s footprint ~55% New State Farm Deposit Accounts3 are new customers to U.S. Bank ~80% + Deposit growth is equivalent to one large MSA2 Credit Card production is equivalent to four large MSAs1 >5x ~3.4x FY20 talech helps small businesses tackle accounts receivable and operational tasks 1 Data from December 2020 to present 2 Data from April 2021 to present 3 Data as of 6/30/2022 4 Real Time Payments Note: State Farm and logo are trademarks of State Farm Mutual Automobile Company New talech Customers
Business Banking and Payments Trends With 1.1 million business1 banking relationships, there is a significant opportunity for us to deepen current relationships and acquire new customers. Banking and Payments2 Relationships Business Banking only Business Banking & Payments Payments only Payments & Business Banking 1 Defined as businesses with under $25M in revenue 2 Payments includes merchant acquiring and card relationships within Retail Payment Solutions 3 Data as of 5/31/22 4 Data indexed to 100 as of 3/31/21 Relationship Growth4 Relationships with both a Banking & Payments Product Total Relationships 5/31/22
Average Loans +3.6% linked quarter +10.2% year-over-year On a linked quarter basis, average total loans were higher primarily due to growth in commercial loans and higher residential mortgages. On a year-over-year basis, average total loans were higher primarily due to higher commercial loans, higher residential mortgages, and higher other retail loans, partially offset by lower retail leasing balances and construction and development loans. $ in billions
Average Deposits +0.5% linked quarter +6.4% year-over-year Interest-bearing Deposits Average noninterest-bearing (NIB) deposits decreased on a linked quarter basis and on a year-over-year basis. On a linked quarter basis, the decrease was driven by Corporate and Commercial Banking and Wealth Management and Investment Services, while the year-over-year decrease was primarily driven by Corporate and Commercial Banking, Consumer and Business Banking and Payments Services. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, were higher on a linked quarter basis and on a year-over-year basis. $ in billions
NCO Ratio -1 bps QoQ -5 bps YoY NPAs -5.1% QoQ -27.3% YoY $ in millions, except allowance for credit losses in billions Allowance for Credit Losses by Loan Class, 2Q22 Amount ($B) Loans and Leases Outstanding (%) Commercial $1.9 1.5% Commercial Real Estate 1.0 2.4% Residential Mortgage 0.7 0.8% Credit Card 1.7 7.4% Other Retail 1.0 1.6% Total $6.3 1.9% Credit Quality
Earnings Summary 1 Merger and integration-related charges associated with the planned acquisition of MUFG Union Bank.
Net Interest Income +8.3% linked quarter +9.5% year-over-year $ in millions 1 Includes PPP interest income and PPP loan fees Net interest income on a taxable-equivalent basis; see slide 28 for calculation Including PPP Excluding PPP +8.7% linked quarter +12.5% year-over-year $3,164 $3,200 $3,464 Linked Quarter Net interest income increased, primarily due to higher loan balances, the impact of rising interest rates in the loan and investment portfolios and one more day in the quarter, partially offset by deposit pricing. The net interest margin increased, reflecting the impact of rising interest rates and reinvestment yields on investment securities, partially offset by higher deposit rates paid and lower noninterest-bearing deposits. Year-over-Year Net interest income increased, primarily due to higher loan and investment securities balances in addition to rising interest rates and a favorable yield curve impacting earning assets, partially offset by deposit pricing. The net interest margin increased, primarily due to the impact of rising interest rates and higher yields in the investment portfolio, partially offset by deposit pricing and lower noninterest-bearing deposits. PPP Impact 1
Noninterest Income +6.3% linked quarter -2.7% year-over-year Linked Quarter Payment services revenue increased, as credit card revenue increased due to seasonally higher sales volume and rate. Merchant processing services revenue increased due to higher sales volumes and merchant fees. Trust and Investment Management Services revenue increased, primarily due to higher fees, activity related to the acquisition of PFM, billing cycle timing and lower money market fund fee waivers, partially offset by unfavorable market conditions. Mortgage banking revenue decreased, driven by lower application volume and related gain on sale margins as well as lower performing loan sales, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities. Year-over-Year Mortgage banking revenue decreased, driven by lower application volume, given declining refinancing activity, lower gain on sale margins, and lower performing loan sales, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities. Other noninterest income decreased, driven by lower retail leasing end-of-term residual gains, lower gain on sale of certain assets and lower tax-advantaged investment syndication revenue. Trust and Investment Management fees increased, due to business growth, activity related to the fourth quarter of 2021 acquisition of PFM Asset Management LLC and lower money market fund fees waivers. $ in millions Payments = credit and debit card, corporate payment products and merchant processing Service charges = deposit service charges and treasury management All other = commercial products, investment products fees, securities gains (losses) and other
Payment Services Fee Revenue Growth 1 Includes prepaid card
Merchant Processing Credit and Debit Card1 Corporate Payments All Other Revenue Payment Services Payments Revenue Breakdown Total payments revenue, which includes net interest income and fee revenue, accounted for 27% of 2Q22 net revenue. Total payment fee revenue grew nearly 9.7% year-over-year due to the continued cyclical recovery and increased sales volumes reflecting underlying business momentum as our investments pay off. Seasonal Considerations A Shift to Tech-led3 Revenue Historical Linked Quarter Seasonal Trends for Payment Fees Revenue2 1 Includes prepaid card 2 Linked quarter change based on trends from 2015 – 2019 3 Tech-led includes digital, omni-commerce and e-commerce as well as investments in integrated software providers Payment Fees as a % of Net Revenue (2Q22) Payments fee revenue growth, on a linked quarter basis, is typically seasonally strongest in 2Q Our multiyear investments in e-commerce and tech-led will continue to drive growth Tech-led3 Merchant Processing Fee Revenue Growth ~1.6x FY19 New Tech-led3 Partnerships
Noninterest Expense +6.3% linked quarter +9.9% year-over-year Linked Quarter Compensation expense increased, due to seasonal merit increases, one additional day in the second quarter, and higher variable compensation, partially offset by the impact of seasonally higher stock-based compensation in the first quarter. Marketing and business development expense increased due to the timing of marketing campaigns and higher travel and entertainment. Other noninterest expense in 2Q22 included merger and integration charges of $197 million associated with the planned acquisition of Union Bank. Year-over-Year Compensation expense increased, primarily due to merit and hiring to support business growth, partially offset by lower performance-based incentives. Employee benefits expense increased, primarily due to higher medical expenses. Marketing and business development expense increased, due to increased travel and entertainment. $ in millions PPS = postage, printing and supplies 1 $197 million of merger and integration charges Reported Excluding Notable Items1 +0.7% linked quarter +4.1% year-over-year
Capital Position 1 Ratios calculated in accordance with transitional regulatory requirements related to the current expected credit losses methodology 2 Non-GAAP; see slide 30 for calculations
1 All guidance for stand alone USB 2 Core guidance excludes notable items for merger and integration charges associated with the planned acquisition of MUFG Union Bank 3 Excludes $197 million of merger and integration-related charges associated with the planned acquisition of MUFG Union Bank Outlook1 3Q 2022 Guidance Revenue Up 3 – 5% Compared to 2Q 2022 of $6,012 ($ in millions) Core2 Expenses Full Year 2022 Guidance Up 5 – 6% Compared to FY 2021 of $22,827 Positive operating leverage of at least 200 basis points Core2 Operating Leverage Revenue Up 2 – 3% Compared to 2Q 2022 of $3,5273
Progress What’s Next Integration planning including technology and business line operations largely complete $100 billion community benefits plan announced Participated in numerous stakeholder town-hall meetings Participated in a joint public meeting with the Fed and OCC Continuing to work with regulators in the normal course of action Targeting transaction closing in 2H’22, subject to regulatory approval Finalizing integration and conversion plans across all business and corporate functions Conversion anticipated in 1H’23 Execute conversion and integration plan Union Bank Acquisition Update
Appendix
Average Loans Linked Quarter Average total loans increased by $11.2 billion, or 3.6% Average commercial loans increased by $7.8 billion, or 6.9% Average residential mortgage loans increased by $2.8 billion, or 3.6% Average credit card loans increased by $0.9 billion, or 4.1% Year-over-Year Average total loans increased by $29.9 billion, or 10.2% Average commercial loans increased by $17.7 billion, or 17.2% Average residential mortgage loans increased by $6.9 billion, or 9.4% Average other retail loans increased $2.8 billion, or 4.7% Key Points Year-over-Year Growth (7.5%) (4.6%) 0.1% 6.5% 10.2% Commercial CRE Res Mtg Other Retail Credit Card Average Loans ($bn)
Key Points Year-over-Year Growth 6.4% 6.4% 6.5% 6.5% 6.4% Time Money Market Checking and Savings Noninterest-bearing Average Deposits Average Deposits ($bn) Linked Quarter Average total deposits increased by $2.3 billion, or 0.5% Average low-cost deposits (NIB, interest checking, savings and money market) remained flat Year-over-Year Average total deposits increased by $27.3 billion, or 6.4% Average low-cost deposits (NIB, interest checking, savings and money market) increased by $25.2 billion, or 6.2%
Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Key Points $mm2Q21 1Q22 2Q22 Average Loans$102,974 $112,822 $120,657 30-89 Delinquencies0.17% 0.20% 0.20% 90+ Delinquencies0.04% 0.06% 0.07% Nonperforming Loans0.28% 0.15% 0.12% 0.9% (1.1%) 2.6% 8.0% 6.9% Average loans increased by 6.9% on a linked quarter basis Net charge-offs ratio remained low at 0.10%, while 30-89 day delinquency was flat from the previous quarter Utilization increased quarter over quarter from 22.7% to 23.7% Credit Quality – Commercial Linked Quarter Growth
$mm2Q21 1Q22 2Q22 Average Loans$38,564 $39,084 $39,517 30-89 Delinquencies0.08% 0.22%0.06% 90+ Delinquencies0.01%- %0.01% Nonperforming Loans0.80% 0.55% 0.52% Linked Quarter Growth (0.6%) 0.9% (0.2%) 0.6% 1.1% Average loans increased by 1.1% on a linked quarter basis Net charge offs during the quarter continued to reflect relatively low losses during the quarter Key Points Credit Quality – Commercial Real Estate Average Loans ($mm) and Net Charge-offs Ratio Key Statistics
Credit Quality – Residential Mortgage $mm2Q211Q222Q22 Average Loans$73,351 $77,449 $80,228 30-89 Delinquencies0.24%0.13% 0.12% 90+ Delinquencies0.16% 0.18% 0.12% Nonperforming Loans0.33%0.27%0.27% (2.5%) 1.0% 2.4% 2.1% 3.6% Key Points Average loans increased by 3.6% on a linked quarter basis reflecting a combination of home purchases and slow down of payoffs on existing mortgages Net recovery performance continued to reflect overall portfolio credit quality and strength in housing values Originations continued to be high credit quality (weighted average credit score of 769, weighted average LTV of 71%) Linked Quarter Growth Average Loans ($mm) and Net Charge-offs Ratio Key Statistics
Credit Quality – Credit Card $mm2Q211Q222Q22 Average Loans$21,116 $21,842 $22,748 30-89 Delinquencies0.72% 0.88% 0.84% 90+ Delinquencies0.70%0.74% 0.69% Nonperforming Loans - %- %- % (0.1%) 3.7% 2.3% (2.5%) 4.1% Key Points Linked Quarter Growth Average loans increased by 4.1% on a linked quarter basis Net charge-off ratio remained low during the quarter driven by sustained borrower liquidity Average Loans ($mm) and Net Charge-offs Ratio Key Statistics
$mm2Q211Q222Q22 Average Loans$58,279 $61,769$61,037 30-89 Delinquencies0.34%0.38% 0.39% 90+ Delinquencies0.10%0.11% 0.10% Nonperforming Loans0.29%0.26% 0.24% 2.7% 2.9% 1.9% 1.0% (1.2%) Credit Quality – Other Retail Key Points Linked Quarter Growth Average loans decreased by 1.2% on a linked quarter basis Continued relative low net charge-offs were supported by strong portfolio credit quality and collateral values in housing and used autos Average Loans ($mm) and Net Charge-offs Ratio Key Statistics
Non-GAAP Financial Measures (1), (2) – see slide 31 for corresponding notes
Non-GAAP Financial Measures (2), (3) – see slide 31 for corresponding notes
Non-GAAP Financial Measures * Preliminary data. Subject to change prior to filings with applicable regulatory agencies. (3), (4), (5) – see slide 31 for corresponding notes
Notes Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes. Notable items for the three months ended June 30, 2022 include $197 million ($153 million after-tax) of merger and integration charges. Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements. Includes the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology net of deferred taxes. Includes the impact of the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology.
