Results

U.S. Bancorp

11/05/2024 | Press release | Distributed by Public on 11/05/2024 15:55

Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

usb-20240930
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from (not applicable)
Commission file number 1-6880
U.S. BANCORP
(Exact name of registrant as specified in its charter)
Delaware 41-0255900
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
800 Nicollet Mall
Minneapolis, Minnesota 55402
(Address of principal executive offices, including zip code)
651-466-3000
(Registrant's telephone number, including area code)
(not applicable)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbols Name of each exchange on which registered
Common Stock, $.01 par value per share USB New York Stock Exchange
Depositary Shares (each representing 1/100th interest in a share of Series A Non-Cumulative Perpetual Preferred Stock, par value $1.00) USB PrA New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series B Non-Cumulative Perpetual Preferred Stock, par value $1.00) USB PrH New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series K Non-Cumulative Perpetual Preferred Stock, par value $1.00) USB PrP New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series L Non-Cumulative Perpetual Preferred Stock, par value $1.00) USB PrQ New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series M Non-Cumulative Perpetual Preferred Stock, par value $1.00) USB PrR New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series O Non-Cumulative Perpetual Preferred Stock, par value $1.00) USB PrS New York Stock Exchange
Floating Rate Notes, Series CC (Senior), due May 21, 2028 USB/28 New York Stock Exchange
4.009% Fixed-to-Floating Rate Notes, Series CC (Senior), due May 21, 2032 USB/32 New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☑ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No☑
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
Outstanding as of October 31, 2024
Common Stock, $.01 Par Value
1,560,031,715 shares
Table of Contents and Form 10-Q Cross Reference Index
Part I - Financial Information
1) Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 2)
4
a) Overview
4
b) Statement of Income Analysis
4
c) Balance Sheet Analysis
7
d) Non-GAAP Financial Measures
29
e) Critical Accounting Policies
30
f) Controls and Procedures (Item 4)
30
2) Quantitative and Qualitative Disclosures About Market Risk/Corporate Risk Profile (Item 3)
8
a) Overview
8
b) Credit Risk Management
9
c) Residual Value Risk Management
20
d) Operational Risk Management
20
e) Compliance Risk Management
20
f) Interest Rate Risk Management
20
g) Market Risk Management
21
h) Liquidity Risk Management
22
i) Capital Management
24
3) Line of Business Financial Review
25
4) Financial Statements (Item 1)
31
Part II - Other Information
1) Legal Proceedings (Item 1)
80
2) Risk Factors (Item 1A)
80
3) Unregistered Sales of Equity Securities and Use of Proceeds (Item 2)
80
4) Other Information (Item 5)
80
5) Exhibits (Item 6)
80
6) Signature
81
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995.
This quarterly report on Form 10-Q contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, future economic conditions and the anticipated future revenue, expenses, financial condition, asset quality, capital and liquidity levels, plans, prospects and operations of U.S. Bancorp. Forward-looking statements often use words such as "anticipates," "targets," "expects," "hopes," "estimates," "projects," "forecasts," "intends," "plans," "goals," "believes," "continue" and other similar expressions or future or conditional verbs such as "will," "may," "might," "should," "would" and "could."
Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those set forth in forward-looking statements, including the following risks and uncertainties:
•Deterioration in general business and economic conditions or turbulence in domestic or global financial markets, which could adversely affect U.S. Bancorp's revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility;
•Turmoil and volatility in the financial services industry, including failures or rumors of failures of other depository institutions, which could affect the ability of depository institutions, including U.S. Bank National Association, to attract and retain depositors, and could affect the ability of financial services providers, including U.S. Bancorp, to borrow or raise capital;
•Increases in Federal Deposit Insurance Corporation ("FDIC") assessments, including due to bank failures;
•Actions taken by governmental agencies to stabilize the financial system and the effectiveness of such actions;
•Uncertainty regarding the content, timing and impact of changes to regulatory capital, liquidity and resolution-related requirements applicable to large banking organizations in response to adverse developments affecting the banking sector;
U.S. Bancorp
1
•Changes to statutes, regulations, or regulatory policies or practices, including capital and liquidity requirements, and the enforcement and interpretation of such laws and regulations, and U.S. Bancorp's ability to address or satisfy those requirements and other requirements or conditions imposed by regulatory entities;
•Changes in interest rates;
•Increases in unemployment rates;
•Deterioration in the credit quality of U.S. Bancorp's loan portfolios or in the value of the collateral securing those loans;
•Changes in commercial real estate occupancy rates;
•Risks related to originating and selling mortgages, including repurchase and indemnity demands, and related to U.S. Bancorp's role as a loan servicer;
•Impacts of current, pending or future litigation and governmental proceedings;
•Increased competition from both banks and non-banks;
•Effects of climate change and related physical and transition risks;
•Changes in customer behavior and preferences and the ability to implement technological changes to respond to customer needs and meet competitive demands;
•Breaches in data security;
•Failures or disruptions in or breaches of U.S. Bancorp's operational, technology or security systems or infrastructure, or those of third parties, including as a result of cybersecurity incidents;
•Failures to safeguard personal information;
•Impacts of pandemics, natural disasters, terrorist activities, civil unrest, international hostilities and geopolitical events;
•Impacts of supply chain disruptions, rising inflation, slower growth or a recession;
•Failure to execute on strategic or operational plans;
•Effects of mergers and acquisitions and related integration;
•Effects of critical accounting policies and judgments;
•Effects of changes in or interpretations of tax laws and regulations;
•Management's ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk; and
•The risks and uncertainties more fully discussed in the section entitled "Risk Factors" of U.S. Bancorp's Form 10-K for the year ended December 31, 2023, and subsequent filings with the Securities and Exchange Commission ("SEC").
Factors other than these risks also could adversely affect U.S. Bancorp's results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.
2
U.S. Bancorp
TABLE 1 Selected Financial Data
Three Months Ended September 30 Nine Months Ended September 30
(Dollars and Shares in Millions, Except Per Share Data) 2024 2023 Percent
Change 		2024 2023 Percent
Change
Condensed Income Statement
Net interest income $ 4,135 $ 4,236 (2.4) % $ 12,143 $ 13,285 (8.6) %
Taxable-equivalent adjustment(a)
31 32 (3.1) 90 100 (10.0)
Net interest income (taxable-equivalent basis)(b)
4,166 4,268 (2.4) 12,233 13,385 (8.6)
Noninterest income 2,698 2,764 (2.4) 8,213 7,997 2.7
Total net revenue 6,864 7,032 (2.4) 20,446 21,382 (4.4)
Noninterest expense 4,204 4,530 (7.2) 12,877 13,654 (5.7)
Provision for credit losses 557 515 8.2 1,678 1,763 (4.8)
Income before taxes 2,103 1,987 5.8 5,891 5,965 (1.2)
Income taxes and taxable-equivalent adjustment 381 463 (17.7) 1,232 1,368 (9.9)
Net income 1,722 1,524 13.0 4,659 4,597 1.3
Net (income) loss attributable to noncontrolling interests (8) (1) * (23) (15) (53.3)
Net income attributable to U.S. Bancorp $ 1,714 $ 1,523 12.5 $ 4,636 $ 4,582 1.2
Net income applicable to U.S. Bancorp common shareholders $ 1,601 $ 1,412 13.4 $ 4,328 $ 4,285 1.0
Per Common Share
Earnings per share $ 1.03 $ .91 13.2 $ 2.77 $ 2.79 (.7)
Diluted earnings per share 1.03 .91 13.2 2.77 2.79 (.7)
Dividends declared per share .50 .48 4.2 1.48 1.44 2.8
Book value per share(c)
33.34 29.74 12.1
Market value per share 45.73 33.06 38.3
Average common shares outstanding 1,561 1,548 .8 1,560 1,538 1.4
Average diluted common shares outstanding 1,561 1,549 .8 1,561 1,538 1.5
Financial Ratios
Return on average assets 1.03 % .91 % .94 % .92 %
Return on average common equity 12.4 11.9 11.6 12.3
Net interest margin (taxable-equivalent basis)(a)
2.74 2.81 2.70 2.94
Efficiency ratio(b)
60.2 64.4 62.5 63.8
Net charge-offs as a percent of average loans outstanding .60 .44 .57 .50
Average Balances
Loans $ 374,070 $ 376,877 (.7) % $ 373,278 $ 384,112 (2.8) %
Loans held for sale 2,757 2,661 3.6 2,381 2,564 (7.1)
Investment securities(d)
166,899 163,236 2.2 165,059 163,051 1.2
Earning assets 607,180 605,245 .3 604,080 608,891 (.8)
Assets 664,640 663,999 .1 661,363 667,481 (.9)
Noninterest-bearing deposits 80,939 97,524 (17.0) 83,040 113,556 (26.9)
Deposits 508,757 512,291 (.7) 508,576 506,633 .4
Short-term borrowings 17,723 27,550 (35.7) 17,064 39,364 (56.7)
Long-term debt 54,841 43,826 25.1 53,482 42,551 25.7
Total U.S. Bancorp shareholders' equity 58,283 53,817 8.3 56,666 53,440 6.0
September 30,
2024 		December 31,
2023
Period End Balances
Loans $ 374,164 $ 373,835 .1 %
Investment securities 161,729 153,751 5.2
Assets 686,469 663,491 3.5
Deposits 521,131 512,312 1.7
Long-term debt 54,839 51,480 6.5
Total U.S. Bancorp shareholders' equity 58,859 55,306 6.4
Asset Quality
Nonperforming assets $ 1,848 $ 1,494 23.7 %
Allowance for credit losses 7,927 7,839 1.1
Allowance for credit losses as a percentage of period-end loans 2.12 % 2.10 %
Capital Ratios
Common equity tier 1 capital 10.5 % 9.9 %
Tier 1 capital 12.2 11.5
Total risk-based capital 14.2 13.7
Leverage 8.3 8.1
Total leverage exposure 6.8 6.6
Tangible common equity to tangible assets(b)
5.7 5.3
Tangible common equity to risk-weighted assets(b)
8.6 7.7
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology(b)
10.5 9.7
*Not meaningful
(a)Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.
(b)See Non-GAAP Financial Measures beginning on page 29.
(c)Calculated as U.S. Bancorp common shareholders' equity divided by common shares outstanding at end of the period.
(d)Excludes unrealized gains and losses on available-for-sale investment securities and any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity.
U.S. Bancorp
3
Management's Discussion and Analysis
Overview
Earnings Summary U.S. Bancorp and its subsidiaries (the "Company") reported net income attributable to U.S. Bancorp of $1.7 billion for the third quarter of 2024, or $1.03 per diluted common share, compared with $1.5 billion, or $0.91 per diluted common share, for the third quarter of 2023. Return on average assets and return on average common equity were 1.03 percent and 12.4 percent, respectively, for the third quarter of 2024, compared with 0.91 percent and 11.9 percent, respectively, for the third quarter of 2023. The results for the third quarter of 2023 included the impact of $284 million ($213 million net-of-tax) of merger and integration charges associated with the acquisition of MUFG Union Bank, N.A. ("MUB"), which decreased diluted earnings per common share for the third quarter of 2023 by $0.14.
Total net revenue for the third quarter of 2024 was $168 million (2.4 percent) lower than the third quarter of 2023, reflecting a 2.4 percent decrease in net interest income and a 2.4 percent decrease in noninterest income. The decrease in net interest income from the third quarter of 2023 was primarily due to the impact of higher interest rates on deposit mix and pricing, partially offset by higher rates on earning assets and changes in balance sheet composition. The decrease in noninterest income was driven by net losses on the sales of investment securities, lower service charges and lower other noninterest income, partially offset by higher fee revenue across all other categories.
Noninterest expense in the third quarter of 2024 was $326 million (7.2 percent) lower than the third quarter of 2023, primarily due to the impact of merger and integration charges in the prior year and lower other noninterest expense, partially offset by higher compensation and employee benefits expense.
The provision for credit losses for the third quarter of 2024 was $42 million (8.2 percent) higher than the third quarter of 2023, driven by higher net charge-offs. Net charge-offs in the third quarter of 2024 were $564 million, compared with $420 million in the third quarter of 2023. Refer to "Corporate Risk Profile" for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.
Net income attributable to U.S. Bancorp for the first nine months of 2024 was $4.6 billion, or $2.77 per diluted common share, compared with $4.6 billion, or $2.79 per diluted common share, for the first nine months of 2023. Return on average assets and return on average common equity were 0.94 percent and 11.6 percent, respectively, for the first nine months of 2024, compared with 0.92 percent and 12.3 percent, respectively, for the first nine months of 2023. The results for the first nine months of 2024 included the impact of $291 million ($218 million net-of-tax) of notable items, including $155 million of merger and integration charges and a $136 million charge for an increase in the FDIC special assessment to recover losses to the Deposit Insurance Fund related to certain 2023 bank failures. Combined, these items
decreased diluted earnings per common share for the first nine months of 2024 by $0.14. The results for the first nine months of 2023 included the impact of $1.1 billion ($828 million net-of-tax) of notable items, including $838 million of merger and integration charges, and $243 million of provision for credit losses and an additional $22 million of losses related to balance sheet repositioning and capital management actions. Combined, these items decreased diluted earnings per common share for the first nine months of 2023 by $0.53.
Total net revenue for the first nine months of 2024 was $936 million (4.4 percent) lower than the first nine months of 2023, reflecting an 8.6 percent decrease in net interest income, partially offset by a 2.7 percent increase in noninterest income. The decrease in net interest income from the first nine months of 2023 was primarily due to the impact of higher interest rates on deposit mix and pricing, partially offset by higher rates on earning assets and changes in balance sheet composition. The increase in noninterest income was driven by higher fee revenue across most categories, partially offset by higher net losses on the sales of investment securities, lower service charges and lower other noninterest income.
Noninterest expense in the first nine months of 2024 was $777 million (5.7 percent) lower than the first nine months of 2023, primarily due to lower merger and integration charges, partially offset by higher compensation and employee benefits expense and the impact of the FDIC special assessment.
The provision for credit losses for the first nine months of 2024 was $85 million (4.8 percent) lower than the first nine months of 2023, driven by the impacts of balance sheet repositioning and capital management actions taken in the second quarter of 2023, partially offset by higher net charge-offs in the current year. Net charge-offs in the first nine months of 2024 were $1.6 billion, compared with $1.4 billion in the first nine months of 2023. Refer to "Corporate Risk Profile" for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.
Statement of Income Analysis
Net Interest IncomeNet interest income, on a taxable-equivalent basis, was $4.2 billion in the third quarter and $12.2 billion in the first nine months of 2024, representing decreases of $102 million (2.4 percent) and $1.2 billion (8.6 percent), respectively, compared with the same periods of 2023. The decreases were primarily due to the impact of higher interest rates on deposit mix and pricing, partially offset by higher rates on earning assets and changes in balance sheet composition. Average earning assets for the third quarter of 2024 were $1.9 billion (0.3 percent) higher than the third quarter of 2023, reflecting increases in investment securities and other earning assets, partially offset by decreases in loans and interest-bearing deposits with banks. Average earning assets for the first nine months of 2024 were $4.8 billion (0.8 percent) lower than the first nine months of 2023, reflecting a
4
U.S. Bancorp
decrease in loans, partially offset by increases in investment securities and interest-bearing deposits with banks. The net interest margin, on a taxable-equivalent basis, in the third quarter and first nine months of 2024 was 2.74 percent and 2.70 percent, respectively, compared with 2.81 percent and 2.94 percent in the third quarter and first nine months of 2023, respectively. The decreases in net interest margin from the same periods of the prior year were primarily due to the impact of higher interest rates on deposit mix and pricing, partially offset by higher rates on earning assets and changes in balance sheet composition. Refer to the "Consolidated Daily Average Balance Sheet and Related Yields and Rates" table for further information on net interest income.
Average total loans in the third quarter and first nine months of 2024 were $2.8 billion (0.7 percent) and $10.8 billion (2.8 percent) lower, respectively, than the same periods of 2023. The decreases were primarily due to lower other retail loans, commercial loans and commercial real estate loans, partially offset by higher credit card loans and residential mortgages. The decreases in average other retail loans were driven by lower automobile loans. The decreases in average commercial loans were primarily due to decreased demand as corporate customers accessed the capital markets. The decreases in average commercial real estate loans were primarily due to payoffs exceeding a reduced level of new originations. The increases in average credit cards loans were primarily driven by higher spend volume. The increases in residential mortgages were primarily driven by originations.
Average investment securities in the third quarter and first nine months of 2024 were $3.7 billion (2.2 percent) and $2.0 billion (1.2 percent) higher, respectively, than the same periods of 2023, primarily due to balance sheet positioning and liquidity management.
Average total deposits for the third quarter and first nine months of 2024 were $3.5 billion (0.7 percent) lower and $1.9 billion (0.4 percent) higher, respectively, than the same periods of 2023. Average noninterest-bearing deposits for the third quarter and first nine months of 2024 were $16.6 billion (17.0 percent) and $30.5 billion (26.9 percent) lower, respectively, than the same periods of 2023, driven by decreases in Wealth, Corporate, Commercial and Institutional Banking, and Consumer and Business Banking balances. Average total savings deposits for the third quarter and first nine months of 2024 were $9.0 billion (2.5 percent) and $20.0 billion (5.7 percent) higher, respectively, than the same periods of 2023, driven by increases in Wealth, Corporate, Commercial and Institutional Banking, and Consumer and Business Banking balances. Average time deposits for the third quarter and first nine months of 2024 were $4.1 billion (7.5 percent) and $12.5 billion (28.0 percent) higher, respectively, than the same periods of 2023, mainly due to increases in Consumer and Business Banking balances. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.
Provision for Credit LossesThe provision for credit losses was $557 million in the third quarter of 2024, representing an
increase of $42 million (8.2 percent) from the third quarter of 2023, driven by higher net charge-offs in the current year. Net charge-offs increased $144 million (34.3 percent) in the third quarter of 2024, compared with the third quarter of 2023, reflecting higher credit card, commercial and commercial real estate loan net charge-offs. The provision for credit losses was $1.7 billion in the first nine months of 2024, representing a decrease of $85 million (4.8 percent) from the first nine months of 2023. The decrease was primarily driven by the impacts of balance sheet repositioning and capital management actions in the second quarter of 2023, partially offset by higher net charge-offs in the current year. Net charge-offs increased $148 million (10.3 percent) in the first nine months of 2024, compared with the first nine months of 2023, reflecting higher credit card and commercial loan net charge-offs, partially offset by the impacts of charge-offs in the prior year related to acquired loans and balance sheet repositioning and capital management actions. Refer to "Corporate Risk Profile" for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.
Noninterest IncomeNoninterest income was $2.7 billion in the third quarter and $8.2 billion in the first nine months of 2024, representing a decrease of $66 million (2.4 percent) and an increase of $216 million (2.7 percent), respectively, compared with the same periods of 2023. The decrease in noninterest income in the third quarter of 2024, compared with the third quarter of 2023, was driven by net losses on the sales of investment securities, lower service charges and lower other noninterest income, partially offset by higher commercial products revenue, trust and investment management fees and payment services revenue. The increase in noninterest income in the first nine months of 2024, compared with the first nine months of 2023, was driven by higher commercial products revenue, trust and investment management fees, payment services revenue and mortgage banking revenue, partially offset by higher net losses on the sales of investment securities, lower service charges and lower other noninterest income. Commercial products revenue increased in the current year primarily due to higher corporate bond fees and new product growth. Trust and investment management fees increased primarily due to business growth and favorable market conditions. Payment services revenue increased primarily due to higher merchant processing services revenue due to business volume growth and favorable rates, along with increased card revenue due to favorable rates. Mortgage banking revenue increased in the first nine months of 2024, compared with the first nine months of 2023, primarily driven by a gain on the sale of mortgage servicing rights in the second quarter of 2024, along with the impact of balance sheet repositioning and capital management actions taken in the second quarter of 2023.
U.S. Bancorp
5
 TABLE 2 Noninterest Income
Three Months Ended
September 30 		Nine Months Ended
September 30
(Dollars in Millions) 2024 2023 Percent
Change 		2024 2023 Percent
Change
Card revenue $ 426 $ 412 3.4 % $ 1,246 $ 1,194 4.4 %
Corporate payment products revenue 203 198 2.5 582 577 .9
Merchant processing services 440 427 3.0 1,295 1,250 3.6
Trust and investment management fees 667 627 6.4 1,957 1,838 6.5
Service charges 302 334 (9.6) 939 982 (4.4)
Commercial products revenue 397 354 12.1 1,159 1,046 10.8
Mortgage banking revenue 155 144 7.6 511 403 26.8
Investment products fees 84 70 20.0 243 206 18.0
Securities gains (losses), net (119) - * (153) (29) *
Other 143 198 (27.8) 434 530 (18.1)
Total noninterest income $ 2,698 $ 2,764 (2.4) % $ 8,213 $ 7,997 2.7 %
*Not meaningful
 TABLE 3 Noninterest Expense
Three Months Ended
September 30 		Nine Months Ended
September 30
(Dollars in Millions) 2024 2023 Percent
Change 		2024 2023 Percent
Change
Compensation and employee benefits $ 2,637 $ 2,615 .8 % $ 7,947 $ 7,907 .5 %
Net occupancy and equipment 317 313 1.3 929 950 (2.2)
Professional services 130 127 2.4 356 402 (11.4)
Marketing and business development 165 176 (6.3) 459 420 9.3
Technology and communications 524 511 2.5 1,540 1,536 .3
Other intangibles 142 161 (11.8) 430 480 (10.4)
Other 289 343 (15.7) 1,061 1,121 (5.4)
Total before merger and integration charges 4,204 4,246 (1.0) 12,722 12,816 (.7)
Merger and integration charges - 284 * 155 838 (81.5)
Total noninterest expense $ 4,204 $ 4,530 (7.2) % $ 12,877 $ 13,654 (5.7) %
Efficiency ratio(a)
60.2 % 64.4 % 62.5 % 63.8 %
*Not meaningful
(a)See Non-GAAP Financial Measures beginning on page 29.
Noninterest ExpenseNoninterest expense was $4.2 billion in the third quarter and $12.9 billion in the first nine months of 2024, representing decreases of $326 million (7.2 percent) and $777 million (5.7 percent), respectively, from the same periods of 2023. The decreases from the prior year reflected lower merger and integration charges and lower other noninterest expense, partially offset by higher compensation and employee benefits expense. The decrease in noninterest expense in the first nine months of 2024, compared with the first nine months of 2023, was further offset by the impact of the FDIC special assessment in the current year. Compensation and employee benefits expense increased in the current year primarily due to higher commissions and performance-based incentives. Marketing and business development expense increased in the first nine months of 2024, compared with the first nine months of 2023, primarily due to the timing of campaigns. Professional services expense decreased in the first nine months of 2024, compared with the
first nine months of 2023, primarily due to synergies from the MUB acquisition.
Income Tax ExpenseThe provision for income taxes was $350 million (an effective rate of 16.9 percent) for the third quarter and $1.1 billion (an effective rate of 19.7 percent) for the first nine months of 2024, compared with $431 million (an effective rate of 22.0 percent) and $1.3 billion (an effective rate of 21.6 percent) for the same periods of 2023, respectively. The tax rate in the third quarter and first nine months of 2024 reflected the impact of favorable settlements. For further information on income taxes, refer to Note 11 of the Notes to Consolidated Financial Statements.
6
U.S. Bancorp
Balance Sheet Analysis
LoansThe Company's loan portfolio was $374.2 billion at September 30, 2024, compared with $373.8 billion at December 31, 2023, an increase of $329 million (0.1 percent). The increase was driven by higher residential mortgages and commercial loans, partially offset by lower commercial real estate loans and other retail loans.
Residential mortgages held in the loan portfolio increased $2.5 billion (2.2 percent) at September 30, 2024, compared with December 31, 2023, driven by originations. Residential mortgages originated and placed in the Company's loan portfolio include jumbo mortgages and branch-originated first lien home equity loans to borrowers with high credit quality.
Commercial loans increased $1.8 billion (1.3 percent) at September 30, 2024, compared with December 31, 2023, primarily due to growth in corporate banking.
Credit card loans increased $477 million (1.7 percent) at September 30, 2024, compared with December 31, 2023, primarily driven by higher spend volume.
Commercial real estate loans decreased $2.8 billion (5.3 percent) at September 30, 2024, compared with December 31, 2023, primarily due to payoffs exceeding a reduced level of new originations.
Other retail loans decreased $1.6 billion (3.5 percent) at September 30, 2024, compared with December 31, 2023, primarily due to a decrease in auto loans.
The Company generally retains portfolio loans through maturity; however, the Company's intent may change over time based upon various factors such as ongoing asset/liability management activities, assessment of product profitability, credit risk, liquidity needs, and capital implications. If the Company's intent or ability to hold an existing portfolio loan changes, it is transferred to loans held for sale.
Loans Held for SaleLoans held for sale, consisting primarily of residential mortgages to be sold in the secondary market, were $3.2 billion at September 30, 2024, compared with $2.2 billion at December 31, 2023. The increase in loans held for sale was principally due to a higher level of mortgage loan closings in the third quarter of 2024, compared with the fourth
quarter of 2023. Almost all of the residential mortgage loans the Company originates or purchases for sale follow guidelines that allow the loans to be sold into existing, highly liquid secondary markets, in particular in government agency transactions and to government-sponsored enterprises ("GSEs").
Investment SecuritiesInvestment securities totaled $161.7 billion at September 30, 2024, compared with $153.8 billion at December 31, 2023. The $8.0 billion (5.2 percent) increase was primarily due to net investment purchases driven by balance sheet positioning and liquidity management, along with a $1.2 billion favorable change in net unrealized gains (losses) on available-for-sale investment securities.
The Company's available-for-sale investment securities are carried at fair value with changes in fair value reflected in other comprehensive income (loss) unless a portion of a security's unrealized loss is related to credit and an allowance for credit losses is necessary. At September 30, 2024, the Company's net unrealized losses on available-for-sale investment securities were $5.7 billion ($4.3 billion net-of-tax), compared with $6.9 billion ($5.2 billion net-of-tax) at December 31, 2023. The favorable change in net unrealized gains (losses) was primarily due to increases in the fair value of mortgage-backed securities as a result of changes in interest rates. Gross unrealized losses on available-for-sale investment securities totaled $5.9 billion at September 30, 2024, compared with $7.1 billion at December 31, 2023. When evaluating credit losses, the Company considers various factors such as the nature of the investment security, the credit ratings or financial condition of the issuer, the extent of the unrealized loss, expected cash flows of the underlying collateral, the existence of any government or agency guarantees, and market conditions. At September 30, 2024, the Company had no plans to sell securities with unrealized losses, and believed it was more likely than not that it would not be required to sell such securities before recovery of their amortized cost.
Refer to Notes 3 and 14 in the Notes to Consolidated Financial Statements for further information on investment securities.
U.S. Bancorp
7
 TABLE 4 Investment Securities
September 30, 2024 December 31, 2023
(Dollars in Millions) Amortized Cost Fair Value Weighted- Average Maturity in Years
Weighted- Average Yield(e)
Amortized Cost Fair Value Weighted- Average Maturity in Years
Weighted- Average Yield(e)
Held-to-Maturity
U.S. Treasury and agencies $ 1,296 $ 1,280 1.6 2.85 % $ 1,345 $ 1,310 2.3 2.85 %
Mortgage-backed securities(a)
78,487 69,890 8.3 2.18 82,692 72,770 8.8 2.21
Other 242 245 2.4 2.75 8 8 2.8 2.56
Total held-to-maturity $ 80,025 $ 71,415 8.2 2.20 % $ 84,045 $ 74,088 8.7 2.22 %
Available-for-Sale
U.S. Treasury and agencies $ 31,201 $ 29,399 5.2 2.55 % $ 21,768 $ 19,542 5.9 2.19 %
Mortgage-backed securities(a)
37,935 35,378 6.0 3.42 36,895 33,427 6.3 3.09
Asset-backed securities(a)
6,757 6,788 3.4 5.58 6,713 6,724 2.2 5.33
Obligations of state and political subdivisions(b)(c)
10,732 9,888 9.9 3.25 10,867 9,989 9.9 3.75
Other 248 251 1.7 4.94 24 24 1.7 4.51
Total available-for-sale(d)
$ 86,873 $ 81,704 6.0 3.26 % $ 76,267 $ 69,706 6.3 3.12 %
(a)Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities that take into account anticipated future prepayments.
(b)Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, and yield to maturity if the security is purchased at par or a discount.
(c)Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and the contractual maturity date for securities with a fair value equal to or below par.
(d)Amortized cost excludes portfolio level basis adjustments of $525 million at September 30, 2024 and $335 million at December 31, 2023.
(e)Weighted-average yields for obligations of state and political subdivisions are presented on a fully-taxable equivalent basis based on a federal income tax rate of 21 percent. Yields on investment securities are computed based on amortized cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity.
DepositsTotal deposits were $521.1 billion at September 30, 2024, compared with $512.3 billion at December 31, 2023. The $8.8 billion (1.7 percent) increase in total deposits reflected increases in time deposits and total savings deposits, partially offset by a decrease in noninterest-bearing deposits. Time deposits increased $7.1 billion (13.5 percent) at September 30, 2024, compared with December 31, 2023, driven by higher Consumer and Business Banking balances. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics. Money market deposit balances increased $11.6 billion (5.8 percent), primarily due to higher Consumer and Business Banking, and Wealth, Corporate, Commercial and Institutional Banking balances. Savings account balances decreased $6.2 billion (14.3 percent), driven by lower Consumer and Business Banking balances. Interest checking balances decreased $485 million (0.4 percent), primarily due to lower Consumer and Business Banking balances, partially offset by higher Wealth, Corporate, Commercial and Institutional Banking balances. Noninterest-bearing deposits decreased $3.2 billion (3.5 percent) at September 30, 2024, compared with December 31, 2023, primarily driven by a decrease in Wealth, Corporate, Commercial and Institutional Banking balances due to the impact of higher interest rates.
BorrowingsThe Company utilizes both short-term and long-term borrowings as part of its asset/liability management and funding strategies. Short-term borrowings, which include federal funds purchased, commercial paper, repurchase agreements, borrowings secured by high-grade assets and other short-term borrowings, were $23.7 billion at
September 30, 2024, compared with $15.3 billion at December 31, 2023. The $8.4 billion (55.2 percent) increase in short-term borrowings was primarily due to increases in short-term Federal Home Loan Bank ("FHLB") advances and repurchase agreement balances, partially offset by lower commercial paper balances. Long-term debt was $54.8 billion at September 30, 2024, compared with $51.5 billion at December 31, 2023. The $3.4 billion (6.5 percent) increase was primarily due to $6.1 billion of medium-term note issuances and a $2.5 billion increase in FHLB advances, partially offset by $4.6 billion of medium-term note and $1.0 billion of subordinated note repayments. Refer to the "Liquidity Risk Management" section for discussion of liquidity management of the Company.
Corporate Risk Profile
OverviewManaging risks is an essential part of successfully operating a financial services company. The Company's Board of Directors has approved a risk management framework which establishes governance and risk management requirements for all risk-taking activities. This framework includes Company and business line risk appetite statements which set boundaries for the types and amount of risk that may be undertaken in pursuing business objectives and initiatives. The Board of Directors, primarily through its Risk Management Committee, oversees performance relative to the risk management framework, risk appetite statements, and other policy requirements.
The Executive Risk Committee ("ERC"), which is chaired by the Chief Risk Officer and includes the Chief Executive Officer and other members of the executive management
8
U.S. Bancorp
team, oversees execution against the risk management framework and risk appetite statements. The ERC focuses on current and emerging risks, including strategic and reputation risks, by directing timely and comprehensive actions. Senior operating committees have also been established, each responsible for overseeing a specified category of risk.
The Company's most prominent risk exposures are credit, interest rate, market, liquidity, operational, compliance, strategic, and reputation. Credit risk is the risk of loss associated with a change in the credit profile or the failure of a borrower or counterparty to meet its contractual obligations. Interest rate risk is the current or prospective risk to earnings and capital, or market valuations, arising from the impact of changes in interest rates. Market risk arises from fluctuations in interest rates, foreign exchange rates, and security prices that may result in changes in the values of financial instruments, such as trading and available-for-sale investment securities, mortgage loans held for sale ("MLHFS"), mortgage servicing rights ("MSRs") and derivatives that are accounted for on a fair value basis. Liquidity risk is the risk that financial condition or overall safety and soundness is adversely affected by the Company's inability, or perceived inability, to meet its cash flow obligations in a timely and complete manner in either normal or stressed conditions. Operational risk is the risk to current or projected financial condition and resilience arising from inadequate or failed internal processes or systems, people (including human errors or misconduct), or adverse external events, including the risk of loss resulting from breaches in data security. Operational risk can also include the risk of loss due to failures by third parties with which the Company does business. Compliance risk is the risk that the Company may suffer legal or regulatory sanctions, financial losses, and reputational damage if it fails to adhere to compliance requirements and the Company's compliance policies. Strategic risk is the risk to current or projected financial condition and resilience arising from adverse business decisions, poor implementation of business decisions, or lack of responsiveness to changes in the banking industry and operating environment. Reputation risk is the risk to current or anticipated earnings, capital, or franchise or enterprise value arising from negative public opinion. This risk may impair the Company's competitiveness by affecting its ability to establish new relationships or services, or continue serving existing relationships. In addition to the risks identified above, other risk factors exist that may impact the Company. Refer to "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, for a detailed discussion of these factors.
The Company's Board and management-level governance committees are supported by a "three lines of defense" model for establishing effective checks and balances. The first line of defense, the business lines, manages risks in conformity with established limits and policy requirements. In turn, business line leaders and their risk officers establish programs to ensure conformity with these limits and policy requirements. The second line of defense, which includes the Chief Risk Officer's organization as well as policy and oversight activities of corporate support functions, translates risk appetite and strategy into actionable risk limits and policies. The second line of defense monitors first line of defense conformity with limits and policies and provides reporting and escalation of
emerging risks and other concerns to senior management and the Risk Management Committee of the Board of Directors. The third line of defense, internal audit, is responsible for providing the Audit Committee of the Board of Directors and senior management with independent assessment and assurance regarding the effectiveness of the Company's governance, risk management and control processes.
Management regularly provides reports to the Risk Management Committee of the Board of Directors. The Risk Management Committee discusses with management the Company's risk management performance and provides a summary of key risks to the entire Board of Directors, covering the status of existing matters, areas of potential future concern and specific information on certain types of loss events. The Risk Management Committee considers quarterly reports by management assessing the Company's performance relative to the risk appetite statements and the associated risk limits, including:
•Macroeconomic environment and other qualitative considerations, such as regulatory and compliance changes, litigation developments, geopolitical events, and technology and cybersecurity;
•Credit measures, including adversely rated and nonperforming loans, leveraged transactions, credit concentrations and lending limits;
•Interest rate and market risk, including market value and net income simulation, and trading-related Value at Risk ("VaR");
•Liquidity risk, including funding projections under various stressed scenarios;
•Operational and compliance risk, including losses stemming from events such as fraud, processing errors, control breaches, breaches in data security or adverse business decisions, as well as reporting on technology performance, and various legal and regulatory compliance measures;
•Capital ratios and projections, including regulatory measures and stressed scenarios; and
•Strategic and reputation risk considerations, impacts and responses.
Credit Risk ManagementThe Company's strategy for credit risk management includes well-defined, centralized credit policies, uniform underwriting criteria, and ongoing risk monitoring and review processes for all commercial and consumer credit exposures. The strategy also emphasizes diversification on a geographic, industry and customer level, regular credit examinations and management reviews of loans exhibiting deterioration of credit quality. In evaluating its credit risk, the Company considers changes, if any, in underwriting activities, the loan portfolio composition (including product mix and geographic, industry or customer-specific factors), collateral values, trends in loan performance and macroeconomic factors, such as changes in unemployment rates, gross domestic product levels, inflation, interest rates and consumer bankruptcy filings. The Risk Management Committee oversees the Company's credit risk management process.
In addition, credit quality ratings, as defined by the Company, are an important part of the Company's overall
U.S. Bancorp
9
credit risk management and evaluation of its allowance for credit losses. Loans with a pass rating represent those loans not classified on the Company's rating scale for problem credits, as minimal credit risk has been identified. Loans with a special mention or classified rating (defined by internally assessed rating or exception based monitoring credits in consumer lending and small business loans that are 90 days or more past due and still accruing, nonaccrual loans and loans in a junior lien position that are current but are behind a first lien position on nonaccrual), encompass all loans held by the Company that it considers to have a potential or well-defined weakness that may put full collection of contractual cash flows at risk. The Company's internal credit quality ratings for consumer loans are primarily based on delinquency and nonperforming status. Refer to Note 4 in the Notes to Consolidated Financial Statements for further discussion of the Company's loan portfolios including internal credit quality ratings. In addition, refer to "Management's Discussion and Analysis - Credit Risk Management" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, for a more detailed discussion on credit risk management processes.
The Company manages its credit risk, in part, through diversification of its loan portfolio which is achieved through limit setting by product type criteria, such as industry, geography and identification of credit concentrations. The Company categorizes its loan portfolio into two segments, which is the level at which it develops and documents a systematic methodology to determine the allowance for credit losses. The Company's two loan portfolio segments are commercial lending and consumer lending.
The commercial lending segment includes loans and leases made to small business, middle market, large corporate, commercial real estate, financial institution, non-profit and public sector customers. Key risk characteristics relevant to commercial lending segment loans include the industry and geography of the borrower's business, purpose of the loan, repayment source, borrower's debt capacity and financial flexibility, loan covenants, and nature of pledged collateral, if any, as well as macroeconomic factors such as unemployment rates, gross domestic product levels, corporate bond spreads and long-term interest rates. These risk characteristics, among others, are considered in determining estimates about the likelihood of default by the borrowers and the severity of loss in the event of default. The Company considers these risk characteristics in assigning internal risk ratings to, or forecasting losses on, these loans, which are the significant factors in determining the allowance for credit losses for loans in the commercial lending segment.
The consumer lending segment represents loans and leases made to consumer customers, including residential mortgages, credit card loans, and other retail loans such as revolving consumer lines, auto loans and leases and home equity loans and lines. Key risk characteristics relevant to consumer lending segment loans primarily relate to the borrowers' capacity and willingness to repay and include unemployment rates, consumer bankruptcy filings, household debt levels, real disposable income and other macroeconomic factors, customer payment history and credit scores, effect of higher interest rates on variable rate or adjustable rate loans, and in some cases, updated loan-to-value ("LTV") information
reflecting current market conditions on secured loans. These and other risk characteristics are reflected in forecasts of delinquency levels, bankruptcies and losses which are the primary factors in determining the allowance for credit losses for the consumer lending segment.
The Company further disaggregates its loan portfolio segments into various classes based on their underlying risk characteristics. The two classes within the commercial lending segment are commercial loans and commercial real estate loans. The three classes within the consumer lending segment are residential mortgages, credit card loans and other retail loans.
The Company's consumer lending segment utilizes several distinct business processes and channels to originate consumer credit, including traditional branch lending, mobile and online banking, indirect lending, alliance partnerships and correspondent banks. Each distinct underwriting and origination activity manages unique credit risk characteristics and prices its loan production commensurate with the differing risk profiles.
Residential mortgage originations are generally limited to prime borrowers and are performed through the Company's branches, loan production offices, mobile and online services, and a wholesale network of originators. The Company may retain residential mortgage loans it originates on its balance sheet or sell the loans into the secondary market while retaining the servicing rights and customer relationships. Utilizing the secondary markets enables the Company to effectively reduce its credit and other asset/liability risks. For residential mortgages that are retained in the Company's portfolio and for home equity and second mortgages, credit risk is managed by adherence to LTV and borrower credit criteria during the underwriting process.
The Company estimates updated LTV information on its outstanding residential mortgages quarterly, based on a method that combines automated valuation model updates and relevant home price indices. LTV is the ratio of the loan's outstanding principal balance to the current estimate of property value. For home equity and second mortgages, combined loan-to-value ("CLTV") is the combination of the first mortgage original principal balance and the second lien outstanding principal balance, relative to the current estimate of property value. Certain loans do not have an LTV or CLTV, primarily due to lack of availability of relevant automated valuation model and/or home price indices values, or lack of necessary valuation data on acquired loans.
10
U.S. Bancorp
The following tables provide summary information of residential mortgages and home equity and second mortgages by LTV at September 30, 2024:
Residential Mortgages (Dollars in Millions) Interest Only Amortizing Total Percent of Total
Loan-to-Value
Less than or equal to 80% $ 13,944 $ 92,145 $ 106,089 89.9 %
Over 80% through 90% 168 4,045 4,213 3.6
Over 90% through 100% 21 720 741 .6
Over 100% 8 295 303 .2
No LTV available 1 8 9 -
Loans purchased from GNMA mortgage pools(a)
- 6,679 6,679 5.7
Total $ 14,142 $ 103,892 $ 118,034 100.0 %
(a)Represents loans purchased and loans that could be purchased from Government National Mortgage Association ("GNMA") mortgage pools under delinquent loan repurchase options whose payments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.
Home Equity and Second Mortgages
(Dollars in Millions) 		Lines Loans Total Percent of Total
Loan-to-Value / Combined Loan-to-Value
Less than or equal to 80% $ 10,411 $ 2,372 $ 12,783 95.7 %
Over 80% through 90% 377 70 447 3.3
Over 90% through 100% 55 12 67 .5
Over 100% 39 4 43 .3
No LTV/CLTV available 23 1 24 .2
Total $ 10,905 $ 2,459 $ 13,364 100.0 %
Credit card and other retail loans are diversified across customer segments and geographies. Diversification in the credit card portfolio is achieved with broad customer relationship distribution through the Company's and financial institution partners' branches, retail and affinity partners, and digital channels.
The following table provides a summary of the Company's credit card loan balances disaggregated based upon updated credit score at September 30, 2024:
Percent of Total(a)
Credit score > 660 87 %
Credit score < 660 13
No credit score -
(a)Credit score distribution excludes loans serviced by others.  
Loan DelinquenciesTrends in delinquency ratios are an indicator, among other considerations, of credit risk within the Company's loan portfolios. The entire balance of a loan account is considered delinquent if the minimum payment contractually required to be made is not received by the date specified on the billing statement. Delinquent loans purchased and loans that could be purchased from GNMA mortgage pools under delinquent loan repurchase options, whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, are excluded from delinquency statistics.
Accruing loans 90 days or more past due totaled $738 million at September 30, 2024, compared with $698 million at December 31, 2023. Accruing loans 90 days or more past due are not included in nonperforming assets and continue to accrue interest because they are adequately secured by collateral, are in the process of collection and are reasonably expected to result in repayment or restoration to current status, or are managed in homogeneous portfolios with specified charge-off timeframes adhering to regulatory guidelines. The ratio of accruing loans 90 days or more past due to total loans was 0.20 percent at September 30, 2024 and 0.19 percent at December 31, 2023.
U.S. Bancorp
11
 TABLE 5 Delinquent Loan Ratios as a Percent of Ending Loan Balances
90 days or more past due September 30,
2024 		December 31,
2023
Commercial
Commercial .07 % .09 %
Lease financing - -
Total commercial .07 .09
Commercial Real Estate
Commercial mortgages - -
Construction and development .08 .03
Total commercial real estate .02 .01
Residential Mortgages(a)
.15 .12
Credit Card 1.36 1.31
Other Retail
Retail leasing .05 .05
Home equity and second mortgages .25 .26
Other .11 .11
Total other retail .14 .15
Total loans .20 % .19 %
90 days or more past due and nonperforming loans September 30,
2024 		December 31,
2023
Commercial .51 % .37 %
Commercial real estate 1.85 1.46
Residential mortgages(a)
.28 .25
Credit card 1.36 1.31
Other retail .48 .46
Total loans .68 % .57 %
(a)Delinquent loan ratios exclude $2.0 billion at September 30, 2024 and December 31, 2023, of loans purchased and loans that could be purchased from GNMA mortgage pools under delinquent loan repurchase options whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. Including these loans, the ratio of residential mortgages 90 days or more past due and nonperforming to total residential mortgages was 1.97 percent at September 30, 2024, and 2.00 percent at December 31, 2023.
12
U.S. Bancorp
The following table provides summary delinquency information for residential mortgages, credit card and other retail loans included in the consumer lending segment:
Amount As a Percent of Ending Loan Balances
(Dollars in Millions) September 30,
2024 		December 31,
2023 		September 30,
2024 		December 31,
2023
Residential Mortgages(a)
30-89 days $ 171 $ 169 .14 % .15 %
90 days or more 179 136 .15 .12
Nonperforming 154 158 .13 .14
Total $ 504 $ 463 .43 .40
Credit Card
30-89 days $ 426 $ 406 1.47 1.42
90 days or more 396 375 1.36 1.31
Nonperforming - - - -
Total $ 822 $ 781 2.83 2.73
Other Retail
Retail Leasing
30-89 days $ 21 $ 25 .52 .60
90 days or more 2 2 .05 .05
Nonperforming 8 8 .20 .19
Total $ 31 $ 35 .77 .85
Home Equity and Second Mortgages
30-89 days $ 63 $ 77 .47 .59
90 days or more 33 34 .25 .26
Nonperforming 119 113 .89 .87
Total $ 215 $ 224 1.61 1.72
Other(b)
30-89 days $ 138 $ 176 .54 .65
90 days or more 27 31 .11 .11
Nonperforming 18 17 .07 .06
Total $ 183 $ 224 .72 .82
(a)Excludes $607 million of loans 30-89 days past due and $2.0 billion of loans 90 days or more past due at September 30, 2024, purchased and that could be purchased from GNMA mortgage pools under delinquent loan repurchase options that continue to accrue interest, compared with $595 million and $2.0 billion at December 31, 2023, respectively.
(b)Includes revolving credit, installment and automobile loans.
Modified LoansIn certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term. In most cases the modification is either a concessionary reduction in interest rate, extension of the maturity date or other concessionary modification of loan terms that would otherwise not be considered.
Modified loans accrue interest if the borrower complies with the revised terms and conditions and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles, which is generally six months or greater.
The Company continues to work with borrowers who are experiencing financial difficulties to modify their loans. Many of the Company's loan modifications are determined on a case-by-case basis in connection with ongoing loan collection processes. The modifications vary within each of the Company's loan classes. Commercial lending segment modifications generally include extensions of the maturity date and may be accompanied by an increase or decrease to the interest rate. The Company may also work with the borrower to make other changes to the loan to mitigate losses, such as
obtaining additional collateral and/or guarantees to support the loan.
The Company has also implemented certain residential mortgage loan modification programs. The Company modifies residential mortgage loans under Federal Housing Administration, United States Department of Veterans Affairs, and its own internal programs. Under these programs, the Company offers qualifying homeowners the opportunity to permanently modify their loan and achieve more affordable monthly payments. These modifications may include adjustments to interest rates, conversion of adjustable rates to fixed rates, extensions of maturity dates or deferrals of payments, capitalization of accrued interest and/or outstanding advances, or in limited situations, partial forgiveness of loan principal. In some instances, participation in residential mortgage loan modification programs requires the customer to complete a short-term trial period. A permanent loan modification is contingent on the customer successfully completing the trial period arrangement, and the loan documents are not modified until that time.
Credit card and other retail loan modifications are generally part of distinct modification programs providing
U.S. Bancorp
13
customers modification solutions over a specified time period, generally up to 60 months.
The Company also makes short-term modifications, in limited circumstances, to assist borrowers experiencing temporary hardships. Short-term consumer lending modification programs include payment reductions, deferrals of up to three past due payments, and the ability to return to current status if the borrower makes required payments. The Company may also make short-term modifications to commercial lending loans, with the most common modification being an extension of the maturity date of three months or less. Such extensions generally are used when the maturity date is imminent and the borrower is experiencing some level of financial stress, but the Company believes the borrower will pay all contractual amounts owed.
Nonperforming AssetsThe level of nonperforming assets represents another indicator of the Company's risk within the loan portfolio. Nonperforming assets include nonaccrual loans, modified loans not performing in accordance with modified terms and not accruing interest, modified loans that have not met the performance period required to return to accrual status, other real estate owned ("OREO") and other nonperforming assets owned by the Company. Interest
payments collected from assets on nonaccrual status are generally applied against the principal balance and not recorded as income. However, interest income may be recognized for interest payments received if the remaining carrying amount of the loan is believed to be collectible.
At September 30, 2024, total nonperforming assets were $1.8 billion, compared to $1.5 billion at December 31, 2023. The $354 million (23.7 percent) increase in nonperforming assets was primarily due to higher nonperforming commercial and commercial real estate loans, including the commercial real estate office sector. Office nonperforming loans as a percent of total office loans increased to 12.1 percent at September 30, 2024, compared to 7.6 percent at December 31, 2023. The ratio of total nonperforming assets to total loans and other real estate was 0.49 percent at September 30, 2024, compared with 0.40 percent at December 31, 2023.
OREO was $21 million at September 30, 2024, compared with $26 million at December 31, 2023, and was related to foreclosed properties that previously secured loan balances. These balances exclude foreclosed GNMA loans whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.
14
U.S. Bancorp
TABLE 6
Nonperforming Assets(a)
(Dollars in Millions) September 30,
2024 		December 31,
2023
Commercial
Commercial $ 560 $ 349
Lease financing 25 27
Total commercial 585 376
Commercial Real Estate
Commercial mortgages 853 675
Construction and development 72 102
Total commercial real estate 925 777
Residential Mortgages(b)
154 158
Credit Card - -
Other Retail
Retail leasing 8 8
Home equity and second mortgages 119 113
Other 18 17
Total other retail 145 138
Total nonperforming loans(1)
1,809 1,449
Other Real Estate(c)
21 26
Other Assets 18 19
Total nonperforming assets $ 1,848 $ 1,494
Accruing loans 90 days or more past due(b)
$ 738 $ 698
Period-end loans(2)
$ 374,164 $ 373,835
Nonperforming loans to total loans(1)/(2)
.48 % .39 %
Nonperforming assets to total loans plus other real estate(c)
.49 % .40 %
Changes in Nonperforming Assets
(Dollars in Millions) Commercial and Commercial Real Estate Residential Mortgages, Credit Card and Other Retail Total
Balance December 31, 2023 $ 1,155 $ 339 $ 1,494
Additions to nonperforming assets
New nonaccrual loans and foreclosed properties 1,229 146 1,375
Advances on loans 21 1 22
Total additions 1,250 147 1,397
Reductions in nonperforming assets
Paydowns, payoffs (386) (38) (424)
Net sales (7) (23) (30)
Return to performing status (107) (69) (176)
Charge-offs(d)
(393) (20) (413)
Total reductions (893) (150) (1,043)
Net additions to (reductions in) nonperforming assets 357 (3) 354
Balance September 30, 2024 $ 1,512 $ 336 $ 1,848
(a)Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due.
(b)Excludes $2.0 billion at September 30, 2024 and December 31, 2023, of loans purchased and loans that could be purchased from GNMA mortgage pools under delinquent loan repurchase options that are 90 days or more past due that continue to accrue interest, as their repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.
(c)Foreclosed GNMA loans of $47 million at September 30, 2024 and December 31, 2023, continue to accrue interest and are recorded as other assets and excluded from nonperforming assets because they are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.
(d)Charge-offs exclude actions for certain card products and loan sales that were not classified as nonperforming at the time the charge-off occurred.
U.S. Bancorp
15
TABLE 7 Net Charge-offs as a Percent of Average Loans Outstanding
Three Months Ended September 30
2024 2023
(Dollars in Millions) Average Loan Balance Net Charge-offs Percent Average Loan Balance Net Charge-offs Percent
Commercial
Commercial $ 128,979 $ 139 .43 % $ 130,415 $ 86 .26 %
Lease financing 4,159 8 .77 4,305 6 .55
Total commercial 133,138 147 .44 134,720 92 .27
Commercial Real Estate
Commercial mortgages 40,343 69 .68 42,665 49 .46
Construction and development 11,111 1 .04 11,588 - -
Total commercial real estate 51,454 70 .54 54,253 49 .36
Residential Mortgages 117,559 (3) (.01) 114,627 (3) (.01)
Credit Card 28,994 299 4.10 26,883 220 3.25
Other Retail
Retail leasing 4,088 5 .49 4,436 2 .18
Home equity and second mortgages 13,239 (1) (.03) 12,809 1 .03
Other 25,598 47 .73 29,149 59 .80
Total other retail 42,925 51 .47 46,394 62 .53
Total loans $ 374,070 $ 564 .60 % $ 376,877 $ 420 .44 %
Nine Months Ended September 30
2024 2023
(Dollars in Millions) Average Loan Balance Net Charge-offs Percent Average Loan Balance Net Charge-offs Percent
Commercial
Commercial $ 128,582 $ 383 .40 % $ 131,777 $ 215 .22 %
Lease financing 4,167 23 .74 4,382 14 .43
Total commercial 132,749 406 .41 136,159 229 .22
Commercial Real Estate
Commercial mortgages 40,918 119 .39 43,165 190 .59
Construction and development 11,339 8 .09 11,758 2 .02
Total commercial real estate 52,257 127 .32 54,923 192 .47
Residential Mortgages 116,563 (7) (.01) 116,167 110 .13
Credit Card 28,430 910 4.28 26,171 594 3.03
Other Retail
Retail leasing 4,118 13 .42 4,832 4 .11
Home equity and second mortgages 13,092 (2) (.02) 12,779 (1) (.01)
Other 26,069 143 .73 33,081 314 1.27
Total other retail 43,279 154 .48 50,692 317 .84
Total loans $ 373,278 $ 1,590 .57 % $ 384,112 $ 1,442 .50 %
Analysis of Loan Net Charge-offsTotal loan net charge-offs were $564 million for the third quarter of 2024, compared with $420 million for the third quarter of 2023. The increase reflected higher credit card, commercial and commercial real estate loan net charge-offs. Total loan net charge-offs were $1.6 billion for the first nine months of 2024, compared with $1.4 billion for the first nine months of 2023, reflecting higher
credit card and commercial loan net charge-offs in the current year, partially offset by the impacts in the prior year of charge-offs on acquired loans and charge-offs related to balance sheet repositioning and capital management actions. The ratio of total loan net charge-offs to average loans outstanding on an annualized basis for the third quarter and first nine months of 2024 was 0.60 percent and 0.57 percent, respectively,
16
U.S. Bancorp
compared with 0.44 percent and 0.50 percent, respectively, for the same periods of 2023.
Analysis and Determination of the Allowance for Credit Losses The allowance for credit losses is established for current expected credit losses on the Company's loan and lease portfolio, including unfunded credit commitments. The allowance considers expected losses for the remaining lives of the applicable assets, inclusive of expected recoveries. The allowance for credit losses is increased through provisions charged to earnings and reduced by net charge-offs.
Management evaluates the appropriateness of the allowance for credit losses on a quarterly basis. Multiple economic scenarios are considered over a three-year reasonable and supportable forecast period, which includes increasing consideration of historical loss experience over years two and three. These economic scenarios are constructed with interrelated projections of multiple economic variables, and loss estimates are produced that consider the historical correlation of those economic variables with credit losses. After the forecast period, the Company fully reverts to long-term historical loss experience, adjusted for prepayments and characteristics of the current loan and lease portfolio, to estimate losses over the remaining life of the portfolio. The economic scenarios are updated at least quarterly and are designed to provide a range of reasonable estimates from better to worse than current expectations. Scenarios are weighted based on the Company's expectation of economic conditions for the foreseeable future and reflect significant judgment and consideration of economic forecast uncertainty. Final loss estimates also consider factors affecting credit losses not reflected in the scenarios, due to the unique aspects of current conditions and expectations. These factors may include, but are not limited to, changes in borrower behavior or conditions in specific lending segments, loan servicing practices, regulatory guidance, and/or fiscal and monetary policy actions.
Because business processes and credit risks associated with unfunded credit commitments are essentially the same as for loans, the Company utilizes similar processes to estimate its liability for unfunded credit commitments, which is included in other liabilities in the Consolidated Balance Sheet. Both the allowance for loan losses and the liability for unfunded credit commitments are included in the Company's analysis of credit losses and reported reserve ratios.
The allowance recorded for credit losses utilizes forward-looking expected loss models to consider a variety of factors affecting lifetime credit losses. These factors include, but are not limited to, macroeconomic variables such as unemployment rates, real estate prices, gross domestic product levels, inflation, interest rates, and corporate bond spreads, as well as loan and borrower characteristics, such as internal risk ratings on commercial loans and consumer credit scores, delinquency status, collateral type and available valuation information, consideration of end-of-term losses on lease residuals, and the remaining term of the loan, adjusted for expected prepayments. For each loan portfolio, including those loans modified under various loan modification programs, model estimates are adjusted as necessary to consider any relevant changes in portfolio composition, lending policies, underwriting standards, risk management practices, economic conditions or other factors that may affect
the accuracy of the model. Expected credit loss estimates also include consideration of expected cash recoveries on loans previously charged-off or expected recoveries on collateral-dependent loans where recovery is expected through sale of the collateral at fair value less selling costs. Where loans do not exhibit similar risk characteristics, an individual analysis is performed to consider expected credit losses.
For loans and leases that do not share similar risk characteristics with a pool of loans, the Company establishes individually assessed reserves. Reserves for individual commercial nonperforming loans greater than $5 million in the commercial lending segment are analyzed utilizing expected cash flows discounted using the original effective interest rate, the observable market price of the loan, or the fair value of the collateral, less selling costs, for collateral-dependent loans as appropriate.
When evaluating the appropriateness of the allowance for credit losses for any loans and lines in a junior lien position, the Company considers the delinquency and modification status of the first lien, based on either servicing data for first lien accounts serviced by the Company or the status of first lien mortgage accounts reported on customer credit bureau files when the first lien is not serviced by the Company. This information is considered within the overall assessment of economic conditions, problem loans, recent loss experience and other factors in determining the allowance for credit losses.
When a loan portfolio is purchased, the acquired loans are divided into those considered purchased with more than insignificant credit deterioration ("PCD") and those not considered PCD. An allowance is established for each population and considers product mix, risk characteristics of the portfolio and delinquency status and refreshed LTV ratios when possible. PCD loans also consider whether the loan has experienced a charge-off, bankruptcy or significant deterioration since origination. The allowance established for purchased loans not considered PCD is recognized through provision expense upon acquisition, whereas the allowance established for loans considered PCD at acquisition is offset by an increase in the basis of the acquired loans. Any subsequent increases and decreases in the allowance related to purchased loans, regardless of PCD status, are recognized through provision expense, with charge-offs charged to the allowance. The Company had a total net book balance of $2.7 billion of PCD loans, primarily related to the MUB acquisition, included in its loan portfolio at September 30, 2024.
The Company's methodology for determining the appropriate allowance for credit losses also considers the imprecision inherent in the methodologies used and allocated to the various loan portfolios. As a result, amounts determined under the methodologies described above are adjusted by management to consider the potential impact of other qualitative factors not captured in quantitative model adjustments which include, but are not limited to, the following: model imprecision, imprecision in economic scenario assumptions, and emerging risks related to either changes in the economic environment that are affecting specific portfolios, or changes in portfolio concentrations over time that may affect model performance. The consideration of these items results in adjustments to allowance amounts included in
U.S. Bancorp
17
the Company's allowance for credit losses for each loan portfolio.
Although the Company determined the amount of each element of the allowance separately and considers this process to be an important credit management tool, the entire allowance for credit losses is available for the entire loan portfolio. The actual amount of losses can vary significantly from the estimated amounts.
At September 30, 2024, the allowance for credit losses was $7.9 billion, compared with an allowance of $7.8 billion at December 31, 2023. The $88 million (1.1 percent) increase in the allowance for credit losses at September 30, 2024, compared with December 31, 2023, was primarily driven by credit migration in consumer and small business cards and portfolio growth. The Company continued to monitor economic uncertainty related to interest rates, inflationary pressures and other economic factors that may affect the financial strength of corporate and consumer borrowers. The Company also continued to monitor the commercial real estate office portfolio and has maintained an allowance to loan coverage ratio of over 10 percent at September 30, 2024 and December 31, 2023. In addition to these broad economic factors, expected loss estimates considered various factors including customer specific information impacting changes in risk ratings, projected delinquencies and the impact of economic deterioration on selected borrowers' liquidity and ability to repay.
The ratio of the allowance for credit losses to period-end loans was 2.12 percent at September 30, 2024, compared with 2.10 percent at December 31, 2023. The ratio of the allowance for credit losses to nonperforming loans was 438 percent at September 30, 2024, compared with 541 percent at December 31, 2023. The ratio of the allowance for credit losses to annualized loan net charge-offs was 353 percent at September 30, 2024, compared with 411 percent of full year 2023 net charge-offs at December 31, 2023.
The allowance for credit losses related to commercial lending segment loans increased $24 million during the first nine months of 2024, reflecting credit downgrades in
commercial and commercial real estate portfolios, partially offset by reduced portfolio exposures.
The allowance for credit losses related to consumer lending segment loans increased $64 million during the first nine months of 2024, due to credit migration in credit card portfolios, partially offset by favorability in residential real estate secured portfolios related to strength in home values.
Economic conditions considered in estimating the allowance for credit losses at September 30, 2024 included changes in projected gross domestic product and unemployment levels. These factors were evaluated through a combination of quantitative calculations using multiple economic scenarios and additional qualitative assessments that considered the degree of economic uncertainty in the current environment. The projected unemployment rates for 2024 considered in the estimate ranged from 3.6 percent to 6.2 percent.
The following table summarizes the baseline forecast for key economic variables the Company used in its estimate of the allowance for credit losses at September 30, 2024 and December 31, 2023:
September 30,
2024 		December 31,
2023
United States unemployment rate for the three months ending(a)
September 30, 2024 4.2 % 4.0 %
December 31, 2024 4.3 4.0
September 30, 2025 4.4 4.1
United States real gross domestic product for the three months ending(b)
September 30, 2024 2.2 % 1.1 %
December 31, 2024 1.9 1.3
September 30, 2025 1.7 1.8
(a)Reflects quarterly average of forecasted reported United States unemployment rate.
(b)Reflects year-over-year growth rates.
18
U.S. Bancorp
TABLE 8 Summary of Allowance for Credit Losses
Three Months Ended
September 30 		Nine Months Ended
September 30
(Dollars in Millions) 2024 2023 2024 2023
Balance at beginning of period $ 7,934 $ 7,695 $ 7,839 $ 7,404
Change in accounting principle(a)
- - - (62)
Allowance for acquired credit losses(b)
- - - 127
Charge-Offs
Commercial
Commercial 155 102 455 261
Lease financing 10 8 29 22
Total commercial 165 110 484 283
Commercial real estate
Commercial mortgages 79 51 144 203
Construction and development 1 - 8 2
Total commercial real estate 80 51 152 205
Residential mortgages 3 1 10 126
Credit card 347 259 1,042 716
Other retail
Retail leasing 8 5 23 13
Home equity and second mortgages 2 5 7 10
Other 64 77 198 379
Total other retail 74 87 228 402
Total charge-offs(c)
669 508 1,916 1,732
Recoveries
Commercial
Commercial 16 16 72 46
Lease financing 2 2 6 8
Total commercial 18 18 78 54
Commercial real estate
Commercial mortgages 10 2 25 13
Construction and development - - - -
Total commercial real estate 10 2 25 13
Residential mortgages 6 4 17 16
Credit card 48 39 132 122
Other retail
Retail leasing 3 3 10 9
Home equity and second mortgages 3 4 9 11
Other 17 18 55 65
Total other retail 23 25 74 85
Total recoveries 105 88 326 290
Net Charge-Offs
Commercial
Commercial 139 86 383 215
Lease financing 8 6 23 14
Total commercial 147 92 406 229
Commercial real estate
Commercial mortgages 69 49 119 190
Construction and development 1 - 8 2
Total commercial real estate 70 49 127 192
Residential mortgages (3) (3) (7) 110
Credit card 299 220 910 594
Other retail
Retail leasing 5 2 13 4
Home equity and second mortgages (1) 1 (2) (1)
Other 47 59 143 314
Total other retail 51 62 154 317
Total net charge-offs 564 420 1,590 1,442
Provision for credit losses(d)
557 515 1,678 1,763
Balance at end of period $ 7,927 $ 7,790 $ 7,927 $ 7,790
Components
Allowance for loan losses $ 7,560 $ 7,218
Liability for unfunded credit commitments 367 572
Total allowance for credit losses(1)
$ 7,927 $ 7,790
Period-end loans(2)
$ 374,164 $ 375,234
Nonperforming loans(3)
1,809 1,267
Allowance for Credit Losses as a Percentage of
Period-end loans(1)/(2)
2.12 % 2.08 %
Nonperforming loans(1)/(3)
438 615
Nonperforming and accruing loans 90 days or more past due 311 424
Nonperforming assets 429 595
Annualized net charge-offs 353 468
(a)Effective January 1, 2023, the Company adopted accounting guidance which removed the separate recognition and measurement of troubled debt restructurings.
(b)Allowance for purchased credit deteriorated and charged-off loans acquired from MUB.
(c)Includes $91 million of charge-offs in the first quarter of 2023 related to uncollectible amounts on acquired loans. Includes $309 million of charge-offs in the second quarter of 2023 related to balance sheet repositioning and capital management actions.
(d)Includes provision for credit losses of $243 million related to balance sheet repositioning and capital management actions in the second quarter of 2023.
U.S. Bancorp
19
Residual Value Risk ManagementThe Company manages its risk to changes in the residual value of leased vehicles, office and business equipment, and other assets through disciplined residual valuation at the inception of a lease, diversification of its leased assets, regular residual asset valuation reviews and monitoring of residual value gains or losses upon the disposition of assets. As of September 30, 2024, no significant change in the amount of residual values or concentration of the portfolios had occurred since December 31, 2023. Refer to "Management's Discussion and Analysis - Residual Value Risk Management" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, for further discussion on residual value risk management.
Operational Risk Management The Company operates in many different businesses in diverse markets and relies on the ability of its employees and systems to process a high number of transactions. Operational risk is inherent in all business activities, and the management of this risk is important to the achievement of the Company's objectives. Business lines have direct and primary responsibility and accountability for identifying, controlling, and monitoring operational risks embedded in their business activities, including those additional or increased risks created by economic and financial disruptions.
The Company maintains a system of controls with the objective of providing proper transaction authorization and execution, proper system operations, proper oversight of third parties with whom it does business, safeguarding of assets from misuse or theft, and ensuring the reliability and security of financial and other data. The Company also maintains a cybersecurity risk program which provides centralized planning and management of related and interdependent work with a focus on risks from cybersecurity threats. The Company's cybersecurity risk program is integrated into the Company's overall business and operational strategies and requires that the Company allocate appropriate resources to maintain the program. Refer to "Management's Discussion and Analysis - Operational Risk Management" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, for further discussion on operational risk management.
Compliance Risk ManagementThe Company may suffer legal or regulatory sanctions, material financial loss, or damage to its reputation if it fails to comply with laws, regulations, rules, standards of good practice, and codes of conduct, including those related to compliance with Bank Secrecy Act/anti-money laundering requirements, sanctions compliance requirements as administered by the Office of Foreign Assets Control, consumer protection and other requirements. The Company has controls and processes in place for the assessment, identification, monitoring, management and reporting of compliance risks and issues, including those created or increased by economic and financial disruptions. Refer to "Management's Discussion and Analysis - Compliance Risk Management" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, for further discussion on compliance risk management.
Interest Rate Risk ManagementIn the banking industry, changes in interest rates are a significant risk that can impact
earnings as well as the safety and soundness of an entity. The Company manages its exposure to changes in interest rates through asset and liability management activities within guidelines established by its Asset Liability Management Committee ("ALCO") and approved by the Board of Directors. The ALCO has the responsibility for approving and overseeing compliance with the ALCO management policies, including interest rate risk exposure. One way the Company measures and analyzes its interest rate risk is through analysis of net interest income sensitivities across a range of scenarios.
Net interest income sensitivity analysis includes evaluating all of the Company's assets and liabilities and off-balance sheet instruments, inclusive of new business activity, under various interest rate scenarios that differ in the direction, amount and speed of change over time, as well as the overall shape of the yield curve. The balance sheet includes assumptions regarding loan and deposit volumes and pricing which are based on quantitative analysis, historical trends and management outlook and strategies. Deposit balances, mix and pricing are dynamic across interest rate scenarios and will change both with the absolute level of rates as well as the assumed interest rate shock. Deposit pricing changes, commonly referred to as the deposit beta, represents the amount by which the Company's interest-bearing deposit rates have or will change given a change in short-term market rates. Base case and net interest income sensitivities are reviewed monthly by the ALCO and are used to guide asset/liability management strategies.
The Company also manages interest rate sensitivity by utilizing market value of equity modeling, which measures the degree to which the market values of the Company's assets and liabilities and off-balance sheet instruments will change given a change in interest rates. Management measures the impact of changes in market values due to interest rates under a number of scenarios, including immediate and sustained parallel shifts, and flattening or steepening of the yield curve. The Company manages its interest rate risk position by holding assets with desired interest rate risk characteristics on its balance sheet, executing certain pricing strategies for loans and deposits and deploying investment portfolio, funding and derivative strategies.
Table 9 summarizes the projected impact to net interest income over the next 12 months of various potential interest rate changes. The sensitivity of the projected impact to net interest income over the next 12 months is dependent on balance sheet growth, product mix, deposit behavior, pricing and funding decisions. From December 31, 2023 to September 30, 2024, interest rate sensitivity to higher rates decreased, primarily due to deposit migration into higher yielding products. As of September 30, 2024, the Company is relatively neutral to further parallel upward moves in interest rates while the sensitivity to lower rates has improved driven by the projected repricing of the deposit portfolio in declining rate scenarios. While the Company utilizes models and assumptions based on historical information and expected behaviors, actual outcomes could vary significantly. For larger interest rate shock scenarios, mortgage assets and deposits are expected to behave in a non-linear manner resulting in varying impacts to net interest income in those scenarios.
20
U.S. Bancorp
TABLE 9 Sensitivity of Net Interest Income
September 30, 2024 December 31, 2023
Down 50 bps Immediate Up 50 bps Immediate Down 200 bps Gradual Up 200 bps Gradual Down 50 bps Immediate Up 50 bps Immediate Down 200 bps Gradual Up 200 bps Gradual
Net interest income .06 % .21 % .52 % (.38) % (.19) % .71 % (.15) % .91 %
Use of Derivatives to Manage Interest Rate and Other Risks To manage the sensitivity of earnings and capital to interest rate, prepayment, credit, price and foreign currency fluctuations (asset and liability management positions), the Company enters into derivative transactions. The Company uses derivatives for asset and liability management purposes primarily in the following ways:
•To convert fixed-rate debt and available-for-sale investment securities from fixed-rate payments to floating-rate payments;
•To convert floating-rate loans and debt from floating-rate payments to fixed-rate payments;
•To mitigate changes in value of the Company's unfunded mortgage loan commitments, funded MLHFS and MSRs;
•To mitigate remeasurement volatility of foreign currency denominated balances; and
•To mitigate the volatility of the Company's net investment in foreign operations driven by fluctuations in foreign currency exchange rates.
In addition, the Company enters into interest rate, foreign exchange and commodity derivative contracts to support the business requirements of its customers (customer-related positions). The Company minimizes the market, funding and liquidity risks of customer-related positions by either entering into similar offsetting positions with broker-dealers, or on a portfolio basis by entering into other derivative or non-derivative financial instruments that partially or fully offset the exposure from these customer-related positions. The Company may enter into derivative contracts that are either exchange-traded, centrally cleared through clearinghouses or over-the-counter. The Company does not utilize derivatives for speculative purposes.
The Company does not designate all of the derivatives that it enters into for risk management purposes as accounting hedges because of the inefficiency of applying the accounting requirements and may instead elect fair value accounting for the related hedged items. In particular, the Company enters into interest rate swaps, swaptions, forward commitments to buy to-be-announced securities ("TBAs"), U.S. Treasury and Eurodollar futures and options on U.S. Treasury futures to mitigate fluctuations in the value of its MSRs, but does not designate those derivatives as accounting hedges. Refer to Note 6 of the Notes to Consolidated Financial Statements for additional information regarding MSRs, including management of the changes in fair value.
Additionally, the Company uses forward commitments to sell TBAs and other commitments to sell residential mortgage loans at specified prices to economically hedge the interest rate risk in its residential mortgage loan production activities. The forward commitments to sell and the unfunded mortgage loan commitments on loans intended to be sold are considered derivatives under the accounting guidance related
to accounting for derivative instruments and hedging activities. The Company has elected the fair value option for the MLHFS.
Derivatives are subject to credit risk associated with counterparties to the contracts. Credit risk associated with derivatives is measured by the Company based on the probability of counterparty default. The Company manages the credit risk of its derivative positions by diversifying its positions among various counterparties, by entering into master netting arrangements, and, where possible, by requiring collateral arrangements. The Company may also transfer counterparty credit risk related to interest rate swaps to third parties through the use of risk participation agreements. In addition, certain interest rate swaps, interest rate forwards and credit contracts are required to be centrally cleared through clearinghouses to further mitigate counterparty credit risk. The Company also mitigates the credit risk of its derivative positions, as well as the credit risk on loans or lending portfolios, through the use of credit contracts.
For additional information on derivatives and hedging activities, refer to Notes 12 and 13 in the Notes to Consolidated Financial Statements.
Market Risk ManagementIn addition to interest rate risk, the Company is exposed to other forms of market risk, principally related to trading activities which support customers' strategies to manage their own foreign currency, interest rate risk, commodities risk and funding activities. For purposes of its internal capital adequacy assessment process, the Company considers risk arising from its trading activities, as well as the remeasurement volatility of foreign currency denominated balances included on its Consolidated Balance Sheet (collectively, "Covered Positions"), employing methodologies consistent with the requirements of regulatory rules for market risk. The Company's Market Risk Committee ("MRC"), within the framework of the ALCO, oversees market risk management. The MRC monitors and reviews the Company's Covered Positions and establishes policies for market risk management, including exposure limits for each portfolio. The Company uses a VaR approach to measure general market risk. Theoretically, VaR represents the statistical risk of loss the Company has to adverse market movements over a one-day time horizon. The Company uses the Historical Simulation method to calculate VaR for its Covered Positions measured at the ninety-ninth percentile using a one-year look-back period for distributions derived from past market data. The market factors used in the calculations include those pertinent to market risks inherent in the underlying trading portfolios, principally those that affect the Company's corporate bond trading business, foreign currency transaction business, client derivatives business, loan trading business and municipal securities business, as well as those inherent in the Company's foreign denominated balances and the derivatives used to mitigate the related measurement volatility. On average, the Company expects the
U.S. Bancorp
21
one-day VaR to be exceeded by actual losses two to three times per year related to these positions. The Company monitors the accuracy of internal VaR models and modeling processes by back-testing model performance, regularly updating the historical data used by the VaR models and regular model validations to assess the accuracy of the models' input, processing, and reporting components. All models are required to be independently reviewed and approved prior to being placed in use. If the Company were to experience market losses in excess of the estimated VaR more often than expected, the VaR models and associated assumptions would be analyzed and adjusted.
The average, high, low and period-end one-day VaR amounts for the Company's Covered Positions were as follows:
Nine Months Ended September 30
(Dollars in Millions) 		2024 2023
Average $ 3 $ 4
High 4 7
Low 2 3
Period-end 3 3
The Company did not experience any actual losses for its combined Covered Positions that exceeded VaR during the nine months ended September 30, 2024 and 2023. The Company stress tests its market risk measurements to provide management with perspectives on market events that may not be captured by its VaR models, including worst case historical market movement combinations that have not necessarily occurred on the same date.
The Company calculates Stressed VaR using the same underlying methodology and model as VaR, except that a historical continuous one-year look-back period is utilized that reflects a period of significant financial stress appropriate to the Company's Covered Positions. The period selected by the Company includes the significant market volatility of the last four months of 2008.
The average, high, low and period-end one-day Stressed VaR amounts for the Company's Covered Positions were as follows:
Nine Months Ended September 30
(Dollars in Millions) 		2024 2023
Average $ 10 $ 11
High 16 16
Low 7 6
Period-end 11 7
Valuations of positions in client derivatives and foreign currency activities are based on discounted cash flow or other valuation techniques using market-based assumptions. These valuations are compared to third-party quotes or other market prices to determine if there are significant variances. Significant variances are approved by senior management in the Company's corporate functions. Valuation of positions in the corporate bond trading, loan trading and municipal securities businesses are based on trader marks. These trader marks are evaluated against third-party prices, with significant variances approved by senior management in the Company's corporate functions.
The Company also measures the market risk of its hedging activities related to residential MLHFS and MSRs using the Historical Simulation method. The VaRs are measured at the
ninety-ninth percentile and employ factors pertinent to the market risks inherent in the valuation of the assets and hedges. A one-year look-back period is used to obtain past market data for the models.
The average, high and low VaR amounts for the residential MLHFS and related hedges and the MSRs and related hedges were as follows:
Nine Months Ended September 30
(Dollars in Millions) 		2024 2023
Residential Mortgage Loans Held For Sale and Related Hedges
Average $ 1 $ 1
High 3 2
Low 1 -
Mortgage Servicing Rights and Related Hedges
Average $ 2 $ 8
High 3 12
Low 1 2
Liquidity Risk ManagementThe Company's liquidity risk management process is designed to identify, measure, and manage the Company's funding and liquidity risk to meet its daily funding needs and to address expected and unexpected changes in its funding requirements. The Company engages in various activities to manage its liquidity risk. These activities include diversifying its funding sources, stress testing, and holding readily-marketable assets which can be used as a source of liquidity if needed. In addition, the Company's profitable operations, sound credit quality and strong credit ratings and capital position have enabled it to develop a large and reliable base of core deposit funding within its market areas and in domestic and global capital markets.
The Company's Board of Directors approves the Company's liquidity policy. The Risk Management Committee of the Company's Board of Directors oversees the Company's liquidity risk management process and approves a contingency funding plan. The ALCO reviews the Company's liquidity policy and limits, and regularly assesses the Company's ability to meet funding requirements arising from adverse company-specific or market events.
The Company regularly projects its funding needs under various stress scenarios and maintains a contingency funding plan consistent with the Company's access to diversified sources of contingent funding. The Company maintains a substantial level of total available liquidity in the form of on-balance sheet and off-balance sheet funding sources. These liquidity sources include cash at the Federal Reserve Bank and certain European central banks, unencumbered liquid assets, and capacity to borrow from the FHLB and at the Federal Reserve Bank's Discount Window. Unencumbered liquid assets in the Company's investment securities portfolio provide asset liquidity through the Company's ability to sell the securities or pledge and borrow against them. Refer to Note 3 of the Notes to Consolidated Financial Statements and "Balance Sheet Analysis" for further information on investment securities maturities and trends. Asset liquidity is further enhanced by the Company's practice of pledging loans to
22
U.S. Bancorp
access secured borrowing facilities through the FHLB and Federal Reserve Bank.
The following table summarizes the Company's total available liquidity from on-balance sheet and off-balance sheet funding sources:
(Dollars in Millions) September 30,
2024 		December 31,
2023
Cash held at the Federal Reserve
Bank and other central banks
$ 65,055 $ 52,403
Available investment securities 74,736 34,220
Borrowing capacity from the
Federal Reserve Bank and
FHLB
161,380 215,763
Total available liquidity $ 301,171 $ 302,386
Borrowing capacity from the Federal Reserve Bank and FHLB declined from December 31, 2023 to September 30, 2024 primarily due to the expiration of the Federal Reserve Bank's Bank Term Funding Program ("BTFP"). This decline was partially offset by an increase in available investment securities as a portion of the securities previously pledged through the BTFP were made available for sale or pledging.
The Company's diversified deposit base provides a sizeable source of relatively stable and low-cost funding, while reducing the Company's reliance on the wholesale markets. Total deposits were $521.1 billion at September 30, 2024, compared with $512.3 billion at December 31, 2023. Average noninterest-bearing deposit balances for the third quarter of 2024 decreased 17.0 percent and 3.0 percent compared with the third quarter of 2023 and second quarter of 2024, respectively, reflecting the shift of noninterest-bearing balances into interest-bearing deposit products resulting from the higher interest rate environment. The decrease from the second quarter of 2024 reflected a slowing shift into interest-bearing deposits as the Company continued to emphasize relationship-based deposit generation. Average total deposits for both the third quarter of 2024 and third quarter of 2023 funded approximately 77 percent of the Company's total assets for these same periods. Refer to "Balance Sheet Analysis" for further information on the Company's deposits.
Additional funding is provided by long-term debt and short-term borrowings. Long-term debt was $54.8 billion at September 30, 2024, and is an important funding source because of its multi-year borrowing structure. Short-term borrowings were $23.7 billion at September 30, 2024, and supplement the Company's other funding sources. Refer to "Balance Sheet Analysis" for further information on the Company's long-term debt and short-term borrowings.
In addition to assessing liquidity risk on a consolidated basis, the Company monitors the parent company's liquidity. The parent company's routine funding requirements consist primarily of operating expenses, dividends paid to shareholders, debt service, repurchases of common stock and funds used for acquisitions. The parent company obtains funding to meet its obligations from dividends collected from its subsidiaries and the issuance of debt and capital securities. The Company establishes limits for the minimal number of months into the future where the parent company can meet existing and forecasted obligations with cash and securities held that can be readily monetized. The Company
measures and manages this limit in both normal and adverse conditions. The Company maintains sufficient funding to meet expected capital and debt service obligations for 24 months without the support of dividends from subsidiaries and assuming access to the wholesale markets is maintained. The Company maintains sufficient liquidity to meet its capital and debt service obligations for 12 months under adverse conditions without the support of dividends from subsidiaries or access to the wholesale markets. The parent company is currently in excess of required liquidity minimums.
At September 30, 2024, parent company long-term debt outstanding was $35.1 billion, compared with $34.3 billion at December 31, 2023. The increase was primarily due to $6.1 billion of medium-term note issuances, partially offset by $4.6 billion of medium-term note and $1.0 billion of subordinated note repayments. As of September 30, 2024, there was no parent company debt scheduled to mature in the remainder of 2024. Future debt maturities may be met through medium-term note and capital security issuances and dividends from subsidiaries, as well as from parent company cash and cash equivalents.
The Company is subject to a regulatory Liquidity Coverage Ratio ("LCR") requirement which requires large banking organizations to maintain an adequate level of unencumbered high quality liquid assets to meet estimated liquidity needs over a 30-day stressed period. For the three months ended September 30, 2024 and December 31, 2023, the Company's average daily LCR was 106.9 percent and 109.2 percent, respectively. The Company was compliant with this requirement for both of these periods.
The Company is also subject to a regulatory Net Stable Funding Ratio ("NSFR") requirement which requires large banking organizations to maintain a minimum level of stable funding based on the liquidity characteristics of their assets, commitments, and derivative exposures over a one-year time horizon. The Company was compliant with this requirement at September 30, 2024 and December 31, 2023.
Refer to "Management's Discussion and Analysis - Liquidity Risk Management" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, for further discussion on liquidity risk management.
European ExposuresThe Company provides merchant processing and corporate trust services in Europe either directly or through banking affiliations in Europe. Revenue generated from sources in Europe represented approximately 3 percent of the Company's total net revenue for the three and nine months ended September 30, 2024. Operating cash for these businesses is deposited on a short-term basis typically with certain European central banks. For deposits placed at other European banks, exposure is mitigated by the Company placing deposits at multiple banks and managing the amounts on deposit at any bank based on institution-specific deposit limits. At September 30, 2024, the Company had an aggregate amount on deposit with European banks of approximately $7.6 billion, predominately with the Central Bank of Ireland and Bank of England.
In addition, the Company provides financing to domestic multinational corporations that generate revenue from customers in European countries, transacts with various European banks as counterparties to certain derivative-related activities, and through a subsidiary, manages money market
U.S. Bancorp
23
funds that hold certain investments in European sovereign debt. Any deterioration in economic conditions in Europe, including the impacts resulting from the Russia-Ukraine conflict, is not expected to have a significant effect on the Company related to these activities.
Commitments, Contingent Liabilities and Other Contractual ObligationsThe Company participates in many different contractual arrangements which may or may not be recorded on its balance sheet, with unrelated or consolidated entities, under which the Company has an obligation to pay certain amounts, provide credit or liquidity enhancements or provide market risk support. These arrangements include commitments to extend credit, letters of credit and various forms of guarantees. Refer to Note 15 of the Notes to Consolidated Financial Statements for further information on guarantees and contingent liabilities. These arrangements also include any obligation related to a variable interest held in an unconsolidated entity that provides financing, liquidity, credit enhancement or market risk support. Refer to Note 5 of the Notes to Consolidated Financial Statements for further information related to the Company's interests in variable interest entities.
Capital ManagementThe Company is committed to managing capital to maintain strong protection for depositors and creditors and for maximum shareholder benefit. The Company also manages its capital to exceed regulatory capital requirements for banking organizations. To achieve its capital goals, the Company employs a variety of capital management tools, including dividends, common share repurchases, and the issuance of subordinated debt, non-cumulative perpetual preferred stock, common stock and other capital instruments. The regulatory capital requirements effective for the Company follow Basel III, with the Company being subject to calculating its capital adequacy as a percentage of risk-weighted assets under the standardized approach. Beginning in 2022, the Company began to phase into its regulatory capital requirements the cumulative deferred
impact of its 2020 adoption of the accounting guidance related to the impairment of financial instruments based on the current expected credit losses ("CECL") methodology plus 25 percent of its quarterly credit reserve increases during 2020 and 2021. This cumulative deferred impact will continue to be phased into the Company's regulatory capital during 2024, culminating with a fully phased in regulatory capital calculation beginning in 2025. Table 10 provides a summary of statutory regulatory capital ratios in effect for the Company at September 30, 2024 and December 31, 2023. All regulatory ratios exceeded regulatory "well-capitalized" requirements.
In July 2023, the U.S. federal bank regulatory authorities proposed a rule to refine the Basel III capital framework for financial institutions. The proposal incorporates elements of the international Basel Committee's post-crisis reforms, including the Fundamental Review of the Trading Book to replace the existing market risk rule, and introduces new standardized approaches for credit risk, operational risk and credit valuation adjustment (CVA) risk. The proposal's finalization could revise the risk-based capital measures applicable to the Company. The proposed effective date is July 1, 2025, with a three-year period to transition the effects of the proposal.
The Company believes certain other capital ratios are useful in evaluating its capital adequacy. The Company's tangible common equity, as a percent of tangible assets and as a percent of risk-weighted assets determined in accordance with transitional regulatory capital requirements related to the CECL methodology under the standardized approach, was 5.7 percent and 8.6 percent, respectively, at September 30, 2024, compared with 5.3 percent and 7.7 percent, respectively, at December 31, 2023. In addition, the Company's common equity tier 1 capital to risk-weighted assets ratio, reflecting the full implementation of the CECL methodology, was 10.5 percent at September 30, 2024, compared with 9.7 percent at December 31, 2023. Refer to "Non-GAAP Financial Measures" beginning on page 29 for further information on these other capital ratios.
TABLE 10   Regulatory Capital Ratios
(Dollars in Millions) September 30,
2024 		December 31,
2023
Basel III standardized approach:
Common equity tier 1 capital $ 47,164 $ 44,947
Tier 1 capital 54,416 52,199
Total risk-based capital 63,625 61,921
Risk-weighted assets 447,476 453,390
Common equity tier 1 capital as a percent of risk-weighted assets(a)
10.5 % 9.9 %
Tier 1 capital as a percent of risk-weighted assets 12.2 11.5
Total risk-based capital as a percent of risk-weighted assets 14.2 13.7
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio) 8.3 8.1
Tier 1 capital as a percent of total on- and off-balance sheet leverage exposure (total leverage exposure ratio) 6.8 6.6
(a)The Company's common equity tier 1 capital to risk-weighted assets ratio, reflecting the full implementation of the CECL methodology, was 10.5 percent at September 30, 2024, compared with 9.7 percent at December 31, 2023. See Non-GAAP Financial Measures beginning on page 29.
24
U.S. Bancorp
Total U.S. Bancorp shareholders' equity was $58.9 billion at September 30, 2024, compared with $55.3 billion at December 31, 2023. The increase was primarily the result of corporate earnings and changes in unrealized gains and losses on available-for-sale investment securities included in other comprehensive income (loss), partially offset by dividends paid.
The Company announced on September 12, 2024 that its Board of Directors authorized a share repurchase program to repurchase up to $5.0 billion of its common stock, effective September 13, 2024. This share repurchase program replaced the previous share repurchase program announced on December 22, 2020, which was terminated effective on September 12, 2024. Capital distributions, including dividends and stock repurchases, are subject to the approval of the Company's Board of Directors and compliance with regulatory requirements.
The following table provides a detailed analysis of all shares of common stock of the Company purchased by the Company or any affiliated purchaser during the third quarter of 2024:
Period Total Number
of Shares
Purchased 		Average
Price Paid
Per Share 		Total Number
of Shares Purchased
as Part of Publicly
Announced
Program 		Approximate Dollar Value of Shares
that May Yet Be
Purchased Under
the Program
(In Millions)
July 8,293 $ 44.46 8,293 $ 1,263
August 4,860 43.89 4,860 1,263
September 624 45.75 624 5,000
Total 13,777 $ 44.32 13,777 $ 5,000
Refer to "Management's Discussion and Analysis - Capital Management" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, for further discussion on capital management.
Line of Business Financial Review
The Company's major lines of business are Wealth, Corporate, Commercial and Institutional Banking, Consumer and Business Banking, Payment Services, and Treasury and Corporate Support.
Basis for Financial PresentationBusiness 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. Refer to Note 16 of the Notes to Consolidated Financial Statements for further information on the business lines' basis for financial presentation.
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 2024 and 2023, certain organization and methodology changes were made, including revising the Company's line of business funds transfer-pricing methodology related to deposits and loans during the second quarter of 2024 and combining its Wealth Management and Investment Services and Corporate and Commercial Banking lines of businesses to create the Wealth,
Corporate, Commercial and Institutional Banking line of business during the third quarter of 2023. Prior period results were restated and presented on a comparable basis.
Wealth, Corporate, Commercial and Institutional BankingWealth, Corporate, Commercial and Institutional Banking provides core banking, specialized lending, transaction and payment processing, capital markets, asset management, and brokerage and investment related services to wealth, middle market, large corporate, government and institutional clients. Wealth, Corporate, Commercial and Institutional Banking contributed $1.2 billion of the Company's net income in the third quarter and $3.5 billion in the first nine months of 2024, or an increase of $4 million (0.3 percent) and a decrease of $25 million (0.7 percent), respectively, compared with the same periods of 2023.
Net revenue decreased $12 million (0.4 percent) in the third quarter and increased $94 million (1.0 percent) in the first nine months of 2024, compared with the same periods of 2023. Net interest income, on a taxable-equivalent basis, decreased $127 million (6.3 percent) in the third quarter and $173 million (2.9 percent) in the first nine months of 2024, compared with the same periods of 2023, primarily due to lower noninterest-bearing deposit balances, partially offset by the impact of higher interest rates. Noninterest income increased $115 million (11.2 percent) in the third quarter and $267 million (8.6 percent) in the first nine months of 2024, compared with the same periods of 2023, primarily due to higher commercial products revenue and trust and investment management fees, both driven by business growth and favorable market conditions.
Noninterest expense increased $24 million (1.8 percent) in the third quarter of 2024, compared with the third quarter of 2023, primarily due to higher net shared services expense. Noninterest expense increased $62 million (1.5 percent) in the first nine months of 2024, compared with the first nine months of 2023, primarily due to higher compensation and employee benefits expense. The provision for credit losses decreased $42 million (30.9 percent) in the third quarter of 2024, compared with the third quarter of 2023, primarily due to stable credit quality in the current quarter. The provision for credit losses increased $64 million (23.6 percent) in the first nine months of 2024, compared with the first nine months of 2023, primarily due to higher net charge-offs, partially offset by slower credit deterioration in the first nine months of 2024.
Consumer and Business BankingConsumer and Business Banking comprises consumer banking, small business banking and consumer lending. Products and services are delivered through banking offices, telephone servicing and sales, online services, direct mail, ATM processing, mobile devices, distributed mortgage loan officers, and intermediary relationships including auto dealerships, mortgage banks, and strategic business partners. Consumer and Business Banking contributed $476 million of the Company's net income in the third quarter and $1.4 billion in the first nine months of 2024, or decreases of $89 million (15.8 percent) and $617 million (30.3 percent), respectively, compared with the same periods of 2023.
Net revenue decreased $144 million (5.8 percent) in the third quarter and $1.0 billion (12.7 percent) in the first nine months of 2024, compared with the same periods of 2023. Net
U.S. Bancorp
25
interest income, on a taxable-equivalent basis, decreased $111 million (5.4 percent) in the third quarter and $993 million (14.8 percent) in the first nine months of 2024, compared with the same periods of 2023, due to the impact of deposit mix and pricing. Noninterest income decreased $33 million (7.6 percent) in the third quarter and $26 million (2.1 percent) in the first nine months of 2024, compared with the same periods of 2023, primarily due to lower service charges, partially offset by higher mortgage banking revenue driven by higher gain on sale margins.
Noninterest expense decreased $36 million (2.1 percent) in the third quarter and $269 million (5.1 percent) in the first nine months of 2024, compared with the same periods of 2023, primarily due to lower compensation and employee benefits expense and net shared services expense. The provision for credit losses increased $11 million in the third quarter and $72 million in the first nine months of 2024, compared with the same periods of 2023, primarily due to higher net charge-offs.
Payment ServicesPayment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services and merchant processing. Payment Services contributed $277 million of the Company's net income in the third quarter and $792 million in the first nine months of 2024, or an increase of $54 million (24.2 percent) and a decrease of $75 million (8.7 percent), respectively, compared with the same periods of 2023.
Net revenue increased $98 million (5.8 percent) in the third quarter and $289 million (5.8 percent) in the first nine months of 2024, compared with the same periods of 2023. Net interest income, on a taxable-equivalent basis, increased $64 million (9.7 percent) in the third quarter and $169 million (8.7 percent) in the first nine months of 2024, compared with the same periods of 2023, primarily due to higher loan yields driven by higher interest rates and customer revolve rates, along with higher loan balances, partially offset by higher funding costs. Noninterest income increased $34 million (3.3 percent) in the third quarter and $120 million (4.0 percent) in the first nine months of 2024, compared with the same periods of 2023, driven by higher card revenue due to favorable rates, and higher merchant processing services revenue due to business volume growth and favorable rates.
Noninterest expense increased $20 million (2.0 percent) in the third quarter and $169 million (5.9 percent) in the first nine months of 2024, compared with the same periods of 2023, reflecting higher net shared services expense. The provision for credit losses increased $5 million (1.3 percent) in the third quarter and $218 million (23.4 percent) in the first nine months of 2024, compared with the same periods of 2023, primarily due to higher net charge-offs.
Treasury and Corporate Support 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 recorded net losses of $226 million in the third quarter and $1.0 billion in the first nine months of
2024, compared with net losses of $448 million and $1.8 billion, respectively, in the same periods of 2023.
Net revenue decreased $110 million (53.7 percent) in the third quarter and $300 million (52.1 percent) in the first nine months of 2024, compared with the same periods of 2023. Net interest income, on a taxable-equivalent basis, increased $72 million (15.5 percent) in the third quarter of 2024, compared with the third quarter of 2023, primarily due to higher yields on the investment securities portfolio, partially offset by higher funding costs. Net interest income, on a taxable-equivalent basis, decreased $155 million (13.3 percent) in the first nine months of 2024, compared with the first nine months of 2023, primarily due to higher funding costs, partially offset by higher yields on the investment securities portfolio and cash balances. Noninterest income decreased $182 million (69.7 percent) in the third quarter and $145 million (24.7 percent) in the first nine months of 2024, compared with the same periods of 2023, primarily due to higher net losses on the sales of investment securities and a decrease in other revenue. The decrease in noninterest income in the first nine months of 2024, compared with the first nine months of 2023, was partially offset by a gain on the sale of mortgage servicing rights during the second quarter of 2024.
Noninterest expense decreased $334 million (72.1 percent) in the third quarter and $739 million (50.5 percent) in the first nine months of 2024, compared with the same periods of 2023, primarily due to lower merger and integration charges and lower other noninterest expense, partially offset by higher higher compensation and employee benefits expense. The decrease in noninterest expense in the first nine months of 2024, compared with the first nine months of 2023, was further offset by the impact of the FDIC special assessment in the current year. The provision for credit losses increased $68 million in the third quarter of 2024, compared with the third quarter of 2023, primarily due to the impact of continued economic uncertainty not allocated to business line reserves. The provision for credit losses decreased $439 million (83.0 percent) in the first nine months of 2024, compared with the first nine months of 2023, primarily due to balance sheet repositioning and capital management actions in the prior year.
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.
26
U.S. Bancorp
TABLE 11 Line of Business Financial Performance
Wealth, Corporate, Commercial and Institutional Banking Consumer and
Business Banking 		Payment Services
Three Months Ended September 30
(Dollars in Millions) 		2024 2023 Percent
Change 		2024 2023 Percent
Change 		2024 2023 Percent
Change
Condensed Income Statement
Net interest income (taxable-equivalent basis) $ 1,896 $ 2,023 (6.3) % $ 1,937 $ 2,048 (5.4) % $ 727 $ 663 9.7 %
Noninterest income 1,145 1,030 11.2 401 434 (7.6) 1,073 1,039 3.3
Total net revenue 3,041 3,053 (.4) 2,338 2,482 (5.8) 1,800 1,702 5.8
Noninterest expense 1,364 1,340 1.8 1,685 1,721 (2.1) 1,026 1,006 2.0
Income (loss) before provision and income taxes 1,677 1,713 (2.1) 653 761 (14.2) 774 696 11.2
Provision for credit losses 94 136 (30.9) 18 7 * 404 399 1.3
Income (loss) before income taxes 1,583 1,577 .4 635 754 (15.8) 370 297 24.6
Income taxes and taxable-equivalent adjustment 396 394 .5 159 189 (15.9) 93 74 25.7
Net income (loss) 1,187 1,183 .3 476 565 (15.8) 277 223 24.2
Net (income) loss attributable to noncontrolling interests - - - - - - - - -
Net income (loss) attributable to U.S. Bancorp $ 1,187 $ 1,183 .3 $ 476 $ 565 (15.8) $ 277 $ 223 24.2
Average Balance Sheet
Loans $ 171,833 $ 175,700 (2.2) $ 155,304 $ 157,458 (1.4) $ 41,653 $ 38,954 6.9
Goodwill 4,825 4,638 4.0 4,326 4,515 (4.2) 3,370 3,333 1.1
Other intangible assets 955 921 3.7 4,405 5,154 (14.5) 266 340 (21.8)
Assets 200,199 203,910 (1.8) 168,937 174,883 (3.4) 47,199 44,774 5.4
Noninterest-bearing deposits 54,263 66,055 (17.9) 20,781 25,561 (18.7) 2,653 2,796 (5.1)
Interest-bearing deposits 215,604 210,041 2.6 200,897 192,725 4.2 95 101 (5.9)
Total deposits 269,867 276,096 (2.3) 221,678 218,286 1.6 2,748 2,897 (5.1)
Total U.S. Bancorp shareholders' equity 21,277 22,839 (6.8) 14,247 15,770 (9.7) 9,959 9,442 5.5
Treasury and
Corporate Support 		Consolidated
Company
Three Months Ended September 30
(Dollars in Millions) 		2024 2023 Percent
Change 		2024 2023 Percent
Change
Condensed Income Statement
Net interest income (taxable-equivalent basis) $ (394) $ (466) 15.5 % $ 4,166 $ 4,268 (2.4) %
Noninterest income 79 261 (69.7) 2,698 2,764 (2.4)
Total net revenue (315) (205) (53.7) 6,864 7,032 (2.4)
Noninterest expense 129 463 (72.1) 4,204 4,530 (7.2)
Income (loss) before provision and income taxes (444) (668) 33.5 2,660 2,502 6.3
Provision for credit losses 41 (27) * 557 515 8.2
Income (loss) before income taxes (485) (641) 24.3 2,103 1,987 5.8
Income taxes and taxable-equivalent adjustment (267) (194) (37.6) 381 463 (17.7)
Net income (loss) (218) (447) 51.2 1,722 1,524 13.0
Net (income) loss attributable to noncontrolling interests (8) (1) * (8) (1) *
Net income (loss) attributable to U.S. Bancorp $ (226) $ (448) 49.6 $ 1,714 $ 1,523 12.5
Average Balance Sheet
Loans $ 5,280 $ 4,765 10.8 $ 374,070 $ 376,877 (.7)
Goodwill - - - 12,521 12,486 .3
Other intangible assets 9 10 (10.0) 5,635 6,425 (12.3)
Assets 248,305 240,432 3.3 664,640 663,999 .1
Noninterest-bearing deposits 3,242 3,112 4.2 80,939 97,524 (17.0)
Interest-bearing deposits 11,222 11,900 (5.7) 427,818 414,767 3.1
Total deposits 14,464 15,012 (3.7) 508,757 512,291 (.7)
Total U.S. Bancorp shareholders' equity 12,800 5,766 * 58,283 53,817 8.3
*Not meaningful
U.S. Bancorp
27
Wealth, Corporate, Commercial and Institutional Banking Consumer and
Business Banking 		Payment Services
Nine Months Ended September 30
(Dollars in Millions) 		2024 2023 Percent
Change 		2024 2023 Percent
Change 		2024 2023 Percent
Change
Condensed Income Statement
Net interest income (taxable-equivalent basis) $ 5,711 $ 5,884 (2.9) % $ 5,737 $ 6,730 (14.8) % $ 2,102 $ 1,933 8.7 %
Noninterest income 3,387 3,120 8.6 1,239 1,265 (2.1) 3,146 3,026 4.0
Total net revenue 9,098 9,004 1.0 6,976 7,995 (12.7) 5,248 4,959 5.8
Noninterest expense 4,135 4,073 1.5 4,977 5,246 (5.1) 3,040 2,871 5.9
Income (loss) before provision and income taxes 4,963 4,931 .6 1,999 2,749 (27.3) 2,208 2,088 5.7
Provision for credit losses 335 271 23.6 102 30 * 1,151 933 23.4
Income (loss) before income taxes 4,628 4,660 (.7) 1,897 2,719 (30.2) 1,057 1,155 (8.5)
Income taxes and taxable-equivalent adjustment 1,158 1,165 (.6) 475 680 (30.1) 265 288 (8.0)
Net income (loss) 3,470 3,495 (.7) 1,422 2,039 (30.3) 792 867 (8.7)
Net (income) loss attributable to noncontrolling interests - - - - - - - - -
Net income (loss) attributable to U.S. Bancorp $ 3,470 $ 3,495 (.7) $ 1,422 $ 2,039 (30.3) $ 792 $ 867 (8.7)
Average Balance Sheet
Loans $ 172,249 $ 177,161 (2.8) $ 155,073 $ 164,050 (5.5) $ 40,766 $ 37,942 7.4
Goodwill 4,825 4,634 4.1 4,326 4,514 (4.2) 3,343 3,326 .5
Other intangible assets 1,007 972 3.6 4,611 5,378 (14.3) 282 361 (21.9)
Assets 200,912 203,442 (1.2) 168,954 181,735 (7.0) 46,707 43,926 6.3
Noninterest-bearing deposits 56,650 73,789 (23.2) 21,068 33,599 (37.3) 2,716 3,052 (11.0)
Interest-bearing deposits 213,572 201,805 5.8 200,719 182,267 10.1 96 104 (7.7)
Total deposits 270,222 275,594 (1.9) 221,787 215,866 2.7 2,812 3,156 (10.9)
Total U.S. Bancorp shareholders' equity 21,506 22,249 (3.3) 14,552 16,246 (10.4) 9,955 9,181 8.4
Treasury and
Corporate Support 		Consolidated
Company
Nine Months Ended September 30
(Dollars in Millions) 		2024 2023 Percent
Change 		2024 2023 Percent
Change
Condensed Income Statement
Net interest income (taxable-equivalent basis) $ (1,317) $ (1,162) (13.3) % $ 12,233 $ 13,385 (8.6) %
Noninterest income 441 586 (24.7) 8,213 7,997 2.7
Total net revenue (876) (576) (52.1) 20,446 21,382 (4.4)
Noninterest expense 725 1,464 (50.5) 12,877 13,654 (5.7)
Income (loss) before provision and income taxes (1,601) (2,040) 21.5 7,569 7,728 (2.1)
Provision for credit losses 90 529 (83.0) 1,678 1,763 (4.8)
Income (loss) before income taxes (1,691) (2,569) 34.2 5,891 5,965 (1.2)
Income taxes and taxable-equivalent adjustment (666) (765) 12.9 1,232 1,368 (9.9)
Net income (loss) (1,025) (1,804) 43.2 4,659 4,597 1.3
Net (income) loss attributable to noncontrolling interests (23) (15) (53.3) (23) (15) (53.3)
Net income (loss) attributable to U.S. Bancorp $ (1,048) $ (1,819) 42.4 $ 4,636 $ 4,582 1.2
Average Balance Sheet
Loans $ 5,190 $ 4,959 4.7 $ 373,278 $ 384,112 (2.8)
Goodwill - - - 12,494 12,474 .2
Other intangible assets 9 19 (52.6) 5,909 6,730 (12.2)
Assets 244,790 238,378 2.7 661,363 667,481 (.9)
Noninterest-bearing deposits 2,606 3,116 (16.4) 83,040 113,556 (26.9)
Interest-bearing deposits 11,149 8,901 25.3 425,536 393,077 8.3
Total deposits 13,755 12,017 14.5 508,576 506,633 .4
Total U.S. Bancorp shareholders' equity 10,653 5,764 84.8 56,666 53,440 6.0
*Not meaningful
28
U.S. Bancorp
Non-GAAP Financial Measures
In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:
•Tangible common equity to tangible assets,
•Tangible common equity to risk-weighted assets, and
•Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the CECL methodology.
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 full impact of the 2020 adoption of accounting guidance related to impairment of financial instruments based on the CECL 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 utilize net interest income on a taxable-equivalent basis, including the efficiency ratio and net interest margin.
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 report in their entirety, and not to rely on any single financial measure.
The following tables show the Company's calculation of these non-GAAP financial measures:
(Dollars in Millions) September 30,
2024 		December 31,
2023
Total equity $ 59,321 $ 55,771
Preferred stock (6,808) (6,808)
Noncontrolling interests (462) (465)
Goodwill (net of deferred tax liability)(a)
(11,540) (11,480)
Intangible assets (net of deferred tax liability), other than mortgage servicing rights (1,944) (2,278)
Tangible common equity(1)
38,567 34,740
Common equity tier 1 capital, determined in accordance with transitional regulatory capital requirements related to the CECL methodology implementation 47,164 44,947
Adjustments(b)
(433) (866)
Common equity tier 1 capital, reflecting the full implementation of the CECL methodology(2)
46,731 44,081
Total assets 686,469 663,491
Goodwill (net of deferred tax liability)(a)
(11,540) (11,480)
Intangible assets (net of deferred tax liability), other than mortgage servicing rights (1,944) (2,278)
Tangible assets(3)
672,985 649,733
Risk-weighted assets, determined in accordance with prescribed regulatory capital requirements effective for the Company(4)
447,476 453,390
Adjustments(c)
(368) (736)
Risk-weighted assets, reflecting the full implementation of the CECL methodology(5)
447,108 452,654
Ratios
Tangible common equity to tangible assets(1)/(3)
5.7 % 5.3 %
Tangible common equity to risk-weighted assets(1)/(4)
8.6 7.7
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the CECL methodology(2)/(5)
10.5 9.7
(a)Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.
(b)Includes the estimated increase in the allowance for credit losses related to the adoption of the CECL methodology net of deferred taxes.
(c)Includes the impact of the estimated increase in the allowance for credit losses related to the adoption of the CECL methodology.
U.S. Bancorp
29
Three Months Ended September 30 Nine Months Ended September 30
(Dollars in Millions) 2024 2023 2024 2023
Net interest income $ 4,135 $ 4,236 $ 12,143 $ 13,285
Taxable-equivalent adjustment(a)
31 32 90 100
Net interest income, on a taxable-equivalent basis 4,166 4,268 12,233 13,385
Net interest income, on a taxable-equivalent basis (as calculated above) 4,166 4,268 12,233 13,385
Noninterest income 2,698 2,764 8,213 7,997
Less: Securities gains (losses), net (119) - (153) (29)
Total net revenue, excluding net securities gains (losses)(1)
6,983 7,032 20,599 21,411
Noninterest expense(2)
4,204 4,530 12,877 13,654
Efficiency ratio(1)/(2)
60.2 % 64.4 % 62.5 % 63.8 %
(a)Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.
Critical Accounting Policies
The accounting and reporting policies of the Company comply with accounting principles generally accepted in the United States and conform to general practices within the banking industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. The Company's financial position and results of operations can be affected by these estimates and assumptions, which are integral to understanding the Company's financial statements. Critical accounting policies are those policies management believes are the most important to the portrayal of the Company's financial condition and results, and require management to make estimates that are difficult, subjective or complex. Most accounting policies are not considered by management to be critical accounting policies. Management has discussed the development and the selection of critical accounting policies with the Company's Audit Committee. Those policies considered to be critical accounting policies relate to the allowance for credit losses, fair value estimates, MSRs, and income taxes. These accounting policies are discussed in detail in "Management's Discussion and Analysis - Critical Accounting Policies" and the Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
Controls and Procedures
Under the supervision and with the participation of the Company's management, including its principal executive officer and principal financial officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based upon this evaluation, the principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were effective.
During the most recently completed fiscal quarter, there was no change made in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
30
U.S. Bancorp
U.S. Bancorp
Consolidated Balance Sheet
(Dollars in Millions) September 30,
2024 		December 31,
2023
(Unaudited)
Assets
Cash and due from banks $ 73,562 $ 61,192
Investment securities
Held-to-maturity (fair value $71,415 and $74,088, respectively)
80,025 84,045
Available-for-sale ($313 and $338 pledged as collateral, respectively)(a)
81,704 69,706
Loans held for sale (including $2,887 and $2,011 of mortgage loans carried at fair value, respectively)
3,211 2,201
Loans
Commercial 133,638 131,881
Commercial real estate 50,619 53,455
Residential mortgages 118,034 115,530
Credit card 29,037 28,560
Other retail 42,836 44,409
Total loans 374,164 373,835
Less allowance for loan losses (7,560) (7,379)
Net loans 366,604 366,456
Premises and equipment 3,585 3,623
Goodwill 12,573 12,489
Other intangible assets 5,488 6,084
Other assets (including $7,490 and $3,548 of trading securities at fair value pledged as collateral, respectively)(a)
59,717 57,695
Total assets $ 686,469 $ 663,491
Liabilities and Shareholders' Equity
Deposits
Noninterest-bearing $ 86,838 $ 89,989
Interest-bearing (including $7,655 and $2,818 of time deposits carried at fair value, respectively)
434,293 422,323
Total deposits 521,131 512,312
Short-term borrowings 23,708 15,279
Long-term debt 54,839 51,480
Other liabilities 27,470 28,649
Total liabilities 627,148 607,720
Shareholders' equity
Preferred stock 6,808 6,808
Common stock, $.01 par value per share, authorized: 4,000,000,000 shares; issued: 9/30/24 and 12/31/23-2,125,725,742 shares
21 21
Capital surplus 8,729 8,673
Retained earnings 76,057 74,026
Less cost of common stock in treasury: 9/30/24-565,004,098 shares; 12/31/23-567,732,687 shares
(24,010) (24,126)
Accumulated other comprehensive income (loss) (8,746) (10,096)
Total U.S. Bancorp shareholders' equity 58,859 55,306
Noncontrolling interests 462 465
Total equity 59,321 55,771
Total liabilities and equity $ 686,469 $ 663,491
(a)Includes only collateral pledged by the Company where counterparties have the right to sell or pledge the collateral.
See Notes to Consolidated Financial Statements.
U.S. Bancorp
31
U.S. Bancorp
Consolidated Statement of Income
(Dollars and Shares in Millions, Except Per Share Data)
(Unaudited)
Three Months Ended
September 30 		Nine Months Ended
September 30
2024 2023 2024 2023
Interest Income
Loans $ 5,862 $ 5,700 $ 17,335 $ 16,582
Loans held for sale 45 42 123 111
Investment securities 1,316 1,152 3,785 3,303
Other interest income 863 860 2,592 2,248
Total interest income 8,086 7,754 23,835 22,244
Interest Expense
Deposits 3,004 2,580 8,916 6,024
Short-term borrowings 284 450 850 1,639
Long-term debt 663 488 1,926 1,296
Total interest expense 3,951 3,518 11,692 8,959
Net interest income 4,135 4,236 12,143 13,285
Provision for credit losses 557 515 1,678 1,763
Net interest income after provision for credit losses 3,578 3,721 10,465 11,522
Noninterest Income
Card revenue 426 412 1,246 1,194
Corporate payment products revenue 203 198 582 577
Merchant processing services 440 427 1,295 1,250
Trust and investment management fees 667 627 1,957 1,838
Service charges 302 334 939 982
Commercial products revenue 397 354 1,159 1,046
Mortgage banking revenue 155 144 511 403
Investment products fees 84 70 243 206
Securities gains (losses), net (119) - (153) (29)
Other 143 198 434 530
Total noninterest income 2,698 2,764 8,213 7,997
Noninterest Expense
Compensation and employee benefits 2,637 2,615 7,947 7,907
Net occupancy and equipment 317 313 929 950
Professional services 130 127 356 402
Marketing and business development 165 176 459 420
Technology and communications 524 511 1,540 1,536
Other intangibles 142 161 430 480
Merger and integration charges - 284 155 838
Other 289 343 1,061 1,121
Total noninterest expense 4,204 4,530 12,877 13,654
Income before income taxes 2,072 1,955 5,801 5,865
Applicable income taxes 350 431 1,142 1,268
Net income 1,722 1,524 4,659 4,597
Net (income) loss attributable to noncontrolling interests (8) (1) (23) (15)
Net income attributable to U.S. Bancorp $ 1,714 $ 1,523 $ 4,636 $ 4,582
Net income applicable to U.S. Bancorp common shareholders $ 1,601 $ 1,412 $ 4,328 $ 4,285
Earnings per common share $ 1.03 $ .91 $ 2.77 $ 2.79
Diluted earnings per common share $ 1.03 $ .91 $ 2.77 $ 2.79
Average common shares outstanding 1,561 1,548 1,560 1,538
Average diluted common shares outstanding 1,561 1,549 1,561 1,538
See Notes to Consolidated Financial Statements.
32
U.S. Bancorp
U.S. Bancorp
Consolidated Statement of Comprehensive Income
(Dollars in Millions)
(Unaudited)
Three Months Ended
September 30 		Nine Months Ended
September 30
2024 2023 2024 2023
Net income $ 1,722 $ 1,524 $ 4,659 $ 4,597
Other Comprehensive Income (Loss)
Changes in unrealized gains (losses) on investment securities available-for-sale 1,297 (1,881) 1,048 (1,036)
Changes in unrealized gains (losses) on derivative hedges 460 (349) 8 (610)
Foreign currency translation 12 3 16 21
Changes in unrealized gains (losses) on retirement plans - (1) - -
Reclassification to earnings of realized (gains) losses 328 170 736 475
Income taxes related to other comprehensive income (loss) (535) 521 (458) 302
Total other comprehensive income (loss) 1,562 (1,537) 1,350 (848)
Comprehensive income (loss) 3,284 (13) 6,009 3,749
Comprehensive (income) loss attributable to noncontrolling interests (8) (1) (23) (15)
Comprehensive income (loss) attributable to U.S. Bancorp $ 3,276 $ (14) $ 5,986 $ 3,734
See Notes to Consolidated Financial Statements.
U.S. Bancorp
33
U.S. Bancorp
Consolidated Statement of Shareholders' Equity
U.S. Bancorp Shareholders
(Dollars and Shares in Millions,
Except Per Share Data) (Unaudited) 		Common
Shares
Outstanding 		Preferred
Stock 		Common
Stock 		Capital
Surplus 		Retained
Earnings 		Treasury
Stock 		Accumulated
Other
Comprehensive
Income (Loss) 		Total U.S.
Bancorp
Shareholders'
Equity 		Noncontrolling
Interests 		Total
Equity
Balance June 30, 2023 1,533 $ 6,808 $ 21 $ 8,742 $ 73,355 $ (25,189) $ (10,718) $ 53,019 $ 465 $ 53,484
Net income (loss) 1,523 1,523 1 1,524
Other comprehensive income (loss) (1,537) (1,537) (1,537)
Preferred stock dividends(a)
(102) (102) (102)
Common stock dividends ($.48 per share)
(753) (753) (753)
Issuance of common and treasury stock 24 (99) 1,022 923 923
Purchase of treasury stock (1) (1) (1)
Distributions to noncontrolling interests - (1) (1)
Stock option and restricted stock grants 41 41 41
Balance September 30, 2023 1,557 $ 6,808 $ 21 $ 8,684 $ 74,023 $ (24,168) $ (12,255) $ 53,113 $ 465 $ 53,578
Balance June 30, 2024 1,560 $ 6,808 $ 21 $ 8,688 $ 75,231 $ (24,020) $ (10,308) $ 56,420 $ 465 $ 56,885
Net income (loss) 1,714 1,714 8 1,722
Other comprehensive income (loss) 1,562 1,562 1,562
Preferred stock dividends(b)
(103) (103) (103)
Common stock dividends ($.50 per share)
(785) (785) (785)
Issuance of common and treasury stock 1 (1) 11 10 10
Purchase of treasury stock (1) (1) (1)
Distributions to noncontrolling interests - (8) (8)
Net other changes in noncontrolling interests - (3) (3)
Stock option and restricted stock grants 42 42 42
Balance September 30, 2024 1,561 $ 6,808 $ 21 $ 8,729 $ 76,057 $ (24,010) $ (8,746) $ 58,859 $ 462 $ 59,321
Balance December 31, 2022 1,531 $ 6,808 $ 21 $ 8,712 $ 71,901 $ (25,269) $ (11,407) $ 50,766 $ 466 $ 51,232
Change in accounting principle(c)
46 46 46
Net income (loss) 4,582 4,582 15 4,597
Other comprehensive income (loss) (848) (848) (848)
Preferred stock dividends(d)
(273) (273) (273)
Common stock dividends ($1.44 per share)
(2,233) (2,233) (2,233)
Issuance of common and treasury stock 27 (215) 1,146 931 931
Purchase of treasury stock (1) (45) (45) (45)
Distributions to noncontrolling interests - (15) (15)
Net other changes in noncontrolling interests - (1) (1)
Stock option and restricted stock grants 187 187 187
Balance September 30, 2023 1,557 $ 6,808 $ 21 $ 8,684 $ 74,023 $ (24,168) $ (12,255) $ 53,113 $ 465 $ 53,578
Balance December 31, 2023 1,558 $ 6,808 $ 21 $ 8,673 $ 74,026 $ (24,126) $ (10,096) $ 55,306 $ 465 $ 55,771
Net income (loss) 4,636 4,636 23 4,659
Other comprehensive income (loss) 1,350 1,350 1,350
Preferred stock dividends(e)
(280) (280) (280)
Common stock dividends ($1.48 per share)
(2,325) (2,325) (2,325)
Issuance of common and treasury stock 4 (143) 167 24 24
Purchase of treasury stock (1) (51) (51) (51)
Distributions to noncontrolling interests - (23) (23)
Net other changes in noncontrolling interests - (3) (3)
Stock option and restricted stock grants 199 199 199
Balance September 30, 2024 1,561 $ 6,808 $ 21 $ 8,729 $ 76,057 $ (24,010) $ (8,746) $ 58,859 $ 462 $ 59,321
(a)Reflects dividends declared per share on the Company's Series A, Series B, Series J, Series K, Series L, Series M, Series N and Series O Non-Cumulative Perpetual Preferred Stock of $1,684.00, $394.167, $662.50,$343.75, $234.375, $250.00, $231.25 and $281.25, respectively.
(b)Reflects dividends declared per share on the Company's Series A, Series B, Series J, Series K, Series L, Series M, Series N and Series O Non-Cumulative Perpetual Preferred Stock of $1,682.317, $393.746, $662.50, $343.75, $234.375, $250.00, $231.25 and $281.25, respectively.
(c)Effective January 1, 2023, the Company adopted accounting guidance which removed the separate recognition and measurement of troubled debt restructurings. Upon adoption, the Company reduced its allowance for credit losses and increased retained earnings net of deferred taxes through a cumulative-effect adjustment.
(d)Reflects dividends declared per share on the Company's Series A, Series B, Series J, Series K, Series L, Series M, Series N and Series O Non-Cumulative Perpetual Preferred Stock of $4,733.948, $1,103.862, $1,325.00, $1,031.25, $703.125, $750.00, $693.75 and $843.75, respectively.
(e)Reflects dividends declared per share on the Company's Series A, Series B, Series J, Series K, Series L, Series M, Series N and Series O Non-Cumulative Perpetual Preferred Stock of $5,020.442, $1,175.194, $1,325.00, $1,031.25, $703.125, $750.00, $693.75 and $843.75, respectively.
See Notes to Consolidated Financial Statements.
34
U.S. Bancorp
U.S. Bancorp
Consolidated Statement of Cash Flows
(Dollars in Millions)
(Unaudited)
Nine Months Ended
September 30
2024 2023
Operating Activities
Net income attributable to U.S. Bancorp $ 4,636 $ 4,582
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses 1,678 1,763
Depreciation and amortization of premises and equipment 271 288
Amortization of intangibles 430 480
(Gain) loss on sales of loans held for sale (32) 26
(Gain) loss on sales of securities and other assets 138 9
Loans originated for sale, net of repayments (17,898) (21,637)
Proceeds from sales of loans held for sale 16,756 21,164
Other, net 528 1,356
Net cash provided by operating activities 6,507 8,031
Investing Activities
Proceeds from sales of available-for-sale investment securities 9,867 8,135
Proceeds from maturities of held-to-maturity investment securities 4,651 4,742
Proceeds from maturities of available-for-sale investment securities 4,537 4,828
Purchases of held-to-maturity investment securities (226) (924)
Purchases of available-for-sale investment securities (23,185) (4,857)
Net (increase) decrease in loans outstanding (1,535) 2,946
Proceeds from sales of loans 338 5,622
Purchases of loans (795) (900)
Net increase in securities purchased under agreements to resell (3,914) (1,731)
Net cash paid for acquisitions (103) -
Other, net (1,294) (736)
Net cash (used in) provided by investing activities (11,659) 17,125
Financing Activities
Net increase (decrease) in deposits 8,819 (6,245)
Net increase (decrease) in short-term borrowings 8,429 (9,887)
Proceeds from issuance of long-term debt 8,810 7,254
Principal payments or redemption of long-term debt (5,916) (3,906)
Proceeds from issuance of common stock 22 942
Repurchase of common stock (51) (45)
Cash dividends paid on preferred stock (254) (238)
Cash dividends paid on common stock (2,307) (2,219)
Other, net (30) -
Net cash provided by (used in) financing activities 17,522 (14,344)
Change in cash and due from banks 12,370 10,812
Cash and due from banks at beginning of period 61,192 53,542
Cash and due from banks at end of period $ 73,562 $ 64,354
See Notes to Consolidated Financial Statements.
U.S. Bancorp
35
Notes to Consolidated Financial Statements
(Unaudited)
 NOTE 1 Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States. In the opinion of management of U.S. Bancorp (the "Company"), all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of results for the interim periods have been made. These financial statements and notes should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. Certain amounts in prior periods have been reclassified to conform to the current period presentation.
NOTE 2 Accounting Changes
Reference Interest Rate Transition In March 2020, the Financial Accounting Standards Board ("FASB") issued accounting guidance, providing temporary optional expedients and exceptions to the guidance in United States generally accepted accounting principles on contract modifications and hedge accounting, to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. Under the guidance, a company can elect not to apply certain modification accounting requirements to contracts affected by reference rate transition, if certain criteria are met. A company that makes this election would not be required to remeasure the contracts at the modification date or reassess a previous accounting determination. This guidance also permits a company to elect various optional expedients that would allow it to continue applying hedge accounting for hedging relationships affected by reference rate transition, if certain criteria are met. The guidance is effective upon issuance and generally can be applied through December 31, 2024. The Company is applying certain optional expedients and exceptions for cash flow hedges and will continue to evaluate these for eligible contract modifications and hedging relationships.
Income Taxes - Improvements to Income Tax DisclosuresIn December 2023, the FASB issued guidance, effective for the Company for annual reporting periods beginning after December 15, 2024, related to income tax disclosures. This guidance requires additional information in income tax rate reconciliation disclosures and additional disclosures about income taxes paid. The guidance is required, at a minimum, to be adopted on a prospective basis, with an option to apply it retrospectively. The Company expects the adoption of this guidance will not be material to its financial statements.
Segment Reporting - Improvements to Reportable Segment DisclosuresIn November 2023, the FASB issued guidance, effective for the Company for annual reporting periods beginning after December 15, 2023 and interim reporting periods beginning after December 15, 2024, related to segment disclosures. This guidance requires disclosures of significant segment expenses and other segment items and expands interim period disclosure requirements to include segment profit or loss and assets, which are currently only required to be disclosed annually. The guidance is required to be adopted retrospectively to all periods presented in the financial statements. The Company expects the adoption of this guidance will not be material to its financial statements.
36
U.S. Bancorp
 NOTE 3   Investment Securities
The Company's held-to-maturity investment securities are carried at historical cost, adjusted for amortization of premiums and accretion of discounts. The Company's available-for-sale investment securities are carried at fair value with unrealized net gains or losses reported within accumulated other comprehensive income (loss) in shareholders' equity.
The amortized cost, gross unrealized holding gains and losses, and fair value of held-to-maturity and available-for-sale investment securities were as follows:
September 30, 2024 December 31, 2023
(Dollars in Millions) Amortized
Cost 		Unrealized
Gains 		Unrealized
Losses 		Fair Value Amortized
Cost 		Unrealized
Gains 		Unrealized
Losses 		Fair Value
Held-to-Maturity
U.S. Treasury and agencies $ 1,296 $ - $ (16) $ 1,280 $ 1,345 $ - $ (35) $ 1,310
Mortgage-backed securities
Residential agency 76,788 22 (8,648) 68,162 80,997 6 (9,929) 71,074
Commercial agency 1,699 31 (2) 1,728 1,695 6 (5) 1,696
Other 242 3 - 245 8 - - 8
Total held-to-maturity $ 80,025 $ 56 $ (8,666) $ 71,415 $ 84,045 $ 12 $ (9,969) $ 74,088
Available-for-Sale
U.S. Treasury and agencies $ 31,201 $ 1 $ (1,803) $ 29,399 $ 21,768 $ 8 $ (2,234) $ 19,542
Mortgage-backed securities
Residential agency 29,247 94 (1,575) 27,766 28,185 104 (2,211) 26,078
Commercial
Agency 8,681 - (1,076) 7,605 8,703 - (1,360) 7,343
Non-agency 7 - - 7 7 - (1) 6
Asset-backed securities 6,757 31 - 6,788 6,713 25 (14) 6,724
Obligations of state and political subdivisions 10,732 29 (873) 9,888 10,867 36 (914) 9,989
Other 248 3 - 251 24 - - 24
Total available-for-sale, excluding portfolio level basis adjustments 86,873 158 (5,327) 81,704 76,267 173 (6,734) 69,706
Portfolio level basis adjustments(a)
525 - (525) - 335 - (335) -
Total available-for-sale $ 87,398 $ 158 $ (5,852) $ 81,704 $ 76,602 $ 173 $ (7,069) $ 69,706
(a)Represents fair value hedge basis adjustments related to active portfolio layer method hedges of available-for-sale investment securities, which are not allocated to individual securities in the portfolio. For additional information, refer to Note 12.
Investment securities with a fair value of $21.5 billion at September 30, 2024, and $20.5 billion at December 31, 2023, were pledged to secure public, private and trust deposits, repurchase agreements and for other purposes required by contractual obligation or law. Included in these amounts were securities where the Company and certain counterparties have agreements granting the counterparties the right to sell or pledge the securities. Investment securities securing these types of arrangements had a fair value of $313 million at September 30, 2024, and $338 million at December 31, 2023.
The following table provides information about the amount of interest income from taxable and non-taxable investment securities:
Three Months Ended
September 30 		Nine Months Ended
September 30
(Dollars in Millions) 2024 2023 2024 2023
Taxable $ 1,241 $ 1,074 $ 3,558 $ 3,067
Non-taxable 75 78 227 236
Total interest income from investment securities $ 1,316 $ 1,152 $ 3,785 $ 3,303
U.S. Bancorp
37
The following table provides information about the amount of gross gains and losses realized through the sales of available-for-sale investment securities:
Three Months Ended
September 30 		Nine Months Ended
September 30
(Dollars in Millions) 2024 2023 2024 2023
Realized gains $ 115 $ - $ 118 $ 65
Realized losses (234) - (271) (94)
Net realized gains (losses) $ (119) $ - $ (153) $ (29)
Income tax (benefit) on net realized gains (losses) $ (31) $ - $ (39) $ (7)
The Company conducts a regular assessment of its available-for-sale investment securities with unrealized losses to determine whether all or some portion of a security's unrealized loss is related to credit and an allowance for credit losses is necessary. If the Company intends to sell or it is more likely than not the Company will be required to sell an investment security, the amortized cost of the security is written down to fair value. When evaluating credit losses, the Company considers various factors such as the nature of the investment security, the credit ratings or financial condition of the issuer, the extent of the unrealized loss, expected cash flows of underlying collateral, the existence of any government or agency guarantees, and market conditions. The Company measures the allowance for credit losses using market information where available and discounting the cash flows at the original effective rate of the investment security. The allowance for credit losses is adjusted each period through earnings and can be subsequently recovered. The allowance for credit losses on the Company's available-for-sale investment securities was immaterial at September 30, 2024 and December 31, 2023.
At September 30, 2024, certain investment securities had a fair value below amortized cost. The following table shows the gross unrealized losses excluding portfolio level basis adjustments and fair value of the Company's available-for-sale investment securities with unrealized losses, aggregated by investment category and length of time the individual investment securities have been in continuous unrealized loss positions, at September 30, 2024:
Less Than 12 Months 12 Months or Greater Total
(Dollars in Millions) Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
U.S. Treasury and agencies $ 11,842 $ (23) $ 17,500 $ (1,780) $ 29,342 $ (1,803)
Mortgage-backed securities
Residential agency 712 (2) 16,836 (1,573) 17,548 (1,575)
Commercial
Agency - - 7,605 (1,076) 7,605 (1,076)
Non-agency - - 7 - 7 -
Asset-backed securities 160 - 1,361 - 1,521 -
Obligations of state and political subdivisions 589 (2) 7,772 (871) 8,361 (873)
Other - - 4 - 4 -
Total investment securities $ 13,303 $ (27) $ 51,085 $ (5,300) $ 64,388 $ (5,327)
These unrealized losses primarily relate to changes in interest rates and market spreads subsequent to purchase of these available-for-sale investment securities. U.S. Treasury and agencies securities and agency mortgage-backed securities are issued, guaranteed or otherwise supported by the United States government. The Company's obligations of state and political subdivisions are generally high grade. Accordingly, the Company does not consider these unrealized losses to be credit-related and an allowance for credit losses is not necessary. In general, the issuers of the investment securities are contractually prohibited from prepayment at less than par, and the Company did not pay significant purchase premiums for these investment securities. At September 30, 2024, the Company had no plans to sell investment securities with unrealized losses, and believes it is more likely than not it would not be required to sell such investment securities before recovery of their amortized cost.
During the nine months ended September 30, 2024 and 2023, the Company did not purchase any investment securities that had more-than-insignificant credit deterioration.
Predominately all of the Company's held-to-maturity investment securities are U.S. Treasury and agencies securities and highly rated agency mortgage-backed securities that are guaranteed or otherwise supported by the United States government and have no history of credit losses. Accordingly the Company does not expect to incur any credit losses on held-to-maturity investment securities and has no allowance for credit losses recorded for these securities.
38
U.S. Bancorp
The following table provides information about the amortized cost, fair value and yield by maturity date of the investment securities outstanding at September 30, 2024:
(Dollars in Millions)
Amortized
Cost
Fair Value
Weighted- Average
Maturity in Years
Weighted-Average Yield(e)
Held-to-Maturity
U.S. Treasury and agencies
Maturing in one year or less $ 650 $ 644 0.6 2.71 %
Maturing after one year through five years 646 636 2.6 3.00
Maturing after five years through ten years - - - -
Maturing after ten years - - - -
Total $ 1,296 $ 1,280 1.6 2.85 %
Mortgage-backed securities(a)
Maturing in one year or less $ 40 $ 40 0.8 4.47 %
Maturing after one year through five years 2,148 2,179 3.5 4.55
Maturing after five years through ten years 76,190 67,559 8.4 2.11
Maturing after ten years 109 112 11.0 4.49
Total $ 78,487 $ 69,890 8.3 2.18 %
Other
Maturing in one year or less $ 17 $ 17 0.5 3.24 %
Maturing after one year through five years 225 228 2.5 2.71
Maturing after five years through ten years - - - -
Maturing after ten years - - - -
Total $ 242 $ 245 2.4 2.75 %
Total held-to-maturity(b)
$ 80,025 $ 71,415 8.2 2.20 %
Available-for-Sale
U.S. Treasury and agencies
Maturing in one year or less $ 11 $ 11 0.2 5.14 %
Maturing after one year through five years 15,218 14,601 3.5 2.40
Maturing after five years through ten years 15,215 14,187 6.7 2.73
Maturing after ten years 757 600 10.8 1.92
Total $ 31,201 $ 29,399 5.2 2.55 %
Mortgage-backed securities(a)
Maturing in one year or less $ 39 $ 39 0.7 2.11 %
Maturing after one year through five years 13,326 13,123 3.8 4.29
Maturing after five years through ten years 24,261 21,924 7.1 2.93
Maturing after ten years 309 292 11.5 5.64
Total $ 37,935 $ 35,378 6.0 3.42 %
Asset-backed securities(a)
Maturing in one year or less $ - $ - - - %
Maturing after one year through five years 4,147 4,170 1.7 4.98
Maturing after five years through ten years 2,610 2,618 5.9 6.53
Maturing after ten years - - - -
Total $ 6,757 $ 6,788 3.4 5.58 %
Obligations of state and political subdivisions(c)(d)
Maturing in one year or less $ 284 $ 283 0.5 5.10 %
Maturing after one year through five years 3,111 3,103 2.6 4.57
Maturing after five years through ten years 1,546 1,491 7.2 3.49
Maturing after ten years 5,791 5,011 14.9 2.41
Total $ 10,732 $ 9,888 9.9 3.25 %
Other
Maturing in one year or less $ 49 $ 49 0.9 4.66 %
Maturing after one year through five years 199 202 2.0 5.01
Maturing after five years through ten years - - - -
Maturing after ten years - - - -
Total $ 248 $ 251 1.7 4.94 %
Total available-for-sale(b)(f)
$ 86,873 $ 81,704 6.0 3.26 %
(a)Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities that take into account anticipated future prepayments.
(b)The weighted-average maturity of total held-to-maturity investment securities was 8.7 years at December 31, 2023, with a corresponding weighted-average yield of 2.22 percent. The weighted-average maturity of total available-for-sale investment securities was 6.3 years at December 31, 2023, with a corresponding weighted-average yield of 3.12 percent.
(c)Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, and yield to maturity if the security is purchased at par or a discount.
(d)Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and the contractual maturity date for securities with a fair value equal to or below par.
(e)Weighted-average yields for obligations of state and political subdivisions are presented on a fully-taxable equivalent basis based on a federal income tax rate of 21 percent. Yields on investment securities are computed based on amortized cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity.
(f)Amortized cost excludes portfolio level basis adjustments of $525 million.
U.S. Bancorp
39
NOTE 4 Loans and Allowance for Credit Losses
The composition of the loan portfolio, by class and underlying specific portfolio type, was as follows:
September 30, 2024 December 31, 2023
(Dollars in Millions) Amount Percent of Total Amount Percent of Total
Commercial
Commercial $ 129,434 34.6 % $ 127,676 34.2 %
Lease financing 4,204 1.1 4,205 1.1
Total commercial 133,638 35.7 131,881 35.3
Commercial Real Estate
Commercial mortgages 39,602 10.6 41,934 11.2
Construction and development 11,017 2.9 11,521 3.1
Total commercial real estate 50,619 13.5 53,455 14.3
Residential Mortgages
Residential mortgages 111,790 29.9 108,605 29.0
Home equity loans, first liens 6,244 1.6 6,925 1.9
Total residential mortgages 118,034 31.5 115,530 30.9
Credit Card 29,037 7.8 28,560 7.6
Other Retail
Retail leasing 4,038 1.1 4,135 1.1
Home equity and second mortgages 13,364 3.6 13,056 3.5
Revolving credit 3,644 1.0 3,668 1.0
Installment 14,482 3.9 13,889 3.7
Automobile 7,308 1.9 9,661 2.6
Total other retail 42,836 11.5 44,409 11.9
Total loans $ 374,164 100.0 % $ 373,835 100.0 %
The Company had loans of $127.4 billion at September 30, 2024, and $123.1 billion at December 31, 2023, pledged at the Federal Home Loan Bank, and loans of $84.4 billion at September 30, 2024, and $82.8 billion at December 31, 2023, pledged at the Federal Reserve Bank.
Originated loans are reported at the principal amount outstanding, net of unearned interest and deferred fees and costs, and any partial charge-offs recorded. Purchased loans are recorded at fair value at the date of purchase. Net unearned interest and deferred fees and costs on originated loans and unamortized premiums and discounts on purchased loans amounted to $2.6 billion and $2.7 billion at September 30, 2024 and December 31, 2023, respectively. The Company evaluates purchased loans for more-than-insignificant deterioration at the date of purchase in accordance with applicable authoritative accounting guidance. Purchased loans that have experienced more-than-insignificant deterioration from origination are considered purchased credit deteriorated loans. All other purchased loans are considered non-purchased credit deteriorated loans.
Allowance for Credit LossesThe allowance for credit losses is established for current expected credit losses on the Company's loan and lease portfolio, including unfunded credit commitments. The allowance considers expected losses for the remaining lives of the applicable assets, inclusive of expected recoveries. The allowance for credit losses is increased through provisions charged to earnings and reduced by net charge-offs. Management evaluates the appropriateness of the allowance for credit losses on a quarterly basis.
Multiple economic scenarios are considered over a three-year reasonable and supportable forecast period, which includes increasing consideration of historical loss experience over years two and three. These economic scenarios are constructed with interrelated projections of multiple economic variables, and loss estimates are produced that consider the historical correlation of those economic variables with credit losses. After the forecast period, the Company fully reverts to long-term historical loss experience, adjusted for prepayments and characteristics of the current loan and lease portfolio, to estimate losses over the remaining life of the portfolio. The economic scenarios are updated at least quarterly and are designed to provide a range of reasonable estimates, from better to worse than current expectations. Scenarios are weighted based on the Company's expectation of economic conditions for the foreseeable future and reflect significant judgment and consideration of economic forecast uncertainty. Final loss estimates also consider factors affecting credit losses not reflected in the scenarios, due to the unique aspects of current conditions and expectations. These factors may include, but are not limited to, loan servicing practices, regulatory guidance, and/or fiscal and monetary policy actions.
40
U.S. Bancorp
The allowance recorded for credit losses utilizes forward-looking expected loss models to consider a variety of factors affecting lifetime credit losses. These factors include, but are not limited to, macroeconomic variables such as unemployment rates, real estate prices, gross domestic product levels, inflation, interest rates and corporate bonds spreads, as well as loan and borrower characteristics, such as internal risk ratings on commercial loans and consumer credit scores, delinquency status, collateral type and available valuation information, consideration of end-of-term losses on lease residuals, and the remaining term of the loan, adjusted for expected prepayments. For each loan portfolio, including those loans modified under various loan modification programs, model estimates are adjusted as necessary to consider any relevant changes in portfolio composition, lending policies, underwriting standards, risk management practices, economic conditions or other factors that would affect the accuracy of the model. Expected credit loss estimates also include consideration of expected cash recoveries on loans previously charged-off or expected recoveries on collateral dependent loans where recovery is expected through sale of the collateral at fair value less selling costs. Where loans do not exhibit similar risk characteristics, an individual analysis is performed to consider expected credit losses. For loans and leases that do not share similar risk characteristics with a pool of loans, the Company establishes individually assessed reserves. Reserves for individual commercial nonperforming loans greater than $5 million in the commercial lending segment are analyzed utilizing expected cash flows discounted using the original effective interest rate, the observable market price of the loan, or the fair value of the collateral, less selling costs, for collateral-dependent loans as appropriate. For smaller commercial loans collectively evaluated for impairment, historical loss experience is also incorporated into the allowance methodology applied to this category of loans.
The Company's methodology for determining the appropriate allowance for credit losses also considers the imprecision inherent in the methodologies used and allocated to the various loan portfolios. As a result, amounts determined under the methodologies described above are adjusted by management to consider the potential impact of other qualitative factors not captured in the quantitative model adjustments which include, but are not limited to, the following: model imprecision, imprecision in economic scenario assumptions, and emerging risks related to either changes in the environment that are affecting specific portfolios, or changes in portfolio concentrations over time that may affect model performance. The consideration of these items results in adjustments to allowance amounts included in the Company's allowance for credit losses for each loan portfolio.
The Company also assesses the credit risk associated with off-balance sheet loan commitments, letters of credit, investment securities and derivatives. Credit risk associated with derivatives is reflected in the fair values recorded for those positions. The liability for off-balance sheet credit exposure related to loan commitments and other credit guarantees is included in other liabilities. Because business processes and credit risks associated with unfunded credit commitments are essentially the same as for loans, the Company utilizes similar processes to estimate its liability for unfunded credit commitments.
The results of the analysis are evaluated quarterly to confirm the estimates are appropriate for each specific loan portfolio, as well as the entire loan portfolio, as the entire allowance for credit losses is available for the entire loan portfolio.
U.S. Bancorp
41
Activity in the allowance for credit losses by portfolio class was as follows:
Three Months Ended September 30
(Dollars in Millions) 		Commercial
Commercial Real Estate
Residential Mortgages
Credit Card
Other Retail
Total Loans
2024
Balance at beginning of period $ 2,180 $ 1,596 $ 836 $ 2,498 $ 824 $ 7,934
Add
Provision for credit losses 155 49 (36) 349 40 557
Deduct
Loans charged-off 165 80 3 347 74 669
Less recoveries of loans charged-off (18) (10) (6) (48) (23) (105)
Net loan charge-offs (recoveries) 147 70 (3) 299 51 564
Balance at end of period $ 2,188 $ 1,575 $ 803 $ 2,548 $ 813 $ 7,927
2023
Balance at beginning of period $ 2,209 $ 1,473 $ 899 $ 2,185 $ 929 $ 7,695
Add
Provision for credit losses (14) 266 (49) 285 27 515
Deduct
Loans charged-off 110 51 1 259 87 508
Less recoveries of loans charged-off (18) (2) (4) (39) (25) (88)
Net loan charge-offs (recoveries) 92 49 (3) 220 62 420
Balance at end of period $ 2,103 $ 1,690 $ 853 $ 2,250 $ 894 $ 7,790
Nine Months Ended September 30
(Dollars in Millions) 		Commercial
Commercial Real Estate
Residential Mortgages
Credit Card
Other Retail
Total Loans
2024
Balance at beginning of period $ 2,119 $ 1,620 $ 827 $ 2,403 $ 870 $ 7,839
Add
Provision for credit losses 475 82 (31) 1,055 97 1,678
Deduct
Loans charged-off 484 152 10 1,042 228 1,916
Less recoveries of loans charged-off (78) (25) (17) (132) (74) (326)
Net loan charge-offs (recoveries) 406 127 (7) 910 154 1,590
Balance at end of period $ 2,188 $ 1,575 $ 803 $ 2,548 $ 813 $ 7,927
2023
Balance at beginning of period $ 2,163 $ 1,325 $ 926 $ 2,020 $ 970 $ 7,404
Add
Change in accounting principle(a)
- - (31) (27) (4) (62)
Allowance for acquired credit losses(b)
- 127 - - - 127
Provision for credit losses 169 430 68 851 245 1,763
Deduct
Loans charged-off 283 205 126 716 402 1,732
Less recoveries of loans charged-off (54) (13) (16) (122) (85) (290)
Net loan charge-offs (recoveries) 229 192 110 594 317 1,442
Balance at end of period $ 2,103 $ 1,690 $ 853 $ 2,250 $ 894 $ 7,790
(a)Effective January 1, 2023, the Company adopted accounting guidance which removed the separate recognition and measurement of troubled debt restructurings.
(b)Represents allowance for acquired credit deteriorated and charged-off loans.
The increase in the allowance for credit losses at September 30, 2024, compared with December 31, 2023, was primarily driven by credit migration in consumer and small business cards and portfolio growth.
42
U.S. Bancorp
The following table provides a summary of loans charged-off by portfolio class and year of origination:
Three Months Ended September 30
(Dollars in Millions) 		Commercial Commercial
Real Estate 		Residential Mortgages
Credit Card(c)
Other Retail Total Loans
2024
Originated in 2024 $ 10 $ 39 $ - $ - $ 4 $ 53
Originated in 2023 16 15 - - 13 44
Originated in 2022 48 23 1 - 11 83
Originated in 2021 8 - - - 9 17
Originated in 2020 3 1 - - 4 8
Originated prior to 2020 10 2 2 - 6 20
Revolving 70 - - 347 27 444
Total charge-offs $ 165 $ 80 $ 3 $ 347 $ 74 $ 669
2023
Originated in 2023 $ 22 $ 20 $ - $ - $ 5 $ 47
Originated in 2022 11 - - - 17 28
Originated in 2021 17 27 - - 13 57
Originated in 2020 4 - - - 6 10
Originated in 2019 4 - - - 6 10
Originated prior to 2019 10 4 1 - 13 28
Revolving 42 - - 259 27 328
Total charge-offs $ 110 $ 51 $ 1 $ 259 $ 87 $ 508
Nine Months Ended September 30
(Dollars in Millions) 		Commercial
Commercial Real Estate(a)
Residential Mortgages(b)
Credit Card(c)
Other Retail(d)
Total Loans
2024
Originated in 2024 $ 13 $ 80 $ - $ - $ 6 $ 99
Originated in 2023 68 21 - - 34 123
Originated in 2022 132 47 2 - 39 220
Originated in 2021 23 - - - 30 53
Originated in 2020 9 1 - - 17 27
Originated prior to 2020 31 3 8 - 25 67
Revolving 208 - - 1,042 77 1,327
Total charge-offs $ 484 $ 152 $ 10 $ 1,042 $ 228 $ 1,916
2023
Originated in 2023 $ 29 $ 20 $ - $ - $ 51 $ 100
Originated in 2022 51 88 - - 116 255
Originated in 2021 25 44 5 - 70 144
Originated in 2020 14 - 8 - 31 53
Originated in 2019 11 3 16 - 26 56
Originated prior to 2019 38 50 97 - 26 211
Revolving 115 - - 716 54 885
Revolving converted to term - - - - 28 28
Total charge-offs $ 283 $ 205 $ 126 $ 716 $ 402 $ 1,732
Note: Year of origination is based on the origination date of a loan, or for existing loans the date when the maturity date, pricing or commitment amount is amended. Predominantly all current year and near term loan origination years for gross charge-offs relate to existing loans that have had recent maturity date, pricing or commitment amount amendments.
(a)Includes $91 million of charge-offs in the first quarter of 2023 related to uncollectible amounts on acquired loans.
(b)Includes $117 million of charge-offs related to balance sheet repositioning and capital management actions taken in the second quarter of 2023.
(c)Predominantly all credit card loans are considered revolving loans. Includes an immaterial amount of charge-offs related to revolving converted to term loans.
(d)Includes $192 million of charge-offs related to balance sheet repositioning and capital management actions taken in the second quarter of 2023.
Credit QualityThe credit quality of the Company's loan portfolios is assessed as a function of net credit losses, levels of nonperforming assets and delinquencies, and credit quality ratings as defined by the Company.
For all loan portfolio classes, loans are considered past due based on the number of days delinquent except for monthly amortizing loans which are classified delinquent based upon the number of contractually required payments not made (for example, two missed payments is considered 30 days delinquent). When a loan is placed on nonaccrual status, unpaid accrued interest is reversed, reducing interest income in the current period.
Commercial lending segment loans are generally placed on nonaccrual status when the collection of principal and interest has become 90 days past due or is otherwise considered doubtful. Commercial lending segment loans are generally fully charged
U.S. Bancorp
43
down if unsecured by collateral or partially charged down to the fair value of the collateral securing the loan, less costs to sell, when the loan is placed on nonaccrual.
Consumer lending segment loans are generally charged-off at a specific number of days or payments past due. Residential mortgages and other retail loans secured by 1-4 family properties are generally charged down to the fair value of the collateral securing the loan, less costs to sell, at 180 days past due. Residential mortgage loans and lines in a first lien position are placed on nonaccrual status in instances where a partial charge-off occurs unless the loan is well secured and in the process of collection. Residential mortgage loans and lines in a junior lien position secured by 1-4 family properties are placed on nonaccrual status at 120 days past due or when they are behind a first lien that has become 180 days or greater past due or placed on nonaccrual status. Any secured consumer lending segment loan whose borrower has had debt discharged through bankruptcy, for which the loan amount exceeds the fair value of the collateral, is charged down to the fair value of the related collateral and the remaining balance is placed on nonaccrual status. Credit card loans continue to accrue interest until the account is charged-off. Credit cards are charged-off at 180 days past due. Other retail loans not secured by 1-4 family properties are charged-off at 120 days past due, and revolving consumer lines are charged-off at 180 days past due. Similar to credit cards, other retail loans are generally not placed on nonaccrual status because of the relative short period of time to charge-off. Certain retail customers having financial difficulties may have the terms of their credit card and other loan agreements modified to require only principal payments and, as such, are reported as nonaccrual.
For all loan classes, interest payments received on nonaccrual loans are generally recorded as a reduction to a loan's carrying amount while a loan is on nonaccrual and are recognized as interest income upon payoff of the loan. However, interest income may be recognized for interest payments received if the remaining carrying amount of the loan is believed to be collectible. In certain circumstances, loans in any class may be restored to accrual status, such as when a loan has demonstrated sustained repayment performance or no amounts are past due and prospects for future payment are no longer in doubt, or when the loan becomes well secured and is in the process of collection. Loans where there has been a partial charge-off may be returned to accrual status if all principal and interest (including amounts previously charged-off) is expected to be collected and the loan is current.
The following table provides a summary of loans by portfolio class, including the delinquency status of those that continue to accrue interest, and those that are nonperforming:
Accruing
(Dollars in Millions) Current
30-89 Days
Past Due
90 Days or
More Past Due
Nonperforming(b)
Total
September 30, 2024
Commercial $ 132,626 $ 335 $ 92 $ 585 $ 133,638
Commercial real estate 49,604 81 9 925 50,619
Residential mortgages(a)
117,530 171 179 154 118,034
Credit card 28,215 426 396 - 29,037
Other retail 42,407 222 62 145 42,836
Total loans $ 370,382 $ 1,235 $ 738 $ 1,809 $ 374,164
December 31, 2023
Commercial $ 130,925 $ 464 $ 116 $ 376 $ 131,881
Commercial real estate 52,619 55 4 777 53,455
Residential mortgages(a)
115,067 169 136 158 115,530
Credit card 27,779 406 375 - 28,560
Other retail 43,926 278 67 138 44,409
Total loans $ 370,316 $ 1,372 $ 698 $ 1,449 $ 373,835
(a)At September 30, 2024, $607 million of loans 30-89 days past due and $2.0 billion of loans 90 days or more past due purchased and that could be purchased from GNMA mortgage pools under delinquent loan repurchase options whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, were classified as current, compared with $595 million and $2.0 billion at December 31, 2023, respectively.
(b)Substantially all nonperforming loans at September 30, 2024 and December 31, 2023, had an associated allowance for credit losses. The Company recognized interest income on nonperforming loans of $5 million for both the three months ended September 30, 2024 and 2023, respectively, and $16 million and $12 million for the nine months ended September 30, 2024 and 2023, respectively.
44
U.S. Bancorp
At September 30, 2024, the amount of foreclosed residential real estate held by the Company, and included in OREO, was $21 million, compared with $26 million at December 31, 2023. These amounts excluded $47 million at both September 30, 2024 and December 31, 2023, respectively, of foreclosed residential real estate related to mortgage loans whose payments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. In addition, the amount of residential mortgage loans secured by residential real estate in the process of foreclosure at September 30, 2024 and December 31, 2023, was $587 million and $728 million, respectively, of which $363 million and $487 million, respectively, related to loans purchased and that could be purchased from GNMA mortgage pools under delinquent loan repurchase options whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.
The Company classifies its loan portfolio classes using internal credit quality ratings on a quarterly basis. These ratings include pass, special mention and classified, and are an important part of the Company's overall credit risk management process and evaluation of the allowance for credit losses. Loans with a pass rating represent those loans not classified on the Company's rating scale for problem credits, as minimal credit risk has been identified. Special mention loans are those loans that have a potential weakness deserving management's close attention. Classified loans are those loans where a well-defined weakness has been identified that may put full collection of contractual cash flows at risk. It is possible that others, given the same information, may reach different reasonable conclusions regarding the credit quality rating classification of specific loans.
U.S. Bancorp
45
The following table provides a summary of loans by portfolio class and the Company's internal credit quality rating:
September 30, 2024 December 31, 2023
Criticized Criticized
(Dollars in Millions) Pass
Special
Mention
Classified(a)
Total
Criticized
Total Pass
Special
Mention
Classified(a)
Total
Criticized
Total
Commercial
Originated in 2024 $ 39,799 $ 636 $ 806 $ 1,442 $ 41,241 $ - $ - $ - $ - $ -
Originated in 2023 23,359 276 671 947 24,306 43,023 827 856 1,683 44,706
Originated in 2022 23,723 169 697 866 24,589 40,076 274 632 906 40,982
Originated in 2021 5,918 129 100 229 6,147 9,219 117 154 271 9,490
Originated in 2020 2,962 63 77 140 3,102 3,169 92 71 163 3,332
Originated prior to 2020 4,417 13 86 99 4,516 5,303 30 209 239 5,542
Revolving(b)
28,497 263 977 1,240 29,737 26,213 362 1,254 1,616 27,829
Total commercial 128,675 1,549 3,414 4,963 133,638 127,003 1,702 3,176 4,878 131,881
Commercial real estate
Originated in 2024 7,190 260 1,416 1,676 8,866 - - - - -
Originated in 2023 5,466 102 1,291 1,393 6,859 8,848 465 2,206 2,671 11,519
Originated in 2022 9,964 688 1,339 2,027 11,991 11,831 382 1,141 1,523 13,354
Originated in 2021 7,182 183 505 688 7,870 9,235 500 385 885 10,120
Originated in 2020 3,081 43 119 162 3,243 3,797 51 87 138 3,935
Originated prior to 2020 8,775 124 691 815 9,590 10,759 458 619 1,077 11,836
Revolving 2,144 - 54 54 2,198 2,613 6 70 76 2,689
Revolving converted to term 2 - - - 2 2 - - - 2
Total commercial real estate 43,804 1,400 5,415 6,815 50,619 47,085 1,862 4,508 6,370 53,455
Residential mortgages(c)
Originated in 2024 7,590 - 1 1 7,591 - - - - -
Originated in 2023 9,115 - 10 10 9,125 9,734 - 5 5 9,739
Originated in 2022 28,756 - 30 30 28,786 29,146 - 17 17 29,163
Originated in 2021 35,150 - 29 29 35,179 36,365 - 16 16 36,381
Originated in 2020 13,978 - 16 16 13,994 14,773 - 9 9 14,782
Originated prior to 2020 23,105 - 254 254 23,359 25,202 - 262 262 25,464
Revolving - - - - - 1 - - - 1
Total residential mortgages 117,694 - 340 340 118,034 115,221 - 309 309 115,530
Credit card(d)
28,641 - 396 396 29,037 28,185 - 375 375 28,560
Other retail
Originated in 2024 6,021 - 3 3 6,024 - - - - -
Originated in 2023 4,251 - 8 8 4,259 5,184 - 4 4 5,188
Originated in 2022 4,455 - 12 12 4,467 5,607 - 12 12 5,619
Originated in 2021 7,415 - 16 16 7,431 10,398 - 15 15 10,413
Originated in 2020 3,031 - 5 5 3,036 4,541 - 9 9 4,550
Originated prior to 2020 3,059 - 16 16 3,075 4,008 - 20 20 4,028
Revolving 13,663 - 112 112 13,775 13,720 - 104 104 13,824
Revolving converted to term 725 - 44 44 769 735 - 52 52 787
Total other retail 42,620 - 216 216 42,836 44,193 - 216 216 44,409
Total loans $ 361,434 $ 2,949 $ 9,781 $ 12,730 $ 374,164 $ 361,687 $ 3,564 $ 8,584 $ 12,148 $ 373,835
Total outstanding commitments $ 770,528 $ 4,499 $ 11,828 $ 16,327 $ 786,855 $ 762,869 $ 5,053 $ 10,470 $ 15,523 $ 778,392
Note: Year of origination is based on the origination date of a loan, or for existing loans the date when the maturity date, pricing or commitment amount is amended. Predominately all current year and near term loan origination years for criticized loans relate to existing loans that have had recent maturity date, pricing or commitment amount amendments.
(a)Classified rating on consumer loans primarily based on delinquency status.
(b)Includes an immaterial amount of revolving converted to term loans.
(c)At September 30, 2024, $2.0 billion of GNMA loans 90 days or more past due and $1.4 billion of modified GNMA loans whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs were classified with a pass rating, compared with $2.0 billion and $1.2 billion at December 31, 2023, respectively.
(d)Predominately all credit card loans are considered revolving loans. Includes an immaterial amount of revolving converted to term loans.
Loan Modifications In certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term. The Company
46
U.S. Bancorp
recognizes interest on modified loans if full collection of contractual principal and interest is expected. The effects of modifications on credit loss expectations, such as improved payment capacity, longer expected lives and other factors, are considered when measuring the allowance for credit losses. Modification performance, including redefault rates and how these compare to historical losses, are also considered. Modifications generally do not result in significant changes to the Company's allowance for credit losses.
The following table provides a summary of period-end balances of loans modified during the periods presented, by portfolio class and modification granted:
Three Months Ended September 30
(Dollars in Millions)
Interest Rate
Reduction
Payment
Delay
Term
Extension
Multiple Modifications(a)
Total
Modifications
Percent of
Class Total
2024
Commercial $ 26 $ - $ 292 $ - $ 318 .2 %
Commercial real estate - - 401 27 428 .8
Residential mortgages(b)
- 21 3 7 31 -
Credit card 133 2 - - 135 .5
Other retail 2 - 36 2 40 .1
Total loans, excluding loans purchased from GNMA mortgage pools 161 23 732 36 952 .3
Loans purchased from GNMA mortgage pools(b)
- 391 96 101 588 .5
Total loans $ 161 $ 414 $ 828 $ 137 $ 1,540 .4 %
2023
Commercial $ 16 $ - $ 98 $ - $ 114 .1 %
Commercial real estate - - 426 9 435 .8
Residential mortgages(b)
- 58 6 1 65 .1
Credit card 117 - - - 117 .4
Other retail 2 12 39 - 53 .1
Total loans, excluding loans purchased from GNMA mortgage pools 135 70 569 10 784 .2
Loans purchased from GNMA mortgage pools(b)
- 455 75 127 657 .6
Total loans $ 135 $ 525 $ 644 $ 137 $ 1,441 .4 %
Nine Months Ended September 30
(Dollars in Millions) 		Interest Rate Reduction Payment Delay Term Extension
Multiple Modifications(a)
Total Modifications Percent of Class Total
2024
Commercial $ 63 $ - $ 603 $ - $ 666 .5 %
Commercial real estate 49 - 761 27 837 1.7
Residential mortgages(b)
- 46 15 16 77 .1
Credit card 330 2 - - 332 1.1
Other retail 6 2 98 3 109 .3
Total loans, excluding loans purchased from GNMA mortgage pools 448 50 1,477 46 2,021 .5
Loans purchased from GNMA mortgage pools(b)
1 1,101 257 281 1,640 1.4
Total loans $ 449 $ 1,151 $ 1,734 $ 327 $ 3,661 1.0 %
2023
Commercial $ 36 $ - $ 213 $ - $ 249 .2 %
Commercial real estate - - 527 9 536 1.0
Residential mortgages(b)
- 221 21 17 259 .2
Credit card 268 1 - - 269 1.0
Other retail 6 20 113 2 141 .3
Total loans, excluding loans purchased from GNMA mortgage pools 310 242 874 28 1,454 .4
Loans purchased from GNMA mortgage pools(b)
- 1,020 211 261 1,492 1.3
Total loans $ 310 $ 1,262 $ 1,085 $ 289 $ 2,946 .8 %
(a)Includes $85 million of total loans receiving a payment delay and term extension, $44 million of total loans receiving an interest rate reduction and term extension and $8 million of total loans receiving an interest rate reduction, payment delay and term extension for the three months ended September 30, 2024, compared with $126 million, $9 million and $2 million for the three months ended September 30, 2023, respectively. Includes $251 million of total loans receiving a payment delay and term extension, $56 million of total loans receiving an interest rate reduction and term extension and $20 million of total loans receiving an interest rate reduction, payment delay and term extension for the nine months ended September 30, 2024, compared with $268 million, $14 million and $7 million for the nine months ended September 30, 2023, respectively.
(b)Percent of class total amounts expressed as a percent of total residential mortgage loan balances.
Loan modifications included in the table above exclude trial period arrangements offered to customers and secured loans to consumer borrowers that have had debt discharged through bankruptcy where the borrower has not reaffirmed the debt during the periods presented. At September 30, 2024 the balance of loans modified in trial period arrangements was $142 million, while the balance of secured loans to consumer borrowers that have had debt discharged through bankruptcy was not material.
U.S. Bancorp
47
The following table summarizes the effects of loan modifications made to borrowers on loans modified:
Three Months Ended September 30
Weighted-Average
Interest Rate
Reduction
Weighted-Average
Months of Term
Extension
2024
Commercial(a)
20.5 % 9
Commercial real estate 4.4 12
Residential mortgages 1.1 92
Credit card 16.2 -
Other retail 6.4 5
Loans purchased from GNMA mortgage pools .4 109
2023
Commercial(a)
21.5 % 13
Commercial real estate - 11
Residential mortgages .9 99
Credit card 15.4 -
Other retail 9.1 2
Loans purchased from GNMA mortgage pools .5 121
Nine Months Ended September 30 Weighted-Average Interest Rate Reduction Weighted-Average Months of Term Extension
2024
Commercial(a)
20.2 % 9
Commercial real estate 3.1 12
Residential mortgages .9 88
Credit card 16.3 -
Other retail 7.7 5
Loans purchased from GNMA mortgage pools .5 113
2023
Commercial(a)
21.0 % 10
Commercial real estate - 10
Residential mortgages 1.3 109
Credit card 15.1 -
Other retail 7.8 4
Loans purchased from GNMA mortgage pools .6 98
Note: The weighted-average payment deferral for all portfolio classes was less than $1 million for the three and nine months ended September 30, 2024 and 2023. Forbearance payments are required to be paid at the end of the original term loan.
(a)The weighted-average interest rate reduction was primarily driven by commercial cards.
For the commercial lending segment, modifications generally result in the Company working with borrowers on a case-by-case basis. Commercial and commercial real estate modifications generally include extensions of the maturity date and may be accompanied by an increase or decrease to the interest rate. In addition, the Company may work with the borrower in identifying other changes that mitigate loss to the Company, which may include additional collateral or guarantees to support the loan. To a lesser extent, the Company may provide an interest rate reduction.
Modifications for the consumer lending segment are generally part of programs the Company has initiated. The Company modifies residential mortgage loans under Federal Housing Administration, United States Department of Veterans Affairs, or its own internal programs. Under these programs, the Company offers qualifying homeowners the opportunity to permanently modify their loan and achieve more affordable monthly payments. These modifications may include adjustments to interest rates, conversion of adjustable rates to fixed rates, extension of maturity dates or deferrals of payments, capitalization of accrued interest and/or outstanding advances, or in limited situations, partial forgiveness of loan principal. In some instances, participation in residential mortgage loan modification programs requires the customer to complete a short-term trial period. A permanent loan modification is contingent on the customer successfully completing the trial period arrangement, and the loan documents are not modified until that time.
48
U.S. Bancorp
Credit card and other retail loan modifications are generally part of distinct modification programs providing customers experiencing financial difficulty with modifications whereby balances may be amortized up to 60 months, and generally include waiver of fees and reduced interest rates.
Loans that receive a forbearance plan generally remain in default until they are no longer delinquent as the result of the payment of all past due amounts or the borrower receiving a term extension or modification. Therefore, loans only receiving forbearance plans are not included in the table below.
The following table provides a summary of loan balances at September 30, 2024, which were modified during the prior twelve months, by portfolio class and delinquency status:
(Dollars in Millions)   Current
30-89 Days
Past Due
90 Days or
More Past Due
Total
Commercial $ 556 $ 55 $ 159 $ 770
Commercial real estate 752 2 455 1,209
Residential mortgages(a)
1,487 4 10 1,501
Credit card 298 70 37 405
Other retail 120 17 5 142
Total loans $ 3,213 $ 148 $ 666 $ 4,027
(a)At September 30, 2024, $430 million of loans 30-89 days past due and $265 million of loans 90 days or more past due purchased and that could be purchased from GNMA mortgage pools under delinquent loan repurchase options whose payments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, were classified as current.
The following table provides a summary of loan balances at September 30, 2023, which were modified on or after January 1, 2023, the date the Company adopted accounting guidance which removed the separate recognition and measurement of troubled debt restructurings, through September 30, 2023, by portfolio class and delinquency status:
(Dollars in Millions) Current
30-89 Days
Past Due
90 Days or
More Past Due
Total
Commercial $ 223 $ 11 $ 14 $ 248
Commercial real estate 347 1 189 537
Residential mortgages(a)
1,089 15 14 1,118
Credit card 192 54 22 268
Other retail 106 15 7 128
Total loans $ 1,957 $ 96 $ 246 $ 2,299
(a)At September 30, 2023, $263 million of loans 30-89 days past due and $64 million of loans 90 days or more past due purchased and that could be purchased from GNMA mortgage pools under delinquent loan repurchase options whose payments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, were classified as current.
U.S. Bancorp
49
The following table provides a summary of loans that defaulted (fully or partially charged-off or became 90 days or more past due) that were modified within twelve months prior to default:
(Dollars in Millions) Interest Rate Reduction Payment Delay Term Extension
Multiple Modifications(a)
Three Months Ended September 30, 2024
Commercial $ 8 $ - $ 13 $ -
Commercial real estate - - 180 -
Residential mortgages - 2 - 1
Credit card 33 - - -
Other retail 1 - 5 -
Total loans, excluding loans purchased from GNMA mortgage pools 42 2 198 1
Loans purchased from GNMA mortgage pools - 97 50 54
Total loans $ 42 $ 99 $ 248 $ 55
Nine Months Ended September 30, 2024
Commercial $ 20 $ - $ 13 $ -
Commercial real estate - - 204 -
Residential mortgages - 12 3 4
Credit card 92 - - -
Other retail 2 1 15 -
Total loans, excluding loans purchased from GNMA mortgage pools 114 13 235 4
Loans purchased from GNMA mortgage pools - 154 80 94
Total loans $ 114 $ 167 $ 315 $ 98
(a)Includes $49 million of total loans receiving a payment delay and term extension, $5 million of total loans receiving an interest rate reduction and term extension, and $1 million of total loans receiving an interest rate reduction, payment delay and term extension for the three months ended September 30, 2024. Includes $91 million of total loans receiving a payment delay and term extension, $6 million of total loans receiving an interest rate reduction and term extension and $1 million of total loans receiving an interest rate reduction, payment delay and term extension for the nine months ended September 30, 2024.
The following table provides a summary of loans that defaulted (fully or partially charged-off or became 90 days or more past due) that were modified on or after January 1, 2023, the date the Company adopted accounting guidance which removed the separate recognition and measurement of troubled debt restructurings, through September 30, 2023:
(Dollars in Millions) Interest Rate Reduction
Payment Delay
Term Extension
Multiple Modifications(a)
Three Months Ended September 30, 2023
Commercial $ 2 $ - $ - $ -
Residential mortgages - 4 1 -
Credit card 10 - - -
Other retail - - 4 -
Total loans, excluding loans purchased from GNMA mortgage pools 12 4 5 -
Loans purchased from GNMA mortgage pools - 20 9 6
Total loans $ 12 $ 24 $ 14 $ 6
Nine Months Ended September 30, 2023
Commercial $ 3 $ - $ - $ -
Residential mortgages - 5 1 1
Credit card 15 - - -
Other retail - - 5 -
Total loans, excluding loans purchased from GNMA mortgage pools 18 5 6 1
Loans purchased from GNMA mortgage pools - 23 10 7
Total loans $ 18 $ 28 $ 16 $ 8
(a) Represents loans receiving a payment delay and term extension for the three months ended September 30, 2023. Includes $7 million of total loans receiving a payment delay and term extension and $1 million of total loans receiving an interest rate reduction, payment delay and term extension for the nine months ended September 30, 2023.
As of September 30, 2024 the Company had $437 million of commitments to lend additional funds to borrowers whose terms of their outstanding owed balances have been modified.
50
U.S. Bancorp
NOTE 5 Accounting for Transfers and Servicing of Financial Assets and Variable
Interest Entities
The Company transfers financial assets in the normal course of business. The majority of the Company's financial asset transfers are residential mortgage loan sales primarily to GSEs, transfers of tax-advantaged investments, commercial loan sales through participation agreements, and other individual or portfolio loan and securities sales. In accordance with the accounting guidance for asset transfers, the Company considers any ongoing involvement with transferred assets in determining whether the assets can be derecognized from the balance sheet. Guarantees provided to certain third parties in connection with the transfer of assets are further discussed in Note 15.
For loans sold under participation agreements, the Company also considers whether the terms of the loan participation agreement meet the accounting definition of a participating interest. With the exception of servicing and certain performance-based guarantees, the Company's continuing involvement with financial assets sold is minimal and generally limited to market customary representation and warranty clauses. Any gain or loss on sale depends on the previous carrying amount of the transferred financial assets, the consideration received, and any liabilities incurred in exchange for the transferred assets. Upon transfer, any servicing assets and other interests that continue to be held by the Company are initially recognized at fair value. For further information on MSRs, refer to Note 6. On a limited basis, the Company may acquire and package high-grade corporate bonds for select corporate customers, in which the Company generally has no continuing involvement with these transactions. Additionally, the Company is an authorized GNMA issuer and issues GNMA securities on a regular basis. The Company has no other asset securitizations or similar asset-backed financing arrangements that are off-balance sheet.
The Company is involved in various entities that are considered to be variable interest entities ("VIEs"). The Company's investments in VIEs are primarily related to investments promoting affordable housing, community development and renewable energy sources. Some of these tax-advantaged investments support the Company's regulatory compliance with the Community Reinvestment Act. The Company's investments in these entities generate a return primarily through the realization of federal and state income tax credits, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These tax credits are recognized as a reduction of tax expense or, for investments qualifying as investment tax credits, as a reduction to the related investment asset. The Company recognized federal and state income tax credits related to its affordable housing and other tax-advantaged investments in tax expense of $141 million and $148 million for the three months ended September 30, 2024 and 2023, respectively, and $424 million and $435 million for the nine months ended September 30, 2024 and 2023, respectively. The Company also recognized $133 million and $238 million of investment tax credits for the three months ended September 30, 2024 and 2023, respectively, and $311 million and $474 million for the nine months ended September 30, 2024 and 2023, respectively. The Company recognized $135 million and $134 million of expenses related to all of these investments for the three months ended September 30, 2024 and 2023, respectively, which were primarily included in tax expense. The Company recognized $418 million and $399 million of expenses related to all of the these investments for the nine months ended September 30, 2024 and 2023, respectively, which were primarily included in tax expense.
The Company is not required to consolidate VIEs in which it has concluded it does not have a controlling financial interest, and thus is not the primary beneficiary. In such cases, the Company does not have both the power to direct the entities' most significant activities and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs.
The Company's investments in these unconsolidated VIEs are carried in other assets on the Consolidated Balance Sheet. The Company's unfunded capital and other commitments related to these unconsolidated VIEs are generally carried in other liabilities on the Consolidated Balance Sheet. The Company's maximum exposure to loss from these unconsolidated VIEs include the investment recorded on the Company's Consolidated Balance Sheet, net of unfunded capital commitments, and previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level. While the Company believes potential losses from these investments are remote, the maximum exposure was determined by assuming a scenario where the community-based business and housing projects completely fail and do not meet certain government compliance requirements resulting in recapture of the related tax credits.
The following table provides a summary of investments in community development and tax-advantaged VIEs that the Company has not consolidated:
(Dollars in Millions) September 30, 2024 December 31, 2023
Investment carrying amount $ 7,903 $ 6,659
Unfunded capital and other commitments 4,575 3,619
Maximum exposure to loss 8,992 9,002
The Company also has noncontrolling financial investments in private investment funds and partnerships considered to be VIEs, which are not consolidated. The Company's recorded investment in these entities, carried in other assets on the Consolidated Balance Sheet, was approximately $257 million at September 30, 2024 and $219 million at December 31, 2023. The maximum exposure to loss related to these VIEs was $382 million at September 30, 2024 and $319 million at December 31, 2023, representing the Company's investment balance and its unfunded commitments to invest additional amounts.
The Company also held senior notes of $3.7 billion as available-for-sale investment securities at September 30, 2024, compared with $5.3 billion at December 31, 2023. These senior notes were issued by third-party securitization vehicles that held $4.2 billion at
U.S. Bancorp
51
September 30, 2024 and $6.1 billion at December 31, 2023 of indirect auto loans that collateralize the senior notes. These VIEs are not consolidated by the Company.
The Company's individual net investments in unconsolidated VIEs, which exclude any unfunded capital commitments, ranged from less than $1 million to $79 million at September 30, 2024, compared with less than $1 million to $86 million at December 31, 2023.
The Company is required to consolidate VIEs in which it has concluded it has a controlling financial interest. The Company sponsors entities to which it transfers its interests in tax-advantaged investments to third parties. At September 30, 2024, approximately $5.8 billion of the Company's assets and $3.8 billion of its liabilities included on the Consolidated Balance Sheet were related to community development and tax-advantaged investment VIEs which the Company has consolidated, primarily related to these transfers. These amounts compared to $6.1 billion and $4.4 billion, respectively, at December 31, 2023. The majority of the assets of these consolidated VIEs are reported in other assets, and the liabilities are reported in long-term debt and other liabilities. The assets of a particular VIE are the primary source of funds to settle its obligations. The creditors of the VIEs do not have recourse to the general credit of the Company. The Company's exposure to the consolidated VIEs is generally limited to the carrying value of its variable interests plus any related tax credits previously recognized or transferred to others with a guarantee.
In addition, the Company sponsors a municipal bond securities tender option bond program. The Company controls the activities of the program's entities, is entitled to the residual returns and provides liquidity and remarketing arrangements to the program. As a result, the Company has consolidated the program's entities. At September 30, 2024, $228 million of available-for-sale investment securities and $150 million of short-term borrowings on the Consolidated Balance Sheet were related to the tender option bond program, compared with $607 million of available-for-sale investment securities and $381 million of short-term borrowings at December 31, 2023.
 NOTE 6 Mortgage Servicing Rights
The Company capitalizes MSRs as separate assets when loans are sold and servicing is retained. MSRs may also be purchased from others. The Company carries MSRs at fair value, with changes in the fair value recorded in earnings during the period in which they occur. The Company serviced $215.3 billion of residential mortgage loans for others at September 30, 2024, and $233.4 billion at December 31, 2023, including subserviced mortgages with no corresponding MSR asset. Included in mortgage banking revenue are the MSR fair value changes arising from market rate and model assumption changes, net of the value change in derivatives used to economically hedge MSRs. These changes resulted in net losses of $10 million and $3 million for the three months ended September 30, 2024 and 2023, respectively, and net gains of $11 million and net losses of $45 million for the nine months ended September 30, 2024 and 2023, respectively. Loan servicing and ancillary fees, not including valuation changes, included in mortgage banking revenue were $170 million and $176 million for the three months ended September 30, 2024 and 2023, respectively, and $526 million and $553 million for the nine months ended September 30, 2024 and 2023, respectively.
Changes in fair value of capitalized MSRs are summarized as follows:
Three Months Ended
September 30 		Nine Months Ended
September 30
(Dollars in Millions) 2024 2023 2024 2023
Balance at beginning of period $ 3,326 $ 3,633 $ 3,377 $ 3,755
Rights purchased - 1 1 3
Rights capitalized 72 106 191 301
Rights sold
1 (292) (188) (440)
Changes in fair value of MSRs
Due to fluctuations in market interest rates(a)
(121) 219 27 265
Due to revised assumptions or models(b)
3 16 44 -
Other changes in fair value(c)
(94) (101) (265) (302)
Balance at end of period $ 3,187 $ 3,582 $ 3,187 $ 3,582
(a)Includes changes in MSR value associated with changes in market interest rates, including estimated prepayment rates and anticipated earnings on escrow deposits.
(b)Includes changes in MSR value not caused by changes in market interest rates, such as changes in assumed cost to service, ancillary income and option adjusted spread, as well as the impact of any model changes.
(c)Primarily the change in MSR value from passage of time and cash flows realized (decay), but also includes the impact of changes to expected cash flows not associated with changes in market interest rates, such as the impact of delinquencies.
52
U.S. Bancorp
The estimated sensitivity to changes in interest rates of the fair value of the MSR portfolio and the related derivative instruments was as follows:
September 30, 2024 December 31, 2023
(Dollars in Millions) Down
100 bps 		Down
50 bps 		Down
25 bps 		Up
25 bps 		Up
50 bps 		Up
100 bps 		Down
100 bps 		Down
50 bps 		Down
25 bps 		Up
25 bps 		Up
50 bps 		Up
100 bps
MSR portfolio $ (364) $ (172) $ (83) $ 77 $ 148 $ 271 $ (370) $ (173) $ (84) $ 77 $ 147 $ 268
Derivative instrument hedges 381 180 87 (78) (151) (287) 381 178 86 (79) (152) (289)
Net sensitivity $ 17 $ 8 $ 4 $ (1) $ (3) $ (16) $ 11 $ 5 $ 2 $ (2) $ (5) $ (21)
The fair value of MSRs and their sensitivity to changes in interest rates is influenced by the mix of the servicing portfolio and characteristics of each segment of the portfolio. The Company's servicing portfolio consists of the distinct portfolios of government-insured mortgages, conventional mortgages and Housing Finance Agency ("HFA") mortgages. The servicing portfolios are predominantly comprised of fixed-rate agency loans with limited adjustable-rate or jumbo mortgage loans. The HFA servicing portfolio is comprised of loans originated under state and local housing authority program guidelines which assist purchases by first-time or low- to moderate-income homebuyers through a favorable rate subsidy, down payment and/or closing cost assistance on government- and conventional-insured mortgages.
The following table provides a summary of the Company's MSRs and related characteristics by portfolio:
September 30, 2024 December 31, 2023
(Dollars in Millions) HFA Government
Conventional(d)
Total HFA Government
Conventional(d)
Total
Servicing portfolio(a)
$ 51,526 $ 25,506 $ 137,961 $ 214,993 $ 48,286 $ 25,996 $ 151,056 $ 225,338
Fair value $ 791 $ 490 $ 1,906 $ 3,187 $ 769 $ 507 $ 2,101 $ 3,377
Value (bps)(b)
154 192 138 148 159 195 139 150
Weighted-average servicing fees (bps) 36 45 25 30 36 44 26 30
Multiple (value/servicing fees) 4.32 4.30 5.44 4.92 4.45 4.41 5.41 5.00
Weighted-average note rate 4.84 % 4.34 % 3.81 % 4.12 % 4.56 % 4.23 % 3.81 % 4.02 %
Weighted-average age (in years) 4.5 5.9 4.9 4.9 4.3 5.5 4.3 4.4
Weighted-average expected prepayment (constant prepayment rate) 11.0 % 11.3 % 8.9 % 9.7 % 10.5 % 11.1 % 9.1 % 9.6 %
Weighted-average expected life (in years) 7.0 6.4 7.0 6.9 7.2 6.5 7.0 7.0
Weighted-average option adjusted spread(c)
5.9 % 6.2 % 4.8 % 5.3 % 5.4 % 5.9 % 4.6 % 4.9 %
(a)Represents principal balance of mortgages having corresponding MSR asset.
(b)Calculated as fair value divided by the servicing portfolio.
(c)Option adjusted spread is the incremental spread added to the risk-free rate to reflect optionality and other risk inherent in the MSRs.
(d)Represents loans sold primarily to GSEs.
U.S. Bancorp
53
NOTE 7 Preferred Stock
At September 30, 2024 and December 31, 2023, the Company had authority to issue 50 million shares of preferred stock. The number of shares issued and outstanding and the carrying amount of each outstanding series of the Company's preferred stock were as follows:
September 30, 2024 December 31, 2023
(Dollars in Millions)
Shares Issued and Outstanding
Liquidation Preference
Discount
Carrying Amount
Shares Issued and Outstanding
Liquidation Preference
Discount
Carrying Amount
Series A 12,510 $ 1,251 $ 145 $ 1,106 12,510 $ 1,251 $ 145 $ 1,106
Series B 40,000 1,000 - 1,000 40,000 1,000 - 1,000
Series J 40,000 1,000 7 993 40,000 1,000 7 993
Series K 23,000 575 10 565 23,000 575 10 565
Series L 20,000 500 14 486 20,000 500 14 486
Series M 30,000 750 21 729 30,000 750 21 729
Series N 60,000 1,500 8 1,492 60,000 1,500 8 1,492
Series O 18,000 450 13 437 18,000 450 13 437
Total preferred stock(a)
243,510 $ 7,026 $ 218 $ 6,808 243,510 $ 7,026 $ 218 $ 6,808
(a)The par value of all shares issued and outstanding at September 30, 2024 and December 31, 2023, was $1.00 per share.
54
U.S. Bancorp
NOTE 8 Accumulated Other Comprehensive Income (Loss)
Shareholders' equity is affected by transactions and valuations of asset and liability positions that require adjustments to accumulated other comprehensive income (loss). The reconciliation of the transactions affecting accumulated other comprehensive income (loss) included in shareholders' equity is as follows:
Three Months Ended September 30
(Dollars in Millions) 		Unrealized Gains (Losses) on Investment Securities Available-for- Sale Unrealized Gains (Losses) on Investment Securities Transferred From Available- for-Sale to Held-to-Maturity Unrealized Gains (Losses) on Derivative Hedges Unrealized Gains (Losses) on Retirement Plans Foreign Currency Translation Total
2024
Balance at beginning of period $ (5,310) $ (3,354) $ (482) $ (1,138) $ (24) $ (10,308)
Changes in unrealized gains (losses) 1,297 - 460 - - 1,757
Foreign currency translation adjustment(a)
- - - - 12 12
Reclassification to earnings of realized (gains) losses 119 132 77 - - 328
Applicable income taxes (361) (33) (138) - (3) (535)
Balance at end of period $ (4,255) $ (3,255) $ (83) $ (1,138) $ (15) $ (8,746)
2023
Balance at beginning of period $ (5,716) $ (3,737) $ (294) $ (941) $ (30) $ (10,718)
Changes in unrealized gains (losses) (1,881) - (349) (1) - (2,231)
Foreign currency translation adjustment(a)
- - - - 3 3
Reclassification to earnings of realized (gains) losses - 144 28 (2) - 170
Applicable income taxes 474 (37) 82 2 - 521
Balance at end of period $ (7,123) $ (3,630) $ (533) $ (942) $ (27) $ (12,255)
Nine Months Ended September 30
(Dollars in Millions) 		Unrealized Gains (Losses) on Investment Securities Available-For- Sale Unrealized Gains (Losses) on Investment Securities Transferred From Available- For-Sale to Held-To-Maturity Unrealized Gains (Losses) on Derivative Hedges Unrealized Gains (Losses) on Retirement Plans Foreign Currency Translation Total
2024
Balance at beginning of period $ (5,151) $ (3,537) $ (242) $ (1,138) $ (28) $ (10,096)
Changes in unrealized gains (losses) 1,048 - 8 - - 1,056
Foreign currency translation adjustment(a)
- - - - 16 16
Reclassification to earnings of realized (gains) losses 153 377 206 - - 736
Applicable income taxes (305) (95) (55) - (3) (458)
Balance at end of period $ (4,255) $ (3,255) $ (83) $ (1,138) $ (15) $ (8,746)
2023
Balance at beginning of period $ (6,378) $ (3,933) $ (114) $ (939) $ (43) $ (11,407)
Changes in unrealized gains (losses) (1,036) - (610) - - (1,646)
Foreign currency translation adjustment(a)
- - - - 21 21
Reclassification to earnings of realized (gains) losses 29 406 46 (6) - 475
Applicable income taxes 262 (103) 145 3 (5) 302
Balance at end of period $ (7,123) $ (3,630) $ (533) $ (942) $ (27) $ (12,255)
(a)Represents the impact of changes in foreign currency exchange rates on the Company's investment in foreign operations and related hedges.
U.S. Bancorp
55
Additional detail about the impact to net income for items reclassified out of accumulated other comprehensive income (loss) and into earnings is as follows:
Impact to Net Income
Three Months Ended
September 30 		Nine Months Ended
September 30
Affected Line Item in the Consolidated Statement of Income
(Dollars in Millions) 2024 2023 2024 2023
Unrealized gains (losses) on investment securities available-for-sale
Realized gains (losses) on sales of investment securities $ (119) $ - $ (153) $ (29) Securities gains (losses), net
31 - 39 7 Applicable income taxes
(88) - (114) (22) Net-of-tax
Unrealized gains (losses) on investment securities transferred from available-for-sale to held-to-maturity
Amortization of unrealized gains (losses) (132) (144) (377) (406) Interest income
33 37 95 103 Applicable income taxes
(99) (107) (282) (303) Net-of-tax
Unrealized gains (losses) on derivative hedges
Realized gains (losses) on derivative hedges (77) (28) (206) (46) Net interest income
20 8 53 12 Applicable income taxes
(57) (20) (153) (34) Net-of-tax
Unrealized gains (losses) on retirement plans
Actuarial gains (losses) and prior service cost (credit) amortization - 2 - 6 Other noninterest expense
- (1) - (2) Applicable income taxes
- 1 - 4 Net-of-tax
Total impact to net income $ (244) $ (126) $ (549) $ (355)
NOTE 9 Earnings Per Share
The components of earnings per share were:
Three Months Ended
September 30 		Nine Months Ended
September 30
(Dollars and Shares in Millions, Except Per Share Data) 2024 2023 2024 2023
Net income attributable to U.S. Bancorp $ 1,714 $ 1,523 $ 4,636 $ 4,582
Preferred dividends (103) (102) (280) (273)
Earnings allocated to participating stock awards (10) (9) (28) (24)
Net income applicable to U.S. Bancorp common shareholders $ 1,601 $ 1,412 $ 4,328 $ 4,285
Average common shares outstanding 1,561 1,548 1,560 1,538
Net effect of the exercise and assumed purchase of stock awards - 1 1 -
Average diluted common shares outstanding 1,561 1,549 1,561 1,538
Earnings per common share $ 1.03 $ .91 $ 2.77 $ 2.79
Diluted earnings per common share $ 1.03 $ .91 $ 2.77 $ 2.79
Options outstanding at September 30, 2024 to purchase 1 million common shares for the three and nine months ended September 30, 2024, and outstanding at September 30, 2023 to purchase 3 million common shares for the three and nine months ended September 30, 2023 were not included in the computation of diluted earnings per share because they were antidilutive.
56
U.S. Bancorp
NOTE 10 Employee Benefits
The components of net periodic benefit cost for the Company's pension plans were:
Three Months Ended September 30 Nine Months Ended September 30
(Dollars in Millions) 2024 2023 2024 2023
Service cost $ 55 $ 56 $ 164 $ 168
Interest cost 94 93 282 278
Expected return on plan assets (146) (137) (438) (410)
Prior service cost (credit) amortization (1) - (3) (1)
Actuarial loss (gain) amortization 2 1 7 3
Net periodic benefit cost(a)
$ 4 $ 13 $ 12 $ 38
(a)Service cost is included in compensation and employee benefits expense on the Consolidated Statement of Income. All other components are included in other noninterest expense on the Consolidated Statement of Income.
NOTE 11 Income Taxes
The components of income tax expense were:
Three Months Ended
September 30 		Nine Months Ended
September 30
(Dollars in Millions) 2024 2023 2024 2023
Federal
Current $ 144 $ 416 $ 645 $ 1,076
Deferred 79 (51) 261 (50)
Federal income tax 223 365 906 1,026
State
Current 105 62 214 277
Deferred 22 4 22 (35)
State income tax 127 66 236 242
Total income tax provision $ 350 $ 431 $ 1,142 $ 1,268
A reconciliation of expected income tax expense at the federal statutory rate of 21 percent to the Company's applicable income tax expense follows:
Three Months Ended
September 30 		Nine Months Ended
September 30
(Dollars in Millions) 2024 2023 2024 2023
Tax at statutory rate $ 435 $ 411 $ 1,218 $ 1,232
State income tax, at statutory rates, net of federal tax benefit 106 85 289 270
Tax effect of
Tax credits and benefits, net of related expenses (140) (96) (284) (236)
Exam resolutions (1) - (98) -
Tax-exempt income (38) (40) (105) (115)
Other items (12) 71 122 117
Applicable income taxes $ 350 $ 431 $ 1,142 $ 1,268
The Company's income tax returns are subject to review and examination by federal, state, local and foreign government authorities. On an ongoing basis, numerous federal, state, local and foreign examinations are in progress and cover multiple tax years. As of September 30, 2024, federal tax examinations for all years ending through December 31, 2016 are completed and resolved. The Company's tax returns for the years ended December 31, 2017 through December 31, 2020 are under examination by the Internal Revenue Service. The years open to examination by foreign, state and local government authorities vary by jurisdiction.
The Company's net deferred tax asset was $5.6 billion at September 30, 2024 and $6.4 billion at December 31, 2023.
U.S. Bancorp
57
NOTE 12 Derivative Instruments
In the ordinary course of business, the Company enters into derivative transactions to manage various risks and to accommodate the business requirements of its customers. The Company recognizes all derivatives on the Consolidated Balance Sheet at fair value in other assets or in other liabilities. On the date the Company enters into a derivative contract, the derivative is designated as either a fair value hedge, cash flow hedge, net investment hedge, or a designation is not made as it is a customer-related transaction, an economic hedge for asset/liability risk management purposes or another stand-alone derivative created through the Company's operations ("free-standing derivative"). When a derivative is designated as a fair value, cash flow or net investment hedge, the Company performs an assessment, at inception and, at a minimum, quarterly thereafter, to determine the effectiveness of the derivative in offsetting changes in the value or cash flows of the hedged item(s).
Fair Value HedgesThese derivatives are interest rate swaps the Company uses to hedge the change in fair value related to interest rate changes of its underlying available-for-sale investment securities and fixed-rate debt. Changes in the fair value of derivatives designated as fair value hedges, and changes in the fair value of the hedged items, are recorded in earnings.
Cash Flow HedgesThese derivatives are interest rate swaps the Company uses to hedge the forecasted cash flows from its underlying variable-rate loans and debt. Changes in the fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income (loss) until the cash flows of the hedged items are realized. If a derivative designated as a cash flow hedge is terminated or ceases to be highly effective, the gain or loss in other comprehensive income (loss) is amortized to earnings over the period the forecasted hedged transactions impact earnings. If a hedged forecasted transaction is no longer probable, hedge accounting is ceased and any gain or loss included in other comprehensive income (loss) is reported in earnings immediately, unless the forecasted transaction is at least reasonably possible of occurring, whereby the amounts remain within other comprehensive income (loss). At September 30, 2024, the Company had $83 million (net-of-tax) of realized and unrealized losses on derivatives classified as cash flow hedges recorded in other comprehensive income (loss), compared with $242 million (net-of-tax) of realized and unrealized losses at December 31, 2023. The estimated amount to be reclassified from other comprehensive income (loss) into earnings during the next 12 months is a loss of $86 million (net-of-tax). All cash flow hedges were highly effective for the three months ended September 30, 2024.
Net Investment HedgesThe Company uses forward commitments to sell specified amounts of certain foreign currencies, and non-derivative debt instruments, to hedge the volatility of its net investment in foreign operations driven by fluctuations in foreign currency exchange rates. The carrying amount of non-derivative debt instruments designated as net investment hedges was $1.4 billion at September 30, 2024 and $1.3 billion at December 31, 2023.
Other Derivative PositionsThe Company enters into free-standing derivatives to mitigate interest rate risk and for other risk management purposes. These derivatives include forward commitments to sell TBAs and other commitments to sell residential mortgage loans, which are used to economically hedge the interest rate risk related to MLHFS and unfunded mortgage loan commitments. The Company also enters into interest rate swaps, swaptions, forward commitments to buy TBAs, U.S. Treasury and Eurodollar futures and options on U.S. Treasury futures to economically hedge the change in the fair value of the Company's MSRs. The Company enters into foreign currency forwards to economically hedge remeasurement gains and losses the Company recognizes on foreign currency denominated assets and liabilities. The Company also enters into interest rate swaps as economic hedges of fair value option elected deposits. In addition, the Company acts as a seller and buyer of interest rate, foreign exchange and commodity contracts for its customers. The Company mitigates the market, funding and liquidity risk associated with these customer derivatives by entering into similar offsetting positions with broker-dealers, or on a portfolio basis by entering into other derivative or non-derivative financial instruments that partially or fully offset the exposure to earnings from these customer-related positions. The Company's customer derivatives and related hedges are monitored and reviewed by the Company's Market Risk Committee, which establishes policies for market risk management, including exposure limits for each portfolio. The Company also has derivative contracts that are created through its operations, including certain unfunded mortgage loan commitments and swap agreements related to the sale of a portion of its Class B common and preferred shares of Visa Inc. Refer to Note 14 for further information on these swap agreements. The Company uses credit derivatives to economically hedge the credit risk on its derivative positions and loan portfolios.
58
U.S. Bancorp
The following table summarizes the asset and liability management derivative positions of the Company:
September 30, 2024 December 31, 2023
Notional Value Fair Value Notional Value Fair Value
(Dollars in Millions) Assets Liabilities Assets Liabilities
Fair value hedges
Interest rate contracts
Receive fixed/pay floating swaps $ 12,450 $ - $ - $ 12,100 $ - $ 16
Pay fixed/receive floating swaps 31,831 - - 24,139 - -
Cash flow hedges
Interest rate contracts
Receive fixed/pay floating swaps 24,500 - - 18,400 - -
Net investment hedges
Foreign exchange forward contracts 885 - 6 854 - 10
Other economic hedges
Interest rate contracts
Futures and forwards
Buy 6,046 12 13 5,006 29 5
Sell 5,887 5 14 4,501 7 34
Options
Purchased 6,560 163 - 6,085 237 -
Written 2,494 21 40 3,696 14 75
Receive fixed/pay floating swaps 11,532 162 1 7,029 9 3
Pay fixed/receive floating swaps 2,792 - - 3,801 - -
Foreign exchange forward contracts 713 1 2 734 2 5
Equity contracts 282 5 - 227 2 -
Credit contracts 3,558 - 27 2,620 1 -
Other(a)
1,841 9 105 2,136 11 93
Total $ 111,371 $ 378 $ 208 $ 91,328 $ 312 $ 241
(a)Includes derivative liability swap agreements related to the sale of a portion of the Company's Class B common and preferred shares of Visa Inc. The Visa swap agreements had a total notional value and fair value of $1.0 billion and $102 million at September 30, 2024, respectively, compared to $2.0 billion and $91 million at December 31, 2023, respectively. In addition, includes short-term underwriting purchase and sale commitments with total notional values of $732 million at September 30, 2024, and $28 million at December 31, 2023.
U.S. Bancorp
59
The following table summarizes the customer-related derivative positions of the Company:
September 30, 2024 December 31, 2023
Notional
Value 		Fair Value Notional
Value 		Fair Value
(Dollars in Millions) Assets Liabilities Assets Liabilities
Interest rate contracts
Receive fixed/pay floating swaps $ 406,992 $ 1,664 $ 2,968 $ 363,375 $ 791 $ 4,395
Pay fixed/receive floating swaps 372,912 1,287 526 330,539 1,817 280
Other(a)
75,406 17 51 82,209 17 51
Options
Purchased 94,273 490 15 102,423 1,026 18
Written 88,602 28 579 97,690 20 1,087
Foreign exchange rate contracts
Forwards, spots and swaps 116,108 2,006 1,771 121,119 2,252 1,942
Options
Purchased 608 15 - 1,532 28 -
Written 608 - 15 1,532 - 28
Commodity contracts
Swaps 6,608 236 234 2,498 116 110
Options
Purchased 3,454 218 1 1,936 151 -
Written 3,453 1 216 1,936 - 151
Futures
Sell 152 25 16 - - -
Equity contracts 17 - - - - -
Credit contracts 13,258 1 4 13,053 1 6
Total $ 1,182,451 $ 5,988 $ 6,396 $ 1,119,842 $ 6,219 $ 8,068
(a)Primarily represents floating rate interest rate swaps that pay based on differentials between specified interest rate indexes.
60
U.S. Bancorp
The table below shows the effective portion of the gains (losses) recognized in other comprehensive income (loss) and the gains (losses) reclassified from other comprehensive income (loss) into earnings (net-of-tax):
Three Months Ended September 30 Nine Months Ended September 30
Gains (Losses) Recognized in Other Comprehensive Income (Loss) Gains (Losses) Reclassified from Other Comprehensive Income (Loss) into Earnings Gains (Losses) Recognized in Other Comprehensive Income (Loss) Gains (Losses) Reclassified from Other Comprehensive Income (Loss) into Earnings
(Dollars in Millions) 2024 2023 2024 2023 2024 2023 2024 2023
Asset and Liability Management Positions
Cash flow hedges
Interest rate contracts $ 342 $ (259) $ (57) $ (20) $ 6 $ (453) $ (153) $ (34)
Net investment hedges
Foreign exchange forward contracts (19) 15 - - 59 6 - -
Non-derivative debt instruments (56) 24 - - (15) 7 - -
Note: The Company does not exclude components from effectiveness testing for cash flow and net investment hedges.
The table below shows the effect of fair value and cash flow hedge accounting on the Consolidated Statement of Income:
Three Months Ended September 30 Nine Months Ended September 30
Interest Income Interest Expense Interest Income Interest Expense
(Dollars in Millions) 2024 2023 2024 2023 2024 2023 2024 2023
Total amount of income and expense line items presented in the Consolidated Statement of Income in which the effects of fair value or cash flow hedges are recorded $ 8,086 $ 7,754 $ 3,951 $ 3,518 $ 23,835 $ 22,244 $ 11,692 $ 8,959
Asset and Liability Management Positions
Fair value hedges
Interest rate contract derivatives (1,108) 428 302 (359) (663) 584 314 (230)
Hedged items 1,113 (431) (303) 359 666 (589) (315) 232
Cash flow hedges
Interest rate contract derivatives (70) (21) 7 7 (185) (21) 21 25
Note: The Company does not exclude components from effectiveness testing for fair value and cash flow hedges. The Company reclassified losses of $7 million and $21 million into earnings during the three and nine months ended September 30, 2024, respectively, as a result of realized cash flows on discontinued cash flow hedges, compared with $7 million and $25 million during the three and nine months ended September 30, 2023, respectively. No amounts were reclassified into earnings on discontinued cash flow hedges because it is probable the original hedged forecasted cash flows will not occur.
The table below shows cumulative hedging adjustments and the carrying amount of assets and liabilities currently designated in fair value hedges:
Carrying Amount of the Hedged Assets
and Liabilities 		Cumulative Hedging Adjustment
(Dollars in Millions) September 30, 2024 December 31, 2023 September 30, 2024 December 31, 2023
Line Item in the Consolidated Balance Sheet
Available-for-sale investment securities(a)
$ 32,325 $ 23,924 $ 677 $ (93)
Long-term debt 12,713 12,034 258 (32)
Note: The table above excludes the cumulative hedging adjustment related to discontinued hedging relationships on available-for-sale investment securities and long-term debt of $(73) million and $(208) million, respectively, at September 30, 2024, compared with $(18) million and $(116) million at December 31, 2023, respectively. The carrying amount of available-for-sale investment securities and long-term debt related to discontinued hedging relationships was $4.8 billion and $11.3 billion, respectively, at September 30, 2024, compared with $830 million and $7.2 billion at December 31, 2023, respectively.
(a)Includes amounts related to available-for-sale investment securities currently designated as the hedged item in a fair value hedge using the portfolio layer method. At September 30, 2024, the amortized cost of the closed portfolios used in these hedging relationships was $17.6 billion, of which $11.6 billion was designated as hedged. At September 30, 2024, the cumulative amount of basis adjustments associated with these hedging relationships was $525 million. At December 31, 2023, the amortized cost of the closed portfolios used in these hedging relationships was $15.6 billion, of which $9.6 billion was designated as hedged. At December 31, 2023, the cumulative amount of basis adjustments associated with these hedging relationships was $335 million.
U.S. Bancorp
61
The table below shows the gains (losses) recognized in earnings for other economic hedges and the customer-related positions:
Three Months Ended
September 30 		Nine Months Ended
September 30
(Dollars in Millions) Location of Gains (Losses)
Recognized in Earnings 		2024 2023 2024 2023
Asset and Liability Management Positions
Other economic hedges
Interest rate contracts
Futures and forwards Mortgage banking revenue $ 2 $ 18 $ (12) $ 56
Purchased and written options Mortgage banking revenue 64 74 112 89
Swaps Mortgage banking revenue/Interest expense 107 (241) 30 (221)
Foreign exchange forward contracts Other noninterest income (6) 8 2 (5)
Equity contracts Compensation expense (2) (1) (4) (4)
Credit contracts Commercial products revenue (5) 3 (7) 3
Other Other noninterest income (1) 1 (70) -
Customer-Related Positions
Interest rate contracts
Swaps Commercial products revenue (55) 103 165 198
Purchased and written options Commercial products revenue 109 7 41 7
Futures Commercial products revenue - - - (1)
Foreign exchange rate contracts
Forwards, spots and swaps Commercial products revenue 70 19 126 118
Commodity contracts
Swaps Commercial products revenue (2) 3 (1) 5
Purchased and written options Commercial products revenue 1 - 5 -
Futures Commercial products revenue 4 - 10 -
Credit contracts Commercial products revenue (3) - (3) (1)
Derivatives are subject to credit risk associated with counterparties to the derivative contracts. The Company measures that credit risk using a credit valuation adjustment and includes it within the fair value of the derivative. The Company manages counterparty credit risk through diversification of its derivative positions among various counterparties, by entering into derivative positions that are centrally cleared through clearinghouses, by entering into master netting arrangements and, where possible, by requiring collateral arrangements. A master netting arrangement allows two counterparties, who have multiple derivative contracts with each other, the ability to net settle amounts under all contracts, including any related collateral, through a single payment and in a single currency. Collateral arrangements generally require the counterparty to deliver collateral (typically cash or U.S. Treasury and agency securities) equal to the Company's net derivative receivable, subject to minimum transfer and credit rating requirements.
The Company's collateral arrangements are predominately bilateral and, therefore, contain provisions that require collateralization of the Company's net liability derivative positions. Required collateral coverage is based on net liability thresholds and may be contingent upon the Company's credit rating from two of the nationally recognized statistical rating organizations. If the Company's credit rating were to fall below credit ratings thresholds established in the collateral arrangements, the counterparties to the derivatives could request immediate additional collateral coverage up to and including full collateral coverage for derivatives in a net liability position. The aggregate fair value of all derivatives under collateral arrangements that were in a net liability position at September 30, 2024, was $1.6 billion. At September 30, 2024, the Company had $1.4 billion of cash posted as collateral against this net liability position.
62
U.S. Bancorp
NOTE 13 Netting Arrangements for Certain Financial Instruments and Securities
Financing Activities
The Company's derivative portfolio consists of bilateral over-the-counter trades, certain interest rate derivatives and credit contracts required to be centrally cleared through clearinghouses per current regulations, and exchange-traded positions which may include U.S. Treasury and Eurodollar futures or options on U.S. Treasury futures. Of the Company's $1.3 trillion total notional amount of derivative positions at September 30, 2024, $571.3 billion related to bilateral over-the-counter trades, $719.6 billion related to those centrally cleared through clearinghouses and $2.9 billion related to those that were exchange-traded. The Company's derivative contracts typically include offsetting rights (referred to as netting arrangements), and depending on expected volume, credit risk, and counterparty preference, collateral maintenance may be required. For all derivatives under collateral support arrangements, fair value is determined daily and, depending on the collateral maintenance requirements, the Company and a counterparty may receive or deliver collateral, based upon the net fair value of all derivative positions between the Company and the counterparty. Collateral is typically cash, but securities may be allowed under collateral arrangements with certain counterparties. Receivables and payables related to cash collateral are included in other assets and other liabilities on the Consolidated Balance Sheet, along with the related derivative asset and liability fair values. Any securities pledged to counterparties as collateral remain on the Consolidated Balance Sheet. Securities received from counterparties as collateral are not recognized on the Consolidated Balance Sheet, unless the counterparty defaults. In general, securities used as collateral can be sold, repledged or otherwise used by the party in possession. No restrictions exist on the use of cash collateral by either party. Refer to Note 12 for further discussion of the Company's derivatives, including collateral arrangements.
As part of the Company's treasury and broker-dealer operations, the Company executes transactions that are treated as securities sold under agreements to repurchase or securities purchased under agreements to resell, both of which are accounted for as collateralized financings. Securities sold under agreements to repurchase include repurchase agreements and securities loaned transactions. Securities purchased under agreements to resell include reverse repurchase agreements and securities borrowed transactions. For securities sold under agreements to repurchase, the Company records a liability for the cash received, which is included in short-term borrowings on the Consolidated Balance Sheet. For securities purchased under agreements to resell, the Company records a receivable for the cash paid, which is included in other assets on the Consolidated Balance Sheet.
Securities transferred to counterparties under repurchase agreements and securities loaned transactions continue to be recognized on the Consolidated Balance Sheet, are measured at fair value, and are included in investment securities or other assets. Securities received from counterparties under reverse repurchase agreements and securities borrowed transactions are not recognized on the Consolidated Balance Sheet unless the counterparty defaults. The securities transferred under repurchase and reverse repurchase transactions typically are U.S. Treasury and agency securities, residential agency mortgage-backed securities, corporate debt securities or asset-backed securities. The securities loaned or borrowed typically are corporate debt securities traded by the Company's primary broker-dealer subsidiary. In general, the securities transferred can be sold, repledged or otherwise used by the party in possession. No restrictions exist on the use of cash collateral by either party. Repurchase/reverse repurchase and securities loaned/borrowed transactions expose the Company to counterparty risk. The Company manages this risk by performing assessments, independent of business line managers, and establishing concentration limits on each counterparty. Additionally, these transactions include collateral arrangements that require the fair values of the underlying securities to be determined daily, resulting in cash being obtained or refunded to counterparties to maintain specified collateral levels.
U.S. Bancorp
63
The following table summarizes the maturities by category of collateral pledged for repurchase agreements and securities loaned transactions:
(Dollars in Millions) Overnight and
Continuous
Less Than
30 Days
30-89 Days Greater Than 90 Days Total
September 30, 2024
Repurchase agreements
U.S. Treasury and agencies $ 5,865 $ - $ - $ - $ 5,865
Residential agency mortgage-backed securities 312 - - - 312
Corporate debt securities 1,089 51 - - 1,140
Asset-backed securities 181 73 - - 254
Total repurchase agreements 7,447 124 - - 7,571
Securities loaned
Corporate debt securities 165 - - - 165
Total securities loaned 165 - - - 165
Gross amount of recognized liabilities $ 7,612 $ 124 $ - $ - $ 7,736
December 31, 2023
Repurchase agreements
U.S. Treasury and agencies $ 2,375 $ - $ - $ - $ 2,375
Residential agency mortgage-backed securities 338 - - - 338
Corporate debt securities 821 - - - 821
Asset-backed securities - 45 - - 45
Total repurchase agreements 3,534 45 - - 3,579
Securities loaned
Corporate debt securities 290 - - - 290
Total securities loaned 290 - - - 290
Gross amount of recognized liabilities $ 3,824 $ 45 $ - $ - $ 3,869
The Company executes its derivative, repurchase/reverse repurchase and securities loaned/borrowed transactions under the respective industry standard agreements. These agreements include master netting arrangements that allow for multiple contracts executed with the same counterparty to be viewed as a single arrangement. This allows for net settlement of a single amount on a daily basis. In the event of default, the master netting arrangement provides for close-out netting, which allows all of these positions with the defaulting counterparty to be terminated and net settled with a single payment amount.
The Company has elected to offset the assets and liabilities under netting arrangements for the balance sheet presentation of the majority of its derivative counterparties. The netting occurs at the counterparty level, and includes all assets and liabilities related to the derivative contracts, including those associated with cash collateral received or delivered. The Company has not elected to offset the assets and liabilities under netting arrangements for the balance sheet presentation of repurchase/reverse repurchase and securities loaned/borrowed transactions.
64
U.S. Bancorp
The following tables provide information on the Company's netting adjustments, and items not offset on the Consolidated Balance Sheet but available for offset in the event of default:
Gross Recognized Assets
Gross Amounts Offset on the Consolidated Balance Sheet(a)
Net Amounts Presented on the Consolidated Balance Sheet Gross Amounts Not Offset on the Consolidated Balance Sheet Net Amount
(Dollars in Millions)
Financial Instruments(b)
Collateral Received(c)
September 30, 2024
Derivative assets(d)
$ 6,335 $ (2,878) $ 3,457 $ (107) $ (10) $ 3,340
Reverse repurchase agreements 6,437 - 6,437 (555) (5,874) 8
Securities borrowed 1,927 - 1,927 - (1,851) 76
Total $ 14,699 $ (2,878) $ 11,821 $ (662) $ (7,735) $ 3,424
December 31, 2023
Derivative assets(d)
$ 6,504 $ (3,666) $ 2,838 $ (141) $ (3) $ 2,694
Reverse repurchase agreements 2,513 - 2,513 (568) (1,941) 4
Securities borrowed 1,802 - 1,802 (14) (1,717) 71
Total $ 10,819 $ (3,666) $ 7,153 $ (723) $ (3,661) $ 2,769
(a)Includes $1.4 billion and $1.6 billion of cash collateral related payables that were netted against derivative assets at September 30, 2024 and December 31, 2023, respectively.
(b)For derivative assets this includes any derivative liability fair values that could be offset in the event of counterparty default; for reverse repurchase agreements this includes any repurchase agreement payables that could be offset in the event of counterparty default; for securities borrowed this includes any securities loaned payables that could be offset in the event of counterparty default.
(c)Includes the fair value of securities received by the Company from the counterparty. These securities are not included on the Consolidated Balance Sheet unless the counterparty defaults.
(d)Excludes $31 million and $27 million at September 30, 2024 and December 31, 2023, respectively, of derivative assets not subject to netting arrangements.
Gross Recognized Liabilities
Gross Amounts Offset on the Consolidated Balance Sheet(a)
Net Amounts Presented on the Consolidated Balance Sheet Gross Amounts Not Offset on the Consolidated Balance Sheet Net Amount
(Dollars in Millions)
Financial Instruments(b)
Collateral Pledged(c)
September 30, 2024
Derivative liabilities(d)
$ 6,498 $ (2,847) $ 3,651 $ (107) $ - $ 3,544
Repurchase agreements 7,571 - 7,571 (555) (7,012) 4
Securities loaned 165 - 165 - (161) 4
Total $ 14,234 $ (2,847) $ 11,387 $ (662) $ (7,173) $ 3,552
December 31, 2023
Derivative liabilities(d)
$ 8,217 $ (3,720) $ 4,497 $ (141) $ - $ 4,356
Repurchase agreements 3,579 - 3,579 (568) (3,008) 3
Securities loaned 290 - 290 (14) (270) 6
Total $ 12,086 $ (3,720) $ 8,366 $ (723) $ (3,278) $ 4,365
(a)Includes $1.4 billion and $1.7 billion of cash collateral related receivables that were netted against derivative liabilities at September 30, 2024 and December 31, 2023, respectively.
(b)For derivative liabilities this includes any derivative asset fair values that could be offset in the event of counterparty default; for repurchase agreements this includes any reverse repurchase agreement receivables that could be offset in the event of counterparty default; for securities loaned this includes any securities borrowed receivables that could be offset in the event of counterparty default.
(c)Includes the fair value of securities pledged by the Company to the counterparty. These securities are included on the Consolidated Balance Sheet unless the Company defaults.
(d)Excludes $106 million and $92 million at September 30, 2024 and December 31, 2023, respectively, of derivative liabilities not subject to netting arrangements.
 NOTE 14 Fair Values of Assets and Liabilities
The Company uses fair value measurements for the initial recording of certain assets and liabilities, periodic remeasurement of certain assets and liabilities, and disclosures. Derivatives, trading and available-for-sale investment securities, MSRs, certain time deposits and structured long-term notes, and substantially all MLHFS are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-fair value accounting or impairment write-downs of individual assets. Other financial instruments, such as held-to-maturity investment securities, loans, the majority of time deposits, short-term borrowings and long-term debt, are accounted for at amortized cost. See "Fair Value of Financial Instruments" in this Note for further information on the estimated fair value of these other financial instruments. In accordance with disclosure guidance, certain financial instruments, such as deposits with no defined or contractual maturity, receivables and payables due in one year or less, insurance contracts and equity investments not accounted for at fair value, are excluded from this Note.
U.S. Bancorp
65
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value measurement reflects all of the assumptions that market participants would use in pricing the asset or liability, including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of nonperformance.
The Company groups its assets and liabilities measured at fair value into a three-level hierarchy for valuation techniques used to measure financial assets and financial liabilities at fair value. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
•Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 1 includes U.S. Treasury securities, as well as exchange-traded instruments.
•Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 includes debt securities that are traded less frequently than exchange-traded instruments and which are typically valued using third party pricing services; derivative contracts and other assets and liabilities, including securities, and certain time deposits and structured long-term notes, whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data; and MLHFS whose values are determined using quoted prices for similar assets or pricing models with inputs that are observable in the market or can be corroborated by observable market data.
•Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category includes MSRs and certain derivative contracts.
Valuation Methodologies
The valuation methodologies used by the Company to measure financial assets and liabilities at fair value are described below. In addition, the following section includes an indication of the level of the fair value hierarchy in which the assets or liabilities are classified. Where appropriate, the descriptions include information about the valuation models and key inputs to those models. During the nine months ended September 30, 2024 and 2023, there were no significant changes to the valuation techniques used by the Company to measure fair value.
Available-for-Sale Investment Securities When quoted market prices for identical securities are available in an active market, these prices are used to determine fair value and these securities are classified within Level 1 of the fair value hierarchy. Level 1 investment securities include U.S. Treasury and exchange-traded securities.
For other securities, quoted market prices may not be readily available for the specific securities. When possible, the Company determines fair value based on market observable information, including quoted market prices for similar securities, inactive transaction prices, and broker quotes. These securities are classified within Level 2 of the fair value hierarchy. Level 2 valuations are generally provided by a third-party pricing service. Level 2 investment securities are predominantly agency mortgage-backed securities, certain other asset-backed securities, obligations of state and political subdivisions and agency debt securities.
Mortgage Loans Held For SaleMLHFS measured at fair value, for which an active secondary market and readily available market prices exist, are initially valued at the transaction price and are subsequently valued by comparison to instruments with similar collateral and risk profiles. MLHFS are classified within Level 2. Included in mortgage banking revenue were net gains of $26 million and net losses of $28 million for the three months ended September 30, 2024 and 2023, respectively, and net gains of $22 million and net losses of $61 million for the nine months ended September 30, 2024 and 2023, respectively, from the changes to fair value of these MLHFS under fair value option accounting guidance. Changes in fair value due to instrument specific credit risk were immaterial. Interest income for MLHFS is measured based on contractual interest rates and reported as interest income on the Consolidated Statement of Income. Electing to measure MLHFS at fair value reduces certain timing differences and better matches changes in fair value of these assets with changes in the value of the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting.
Time DepositsThe Company elects the fair value option to account for certain time deposits that are hedged with derivatives that do not qualify for hedge accounting. Electing to measure these time deposits at fair value reduces certain timing differences and better matches changes in fair value of these deposits with changes in the value of the derivative instruments used to economically hedge them. The time deposits measured at fair value are valued using a discounted cash flow model that utilizes market observable inputs and are classified within Level 2. Included in interest expense on deposits were net losses of $13 million and net gains of $1 million for the three months ended September 30, 2024 and 2023, respectively, and net losses of $2 million and net gains of $1 million for the nine months ended September 30, 2024 and 2023, respectively, from the changes in fair value of time deposits under fair value option accounting guidance.
Long-term DebtThe Company elects the fair value option to account for certain structured notes that are hedged with derivatives that do not qualify for hedge accounting. Electing to measure these structured notes at fair value reduces certain timing differences and better matches changes in fair value of these notes with changes in the value of the derivative instruments used to economically
66
U.S. Bancorp
hedge them. The structured notes measured at fair value are valued using a discounted cash flow model that utilizes market observable inputs and are classified within Level 2. The discount rate used in the discounted cash flow model incorporates the impact of the Company's credit spread, which is based on observable spreads in the secondary bond market. Changes in fair value attributable to instrument specific credit risk are recorded as debit valuation adjustments in other comprehensive income (loss) with all other changes in fair value recorded in interest expense. During the three and nine months ended September 30, 2024, there were no significant changes in fair value of structured notes under fair value option accounting guidance.
Mortgage Servicing RightsMSRs are valued using a discounted cash flow methodology, and are classified within Level 3. The Company determines fair value of the MSRs by projecting future cash flows for different interest rate scenarios using prepayment rates and other assumptions, and discounts these cash flows using a risk adjusted rate based on option adjusted spread levels. There is minimal observable market activity for MSRs on comparable portfolios, and therefore, the determination of fair value requires significant management judgment. Refer to Note 6 for further information on MSR valuation assumptions.
DerivativesThe majority of derivatives held by the Company are executed over-the-counter or centrally cleared through clearinghouses and are valued using market standard cash flow valuation techniques. The models incorporate inputs, depending on the type of derivative, including interest rate curves, foreign exchange rates and volatility. All derivative values incorporate an assessment of the risk of counterparty nonperformance, measured based on the Company's evaluation of credit risk including external assessments of credit risk. The Company monitors and manages its nonperformance risk by considering its ability to net derivative positions under master netting arrangements, as well as collateral received or provided under collateral arrangements. Accordingly, the Company has elected to measure the fair value of derivatives, at a counterparty level, on a net basis. The majority of the derivatives are classified within Level 2 of the fair value hierarchy, as the significant inputs to the models, including nonperformance risk, are observable. However, certain derivative transactions are with counterparties where risk of nonperformance cannot be observed in the market and, therefore, the credit valuation adjustments result in these derivatives being classified within Level 3 of the fair value hierarchy.
The Company also has other derivative contracts that are created through its operations, including commitments to purchase and originate mortgage loans and swap agreements executed in conjunction with the sale of a portion of its Class B common and preferred shares of Visa Inc. (the "Visa swaps"). The mortgage loan commitments are valued by pricing models that include market observable and unobservable inputs, which result in the commitments being classified within Level 3 of the fair value hierarchy. The unobservable inputs include assumptions about the percentage of commitments that actually become a closed loan and the MSR value that is inherent in the underlying loan value. The Visa swaps require payments by either the Company or the purchaser of the Visa Inc. Class B common and preferred shares when there are changes in the conversion rate of the Visa Inc. Class B common and preferred shares to Visa Inc. Class A common and preferred shares, respectively, as well as quarterly payments to the purchaser based on specified terms of the agreements. Management reviews and updates the Visa swaps fair value in conjunction with its review of Visa Inc. related litigation contingencies, and the associated escrow funding. The expected litigation resolution impacts the Visa Inc. Class B common share to Visa Inc. Class A common share conversion rate, as well as the ultimate termination date for the Visa swaps. Accordingly, the Visa swaps are classified within Level 3. Refer to Note 15 for further information on the Visa Inc. restructuring and related card association litigation.
Significant Unobservable Inputs of Level 3 Assets and Liabilities
The following section provides information to facilitate an understanding of the uncertainty in the fair value measurements for the Company's Level 3 assets and liabilities recorded at fair value on the Consolidated Balance Sheet. This section includes a description of the significant inputs used by the Company and a description of any interrelationships between these inputs. The discussion below excludes nonrecurring fair value measurements of collateral value used for impairment measures for loans and OREO. These valuations utilize third party appraisal or broker price opinions, and are classified as Level 3 due to the significant judgment involved.
Mortgage Servicing Rights The significant unobservable inputs used in the fair value measurement of the Company's MSRs are expected prepayments and the option adjusted spread that is added to the risk-free rate to discount projected cash flows. Significant increases in either of these inputs in isolation would have resulted in a significantly lower fair value measurement. Significant decreases in either of these inputs in isolation would have resulted in a significantly higher fair value measurement. There is no direct interrelationship between prepayments and option adjusted spread. Prepayment rates generally move in the opposite direction of market interest rates. Option adjusted spread is generally impacted by changes in market return requirements.
The following table shows the significant valuation assumption ranges for MSRs at September 30, 2024:
Minimum Maximum
Weighted-
Average(a)
Expected prepayment 7 % 23 % 10 %
Option adjusted spread 4 11 5
(a)Determined based on the relative fair value of the related mortgage loans serviced.
Derivatives The Company has two distinct Level 3 derivative portfolios: (i) the Company's commitments to purchase and originate mortgage loans that meet the requirements of a derivative and (ii) the Company's asset/liability and customer-related derivatives that
U.S. Bancorp
67
are Level 3 due to unobservable inputs related to measurement of risk of nonperformance by the counterparty. In addition, the Company's Visa swaps are classified within Level 3.
The significant unobservable inputs used in the fair value measurement of the Company's derivative commitments to purchase and originate mortgage loans are the percentage of commitments that actually become a closed loan and the MSR value that is inherent in the underlying loan value. A significant increase in the rate of loans that close would have resulted in a larger derivative asset or liability. A significant increase in the inherent MSR value would have resulted in an increase in the derivative asset or a reduction in the derivative liability. Expected loan close rates and the inherent MSR values are directly impacted by changes in market rates and will generally move in the same direction as interest rates.
The following table shows the significant valuation assumption ranges for the Company's derivative commitments to purchase and originate mortgage loans at September 30, 2024:
Minimum Maximum
Weighted-
Average(a)
Expected loan close rate 11 % 100 % 75 %
Inherent MSR value (basis points per loan) 52 199 107
(a)Determined based on the relative fair value of the related mortgage loans.
The significant unobservable input used in the fair value measurement of certain of the Company's asset/liability and customer-related derivatives is the credit valuation adjustment related to the risk of counterparty nonperformance. A significant increase in the credit valuation adjustment would have resulted in a lower fair value measurement. A significant decrease in the credit valuation adjustment would have resulted in a higher fair value measurement. The credit valuation adjustment is impacted by changes in market rates, volatility, market implied credit spreads, and loss recovery rates, as well as the Company's assessment of the counterparty's credit position. At September 30, 2024, the minimum, maximum and weighted-average credit valuation adjustment as a percentage of the net fair value of the counterparty's derivative contracts prior to adjustment was 0 percent, 435 percent and 2 percent, respectively.
The significant unobservable inputs used in the fair value measurement of the Visa swaps are management's estimate of the probability of certain litigation scenarios occurring, and the timing of the resolution of the related litigation loss estimates in excess, or shortfall, of the Company's proportional share of escrow funds. An increase in the loss estimate or a delay in the resolution of the related litigation would have resulted in an increase in the derivative liability. A decrease in the loss estimate or an acceleration of the resolution of the related litigation would have resulted in a decrease in the derivative liability.
68
U.S. Bancorp
The following table summarizes the balances of assets and liabilities measured at fair value on a recurring basis:
(Dollars in Millions) Level 1 Level 2 Level 3 Netting Total
September 30, 2024
Available-for-sale securities
U.S. Treasury and agencies $ 24,689 $ 4,710 $ - $ - $ 29,399
Mortgage-backed securities
Residential agency - 27,766 - - 27,766
Commercial
Agency - 7,605 - - 7,605
Non-agency - 7 - - 7
Asset-backed securities - 6,788 - - 6,788
Obligations of state and political subdivisions - 9,888 - - 9,888
Other - 251 - - 251
Total available-for-sale 24,689 57,015 - - 81,704
Mortgage loans held for sale - 2,887 - - 2,887
Mortgage servicing rights - - 3,187 - 3,187
Derivative assets 30 4,773 1,563 (2,878) 3,488
Other assets 440 2,185 - - 2,625
Total $ 25,159 $ 66,860 $ 4,750 $ (2,878) $ 93,891
Time deposits $ - $ 7,655 $ - $ - $ 7,655
Long-term debt - 45 - - 45
Derivative liabilities 16 4,213 2,375 (2,847) 3,757
Short-term borrowings and other liabilities(a)
514 1,892 - - 2,406
Total $ 530 $ 13,805 $ 2,375 $ (2,847) $ 13,863
December 31, 2023
Available-for-sale securities
U.S. Treasury and agencies $ 14,787 $ 4,755 $ - $ - $ 19,542
Mortgage-backed securities
Residential agency - 26,078 - - 26,078
Commercial
Agency - 7,343 - - 7,343
Non-agency - 6 - - 6
Asset-backed securities - 6,724 - - 6,724
Obligations of state and political subdivisions - 9,989 - - 9,989
Other - 24 - - 24
Total available-for-sale 14,787 54,919 - - 69,706
Mortgage loans held for sale - 2,011 - - 2,011
Mortgage servicing rights - - 3,377 - 3,377
Derivative assets - 5,078 1,453 (3,666) 2,865
Other assets 550 1,991 - - 2,541
Total $ 15,337 $ 63,999 $ 4,830 $ (3,666) $ 80,500
Time deposits $ - $ 2,818 $ - $ - $ 2,818
Derivative liabilities 16 4,955 3,338 (3,720) 4,589
Short-term borrowings and other liabilities(a)
517 1,786 - - 2,303
Total $ 533 $ 9,559 $ 3,338 $ (3,720) $ 9,710
Note: Excluded from the table above are equity investments without readily determinable fair values. The Company has elected to carry these investments at historical cost, adjusted for impairment and any changes resulting from observable price changes for identical or similar investments of the issuer. The aggregate carrying amount of these equity investments was $133 million at both September 30, 2024 and December 31, 2023, and reflect no impairment or observable price change adjustment at September 30, 2024, compared with a cumulative impairment of $5 million and no observable price change adjustment at December 31, 2023. The Company recorded a $5 million impairment on these equity investments during the first nine months of 2023. The Company did not record any adjustments for observable price changes during the first nine months of 2024 and 2023.
(a)Primarily represents the Company's obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance.
U.S. Bancorp
69
The following table presents the changes in fair value for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
Three Months Ended September 30
(Dollars in Millions) 		Beginning of Period Balance Net Gains (Losses) Included in Net Income Purchases Sales Principal Payments Issuances Settlements End of Period Balance Net Change in Unrealized Gains (Losses) Relating to Assets and Liabilities Held at End of Period
2024
Mortgage servicing rights $ 3,326 $ (212)
(a)
$ - $ 1 $ - $ 72
(c)
$ - $ 3,187 $ (212)
(a)
Net derivative assets and liabilities (2,303) 651
(b)
264 (9) - - 585 (812) 1,438
(d)
2023
Mortgage servicing rights $ 3,633 $ 134
(a)
$ 1 $ (292) $ - $ 106
(c)
$ - $ 3,582 $ 134
(a)
Net derivative assets and liabilities (3,419) (1,315)
(e)
25 (9) - - 962 (3,756) (693)
(f)
Nine Months Ended September 30
(Dollars in Millions) 		Beginning of Period Balance Net Gains (Losses) Included in Net Income Purchases Sales Principal Payments Issuances Settlements End of Period Balance Net Change in Unrealized Gains (Losses) Relating to Assets and Liabilities Held at End of Period
2024
Mortgage servicing rights $ 3,377 $ (194)
(a)
$ 1 $ (188) $ - $ 191
(c)
$ - $ 3,187 $ (194)
(a)
Net derivative assets and liabilities (1,885) (2,036)
(g)
912 (14) - - 2,211 (812) 666
(h)
2023
Available-for-sale securities
Obligations of state and political subdivisions $ 1 $ - $ - $ - $ (1) $ - $ - $ - $ -
Total available-for-sale 1 - - - (1) - - - -
Mortgage servicing rights 3,755 (37)
(a)
3 (440) - 301
(c)
- 3,582 (37)
(a)
Net derivative assets and liabilities (3,199) (3,558)
(i)
430 (28) - - 2,599 (3,756) (1,925)
(j)
(a)Included in mortgage banking revenue.
(b)Approximately $89 million, $563 million and $(1) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(c)Represents MSRs capitalized during the period.
(d)Approximately $20 million, $1.4 billion and $(1) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(e)Approximately $35 million, $(1.4) billion and $1 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(f)Approximately $11 million, $(705) million and $1 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(g)Approximately $185 million, $(2.2) billion and $(70) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(h)Approximately $20 million, $716 million and $(70) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(i)Approximately $133 million and $(3.7) billion included in mortgage banking revenue and commercial products revenue, respectively.
(j)Approximately $11 million and $(1.9) billion included in mortgage banking revenue and commercial products revenue, respectively.
The Company is also required periodically to measure certain other financial assets at fair value on a nonrecurring basis. These measurements of fair value usually result from the application of lower-of-cost-or-fair value accounting or write-downs of individual assets.
The following table summarizes the balances as of the measurement date of assets measured at fair value on a nonrecurring basis, and still held as of the reporting date:
September 30, 2024 December 31, 2023
(Dollars in Millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Loans(a)
$ - $ - $ 625 $ 625 $ - $ - $ 354 $ 354
Other assets(b)
- - 16 16 - - 27 27
(a)Represents the carrying value of loans for which adjustments were based on the fair value of the collateral, excluding loans fully charged-off.
(b)Primarily represents the fair value of foreclosed properties that were measured at fair value based on an appraisal or broker price opinion of the collateral subsequent to their initial acquisition.
70
U.S. Bancorp
The following table summarizes losses recognized related to nonrecurring fair value measurements of individual assets or portfolios:
Three Months Ended September 30 Nine Months Ended September 30
(Dollars in Millions) 2024 2023 2024 2023
Loans(a)
$ 116 $ 71 $ 279 $ 281
Other assets(b)
1 1 4 2
(a)Represents write-downs of loans which were based on the fair value of the collateral, excluding loans fully charged-off.
(b)Primarily represents related losses of foreclosed properties that were measured at fair value subsequent to their initial acquisition.
Fair Value Option
The following table summarizes the differences between the aggregate fair value carrying amount of the assets and liabilities for which the fair value option has been elected and the aggregate remaining contractual principal balance outstanding:
September 30, 2024 December 31, 2023
(Dollars in Millions) Fair Value Carrying Amount Contractual Principal Outstanding Carrying Amount Over (Under) Contractual Principal Outstanding Fair Value Carrying Amount Contractual Principal Outstanding Carrying Amount Over (Under) Contractual Principal Outstanding
Total loans(a)
$ 2,887 $ 2,848 $ 39 $ 2,011 $ 1,994 $ 17
Time deposits 7,655 7,657 (2) 2,818 2,822 (4)
Long-term debt 45 45 - - - -
(a)Includes nonaccrual loans of $1 million carried at fair value with contractual principal outstanding of $1 million at September 30, 2024 and $1 million carried at fair value with contractual principal outstanding of $1 million at December 31, 2023. Includes loans 90 days or more past due of $3 million carried at fair value with contractual principal outstanding of $3 million at September 30, 2024 and $4 million carried at fair value with contractual principal outstanding of $4 million at December 31, 2023.
Fair Value of Financial Instruments
The following section summarizes the estimated fair value for financial instruments accounted for at amortized cost as of September 30, 2024 and December 31, 2023. In accordance with disclosure guidance related to fair values of financial instruments, the Company did not include assets and liabilities that are not financial instruments, such as the value of goodwill, long-term relationships with deposit, credit card, merchant processing and trust customers, other purchased intangibles, premises and equipment, deferred taxes and other liabilities. Additionally, in accordance with the disclosure guidance, receivables and payables due in one year or less, insurance contracts, equity investments not accounted for at fair value, and deposits with no defined or contractual maturities are excluded.
The estimated fair values of the Company's financial instruments are shown in the table below:
September 30, 2024 December 31, 2023
Carrying Amount Fair Value Carrying Amount Fair Value
(Dollars in Millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Financial Assets
Cash and due from banks $ 73,562 $ 73,562 $ - $ - $ 73,562 $ 61,192 $ 61,192 $ - $ - $ 61,192
Federal funds sold and securities purchased under resale agreements 6,426 - 6,426 - 6,426 2,543 - 2,543 - 2,543
Investment securities held-to-maturity 80,025 1,280 70,135 - 71,415 84,045 1,310 72,778 - 74,088
Loans held for sale(a)
324 - - 324 324 190 - - 190 190
Loans 366,604 - - 363,988 363,988 366,456 - - 362,849 362,849
Other(b)
2,436 - 1,910 526 2,436 2,377 - 1,863 514 2,377
Financial Liabilities
Time deposits(c)
51,686 - 51,918 - 51,918 49,455 - 49,607 - 49,607
Short-term borrowings(d)
21,302 - 21,174 - 21,174 12,976 - 12,729 - 12,729
Long-term debt(e)
54,794 - 54,468 - 54,468 51,480 - 49,697 - 49,697
Other(f)
4,800 - 1,327 3,473 4,800 5,432 - 1,406 4,026 5,432
(a)Excludes mortgages held for sale for which the fair value option under applicable accounting guidance was elected.
(b)Includes investments in Federal Reserve Bank and Federal Home Loan Bank stock and tax-advantaged investments.
(c)Excludes time deposits for which the fair value option under applicable accounting guidance was elected.
(d)Excludes the Company's obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance.
(e)Excludes structured long-term notes for which the fair value option under applicable accounting guidance was elected.
(f)Includes operating lease liabilities and liabilities related to tax-advantaged investments.
The fair value of unfunded commitments, deferred non-yield related loan fees, standby letters of credit and other guarantees is approximately equal to their carrying value. The carrying value of unfunded commitments, deferred non-yield related loan fees and standby letters of credit was $399 million and $489 million at September 30, 2024 and December 31, 2023, respectively. The carrying value of other guarantees was $179 million and $198 million at September 30, 2024 and December 31, 2023, respectively.
U.S. Bancorp
71
 NOTE 15 Guarantees and Contingent Liabilities
Visa Restructuring and Card Association LitigationThe Company's Payment Services business issues credit and debit cards and acquires credit and debit card transactions through the Visa U.S.A. Inc. card association or its affiliates (collectively "Visa"). In 2007, Visa completed a restructuring and issued shares of Visa Inc. common stock to its financial institution members in contemplation of its initial public offering ("IPO") completed in the first quarter of 2008 (the "Visa Reorganization"). As a part of the Visa Reorganization, the Company received its proportionate number of shares of Visa Inc. common stock, which were subsequently converted to Class B shares of Visa Inc. ("Class B shares"). As of September 30, 2024, the Company has sold substantially all of its Class B shares.
Visa U.S.A. Inc. ("Visa U.S.A.") and MasterCard International (collectively, the "Card Brands") are defendants in antitrust lawsuits challenging the practices of the Card Brands (the "Visa Litigation"). Visa U.S.A. member banks have a contingent obligation to indemnify Visa Inc. under the Visa U.S.A. bylaws (which were modified at the time of the restructuring in October 2007) for potential losses arising from the Visa Litigation. The indemnification by the Visa U.S.A. member banks has no specific maximum amount. Using proceeds from its IPO and through reductions to the conversion ratio applicable to the Class B shares held by Visa U.S.A. member banks, Visa Inc. has funded an escrow account for the benefit of member financial institutions to fund their indemnification obligations associated with the Visa Litigation. The receivable related to the escrow account is classified in other liabilities and fully offsets the related Visa Litigation contingent liability.
In October 2012, Visa signed a settlement agreement to resolve merchant class action claims associated with the multidistrict interchange litigation pending in the United States District Court for the Eastern District of New York (the "Multi-District Litigation"). The U.S. Court of Appeals for the Second Circuit reversed the approval of that settlement and remanded the matter to the district court. Thereafter, the case was split into two putative class actions, one seeking damages (the "Damages Action") and a separate class action seeking injunctive relief only (the "Injunctive Action"). The Damages Action was settled and is fully resolved. A number of merchants opted out of the Damages Action class settlement and filed individual cases in various federal district courts. Some of those cases have been settled and others are still being litigated. In March 2024, Visa signed a settlement agreement to resolve the Injunctive Action. In June 2024, the court declined to grant preliminary approval of the proposed settlement, which provided for lower interchange fees and various other rule changes for U.S. merchants. Accordingly, the Injunctive Action continues.
Other Guarantees and Contingent Liabilities
The following table is a summary of other guarantees and contingent liabilities of the Company at September 30, 2024:
(Dollars in Millions)
Collateral Held
Carrying Amount
Maximum
Potential
Future
Payments
Standby letters of credit $ - $ 22 $ 10,590
Third party borrowing arrangements - - 1
Securities lending indemnifications 7,442 - 7,243
Asset sales - 97 11,185
 (a)
Merchant processing 760 61 152,013
Tender option bond program guarantee 222 - 228
Other - 21 2,690
(a)The maximum potential future payments do not include loan sales where the Company provides standard representation and warranties to the buyer against losses related to loan underwriting documentation defects that may have existed at the time of sale that generally are identified after the occurrence of a triggering event such as delinquency. For these types of loan sales, the maximum potential future payments is generally the unpaid principal balance of loans sold measured at the end of the current reporting period. Actual losses will be significantly less than the maximum exposure, as only a fraction of loans sold will have a representation and warranty breach, and any losses on repurchase would generally be mitigated by any collateral held against the loans.
Merchant Processing The Company, through its subsidiaries, provides merchant processing services. Under the rules of credit card associations, a merchant processor retains a contingent liability for credit card transactions processed. This contingent liability arises in the event of a billing dispute between the merchant and a cardholder that is ultimately resolved in the cardholder's favor. In this situation, the transaction is "charged-back" to the merchant and the disputed amount is credited or otherwise refunded to the cardholder. If the Company is unable to collect this amount from the merchant, it bears the loss for the amount of the refund paid to the cardholder.
The Company currently processes card transactions in the United States, Canada and Europe through wholly-owned subsidiaries. In the event a merchant was unable to fulfill product or services subject to future delivery, such as airline tickets, the Company could become financially liable for refunding the purchase price of such products or services purchased through the credit card associations under the charge-back provisions. Charge-back risk related to these merchants is evaluated in a manner similar to credit risk assessments and, as such, merchant processing contracts contain various provisions to protect the Company in the event of default. At September 30, 2024, the value of airline tickets purchased to be delivered at a future date through card transactions processed by the Company was $12.0 billion. The Company held collateral of $635 million in escrow deposits, letters of credit and indemnities from financial institutions, and liens on various assets. In addition to specific collateral or other credit
72
U.S. Bancorp
enhancements, the Company maintains a liability for its implied guarantees associated with future delivery. At September 30, 2024, the liability was $40 million primarily related to these airline processing arrangements.
Asset Sales The Company regularly sells loans to GSEs as part of its mortgage banking activities. The Company provides customary representations and warranties to GSEs in conjunction with these sales. These representations and warranties generally require the Company to repurchase assets if it is subsequently determined that a loan did not meet specified criteria, such as a documentation deficiency or rescission of mortgage insurance. If the Company is unable to cure or refute a repurchase request, the Company is generally obligated to repurchase the loan or otherwise reimburse the GSE for losses. At September 30, 2024, the Company had reserved $10 million for potential losses from representation and warranty obligations, compared with $13 million at December 31, 2023. The Company's reserve reflects management's best estimate of losses for representation and warranty obligations. The Company's repurchase reserve is modeled at the loan level, taking into consideration the individual credit quality and borrower activity that has transpired since origination. The model applies credit quality and economic risk factors to derive a probability of default and potential repurchase that are based on the Company's historical loss experience, and estimates loss severity based on expected collateral value. The Company also considers qualitative factors that may result in anticipated losses differing from historical loss trends.
As of September 30, 2024 and December 31, 2023, the Company had $14 million and $18 million, respectively, of unresolved representation and warranty claims from GSEs. The Company does not have a significant amount of unresolved claims from investors other than GSEs.
Litigation and Regulatory Matters
The Company is subject to various litigation and regulatory matters that arise from the conduct of its business activities. The Company establishes reserves for such matters when potential losses become probable and can be reasonably estimated. The Company believes the ultimate resolution of existing legal and regulatory matters will not have a material adverse effect on the financial condition, results of operations or cash flows of the Company. However, in light of the uncertainties inherent in these matters, it is possible that the ultimate resolution of one or more of these matters may have a material adverse effect on the Company's results of operations for a particular period, and future changes in circumstances or additional information could result in additional accruals or resolution in excess of established accruals, which could adversely affect the Company's results of operations, potentially materially.
Residential Mortgage-Backed Securities Litigation Starting in 2011, the Company and other large financial institutions have been sued in their capacity as trustee for residential mortgage-backed securities trusts for losses arising out of the 2008 financial crisis. In the lawsuits brought against the Company, the investors allege that the Company's banking subsidiary, U.S. Bank National Association ("USBNA"), as trustee caused them to incur substantial losses by failing to enforce loan repurchase obligations and failing to abide by appropriate standards of care after events of default allegedly occurred. The plaintiffs in these matters seek monetary damages in unspecified amounts and most also seek equitable relief.
Regulatory Matters The Company is continually subject to examinations, inquiries, investigations and other forms of regulatory and governmental inquiry or scrutiny covering a wide range of issues in its financial services businesses including in areas of heightened regulatory scrutiny, such as compliance, risk management, third-party risk management and consumer protection. In some cases, these matters are part of reviews of specified activities at multiple industry participants; in others, they are directed at the Company individually. For example, the Division of Enforcement of the SEC has been investigating U.S. Bancorp Fund Services, LLC ("USBFS"), a subsidiary of USBNA, relating to its role providing fund administration services to a third-party investment fund. This investment fund was advised by an investment adviser who engaged in fraud, and USBFS was not affiliated with the investment adviser and did not provide any advisory services to the fund. The Division of Enforcement has made a preliminary determination to recommend that the SEC file an enforcement action against USBFS, and USBFS is in ongoing discussions with the SEC on this matter. The Company is cooperating fully with all pending examinations, inquiries and investigations, any of which could lead to administrative or legal proceedings or settlements. Remedies in these proceedings or settlements may include fines, penalties, restitution or alterations in the Company's business practices (which may increase the Company's operating expenses and decrease its revenue).
Outlook Due to their complex nature, it can be years before litigation and regulatory matters are resolved. The Company may be unable to develop an estimate or range of loss where matters are in early stages, there are significant factual or legal issues to be resolved, damages are unspecified or uncertain, or there is uncertainty as to a litigation class being certified or the outcome of pending motions, appeals or proceedings. For those litigation and regulatory matters where the Company has information to develop an estimate or range of loss, the Company believes the upper end of the range of reasonably possible losses in aggregate, in excess of any reserves established for matters where a loss is considered probable, will not be material to its financial condition, results of operations or cash flows. The Company's estimates are subject to significant judgment and uncertainties, and the matters underlying the estimates will change from time to time. Actual results may vary significantly from the current estimates.
U.S. Bancorp
73
NOTE 16 Business Segments
Within the Company, financial performance is measured by major lines of business based on the products and services provided to customers through its distribution channels. 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. The Company has the following reportable operating segments and functional activities in Treasury and Corporate Support:
Wealth, Corporate, Commercial and Institutional Banking Wealth, Corporate, Commercial and Institutional Banking provides core banking, specialized lending, transaction and payment processing, capital markets, asset management, and brokerage and investment related services to wealth, middle market, large corporate, government and institutional clients.
Consumer and Business BankingConsumer and Business Banking comprises consumer banking, small business banking and consumer lending. Products and services are delivered through banking offices, telephone servicing and sales, online services, direct mail, ATM processing, mobile devices, distributed mortgage loan officers, and intermediary relationships including auto dealerships, mortgage banks, and strategic business partners.
Payment Services Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services and merchant processing.
Treasury and Corporate SupportTreasury and Corporate Support includes the Company's investment portfolios, funding, capital management, interest rate risk management, income taxes not allocated to business segments, 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.
Basis of Presentation Business segment 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. The allowance for credit losses and related provision expense are allocated to the business segments according to the volume and credit quality of the loan balances managed, but with the impact of changes in economic forecasts recorded in Treasury and Corporate Support. Goodwill and other intangible assets are assigned to the business segments based on the mix of business of an entity acquired by the Company. Within the Company, capital levels are evaluated and managed centrally; however, capital is allocated to the business segments to support evaluation of business performance. Business segments are allocated capital on a risk-adjusted basis considering economic and regulatory capital requirements. Generally, the determination of the amount of capital allocated to each business segment includes credit allocations following a Basel III regulatory framework. Interest income and expense is determined based on the assets and liabilities managed by the business segment. Because funding and asset/liability management is a central function, funds transfer-pricing methodologies are utilized to allocate a cost of funds used or credit for funds provided to all business segment assets and liabilities, respectively, using a matched funding concept. Also, each business unit is allocated the taxable-equivalent benefit of tax-exempt products. The residual effect on net interest income of asset/liability management activities is included in Treasury and Corporate Support. Noninterest income and expenses directly managed by each business segment, including fees, service charges, salaries and benefits, and other direct revenues and costs are accounted for within each segment's financial results in a manner similar to the consolidated financial statements. Occupancy costs are allocated based on utilization of facilities by the business segments. Generally, operating losses are charged to the business segment when the loss event is realized in a manner similar to a loan charge-off. Noninterest expenses incurred by centrally managed operations or business segments that directly support another business segment's operations are charged to the applicable business segment based on its utilization of those services, primarily measured by the volume of customer activities, number of employees or other relevant factors. These allocated expenses are reported as net shared services expense within noninterest expense. Certain activities that do not directly support the operations of the business segments or for which the business segments are not considered financially accountable in evaluating their performance are not charged to the business segments. The income or expenses associated with these corporate activities, including merger and integration charges, are reported within the Treasury and Corporate Support business segment. Income taxes are assessed to each business segment at a standard tax rate with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in Treasury and Corporate Support.
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 2024 and 2023, certain organization and methodology changes were made, including revising the Company's line of business funds transfer-pricing methodology related to deposits and loans during the second quarter of 2024 and combining its Wealth Management and Investment Services and Corporate and Commercial Banking lines of businesses to create the Wealth, Corporate, Commercial and Institutional Banking line of business during the third quarter of 2023. Prior period results were restated and presented on a comparable basis.
74
U.S. Bancorp
Business segment results for the three months ended September 30 were as follows:
Wealth, Corporate, Commercial and Institutional Banking Consumer and Business Banking Payment Services
(Dollars in Millions) 2024 2023 2024 2023 2024 2023
Condensed Income Statement
Net interest income (taxable-equivalent basis) $ 1,896 $ 2,023 $ 1,937 $ 2,048 $ 727 $ 663
Noninterest income 1,145 1,030 401 434 1,073  (a) 1,039  (a)
Total net revenue 3,041 3,053 2,338 2,482 1,800 1,702
Noninterest expense 1,364 1,340 1,685 1,721 1,026 1,006
Income (loss) before provision and income taxes 1,677 1,713 653 761 774 696
Provision for credit losses 94 136 18 7 404 399
Income (loss) before income taxes 1,583 1,577 635 754 370 297
Income taxes and taxable-equivalent adjustment 396 394 159 189 93 74
Net income (loss) 1,187 1,183 476 565 277 223
Net (income) loss attributable to noncontrolling interests - - - - - -
Net income (loss) attributable to U.S. Bancorp $ 1,187 $ 1,183 $ 476 $ 565 $ 277 $ 223
Average Balance Sheet
Loans $ 171,833 $ 175,700 $ 155,304 $ 157,458 $ 41,653 $ 38,954
Other earning assets 10,740 6,458 2,738 2,688 8 5
Goodwill 4,825 4,638 4,326 4,515 3,370 3,333
Other intangible assets 955 921 4,405 5,154 266 340
Assets 200,199 203,910 168,937 174,883 47,199 44,774
Noninterest-bearing deposits 54,263 66,055 20,781 25,561 2,653 2,796
Interest-bearing deposits 215,604 210,041 200,897 192,725 95 101
Total deposits 269,867 276,096 221,678 218,286 2,748 2,897
Total U.S. Bancorp shareholders' equity 21,277 22,839 14,247 15,770 9,959 9,442
Treasury and Corporate Support Consolidated Company
(Dollars in Millions) 2024 2023 2024 2023
Condensed Income Statement
Net interest income (taxable-equivalent basis) $ (394) $ (466) $ 4,166 $ 4,268
Noninterest income 79 261 2,698 (b) 2,764 (b)
Total net revenue (315) (205) 6,864 (c) 7,032 (c)
Noninterest expense 129 463 4,204 4,530
Income (loss) before provision and income taxes (444) (668) 2,660 2,502
Provision for credit losses 41 (27) 557 515
Income (loss) before income taxes (485) (641) 2,103 1,987
Income taxes and taxable-equivalent adjustment (267) (194) 381 463
Net income (loss) (218) (447) 1,722 1,524
Net (income) loss attributable to noncontrolling interests (8) (1) (8) (1)
Net income (loss) attributable to U.S. Bancorp $ (226) $ (448) $ 1,714 $ 1,523
Average Balance Sheet
Loans $ 5,280 $ 4,765 $ 374,070 $ 376,877
Other earning assets 219,624 219,217 233,110 228,368
Goodwill - - 12,521 12,486
Other intangible assets 9 10 5,635 6,425
Assets 248,305 240,432 664,640 663,999
Noninterest-bearing deposits 3,242 3,112 80,939 97,524
Interest-bearing deposits 11,222 11,900 427,818 414,767
Total deposits 14,464 15,012 508,757 512,291
Total U.S. Bancorp shareholders' equity 12,800 5,766 58,283 53,817
(a)Presented net of related rewards and rebate costs and certain partner payments of $796 million and $762 million for the three months ended September 30, 2024 and 2023, respectively.
(b)Includes revenue generated from certain contracts with customers of $2.3 billion and $2.2 billion for the three months ended September 30, 2024 and 2023, respectively.
(c)The Company, as a lessor, originates retail and commercial leases either directly to the consumer or indirectly through dealer networks. Under these arrangements, the Company recorded $195 million and $185 million of revenue for the three months ended September 30, 2024 and 2023, respectively, primarily consisting of interest income on sales-type and direct financing leases.
U.S. Bancorp
75
Business segment results for the nine months ended September 30 were as follows:
Wealth, Corporate, Commercial and Institutional Banking Consumer and Business Banking Payment Services
(Dollars in Millions) 2024 2023 2024 2023 2024 2023
Condensed Income Statement
Net interest income (taxable-equivalent basis) $ 5,711 $ 5,884 $ 5,737 $ 6,730 $ 2,102 $ 1,933
Noninterest income 3,387 3,120 1,239 1,265 3,146  (a) 3,026  (a)
Total net revenue 9,098 9,004 6,976 7,995 5,248 4,959
Noninterest expense 4,135 4,073 4,977 5,246 3,040 2,871
Income (loss) before provision and income taxes 4,963 4,931 1,999 2,749 2,208 2,088
Provision for credit losses 335 271 102 30 1,151 933
Income (loss) before income taxes 4,628 4,660 1,897 2,719 1,057 1,155
Income taxes and taxable-equivalent adjustment 1,158 1,165 475 680 265 288
Net income (loss) 3,470 3,495 1,422 2,039 792 867
Net (income) loss attributable to noncontrolling interests - - - - - -
Net income (loss) attributable to U.S. Bancorp $ 3,470 $ 3,495 $ 1,422 $ 2,039 $ 792 $ 867
Average Balance Sheet
Loans $ 172,249 $ 177,161 $ 155,073 $ 164,050 $ 40,766 $ 37,942
Other earning assets 9,693 6,386 2,300 2,462 92 126
Goodwill 4,825 4,634 4,326 4,514 3,343 3,326
Other intangible assets 1,007 972 4,611 5,378 282 361
Assets 200,912 203,442 168,954 181,735 46,707 43,926
Noninterest-bearing deposits 56,650 73,789 21,068 33,599 2,716 3,052
Interest-bearing deposits 213,572 201,805 200,719 182,267 96 104
Total deposits 270,222 275,594 221,787 215,866 2,812 3,156
Total U.S. Bancorp shareholders' equity 21,506 22,249 14,552 16,246 9,955 9,181
Treasury and Corporate Support Consolidated Company
(Dollars in Millions) 2024 2023 2024 2023
Condensed Income Statement
Net interest income (taxable-equivalent basis) $ (1,317) $ (1,162) $ 12,233 $ 13,385
Noninterest income 441 586 8,213 (b) 7,997 (b)
Total net revenue (876) (576) 20,446 (c) 21,382 (c)
Noninterest expense 725 1,464 12,877 13,654
Income (loss) before provision and income taxes (1,601) (2,040) 7,569 7,728
Provision for credit losses 90 529 1,678 1,763
Income (loss) before income taxes (1,691) (2,569) 5,891 5,965
Income taxes and taxable-equivalent adjustment (666) (765) 1,232 1,368
Net income (loss) (1,025) (1,804) 4,659 4,597
Net (income) loss attributable to noncontrolling interests (23) (15) (23) (15)
Net income (loss) attributable to U.S. Bancorp $ (1,048) $ (1,819) $ 4,636 $ 4,582
Average Balance Sheet
Loans $ 5,190 $ 4,959 $ 373,278 $ 384,112
Other earning assets 218,717 215,805 230,802 224,779
Goodwill - - 12,494 12,474
Other intangible assets 9 19 5,909 6,730
Assets 244,790 238,378 661,363 667,481
Noninterest-bearing deposits 2,606 3,116 83,040 113,556
Interest-bearing deposits 11,149 8,901 425,536 393,077
Total deposits 13,755 12,017 508,576 506,633
Total U.S. Bancorp shareholders' equity 10,653 5,764 56,666 53,440
(a)Presented net of related rewards and rebate costs and certain partner payments of $2.3 billion and $2.2 billion for the nine months ended September 30, 2024 and 2023, respectively.
(b)Includes revenue generated from certain contracts with customers of $6.8 billion and $6.6 billion for the nine months ended September 30, 2024 and 2023, respectively.
(c)The Company, as a lessor, originates retail and commercial leases either directly to the consumer or indirectly through dealer networks. Under these arrangements, the Company recorded $577 million and $554 million of revenue for the nine months ended September 30, 2024 and 2023, respectively, primarily consisting of interest income on sales-type and direct financing leases.
76
U.S. Bancorp
NOTE 17 Subsequent Events
The Company has evaluated the impact of events that have occurred subsequent to September 30, 2024 through the date the consolidated financial statements were filed with the SEC. Based on this evaluation, the Company has determined none of these events were required to be recognized or disclosed in the consolidated financial statements and related notes.
U.S. Bancorp
77
U.S. Bancorp
Consolidated Daily Average Balance Sheet and Related Yields and Rates(a)
For the Three Months Ended September 30
2024 2023 2024 v 2023
(Dollars in Millions) (Unaudited) Average Balances Interest Yields and Rates Average Balances Interest Yields and Rates % Change Average Balances
Assets
Investment securities(b)
$ 166,899 $ 1,335 3.20 % $ 163,236 $ 1,172 2.87 % 2.2 %
Loans held for sale 2,757 45 6.44 2,661 42 6.28 3.6
Loans(c)
Commercial 133,138 2,217 6.63 134,720 2,254 6.64 (1.2)
Commercial real estate 51,454 841 6.50 54,253 854 6.25 (5.2)
Residential mortgages 117,559 1,160 3.95 114,627 1,078 3.76 2.6
Credit card 28,994 987 13.54 26,883 886 13.07 7.9
Other retail 42,925 669 6.20 46,394 642 5.49 (7.5)
Total loans 374,070 5,874 6.25 376,877 5,714 6.02 (.7)
Interest-bearing deposits with banks 50,547 694 5.46 53,100 742 5.55 (4.8)
Other earning assets 12,907 169 5.19 9,371 118 5.01 37.7
Total earning assets 607,180 8,117 5.33 605,245 7,788 5.12 .3
Allowance for loan losses (7,576) (7,266) (4.3)
Unrealized gain (loss) on investment securities (6,291) (8,241) 23.7
Other assets 71,327 74,261 (4.0)
Total assets $ 664,640 $ 663,999 .1
Liabilities and Shareholders' Equity
Noninterest-bearing deposits $ 80,939 $ 97,524 (17.0) %
Interest-bearing deposits
Interest checking 125,631 399 1.26 132,560 370 1.11 (5.2)
Money market savings 206,546 1,930 3.72 177,340 1,638 3.66 16.5
Savings accounts 36,814 28 .30 50,138 25 .19 (26.6)
Time deposits 58,827 647 4.37 54,729 547 3.97 7.5
Total interest-bearing deposits 427,818 3,004 2.79 414,767 2,580 2.47 3.1
Short-term borrowings
Federal funds purchased 302 4 4.97 277 4 5.07 9.0
Securities sold under agreements to repurchase 7,253 95 5.22 2,919 32 4.36 *
Commercial paper 6,538 65 3.94 7,558 73 3.85 (13.5)
Other short-term borrowings(d)
3,630 120 13.21 16,796 343 8.09 (78.4)
Total short-term borrowings 17,723 284 6.38 27,550 452 6.50 (35.7)
Long-term debt 54,841 663 4.81 43,826 488 4.42 25.1
Total interest-bearing liabilities 500,382 3,951 3.14 486,143 3,520 2.87 2.9
Other liabilities 24,575 26,049 (5.7)
Shareholders' equity
Preferred equity 6,808 6,808 -
Common equity 51,475 47,009 9.5
Total U.S. Bancorp shareholders' equity 58,283 53,817 8.3
Noncontrolling interests 461 466 (1.1)
Total equity 58,744 54,283 8.2
Total liabilities and equity $ 664,640 $ 663,999 .1
Net interest income $ 4,166 $ 4,268
Gross interest margin 2.19 % 2.25 %
Gross interest margin without taxable-equivalent increments 2.17 % 2.23 %
Percent of Earning Assets
Interest income 5.33 % 5.12 %
Interest expense 2.59 2.31
Net interest margin 2.74 % 2.81 %
Net interest margin without taxable-equivalent increments 2.72 % 2.79 %
* Not meaningful
(a)Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent.
(b)Yields on investment securities are computed based on amortized cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity. Yields include impacts of hedge accounting, including portfolio level basis adjustments.
(c)Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances.
(d)Interest expense and rates includes interest paid on collateral associated with derivative positions.
78
U.S. Bancorp
U.S. Bancorp
Consolidated Daily Average Balance Sheet and Related Yields and Rates(a)
For the Nine Months Ended September 30
2024 2023 2024 v 2023
(Dollars in Millions) (Unaudited) Average Balances Interest Yields and Rates Average Balances Interest Yields and Rates % Change Average Balances
Assets
Investment securities(b)
$ 165,059 $ 3,843 3.10 % $ 163,051 $ 3,364 2.75 % 1.2 %
Loans held for sale 2,381 123 6.86 2,564 111 5.77 (7.1)
Loans(c)
Commercial 132,749 6,606 6.65 136,159 6,452 6.33 (2.5)
Commercial real estate 52,257 2,542 6.50 54,923 2,504 6.09 (4.9)
Residential mortgages 116,563 3,408 3.90 116,167 3,215 3.69 .3
Credit card 28,430 2,852 13.40 26,171 2,508 12.81 8.6
Other retail 43,279 1,961 6.05 50,692 1,947 5.13 (14.6)
Total loans 373,278 17,369 6.21 384,112 16,626 5.78 (2.8)
Interest-bearing deposits with banks 51,499 2,134 5.53 49,495 1,904 5.14 4.0
Other earning assets 11,863 458 5.16 9,669 344 4.76 22.7
Total earning assets 604,080 23,927 5.29 608,891 22,349 4.90 (.8)
Allowance for loan losses (7,521) (7,094) (6.0)
Unrealized gain (loss) on investment securities (6,956) (7,708) 9.8
Other assets 71,760 73,392 (2.2)
Total assets $ 661,363 $ 667,481 (.9)
Liabilities and Shareholders' Equity
Noninterest-bearing deposits $ 83,040 $ 113,556 (26.9) %
Interest-bearing deposits
Interest checking 125,451 1,147 1.22 129,980 965 .99 (3.5)
Money market savings 203,821 5,837 3.83 159,178 3,841 3.23 28.0
Savings accounts 39,097 80 .27 59,251 61 .14 (34.0)
Time deposits 57,167 1,852 4.33 44,668 1,157 3.46 28.0
Total interest-bearing deposits 425,536 8,916 2.80 393,077 6,024 2.05 8.3
Short-term borrowings
Federal funds purchased 327 12 5.05 475 16 4.63 (31.2)
Securities sold under agreements to repurchase 5,957 224 5.03 2,873 84 3.91 *
Commercial paper 7,177 214 3.98 7,880 193 3.27 (8.9)
Other short-term borrowings(d)
3,603 402 14.88 28,136 1,351 6.42 (87.2)
Total short-term borrowings 17,064 852 6.67 39,364 1,644 5.58 (56.7)
Long-term debt 53,482 1,926 4.81 42,551 1,296 4.07 25.7
Total interest-bearing liabilities 496,082 11,694 3.15 474,992 8,964 2.52 4.4
Other liabilities 25,112 25,028 .3
Shareholders' equity
Preferred equity 6,808 6,808 -
Common equity 49,858 46,632 6.9
Total U.S. Bancorp shareholders' equity 56,666 53,440 6.0
Noncontrolling interests 463 465 (.4)
Total equity 57,129 53,905 6.0
Total liabilities and equity $ 661,363 $ 667,481 (.9)
Net interest income $ 12,233 $ 13,385
Gross interest margin 2.14 % 2.38 %
Gross interest margin without taxable-equivalent increments 2.12 % 2.36 %
Percent of Earning Assets
Interest income 5.29 % 4.90 %
Interest expense 2.59 1.96
Net interest margin 2.70 % 2.94 %
Net interest margin without taxable-equivalent increments 2.68 % 2.92 %
* Not meaningful
(a)Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent.
(b)Yields on investment securities are computed based on amortized cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity. Yields include impacts of hedge accounting, including portfolio level basis adjustments.
(c)Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances.
(d)Interest expense and rates includes interest paid on collateral associated with derivative positions.
U.S. Bancorp
79
Part II - Other Information
Item 1. Legal Proceedings- See the information set forth in "Litigation and Regulatory Matters" in Note 15 in the Notes to Consolidated Financial Statements on page 73 of this Report, which is incorporated herein by reference.
Item 1A. Risk Factors - There are a number of factors that may adversely affect the Company's business, financial results or stock price. Refer to "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, for discussion of these risks.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds- See the information set forth in the "Capital Management" section on page 25 of this Report for information regarding shares repurchased by the Company during the third quarter of 2024, which is incorporated herein by reference.
Item 5. Other Information - During the three months ended September 30, 2024, no director or officer (as defined in SEC Rule 16a-1(f)) of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 of Regulation S-K.
Item 6. Exhibits
3.1
3.2
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
101
The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Inline XBRL: (i) Consolidated Balance Sheet, (ii) Consolidated Statement of Income, (iii) Consolidated Statement of Comprehensive Income, (iv) Consolidated Statement of Shareholders' Equity, (v) Consolidated Statement of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).
80
U.S. Bancorp
SIGNATURE
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, thereunto duly authorized.
U.S. BANCORP
By: /s/  LISA R. STARK
Dated: November 5, 2024
Lisa R. Stark
Controller
(Principal Accounting Officer and Duly Authorized Officer)
U.S. Bancorp
81
Corporate Information
Executive Offices
U.S. Bancorp
800 Nicollet Mall
Minneapolis, MN 55402
Investor Relations Contact
George Andersen
Senior Vice President, Director of Investor Relations
Phone: 612-303-3620
Media Requests
David R. Palombi
Executive Vice President
Chief Communications Officer
Public Affairs and Communications
Phone: 612-303-3167
Financial Information
U.S. Bancorp news and financial results are available through our website and by mail.
WebsiteFor information about U.S. Bancorp, including news, financial results, annual reports and other documents filed with the Securities and Exchange Commission, visit usbank.com and click on About Us and thenInvestor Relations.
MailAt your request, we will mail to you our quarterly earnings, news releases, quarterly financial data reported on Form 10-Q, Form 10-K and additional copies of our annual reports. Please contact:
U.S. Bancorp Investor Relations
800 Nicollet Mall
Minneapolis, MN 55402
Phone: 866-775-9668
Common Stock Transfer Agent and Registrar
Computershare acts as our transfer agent and registrar, dividend paying agent and dividend reinvestment plan administrator, and maintains all shareholder records for the Company. Inquiries related to shareholder records, stock transfers, changes of ownership, lost stock certificates, changes of address and dividend payment should be directed to the transfer agent at:
Computershare
P.O. Box 505000
Louisville, KY 40233
Phone: 888-778-1311 or 201-680-6578 (international calls)
computershare.com/investor
Registered or Certified Mail:
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
Telephone representatives are available weekdays from 8 a.m. to 6 p.m., Central Time, and automated support is available 24 hours a day, seven days a week. Specific information about your account is available on Computershare's Investor Center website.
Independent Auditor
Ernst & Young LLP serves as the independent auditor for U.S. Bancorp.
Common Stock Listing and Trading
U.S. Bancorp common stock is listed and traded on the New York Stock Exchange under the ticker symbol USB.
Dividends and Reinvestment Plan
U.S. Bancorp currently pays quarterly dividends on our common stock on or about the 15th day of January, April, July and October, subject to approval by our Board of Directors. U.S. Bancorp shareholders can choose to participate in a plan that provides automatic reinvestment of dividends and/or optional cash purchase of additional shares of U.S. Bancorp common stock. For more information, please contact our transfer agent, Computershare.