Exhibit 99.1

 

		U.S. Bancorp Reports Third Quarter 2021 Results   • Net income of $2.0 billion and net revenue of $5.9 billion • Return on average assets of 1.45% and return on average common equity of 15.9% • Common Equity Tier 1 capital ratio of 10.2% and strong levels of liquidity

3Q21 Key Financial Data		3Q21 Highlights

PROFITABILITY METRICS			3Q21				2Q21				3Q20					•  Net income of $2,028 million and diluted earnings per common share of $1.30   •  Return on average assets of 1.45% and return on average common equity of 15.9%   •  Net revenue of $5,890 million, including $3,197 million of net interest income and $2,693 million of noninterest income   •  Positive operating leverage on a linked quarter basis driven by 2.8% linked quarter noninterest income growth   •  Payments revenue increased 3.6%   •  Trust and investment management fees increased 2.9%   •  Average total earning assets growth of 3.5% year-over-year   •  Average total deposits growth of 6.4% year-over-year   •  Allowance for credit losses declined $310 million during the quarter given improving economic outlook and credit trends   •  CET1 capital ratio increased to 10.2% at September 30, 2021, compared with 9.4% at September 30, 2020
Return on average assets (%)			1.45				1.44				1.17
Return on average common equity (%)			15.9				16.3				12.8
Return on tangible common equity (%) (a)			20.2				20.9				16.6
Net interest margin (%)			2.53				2.53				2.67
Efficiency ratio (%) (a)			58.4				59.0				56.6
INCOME STATEMENT (b)			3Q21				2Q21				3Q20
Net interest income (taxable-equivalent basis)			$3,197				$3,164				$3,252
Noninterest income			$2,693				$2,619				$2,712
Net income attributable to U.S. Bancorp			$2,028				$1,982				$1,580
Diluted earnings per common share			$1.30				$1.28				$.99
Dividends declared per common share			$.46				$.42				$.42
BALANCE SHEET (b)			3Q21				2Q21				3Q20
Average total loans			$296,739				$294,284				$311,018
Average total deposits			$431,487				$429,210				$405,523
Net charge-off ratio			.20%				.25%				.66%
Book value per common share (period end)			$32.22				$31.74				$30.93
Basel III standardized CET1 (c)			10.2%				9.9%				9.4%
(a) See Non-GAAP Financial Measures reconciliation on page 16
(b) Dollars in millions, except per share data
(c) CET1 = Common equity tier 1 capital ratio

CEO Commentary

“In the third quarter we generated net revenue of $5.9 billion, net income of $2.0 billion, and a return on tangible common equity of over 20%. Our results were supported by continued momentum across our fee businesses, a pick-up in loan growth, and improvement in our efficiency ratio. Credit quality was once again better than expected and for the third straight quarter our net charge-off ratio hit a record low level. We continue to supplement our organic growth by utilizing excess capital for strategically sound, financially attractive acquisitions. During the quarter we acquired Bento Technologies, which expands the capabilities of our payments ecosystem, and entered into a definitive agreement to acquire MUFG Union Bank’s core regional banking franchise. These acquisitions provide strategic and secular growth opportunities that will allow U.S. Bank to continue to deliver industry leading results for years to come. I want to thank all our employees for their continued hard work and dedication to serving all of our stakeholders.”

— Andy Cecere, Chairman, President and CEO, U.S. Bancorp                    

 

 

 

        Investor contact: Jennifer Thompson, 612.303.0778 | Media contact: Jeff Shelman, 612.422.1423

		U.S. Bancorp Third Quarter 2021 Results

 

INCOME STATEMENT HIGHLIGHTS
($ in millions, except per-share data)														Percent Change
		3Q 2021				2Q 2021				3Q 2020				3Q21 vs 2Q21				3Q21 vs  3Q20				YTD 2021				YTD 2020				Percent Change
Net interest income			$3,171				$3,137				$3,227				1.1				(1.7)				$9,371				$9,650				(2.9	)
Taxable-equivalent adjustment			26				27				25				(3.7	)			4.0				79				73				8.2
Net interest income (taxable-equivalent basis)			3,197				3,164				3,252				1.0				(1.7)				9,450				9,723				(2.8	)
Noninterest income			2,693				2,619				2,712				2.8				(.7)				7,693				7,851				(2.0	)
Total net revenue			5,890				5,783				5,964				1.9				(1.2)				17,143				17,574				(2.5	)
Noninterest expense			3,429				3,387				3,371				1.2				1.7				10,195				10,005				1.9
Income before provision and income taxes			2,461				2,396				2,593				2.7				(5.1)				6,948				7,569				(8.2	)
Provision for credit losses			(163	)			(170	)			635				4.1				nm				(1,160	)			3,365				nm
Income before taxes			2,624				2,566				1,958				2.3				34.0				8,108				4,204				92.9
Income taxes and taxable-equivalent adjustment			590				578				372				2.1				58.6				1,801				744				nm
Net income			2,034				1,988				1,586				2.3				28.2				6,307				3,460				82.3
Net (income) loss attributable to noncontrolling interests			(6	)			(6	)			(6	)			--				--				(17	)			(20	)			15.0
Net income attributable to U.S. Bancorp			$2,028				$1,982				$1,580				2.3				28.4				$6,290				$3,440				82.8
Net income applicable to U.S. Bancorp common shareholders			$1,934				$1,914				$1,494				1.0				29.5				$6,023				$3,196				88.5
Diluted earnings per common share			$1.30				$1.28				$.99				1.6				31.3				$4.04				$2.11				91.5

Net income attributable to U.S. Bancorp was $2,028 million for the third quarter of 2021, which was $448 million higher than the $1,580 million for the third quarter of 2020, and $46 million higher than the $1,982 million for the second quarter of 2021. Diluted earnings per common share were $1.30 in the third quarter of 2021, compared with $0.99 in the third quarter of 2020 and $1.28 in the second quarter of 2021.

The increase in net income year-over-year was primarily due to lower provision for credit losses driven by a reserve release, a result of continued improvement in the global economy, as well as strong credit and collateral performance. This compares with a reserve build during 2020 related to acquired loans. Net interest income decreased 1.7 percent on a year-over-year taxable-equivalent basis due to changes in loan portfolio composition and lower average loan balances primarily driven by commercial loan paydowns by corporate customers accessing the capital markets and the Small Business Administration (“SBA”) Paycheck Protection Program, partially offset by the benefit of deposit and funding mix in addition to higher loan fees related to the SBA Paycheck Protection Program. The net interest margin declined from 2.67 percent a year ago to 2.53 percent in the third quarter of 2021 primarily due to the impact of declining interest rates on loan yields, the mix of earning assets and lower reinvestment yields in the investment portfolio, partially offset by the net benefit of funding composition and higher loan fees. Noninterest income decreased 0.7 percent compared with a year ago driven by lower mortgage banking revenue, commercial products revenue related to slower capital markets activities and other noninterest income, mostly offset by improvements in payment services revenue, trust and investment management fees, deposit service charges, treasury management fees and investment products fees. Noninterest expense increased 1.7 percent reflecting increases in compensation expense, primarily related to performance-based incentive compensation, as well as higher professional services expense, marketing and business development expense and technology and communications expense, partially offset by lower net occupancy and equipment expense and other noninterest expense.

Net income increased on a linked quarter basis primarily due to 1.9 percent growth in total net revenue including growth in net interest income and stronger noninterest income. Net interest income on a taxable-equivalent basis increased 1.0 percent primarily due to higher loan fees mainly related to the SBA Paycheck Protection Program, lower premium amortization in the investment portfolio, and one more day in the quarter, partially offset by lower loan yields and earning asset mix. The net interest margin was flat on a linked quarter basis primarily reflecting favorable funding and deposit mix as well as higher loan fees, partially offset by lower loan yields in addition to earning asset composition. Noninterest income increased 2.8 percent compared with the second quarter of 2021 driven by increases in payment services revenue, trust and investment management fees, deposit service charges and mortgage banking revenue, partially offset by lower securities gains and other noninterest income. Noninterest expense increased 1.2 percent on a linked quarter basis reflecting higher compensation expense and professional services expense, partly offset by lower other noninterest expense.

 

 

        2

		U.S. Bancorp Third Quarter 2021 Results

 

NET INTEREST INCOME
(Taxable-equivalent basis; $ in millions)														Change
		3Q 2021				2Q 2021				3Q 2020				3Q21 vs 2Q21				3Q21 vs 3Q20				YTD 2021				YTD 2020				Change
Components of net interest income
Income on earning assets			$3,435				$3,409				$3,598				$26				$(163)				$10,211				$11,437				$(1,226)
Expense on interest-bearing liabilities			238				245				346				(7)				(108)				761				1,714				(953)
Net interest income			$3,197				$3,164				$3,252				$33				$(55)				$9,450				$9,723				$(273)
Average yields and rates paid
Earning assets yield			2.72%				2.73%				2.95%				(.01)%				(.23)%				2.72%				3.21%				(.49)%
Rate paid on interest-bearing liabilities			.27				.28				.39				(.01)				(.12)				.28				.63				(.35)
Gross interest margin			2.45%				2.45%				2.56%				--%				(.11)%				2.44%				2.58%				(.14)%
Net interest margin			2.53%				2.53%				2.67%				--%				(.14)%				2.52%				2.73%				(.21)%
Average balances
Investment securities (a)			$151,755				$160,615				$128,565				$(8,860)				$23,190				$152,653				$123,444				$29,209
Loans			296,739				294,284				311,018				2,455				(14,279)				295,014				308,935				(13,921)
Earning assets			503,325				500,751				486,104				2,574				17,221				500,616				476,018				24,598
Interest-bearing liabilities			353,129				356,565				357,739				(3,436)				(4,610)				356,731				363,585				(6,854)
(a) Excludes unrealized gain (loss)

 

 

 

Net interest income on a taxable-equivalent basis in the third quarter of 2021 was $3,197 million, a decrease of $55 million (1.7 percent) compared with the third quarter of 2020. The decrease was primarily due to loan mix and lower average loan volumes primarily driven by corporate loan paydowns by corporate customers accessing the capital markets and SBA Paycheck Protection Program loans, partially offset by favorable deposit and funding mix and higher loan fees related to the SBA Paycheck Protection Program. Average earning assets were $17.2 billion (3.5 percent) higher than the third quarter of 2020, reflecting an increase of $23.2 billion (18.0 percent) in average investment securities and an increase of $8.9 billion (23.0 percent) in average other earning assets, primarily driven by higher cash balances, while average total loans decreased $14.3 billion (4.6 percent) due to continued paydowns by corporate customers.

Net interest income on a taxable-equivalent basis increased $33 million (1.0 percent) on a linked quarter basis primarily due to higher loan fees primarily related to the SBA Paycheck Protection Program, lower premium amortization in the investment portfolio, and one more day in the quarter, partially offset by lower loan yields and earning asset mix. Average earning assets were $2.6 billion (0.5 percent) higher on a linked quarter basis, reflecting increases of $2.5 billion (0.8 percent) in average loans and an increase of $9.4 billion (24.6 percent) in average other earning assets, driven by higher cash balances, partially offset by a decrease of $8.9 billion (5.5 percent) in average investment securities.

The net interest margin in the third quarter of 2021 was 2.53 percent, compared with 2.67 percent in the third quarter of 2020 and 2.53 percent in the second quarter of 2021. The decrease in the net interest margin from the prior year was primarily due to the impact of declining interest rates on loan yields, the mix of earning assets and lower reinvestment yields in the investment portfolio, partially offset by the net benefit of funding composition and higher loan fees. Net interest margin was flat on a linked quarter basis reflecting favorable funding and deposit mix as well as higher loan fees, partially offset by lower loan yields in addition to earning asset composition.

The increase in average investment securities year-over-year was due to purchases of mortgage-backed, U.S. Treasury and state and political securities, net of prepayments and maturities, while the decrease on a linked quarter basis was primarily driven by repayments and maturities.

 

 

        3

		U.S. Bancorp Third Quarter 2021 Results

 

AVERAGE LOANS
($ in millions)														Percent Change
		3Q 2021				2Q 2021				3Q 2020				3Q21 vs 2Q21				3Q21 vs 3Q20				YTD 2021				YTD 2020				Percent Change
Commercial			$96,673				$97,713				$109,899				(1.1	)			(12.0)				$97,047				$110,886				(12.5)
Lease financing			5,159				5,261				5,590				(1.9	)			(7.7	)			5,251				5,615				(6.5)
Total commercial			101,832				102,974				115,489				(1.1	)			(11.8	)			102,298				116,501				(12.2)
Commercial mortgages			28,080				27,721				29,849				1.3				(5.9	)			27,923				29,855				(6.5)
Construction and development			10,841				10,843				11,080				--				(2.2	)			10,834				10,844				(.1)
Total commercial real estate			38,921				38,564				40,929				.9				(4.9	)			38,757				40,699				(4.8)
Residential mortgages			74,104				73,351				75,786				1.0				(2.2	)			74,215				72,612				2.2
Credit card			21,905				21,116				22,052				3.7				(.7	)			21,391				22,465				(4.8)
Retail leasing			7,643				7,873				8,438				(2.9	)			(9.4	)			7,829				8,441				(7.3)
Home equity and second mortgages			10,936				11,368				13,551				(3.8	)			(19.3	)			11,451				14,256				(19.7)
Other			41,398				39,038				34,773				6.0				19.1				39,073				33,961				15.1
Total other retail			59,977				58,279				56,762				2.9				5.7				58,353				56,658				3.0
Total loans			$296,739				$294,284				$311,018				.8				(4.6	)			$295,014				$308,935				(4.5)

 

 

 

Average total loans for the third quarter of 2021 were $14.3 billion (4.6 percent) lower than the third quarter of 2020. The decrease was primarily due to lower total commercial loans (11.8 percent) driven by continued paydowns by corporate customers that accessed the capital markets last year and SBA Paycheck Protection Program loans, lower home equity and second mortgages (19.3 percent) as more customers chose to refinance their existing first lien residential mortgage balances during the prior year due to the low interest rate environment, lower total commercial real estate loans (4.9 percent) as a result of paydowns and lower residential mortgages (2.2 percent) driven by paydowns. These decreases were partially offset by strong growth in other retail loans (19.1 percent) driven by growth in installment loans due to strong auto and recreational vehicle lending.

Average total loans were $2.5 billion (0.8 percent) higher than the second quarter of 2021 primarily driven by higher other retail loans (6.0 percent) driven by growth in installment loans, higher credit card loans (3.7 percent) due to higher sales volumes as well as account growth and higher residential mortgages (1.0 percent) due to higher closings, partially offset by lower total commercial loans (1.1 percent) primarily due to paydowns of SBA Paycheck Protection Program loans by corporate customers.

 

 

        4

		U.S. Bancorp Third Quarter 2021 Results

 

AVERAGE DEPOSITS
($ in millions)														Percent Change
		3Q				2Q				3Q				3Q21 vs				3Q21 vs				YTD				YTD				Percent
		2021				2021				2020				2Q21				3Q20				2021				2020				Change
Noninterest-bearing deposits		$	129,018			$	125,297			$	109,375				3.0				18.0			$	124,262			$	92,935				33.7
Interest-bearing savings deposits
Interest checking			103,036				103,356				84,494				(.3	)			21.9				101,280				81,890				23.7
Money market savings			112,543				113,673				124,115				(1.0	)			(9.3	)			116,968				125,247				(6.6	)
Savings accounts			63,387				62,102				53,499				2.1				18.5				61,462				50,937				20.7
Total savings deposits			278,966				279,131				262,108				(.1	)			6.4				279,710				258,074				8.4
Time deposits			23,503				24,782				34,040				(5.2	)			(31.0	)			25,067				39,589				(36.7	)
Total interest-bearing deposits			302,469				303,913				296,148				(.5	)			2.1				304,777				297,663				2.4
Total deposits		$	431,487			$	429,210			$	405,523				.5				6.4			$	429,039			$	390,598				9.8

 

 

Average total deposits for the third quarter of 2021 were $26.0 billion (6.4 percent) higher than the third quarter of 2020, including approximately $7 billion related to the acquisition of deposit balances from State Farm Bank in the fourth quarter of 2020. Average noninterest-bearing deposits increased $19.6 billion (18.0 percent) primarily within Corporate and Commercial Banking and Wealth Management and Investment Services, partially offset by a decrease in Payments Services. Average total savings deposits were $16.9 billion (6.4 percent) higher year-over-year driven by Consumer and Business Banking, partially offset by a decrease in Corporate and Commercial Banking. Average time deposits were $10.5 billion (31.0 percent) lower than the prior year quarter primarily within Corporate and Commercial Banking and Wealth Management and Investment Services. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.

Average total deposits increased $2.3 billion (0.5 percent) from the second quarter of 2021. On a linked quarter basis, average noninterest-bearing deposits increased $3.7 billion (3.0 percent) driven by Corporate and Commercial Banking and Wealth Management and Investment Services. Average total savings deposits were flat compared with the second quarter of 2021 as decreases in Wealth Management and Investment Services and Corporate and Commercial Banking were offset by an increase in Consumer and Business Banking. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, were $1.3 billion (5.2 percent) lower on a linked quarter basis, with decreases across most business lines.

The growth in average noninterest-bearing deposits and total average savings deposits year-over-year was primarily a result of actions by the federal government to increase liquidity in the financial system and government stimulus programs.

 

 

        5

		U.S. Bancorp Third Quarter 2021 Results

 

NONINTEREST INCOME
($ in millions)														Percent Change
		3Q				2Q				3Q				3Q21 vs				3Q21 vs				YTD				YTD				Percent
		2021				2021				2020				2Q21				3Q20				2021				2020				Change
Credit and debit card revenue			$393				$396				$388				(.8)				1.3				$1,125				$976				15.3
Corporate payment products revenue			156				138				125				13.0				24.8				420				371				13.2
Merchant processing services			392				374				347				4.8				13.0				1,084				950				14.1
Trust and investment management fees			459				446				434				2.9				5.8				1,349				1,295				4.2
Deposit service charges			194				176				170				10.2				14.1				531				512				3.7
Treasury management fees			155				160				145				(3.1	)			6.9				462				425				8.7
Commercial products revenue			277				280				303				(1.1	)			(8.6	)			837				904				(7.4	)
Mortgage banking revenue			418				346				553				20.8				(24.4	)			1,063				1,596				(33.4	)
Investment products fees			62				60				48				3.3				29.2				177				142				24.6
Securities gains (losses), net			20				43				12				(53.5	)			66.7				88				143				(38.5	)
Other			167				200				187				(16.5	)			(10.7	)			557				537				3.7
Total noninterest income		$	2,693			$	2,619			$	2,712				2.8				(.7	)		$	7,693			$	7,851				(2.0	)

 

 

Third quarter noninterest income of $2,693 million was $19 million (0.7 percent) lower than the third quarter of 2020. Mortgage banking revenue decreased $135 million (24.4 percent) driven by lower production volume and related gain on sale margins, partially offset by the favorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities, as well as gains on higher GNMA loan sales. Commercial products revenue decreased $26 million (8.6 percent) primarily due to lower capital markets activity and trading revenue, partially offset by higher syndication revenue and fees. Other noninterest income decreased $20 million (10.7 percent) primarily due to the third quarter of 2020 impact of higher equity investment income and transition services agreement revenue associated with the sale of the Company’s ATM third-party servicing business, partially offset by certain asset impairments as a result of branch optimization and higher retail leasing end of term residual gains in the third quarter of 2021. Mostly offsetting these decreases, payments services revenue increased $81 million (9.4 percent) compared with the third quarter of 2020. During 2020, payment services revenue had been adversely affected by the impact of the pandemic on consumer and business spending, particularly related to travel and entertainment activities. However, spending has continued to strengthen across most sectors driven by government stimulus, local jurisdictions reducing restrictions and consumer behaviors normalizing. The components of payment services revenue included higher credit and debit card revenue of $5 million (1.3 percent) driven by higher net interchange revenue related to sales volume as well as stronger transaction and cash advance fees, partially offset by lower prepaid card processing activities as government stimulus dissipates and higher investment in customer acquisition. In addition, corporate payment products revenue increased $31 million (24.8 percent) reflecting improving business spending, and merchant processing services revenue increased $45 million (13.0 percent) driven by higher sales volume as well as higher merchant and equipment fees. Trust and investment management fees increased $25 million (5.8 percent) driven by business growth and favorable market conditions. Deposit service charges increased $24 million (14.1 percent) primarily due to customer activity and ATM processing revenue. Treasury management fees increased $10 million (6.9 percent) due to core growth driven by the COVID-19 economic recovery, partially offset by lower IRS volumes due to the extension of the 2019 tax filing deadline to the third quarter of 2020. Investment products fees increased $14 million (29.2 percent) primarily driven by favorable market conditions and core growth.

Noninterest income was $74 million (2.8 percent) higher in the third quarter of 2021 compared with the second quarter of 2021. Payment services revenue increased $33 million (3.6 percent) compared with the second quarter of 2021 as the global economy continues to recover from the impacts of the COVID-19 pandemic. Within payment services, corporate payment products revenue increased $18 million (13.0 percent) driven by improving business spending and merchant processing services increased $18 million (4.8 percent) driven by higher merchant and equipment fees as well as higher sales volume. Credit card revenue declined slightly due to lower prepaid card fees and higher investment in customer acquisition. Trust and investment management fees increased $13 million (2.9 percent) driven by favorable market conditions, lower fee waivers and core growth. Deposit service charges increased $18 million (10.2 percent) primarily due to seasonally higher customer activity. Mortgage banking revenue increased $72 million (20.8 percent) driven by higher production volume and related gain on sale margins as well as higher loan sales, partially offset by a slightly unfavorable net impact of the change in fair value of mortgage servicing rights, net of hedging activities.

 

 

        6

		U.S. Bancorp Third Quarter 2021 Results

 

NONINTEREST EXPENSE
($ in millions)														Percent Change
		3Q 2021				2Q 2021				3Q 2020				3Q21 vs 2Q21				3Q21 vs 3Q20				YTD 2021				YTD 2020				Percent Change
Compensation		$	1,847			$	1,798			$	1,687				2.7				9.5				$5,448				$4,992				9.1
Employee benefits			336				337				335				(.3	)			.3				1,057				1,001				5.6
Net occupancy and equipment			259				258				276				.4				(6.2	)			780				823				(5.2	)
Professional services			126				108				102				16.7				23.5				332				307				8.1
Marketing and business development			99				90				72				10.0				37.5				237				213				11.3
Technology and communications			361				362				334				(.3	)			8.1				1,082				932				16.1
Postage, printing and supplies			69				65				70				6.2				(1.4	)			203				214				(5.1	)
Other intangibles			41				40				44				2.5				(6.8	)			119				129				(7.8	)
Other			291				329				451				(11.6	)			(35.5	)			937				1,394				(32.8	)
Total noninterest expense		$	3,429			$	3,387			$	3,371				1.2				1.7			$	10,195			$	10,005				1.9

Third quarter noninterest expense of $3,429 million was $58 million (1.7 percent) higher than the third quarter of 2020 reflecting increases in compensation expense, professional services expense, marketing and business development expense and technology and communications expense, partially offset by lower net occupancy and equipment expense and other noninterest expense. Compensation expense increased $160 million (9.5 percent) compared with the third quarter of 2020 due to performance-based incentives, merit, and revenue-related compensation driven by business production. Professional services expense increased $24 million (23.5 percent) primarily due to an increase in business investment and related initiatives in the third quarter of 2021. Marketing and business development expense increased $27 million (37.5 percent) due to the timing of marketing campaigns supporting business development and lower marketing activities during the pandemic. Technology and communications expense increased $27 million (8.1 percent) primarily due to higher capital expenditures supporting business technology investments. These increases were partially offset by lower net occupancy and equipment expense of $17 million (6.2 percent) primarily related to optimization initiatives and lower other noninterest expense of $160 million (35.5 percent) primarily due to higher COVID-19 related accruals in the third quarter of 2020, including recognizing liabilities related to future delivery exposures for merchant and airline processing. In addition, the decline reflects the timing of lower amortization related to tax-advantaged investments which were scaled back in 2020 during the pandemic. In 2021, investment levels in tax-advantaged projects are normalizing which will benefit future tax rates while increasing amortization.

Noninterest expense increased $42 million (1.2 percent) on a linked quarter basis largely driven by an increase of $49 million (2.7 percent) in compensation expense due to performance-based incentives, revenue-related compensation driven by business production, and one extra day in the quarter. Professional services expense increased $18 million (16.7 percent) primarily due to an increase in initiatives in the third quarter of 2021. Partially offsetting these increases, other noninterest expense decreased $38 million (11.6 percent) primarily due to lower accruals related to future delivery exposures for merchant and airline processing. On a linked quarter basis, we expect amortization of tax-advantaged investments to seasonally increase approximately $60 million in the fourth quarter of 2021.

Provision for Income Taxes

The provision for income taxes for the third quarter of 2021 resulted in a tax rate of 22.5 percent on a taxable-equivalent basis (effective tax rate of 21.7 percent), compared with 19.0 percent on a taxable-equivalent basis (effective tax rate of 18.0 percent) in the third quarter of 2020, and a tax rate of 22.5 percent on a taxable-equivalent basis (effective tax rate of 21.7 percent) in the second quarter of 2021. The increase in the tax rate year-over-year was due to the marginal impact of providing taxes on higher pretax earnings in the third quarter of 2021.

 

 

        7

		U.S. Bancorp Third Quarter 2021 Results

 

ALLOWANCE FOR CREDIT LOSSES
($ in millions)		3Q 2021				% (a)				2Q 2021				% (a)				1Q 2021				% (a)				4Q 2020				% (a)				3Q 2020				% (a)
Balance, beginning of period			$6,610								$6,960								$8,010								$8,010								$7,890
Net charge-offs
Commercial			13				.05				26				.11				52				.22				142				.56				167				.60
Lease financing			1				.08				1				.08				4				.30				8				.57				11				.78
Total commercial			14				.05				27				.11				56				.22				150				.56				178				.61
Commercial mortgages			1				.01				--				--				(12	)			(.17	)			82				1.12				85				1.13
Construction and development			12				.44				--				--				5				.19				2				.07				(2	)			(.07	)
Total commercial real estate			13				.13				--				--				(7	)			(.07	)			84				.83				83				.81
Residential mortgages			(10	)			(.05	)			(10	)			(.05	)			(5	)			(.03	)			(7	)			(.04	)			(3	)			(.02	)
Credit card			111				2.01				148				2.81				144				2.76				165				2.99				201				3.63
Retail leasing			1				.05				(1	)			(.05	)			1				.05				9				.43				20				.94
Home equity and second mortgages			(3	)			(.11	)			(3	)			(.11	)			(2	)			(.07	)			(3	)			(.09	)			(2	)			(.06	)
Other			21				.20				19				.20				36				.40				43				.48				38				.43
Total other retail			19				.13				15				.10				35				.25				49				.34				56				.39
Total net charge-offs			147				.20				180				.25				223				.31				441				.58				515				.66
Provision for credit losses			(163	)							(170	)							(827	)							441								635
Balance, end of period			$6,300								$6,610								$6,960								$8,010								$8,010
Components
Allowance for loan losses			$5,792								$6,026								$6,343								$7,314								$7,407
Liability for unfunded credit commitments			508								584								617								696								603
Total allowance for credit losses			$6,300								$6,610								$6,960								$8,010								$8,010
Gross charge-offs			$266								$314								$374								$556								$611
Gross recoveries			$119								$134								$151								$115								$96
Allowance for credit losses as a percentage of Period-end loans			2.12								2.23								2.36								2.69								2.61
Nonperforming loans			695								649								617								654								678
Nonperforming assets			667								624								579								617								631
(a)  Annualized and calculated on average loan balances

 

 

        8

		U.S. Bancorp Third Quarter 2021 Results

 

The Company’s provision for credit losses for the third quarter of 2021 was a benefit of $163 million, which was $7 million higher than the prior quarter and $798 million lower than the third quarter of 2020. During 2021, factors affecting economic conditions, including passing of additional government stimulus, widespread vaccine availability in the U.S. and reduced levels of new virus cases, have contributed to an economic recovery. However, economic uncertainty remains associated with rising inflationary concerns, additional virus variants and lack of a clear path to government funding. In addition to these factors, expected loss estimates consider various factors including customer specific information impacting changes in risk ratings, projected delinquencies and potential effects of diminishing liquidity without support of mortgage forbearance and direct federal stimulus. Currently, consumer credit trends continue to perform better than expected, while select commercial portfolios continue to be monitored for structural shifts associated with the pandemic.

Total net charge-offs in the third quarter of 2021 were $147 million, compared with $180 million in the second quarter of 2021, and $515 million in the third quarter of 2020. The net charge-off ratio was 0.20 percent in the third quarter of 2021, compared with 0.25 percent in the second quarter of 2021 and 0.66 percent in the third quarter of 2020. Net charge-offs decreased $33 million (18.3 percent) compared with the second quarter of 2021 associated with improving economic conditions, borrower liquidity and strong asset prices in the market that support repayment and recovery on problem loans. Net charge-offs decreased $368 million (71.5 percent) compared with the third quarter of 2020 reflecting improvement across all loan categories.

The allowance for credit losses was $6,300 million at September 30, 2021, compared with $6,610 million at June 30, 2021, and $8,010 million at September 30, 2020. The decrease on a linked quarter basis was driven by continued strong credit and collateral performance and incremental improvement in the economy, partially offset by increased economic uncertainty compared with the reserve build during 2020 driven by the concerns associated with the economic impact of COVID-19. The ratio of the allowance for credit losses to period-end loans was 2.12 percent at September 30, 2021, compared with 2.23 percent at June 30, 2021, and 2.61 percent at September 30, 2020. The ratio of the allowance for credit losses to nonperforming loans was 695 percent at September 30, 2021, compared with 649 percent at June 30, 2021, and 678 percent at September 30, 2020.

Nonperforming assets were $944 million at September 30, 2021, compared with $1,059 million at June 30, 2021, and $1,270 million at September 30, 2020. The ratio of nonperforming assets to loans and other real estate was 0.32 percent at September 30, 2021, compared with 0.36 percent at June 30, 2021, and 0.41 percent at September 30, 2020. The year-over-year and linked quarter decrease in nonperforming assets was primarily due to decreases in total commercial nonperforming loans and commercial mortgage nonperforming loans. Accruing loans 90 days or more past due were $385 million at September 30, 2021, compared with $376 million at June 30, 2021, and $461 million at September 30, 2020. The Company expects credit quality to return to more normalized levels over time as the economy rebounds and consumer spending resumes. However, some manageable levels of elevated nonperforming assets in certain industries and loan categories impacted by the pandemic may experience longer recovery periods.

 

 

        9

		U.S. Bancorp Third Quarter 2021 Results

 

DELINQUENT LOAN RATIOS AS A PERCENT OF ENDING LOAN BALANCES
(Percent)		Sep 30 2021				Jun 30 2021				Mar 31 2021				Dec 31 2020				Sep 30 2020
Delinquent loan ratios - 90 days or more past due excluding nonperforming loans
Commercial			.04				.04				.06				.05				.06
Commercial real estate			.05				.01				.01				.01				--
Residential mortgages			.15				.16				.19				.18				.15
Credit card			.66				.70				.95				.88				.91
Other retail			.11				.10				.12				.15				.14
Total loans			.13				.13				.16				.16				.15
Delinquent loan ratios - 90 days or more past due including nonperforming loans
Commercial			.25				.32				.39				.42				.48
Commercial real estate			.82				.81				.94				1.15				.82
Residential mortgages			.47				.49				.54				.50				.46
Credit card			.66				.70				.95				.88				.91
Other retail			.36				.39				.42				.42				.40
Total loans			.43				.47				.54				.57				.53

 

ASSET QUALITY (a)
($ in millions)
		Sep 30 2021				Jun 30 2021				Mar 31 2021				Dec 31 2020				Sep 30 2020
Nonperforming loans
Commercial			$179				$247				$298				$321				$403
Lease financing			37				44				49				54				56
Total commercial			216				291				347				375				459
Commercial mortgages			215				224				266				411				323
Construction and development			81				88				90				39				7
Total commercial real estate			296				312				356				450				330
Residential mortgages			237				244				253				245				240
Credit card			--				--				--				--				--
Other retail			157				171				172				154				152
Total nonperforming loans			906				1,018				1,128				1,224				1,181
Other real estate			17				17				19				24				35
Other nonperforming assets			21				24				55				50				54
Total nonperforming assets			$944				$1,059				$1,202				$1,298				$1,270
Accruing loans 90 days or more past due			$385				$376				$476				$477				$461
Nonperforming assets to loans plus ORE (%)			.32				.36				.41				.44				.41
(a) Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due

 

 

        10

		U.S. Bancorp Third Quarter 2021 Results

 

COMMON SHARES
(Millions)		3Q 2021				2Q 2021				1Q 2021				4Q 2020				3Q 2020
Beginning shares outstanding			1,483				1,497				1,507				1,506				1,506
Shares issued for stock incentive plans, acquisitions and other corporate purposes			--				1				3				1				--
Shares repurchased			--				(15	)			(13	)			--				--
Ending shares outstanding			1,483				1,483				1,497				1,507				1,506

 

CAPITAL POSITION
($ in millions)		Sep 30				Jun 30				Mar 31				Dec 31				Sep 30
		2021				2021				2021				2020				2020
Total U.S. Bancorp shareholders’ equity		$	53,743			$	53,039			$	51,678			$	53,095			$	52,565
Basel III Standardized Approach (a)
Common equity tier 1 capital		$	41,014			$	39,691			$	39,103			$	38,045			$	37,485
Tier 1 capital			47,426				46,103				45,517				44,474				43,916
Total risk-based capital			54,178				53,625				53,625				52,602				52,086
Common equity tier 1 capital ratio			10.2	%			9.9	%			9.9	%			9.7	%			9.4	%
Tier 1 capital ratio			11.7				11.5				11.5				11.3				11.0
Total risk-based capital ratio			13.4				13.4				13.5				13.4				13.1
Leverage ratio			8.7				8.5				8.4				8.3				8.3
Tangible common equity to tangible assets (b)			6.8				6.8				6.6				6.9				7.0
Tangible common equity to risk-weighted assets (b)			9.4				9.3				9.1				9.5				9.3
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (b)			9.7				9.5				9.5				9.3				9.0
(a) Amounts and ratios calculated in accordance with transitional regulatory requirements related to the current expected credit losses methodology
(b) See Non-GAAP Financial Measures reconciliation on page 16

 

 

Total U.S. Bancorp shareholders’ equity was $53.7 billion at September 30, 2021, compared with $53.0 billion at June 30, 2021, and $52.6 billion at September 30, 2020. The capital restrictions instituted by the Federal Reserve in the third quarter of 2020 in response to the economic uncertainty from the pandemic expired on June 30, 2021. Based on the results of the 2021 Annual Stress Test, the Company’s Board of Directors approved a 9.5 percent increase to its third quarter dividend payable in October 2021. The Company suspended share repurchases at the beginning of the third quarter due to its recently announced acquisition of MUFG Union Bank’s core regional banking franchise. The Company does not expect to commence repurchasing shares again until after the acquisition closes in order to build capital prior to the acquisition. The Company expects to operate at a CET1 capital ratio between our target ratio and 9.0 percent after closing of the acquisition.

All regulatory ratios continue to be in excess of “well-capitalized” requirements. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III standardized approach was 10.2 percent at September 30, 2021, compared with 9.9 percent at June 30, 2021, and 9.4 percent at September 30, 2020. The Company’s common equity tier 1 capital to risk-weighted assets ratio, reflecting the full implementation of the current expected credit losses methodology was 9.7 percent at September 30, 2021, compared with 9.5 percent at June 30, 2021, and 9.0 percent at September 30, 2020.

 

 

        11

		U.S. Bancorp Third Quarter 2021 Results

 

Investor Conference Call

On Thursday, October 14, 2021, at 7 a.m. CT, Chairman, President and Chief Executive Officer Andy Cecere and Vice Chair and Chief Financial Officer Terry Dolan will host a conference call to review the financial results. The conference call will be available online or by telephone. To access the webcast and presentation, visit U.S. Bancorp’s website at usbank.com and click on “About Us,” “Investor Relations” and “Webcasts & Presentations.” To access the conference call from locations within the United States and Canada, please dial 866.316.1409. Participants calling from outside the United States and Canada, please dial 706.634.9086. The conference ID number for all participants is 7689764. For those unable to participate during the live call, a recording will be available at approximately 10 a.m. CT on Thursday, October 14 and will be accessible until Thursday, October 21 at 10:59 p.m. CT. To access the recorded message within the United States and Canada, please dial 855.859.2056. If calling from outside the United States and Canada, please dial 404.537.3406 to access the recording. The conference ID is 7689764.

 

 

About U.S. Bancorp

U.S. Bancorp, with nearly 70,000 employees and $567 billion in assets as of September 30, 2021, is the parent company of U.S. Bank National Association. The Minneapolis-based company serves millions of customers locally, nationally and globally through a diversified mix of businesses: Consumer and Business Banking; Payment Services; Corporate & Commercial Banking; and Wealth Management and Investment Services. The company has been recognized for its approach to digital innovation, social responsibility, and customer service, including being named one of the 2021 World’s Most Ethical Companies and Fortune’s most admired superregional bank. Learn more at usbank.com/about.

 

 

Forward-looking Statements

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

This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. The COVID-19 pandemic is adversely affecting U.S. Bancorp, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; further increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; civil unrest; changes in customer behavior and preferences; breaches in data security, including as a result of work-from-home arrangements; failures to safeguard personal information; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk. In addition, U.S. Bancorp’s proposed acquisition of MUFG Union Bank presents risks and uncertainties, including, among others: the risk that the cost savings, any revenue synergies and other anticipated benefits of the proposed acquisition may not be realized or may take longer than anticipated to be realized; the possibility that the proposed acquisition, including the integration of MUFG Union Bank, may be more costly or difficult to complete than anticipated; delays in closing the proposed acquisition; and the failure of required governmental approvals to be obtained or any other closing conditions in the definitive purchase agreement to be satisfied.

 

 

        12

		U.S. Bancorp Third Quarter 2021 Results

 

For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2020, on file with the Securities and Exchange Commission, including the sections entitled “Corporate Risk Profile” and “Risk Factors” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. In addition, factors other than these risks also could adversely affect U.S. Bancorp’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.

 

 

Non-GAAP 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

•

Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology, and

•

Return on tangible common equity.

These capital measures are viewed by management as useful additional methods of evaluating the Company’s utilization of its capital held and the level of capital available to withstand unexpected negative market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Company’s capital position relative to other financial services companies. These capital measures are not defined in generally accepted accounting principles (“GAAP”), or are not currently effective or defined in banking regulations. In addition, certain of these measures differ from currently effective capital ratios defined by banking regulations principally in that the currently effective ratios, which are subject to certain transitional provisions, temporarily exclude the impact of the 2020 adoption of accounting guidance related to impairment of financial instruments based on the current expected credit losses methodology. As a result, these capital measures disclosed by the Company may be considered non-GAAP financial measures. Management believes this information helps investors assess trends in the Company’s capital adequacy.

The Company also discloses net interest income and related ratios and analysis on a taxable-equivalent basis, which may also be considered non-GAAP financial measures. The Company believes this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable and tax-exempt sources. In addition, certain performance measures, including the efficiency ratio and net interest margin utilize net interest income on a taxable-equivalent basis.

There may be limits in the usefulness of these measures to investors. As a result, the Company encourages readers to consider the consolidated financial statements and other financial information contained in this press release in their entirety, and not to rely on any single financial measure. A table follows that shows the Company’s calculation of these non-GAAP financial measures.

 

 

        13