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U.S. Bancorp reports third quarter2021 results

PUBLISHED ON 2021-10-14 01:50:00 EST Hemanth

Picture credit: Pensions & investments

U.S. Bancorp Reports Third Quarter2021 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 of10.2% and strong levels of liquidity


3Q21 Highlights:

•  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

 

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.”

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.

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.

EX-99.1 2 d207212dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

    

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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                    

 

In the Spotlight

 

U.S. Bancorp to acquire MUFG Union Bank

U.S. Bancorp has entered into a definitive agreement to acquire MUFG Union Bank’s core regional banking franchise for approximately $8 billion, including $5.5 billion in cash and approximately 44 million shares of U.S. Bancorp common stock. The acquisition would add more than 1 million consumer customers and about 190,000 small business customers on the West Coast in addition to approximately $58 billion in loans and $90 billion in deposits. The acquisition will provide benefits for both customers and the communities served by the combined organization through improved technology, expanded products and customer choice. The transaction is expected to close in the first half of 2022.

Award-winning Mobile App

The U.S. Bank Mobile App was ranked first among banking apps by industry benchmarking firm Keynova in its 3Q 2021 scorecard. The firm evaluates the top 17 banks on more than 200 criteria across four main categories: functionality, ease of use, privacy and security, and quality and availability.

U.S. Bank to launch fleet industry Voyager Mastercard

U.S. Bank and Mastercard have partnered on a new card for fleet-related expenses. The new U.S. Bank Voyager Mastercard will build on U.S. Bank’s existing Voyager card, which allows customers to pay for fuel, fleet maintenance and other expenses at more than 320,000 merchant locations. Now customers can use a single card to pay for fleet-related expenses at any merchant that accepts Mastercard, providing unprecedented flexibility to support fleet operations and productivity on two major networks.

U.S. Bank Acquires Small Business Payments Software Company

In September, U.S. Bank acquired Bento Technologies, known as Bento for Business, a fintech company based in Chicago and San Francisco that provides payment and expense management services to small and mid-size businesses. The acquisition is part of U.S. Bank’s vision to bring payments and banking services together to simplify cash flow and money management for small businesses.

 

 

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


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   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.

 

 

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   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.

 

 

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   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.

 

 

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   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.

 

 

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   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.

 

 

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 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.

 

 

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   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

   

 

 

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   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.

 

 

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 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          

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

 

 

 

 

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   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

     --                              --   

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.

 

 

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   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.

 

 

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   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.

 

 

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CONSOLIDATED STATEMENT OF INCOME  
(Dollars and Shares in Millions, Except Per Share Data)        Three Months Ended
September 30,
         Nine Months Ended    
September 30,
 
(Unaudited)    2021     2020     2021     2020  

Interest Income

        

Loans

     $2,711       $2,892       $8,112       $9,152  

Loans held for sale

     54       61       176       157  

Investment securities

     606       586       1,741       1,908  

Other interest income

     38       34       103       144  

Total interest income

     3,409       3,573       10,132       11,361  

Interest Expense

        

Deposits

     78       130       245       849  

Short-term borrowings

     18       19       52       124  

Long-term debt

     142       197       464       738  

Total interest expense

     238       346       761       1,711  

Net interest income

     3,171       3,227       9,371       9,650  

Provision for credit losses

     (163     635       (1,160     3,365  

Net interest income after provision for credit losses

     3,334       2,592       10,531       6,285  

Noninterest Income

        

Credit and debit card revenue

     393       388       1,125       976  

Corporate payment products revenue

     156       125       420       371  

Merchant processing services

     392       347       1,084       950  

Trust and investment management fees

     459       434       1,349       1,295  

Deposit service charges

     194       170       531       512  

Treasury management fees

     155       145       462       425  

Commercial products revenue

     277       303       837       904  

Mortgage banking revenue

     418       553       1,063       1,596  

Investment products fees

     62       48       177       142  

Securities gains (losses), net

     20       12       88       143  

Other

     167       187       557       537  

Total noninterest income

     2,693       2,712       7,693       7,851  

Noninterest Expense

        

Compensation

     1,847       1,687       5,448       4,992  

Employee benefits

     336       335       1,057       1,001  

Net occupancy and equipment

     259       276       780       823  

Professional services

     126       102       332       307  

Marketing and business development

     99       72       237       213  

Technology and communications

     361       334       1,082       932  

Postage, printing and supplies

     69       70       203       214  

Other intangibles

     41       44       119       129  

Other

     291       451       937       1,394  

Total noninterest expense

     3,429       3,371       10,195       10,005  

Income before income taxes

     2,598       1,933       8,029       4,131  

Applicable income taxes

     564       347       1,722       671  

Net income

     2,034       1,586       6,307       3,460  

Net (income) loss attributable to noncontrolling interests

     (6     (6     (17     (20

Net income attributable to U.S. Bancorp

     $2,028       $1,580       $6,290       $3,440  

Net income applicable to U.S. Bancorp common shareholders

     $1,934       $1,494       $6,023       $3,196  

Earnings per common share

     $1.30       $.99       $4.04       $2.12  

Diluted earnings per common share

     $1.30       $.99       $4.04       $2.11  

Dividends declared per common share

     $.46       $.42       $1.30       $1.26  

Average common shares outstanding

     1,483       1,506       1,491       1,510  

Average diluted common shares outstanding

     1,484       1,507       1,492       1,511  

 

 

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 CONSOLIDATED ENDING BALANCE SHEET

 

 
(Dollars in Millions)   

September 30,

2021

   

December 31,

2020

   

September 30,

2020

 

Assets

     (Unaudited       (Unaudited

Cash and due from banks

     $63,904       $62,580       $44,047  

Available-for-sale investment securities

     149,376       136,840       134,032  

Loans held for sale

     6,191       8,761       7,618  

Loans

      

Commercial

     101,013       102,871       110,764  

Commercial real estate

     38,808       39,311       40,380  

Residential mortgages

     74,954       76,155       76,789  

Credit card

     22,137       22,346       21,898  

Other retail

     60,696       57,024       57,154  

Total loans

     297,608       297,707       306,985  

Less allowance for loan losses

     (5,792     (7,314     (7,407

Net loans

     291,816       290,393       299,578  

Premises and equipment

     3,262       3,468       3,516  

Goodwill

     9,996       9,918       9,889  

Other intangible assets

     3,528       2,864       2,654  

Other assets

     39,422       39,081       39,121  

Total assets

     $567,495       $553,905       $540,455  

Liabilities and Shareholders’ Equity

      

Deposits

      

Noninterest-bearing

     135,549       $118,089       $114,583  

Interest-bearing

     307,353       311,681       298,634  

Total deposits

     442,902       429,770       413,217  

Short-term borrowings

     16,088       11,766       13,723  

Long-term debt

     35,671       41,297       42,443  

Other liabilities

     18,456       17,347       17,877  

Total liabilities

     513,117       500,180       487,260  

Shareholders’ equity

      

Preferred stock

     5,968       5,983       5,984  

Common stock

     21       21       21  

Capital surplus

     8,550       8,511       8,516  

Retained earnings

     68,297       64,188       63,391  

Less treasury stock

     (27,301     (25,930     (25,959

Accumulated other comprehensive income (loss)

     (1,792     322       612  

Total U.S. Bancorp shareholders’ equity

     53,743       53,095       52,565  

Noncontrolling interests

     635       630       630  

Total equity

     54,378       53,725       53,195  

Total liabilities and equity

     $567,495       $553,905       $540,455  

 

 

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 NON-GAAP FINANCIAL MEASURES

 

(Dollars in Millions, Unaudited)   

September 30,

2021

   

June 30,

2021

   

March 31,

2021

   

December 31,

2020

   

September 30,

2020

 

Total equity

     $54,378       $53,674       $52,308       $53,725       $53,195  

Preferred stock

     (5,968     (5,968     (5,968     (5,983     (5,984

Noncontrolling interests

     (635     (635     (630     (630     (630

Goodwill (net of deferred tax liability) (1)

     (9,063     (8,987     (8,992     (9,014     (8,992

Intangible assets, other than mortgage servicing rights

     (618     (650     (675     (654     (676

Tangible common equity (a)

     38,094       37,434       36,043       37,444       36,913  

Common equity tier 1 capital, determined in accordance with transitional regulatory capital requirements related to the current expected credit losses methodology implementation

     41,014       39,691       39,103       38,045       37,485  

Adjustments (2)

     (1,733     (1,732     (1,732     (1,733     (1,733

Common equity tier 1 capital, reflecting the full implementation of the current expected credit losses methodology (b)

     39,281       37,959       37,371       36,312       35,752  

Total assets

     567,495       558,886       553,375       553,905       540,455  

Goodwill (net of deferred tax liability) (1)

     (9,063     (8,987     (8,992     (9,014     (8,992

Intangible assets, other than mortgage servicing rights

     (618     (650     (675     (654     (676

Tangible assets (c)

     557,814       549,249       543,708       544,237       530,787  

Risk-weighted assets, determined in accordance with prescribed regulatory capital requirements effective for the Company (d)

     404,021*       401,301       396,351       393,648       397,657  

Adjustments (3)

     (684)*       (1,027     (1,440     (1,471     (1,449

Risk-weighted assets, reflecting the full implementation of the current expected credit losses
methodology (e)

     403,337*       400,274       394,911       392,177       396,208  

Ratios*

          

Tangible common equity to tangible assets (a)/(c)

     6.8       6.8       6.6       6.9       7.0  

Tangible common equity to risk-weighted assets (a)/(d)

     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)/(e)

     9.7       9.5       9.5       9.3       9.0  
          
          
     Three Months Ended  
     September 30,
2021
    June 30,
2021
    March 31,
2021
    December 31,
2020
    September 30,
2020
 

Net income applicable to U.S. Bancorp common shareholders

     $1,934       $1,914       $2,175       $1,425       $1,494  

Intangibles amortization (net-of-tax)

     32       32       30       37       35  

Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization

     1,966       1,946       2,205       1,462       1,529  

Annualized net income applicable to U.S. Bancorp common shareholders, excluding intangible amortization (f)

     7,800       7,805       8,943       5,816       6,083  

Average total equity

     54,908       53,593       53,359       53,801       53,046  

Average preferred stock

     (5,968     (5,968     (6,213     (6,217     (5,984

Average noncontrolling interests

     (635     (631     (630     (630     (630

Average goodwill (net of deferred tax liability) (1)

     (9,019     (9,003     (9,010     (9,003     (8,975

Average intangible assets, other than mortgage servicing rights

     (632     (662     (649     (673     (711

Average tangible common equity (g)

     38,654       37,329       36,857       37,278       36,746  

Return on tangible common equity (f)/(g)

     20.2       20.9       24.3       15.6       16.6  

Net interest income

     $3,171       $3,137       $3,063       $3,175       $3,227  

Taxable-equivalent adjustment (4)

     26       27       26       26       25  

Net interest income, on a taxable-equivalent basis

     3,197       3,164       3,089       3,201       3,252  

Net interest income, on a taxable-equivalent basis (as calculated above)

     3,197       3,164       3,089       3,201       3,252  

Noninterest income

     2,693       2,619       2,381       2,550       2,712  

Less: Securities gains (losses), net

     20       43       25       34       12  

Total net revenue, excluding net securities gains (losses) (h)

     5,870       5,740       5,445       5,717       5,952  

Noninterest expense (i)

     3,429       3,387       3,379       3,364       3,371  

Efficiency ratio (i)/(h)

     58.4     59.0     62.1     58.8     56.6
*

Preliminary data. Subject to change prior to filings with applicable regulatory agencies.

(1)

Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.

(2)

Includes the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology net of deferred taxes.

(3)

Includes the impact of the estimated increase in the allowance for credit losses related to the adoption of the current expected credit losses methodology.

(4)

Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.

 

 

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LINE OF BUSINESS FINANCIAL PERFORMANCE (a)  
($ in millions)    Net Income Attributable                       Net Income Attributable        
      to U.S. Bancorp      Percent Change          to U.S. Bancorp        
Business Line    3Q
2021
     2Q
2021
     3Q  
2020  
     3Q21 vs
2Q21
    3Q21 vs
3Q20
         YTD
2021
     YTD
2020
    Percent
Change
 

Corporate and Commercial Banking

     $403        $429        $447          (6.1     (9.8        $1,291        $1,230       5.0  

Consumer and Business Banking

     628        632        649          (.6     (3.2        1,833        1,747       4.9  

Wealth Management and Investment Services

     196        198        227          (1.0     (13.7        618        737       (16.1

Payment Services

     409        442        322          (7.5     27.0          1,341        1,010       32.8  

Treasury and Corporate Support

     392        281        (65)         39.5       nm          1,207        (1,284     nm  
   

Consolidated Company

     $2,028        $1,982        $1,580          2.3       28.4          $6,290        $3,440       82.8  
   

(a) preliminary data

 

                                                                         

Lines of Business

The Company’s major lines of business are Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate resources and assess performance. Business line results are derived from the Company’s business unit profitability reporting systems by specifically attributing managed balance sheet assets, deposits and other liabilities and their related income or expense. Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Company’s diverse customer base. During 2021, certain organization and methodology changes were made and, accordingly, prior period results were restated and presented on a comparable basis.

 

 

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CORPORATE AND COMMERCIAL BANKING (a)  
($ in millions)                         Percent Change                          
     

3Q

2021

    

2Q

2021

    

3Q  

2020  

     3Q21 vs
2Q21
    3Q21 vs
3Q20
          YTD
2021
    YTD
2020
     Percent
Change
 

Condensed Income Statement

                           

Net interest income (taxable-equivalent basis)

     $717        $734        $852          (2.3     (15.8        $2,172       $2,623        (17.2

Noninterest income

     253        265        267          (4.5     (5.2        786       899        (12.6

Securities gains (losses), net

     --          --          --            --         --            --         --          --    

Total net revenue

     970        999        1,119          (2.9     (13.3        2,958       3,522        (16.0

Noninterest expense

     418        425        428          (1.6     (2.3        1,257       1,310        (4.0

Other intangibles

     --          --          --            --         --            --         --          --    

Total noninterest expense

     418        425        428          (1.6     (2.3        1,257       1,310        (4.0

Income before provision and taxes

     552        574        691          (3.8     (20.1        1,701       2,212        (23.1

Provision for credit losses

     15        2        95          nm       (84.2        (20     572        nm  

Income before income taxes

     537        572        596          (6.1     (9.9        1,721       1,640        4.9  

Income taxes and taxable-equivalent adjustment

     134        143           149          (6.3     (10.1        430       410        4.9  

Net income

     403        429        447          (6.1     (9.8        1,291       1,230        5.0  

Net (income) loss attributable to noncontrolling interests

     --          --             --            --         --            --         --          --    

Net income attributable to U.S. Bancorp

     $403        $429        $447          (6.1     (9.8        $1,291       $1,230        5.0  
   

Average Balance Sheet Data

                                

Loans

     $102,431        $102,024        $115,547          .4       (11.4        $102,117       $118,686        (14.0

Other earning assets

     4,722        4,409        4,110          7.1       14.9          4,485       4,170        7.6  

Goodwill

     1,650        1,647        1,647          .2       .2          1,648       1,647        .1  

Other intangible assets

     5        5        6          --         (16.7        5       6        (16.7

Assets

     114,629        113,904        128,369          .6       (10.7        114,182       131,106        (12.9
   

Noninterest-bearing deposits

     62,642        60,554        48,058          3.4       30.3          59,841       41,091        45.6  

Interest-bearing deposits

     68,917        69,626        87,558          (1.0     (21.3        69,999       90,581        (22.7

Total deposits

     131,559        130,180        135,616          1.1       (3.0        129,840       131,672        (1.4
   

Total U.S. Bancorp shareholders’ equity

     13,772        13,824        15,051          (.4     (8.5        13,995       15,201        (7.9
   

(a) preliminary data

                                                                         

Corporate and Commercial Banking offers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets services, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution, non-profit and public sector clients.

Corporate and Commercial Banking contributed $403 million of the Company’s net income in the third quarter of 2021, compared with $447 million in the third quarter of 2020. Total net revenue was $149 million (13.3 percent) lower due to a decrease of $135 million (15.8 percent) in net interest income and a decrease of $14 million (5.2 percent) in total noninterest income. Net interest income decreased primarily due to lower average loan and deposit balances as well as the impact of declining interest rates on the margin benefit from deposits, partially offset by favorable deposit mix with higher noninterest-bearing balances and slightly higher loan spreads. Average loans declined 11.4 percent as significant liquidity draws during the pandemic were paid down during the past several quarters. Total noninterest income decreased year-over-year primarily driven by lower capital markets activity and trading revenue, partially offset by continued stronger treasury management fees due to core growth driven by the economic recovery. Total noninterest expense decreased $10 million (2.3 percent) compared with a year ago primarily due to lower FDIC insurance expense, lower production incentives, and higher capitalized loan costs, partially offset by an increase in net shared services expense driven by investment in infrastructure and technology development. The provision for credit losses decreased $80 million (84.2 percent) compared with the third quarter of 2020 primarily due to a favorable change in the reserve allocation driven by improving portfolio credit quality in the current quarter, compared with deteriorating credit quality in the third quarter of 2020.

 

 

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CONSUMER AND BUSINESS BANKING (a)          
($ in millions)                       Percent Change                          
     

3Q

2021

   

2Q

2021

   

3Q  

2020  

     3Q21 vs
2Q21
    3Q21 vs
3Q20
          YTD
2021
    YTD
2020
     Percent
Change
 

Condensed Income Statement

                         

Net interest income (taxable-equivalent basis)

     $1,551       $1,537       $1,474          .9       5.2          $4,603       $4,239        8.6  

Noninterest income

     715       634       848          12.8       (15.7        1,918       2,433        (21.2

Securities gains (losses), net

     --         --         --            --         --            --         --          --    

Total net revenue

     2,266       2,171       2,322          4.4       (2.4        6,521       6,672        (2.3

Noninterest expense

     1,450       1,394       1,383          4.0       4.8          4,210       4,061        3.7  

Other intangibles

     3       3       4          --         (25.0        9       12        (25.0

Total noninterest expense

     1,453       1,397       1,387          4.0       4.8          4,219       4,073        3.6  

Income before provision and taxes

     813       774       935          5.0       (13.0        2,302       2,599        (11.4

Provision for credit losses

     (25     (69     69          63.8       nm          (143     269        nm  

Income before income taxes

     838       843       866          (.6     (3.2        2,445       2,330        4.9  

Income taxes and taxable-equivalent adjustment

     210       211       217          (.5     (3.2        612       583        5.0  

Net income

     628       632       649          (.6     (3.2        1,833       1,747        4.9  

Net (income) loss attributable to noncontrolling interests

     --         --         --            --         --            --         --          --    

Net income attributable to U.S. Bancorp

     $628       $632       $649          (.6     (3.2        $1,833       $1,747        4.9  
   

Average Balance Sheet Data

                       

Loans

     $140,833       $141,081       $145,229          (.2     (3.0        $141,220       $139,981        .9  

Other earning assets

     7,645       8,022       8,195          (4.7     (6.7        8,606       6,578        30.8  

Goodwill

     3,506       3,475       3,475          .9       .9          3,485       3,508        (.7

Other intangible assets

     2,754       2,827       1,942          (2.6     41.8          2,692       2,095        28.5  

Assets

     160,882       161,948       164,246          (.7     (2.0        162,316       157,177        3.3  
   

Noninterest-bearing deposits

     34,416       33,882       34,288          1.6       .4          33,734       29,397        14.8  

Interest-bearing deposits

     160,271       158,792       133,095          .9       20.4          156,821       126,934        23.5  

Total deposits

     194,687       192,674       167,383          1.0       16.3          190,555       156,331        21.9  
   

Total U.S. Bancorp shareholders’ equity

     12,277       12,359       13,562          (.7     (9.5        12,378       12,797        (3.3
   

(a) preliminary data

 

                                                                       

Consumer and Business Banking delivers products and services through banking offices, telephone servicing and sales, on-line services, direct mail, ATM processing and mobile devices. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking.

Consumer and Business Banking contributed $628 million of the Company’s net income in the third quarter of 2021, compared with $649 million in the third quarter of 2020. Total net revenue was lower by $56 million (2.4 percent) due to a decrease in total noninterest income of $133 million (15.7 percent), partially offset by an increase of $77 million (5.2 percent) in net interest income. Net interest income reflected continued strong growth in deposit balances as well as favorable deposit mix, favorable loan spreads driven by growth in installment loans, and higher loan fees driven by PPP loan forgiveness. This was partially offset by lower deposit spreads. Total noninterest income decreased primarily due to lower mortgage banking revenue reflecting lower production volume and related gain on sale margins as refinancing activities decline, 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. Retail product fees were stronger driven by retail leasing end of term residual gains and deposit service charges increased as a result of customer activity and ATM processing revenue. Total noninterest expense increased $66 million (4.8 percent) primarily due to an increase in net shared services expense due to investments in digital capabilities and higher compensation expense from merit, business hiring related to mortgage forbearance loss mitigation and revenue-related compensation driven by business production. The provision for credit losses decreased $94 million due to a favorable change in the reserve allocation primarily reflecting lower delinquency rates in consumer portfolios and a reduction in end of period outstanding balances in the third quarter of 2021 compared with growth in the third quarter of 2020.

 

 

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WEALTH MANAGEMENT AND INVESTMENT SERVICES (a)  
($ in millions)                         Percent Change                           
      3Q
2021
     2Q
2021
     3Q  
2020  
     3Q21 vs
2Q21
    3Q21 vs
3Q20
          YTD
2021
     YTD
2020
     Percent
Change
 

Condensed Income Statement

                          

Net interest income (taxable-equivalent basis)

     $225        $230        $301          (2.2     (25.2           $721        $964        (25.2

Noninterest income

     558        549        505          1.6       10.5          1,638        1,507        8.7  

Securities gains (losses), net

     --          --          --          --         --            --          --          --    

Total net revenue

     783        779        806          .5       (2.9        2,359        2,471        (4.5

Noninterest expense

     507        507        489          --         3.7          1,499        1,445        3.7  

Other intangibles

     4        4        3          --         33.3          10        9        11.1  

Total noninterest expense

     511        511        492          --         3.9          1,509        1,454        3.8  

Income before provision and taxes

     272        268        314          1.5       (13.4        850        1,017        (16.4

Provision for credit losses

     11        4        11          nm       --            26