20
20
23
23
Annual
Annual
Report
Report
Annual Report Cover.indd 1
Annual Report Cover.indd 1
BACK COVER
Color:
Black
PMS 199 C
PMS 2756 C
PMS 285 C
FRONT COVER
Lot: Annual Report Cover ART.p1.pdf Job Name: 73360_US Bank
Date: 24-02-12 Time: 11:43:20 Page Width 17.3269 Page Height 10.875
2/9/24 1:50 PM
2/9/24 1:50 PM
L E T T E R T O S H A R E H O L D E R S
Andy Cecere
Chairman, President and
Chief Executive Officer
Over the years, U.S. Bank has built a reputation for being a company
that does the right thing, delivers consistent results, and drives value for
and earns trust with our various stakeholders. We are keeping our focus
on the long term, while managing the short term effectively. We are proud
of our proven record of responding to the environment and ensuring that
our actions keep us on the right track for long-term success.
That commitment to being both responsive and proactive was
on full display throughout 2023.
L E T T E R T O S H A R E H O L D E R S
Optimism and confidence were high heading into
the new year, on the heels of regulatory approval
for and the closing of our Union Bank transaction.
Much of our early planning for 2023 focused
on integration and conversion, and refining
efforts we had introduced the prior year as
we accelerated our growth efforts.
That focus shifted quickly, however, when the
crisis of confidence in the banking industry that
began with the failure of Silicon Valley Bank
demanded our primary attention. The implications
stemming from that catalyst drove refinements
to our strategic priorities, focusing our attention
on client needs, a heightened regulatory
environment, and increased expectations
within the industry around capital and liquidity
requirements. More than ever, setting a clear
direction for where, when and how we would
grow profitability while strengthening our
balance sheet and enabling and safeguarding
our customers was important.
Our strategic priorities evolved to keep pace with
the changes in the external environment. This
kind of reflection always requires a certain level
of give-and-take. We paused some efforts and
accelerated others. We put more energy into
areas of the business that provided near-term
results given current customer needs, and we
pulled back – temporarily – on others that were
more capital-intensive or with a longer runway for
return on investment. We pushed our teams for
prudent expense management and optimization.
Leading us through this time was a strong
management team, fortified by a succession plan
that we enacted as it was needed. Early in 2023,
for instance, we announced several leadership
changes given the retirements of three of our
Managing Committee members. This afforded
us the opportunity to elevate new leaders to our
executive leadership team, enhance the roles
others have, and leverage the moment to create
synergies within our structure.
As I look back on the year, there are four areas
for which I am most proud of our efforts.
Integrating and converting
Union Bank
One of our biggest initiatives this year was
finalizing our Union Bank acquisition, which
involved many people across the company as
we migrated more than a million customers to
our systems and welcomed new employees
to our team. This was meaningful for the bank;
it was a strategic investment in our future that
greatly expanded our reach and scale, and it
enhanced our ability to support clients and
communities in important ways. We began
to deliver the commitments of our multiyear,
multibillion dollar Community Benefits Plan.
Early indications of the potential to deepen
relationships with legacy Union Bank’s
loyal, affluent and diversified client base
are promising. We expect to realize revenue
opportunities in 2024 and beyond, and we
remain on track to achieve about $900 million
in cost synergies overall.
Demonstrating strength
and stability
Like many financial institutions, we needed to
demonstrate our strength and stability, the health
of our balance sheet, and our ability to manage
deposit flows in the wake of the industry stress
of early 2023. We did all those things. At the end
of 2023 our Common Equity Tier 1 capital ratio
was 9.9% – up from 9.7% at the end of the third
quarter and 8.4% at the end of last year. This 150
basis point increase demonstrates our ability to
accrete capital when needed, and it brings our
capital levels above where they were prior to
our acquisition of Union Bank.
1
L E T T E R T O S H A R E H O L D E R S
Consistent with this, the Federal Reserve notified
us in October that they granted us full relief from
an accelerated Category II commitment made in
conjunction with the Union Bank acquisition given
our ability to further enhance our balance sheet
risk profile and achieve near-term capital actions.
As a result, we are now subject to existing capital
rules or, if adopted, the same transition rules as
all other Category III banks related to enhanced
capital requirements under the Basel III proposals.
Growing in capital-efficient ways
We also continued to strategically execute
capital-efficient growth opportunities across each
of our business lines. We are well positioned with
our enhanced earnings profile and diversified
business mix to further increase our capital levels,
continue our disciplined lending activities, and
further strengthen our balance sheet.
A great benefit of our diversified business model
is the balance between our spread and fee income
businesses that helps us reduce earnings volatility
through a business cycle. As a result, we can
reinvest in our operations to position us for the
future. Within Payments Services, for example,
we invested in our digital capabilities, expanded
our payments ecosystem and optimized our
distribution. This led to further technology-led
growth across our merchant processing network.
We also continue to make targeted investments
that leverage our scale and strategic marketing
positioning across our corporate trust, mortgage
banking and capital markets businesses, which
should enhance our already strong annualized
growth trajectories.
Building relationships and
creating new opportunities
Through it all, our team served customers, built
relationships and provided products and services
to meet the ever-changing needs of those who
relied on us. That took extraordinary effort and
a shared belief that we could do great things
together. From investment in innovation and new
capabilities, to the basics of doing business right,
2 U.S. Bancorp 2023 Annual Report | usbank.com/AR2023
this cross-company focus helped us bring the
best of the whole bank to clients to help them
meet their financial needs. I would be remiss if
I did not take this opportunity to thank our more
than 70,000 employees for their dedication to
supporting the needs of our clients, communities
and shareholders.
Looking ahead into 2024, we expect near-
term industry uncertainty, but we believe the
groundwork we have laid will help us navigate
it effectively. We have a strong business
profile and position, which will enable us to
be confident in the decisions we make and
actions we will take. It is likely that there will be
strong deposit competition. We anticipate new
regulatory requirements related to increased
capital to impact return profiles for us and other
financial institutions, but we expect our approach
to capital management and operating discipline
will serve us well – and position us to be able to
move quickly.
We will rely on our advantages to carry us
forward. Our ready, willing and able team.
Our diversified business mix. Our focus on
leveraging our businesses holistically through
the cycle for the benefit of our customers and
to create value for our shareholders. Our ability
to overcome challenging environments with
strength and stability – and more.
We are proud of the position we are in, the trust
we have earned, and the opportunity we have
to move confidently into a future that is as
dynamic as the environment in which we operate.
Thank you for your investment in our company.
We appreciate your belief and your support.
Sincerely,
Andy Cecere
Chairman, President and Chief Executive Officer
U.S. Bancorp
February 2024
A B O U T U S
A B O U T U S
U.S. Bancorp, with more than 70,000 employees and $663 billion in
assets as of December 31, 2023, is the parent company of U.S. Bank
National Association.
Headquartered in Minneapolis, the company serves millions of clients locally, nationally and globally
through a diversified mix of businesses including consumer banking, business banking, commercial banking,
institutional banking, payments and wealth management. U.S. Bancorp has been recognized for its approach
to digital innovation, community partnerships and customer service, including being named one of the 2023
World’s Most Ethical Companies® and most admired superregional bank by Fortune®.
Learn more at usbank.com/about.
Revenue mix by business line
2023 taxable-equivalent basis. Business line revenue percentages exclude Treasury and Corporate
Support. See Non-GAAP Financial Measures on page 59.
37%
38%
25%
Consumer and
Business Banking:
Branch Banking, Small
Business Banking, Consumer
Lending, Mortgage Banking
and Omnichannel Delivery
Wealth, Corporate,
Commercial and
Institutional Banking:
Wealth Management,
Asset Management, Capital
Markets, Global Fund
Services, Corporate Banking,
Commercial Banking and
Commercial Real Estate
Payment Services:
Retail Payment Solutions,
Global Merchant
Acquiring and Corporate
Payment Systems
Our strategic pillars
Our strategy is how we will grow; it comes to life by activating our pillars.
Being the Most
Trusted Choice
Driving One
U.S. Bank
Striving for
Simplicity
Creating the
Future Now
usbank.com
3
F I N A N C I A L H I G H L I G H T S
$28.1B
in record net revenue
(an increase of
15.8% over 2022)
$900M
in full run-rate cost
synergies achieved with
Union Bank acquisition
14.3%
increase in average total
loans year-over-year
9.4%
increase in average total
deposits year-over-year
9.9%
Common Equity Tier 1 capital
ratio (an increase of 150 basis
points throughout 2023)
12.3%
increase in non-interest
income year-over-year
21.7%1
return on tangible common equity
14.7%2
increase in tangible book
value per share year-over-year
1. Return on tangible common equity excludes certain notable items, and is a non-GAAP financial metric. Please see Non-GAAP Financial Measures beginning
on page 59.
2. Tangible book value per share is a non-GAAP financial metric. Please see Non-GAAP Financial Measures beginning on page 59.
4 U.S. Bancorp 2023 Annual Report | usbank.com/AR2023
F I N A N C I A L S U M M A R Y
Year Ended December 31
(Dollars and Shares in Millions, Except Per Share Data)
2023
2022
2021
2023
v 2022
2022
v 2021
Net interest income ............................................................................
Taxable-equivalent adjustment(a) .........................................................
Net interest income (taxable-equivalent basis)(b) ..............................
Noninterest income ............................................................................
Total net revenue .............................................................................
Noninterest expense ..........................................................................
Provision for credit losses ...................................................................
Income taxes and taxable-equivalent adjustment ..............................
Net income ......................................................................................
Net (income) loss attributable to noncontrolling interests ...............
$17,396
131
17,527
10,617
28,144
18,873
2,275
1,538
5,458
(29)
$14,728
118
14,846
9,456
24,302
14,906
1,977
1,581
5,838
(13)
$12,494
106
12,600
10,227
22,827
13,728
(1,173)
2,287
7,985
(22)
Net income attributable to U.S. Bancorp .........................................
$5,429
$5,825
$7,963
Net income applicable to U.S. Bancorp common shareholders .......
$5,051
$5,501
$7,605
Per Common Share
Earnings per share ..............................................................................
Diluted earnings per share ..................................................................
Dividends declared per share .............................................................
Book value per share(c) .........................................................................
Market value per share .......................................................................
Average common shares outstanding ................................................
Average diluted common shares outstanding ....................................
Financial Ratios
Return on average assets ....................................................................
Return on average common equity .....................................................
Net interest margin (taxable-equivalent basis)(a) ..................................
Efficiency ratio(b) .................................................................................
$3.27
3.27
1.93
31.13
43.28
1,543
1,543
$3.69
3.69
1.88
28.71
43.61
1,489
1,490
.82%
10.8
2.90
66.7
.98%
12.6
2.72
61.4
$5.11
5.10
1.76
32.71
56.17
1,489
1,490
1.43%
16.0
2.49
60.4
Average Balances
Loans .................................................................................................. $381,275 $333,573
Investment securities(d) .......................................................................
169,442
545,343
Earning assets ....................................................................................
592,149
Assets .................................................................................................
462,384
Deposits .............................................................................................
50,416
Total U.S. Bancorp shareholders' equity ..............................................
162,757
605,199
663,440
505,663
53,660
Period End Balances
Loans .................................................................................................. $373,835 $388,213
7,404
Allowance for credit losses .................................................................
161,650
Investment securities ..........................................................................
674,805
Assets .................................................................................................
524,976
Deposits .............................................................................................
50,766
Total U.S. Bancorp shareholders' equity ..............................................
7,839
153,751
663,491
512,312
55,306
$296,965
154,702
506,141
556,532
434,281
53,810
$312,028
6,155
174,821
573,284
456,083
54,918
Capital Ratios
Common equity tier 1 capital .............................................................
Tier 1 capital ......................................................................................
Total risk-based capital ......................................................................
Leverage .............................................................................................
Total leverage exposure ......................................................................
Tangible common equity to tangible assets(b) ......................................
Tangible common equity to risk-weighted assets(b) .............................
Common equity tier 1 capital to risk-weighted assets, reflecting the full
implementation of the current expected credit losses methodology(b) ......
9.9%
11.5
13.7
8.1
6.6
5.3
7.7
8.4%
9.8
11.9
7.9
6.4
4.5
6.0
10.0%
11.6
13.4
8.6
6.9
6.8
9.2
9.7
8.1
9.6
18.1%
11.0
18.1
12.3
15.8
26.6
15.1
(2.7)
(6.5)
*
(6.8)
(8.2)
(11.4)%
(11.4)
2.7
8.4
(.8)
3.6
3.6
14.3%
(3.9)
11.0
12.0
9.4
6.4
(3.7)%
5.9
(4.9)
(1.7)
(2.4)
8.9
17.9%
11.3
17.8
(7.5)
6.5
8.6
*
(30.9)
(26.9)
40.9
(26.8)
(27.7)
(27.8)%
(27.6)
6.8
(12.2)
(22.4)
--
--
12.3%
9.5
7.7
6.4
6.5
(6.3)
24.4%
20.3
(7.5)
17.7
15.1
(7.6)
* Not meaningful
(a) Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.
(b) See Non-GAAP Financial Measures beginning on page 59.
(c) Calculated as U.S. Bancorp common shareholders' equity divided by common shares outstanding at end of the period.
(d) Excludes unrealized gains and losses on available-for-sale investment securities and any premiums or discounts recorded related to the transfer of investment securities
5
at fair value from available-for-sale to held-to-maturity.
M A N A G I N G C O M M I T T E E
Andrew Cecere
Chairman, President and
Chief Executive Officer
Souheil S. Badran
Senior Executive Vice President
and Chief Operations Officer
Elcio R.T. Barcelos
Senior Executive Vice President and
Chief Human Resources Officer
James L. Chosy
Senior Executive Vice President
and General Counsel
Gregory G. Cunningham
Senior Executive Vice President
and Chief Diversity Officer
Terrance R. Dolan
Vice Chair and Chief
Administration Officer
Venkatachari Dilip
Senior Executive Vice President
and Chief Information and
Technology Officer
Revathi N. Dominski
Senior Executive Vice President,
Chief Social Responsibility Officer,
and President, U.S. Bank Foundation
Gunjan Kedia
Vice Chair, Wealth, Corporate,
Commercial & Institutional Banking
Shailesh M. Kotwal
Vice Chair, Payment Services
Stephen L. Philipson
Senior Executive Vice President
and Head of Global Markets and
Specialized Finance
Jodi L. Richard
Vice Chair and Chief Risk Officer
Mark G. Runkel
Senior Executive Vice President
and Chief Transformation Officer
John C. Stern
Senior Executive Vice President
and Chief Financial Officer
Dominic V. Venturo
Senior Executive Vice President
and Chief Digital Officer
Timothy A. Welsh
Vice Chair, Consumer
and Business Banking
6 U.S. Bancorp 2023 Annual Report | usbank.com/AR2023
B O A R D O F D I R E C T O R S
Andrew Cecere
Chairman, President and Chief
Executive Officer, U.S. Bancorp
Dorothy J. Bridges
Chief Executive Officer,
Metropolitan Economic Development
Association (Meda)
Warner L. Baxter
Retired Executive Chairman and
Former Chairman, President
and CEO, Ameren Corporation
Elizabeth L. Buse
Former Chief Executive Officer,
Monitise plc
Alan B. Colberg
Retired President and Chief Executive
Officer, Assurant, Inc.
Kimberly N. Ellison-Taylor
Founder and Chief Executive Officer,
KET Solutions, LLC
Kimberly J. Harris
Retired President and Chief Executive
Officer, Puget Energy, Inc.
Roland A. Hernandez
Founding Principal and Chief Executive
Officer, Hernandez Media Ventures
(Lead Independent Director)
Richard P. McKenney
President and Chief Executive Officer,
Unum Group
Yusuf I. Mehdi
Executive Vice President and
Consumer Chief Marketing Officer,
Microsoft Corporation
Loretta E. Reynolds
Founder and Chief Executive Officer,
LEReynolds Group, LLC
John P. Wiehoff
Retired Chairman and Chief Executive
Officer, C.H. Robinson Worldwide, Inc.
Scott W. Wine
Chief Executive Officer,
CNH Industrial N.V.
7
Maintaining our strength and
stability in unstable times
2023 tested the financial services industry with a heightened regulatory
environment and increased focus on capital levels, and the stress banks
felt was compounded by pressures in the broader economy. Despite the
challenges around us and this “new normal,” we achieved solid results –
thanks in large part to our strong foundation and financial discipline.
8 U.S. Bancorp 2023 Annual Report | usbank.com/AR2023
A strong
deposit base
+50%
of our deposit base
consists of consumer
deposits
~50%
of our deposit base
consists of wholesale
deposits
Investment
portfolio
~90%
of our investments are
backed by the U.S.
government
9
Strength in our financial position
Our debt ratings for both long-term senior debt and bank
deposits remained relatively strong, and we grew our
CET1 ratio 150 basis points throughout the year to 9.9%
as of Dec. 31, 2023 – above what it was shortly before
U.S. Bancorp closed on the acquisition of Union Bank.
Results of our Dodd-Frank Act Stress Test demonstrated
that we are well-capitalized and remain prepared to withstand
an economic downturn. We’ve performed well on each
stress test since they were instituted a decade ago.
Strength in our liquidity position
We maintained strong capital and liquidity positions, along
with a disciplined asset liability management framework and
sound balance sheet actions. Our investment portfolio also
remained well-balanced, with what we believe are appropriate
levels of liquidity to help us be prepared for unexpected events.
Strength in our diversified business
Our diverse mix of businesses (seen on page 3 and throughout
this report) helped set us apart and provided varied sources
of revenue from both a geographical and client composition
perspective, which we believe helps us weather economic turns.
Our competitive advantage:
the diversity of our business
We’re strong and stable, and we stand out. Our business model isn’t like every
other bank, and that’s intentional. Within our three primary revenue lines, we
have more than 50 business areas generating “through cycle” earnings power.
That power extends to our clients. With unique offerings from Corporate
Payments and Corporate Trust to Capital Markets and Asset Management –
just to name a few – we’re able to bring the whole bank to our clients as
trusted consultants helping power potential.
10 U.S. Bancorp 2023 Annual Report | usbank.com/AR2023
At a glance
#1
largest provider
of commercial card
payments to the U.S.
federal government1
#1
freight payment
provider ranked by
payment volume2
#6
U.S. merchant acquirer
based on volume3
#5
credit card issuer based
on purchase volume4
#7
U.S. debit card issuer
based on volume5
1. Based on year-end 2022 results
(most recent data available).
Source: GSA SmartPay® program.
2. Based on full year 2022 results
(most recent data available) for
key competitors and analysis of
company reports.
3. Based on Nilson Report (Issue 1238).
U.S. rank consolidates Joint Ventures.
Puerto Rico is included in U.S. rankings.
4. As of June 30, 2023 (most recent data
available). Based on Visa and Mastercard
purchase volume. Includes consumer,
small business and commercial volume.
Source: Nilson Report 1249.
5. Ranking is for fiscal year 2022 (most
recent data available) and does not
include benefits from Union Bank
acquisition. Source: Nilson Report #1240.
11
G L O B A L M E R C H A N T A C Q U I R I N G
The launch of U.S. Bank Avvance™,
our new flexible financing solution
With payment methods and consumer expectations constantly
evolving, we introduced our new multichannel point-of-sale lending
solution, U.S. Bank Avvance™, in the fourth quarter of 2023. Avvance
enables businesses to offer consumer financing during checkout
with a quick application and instant decisioning. Additionally, the
solution provides a transparent, convenient way to pay over time.
Loan offers are personalized, providing flexibility while making it easy
for customers to see how much they would pay. For business owners,
Avvance is embedded in the checkout process, enabling them to
offer their customers convenience from a trusted provider without
the hassle of managing payments after the sale.
R E TA I L PAY M E N T S O L U T I O N S
U.S. Bank offers recycled plastic for Altitude Go
In September, we announced that U.S. Bank will issue credit cards
made from recycled plastic for the entire U.S. Bank Altitude® Go
Visa Signature® and U.S. Bank Altitude® Go Secured Visa® credit
card lines, as well as U.S. Bank Altitude® Go World Elite Mastercard®.
Additionally, cardholders can redeem earned points as a contribution
toward a variety of nonprofits listed in the Altitude Rewards Center.
U.S. Bank will match each point donation made for Altitude Go
cardholders – doubling the value of donations to cardholders'
selected nonprofits.
At a glance
#5
Treasury Management
bank nationally1
#3
U.S. commercial
card issuer ranked
by spend volume2
35+
countries where businesses
can use our merchant
payment solutions
9
major co-branded
credit card partners with
~40,000
distribution points
~1,300
financial institution clients
that we issue credit cards for
1. Based on fee-equivalent revenue.
Source: Ernst & Young 2022 Cash
Management Services Survey
(most recent data available).
2. Based on analysis of Nilson Commercial
Card report and company filings for 2022
(most recent data available).
C O R P O R AT E PAY M E N T A N D T R E A S U R Y S O L U T I O N S
A new expense management solution
for middle market companies
With many companies looking for ways to simplify the time,
effort and dollars spent processing employee expense reports,
we continued our ramp up of digital payment solutions in 2023.
Together with our wholly owned subsidiary, TravelBank, we
developed the Commercial Rewards Card, an innovative solution
to help emerging middle market companies control and monitor
business expenses in real time. The solution integrates controls and
workflows into one card, expense and travel management platform
designed especially for mid-size companies, helping them replace
time-consuming manual processes with a single, integrated tool
for business expense, travel and card management. Additionally,
real-time data gives clients greater control, improved productivity,
visibility into business spending and an easier experience for
employees to track their expenses via a suite of integrated products.
Accelerating business payment options
Business clients of both U.S. Bank and Kyriba, a global leader of
cloud-based finance solutions, can now easily send instant payments
to vendors, customers, and employees from their U.S. Bank®
accounts within their existing Kyriba dashboard thanks to our new
API-powered payment connectors. The collaboration with Kyriba's
Real-time API Connectivity Network integrates banks, enterprise
resource planning systems, trading portals, data services and
payment apps using pre-built connectors to improve business
continuity and minimize IT time and cost. For clients of U.S. Bank
and Kyriba, these connectors reduce time and resources required to
enable new payment methods. In addition to instant RTP® Network
payments, joint U.S. Bank and Kyriba clients can leverage the API
connectors to send Zelle® payments. The embedded payment
solution also provides businesses with real-time visibility into bank
account balance and transaction reporting, which helps improve
cash flow management.
12 U.S. Bancorp 2023 Annual Report | usbank.com/AR2023
Continued growth
via our alliance
with State Farm
In 2020, we teamed up
with State Farm to
provide banking solutions
and services to consumers
and small businesses
through State Farm
agents. Three years later,
we continue to grow
our relationship.
+875K
current clients1
+120K
new accounts
opened in 20231
1. As of December 31, 2023.
B U S I N E S S B A N K I N G
New initiative offers banking, payments
and wealth management for small-to-midsize
healthcare practices
We’ve served healthcare organizations for more than 100 years,
but in 2023, we began a new cross-business initiative to serve
a growing and new-to-us segment of healthcare practices that
have up to $25 million in annual revenue. A specialized team with
expertise from banking, payments and wealth management delivers
a comprehensive suite of solutions for medical, dental and veterinary
practices and practice owners, as well as physician-owned medical
and diagnostic laboratories and outpatient care centers. The high-
touch service is led by a healthcare banker who can bring solutions
and advice designed to strengthen the client’s practice, improve their
patient payment experience, and help them achieve their personal
financial goals. The services are designed to help simplify finances
and operations for these practices, so practitioners can spend more
time on patients and less time on administrative tasks.
C O N S U M E R
Growing beyond branch markets
We made it easier to do business with U.S. Bank in 2023, with a
historic move in our deposits strategy. Clients and non-clients
in all 50 states now can open certificates of deposit (CDs), even
if there isn’t a local branch in the area. This opportunity is a first in
our 160-year history. Previously, we had offered most consumer
deposit and banking products only to clients within our 26-state
branch network. The move follows several digital advancements,
alliances and new market entries that have accelerated our ability
to provide more products and services to a significantly larger
segment of the U.S. This includes a new branch presence in
Charlotte, North Carolina, with four new branch locations
opening over the last three years. Additionally, we expanded
corporate and commercial banking services to Texas.
13
Growing our business with
first-to-the-market solutions
Among our 2023 highlights, we became the first
U.S. financial lender to offer a direct-to-consumer
recreational vehicle (RV) and boat purchasing
experience. U.S. Bank and Rollick teamed up
to provide consumers and dealerships with
a streamlined buying experience via the
U.S. Bank® RV and Boat Marketplace, where
shoppers can search dealer inventory and apply
for financing at participating dealers nationwide.
The marketplace – available on the U.S. Bank®
website and U.S. Bank® Mobile App – is
accessible to clients and non-clients of the bank,
and all boat and RV dealers using U.S. Bank as a
lender can participate in the program at no cost.
The first bank to automate
direct deposit switching
Operational improvements directly impact
our clients, for the better. One example in
2023 was our new DIY direct deposit feature,
which enables clients opening new U.S. Bank®
checking accounts to switch their payroll direct
deposit in just minutes, as part of the bank’s new
enhanced account onboarding experience. The
time-consuming and manual process of filling
out paperwork and finding routing and account
numbers is something clients can now do without.
The secure and automated process is available on
the U.S. Bank® Mobile App and online banking and
reaches over 85% of the U.S. workforce, including
many companies within the gig economy. In
just minutes, clients can search for their payroll
provider, sign into their corresponding employer
account and receive confirmation that their
payroll direct deposit has been successfully
switched. Very few banks have a feature like
this, and U.S. Bank is the first large bank to fully
automate the process and provide clients with
instant confirmation that it was successful.
C O N S U M E R
Building on U.S. Bank Access
Home with a new loan program
In July, we expanded access to homeownership
with the launch of U.S. Bank Access Home™
Loan, a mortgage Special Purpose Credit Program
(SPCP) that provides up to $12,500 in down
payment assistance and up to an additional $5,000
lender credit for home buyers to buy down their
interest rate. Access Home Loan provides financial
assistance for buyers in 11 pilot areas – including
six in California – where the minority population is
more than 50% according to census tract data. We
closed the first program loan in 12 days for a single
mother who’d been renting for 16 years. We’ve
committed $100 million over the next five years to
the program. The new offering is an extension of
U.S. Bank Access™ Home and U.S. Bank Access
Commitment®, our long-term approach to help
close the wealth gap for underserved communities.
14 U.S. Bancorp 2023 Annual Report | usbank.com/AR2023
A new look for two of our business lines
In 2023, U.S. Bank Wealth Management, Corporate, Commercial
and Institutional Banking (WCIB) came together to form one unit.
This expansive franchise has talented professionals with client
relationships that sometimes go back 100 years, represent $10.6
trillion in assets under custody and administration, and $454 billion
in assets under management. Its digitally innovative products across
banking, investing, and servicing capabilities serve clients across a
diverse set of industries from manufacturing to agriculture; hospitality
to governments; asset managers, insurance companies, universities
and wealthy families – and more.
A S S E T M A N A G E M E N T
Growing our outsourced chief
investment officer business
The increasing complexity of portfolios and regulatory requirements,
combined with market volatility, means that many institutions are
reevaluating their approach to managing investment portfolios and
choosing to “outsource” this expertise. As part of our steadily growing
outsourced chief investment officer (OCIO) business – a fee-based
revenue generator for U.S. Bancorp Asset Management Inc. – we
added a head of distribution for our institutional OCIO practice, housed
within our subsidiary, PFM Asset Management LLC. The team supports
the firm’s consultant relationships, as well as not-for-profit, corporate,
public sector and Taft-Hartley clients.
W E A LT H M A N A G E M E N T
Understanding young investors’ needs
Gen Z and millennial investors are having a profound impact on our
society and on investing behavior. To best help this next generation
craft a plan for building wealth, we wanted to understand how they
define wealth, and how and why they invest, so we surveyed 4,000
active and aspiring investors across all generations.
We found Gen Z views wealth differently than older generations and
will sacrifice returns to invest in causes they believe in – but many
are unsure of how to begin investing. You can learn more about the
survey at usbank.com/younginvestors.
At a glance
+500K
wealth clients
+30K
institutional and
government clients
54%
of bank deposits are
from WCIB clients1
46%
of bank loans are
from WCIB clients1
~90%
of Fortune 1000®
companies choose
U.S. Bank as their
banking partner 2
1. Full-year average during the year ended
December 31, 2023.
2. Fortune and Fortune 1000 are registered
trademarks of Fortune Media IP Limited
and are used under license. Fortune
and Fortune Media IP Limited are not
affiliated with, and do not endorse
products or services of, U.S. Bank N.A.
15
At a glance
#1 or #2
in corporate trust
markets we serve1
#5
U.S. commercial bank2
#5
2023 U.S. overall
and investment
grade bookrunner,
syndicated loans3
#6
U.S. custodian in
transaction processing4
1. Based on number of deals and volume
in dollars for U.S. and Europe as of
January 15, 2024. Source: Greenstreet
ABAlert and Refinitiv.
2. Based on insured U.S.-chartered
commercial banks that have consolidated
assets of $300 million or more, ranked
by consolidated assets as of September
30, 2023. Source: Federal Reserve
Statistical Release.
3. Based on number of deals.
Source: LSEG LPC 2023.
4. As of September 30, 2023 (most recent
data available), per FDIC; rankings
exclude non-bank custodians, foreign
banks, and non-FDIC banks.
I N S T I T U T I O N A L
Tailored portfolio optimization
now available to CLO clients
Collateralized loan obligation (CLO) clients now have access to
comprehensive insights for faster and more effective trading with
our new portfolio optimization capabilities. Using a set of criteria
selected by the client, Pivot Portfolio Optimization sorts through
tens of thousands of potential portfolio combinations to identify a
combination of investments that best advance the client’s stated
objective – typically, maximizing the weighted average spread of the
CLO. U.S. Bank focused research and development on two priorities:
calculation speed and seamless execution, and U.S. Bank currently
has one patent granted and another pending covering Pivot Portfolio
Optimization capabilities on these critical features.
New ETF servicing capability
for clients in Europe
In the spring of 2023, we launched our new exchange-traded fund
(ETF) services in Europe, along with our first client for the offering.
U.S. Bank supports Horizon Kinetics' European version of its Inflation
Beneficiaries ETF, an actively managed fund that seeks to address one
of the most important economic and investment drivers – inflation –
by identifying unique, scalable businesses that have the potential to
thrive in an inflationary environment. The fund is structured as a UCITS
ETF and trades on Euronext Amsterdam. U.S. Bank provides clients
with a holistic offering, including fund administration, transfer agency,
depositary and global custody solutions, as well as several specialized
European exchange-traded fund services.
16 U.S. Bancorp 2023 Annual Report | usbank.com/AR2023
The heart of our operations:
our employees
When it comes to assets, our people are our most significant: they’re vital to our
success and our clients' success. That’s why we’re proud to invest in the careers
of our more than 70,000 employees through programs that empower each of us
to bring our diverse perspectives to work every day.
17
We’re honored that our efforts to create a great place to work received
wide recognition yet again in 2023.
This is the ninth
consecutive year we’ve
received this honor, and
we’re one of only two
U.S.-based banks honored.
U.S. Bank is one of
the 2023 Fortune®
World’s Most Admired
Companies™ and the
No. 1 Superregional
Bank for the 13th
consecutive year.1
J.D. Power ranked
U.S. Bank #1 in California
for Retail Banking
Customer Satisfaction.2
We’re the No. 1 ranked bank
on the Fair360, formerly
DiversityInc, Top 50
Companies for Diversity®
list and No. 11 on the overall
Top 50 list.
The 2023 Disability:IN Disability Equality Index
again gave us a score of 100.
The Human Rights Campaign
Foundation’s 2023 Corporate
Equality Index® gave us a
perfect score of 100 for
the 17th consecutive year.
“World’s Most Ethical Companies” and “Ethisphere” names and marks are registered trademarks of Ethisphere LLC.
1. Fortune, ©2023 Fortune Media IP Limited. All rights reserved. Used under license. Fortune® is a registered trademark and Fortune World’s Most
Admired Companies™ is a trademark of Fortune Media IP Limited and are used under license. Fortune and Fortune Media IP Limited are not affiliated
with, and do not endorse the products or services of, U.S. Bancorp.
2. For J.D. Power 2023 award information, visit jdpower.com/awards.
18 U.S. Bancorp 2023 Annual Report | usbank.com/AR2023
Our impact in the communities we serve
As a financial services provider, we invest our human and financial resources to help people and the planet.
You can learn more about our progress in our 2022 ESG report, with a 2023 version expected later this year.
Below are some key advancements we made in 2023.
$96.4M
in corporate contributions and
U.S. Bank Foundation giving
360,000
employee volunteer hours
$17M
pledged to nonprofits
through annual Employee
Giving Campaign
1.5M
individuals received
financial education with
a focus on underserved
communities
Outstanding
rating received by U.S. Bank
from the most recent
Community Reinvestment
Act (CRA) exam1
$555M
committed to community
development financial
institutions (CDFIs) and
other intermediaries2
$3B
98%
$3.2B
in affordable housing tax equity
and debt commitments
renewable electricity sourced
for our operations3
in renewable energy tax equity
and debt commitments
1. Community Reinvestment Act (CRA) exam by the Office of the Comptroller of the Currency (OCC) is from January 1, 2016, to December 31, 2020.
2. Figure represents total 2023 debt commitment, foundation grants and corporate contributions.
3. As of year-end 2022 (most recent data available).
19
In communities, we again teamed up with
Freedom Alliance, Operation Homefront and
others to give back to military families. With the
help of these partners, in 2023 we donated four
homes to veterans, including U.S. Army Sergeant
Xanthin Luptak and his family, who received a
mortgage-free home through the U.S. Bank®
HOME program. In total, we’ve donated 26 homes
to veteran families since 2013. Additionally, as
part of the Driven to Serve initiative, we helped
provide payment-free vehicles to two Gold Star
families of service members who were killed in
the line of duty, and a wheelchair-accessible van
to U.S. Army Staff Sergeant Jarid Clapp, marking
our 68th vehicle donation to veterans since 2018.
The donations represent a long-term commitment
to giving back to those who serve. Since 2013,
U.S. Bank Impact Finance has supported a range
of housing for veterans nationwide, totaling over
3,600 units, $575 million in equity and $588
million in debt commitments in investments –
and we expect to invest in more veteran-focused
projects in 2024.
Supporting excellence
for our veterans
In 2023, we continued our investment in
our veterans – both on our teams and in our
communities. We were honored to once again be
named to the annual Military Times Best for Vets:
Employers list, which we’ve appeared on every
year since it began in 2010. This year, we climbed
to No. 3 on the list, which prioritizes recruitment
and employment practices, as well as retention
and support programs, in its scoring and final
rankings. U.S. Bank actively recruits military and
veteran employees through partnerships with
Hiring Our Heroes and a dedicated careers page
that matches military skills and training to open
roles. We also support our military and veteran
employees through expansive leave policies, iPads
for families to stay connected during deployments
and our award-winning, 5,000-member Proud
to Serve business resource group. These efforts
also earned us recognition from Forbes® as one of
America's Best Employers for Veterans 2023.
Receive a digital copy of the Annual Report.
20
23
Annual
Report
To help to reduce the use of environmental resources and promote environmental
stewardship, the past three years we’ve partnered with Arbor Day to donate
$1 for every shareholder who opts for electronic delivery of our Annual Report.
Each dollar supports the planting of a new tree. In 2023, we were able to donate
$5,570 as a result – up from $3,200 the year prior – and we are continuing that
partnership again this year. If you haven’t already done so, you can sign up to
receive electronic versions of our Annual Report at usbank.com/ElectronicAR.
20 U.S. Bancorp 2023 Annual Report | usbank.com/AR2023
The following pages discuss in detail the financial results we achieved in 2023 –
results that reflect how we are creating the future now.
The following information appears in accordance with the Private Securities Litigation Reform Act of 1995:
This report contains forward-looking statements about
U.S. Bancorp. Statements that are not historical or current
facts, including statements about beliefs and expectations,
are forward-looking statements and are based on the information
available to, and assumptions and estimates made by, management
as of the date hereof. These forward-looking statements cover,
among other things, future economic conditions and the anticipated
future revenue, expenses, financial condition, asset quality,
capital and liquidity levels, plans, prospects and operations of
U.S. Bancorp. Forward-looking statements often use words such
as “anticipates,” “targets,” “expects,” “hopes,” “estimates,”
“projects,” “forecasts,” “intends,” “plans,” “goals,” “believes,”
“continue” and other similar expressions or future or conditional
verbs such as “will,” “may,” “might,” “should,” “would” and “could.”
Forward-looking statements involve inherent risks and uncertainties
that could cause actual results to differ materially from those set
forth in forward-looking statements, including the following risks
and uncertainties:
• Deterioration in general business and economic conditions or
turbulence in domestic or global financial markets, which could
adversely affect U.S. Bancorp’s revenues and the values of its
assets and liabilities, reduce the availability of funding to certain
financial institutions, lead to a tightening of credit, and increase
stock price volatility;
• Turmoil and volatility in the financial services industry, including
failures or rumors of failures of other depository institutions,
which could affect the ability of depository institutions, including
U.S. Bank National Association, to attract and retain depositors,
and could affect the ability of financial services providers, including
U.S. Bancorp, to borrow or raise capital;
• Impacts of pandemics, natural disasters, terrorist activities,
civil unrest, international hostilities and geopolitical events;
• Impacts of supply chain disruptions, rising inflation, slower
growth or a recession;
• Failure to execute on strategic or operational plans;
• Effects of mergers and acquisitions and related integration;
• Effects of critical accounting policies and judgments;
• Effects of changes in or interpretations of tax laws and regulations;
• Management’s ability to effectively manage credit risk, market risk,
operational risk, compliance risk, strategic risk, interest rate risk,
liquidity risk and reputation risk; and
• The risks and uncertainties more fully discussed in the section
entitled “Risk Factors” of this report.
In addition, U.S. Bancorp’s acquisition of MUFG Union Bank,
N.A. presents risks and uncertainties, including, among others:
the risk that any revenue synergies and other anticipated benefits
of the acquisition may not be realized or may take longer than
anticipated to be realized.
In addition, factors other than these risks also could adversely
affect U.S. Bancorp’s results, and the reader should not consider
these risks to be a complete set of all potential risks or uncertainties.
Readers are cautioned not to place undue reliance on any forward-
looking statements. Forward-looking statements speak only as
of the date hereof, and U.S. Bancorp undertakes no obligation
to update them in light of new information or future events.
22 Management’s Discussion and Analysis
22 Overview
• Actions taken by governmental agencies to stabilize the financial
24 Statement of Income Analysis
system and the effectiveness of such actions;
• Changes to regulatory capital, liquidity and resolution-related
requirements applicable to large banking organizations in response
to recent developments affecting the banking sector;
• Changes to statutes, regulations, or regulatory policies or
practices, including capital and liquidity requirements, and the
enforcement and interpretation of such laws and regulations, and
U.S. Bancorp’s ability to address or satisfy those requirements and
other requirements or conditions imposed by regulatory entities;
• Changes in interest rates;
• Increases in unemployment rates;
• Deterioration in the credit quality of U.S. Bancorp's loan portfolios
or in the value of the collateral securing those loans;
• Risks related to originating and selling mortgages, including
repurchase and indemnity demands, and related to U.S. Bancorp’s
role as a loan servicer;
• Impacts of current, pending or future litigation and
governmental proceedings;
• Increased competition from both banks and non-banks;
28 Balance Sheet Analysis
35 Corporate Risk Profile
35 Overview
36 Credit Risk Management
48 Residual Value Risk Management
48 Operational Risk Management
49 Compliance Risk Management
49
Interest Rate Risk Management
50 Market Risk Management
51 Liquidity Risk Management
54 Capital Management
56 Line of Business Financial Review
59 Non-GAAP Financial Measures
61 Accounting Changes
61 Critical Accounting Policies
63 Controls and Procedures
• Effects of climate change and related physical and transition risks;
64 Reports of Management and Independent Accountants
• Changes in customer behavior and preferences and the ability to
implement technological changes to respond to customer needs
and meet competitive demands;
• Breaches in data security;
• Failures or disruptions in or breaches of U.S. Bancorp’s operational,
technology or security systems or infrastructure,
or those of third parties;
• Failures to safeguard personal information;
68 Consolidated Financial Statements and Notes
138 Consolidated Daily Average Balance Sheet and
Related Yields and Rates
139 Supplemental Financial Data
140 Company Information
156 Managing Committee
158 Directors
21
Management’s Discussion and Analysis
Overview
U.S. Bancorp and its subsidiaries (the “Company”)
continued to demonstrate financial strength and stability as
2023 financial results showcased solid fee revenue growth,
prudent expense management, and the accretion of
common equity tier 1 capital of 150 basis points. Disruption
in the banking industry in early 2023 reinforced the
Company's focus of maintaining a well-diversified business
with an appropriate risk profile and diversified deposit base.
During 2023, the Company continued to prudently manage
its balance sheet by reducing its exposure to certain capital-
intensive assets and focusing on capital-efficient growth.
MUFG Union Bank Acquisition On December 1, 2022, the
Company acquired MUFG Union Bank N.A.’s core regional
banking franchise (“MUB”) from Mitsubishi UFJ Financial
Group, Inc. ("MUFG"). Pursuant to the terms of the Share
Purchase Agreement, the Company acquired all of the
issued and outstanding shares of common stock of MUB for
a purchase price consisting of $5.5 billion in cash and
approximately 44 million shares of the Company’s common
stock. The Company also received additional MUB cash of
$3.5 billion upon completion of the acquisition, which is
required to be repaid to MUFG on or prior to the fifth
anniversary date of the completion of the purchase. On
August 3, 2023, the Company completed a debt/equity
conversion with MUFG. As a result, the Company repaid
$936 million of its debt obligation from the proceeds of the
issuance of 24 million shares of common stock of the
Company to an affiliate of MUFG (the “Debt/Equity
Conversion”). After the Debt/Equity Conversion, the
Company had a remaining repayment obligation to MUFG of
$2.6 billion. On May 26, 2023, the Company merged MUB
into U.S. Bank National Association ("USBNA"), the
Company’s primary banking subsidiary. During 2023, the
Company successfully completed the integration of the MUB
business and system conversion. Additionally, as a
condition of the regulatory approval, the Company
committed to meet requirements applicable to Category II
banking organizations by the earlier of (i) the date required
under the federal banking regulators' Tailoring Rules; and
(ii) December 31, 2024, if the Federal Reserve notified the
Company by January 1, 2024, that the Company must
comply with those requirements. During 2023, the Company
took several actions to optimize the balance sheet and
reduce risk-weighted assets to enhance capital and reduce
the risk profile of the balance sheet. As a result, on October
16, 2023, the Federal Reserve granted the Company full
relief from this commitment. The Company’s 2023 results
reflect the impacts of balance sheet and capital
management actions and the full financial results of the
acquired business.
Financial Performance The Company earned $5.4 billion
in 2023, or $3.27 per diluted common share, compared with
$5.8 billion, or $3.69 per diluted common share in 2022.
22 U.S. Bancorp 2023 Annual Report
Financial performance for 2023, compared with 2022,
included the following:
• Net interest income increased $2.7 billion (18.1 percent)
due to higher interest rates on earning assets and the
MUB acquisition, partially offset by the impact of deposit
mix and pricing;
• Noninterest income increased $1.2 billion (12.3 percent)
primarily due to higher commercial products revenue,
payment services revenue, trust and investment
management fees and other noninterest income, partially
offset by losses on investment securities;
• Noninterest expense increased $4.0 billion (26.6 percent),
reflecting increased merger and integration charges and
operating expenses related to the MUB acquisition,
including core deposit intangible amortization expense, as
well as increases in compensation and employee benefits
expense to support business growth and higher other
noninterest expense due to a Federal Deposit Insurance
Corporation ("FDIC") special assessment;
• The provision for credit losses increased $298 million
(15.1 percent), driven by normalizing credit losses and
stress in commercial real estate, partially offset by relative
stability in the economic outlook;
• Average loans increased $47.7 billion (14.3 percent)
primarily driven by the impact of the MUB acquisition and
growth in most loan categories; and
• Average deposits increased $43.3 billion (9.4 percent),
driven by increases in average total savings deposits and
time deposits including the impact of the MUB acquisition,
partially offset by a decrease in average noninterest
bearing deposits.
Credit Quality The Company continues to prudently
manage credit underwriting.
• The allowance for credit losses was $7.8 billion at
December 31, 2023, an increase of $435 million
compared with December 31, 2022. The increase was
primarily driven by normalizing credit losses, credit card
balance growth and commercial real estate credit quality.
• Nonperforming assets were $1.5 billion at December 31,
2023, an increase of $478 million compared with
December 31, 2022. The increase was primarily due to
higher nonperforming commercial real estate and
commercial loans, partially offset by a decrease in
nonperforming residential mortgages.
• Net charge-offs were $1.9 billion in 2023, an increase of
$842 million compared with 2022. The increase reflected
higher charge-offs in most loan categories consistent with
normalizing credit conditions and adverse conditions in
commercial real estate.
TABLE 1 Selected Financial Data
Year Ended December 31
(Dollars and Shares in Millions, Except Per Share Data)
Condensed Income Statement
Net interest income
Taxable-equivalent adjustment(a)
Net interest income (taxable-equivalent basis)(b)
Noninterest income
Total net revenue
Noninterest expense
Provision for credit losses
Income before taxes
Income taxes and taxable-equivalent adjustment
Net income
Net (income) loss attributable to noncontrolling interests
Net income attributable to U.S. Bancorp
Net income applicable to U.S. Bancorp common shareholders
Per Common Share
Earnings per share
Diluted earnings per share
Dividends declared per share
Book value per share(c)
Market value per share
Average common shares outstanding
Average diluted common shares outstanding
Financial Ratios
Return on average assets
Return on average common equity
Net interest margin (taxable-equivalent basis)(a)
Efficiency ratio(b)
Net charge-offs as a percent of average loans outstanding
Average Balances
Loans
Loans held for sale
Investment securities(d)
Earning assets
Assets
Noninterest-bearing deposits
Deposits
Short-term borrowings
Long-term debt
Total U.S. Bancorp shareholders’ equity
Period End Balances
Loans
Investment securities
Assets
Deposits
Long-term debt
Total U.S. Bancorp shareholders’ equity
Asset Quality
Nonperforming assets
Allowance for credit losses
Allowance for credit losses as a percentage of period-end loans
Capital Ratios
Common equity tier 1 capital
Tier 1 capital
Total risk-based capital
Leverage
Total leverage exposure
Tangible common equity to tangible assets(b)
Tangible common equity to risk-weighted assets(b)
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the
current expected credit losses methodology(b)
2023
2022
2021
$ 17,396
131
17,527
10,617
28,144
18,873
2,275
6,996
1,538
5,458
(29)
5,429
5,051
$
$
$ 14,728
118
14,846
9,456
24,302
14,906
1,977
7,419
1,581
5,838
(13)
5,825
5,501
$
$
$ 12,494
106
12,600
10,227
22,827
13,728
(1,173)
10,272
2,287
7,985
(22)
7,963
7,605
$
$
$
$
3.27
3.27
1.93
31.13
43.28
1,543
1,543
$
3.69
3.69
1.88
28.71
43.61
1,489
1,490
.82%
.98%
10.8
2.90
66.7
.50
12.6
2.72
61.4
.32
5.11
5.10
1.76
32.71
56.17
1,489
1,490
1.43%
16.0
2.49
60.4
.23
$ 381,275
2,461
162,757
605,199
663,440
107,768
505,663
34,141
44,142
53,660
$ 373,835
153,751
663,491
512,312
51,480
55,306
$ 333,573
3,829
169,442
545,343
592,149
120,394
462,384
25,740
33,114
50,416
$ 388,213
161,650
674,805
524,976
39,829
50,766
$ 296,965
8,024
154,702
506,141
556,532
127,204
434,281
14,774
36,682
53,810
$ 312,028
174,821
573,284
456,083
32,125
54,918
$
1,494
7,839
$
1,016
7,404
$
878
6,155
2.10%
1.91%
1.97%
9.9%
11.5
13.7
8.1
6.6
5.3
7.7
9.7
8.4%
9.8
11.9
7.9
6.4
4.5
6.0
10.0%
11.6
13.4
8.6
6.9
6.8
9.2
8.1
9.6
(a) Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.
(b) See Non-GAAP Financial Measures beginning on page 59.
(c) Calculated as U.S. Bancorp common shareholders’ equity divided by common shares outstanding at end of the period.
(d) Excludes unrealized gains and losses on available-for-sale investment securities and any premiums or discounts recorded related to the transfer of investment securities at fair
value from available-for-sale to held-to-maturity.
23
Capital Management At December 31, 2023, all of the
Company’s regulatory capital ratios exceeded regulatory
“well-capitalized” requirements.
• The Company’s common equity tier 1 capital ratio was 9.9
percent at December 31, 2023.
The Company's financial strength, diversified business
model and strong credit quality position it well for 2024. The
Company believes it is well positioned to continue to deliver
strong returns on tangible common equity, is appropriately
reserved for a potential macroeconomic slowdown, and
remains confident in its strategy for future growth and
expansion. The Company is seeing positive momentum
across its fee-based businesses, as it deepens its most
profitable client relationships and further executes on
revenue growth opportunities resulting from the MUB
acquisition. The Company is working to effectively manage
its balance sheet for continued capital-efficient growth as it
maintains its disciplined, through-the-cycle approach to
credit risk management. The Company's growth strategy
remains focused on supporting the needs of and creating
value for its customers, communities and shareholders.
Earnings Summary The Company reported net income
attributable to U.S. Bancorp of $5.4 billion in 2023, or $3.27
per diluted common share, compared with $5.8 billion, or
$3.69 per diluted common share, in 2022. Return on
average assets and return on average common equity were
0.82 percent and 10.8 percent, respectively, in 2023,
compared with 0.98 percent and 12.6 percent, respectively,
in 2022. The results for 2023 included the full financial
results of the acquisition of MUB, while the results for 2022
reflected one month of operating results of MUB. The results
for 2023 included the impacts of $1.0 billion of merger and
integration charges, $734 million of FDIC special
assessment charges, $243 million of provision for credit
losses related to balance sheet repositioning and capital
management actions, $140 million of securities losses
related to balance sheet repositioning, a $110 million
charitable contribution to support a community benefit plan
related to the acquisition, and a $70 million discrete tax
benefit. Combined, these items decreased 2023 diluted
earnings per common share by $1.04. The results for 2022
included $399 million of losses primarily resulting from
interest rate economic hedges related to the MUB
acquisition, $329 million of merger and integration charges,
and $791 million of provision for credit losses related to
acquired loans and balance sheet repositioning and capital
management actions. Combined, these items decreased
2022 diluted earnings per common share by $0.76.
Total net revenue for 2023 was $3.8 billion (15.8 percent)
higher than 2022, reflecting an 18.1 percent increase in net
interest income and a 12.3 percent increase in noninterest
income. The increase in net interest income from the prior
year was primarily due to higher interest rates on earning
assets and the MUB acquisition, partially offset by the
impact of deposit mix and pricing. The increase in
noninterest income reflected higher commercial products
revenue, payment services revenue, trust and investment
management fees and other noninterest income, partially
offset by losses on investment securities.
Noninterest expense in 2023 was $4.0 billion (26.6
percent) higher than 2022, reflecting increased merger and
integration charges and operating expenses related to the
MUB acquisition, including core deposit intangible
amortization expense, as well as increases in compensation
and employee benefits expense to support business growth
and higher other noninterest expense due to the FDIC
special assessment charges.
Results for 2022 Compared With 2021 For discussion
related to changes in financial condition and results of
operations for 2022 compared with 2021, refer to
“Management’s Discussion and Analysis” in the Company’s
Annual Report for the year ended December 31, 2022,
included as Exhibit 13 to the Company’s Form 10-K filed
with the Securities and Exchange Commission ("SEC") on
February 27, 2023.
Statement of Income Analysis
Net Interest Income Net interest income, on a taxable-
equivalent basis, was $17.5 billion in 2023, compared with
$14.8 billion in 2022. The $2.7 billion (18.1 percent)
increase in 2023 compared with 2022 was primarily due to
higher interest rates on earning assets and the acquisition of
MUB, partially offset by the impact of deposit mix and
pricing. Average earning assets were $59.9 billion (11.0
percent) higher in 2023, compared with 2022, reflecting
increases in loans and interest-bearing deposits with banks,
partially offset by a decrease in investment securities. The
net interest margin, on a taxable-equivalent basis, in 2023
was 2.90 percent, compared with 2.72 percent in 2022. The
increase in the net interest margin in 2023, compared with
2022, was primarily due to the impact of higher rates on
earning assets and the acquisition of MUB, partially offset
by the impact of deposit mix and pricing. Refer to the
“Interest Rate Risk Management” section for further
information on the sensitivity of the Company’s net interest
income to changes in interest rates.
24 U.S. Bancorp 2023 Annual Report
TABLE 2 Analysis of Net Interest Income(a)
Year Ended December 31 (Dollars in Millions)
Components of Net Interest Income
2023
2022
2021
2023
v 2022
2022
v 2021
Income on earning assets (taxable-equivalent basis)
$ 30,144
$ 18,066
$ 13,593
$ 12,078
$ 4,473
Expense on interest-bearing liabilities (taxable-equivalent basis)
12,617
3,220
993
9,397
2,227
Net interest income (taxable-equivalent basis)(b)
$ 17,527
$ 14,846
$ 12,600
$ 2,681
$ 2,246
Net interest income, as reported
Average Yields and Rates Paid
$ 17,396
$ 14,728
$ 12,494
$ 2,668
$ 2,234
Earning assets yield (taxable-equivalent basis)
4.98%
3.31%
2.69%
1.67%
Rate paid on interest-bearing liabilities (taxable-equivalent basis)
Gross interest margin (taxable-equivalent basis)
Net interest margin (taxable-equivalent basis)
2.65
2.33%
2.90%
.80
2.51%
2.72%
.28
1.85
2.41%
2.49%
(.18) %
.18%
.62%
.52
.10%
.23%
Average Balances
Investment securities(c)
Loans
Earning assets
Noninterest-bearing deposits
Interest-bearing deposits
Total deposits
Interest-bearing liabilities
$ 162,757
$ 169,442
$ 154,702
$ (6,685) $ 14,740
381,275
333,573
296,965
47,702
36,608
605,199
545,343
506,141
59,856
39,202
107,768
120,394
127,204
(12,626)
(6,810)
397,895
341,990
307,077
55,905
34,913
505,663
462,384
434,281
43,279
28,103
476,178
400,844
358,533
75,334
42,311
(a) Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent.
(b) See Non-GAAP Financial Measures beginning on page 59.
(c) Excludes unrealized gains and losses on available-for-sale investment securities and any premiums or discounts recorded related to the transfer of investment securities at fair
value from available-for-sale to held-to-maturity.
Average total loans were $381.3 billion in 2023,
compared with $333.6 billion in 2022. The $47.7 billion (14.3
percent) increase was due to growth in the Company's
legacy loan portfolio as well as balances from the MUB
acquisition. Increases in residential mortgages, commercial
real estate loans, commercial loans and credit card loans
were partially offset by a decrease in other retail loans.
Average residential mortgages increased $31.2 billion (36.8
percent), driven by the impact of the MUB acquisition,
partially offset by the impact of a sale of residential
mortgages in the second quarter of 2023 as part of balance
sheet repositioning and capital management actions.
Average commercial real estate loans increased $13.5
billion (33.0 percent), primarily due to the impact of the MUB
acquisition. Average commercial loans increased $11.1
billion (9.0 percent), primarily due to higher utilization driven
by working capital needs of corporate customers, slower
payoffs given higher volatility in the capital markets, as well
as core growth and the impact related to the MUB
acquisition. Average credit card loans increased $3.1 billion
(13.2 percent) primarily due to higher spend volume and
lower payment rates. Average other retail loans decreased
$11.2 billion (18.5 percent), driven by lower auto loans
primarily due to balance sheet repositioning and capital
management actions, along with lower installment loans.
Average investment securities in 2023 were $6.7 billion
(3.9 percent) lower than in 2022, primarily due to balance
sheet repositioning and liquidity management.
Average total deposits for 2023 were $43.3 billion (9.4
percent) higher than 2022. Average total savings deposits
were $39.8 billion (12.8 percent) higher in 2023, compared
with 2022, driven by increases in Wealth, Corporate,
Commercial and Institutional Banking, and Consumer and
Business Banking balances, including the impact of the
MUB acquisition. Average time deposits for 2023 were
$16.1 billion (52.7 percent) higher than 2022, mainly due to
the acquisition of MUB and increases in Consumer and
Business Banking balances. Changes in time deposits are
primarily related to those deposits managed as an
alternative to other funding sources, based largely on
relative pricing and liquidity characteristics. Average
noninterest-bearing deposits were $12.6 billion (10.5
percent) lower in 2023, compared with 2022, driven by
decreases in Wealth, Corporate, Commercial and
Institutional Banking balances, partially offset by the impact
of the MUB acquisition.
25
TABLE 3 Net Interest Income — Changes Due to Rate and Volume(a)
Year Ended December 31 (Dollars in Millions)
Volume Yield/Rate
Total
Volume Yield/Rate
Total
2023 v 2022
2022 v 2021
Increase (decrease) in
Interest Income
Investment securities
Loans held for sale
Loans
Commercial
Commercial real estate
Residential mortgages
Credit card
Other retail
Total loans
Interest-bearing deposits with banks
Other earning assets
Total earning assets
Interest Expense
Interest-bearing deposits
Interest checking
Money market savings
Savings accounts
Time deposits
Total interest-bearing deposits
Short-term borrowings
Long-term debt
Total interest-bearing liabilities
Increase (decrease) in net interest income
$
(136) $ 1,245 $ 1,109 $
231 $
792 $ 1,023
(72)
18
(54)
(121)
90
(31)
389
546
1,019
340
(424)
3,933
4,322
547
1,109
1,656
1,183
1,729
511
506
731
1,530
846
307
73
336
193
50
363
(38)
112
116
436
298
305
166
1,870
6,864
8,734
1,199
1,662
2,861
313
1,709
2,022
76
191
267
(8)
8
525
95
517
103
2,051 10,027 12,078
1,309
3,164
4,473
28
1,029
1,057
388
4,046
4,434
(2)
82
80
1,140
1,332
6,297
6,903
1,223
1,409
192
606
186
259
3
16
1
23
43
52
250
253
1,005
1,021
2
3
252
275
1,509
1,552
446
236
498
177
826
1,085
(59)
1,051
8,346
9,397
36
2,191
2,227
$ 1,000 $ 1,681 $ 2,681 $ 1,273 $
973 $ 2,246
(a) This table shows the components of the change in net interest income by volume and rate on a taxable-equivalent basis based on a federal income tax rate of 21 percent. This
table does not take into account the level of noninterest-bearing funding, nor does it fully reflect changes in the mix of assets and liabilities. The change in interest not solely due to
changes in volume or rates has been allocated on a pro-rata basis to volume and yield/rate.
Provision for Credit Losses The provision for credit losses
reflects changes in economic conditions and the size and
credit quality of the entire portfolio of loans. The Company
maintains an allowance for credit losses considered
appropriate by management for expected losses, based on
factors discussed in the “Analysis and Determination of
Allowance for Credit Losses” section.
The provision for credit losses was $2.3 billion in 2023,
compared with $2.0 billion in 2022. The $298 million (15.1
percent) increase was driven by normalizing credit losses
and stress in commercial real estate, partially offset by
relative stability in the economic outlook. The provision for
credit losses in 2023 included the impact of balance sheet
repositioning and capital management actions taken in the
second quarter of 2023. The provision for credit losses in
2022 included the impacts of recognizing an initial provision
for credit losses related to the MUB acquisition and balance
sheet optimization activities in the fourth quarter of 2022,
along with strong loan growth in the legacy portfolio and
increasing economic uncertainty. Net charge-offs increased
$842 million (79.2 percent) in 2023, compared with 2022,
reflecting higher charge-offs in most loan categories
consistent with normalizing credit conditions and adverse
conditions in commercial real estate.
Refer to “Corporate Risk Profile” for further information
on the provision for credit losses, net charge-offs,
nonperforming assets and other factors considered by the
Company in assessing the credit quality of the loan portfolio
and establishing the allowance for credit losses.
26 U.S. Bancorp 2023 Annual Report
TABLE 4 Noninterest Income
Year Ended December 31 (Dollars in Millions)
Card revenue
Corporate payment products revenue
Merchant processing services
Trust and investment management fees
Service charges
Commercial products revenue
Mortgage banking revenue
Investment products fees
Securities gains (losses), net
Other
Total noninterest income
2023
2022
2021
$ 1,630
$ 1,512
$ 1,507
2023
v 2022
7.8%
8.7
5.1
575
1,449
1,832
11.3
1,338
.6
1,102
24.2
1,361
239
103
721
2.5
18.7
*
*
2022
v 2021
.3%
21.4
9.0
20.6
(3.0)
.3
(61.3)
(1.7)
(80.6)
(62.1)
759
1,659
2,459
1,306
1,372
540
279
(145)
758
698
1,579
2,209
1,298
1,105
527
235
20
273
$10,617
$ 9,456
(a) $10,227
12.3 %
(7.5) %
* Not meaningful
(a) Includes $399 million of losses primarily related to interest rate economic hedges, entered into after regulatory approval for the MUB acquisition was obtained, to manage the
impact of interest rate volatility on capital prior to closing the transaction.
Noninterest Income Noninterest income in 2023 was $10.6
billion, compared with $9.5 billion in 2022. The $1.2 billion
(12.3 percent) increase in 2023 from 2022 reflected higher
commercial products revenue, payment services revenue,
trust and investment management fees and other
noninterest income, partially offset by losses on the sale of
investment securities related to balance sheet repositioning.
Commercial products revenue increased 24.2 percent
primarily due to higher trading revenue, commercial loan
fees, corporate bond fees and the acquisition of MUB.
Payment services revenue increased in 2023, compared
TABLE 5 Noninterest Expense
Year Ended December 31 (Dollars in Millions)
Compensation and employee benefits
Net occupancy and equipment
Professional services
Marketing and business development
Technology and communications
Other intangibles
Other
Total before merger and integration charges
Merger and integration charges
Total noninterest expense
Efficiency ratio(a)
* Not meaningful
(a) See Non-GAAP Financial Measures beginning on page 59.
with 2022, driven by a 7.8 percent increase in card revenue
and a 5.1 percent increase in merchant processing services
revenue, both due to higher spend volume. Corporate
payment products revenue increased 8.7 percent due to
product mix. Trust and investment management fees
increased 11.3 percent primarily due to the acquisition of
MUB and core business growth. Other noninterest income
was higher in 2023, compared with 2022, primarily due to
the impact in 2022 of interest rate economic hedges related
to the MUB acquisition.
2023
2022
2021
2023
v 2022
2022
v 2021
$10,416
$ 9,157
$ 8,728
13.7%
4.9%
1,266
1,096
1,048
560
726
529
456
492
366
2,049
1,726
1,728
636
215
159
2,211
1,398
1,207
17,864
14,577
13,728
1,009
329
—
15.5
5.9
59.2
18.7
*
58.2
22.5
*
4.6
7.5
24.6
(.1)
35.2
15.8
6.2
*
$18,873
$14,906
$13,728
26.6%
8.6%
66.7%
61.4%
60.4%
27
Noninterest Expense Noninterest expense in 2023 was
$18.9 billion, compared with $14.9 billion in 2022. The
Company’s efficiency ratio was 66.7 percent in 2023,
compared with 61.4 percent in 2022. The $4.0 billion (26.6
percent) increase in noninterest expense in 2023 over 2022
reflected the impact of increased merger and integration
charges, as well as operating expenses related to the MUB
acquisition, higher compensation and employee benefits
expense, and higher other intangibles and other noninterest
expense. Compensation and employee benefits expense
increased 13.7 percent in 2023 over 2022, primarily due to
MUB expense as well as merit increases and hiring to
support business growth. Other intangibles expense
increased primarily due to the core deposit intangible
created as a result of the MUB acquisition. Other
noninterest expense increased 58.2 percent primarily due to
the $734 million FDIC special assessment charge.
Income Tax Expense The provision for income taxes was
$1.4 billion (an effective rate of 20.5 percent) in 2023,
compared with $1.5 billion (an effective rate of 20.0 percent)
in 2022.
For further information on income taxes, refer to Note 19
of the Notes to Consolidated Financial Statements.
Balance Sheet Analysis
Average earning assets were $605.2 billion in 2023,
compared with $545.3 billion in 2022. The increase in
average earning assets of $59.9 billion (11.0 percent) was
primarily due to increases in loans of $47.7 billion (14.3
percent) and interest-bearing deposits with banks of $17.6
billion (55.9 percent), partially offset by a decrease in
investment securities of $6.7 billion (3.9 percent).
For average balance information, refer to the "Net
Interest Income" section in Statement of Income Analysis
and Consolidated Daily Average Balance Sheet and Related
Yields and Rates on page 138.
Loans The Company’s loan portfolio was $373.8 billion at
December 31, 2023, compared with $388.2 billion at
December 31, 2022, a decrease of $14.4 billion (3.7
percent). The decrease was driven by decreases in other
retail loans of $10.5 billion (19.1 percent), commercial loans
of $3.8 billion (2.8 percent), commercial real estate loans of
$2.0 billion (3.7 percent) and residential mortgages of $315
million (0.3 percent), partially offset by an increase in credit
card loans of $2.3 billion (8.6 percent). Table 6 provides a
summary of the loan distribution by product type, while
Table 7 provides a summary of the selected loan maturity
distribution by loan category.
28 U.S. Bancorp 2023 Annual Report
TABLE 6 Loan Portfolio Distribution
At December 31 (Dollars in Millions)
Commercial
Commercial
Lease financing
Total commercial
Commercial Real Estate
Commercial mortgages
Construction and development
Total commercial real estate
Residential Mortgages
Residential mortgages
Home equity loans, first liens
Total residential mortgages
Credit Card
Other Retail
Retail leasing
Home equity and second mortgages
Revolving credit
Installment
Automobile
Total other retail
Total loans
TABLE 7 Selected Loan Maturity Distribution
2023
2022
Amount
Percent
of Total
Amount
Percent
of Total
$ 127,676
34.2% $ 131,128
33.8%
4,205
131,881
41,934
11,521
53,455
108,605
6,925
115,530
28,560
4,135
13,056
3,668
13,889
9,661
1.1
35.3
11.2
3.1
14.3
29.0
1.9
30.9
7.6
1.1
3.5
1.0
3.7
2.6
44,409
11.9
4,562
135,690
43,765
11,722
55,487
107,858
7,987
115,845
26,295
5,519
12,863
3,983
14,592
17,939
54,896
1.2
35.0
11.3
3.0
14.3
27.8
2.0
29.8
6.8
1.4
3.3
1.0
3.8
4.6
14.1
$ 373,835
100.0% $ 388,213
100.0%
One Year
or Less
Over One
Through
Five Years
Over Five
Through
Fifteen Years
Over Fifteen
Years
Total
$
37,097 $
85,548 $
9,055 $
181
$
131,881
14,724
23,149
182
2,125
28,560
—
6,870
6,572
—
8,712
(a)
106,651
—
2,367
12,561
13,342
16,139
53,455
115,530
28,560
44,409
$
82,930 $
123,383 $
35,839 $
131,683
$
373,835
At December 31, 2023 (Dollars in Millions)
Commercial
Commercial real estate
Residential mortgages
Credit card
Other retail
Total loans
Total of loans due after one year with:
Commercial
Commercial real estate
Residential mortgages
Credit card
Other retail
Total
(a) Primarily represents construction loans for single-family residences or loans guaranteed by the Small Business Administration.
Predetermined
Interest Rates
Floating
Interest Rates
$
13,786
$
80,998
12,585
63,080
—
29,359
26,147
52,267
—
12,683
$
118,810
$
172,095
29
TABLE 8 Commercial Loans by Industry Group and Geography
At December 31 (Dollars in Millions)
Industry Group
Financial institutions
Real-estate related
Personal, professional and commercial services
Healthcare
Automotive
Media and entertainment
Capital goods
Retail
Transportation
Food and beverage
Technology
Energy
Power
Metals and mining
Education and non-profit
State and municipal government
Building materials
Agriculture
Other
Total
Geography
California
New York
Texas
Illinois
Minnesota
Ohio
Wisconsin
Colorado
Washington
Missouri
All other states
Total
Commercial Commercial loans, including lease financing,
decreased $3.8 billion (2.8 percent) at December 31, 2023,
compared with December 31, 2022, primarily due to
2023
2022
Loans
Percent
of Total
Loans
Percent
of Total
$ 20,016
15.2% $ 17,381
12.8%
19,108
10,273
8,240
6,678
6,265
5,315
4,970
4,467
4,053
3,963
3,744
3,435
3,332
3,330
3,217
3,008
1,778
14.5
7.8
6.2
5.1
4.8
4.0
3.8
3.4
3.1
3.0
2.8
2.6
2.5
2.5
2.4
2.3
1.3
19,539
10,106
8,536
7,154
5,867
5,332
5,128
4,988
5,574
5,425
3,811
4,945
3,700
3,609
3,240
3,293
1,909
14.4
7.5
6.3
5.3
4.3
3.9
3.8
3.7
4.1
4.0
2.8
3.6
2.7
2.7
2.4
2.4
1.4
16,689
12.7
16,153
11.9
$ 131,881
100.0% $ 135,690
100.0%
$ 21,275
16.1% $ 23,736
17.5%
9,393
9,092
6,861
6,365
4,291
4,129
3,675
3,604
3,454
7.1
6.9
5.2
4.8
3.3
3.1
2.8
2.7
2.6
8,989
10,244
7,626
6,707
4,497
4,112
3,613
3,721
3,503
6.6
7.6
5.6
4.9
3.3
3.0
2.7
2.7
2.6
59,742
45.4
58,942
43.5
$ 131,881
100.0% $ 135,690
100.0%
decreased demand as corporate customers accessed the
capital markets.
30 U.S. Bancorp 2023 Annual Report
TABLE 9 Commercial Real Estate Loans by Property Type and Geography
At December 31 (Dollars in Millions)
Property Type
Multi-family
Business owner occupied
Office
Industrial
Residential land and development
Retail
Lodging
Other
Total
Geography
California
Washington
Texas
Florida
Oregon
Illinois
Minnesota
Colorado
New York
Wisconsin
All other states
Total
Commercial Real Estate The Company’s portfolio of
commercial real estate loans, which includes commercial
mortgages and construction and development loans,
decreased $2.0 billion (3.7 percent) at December 31, 2023,
compared with December 31, 2022. The decrease was
primarily due to payoffs exceeding a reduced level of new
originations. Table 9 provides a summary of commercial real
estate loans by property type and geographical location.
The Company’s commercial mortgage and construction
and development loans had unfunded commitments of
2023
2022
Loans
Percent
of Total
Loans
Percent
of Total
$ 17,786
33.3% $ 16,722
30.1%
10,795
6,948
5,608
4,419
3,806
1,661
2,432
20.2
13.0
10.5
8.3
7.1
3.1
4.5
11,487
7,239
5,258
4,454
4,011
1,932
4,384
20.7
13.1
9.5
8.0
7.2
3.5
7.9
$ 53,455
100.0% $ 55,487
100.0%
$ 20,130
37.7% $ 22,250
40.1%
4,245
2,669
1,843
1,809
1,516
1,497
1,476
1,273
1,266
7.9
5.0
3.4
3.4
2.8
2.8
2.8
2.4
2.4
4,235
2,337
1,276
1,622
1,830
1,470
1,648
2,547
1,236
7.6
4.2
2.3
2.9
3.3
2.7
3.0
4.6
2.2
15,731
29.4
15,036
27.1
$ 53,455
100.0% $ 55,487
100.0%
$10.6 billion and $13.8 billion at December 31, 2023 and
2022, respectively.
The Company also finances the operations of real estate
developers and other entities with operations related to real
estate. These loans are not secured directly by real estate
but have similar characteristics to commercial real estate
loans. These loans were included in the commercial loan
category and totaled $19.1 billion and $19.5 billion at
December 31, 2023 and 2022, respectively.
31
TABLE 10 Residential Mortgages by Geography
2023
2022
Loans
Percent
of Total
Loans
$ 52,584
45.5% $ 53,967
Percent
of Total
46.6%
6,678
3,881
3,767
3,630
3,600
3,287
3,134
2,726
2,680
5.8
3.4
3.3
3.1
3.1
2.8
2.7
2.4
2.3
6,343
4,192
3,946
3,592
3,692
2,801
3,178
2,315
2,536
5.5
3.6
3.4
3.1
3.2
2.4
2.7
2.0
2.2
29,563
25.6
29,283
25.3
$ 115,530
100.0% $ 115,845
100.0%
Other Retail Total other retail loans, which include retail
leasing, home equity and second mortgages and other retail
loans, decreased $10.5 billion (19.1 percent) at
December 31, 2023, compared with December 31, 2022,
driven by decreases in auto loans, retail leasing balances
and installment loans. The decrease in auto loans was
primarily driven by a sale of indirect auto loans as part of
balance sheet repositioning and capital management
actions taken in the second quarter of 2023. Tables 10, 11
and 12 provide a geographic summary of residential
mortgages, credit card loans and other retail loans
outstanding, respectively, as of December 31, 2023 and
2022.
2023
2022
Loans
Percent
of Total
Loans
$
2,928
10.3% $
2,609
1,719
1,472
1,406
1,363
1,333
1,177
964
948
918
6.0
5.2
4.9
4.8
4.7
4.1
3.3
3.3
3.2
1,584
1,330
1,320
1,252
1,257
1,029
862
925
850
Percent
of Total
9.9%
6.0
5.1
5.0
4.8
4.8
3.9
3.3
3.5
3.2
14,332
50.2
13,277
50.5
$ 28,560
100.0% $ 26,295
100.0%
At December 31 (Dollars in Millions)
California
Washington
Colorado
Florida
Illinois
Minnesota
Texas
Arizona
New York
Massachusetts
All other states
Total
Residential Mortgages Residential mortgages held in the
loan portfolio at December 31, 2023, decreased $315 million
(0.3 percent) compared to December 31, 2022, driven by a
sale of residential mortgages in the second quarter of 2023
as part of balance sheet repositioning and capital
management actions, partially offset by originations.
Residential mortgages originated and placed in the
Company’s loan portfolio include jumbo mortgages and
branch-originated first lien home equity loans to borrowers
with high credit quality.
Credit Card Total credit card loans increased $2.3 billion
(8.6 percent) at December 31, 2023, compared with
December 31, 2022, primarily driven by higher spend
volume and lower payment rates.
TABLE 11 Credit Card Loans by Geography
At December 31 (Dollars in Millions)
California
Texas
Illinois
Ohio
Florida
Minnesota
Wisconsin
Colorado
Michigan
Missouri
All other states
Total
32 U.S. Bancorp 2023 Annual Report
TABLE 12 Other Retail Loans by Geography
At December 31 (Dollars in Millions)
California
Texas
Florida
Minnesota
Washington
Ohio
Illinois
New York
Colorado
Oregon
All other states
Total
The Company generally retains portfolio loans through
maturity; however, the Company’s intent may change over
time based upon various factors such as ongoing asset/
liability management activities, assessment of product
profitability, credit risk, liquidity needs, and capital
implications. If the Company’s intent or ability to hold an
existing portfolio loan changes, it is transferred to loans held
for sale.
Loans Held for Sale Loans held for sale, consisting
primarily of residential mortgages to be sold in the
TABLE 13
Investment Securities
2023
2022
Loans
Percent
of Total
Loans
$
9,506
21.4% $ 11,098
Percent
of Total
20.2%
3,505
2,729
1,943
1,800
1,752
1,704
1,444
1,440
1,313
7.9
6.1
4.4
4.1
3.9
3.8
3.3
3.2
3.0
5,149
3,449
2,527
1,999
2,083
2,180
1,878
1,673
1,414
9.4
6.3
4.6
3.6
3.8
4.0
3.4
3.0
2.6
17,273
38.9
21,446
39.1
$ 44,409
100.0% $ 54,896
100.0%
secondary market, were $2.2 billion at December 31, 2023
and December 31, 2022. Almost all of the residential
mortgage loans the Company originates or purchases for
sale follow guidelines that allow the loans to be sold into
existing, highly liquid secondary markets, in particular in
government agency transactions and to government
sponsored enterprises (“GSEs”).
2023
2022
At December 31 (Dollars in Millions)
Held-to-maturity
U.S. Treasury and agencies
Mortgage-backed securities(a)
Other
Total held-to-maturity
Available-for-sale
U.S. Treasury and agencies
Mortgage-backed securities(a)
Asset-backed securities(a)
Other
Total available-for-sale (d)
Obligations of state and political subdivisions(b)(c)
10,867
Weighted-
Average Weighted-
Amortized
Cost Fair Value
Maturity in
Years
Average Amortized
Yield(e)
Cost Fair Value
Weighted-
Average Weighted-
Average
Yield(e)
Maturity in
Years
$ 1,345 $ 1,310
82,692
72,770
8
8
$ 84,045 $ 74,088
$ 21,768 $ 19,542
36,895
33,427
6,713
24
6,724
9,989
24
2.3
8.8
2.8
8.7
5.9
6.3
2.2
9.9
1.7
6.3
2.85% $ 1,344 $ 1,293
2.21
2.56
87,396
76,581
—
—
2.22% $ 88,740 $ 77,874
2.19% $ 24,801 $ 22,033
40,803
36,423
4,356
4,323
3.09
5.33
3.75
4.51
11,484
10,125
13.6
6
6
3.3
9.3
—
9.2
7.1
6.6
1.3
0.1
7.4
2.85%
2.17
—
2.18%
2.43%
2.83
4.59
3.76
1.99
2.94%
$ 76,267 $ 69,706
3.12% $ 81,450 $ 72,910
(a) Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities that take into account anticipated future
prepayments.
(b) Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, and yield to
maturity if the security is purchased at par or a discount.
(c) Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and the contractual maturity
date for securities with a fair value equal to or below par.
(d) Amortized cost excludes portfolio level basis adjustments of $335 million at December 31, 2023.
(e) Weighted-average yields for obligations of state and political subdivisions are presented on a fully-taxable equivalent basis based on a federal income tax rate of 21 percent. Yields
on investment securities are computed based on amortized cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair
value from available-for-sale to held-to-maturity.
33
Investment Securities The Company uses its investment
securities portfolio to manage interest rate risk, provide
liquidity (including the ability to meet regulatory
requirements), generate interest and dividend income, and
as collateral for public deposits and wholesale funding
sources. While the Company intends to hold its investment
securities indefinitely, it may sell available-for-sale
investment securities in response to structural changes in
the balance sheet and related interest rate risk and to meet
liquidity requirements, among other factors.
Investment securities totaled $153.8 billion at
December 31, 2023, compared with $161.7 billion at
December 31, 2022. The $7.9 billion (4.9 percent) decrease
was primarily due to $10.5 billion of net investment sales
and maturities, partially offset by a $1.6 billion favorable
change in net unrealized gains (losses) on available-for-sale
investment securities. Investment securities by type are
shown in Table 13.
The Company’s available-for-sale investment securities
are carried at fair value with changes in fair value reflected
in other comprehensive income (loss) unless a portion of a
security’s unrealized loss is related to credit and an
allowance for credit losses is necessary. At December 31,
2023, the Company’s net unrealized losses on available-for-
sale investment securities were $6.9 billion ($5.2 billion net-
of-tax), compared with net unrealized losses of $8.5 billion
($6.4 billion net-of-tax) at December 31, 2022. The
favorable change in net unrealized gains (losses) was
primarily due to increases in the fair value of mortgage-
backed, U.S. Treasury and agencies and state and political
subdivisions securities as a result of changes in interest
rates. Gross unrealized losses on available-for-sale
investment securities totaled $7.1 billion at December 31,
2023, compared with $8.6 billion at December 31, 2022.
When evaluating credit losses, the Company considers
various factors such as the nature of the investment
security, the credit ratings or financial condition of the
issuer, the extent of the unrealized loss, expected cash
flows of the underlying collateral, the existence of any
government or agency guarantees, and market conditions.
At December 31, 2023, the Company had no plans to sell
securities with unrealized losses, and believes it is more
likely than not that it would not be required to sell such
securities before recovery of their amortized cost.
Refer to Notes 5 and 22 in the Notes to Consolidated
Financial Statements for further information on investment
securities.
Deposits Total deposits were $512.3 billion at
December 31, 2023, compared with $525.0 billion at
December 31, 2022. The $12.7 billion (2.4 percent)
decrease in total deposits reflected a decrease in
noninterest-bearing deposits, partially offset by increases in
time deposits and total savings deposits.
Noninterest-bearing deposits at December 31, 2023,
decreased $47.8 billion (34.7 percent) from December 31,
2022. The decrease was driven by lower Wealth, Corporate,
Commercial and Institutional Banking, and Consumer and
Business Banking balances.
Time deposits at December 31, 2023, increased $19.3
billion (58.7 percent), compared with December 31, 2022,
driven by higher Consumer and Business Banking balances.
Changes in time deposits are primarily related to those
deposits managed as an alternative to other funding
sources, based largely on relative pricing and liquidity
characteristics.
Interest-bearing savings deposits increased $15.8 billion
(4.4 percent) at December 31, 2023, compared with
December 31, 2022. The increase was related to higher
money market deposit balances, partially offset by lower
savings account and interest checking deposit balances.
Money market deposit balances increased $51.4 billion
(34.7 percent), primarily due to higher Consumer and
Business Banking, and Wealth, Corporate, Commercial and
Institutional Banking balances. Savings account balances
decreased $28.6 billion (39.8 percent), driven by lower
Consumer and Business Banking balances. Interest
checking balances decreased $7.0 billion (5.2 percent)
primarily due to lower Wealth, Corporate, Commercial and
Institutional Banking balances.
34 U.S. Bancorp 2023 Annual Report
TABLE 14 Deposits
The composition of deposits was as follows:
At December 31 (Dollars in Millions)
Noninterest-bearing deposits
Interest-bearing deposits
Interest checking
Money market savings
Savings accounts
Total savings deposits
Domestic time deposits less than $250,000
Domestic time deposits greater than $250,000
Foreign time deposits
Total interest-bearing deposits
Total deposits(a)
2023
2022
Amount
Percent
of Total
Amount
$ 89,989
17.6% $ 137,743
127,453
199,378
43,219
370,050
35,700
15,336
1,237
24.9
38.9
8.4
72.2
7.0
3.0
.2
134,491
148,014
71,782
354,287
16,329
11,999
4,618
Percent
of Total
26.2%
25.6
28.2
13.7
67.5
3.1
2.3
.9
422,323
82.4
387,233
73.8
$ 512,312
100.0% $ 524,976
100.0%
(a) Includes $260.7 billion and $289.3 billion of deposits at December 31, 2023 and 2022, respectively, that are not subject to any federal, state or foreign deposit insurance program.
The maturity of domestic time deposits in excess of the insurance limit and those time deposits not subject to any federal, state or
foreign deposit insurance program at December 31, 2023 was as follows:
(Dollars in Millions)
Three months or less
Three months through six months
Six months through one year
Thereafter
Total
Borrowings The Company utilizes both short-term and
long-term borrowings as part of its asset/liability
management and funding strategies. Short-term borrowings,
which include federal funds purchased, commercial paper,
repurchase agreements, borrowings secured by high-grade
assets and other short-term borrowings, were $15.3 billion
at December 31, 2023, compared with $31.2 billion at
December 31, 2022. The $15.9 billion (51.1 percent)
decrease in short-term borrowings at December 31, 2023,
compared with December 31, 2022, was primarily due to
decreases in short-term Federal Home Loan Bank (“FHLB”)
advances.
Long-term debt was $51.5 billion at December 31, 2023,
compared with $39.8 billion at December 31, 2022. The
$11.7 billion (29.3 percent) increase was primarily due to
$8.2 billion of medium-term note issuances, a $7.1 billion
increase in FHLB advances, partially offset by $2.8 billion of
bank note repayments and maturities and a $936 million
repayment of the Company's debt obligation to MUFG.
Refer to Notes 13 and 14 of the Notes to Consolidated
Financial Statements for additional information regarding
short-term borrowings and long-term debt, and the “Liquidity
Risk Management” section for discussion of liquidity
management of the Company.
Domestic
Time
Deposits
Greater Than Foreign Time
Deposits
$250,000
Total
$
5,538 $
1,237 $
6,775
3,624
4,247
1,927
—
—
—
3,624
4,247
1,927
$ 15,336 $
1,237 $ 16,573
Corporate Risk Profile
Overview Managing risks is an essential part of
successfully operating a financial services company. The
Company’s Board of Directors has approved a risk
management framework which establishes governance and
risk management requirements for all risk-taking activities.
This framework includes Company and business line risk
appetite statements which set boundaries for the types and
amount of risk that may be undertaken in pursuing business
objectives and initiatives. The Board of Directors, primarily
through its Risk Management Committee, oversees
performance relative to the risk management framework,
risk appetite statements, and other policy requirements.
The Executive Risk Committee (“ERC”), which is chaired
by the Chief Risk Officer and includes the Chief Executive
Officer and other members of the executive management
team, oversees execution against the risk management
framework and risk appetite statements. The ERC focuses
on current and emerging risks, including strategic and
reputation risks, by directing timely and comprehensive
actions. Senior operating committees have also been
established, each responsible for overseeing a specified
category of risk.
Upon closing of the MUB acquisition, the Company’s risk
management framework applied to the legal entities
35
acquired from MUFG, including MUB, up until its merger into
USBNA. Updates were made to align the acquired entities
with the Company’s risk appetite and connect the elements
of their respective risk governance and reporting into the
Company’s existing risk management framework. Upon
completing the merger of MUB into USBNA, which occurred
on May 26, 2023, the MUB risk governance and reporting
framework is no longer applicable.
The Company’s most prominent risk exposures are
credit, interest rate, market, liquidity, operational,
compliance, strategic, and reputation. Credit risk is the risk
of loss associated with a change in the credit profile or the
failure of a borrower or counterparty to meet its contractual
obligations. Interest rate risk is the current or prospective
risk to earnings and capital, or market valuations, arising
from the impact of changes in interest rates. Market risk
arises from fluctuations in interest rates, foreign exchange
rates, and security prices that may result in changes in the
values of financial instruments, such as trading and
available-for-sale investment securities, mortgage loans
held for sale (“MLHFS”), mortgage servicing rights ("MSRs")
and derivatives that are accounted for on a fair value basis.
Liquidity risk is the risk that financial condition or overall
safety and soundness is adversely affected by the
Company’s inability, or perceived inability, to meet its cash
flow obligations in a timely and complete manner in either
normal or stressed conditions. Operational risk is the risk to
current or projected financial condition and resilience arising
from inadequate or failed internal processes or systems,
people (including human errors or misconduct), or adverse
external events, including the risk of loss resulting from
breaches in data security. Operational risk can also include
the risk of loss due to failures by third parties with which the
Company does business. Compliance risk is the risk that the
Company may suffer legal or regulatory sanctions, financial
losses, and reputational damage if it fails to adhere to
compliance requirements and the Company’s compliance
policies. Strategic risk is the risk to current or projected
financial condition and resilience arising from adverse
business decisions, poor implementation of business
decisions, or lack of responsiveness to changes in the
banking industry and operating environment. Reputation risk
is the risk to current or anticipated earnings, capital, or
franchise or enterprise value arising from negative public
opinion. This risk may impair the Company’s
competitiveness by affecting its ability to establish new
relationships or services, or continue serving existing
relationships. In addition to the risks identified above, other
risk factors exist that may impact the Company. Refer to
“Risk Factors” beginning on page 140 for a detailed
discussion of these factors.
The Company’s Board and management-level
governance committees are supported by a “three lines of
defense” model for establishing effective checks and
balances. The first line of defense, the business lines,
manages risks in conformity with established limits and
policy requirements. In turn, business line leaders and their
risk officers establish programs to ensure conformity with
these limits and policy requirements. The second line of
defense, which includes the Chief Risk Officer’s
organization as well as policy and oversight activities of
36 U.S. Bancorp 2023 Annual Report
corporate support functions, translates risk appetite and
strategy into actionable risk limits and policies. The second
line of defense monitors first line of defense conformity with
limits and policies, and provides reporting and escalation of
emerging risks and other concerns to senior management
and the Risk Management Committee of the Board of
Directors. The third line of defense, internal audit, is
responsible for providing the Audit Committee of the Board
of Directors and senior management with independent
assessment and assurance regarding the effectiveness of
the Company’s governance, risk management and control
processes.
Management regularly provides reports to the Risk
Management Committee of the Board of Directors. The Risk
Management Committee discusses with management the
Company’s risk management performance, and provides a
summary of key risks to the entire Board of Directors,
covering the status of existing matters, areas of potential
future concern and specific information on certain types of
loss events. The Risk Management Committee considers
quarterly reports by management assessing the Company’s
performance relative to the risk appetite statements and the
associated risk limits, including:
• Macroeconomic environment and other qualitative
considerations, such as regulatory and compliance
changes, litigation developments, geopolitical events, and
technology and cybersecurity;
• Credit measures, including adversely rated and
nonperforming loans, leveraged transactions, credit
concentrations and lending limits;
• Interest rate and market risk, including market value and
net income simulation, and trading-related Value at Risk
(“VaR”);
• Liquidity risk, including funding projections under various
stressed scenarios;
• Operational and compliance risk, including losses
stemming from events such as fraud, processing errors,
control breaches, breaches in data security or adverse
business decisions, as well as reporting on technology
performance, and various legal and regulatory
compliance measures;
• Capital ratios and projections, including regulatory
measures and stressed scenarios; and
• Strategic and reputation risk considerations, impacts and
responses.
Credit Risk Management The Company’s strategy for
credit risk management includes well-defined, centralized
credit policies, uniform underwriting criteria, and ongoing
risk monitoring and review processes for all commercial and
consumer credit exposures. The strategy also emphasizes
diversification on a geographic, industry and customer level,
regular credit examinations and management reviews of
loans exhibiting deterioration of credit quality. The Risk
Management Committee oversees the Company’s credit
risk management process.
In addition, credit quality ratings, as defined by the
Company, are an important part of the Company’s overall
credit risk management and evaluation of its allowance for
credit losses. Loans with a pass rating represent those
loans not classified on the Company’s rating scale for
problem credits, as minimal credit risk has been identified.
Loans with a special mention or classified rating, including
consumer lending and small business loans that are 90
days or more past due and still accruing, nonaccrual loans
and loans in a junior lien position that are current but are
behind a first lien position on nonaccrual, encompass all
loans held by the Company that it considers to have a
potential or well-defined weakness that may put full
collection of contractual cash flows at risk. The Company’s
internal credit quality ratings for consumer loans are
primarily based on delinquency and nonperforming status,
except for a limited population of larger loans within those
portfolios that are individually evaluated. For this limited
population, the determination of the internal credit quality
rating may also consider collateral value and customer cash
flows. Refer to Notes 1 and 6 in the Notes to Consolidated
Financial Statements for further discussion of the
Company’s loan portfolios including internal credit quality
ratings.
The Company categorizes its loan portfolio into two
segments, which is the level at which it develops and
documents a systematic methodology to determine the
allowance for credit losses. The Company’s two loan
portfolio segments are commercial lending and consumer
lending.
The commercial lending segment includes loans and
leases made to small business, middle market, large
corporate, commercial real estate, financial institution, non-
profit and public sector customers. Key risk characteristics
relevant to commercial lending segment loans include the
industry and geography of the borrower’s business, purpose
of the loan, repayment source, borrower’s debt capacity and
financial flexibility, loan covenants, and nature of pledged
collateral, if any, as well as macroeconomic factors such as
unemployment rates, gross domestic product levels,
corporate bond spreads and long-term interest rates. These
risk characteristics, among others, are considered in
determining estimates about the likelihood of default by the
borrowers and the severity of loss in the event of default.
The Company considers these risk characteristics in
assigning internal risk ratings to, or forecasting losses on,
these loans, which are the significant factors in determining
the allowance for credit losses for loans in the commercial
lending segment.
The consumer lending segment represents loans and
leases made to consumer customers, including residential
mortgages, credit card loans, and other retail loans such as
revolving consumer lines, auto loans and leases and home
equity loans and lines. Home equity or second mortgage
loans are junior lien closed-end accounts fully disbursed at
origination. These loans typically are fixed rate loans,
secured by residential real estate, with a 10- or 15-year
fixed payment amortization schedule. Home equity lines are
revolving accounts giving the borrower the ability to draw
and repay balances repeatedly, up to a maximum
commitment, and are secured by residential real estate.
These include accounts in either a first or junior lien
position. Typical terms on home equity lines in the portfolio
are variable rates benchmarked to the prime rate, with a 10-
year draw period during which a minimum payment is
equivalent to the monthly interest, followed by a 20-year
amortization period. At December 31, 2023, substantially all
of the Company’s home equity lines were in the draw
period. Key risk characteristics relevant to consumer lending
segment loans primarily relate to the borrowers’ capacity
and willingness to repay and include unemployment rates,
consumer bankruptcy filings and other macroeconomic
factors, customer payment history and credit scores, and in
some cases, updated loan-to-value (“LTV”) information
reflecting current market conditions on real estate-based
loans. These and other risk characteristics are reflected in
forecasts of delinquency levels, bankruptcies and losses
which are the primary factors in determining the allowance
for credit losses for the consumer lending segment.
The Company further disaggregates its loan portfolio
segments into various classes based on their underlying risk
characteristics. The two classes within the commercial
lending segment are commercial loans and commercial real
estate loans. The three classes within the consumer lending
segment are residential mortgages, credit card loans and
other retail loans.
Because business processes and credit risks associated
with unfunded credit commitments are essentially the same
as for loans, the Company utilizes similar processes to
estimate its liability for unfunded credit commitments. The
Company also engages in non-lending activities that may
give rise to credit risk, including derivative transactions for
balance sheet hedging purposes, foreign exchange
transactions, deposit overdrafts and interest rate contracts
for customers, investments in securities and other financial
assets, and settlement risk, including Automated Clearing
House transactions and the processing of credit card
transactions for merchants. These activities are subject to
credit review, analysis and approval processes.
Economic and Other Factors In evaluating its credit risk,
the Company considers changes, if any, in underwriting
activities, the loan portfolio composition (including product
mix and geographic, industry or customer-specific
concentrations), collateral values, trends in loan
performance and macroeconomic factors, such as changes
in unemployment rates, gross domestic product levels,
inflation, interest rates and consumer bankruptcy filings.
During 2023, economic uncertainty and recession risk
stabilized as inflation began to subside. Borrowers
continued to experience the lagged impact of elevated
interest rates on earnings potential. In addition to these
broad economic factors, expected loss estimates consider
various factors including customer specific information
impacting changes in risk ratings, projected delinquencies
and the impact of economic deterioration on selected
borrowers’ liquidity and ability to repay.
Credit Diversification The Company manages its credit
risk, in part, through diversification of its loan portfolio which
is achieved through limit setting by product type criteria,
such as industry, and identification of credit concentrations.
As part of its normal business activities, the Company offers
a broad array of traditional commercial lending products and
specialized products such as asset-based lending,
commercial lease financing, agricultural credit, warehouse
37
Residential mortgage originations are generally limited to
prime borrowers and are performed through the Company’s
branches, loan production offices, mobile and online
services, and a wholesale network of originators. The
Company may retain residential mortgage loans it originates
on its balance sheet or sell the loans into the secondary
market while retaining the servicing rights and customer
relationships. Utilizing the secondary markets enables the
Company to effectively reduce its credit and other asset/
liability risks. For residential mortgages that are retained in
the Company’s portfolio and for home equity and second
mortgages, credit risk is managed by adherence to LTV and
borrower credit criteria during the underwriting process.
The Company estimates updated LTV information on its
outstanding residential mortgages quarterly, based on a
method that combines automated valuation model updates
and relevant home price indices. LTV is the ratio of the
loan’s outstanding principal balance to the current estimate
of property value. For home equity and second mortgages,
combined loan-to-value (“CLTV”) is the combination of the
first mortgage original principal balance and the second lien
outstanding principal balance, relative to the current
estimate of property value. Certain loans do not have an
LTV or CLTV, primarily due to lack of availability of relevant
automated valuation model and/or home price indices
values, or lack of necessary valuation data on acquired
loans.
The following tables provide summary information of
residential mortgages and home equity and second
mortgages by LTV at December 31, 2023:
Residential Mortgages
(Dollars in Millions)
Interest
Only
Amortizing
Total
Percent
of Total
Loan-to-Value
Less than or
equal to 80%
Over 80%
through 90%
Over 90%
through 100%
Over 100%
No LTV available
Loans purchased
from GNMA
mortgage
pools(a)
$ 13,945 $ 86,758 $ 100,703
87.2%
255
6,326
6,581
5.7
30
1,062
1,092
6
1
370
10
376
11
.9
.3
—
—
6,767
6,767
5.9
Total
$ 14,237 $ 101,293 $ 115,530 100.0%
(a) Represents loans purchased and loans that could be purchased from
Government National Mortgage Association (“GNMA”) mortgage pools under
delinquent loan repurchase options whose payments are primarily insured by the
Federal Housing Administration or guaranteed by the United States Department
of Veterans Affairs.
mortgage lending, small business lending, commercial real
estate lending, health care lending and correspondent
banking financing. The Company also offers an array of
consumer lending products, including residential mortgages,
credit card loans, auto loans, retail leases, home equity
loans and lines, revolving credit arrangements and other
consumer loans. These consumer lending products are
primarily offered through the branch office network, home
mortgage and loan production offices, mobile and online
banking, and indirect distribution channels, such as auto
and recreational vehicle dealers. The Company monitors
and manages the portfolio diversification by industry,
customer and geography. The Company has significant loan
exposure within California given its strategic position in
those markets and size of the economy. Table 6 provides
information with respect to the overall product diversification
and changes in the mix during 2023.
The commercial loan class is diversified among various
industries with higher concentrations in financial institutions
and real estate. Table 8 provides a summary of significant
industry groups and geographical locations of commercial
loans outstanding at December 31, 2023 and 2022.
The commercial real estate loan class reflects the
Company’s focus on serving business owners within its local
network, as well as regional and national investment-based
real estate owners and developers. Within the commercial
real estate loan class, different property types have varying
degrees of credit risk. Table 9 provides a summary of the
significant property types and geographical locations of
commercial real estate loans outstanding at December 31,
2023 and 2022. Commercial real estate loans are diversified
among various property types with higher concentrations in
multi-family, business owner-occupied and office properties.
The commercial real estate office sector, which represented
13.0 percent of commercial real estate loans and 1.9
percent of total loans at December 31, 2023, is driving
stress in this sector. The Company believes it has prudently
monitored this portfolio and established an allowance to
loan coverage ratio of approximately 10 percent as of
December 31, 2023. Office nonperforming loans
represented 7.6 percent of total office loans at December
31, 2023. The Company's commercial real estate multi-
family portfolio is underwritten on the basis of current in
place cash flows without consideration to any potential net
benefits of the ability to convert rent-stabilized units to
market rate. The Company's exposure to rent-stabilized
properties in the New York City market is de minimis.
The Company’s consumer lending segment utilizes
several distinct business processes and channels to
originate consumer credit, including traditional branch
lending, mobile and online banking, indirect lending, alliance
partnerships and correspondent banks. Each distinct
underwriting and origination activity manages unique credit
risk characteristics and prices its loan production
commensurate with the differing risk profiles.
38 U.S. Bancorp 2023 Annual Report
Home Equity and Second
Mortgages
(Dollars in Millions)
Lines
Loans
Total
Percent
of Total
Loan-to-Value / Combined Loan-to-Value
Less than or equal
to 80%
Over 80% through
90%
Over 90% through
100%
Over 100%
No LTV/CLTV
available
Total
$ 10,406 $ 1,904 $ 12,310
94.3%
492
103
595
4.5
70
32
29
16
4
—
86
36
29
.7
.3
.2
See the “Analysis and Determination of the Allowance for
Credit Losses” section for additional information on how the
Company determines the allowance for credit losses for
loans in a junior lien position.
Credit card and other retail loans are diversified across
customer segments and geographies. Diversification in the
credit card portfolio is achieved with broad customer
relationship distribution through the Company’s and financial
institution partners’ branches, retail and affinity partners,
and digital channels.
Tables 10, 11 and 12 provide a geographical summary of
the residential mortgage, credit card and other retail loan
portfolios, respectively.
$ 11,029 $ 2,027 $ 13,056 100.0%
The following table provides a summary of the
Company’s credit card loan balances disaggregated based
upon updated credit score at December 31, 2023:
Credit score > 660
Credit score < 660
No credit score
(a) Credit score distribution excludes loans serviced by others.
Percent
of Total(a)
86%
14
—
Home equity and second mortgages were $13.1 billion at
December 31, 2023, compared with $12.9 billion at
December 31, 2022, and included $2.6 billion of home
equity lines in a first lien position and $10.5 billion of home
equity and second mortgage loans and lines in a junior lien
position. Loans and lines in a junior lien position at
December 31, 2023, included approximately $3.1 billion of
loans and lines for which the Company also serviced the
related first lien loan, and approximately $7.4 billion where
the Company did not service the related first lien loan. The
Company was able to determine the status of the related
first liens using information the Company has as the servicer
of the first lien or information reported on customer credit
bureau files. The Company also evaluates other indicators
of credit risk for these junior lien loans and lines, including
delinquency, estimated average CLTV ratios and updated
weighted-average credit scores in making its assessment of
credit risk, related loss estimates and determining the
allowance for credit losses.
The following table provides a summary of delinquency
statistics and other credit quality indicators for the
Company’s junior lien positions at December 31, 2023:
Junior Liens Behind
Company
Owned
or Serviced
First Lien
Third
Party
First Lien
Total
$
3,108
$ 7,351
$10,459
.38%
.58%
.52%
.05%
.08%
.07%
70%
68%
69%
784
785
785
(Dollars in Millions)
Total
Percent 30 - 89 days
past due
Percent 90 days or
more past due
Weighted-average
CLTV
Weighted-average
credit score
39
TABLE 15 Delinquent Loan Ratios as a Percent of Ending Loan Balances
At December 31
90 days or more past due
Commercial
Commercial
Lease financing
Total commercial
Commercial Real Estate
Commercial mortgages
Construction and development
Total commercial real estate
Residential Mortgages(a)
Credit Card
Other Retail
Retail leasing
Home equity and second mortgages
Other
Total other retail
Total loans
At December 31
90 days or more past due and nonperforming loans
Commercial
Commercial real estate
Residential mortgages(a)
Credit card
Other retail
Total loans
2023
2022
.09%
.07%
—
.09
—
.03
.01
.12
1.31
.05
.26
.11
.15
—
.07
—
.03
.01
.08
.88
.04
.28
.08
.12
.19%
.13%
2023
2022
.37%
.19%
1.46
.25
1.31
.46
.62
.36
.88
.37
.57%
.38%
(a) Delinquent loan ratios exclude $2.0 billion and $2.2 billion at December 31, 2023 and 2022, respectively, of loans purchased and loans that could be purchased from GNMA
mortgage pools under delinquent loan repurchase options whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States
Department of Veterans Affairs. Including these loans, the ratio of residential mortgages 90 days or more past due and nonperforming to total residential mortgages was 2.00
percent and 2.28 percent at December 31, 2023 and 2022, respectively.
Accruing loans 90 days or more past due totaled $698
million at December 31, 2023, compared with $491 million
at December 31, 2022. Accruing loans 90 days or more past
due are not included in nonperforming assets and continue
to accrue interest because they are adequately secured by
collateral, are in the process of collection and are
reasonably expected to result in repayment or restoration to
current status, or are managed in homogeneous portfolios
with specified charge-off timeframes adhering to regulatory
guidelines. The ratio of accruing loans 90 days or more past
due to total loans was 0.19 percent at December 31, 2023,
compared with 0.13 percent at December 31, 2022.
Loan Delinquencies Trends in delinquency ratios are an
indicator, among other considerations, of credit risk within
the Company’s loan portfolios. The entire balance of a loan
account is considered delinquent if the minimum payment
contractually required to be made is not received by the
date specified on the billing statement. Delinquent loans
purchased and loans that could be purchased from GNMA
mortgage pools under delinquent loan repurchase options
whose repayments are primarily insured by the Federal
Housing Administration or guaranteed by the United States
Department of Veterans Affairs, are excluded from
delinquency statistics. In addition, in certain situations, a
consumer lending customer’s account may be re-aged to
remove it from delinquent status. Generally, the purpose of
re-aging accounts is to assist customers who have recently
overcome temporary financial difficulties and have
demonstrated both the ability and willingness to resume
regular payments. In addition, the Company may re-age the
consumer lending account of a customer who has
experienced longer-term financial difficulties and apply
modified, concessionary terms and conditions to the
account. Commercial lending loans are generally not subject
to re-aging policies.
40 U.S. Bancorp 2023 Annual Report
The following table provides summary delinquency
information for residential mortgages, credit card and other
retail loans included in the consumer lending segment:
At December 31
(Dollars in Millions)
Residential Mortgages(a)
30-89 days
90 days or more
Nonperforming
Total
Credit Card
30-89 days
90 days or more
Nonperforming
Total
Other Retail
Retail Leasing
30-89 days
90 days or more
Nonperforming
Total
Home Equity and Second
Mortgages
30-89 days
90 days or more
Nonperforming
Total
Other(b)
30-89 days
90 days or more
Nonperforming
Total
Amount
As a Percent of
Ending
Loan Balances
2023
2022
2023
2022
$ 169 $ 201
.15%
.17%
136
158
95
.12
325
.14
.08
.28
$ 463 $ 621
.40%
.54%
$ 406 $ 283 1.42% 1.08%
375
231 1.31
—
1 —
.88
—
$ 781 $ 515 2.73% 1.96%
$ 25 $ 27
.60%
.49%
2
8
2
8
.05
.19
.04
.14
$ 35 $ 37
.85%
.67%
$ 77 $ 65
.59%
.51%
34
36
.26
113
110
.87
.28
.86
$ 176 $ 217
.65%
.59%
31
17
28
.11
21
.06
.08
.06
$ 224 $ 266
.82%
.73%
(a) Excludes $595 million of loans 30-89 days past due and $2.0 billion of loans 90
days or more past due at December 31, 2023, purchased and that could be
purchased from GNMA mortgage pools under delinquent loan repurchase
options that continue to accrue interest, compared with $647 million and $2.2
billion at December 31, 2022.
(b) Includes revolving credit, installment and automobile loans.
Modified Loans In certain circumstances, the Company
may modify the terms of a loan to maximize the collection of
amounts due when a borrower is experiencing financial
difficulties or is expected to experience difficulties in the
near-term. In most cases the modification is either a
concessionary reduction in interest rate, extension of the
maturity date or reduction in the principal balance that would
otherwise not be considered.
Modified loans accrue interest if the borrower complies
with the revised terms and conditions and has demonstrated
repayment performance at a level commensurate with the
modified terms over several payment cycles, which is
generally six months or greater.
The Company continues to work with customers to
modify loans for borrowers who are experiencing financial
difficulties. Many of the Company’s loan modifications are
determined on a case-by-case basis in connection with
ongoing loan collection processes. The modifications vary
within each of the Company’s loan classes. Commercial
lending segment modifications generally include extensions
of the maturity date and may be accompanied by an
increase or decrease to the interest rate. The Company may
also work with the borrower to make other changes to the
loan to mitigate losses, such as obtaining additional
collateral and/or guarantees to support the loan.
The Company has also implemented certain residential
mortgage loan modification programs. The Company
modifies residential mortgage loans under Federal Housing
Administration, United States Department of Veterans
Affairs, and its own internal programs. Under these
programs, the Company offers qualifying homeowners the
opportunity to permanently modify their loan and achieve
more affordable monthly payments. These modifications
may include adjustments to interest rates, conversion of
adjustable rates to fixed rates, extensions of maturity dates
or deferrals of payments, capitalization of accrued interest
and/or outstanding advances, or in limited situations, partial
forgiveness of loan principal. In most instances, participation
in residential mortgage loan modification programs requires
the customer to complete a short-term trial period. A
permanent loan modification is contingent on the customer
successfully completing the trial period arrangement, and
the loan documents are not modified until that time.
Credit card and other retail loan modifications are
generally part of distinct modification programs providing
customers modification solutions over a specified time
period, generally up to 60 months.
limited circumstances, to assist borrowers experiencing
temporary hardships, including previously offering payment
relief to borrowers that experienced financial hardship
resulting directly from the effects of the COVID-19
pandemic. Short-term consumer lending modification
programs include payment reductions, deferrals of up to
three past due payments, and the ability to return to current
status if the borrower makes required payments. The
Company may also make short-term modifications to
commercial lending loans, with the most common
modification being an extension of the maturity date of three
months or less. Such extensions generally are used when
the maturity date is imminent and the borrower is
experiencing some level of financial stress, but the
Company believes the borrower will pay all contractual
amounts owed.
Nonperforming Assets The level of nonperforming assets
represents another indicator of the potential for future credit
losses. Nonperforming assets include nonaccrual loans,
modified loans not performing in accordance with modified
terms and not accruing interest, modified loans that have
not met the performance period required to return to accrual
status, other real estate owned (“OREO”) and other
nonperforming assets owned by the Company. Interest
payments collected from assets on nonaccrual status are
generally applied against the principal balance and not
41
$ 224 $ 211 1.72% 1.64%
The Company also makes short-term modifications, in
recorded as income. However, interest income may be
recognized for interest payments if the remaining carrying
amount of the loan is believed to be collectible.
assets to total loans and other real estate was 0.40 percent
at December 31, 2023, compared with 0.26 percent at
December 31, 2022.
At December 31, 2023, total nonperforming assets were
OREO was $26 million at December 31, 2023, compared
$1.5 billion, compared with $1.0 billion at December 31,
2022. The $478 million (47.0 percent) increase in
nonperforming assets, from December 31, 2022 to
December 31, 2023, was primarily due to higher
nonperforming commercial real estate and commercial
loans, partially offset by a decrease in nonperforming
residential mortgages. The ratio of total nonperforming
with $23 million at December 31, 2022, and was related to
foreclosed properties that previously secured loan balances.
These balances exclude foreclosed GNMA loans whose
repayments are primarily insured by the Federal Housing
Administration or guaranteed by the United States
Department of Veterans Affairs.
42 U.S. Bancorp 2023 Annual Report
TABLE 16 Nonperforming Assets(a)
At December 31 (Dollars in Millions)
Commercial
Commercial
Lease financing
Total commercial
Commercial Real Estate
Commercial mortgages
Construction and development
Total commercial real estate
Residential Mortgages(b)
Credit Card
Other Retail
Retail leasing
Home equity and second mortgages
Other
Total other retail
Total nonperforming loans(1)
Other Real Estate(c)
Other Assets
Total nonperforming assets
Accruing loans 90 days or more past due(b)
Period-end loans(2)
Nonperforming assets to total loans(1)/(2)
Nonperforming assets to total loans plus other real estate(c)
Changes in Nonperforming Assets
(Dollars in Millions)
Balance December 31, 2022
Additions to nonperforming assets
New nonaccrual loans and foreclosed properties
Advances on loans
Acquired nonperforming assets
Total additions
Reductions in nonperforming assets
Paydowns, payoffs
Net sales
Return to performing status
Charge-offs(d)
Total reductions
Net additions to (reductions in) nonperforming assets
Balance December 31, 2023
2023
2022
$
349
$
27
376
675
102
777
158
—
8
113
17
138
1,449
26
19
139
30
169
251
87
338
325
1
8
110
21
139
972
23
21
$
$
1,494
698
$
$
1,016
491
$ 373,835
$ 388,213
.39%
.40%
.25%
.26%
Commercial and
Residential
Mortgages,
Commercial Credit Card and
Other Retail
Real Estate
$
509 $
507 $
1,403
49
—
1,452
(415)
(51)
(32)
(308)
(806)
646
174
1
—
175
(109)
(23)
(199)
(12)
(343)
(168)
$
1,155 $
339 $
Total
1,016
1,577
50
—
1,627
(524)
(74)
(231)
(320)
(1,149)
478
1,494
(a) Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due.
(b) Excludes $2.0 billion and $2.2 billion at December 31, 2023 and 2022, respectively, of loans purchased and loans that could be purchased from GNMA mortgage pools under
delinquent loan repurchase options that are 90 days or more past due that continue to accrue interest, as their repayments are primarily insured by the Federal Housing
Administration or guaranteed by the United States Department of Veterans Affairs.
(c) Foreclosed GNMA loans of $47 million and $53 million at December 31, 2023 and 2022, respectively, continue to accrue interest and are recorded as other assets and excluded
from nonperforming assets because they are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.
(d) Charge-offs exclude actions for certain card products and loan sales that were not classified as nonperforming at the time the charge-off occurred.
43
TABLE 17 Net Charge-offs as a Percent of Average Loans Outstanding
Year Ended December 31
(Dollars in Millions)
Commercial
Commercial
Lease financing
Total commercial
Commercial real estate
Commercial mortgages
Construction
Total commercial real estate
Residential mortgages
Credit card
Other retail
Retail leasing
Home equity and second mortgages
Other
Total other retail
Total loans
2023
Average
Loan
Net
2022
Average
Loan
Net
2021
Average
Loan
Net
Balance Charge-offs Percent
Balance Charge-offs Percent
Balance Charge-offs Percent
$ 130,544 $
293
.22%
$ 118,967 $
211
.18% $ 97,649 $
4,339
134,883
21
314
.48
.23
4,830
123,797
42,894
11,752
54,646
115,922
265
.62
30,890
(2)
(.02)
10,208
263
109
.48
.09
41,098
84,749
23,478
26,570
849 3.20
16
227
17
20
37
.33
.18
.06
.20
.09
5,206
102,855
27,997
10,784
38,781
97
6
103
.10%
.12
.10
(14)
(.05)
16
2
.15
.01
(23)
(.03)
74,629
(32)
(.04)
524 2.23
21,645
512 2.37
4,665
12,829
31,760
49,254
6
.13
6,459
3
.05
7,710
2
.03
(2)
(.02)
11,051
(7)
(.06)
11,228
(10)
(.09)
366 1.15
370
.75
42,941
60,451
302
298
.70
.49
40,117
59,055
105
97
.26
.16
$ 381,275 $ 1,905
.50%
$ 333,573 $ 1,063
.32% $ 296,965 $
682
.23%
Analysis of Loan Net Charge-offs Total loan net
charge-offs were $1.9 billion in 2023, compared with $1.1
billion in 2022. The $842 million (79.2 percent) increase in
total net charge-offs in 2023, compared with 2022, reflected
higher charge-offs in most loan categories consistent with
normalizing credit conditions and adverse conditions in
commercial real estate, along with the impacts of balance
sheet repositioning and capital management actions in 2023
and 2022. Net charge-offs in 2023 included charge-offs
related to balance sheet repositioning and capital
management actions taken in the second quarter of 2023,
along with charge-offs in the first quarter of 2023 related to
the uncollectible amount of acquired loans, which were
considered purchased credit deteriorated as of the date of
the MUB acquisition. Net charge-offs in 2022 included
charge-offs in the fourth quarter of 2022 related to
uncollectible amounts on acquired loans and balance sheet
optimization activities. The ratio of total loan net charge-offs
to average loans outstanding was 0.50 percent in 2023,
compared with 0.32 percent in 2022. Excluding the impact
of charge-offs related to the MUB acquisition and balance
sheet repositioning and capital management actions, the
ratio of total loan net charge-offs to average loans
outstanding was 0.39 percent in 2023, compared with 0.21
percent in 2022. See "Non-GAAP Financial Measures" for
additional information.
Commercial and commercial real estate loan net charge-
offs for 2023 were $577 million (0.30 percent of average
loans outstanding), compared with $264 million (0.16
percent of average loans outstanding) in 2022. The increase
in net charge-offs in 2023, compared with 2022, was driven
primarily by normalizing credit conditions and adverse
conditions in commercial real estate.
44 U.S. Bancorp 2023 Annual Report
Residential mortgage loan net charge-offs for 2023 were
$109 million (0.09 percent of average loans outstanding),
compared with a net recovery of $23 million (0.03 percent of
average loans outstanding) in 2022. Credit card loan net
charge-offs in 2023 were $849 million (3.20 percent of
average loans outstanding), compared with $524 million
(2.23 percent of average loans outstanding) in 2022. Other
retail loan net charge-offs for 2023 were $370 million (0.75
percent of average loans outstanding), compared with $298
million (0.49 percent of average loans outstanding) in 2022.
The increase in total residential mortgage, credit card and
other retail loan net charge-offs in 2023, compared with
2022, was driven by normalizing credit conditions along with
charge-offs related to balance sheet repositioning and
capital management actions taken in 2023.
Analysis and Determination of the Allowance for Credit
Losses The allowance for credit losses is established for
current expected credit losses on the Company’s loan and
lease portfolio, including unfunded credit commitments. The
allowance considers expected losses for the remaining lives
of the applicable assets, inclusive of expected recoveries.
The allowance for credit losses is increased through
provisions charged to earnings and reduced by net charge-
offs.
Management evaluates the appropriateness of the
allowance for credit losses on a quarterly basis. Multiple
economic scenarios are considered over a three-year
reasonable and supportable forecast period, which includes
increasing consideration of historical loss experience over
years two and three. These economic scenarios are
constructed with interrelated projections of multiple
economic variables, and loss estimates are produced that
consider the historical correlation of those economic
variables with credit losses. After the forecast period, the
Company fully reverts to long-term historical loss
experience, adjusted for prepayments and characteristics of
the current loan and lease portfolio, to estimate losses over
the remaining life of the portfolio. The economic scenarios
are updated at least quarterly and are designed to provide a
range of reasonable estimates from better to worse than
current expectations. Scenarios are weighted based on the
Company’s expectation of economic conditions for the
foreseeable future and reflect significant judgment and
consideration of economic forecast uncertainty. Final loss
estimates also consider factors affecting credit losses not
reflected in the scenarios, due to the unique aspects of
current conditions and expectations. These factors may
include, but are not limited to, loan servicing practices,
regulatory guidance, and/or fiscal and monetary policy
actions.
Because business processes and credit risks associated
with unfunded credit commitments are essentially the same
as for loans, the Company utilizes similar processes to
estimate its liability for unfunded credit commitments, which
is included in other liabilities in the Consolidated Balance
Sheet. Both the allowance for loan losses and the liability for
unfunded credit commitments are included in the
Company’s analysis of credit losses and reported reserve
ratios.
The allowance recorded for credit losses utilizes forward-
looking expected loss models to consider a variety of factors
affecting lifetime credit losses. These factors include, but
are not limited to, macroeconomic variables such as
unemployment rates, real estate prices, gross domestic
product levels, inflation, interest rates, and corporate bond
spreads, as well as loan and borrower characteristics, such
as internal risk ratings on commercial loans and consumer
credit scores, delinquency status, collateral type and
available valuation information, consideration of end-of-term
losses on lease residuals, and the remaining term of the
loan, adjusted for expected prepayments. For each loan
portfolio, including those loans modified under various loan
modification programs, model estimates are adjusted as
necessary to consider any relevant changes in portfolio
composition, lending policies, underwriting standards, risk
management practices, economic conditions or other factors
that may affect the accuracy of the model. Expected credit
loss estimates also include consideration of expected cash
recoveries on loans previously charged-off or expected
recoveries on collateral-dependent loans where recovery is
expected through sale of the collateral at fair value less
selling costs. Where loans do not exhibit similar risk
characteristics, an individual analysis is performed to
consider expected credit losses.
The allowance recorded for individually evaluated loans
greater than $5 million in the commercial lending segment is
based on an analysis utilizing expected cash flows
discounted using the original effective interest rate, the
observable market price of the loan, or the fair value of the
collateral, less selling costs, for collateral-dependent loans
as appropriate.
When evaluating the appropriateness of the allowance
for credit losses for any loans and lines in a junior lien
position, the Company considers the delinquency and
modification status of the first lien. At December 31, 2023,
the Company serviced the first lien on 30 percent of the
home equity loans and lines in a junior lien position. The
Company also considers the status of first lien mortgage
accounts reported on customer credit bureau files when the
first lien is not serviced by the Company. Regardless of
whether the Company services the first lien, an assessment
is made of economic conditions, problem loans, recent loss
experience and other factors in determining the allowance
for credit losses. Based on the available information, the
Company estimated $204 million or 1.6 percent of its total
home equity portfolio at December 31, 2023, represented
non-delinquent junior liens where the first lien was
delinquent or modified.
When a loan portfolio is purchased, the acquired loans
are divided into those considered purchased with more than
insignificant credit deterioration (“PCD”) and those not
considered PCD. An allowance is established for each
population and considers product mix, risk characteristics of
the portfolio and delinquency status and refreshed LTV
ratios when possible. PCD loans also consider whether the
loan has experienced a charge-off, bankruptcy or significant
deterioration since origination. The allowance established
for purchased loans not considered PCD is recognized
through provision expense upon acquisition, whereas the
allowance established for loans considered PCD at
acquisition is offset by an increase in the basis of the
acquired loans. Any subsequent increases and decreases in
the allowance related to purchased loans, regardless of
PCD status, are recognized through provision expense, with
charge-offs charged to the allowance. The Company had a
total net book balance of $3.1 billion of PCD loans, primarily
related to the MUB acquisition, included in its loan portfolio
at December 31, 2023.
The Company’s methodology for determining the
appropriate allowance for credit losses also considers the
imprecision inherent in the methodologies used and
allocated to the various loan portfolios. As a result, amounts
determined under the methodologies described above are
adjusted by management to consider the potential impact of
other qualitative factors not captured in quantitative model
adjustments which include, but are not limited to, the
following: model imprecision, imprecision in economic
scenario assumptions, and emerging risks related to either
changes in the economic environment that are affecting
specific portfolios, or changes in portfolio concentrations
over time that may affect model performance. The
consideration of these items results in adjustments to
allowance amounts included in the Company’s allowance for
credit losses for each loan portfolio.
The results of the analysis are evaluated quarterly to
confirm the estimates are appropriate for each loan portfolio.
Table 19 shows the amount of the allowance for credit
losses by loan class and underlying portfolio category.
Although the Company determined the amount of each
element of the allowance separately and considers this
process to be an important credit management tool, the
entire allowance for credit losses is available for the entire
loan portfolio. The actual amount of losses can vary
significantly from the estimated amounts.
At December 31, 2023, the allowance for credit losses
was $7.8 billion, compared with an allowance of $7.4 billion
45
at December 31, 2022. The allowance for credit losses at
December 31, 2023 included a $62 million decrease due to
a change in accounting principle adopted on January 1,
2023 related to discontinuing the separate recognition and
measurement of troubled debt restructurings ("TDRs"). The
increase in the allowance for credit losses of $435 million
(5.9 percent) at December 31, 2023, compared with
December 31, 2022, was primarily driven by normalizing
credit losses, credit card balance growth and commercial
real estate credit quality.
The ratio of the allowance for credit losses to period-end
loans was 2.10 percent at December 31, 2023, compared
with 1.91 percent at December 31, 2022. The ratio of the
allowance for credit losses to nonperforming loans was 541
percent at December 31, 2023, compared with 762 percent
at December 31, 2022. The ratio of the allowance for credit
losses to annual loan net charge-offs at December 31,
2023, was 411 percent, compared with 697 percent at
December 31, 2022. Management determined the
allowance for credit losses was appropriate on
December 31, 2023 and 2022.
Economic conditions considered in estimating the
allowance for credit losses at December 31, 2023 included
changes in projected gross domestic product and
unemployment levels. These factors are evaluated through
a combination of quantitative calculations using multiple
economic scenarios and additional qualitative assessments
that consider the degree of economic uncertainty in the
current environment. The projected unemployment rates for
2024 considered in the estimate range from 3.0 percent to
8.2 percent.
The following table summarizes the baseline forecast for key economic variables the Company used in its estimate of the
allowance for credit losses at December 31, 2023 and 2022:
United States unemployment rate for the three months ending(a)
December 31, 2023
June 30, 2024
December 31, 2024
United States real gross domestic product for the three months ending(b)
December 31, 2023
June 30, 2024
December 31, 2024
(a) Reflects quarterly average of forecasted reported United States unemployment rate.
(b) Reflects year-over-year growth rates.
December 31,
2023
December 31,
2022
3.8%
3.9
4.0
2.5%
2.0
1.3
4.2%
4.1
3.9
1.0%
1.9
2.5
The allowance for credit losses related to commercial
lending segment loans increased $251 million during the
year ended December 31, 2023, reflecting the impact of
normalizing credit conditions and select commercial real
estate loan deterioration, partially offset by declining
commercial exposures.
The allowance for credit losses related to consumer
lending segment loans increased $184 million during the
year ended December 31, 2023, due to the impacts of
normalizing credit performance, partially offset by reduced
portfolio exposures and a decrease related to a change in
accounting principle.
46 U.S. Bancorp 2023 Annual Report
TABLE 18 Summary of Allowance for Credit Losses
(Dollars in Millions)
Balance at beginning of year
Change in accounting principle(a)
Allowance for acquired credit losses(b)
Charge-Offs
Commercial
Commercial
Lease financing
Total commercial
Commercial real estate
Commercial mortgages
Construction and development
Total commercial real estate
Residential mortgages
Credit card
Other retail
Retail leasing
Home equity and second mortgages
Other
Total other retail
Total charge-offs(c)
Recoveries
Commercial
Commercial
Lease financing
Total commercial
Commercial real estate
Commercial mortgages
Construction and development
Total commercial real estate
Residential mortgages
Credit card
Other retail
Retail leasing
Home equity and second mortgages
Other
Total other retail
Total recoveries
Net Charge-Offs
Commercial
Commercial
Lease financing
Total commercial
Commercial real estate
Commercial mortgages
Construction and development
Total commercial real estate
Residential mortgages
Credit card
Other retail
Retail leasing
Home equity and second mortgages
Other
Total other retail
Total net charge-offs
Provision for credit losses(d)
Other changes
Balance at end of year
Components
Allowance for loan losses
Liability for unfunded credit commitments
Total allowance for credit losses(1)
Period-end loans(2)
Nonperforming loans(3)
Allowance for Credit Losses as a Percentage of
Period-end loans(1)/(2)
Nonperforming loans(1)/(3)
Nonperforming and accruing loans 90 days or more past due
Nonperforming assets
Net charge-offs
$
2023
7,404
(62)
127
$
2022
6,155
—
336
$
2021
8,010
—
—
357
32
389
278
3
281
129
1,014
18
12
448
478
2,291
64
11
75
13
5
18
20
165
12
14
82
108
386
293
21
314
265
(2)
263
109
849
294
25
319
28
26
54
13
696
18
9
391
418
1,500
83
9
92
11
6
17
36
172
15
16
89
120
437
211
16
227
17
20
37
(23)
524
206
16
222
9
20
29
18
686
26
12
215
253
1,208
109
10
119
23
4
27
50
174
24
22
110
156
526
97
6
103
(14)
16
2
(32)
512
6
(2)
366
370
1,905
2,275
—
7,839
$
3
(7)
302
298
1,063
1,977
(1)
7,404
2
(10)
105
97
682
(1,173)
—
6,155
$
$
$
7,379
460
$
7,839
$ 373,835
1,449
$
6,936
468
$
7,404
$ 388,213
972
$
5,724
431
$
6,155
$ 312,028
834
2.10%
541
365
525
411
1.91%
762
506
729
697
1.97%
738
471
701
902
(a) Effective January 1, 2023, the Company adopted accounting guidance which removed the separate recognition and measurement of troubled debt restructurings.
(b) Allowance for purchased credit deteriorated and charged-off loans acquired from MUB.
(c) 2023 includes $91 million of charge-offs related to uncollectible amounts on acquired loans, as well as $309 million of charge-offs related to balance sheet repositioning and capital
management actions. 2022 includes $179 million of charge-offs related to uncollectible amounts on acquired loans, as well as $189 million of charge-offs related to balance sheet
repositioning and capital management actions.
(d) 2023 includes provision for credit losses of $243 million related to balance sheet repositioning and capital management actions. 2022 includes provision for credit losses of $662
million related to the acquisition of MUB and $129 million related to balance sheet repositioning and capital management actions.
47
TABLE 19 Allocation of the Allowance for Credit Losses
At December 31 (Dollars in Millions)
Commercial
Commercial
Lease financing
Total commercial
Commercial Real Estate
Commercial mortgages
Construction and development
Total commercial real estate
Residential Mortgages
Credit Card
Other Retail
Retail leasing
Home equity and second mortgages
Other
Total other retail
Total allowance
Residual Value Risk Management The Company
manages its risk to changes in the residual value of leased
vehicles, office and business equipment, and other assets
through disciplined residual valuation at the inception of a
lease, diversification of its leased assets, regular residual
asset valuation reviews and monitoring of residual value
gains or losses upon the disposition of assets. Lease
originations are subject to the same well-defined
underwriting standards referred to in the “Credit Risk
Management” section, which includes an evaluation of the
residual value risk. Retail lease residual value risk is
mitigated further by effective end-of-term marketing of off-
lease vehicles.
Included in the retail leasing portfolio was approximately
$3.4 billion of retail leasing residuals at December 31, 2023,
compared with $4.4 billion at December 31, 2022. The
Company monitors concentrations of leases by
manufacturer and vehicle type. As of December 31, 2023,
vehicle lease residuals related to sport utility vehicles were
53.5 percent of the portfolio, while truck and crossover utility
vehicle classes represented approximately 21.4 percent and
13.7 percent of the portfolio, respectively. At year-end 2023,
the individual vehicle model with the largest residual value
outstanding represented 27.0 percent of the aggregate
residual value of all vehicles in the portfolio. At
December 31, 2023, the weighted-average origination term
of the portfolio was 41 months, compared with 42 months at
December 31, 2022. At December 31, 2023, the commercial
leasing portfolio had $491 million of residuals, compared
with $500 million at December 31, 2022. At year-end 2023,
lease residuals related to trucks and other transportation
equipment represented 38.0 percent of the total residual
portfolio, while business and office equipment represented
28.5 percent.
48 U.S. Bancorp 2023 Annual Report
Allowance Amount
Allowance as a Percent of
Loans
2023
2022
2023
2022
$
2,038 $
2,087
1.60%
1.59%
81
76
2,119
2,163
1,068
552
1,620
827
2,403
95
321
454
870
878
447
1,325
926
2,020
127
298
545
970
1.91
1.61
2.55
4.79
3.03
.72
8.41
2.30
2.46
1.67
1.96
1.67
1.59
2.01
3.81
2.39
.80
7.68
2.30
2.32
1.49
1.77
$
7,839 $
7,404
2.10%
1.91%
Operational Risk Management. The Company operates in
many different businesses in diverse markets and relies on
the ability of its employees and systems to process a high
number of transactions. Operational risk is inherent in all
business activities, and the management of this risk is
important to the achievement of the Company’s objectives.
Business lines have direct and primary responsibility and
accountability for identifying, controlling, and monitoring
operational risks embedded in their business activities,
including those additional or increased risks created by
economic and financial disruptions.
The Company maintains a system of controls with the
objective of providing proper transaction authorization and
execution, proper system operations, proper oversight of
third parties with whom it does business, safeguarding of
assets from misuse or theft, and ensuring the reliability and
security of financial and other data. The Company also
maintains a cybersecurity risk program which provides
centralized planning and management of related and
interdependent work with a focus on risks from
cybersecurity threats. The Company's cybersecurity risk
program is integrated into the Company's overall business
and operational strategies and requires that the Company
allocate appropriate resources to maintain the program.
Refer to “Item 1C. Cybersecurity” in the Company’s Annual
Report on Form 10-K for the year ended December 31,
2023, for further discussion on the Company's cybersecurity
risk program.
Business continuation and disaster recovery planning is
also critical to effectively managing operational risks. Each
business unit of the Company is required to develop,
maintain and test these plans at least annually to ensure
that recovery activities, if needed, can support mission
critical functions, including technology, networks and data
centers supporting customer applications and business
operations.
While the Company strives to design processes to
minimize operational risks, there is no absolute assurance
that business disruption or operational losses would not
occur from an external event or internal control breakdown.
On an ongoing basis, management makes process changes
and investments to enhance its systems of internal controls
and business continuity and disaster recovery plans.
Compliance Risk Management The Company may suffer
legal or regulatory sanctions, material financial loss, or
damage to its reputation if it fails to comply with laws,
regulations, rules, standards of good practice, and codes of
conduct, including those related to compliance with Bank
Secrecy Act/anti-money laundering requirements, sanctions
compliance requirements as administered by the Office of
Foreign Assets Control, consumer protection and other
requirements. The Company has controls and processes in
place for the assessment, identification, monitoring,
management and reporting of compliance risks and issues,
including those created or increased by economic and
financial disruptions. Refer to “Supervision and Regulation”
in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2023, for further discussion of the
regulatory framework applicable to bank holding companies
and their subsidiaries.
Interest Rate Risk Management In the banking industry,
changes in interest rates are a significant risk that can
impact earnings as well as the safety and soundness of an
entity. The Company manages its exposure to changes in
interest rates through asset and liability management
activities within guidelines established by its Asset Liability
Management Committee (“ALCO”) and approved by the
Board of Directors. The ALCO has the responsibility for
approving and overseeing compliance with the ALCO
management policies, including interest rate risk exposure.
One way the Company measures and analyzes its interest
rate risk is through analysis of net interest income
sensitivities across a range of scenarios.
Net interest income sensitivity analysis includes
evaluating all of the Company’s assets and liabilities and off-
balance sheet instruments, inclusive of new business
activity under various interest rate scenarios that differ in the
direction, amount and speed of change over time, as well as
the overall shape of the yield curve. The balance sheet
includes assumptions regarding loan and deposit volumes
and pricing which are based on quantitative analysis,
historical trends and management outlook and strategies.
Deposit balances and mix are dynamic across interest rate
scenarios and will change both with the absolute level of
rates as well as the assumed interest rate shock. Base case
and net interest income sensitivities are reviewed monthly
by the ALCO and are used to guide asset/liability
management strategies.
The Company also manages interest rate sensitivity by
utilizing market value of equity modeling, which measures
the degree to which the market values of the Company’s
assets and liabilities and off-balance sheet instruments will
change given a change in interest rates. Management
measures the impact of changes in market values due to
interest rates under a number of scenarios, including
immediate and sustained parallel shifts, and flattening or
steepening of the yield curve. The Company manages its
interest rate risk position by holding assets with desired
interest rate risk characteristics on its balance sheet,
executing certain pricing strategies for loans and deposits
and deploying investment portfolio, funding and derivative
strategies .
Table 20 summarizes the projected impact to net interest
income over the next 12 months of various potential interest
rate changes. The sensitivity of the projected impact to net
interest income over the next 12 months is dependent on
balance sheet growth, product mix, deposit behavior, pricing
and funding decisions. From December 31, 2022 to
December 31, 2023, interest rate sensitivity decreased,
primarily due to changes in deposit composition and rates
paid on deposits as interest rate hikes materialized
throughout 2023. As of December 31, 2023, the Company
continues to be slightly asset sensitive to a parallel upward
move in interest rates with most of that impact coming from
the short end of the yield curve. While the Company utilizes
models and assumptions based on historical information
and expected behaviors, actual outcomes could vary
significantly.
Use of Derivatives to Manage Interest Rate and Other
Risks To manage the sensitivity of earnings and capital to
interest rate, prepayment, credit, price and foreign currency
fluctuations (asset and liability management positions), the
Company enters into derivative transactions. The Company
uses derivatives for asset and liability management
purposes primarily in the following ways:
• To convert fixed-rate debt and available-for-sale
investment securities from fixed-rate payments to floating-
rate payments;
• To convert floating-rate loans and debt from floating-rate
payments to fixed-rate payments;
• To mitigate changes in value of the Company’s unfunded
mortgage loan commitments, funded MLHFS and MSRs;
• To mitigate remeasurement volatility of foreign currency
denominated balances; and
• To mitigate the volatility of the Company’s net investment
in foreign operations driven by fluctuations in foreign
currency exchange rates.
In addition, the Company enters into interest rate, foreign
exchange and commodity derivative contracts to support the
business requirements of its customers (customer-related
positions). The Company minimizes the market and liquidity
risks of customer-related positions by either entering into
similar offsetting positions with broker-dealers, or on a
portfolio basis by entering into other derivative or non-
derivative financial instruments that partially or fully offset
the exposure from these customer-related positions. The
Company may enter into derivative contracts that are either
exchange-traded, centrally cleared through clearinghouses
or over-the-counter. The Company does not utilize
derivatives for speculative purposes.
49
TABLE 20 Sensitivity of Net Interest Income
December 31, 2023
December 31, 2022
Down 50 bps
Immediate
Up 50 bps Down 200 bps Up 200 bps Down 50 bps
Immediate
Immediate
Gradual
Gradual
Up 50 bps Down 200 bps Up 200 bps
Gradual
Immediate
Gradual
Net interest income
(.19) %
.71%
(.15) %
.91%
(.58) %
.95%
(2.02) %
1.44%
The Company does not designate all of the derivatives
that it enters into for risk management purposes as
accounting hedges because of the inefficiency of applying
the accounting requirements and may instead elect fair
value accounting for the related hedged items. In particular,
the Company enters into interest rate swaps, swaptions,
forward commitments to buy to-be-announced securities
(“TBAs”), U.S. Treasury and Eurodollar futures and options
on U.S. Treasury futures to mitigate fluctuations in the value
of its MSRs, but does not designate those derivatives as
accounting hedges. Refer to Note 10 of the Notes to
Consolidated Financial Statements for additional information
regarding MSRs, including management of the changes in
fair value.
Additionally, the Company uses forward commitments to
sell TBAs and other commitments to sell residential
mortgage loans at specified prices to economically hedge
the interest rate risk in its residential mortgage loan
production activities. The forward commitments to sell and
the unfunded mortgage loan commitments on loans
intended to be sold are considered derivatives under the
accounting guidance related to accounting for derivative
instruments and hedging activities. The Company has
elected the fair value option for the MLHFS.
Derivatives are subject to credit risk associated with
counterparties to the contracts. Credit risk associated with
derivatives is measured by the Company based on the
probability of counterparty default. The Company manages
the credit risk of its derivative positions by diversifying its
positions among various counterparties, by entering into
master netting arrangements, and, where possible, by
requiring collateral arrangements. The Company may also
transfer counterparty credit risk related to interest rate
swaps to third parties through the use of risk participation
agreements. In addition, certain interest rate swaps, interest
rate forwards and credit contracts are required to be
centrally cleared through clearinghouses to further mitigate
counterparty credit risk. The Company also mitigates the
credit risk of its derivative positions, as well as the credit risk
on loans or lending portfolios, through the use of credit
contracts.
For additional information on derivatives and hedging
activities, refer to Notes 20 and 21 in the Notes to
Consolidated Financial Statements.
Market Risk Management In addition to interest rate risk,
the Company is exposed to other forms of market risk,
principally related to trading activities which support
customers’ strategies to manage their own foreign currency,
interest rate risk, commodities risk and funding activities.
For purposes of its internal capital adequacy assessment
process, the Company considers risk arising from its trading
activities, as well as the remeasurement volatility of foreign
currency denominated balances included on its
Consolidated Balance Sheet (collectively, “Covered
50 U.S. Bancorp 2023 Annual Report
Positions”), employing methodologies consistent with the
requirements of regulatory rules for market risk. The
Company’s Market Risk Committee (“MRC”), within the
framework of the ALCO, oversees market risk management.
The MRC monitors and reviews the Company’s Covered
Positions and establishes policies for market risk
management, including exposure limits for each portfolio.
The Company uses a VaR approach to measure general
market risk. Theoretically, VaR represents the statistical risk
of loss the Company has to adverse market movements
over a one-day time horizon. The Company uses the
Historical Simulation method to calculate VaR for its
Covered Positions measured at the ninety-ninth percentile
using a one-year look-back period for distributions derived
from past market data. The market factors used in the
calculations include those pertinent to market risks inherent
in the underlying trading portfolios, principally those that
affect the Company’s corporate bond trading business,
foreign currency transaction business, client derivatives
business, loan trading business and municipal securities
business, as well as those inherent in the Company’s
foreign denominated balances and the derivatives used to
mitigate the related measurement volatility. On average, the
Company expects the one-day VaR to be exceeded by
actual losses two to three times per year related to these
positions. The Company monitors the accuracy of internal
VaR models and modeling processes by back-testing model
performance, regularly updating the historical data used by
the VaR models and regular model validations to assess the
accuracy of the models’ input, processing, and reporting
components. All models are required to be independently
reviewed and approved prior to being placed in use. If the
Company were to experience market losses in excess of the
estimated VaR more often than expected, the VaR models
and associated assumptions would be analyzed and
adjusted. VaR amounts reflected MUB beginning December
1, 2022, the day the acquisition transaction closed.
The average, high, low and period-end one-day VaR
amounts for the Company’s Covered Positions were as
follows:
Year Ended December 31
(Dollars in Millions)
Average
High
Low
Period-end
2023
2022
$
4 $
7
2
3
2
7
1
5
The Company did not experience any actual losses for
its combined Covered Positions that exceeded VaR during
the years ended December 31, 2023 and 2022. The
Company stress tests its market risk measurements to
provide management with perspectives on market events
that may not be captured by its VaR models, including worst
case historical market movement combinations that have
not necessarily occurred on the same date.
The Company calculates Stressed VaR using the same
underlying methodology and model as VaR, except that a
historical continuous one-year look-back period is utilized
that reflects a period of significant financial stress
appropriate to the Company’s Covered Positions. The
period selected by the Company includes the significant
market volatility of the last four months of 2008.
The average, high, low and period-end one-day Stressed
VaR amounts for the Company’s Covered Positions were as
follows:
Year Ended December 31
(Dollars in Millions)
Average
High
Low
Period-end
2023
2022
$
10 $ 10
16
6
8
19
6
13
Valuations of positions in client derivatives and foreign
currency activities are based on discounted cash flow or
other valuation techniques using market-based
assumptions. These valuations are compared to third-party
quotes or other market prices to determine if there are
significant variances. Significant variances are approved by
senior management in the Company’s corporate functions.
Valuation of positions in the corporate bond trading, loan
trading and municipal securities businesses are based on
trader marks. These trader marks are evaluated against
third-party prices, with significant variances approved by
senior management in the Company’s corporate functions.
The Company also measures the market risk of its
hedging activities related to residential MLHFS and MSRs
using the Historical Simulation method. The VaRs are
measured at the ninety-ninth percentile and employ factors
pertinent to the market risks inherent in the valuation of the
assets and hedges. A one-year look-back period is used to
obtain past market data for the models.
The average, high and low VaR amounts for the residential
MLHFS and related hedges and the MSRs and related
hedges were as follows:
Year Ended December 31
(Dollars in Millions)
Residential Mortgage Loans Held For
Sale and Related Hedges
Average
High
Low
Mortgage Servicing Rights and Related
Hedges
Average
High
Low
2023
2022
$
1 $
2
—
2
5
—
$
7 $
8
12
2
20
3
Liquidity Risk Management The Company’s liquidity risk
management process is designed to identify, measure, and
manage the Company’s funding and liquidity risk to meet its
daily funding needs and to address expected and
unexpected changes in its funding requirements. The
Company engages in various activities to manage its
liquidity risk. These activities include diversifying its funding
sources, stress testing, and holding readily-marketable
assets which can be used as a source of liquidity if needed.
In addition, the Company’s profitable operations, sound
credit quality and strong credit ratings and capital position
have enabled it to develop a large and reliable base of core
deposit funding within its market areas and in domestic and
global capital markets.
The Company’s Board of Directors approves the
Company’s liquidity policy. The Risk Management
Committee of the Company’s Board of Directors oversees
the Company’s liquidity risk management process and
approves a contingency funding plan. The ALCO reviews
the Company’s liquidity policy and limits, and regularly
assesses the Company’s ability to meet funding
requirements arising from adverse company-specific or
market events.
The Company’s liquidity policy requires it to maintain
diversified wholesale funding sources to avoid maturity,
entity and market concentrations. The Company operates a
Cayman Islands branch for issuing Eurodollar time deposits.
In addition, the Company has relationships with dealers to
issue national market retail and institutional savings
certificates and short-term and medium-term notes. The
Company also maintains a significant correspondent
banking network and relationships. Accordingly, the
Company has access to national federal funds, funding
through repurchase agreements and sources of stable
certificates of deposit and commercial paper.
The Company regularly projects its funding needs under
various stress scenarios and maintains a contingency
funding plan consistent with the Company’s access to
diversified sources of contingent funding. The Company
maintains a substantial level of total available liquidity in the
form of on-balance sheet and off-balance sheet funding
sources. These liquidity sources include cash at the Federal
Reserve Bank and certain European central banks,
unencumbered liquid assets, and capacity to borrow from
the FHLB and at the Federal Reserve Bank’s Discount
Window. Unencumbered liquid assets in the Company’s
investment securities portfolio provide asset liquidity through
the Company’s ability to sell the securities or pledge and
borrow against them. Refer to Note 5 of the Notes to
Consolidated Financial Statements and “Balance Sheet
Analysis” for further information on investment securities
maturities and trends. Asset liquidity is further enhanced by
the Company’s practice of pledging loans to access secured
borrowing facilities through the FHLB and Federal Reserve
Bank.
51
The following table summarizes the Company's total
available liquidity from on-balance sheet and off-balance
sheet funding sources:
(Dollars in millions)
Cash held at the Federal Reserve
Bank and other central banks
Available investment securities
Borrowing capacity from the
Federal Reserve Bank and FHLB
December 31, December 31,
2022
2023
$
52,403 $
44,428
34,220
131,962
215,763
114,775
Total available liquidity
$ 302,386 $ 291,165
The Company’s diversified deposit base provides a
sizeable source of relatively stable and low-cost funding,
while reducing the Company’s reliance on the wholesale
markets. Total deposits were $512.3 billion at December 31,
2023, compared with $525.0 billion at December 31, 2022.
Refer to Note 12 of the Notes to Consolidated Financial
Statements and “Balance Sheet Analysis” for further
information on the maturities, terms and trends of the
Company’s deposits.
TABLE 21 Credit Ratings
Additional funding is provided by long-term debt and
short-term borrowings. Long-term debt was $51.5 billion at
December 31, 2023, and is an important funding source
because of its multi-year borrowing structure. Refer to Note
14 of the Notes to Consolidated Financial Statements for
information on the terms and maturities of the Company’s
long-term debt issuances and “Balance Sheet Analysis” for
discussion on long-term debt trends. Short-term borrowings
were $15.3 billion at December 31, 2023, and supplement
the Company’s other funding sources. Refer to Note 13 of
the Notes to Consolidated Financial Statements and
“Balance Sheet Analysis” for further information on the
terms and trends of the Company’s short-term borrowings.
The Company’s ability to raise negotiated funding at
competitive prices is influenced by rating agencies’ views of
the Company’s credit quality, liquidity, capital and earnings.
Table 21 details the rating agencies’ most recent
assessments as of December 31, 2023.
Moody's S&P Global Ratings
Fitch Ratings
DBRS Morningstar
U.S. Bancorp
Long-term issuer rating
Short-term issuer rating
Senior unsecured debt
Subordinated debt
Junior subordinated debt
Preferred stock
Commercial paper
U.S. Bank National Association
Long-term issuer rating
Short-term issuer rating
Long-term deposits
Short-term deposits
Senior unsecured debt
Subordinated debt
Commercial paper
Counterparty risk assessment
Counterparty risk rating
Baseline credit assessment
A
A-1
A
A-
N/A
BBB
N/A
A+
A-1
N/A
N/A
A+
A
A-1
A+
F1
A
A-
N/A
BBB
F1
A+
F1
AA-
F1+
A+
N/A
N/A
AA
R-1 (middle)
AA
AA (low)
N/A
A
N/A
AA (high)
R-1 (high)
AA (high)
N/A
AA (high)
AA
R-1 (high)
A3
N/A
A3
A3
Baa1
Baa2
P-2
A2
P-1
Aa3
P-1
A2
A2
P-1
A1(cr)/P-1(cr)
A2/P-1
a2
In addition to assessing liquidity risk on a consolidated
basis, the Company monitors the parent company’s liquidity.
The parent company’s routine funding requirements consist
primarily of operating expenses, dividends paid to
shareholders, debt service, repurchases of common stock
and funds used for acquisitions. The parent company
obtains funding to meet its obligations from dividends
collected from its subsidiaries and the issuance of debt and
capital securities. The Company establishes limits for the
minimal number of months into the future where the parent
company can meet existing and forecasted obligations with
52 U.S. Bancorp 2023 Annual Report
cash and securities held that can be readily monetized. The
Company measures and manages this limit in both normal
and adverse conditions. The Company maintains sufficient
funding to meet expected capital and debt service
obligations for 24 months without the support of dividends
from subsidiaries and assuming access to the wholesale
markets is maintained. The Company maintains sufficient
liquidity to meet its capital and debt service obligations for
12 months under adverse conditions without the support of
dividends from subsidiaries or access to the wholesale
markets. The parent company is currently in excess of
required liquidity minimums.
Under SEC rules, the parent company is classified as a
“well-known seasoned issuer,” which allows it to file a
registration statement that does not have a limit on issuance
capacity. “Well-known seasoned issuers” generally include
those companies with outstanding common securities with a
market value of at least $700 million held by non-affiliated
parties or those companies that have issued at least $1
billion in aggregate principal amount of non-convertible
securities, other than common equity, in the last three years.
However, the parent company’s ability to issue debt and
other securities under a registration statement filed with the
SEC under these rules is limited by the debt issuance
authority granted by the Company’s Board of Directors and/
or the ALCO policy.
At December 31, 2023, parent company long-term debt
outstanding was $34.3 billion, compared with $27.0 billion at
December 31, 2022. The increase was primarily due to
$8.2 billion of medium-term note issuances, partially offset
by a $936 million repayment of the Company's debt
obligation to MUFG. As of December 31, 2023, there was
$5.6 billion of parent company debt scheduled to mature in
2024. Future debt maturities may be met through medium-
term note and capital security issuances and dividends from
subsidiaries, as well as from parent company cash and cash
equivalents.
Dividend payments to the Company by its subsidiary
banks are subject to regulatory review and statutory
limitations and, in some instances, regulatory approval. In
general, dividends to the parent company from its banking
subsidiaries are limited by rules which compare dividends to
net income for regulatorily-defined periods. For further
information, see Note 25 of the Notes to Consolidated
Financial Statements.
The Company is subject to a regulatory Liquidity
Coverage Ratio (“LCR”) requirement which requires large
banking organizations to maintain an adequate level of
unencumbered high quality liquid assets to meet estimated
liquidity needs over a 30-day stressed period. At
December 31, 2023, the Company was compliant with this
requirement.
The Company is also subject to a regulatory Net Stable
Funding Ratio (“NSFR”) requirement which requires large
banking organizations to maintain a minimum level of stable
funding based on the liquidity characteristics of their assets,
commitments, and derivative exposures over a one-year
time horizon. At December 31, 2023, the Company was
compliant with this requirement.
European Exposures The Company provides merchant
processing and corporate trust services in Europe either
directly or through banking affiliations in Europe. Revenue
generated from sources in Europe represented
approximately 2 percent of the Company’s total net revenue
for 2023. Operating cash for these businesses is deposited
on a short-term basis typically with certain European central
banks. For deposits placed at other European banks,
exposure is mitigated by the Company placing deposits at
multiple banks and managing the amounts on deposit at any
bank based on institution-specific deposit limits. At
December 31, 2023, the Company had an aggregate
amount on deposit with European banks of approximately
$7.3 billion, predominately with the Central Bank of Ireland
and Bank of England.
In addition, the Company provides financing to domestic
multinational corporations that generate revenue from
customers in European countries, transacts with various
European banks as counterparties to certain derivative-
related activities, and through a subsidiary, manages money
market funds that hold certain investments in European
sovereign debt. Any deterioration in economic conditions in
Europe, including the impacts resulting from the Russia-
Ukraine conflict, is not expected to have a significant effect
on the Company related to these activities.
Commitments, Contingent Liabilities and Other
Contractual Obligations The Company participates in
many different contractual arrangements which may or may
not be recorded on its balance sheet, with unrelated or
consolidated entities, under which the Company has an
obligation to pay certain amounts, provide credit or liquidity
enhancements or provide market risk support. These
arrangements also include any obligation related to a
variable interest held in an unconsolidated entity that
provides financing, liquidity, credit enhancement or market
risk support.
In the ordinary course of business, the Company enters
into contractual obligations that may require future cash
payments, including funding for customer loan requests,
customer deposit maturities and withdrawals, debt service,
leases for premises and equipment, and other cash
commitments. Refer to Notes 7, 12, 14, 17 and 23 in the
Notes to Consolidated Financial Statements for information
on the Company’s operating lease obligations, deposits,
long-term debt, benefit obligations and guarantees and
other commitments, respectively.
Commitments to extend credit are legally binding and
generally have fixed expiration dates or other termination
clauses. Many of the Company’s commitments to extend
credit expire without being drawn and, therefore, total
commitment amounts do not necessarily represent future
liquidity requirements or the Company’s exposure to credit
loss. Commitments to extend credit also include consumer
credit lines that are cancellable upon notification to the
consumer. Total contractual amounts of commitments to
extend credit at December 31, 2023 were $400.5 billion.
The Company also issues and confirms various types of
letters of credit, including standby and commercial. Total
contractual amounts of letters of credit at December 31,
2023 were $11.6 billion. For more information on the
Company’s commitments to extend credit and letters of
credit, refer to Note 23 in the Notes to Consolidated
Financial Statements.
The Company’s off-balance sheet arrangements with
unconsolidated entities primarily consist of private
investment funds or partnerships that make equity
investments, provide debt financing or support community-
based investments in tax-advantaged projects. In addition to
providing investment returns, these arrangements in many
cases assist the Company in complying with requirements
of the Community Reinvestment Act. The investments in
these entities generate a return primarily through the
realization of federal and state income tax credits and other
53
tax benefits, such as tax deductions from operating losses
of the investments, over specified time periods. The entities
in which the Company invests are generally considered
variable interest entities (“VIEs”). The Company’s recorded
investment in these entities, net of contractual equity
investment commitments of $3.6 billion, was $3.0 billion at
December 31, 2023.
The Company also has non-controlling financial
investments in private funds and partnerships considered
VIEs. The Company’s recorded investment in these entities
was approximately $219 million at December 31, 2023, and
the Company had unfunded commitments to invest an
additional $100 million. For more information on the
Company’s interests in unconsolidated VIEs, refer to Note 8
in the Notes to Consolidated Financial Statements.
Guarantees are contingent commitments issued by the
Company to customers or other third parties requiring the
Company to perform if certain conditions exist or upon the
occurrence or nonoccurrence of a specified event, such as a
scheduled payment to be made under contract. The
Company’s primary guarantees include commitments from
securities lending activities in which indemnifications are
provided to customers; indemnification or buy-back
provisions related to sales of loans and tax credit
investments; and merchant charge-back guarantees through
the Company’s involvement in providing merchant
processing services. For certain guarantees, the Company
may have access to collateral to support the guarantee, or
through the exercise of other recourse provisions, be able to
offset some or all of any payments made under these
guarantees.
The Company and certain of its subsidiaries, along with
other Visa U.S.A. Inc. member banks, have a contingent
guarantee obligation to indemnify Visa Inc. for potential
losses arising from antitrust lawsuits challenging the
practices of Visa U.S.A. Inc. and MasterCard International.
The indemnification by the Company and other Visa U.S.A.
Inc. member banks has no maximum amount. Refer to Note
23 in the Notes to Consolidated Financial Statements for
further details regarding guarantees, other commitments,
and contingent liabilities, including maximum potential future
payments and current carrying amounts.
Capital Management The Company is committed to
managing capital to maintain strong protection for
depositors and creditors and for maximum shareholder
benefit. The Company also manages its capital to exceed
regulatory capital requirements for banking organizations.
To achieve its capital goals, the Company employs a variety
of capital management tools, including dividends, common
share repurchases, and the issuance of subordinated debt,
non-cumulative perpetual preferred stock, common stock
and other capital instruments.
The Company announced on December 12, 2023 that its
Board of Directors had approved a regular quarterly
dividend of $0.49 per common share. This represented a
2.1 percent increase over the previous dividend rate per
common share of $0.48 per quarter.
The Company announced on December 22, 2020 that its
Board of Directors had approved an authorization to
repurchase $3.0 billion of its common stock beginning
54 U.S. Bancorp 2023 Annual Report
January 1, 2021. The Company suspended all common
stock repurchases at the beginning of the third quarter of
2021, except for those done exclusively in connection with
its stock-based compensation programs, due to its
acquisition of MUB. The Company will evaluate its share
repurchases in connection with the potential capital
requirements given proposed regulatory capital rules and
related landscape.
Capital distributions, including dividends and stock
repurchases, are subject to the approval of the Company’s
Board of Directors and compliance with regulatory
requirements. For a more complete analysis of activities
impacting shareholders’ equity and capital management
programs, refer to Note 15 of the Notes to Consolidated
Financial Statements.
Total U.S. Bancorp shareholders’ equity was $55.3 billion
at December 31, 2023, compared with $50.8 billion at
December 31, 2022. The increase was primarily the result of
corporate earnings, the issuance of shares of common stock
and changes in unrealized gains and losses on available-
for-sale investment securities included in other
comprehensive income (loss), partially offset by dividends
paid. In the third quarter of 2023, the Company issued 24
million shares of common stock of the Company to an
affiliate of MUFG for a purchase price of $936 million. The
proceeds of the issuance were used to repay a portion of
the Company’s $3.5 billion debt obligation to MUFG. See
“MUFG Union Bank Acquisition” on page 22 for further
information.
The regulatory capital requirements effective for the
Company follow Basel III, with the Company being subject
to calculating its capital adequacy as a percentage of risk-
weighted assets under the standardized approach. Under
Basel III, banking regulators define minimum capital
requirements for banks and financial services holding
companies. These requirements are expressed in the form
of a minimum common equity tier 1 capital ratio, tier 1
capital ratio, total risk-based capital ratio, tier 1 leverage
ratio and a tier 1 total leverage exposure, or supplementary
leverage, ratio. The Company’s minimum required level for
these ratios at December 31, 2023, which include a stress
capital buffer of 2.5 percent for the common equity tier 1
capital, tier 1 capital and total capital ratios, was 7.0 percent,
8.5 percent, 10.5 percent, 4.0 percent, and 3.0 percent,
respectively. The Company targets its regulatory capital
levels, at both the bank and bank holding company level, to
exceed the “well-capitalized” threshold for these ratios under
the FDIC Improvement Act prompt corrective action
provisions that are applicable to all banks. At December 31,
2023, the minimum “well-capitalized” thresholds under the
prompt corrective action framework for the common equity
tier 1 capital ratio, tier 1 capital ratio, total risk-based capital
ratio, tier 1 leverage ratio, and tier 1 total leverage exposure
ratio was 6.5 percent, 8.0 percent, 10.0 percent, 5.0
percent, and 3.0 percent, respectively. Beginning in 2022,
the Company began to phase into its regulatory capital
requirements the cumulative deferred impact of its 2020
adoption of the accounting guidance related to the
impairment of financial instruments based on the current
expected credit losses (“CECL”) methodology plus 25
percent of its quarterly credit reserve increases during 2020
and 2021. This cumulative deferred impact will continue to
be phased into the Company’s regulatory capital over the
next year, culminating with a fully phased in regulatory
capital calculation beginning in 2025. As of December 31,
2023, USBNA met all regulatory capital ratios to be
TABLE 22 Regulatory Capital Ratios
At December 31 (Dollars in Millions)
Basel III standardized approach:
Common shareholders’ equity
Less intangible assets
Goodwill (net of deferred tax liability)
Other disallowed intangible assets (net of deferred tax liability)
Other(a)
Common equity tier 1 capital
Qualifying preferred stock
Noncontrolling interests eligible for tier 1 capital
Other(b)
Tier 1 capital
Eligible portion of allowance for credit losses
Subordinated debt and noncontrolling interests eligible for tier 2 capital
Tier 2 capital
Total risk-based capital
Risk-weighted assets
Common equity tier 1 capital as a percent of risk-weighted assets
Tier 1 capital as a percent of risk-weighted assets
Total risk-based capital as a percent of risk-weighted assets
considered “well-capitalized”. There are no conditions or
events since December 31, 2023 that management believes
have changed the risk-based category of USBNA.
2023
2022
$ 48,498
$ 43,958
(11,480)
(11,395)
(2,278)
(2,792)
10,207
44,947
6,808
450
(6)
11,789
41,560
6,808
450
(5)
52,199
48,813
5,645
4,077
9,722
5,682
4,520
10,202
$ 61,921
$ 59,015
$ 453,390
$ 496,500
9.9%
8.4%
11.5
13.7
8.1
6.6
9.8
11.9
7.9
6.4
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio)
Tier 1 capital as a percent of total on- and off-balance sheet leverage exposure (total leverage exposure ratio)
(a) Includes the impact of items included in other comprehensive income (loss), such as unrealized gains (losses) on available-for-sale securities, accumulated net gains on cash flow
hedges, pension liability adjustments, etc., and the portion of deferred tax assets related to net operating loss and tax credit carryforwards not eligible for common equity tier 1
capital.
(b) Includes the remaining portion of deferred tax assets not eligible for total tier 1 capital.
Table 22 provides a summary of statutory regulatory
capital ratios in effect for the Company at December 31,
2023 and 2022. All regulatory ratios exceeded regulatory
“well-capitalized” requirements.
In July 2023, the U.S. federal bank regulatory authorities
proposed a rule implementing the Basel Committee’s
finalization of the post-crisis regulatory capital reforms. The
proposal provides for a July 1, 2025 effective date, subject
to a three-year transition period. The proposal includes the
Fundamental Review of the Trading Book, which replaces
the market risk rule, and introduces new standardized
approaches for credit risk, operational risk and credit
valuation adjustment (CVA) risk, which would replace the
current models-based approaches. The Company is
currently evaluating the impact of the proposed rule and
expects that any final rule would result in the Company
being required to maintain increased levels of regulatory
capital.
The Company believes certain other capital ratios are
useful in evaluating its capital adequacy. The Company’s
tangible common equity, as a percent of tangible assets and
as a percent of risk-weighted assets determined in
accordance with transitional regulatory capital requirements
related to the CECL methodology under the standardized
approach, was 5.3 percent and 7.7 percent, respectively, at
December 31, 2023, compared with 4.5 percent and 6.0
percent at December 31, 2022, respectively. In addition, the
Company’s common equity tier 1 capital to risk-weighted
assets ratio, reflecting the full implementation of the CECL
methodology was 9.7 percent at December 31, 2023,
compared with 8.1 percent at December 31, 2022. Refer to
“Non-GAAP Financial Measures” beginning on page 59 for
further information on these other capital ratios.
As an approved mortgage seller and servicer, USBNA,
through its mortgage banking division, is required to
maintain various levels of shareholder’s equity, as specified
by various agencies, including the United States
Department of Housing and Urban Development,
Government National Mortgage Association, Federal Home
Loan Mortgage Corporation and the Federal National
Mortgage Association. At December 31, 2023, USBNA met
these requirements.
55
Line of Business Financial Review
The Company’s major lines of business are Wealth,
Corporate, Commercial and Institutional Banking, Consumer
and Business Banking, Payment Services, and Treasury
and Corporate Support.
Basis for Financial Presentation 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. Refer to Note 24 of the Notes to
Consolidated Financial Statements for further information on
the business lines’ basis for financial presentation.
Designations, assignments and allocations change from
time to time as management systems are enhanced,
methods of evaluating performance or product lines change
or business segments are realigned to better respond to the
Company’s diverse customer base. During 2023, certain
organization and methodology changes were made,
including the Company combining its Wealth Management
and Investment Services and Corporate and Commercial
Banking lines of businesses to create the Wealth,
Corporate, Commercial and Institutional Banking line of
business. 2022 results were restated and presented on a
comparable basis.
Wealth, Corporate, Commercial and Institutional
Banking Wealth, Corporate, Commercial and Institutional
Banking provides core banking, specialized lending,
transaction and payment processing, capital markets, asset
management, and brokerage and investment related
services to wealth, middle market, large corporate,
government and institutional clients. Wealth, Corporate,
Commercial and Institutional Banking contributed $3.6
billion of the Company’s net income in 2023, or an increase
of $202 million (6.0 percent), compared with 2022.
Net revenue increased $1.5 billion (17.1 percent) in
2023, compared with 2022. Net interest income, on a
taxable-equivalent basis, increased $916 million (17.6
percent) in 2023, compared with 2022, primarily due to the
impact of higher rates on the margin benefit from deposits
and the acquisition of MUB, partially offset by the impact of
deposit mix and pricing. Noninterest income increased $582
million (16.3 percent) in 2023, compared with 2022,
primarily due to higher trust and investment management
fees driven by the acquisition of MUB and core business
growth, and higher commercial products revenue mainly
due to higher trading revenue and corporate bond fees.
Noninterest expense increased $1.0 billion (25.3 percent)
in 2023, compared with 2022, primarily due to higher FDIC
insurance expense driven by an increase in the assessment
base and rate along with the inclusion of MUB in the current
year. Compensation and employee benefits expense and
net shared services expense were also higher, driven by
investment in support of business growth and the impact of
the MUB acquisition, including intangible amortization driven
by the core deposit intangible. The provision for credit
losses increased $180 million in 2023, compared with 2022,
primarily due to commercial real estate credit quality.
Consumer and Business Banking Consumer and
Business Banking comprises consumer banking, small
56 U.S. Bancorp 2023 Annual Report
business banking and consumer lending. Products and
services are delivered through banking offices, telephone
servicing and sales, online services, direct mail, ATM
processing, mobile devices, distributed mortgage loan
officers, and intermediary relationships including auto
dealerships, mortgage banks, and strategic business
partners. Consumer and Business Banking contributed $2.2
billion of the Company’s net income in 2023, or an increase
of $378 million (20.6 percent), compared with 2022.
Net revenue increased $1.7 billion (20.4 percent) in
2023, compared with 2022. Net interest income, on a
taxable-equivalent basis, increased $1.6 billion (23.2
percent) in 2023, compared with 2022, reflecting the
favorable impact of higher rates on the margin benefit of
deposits and the acquisition of MUB, partially offset by the
impact of deposit mix and pricing. Noninterest income
increased $126 million (8.2 percent) in 2023, compared with
2022, primarily due to higher mortgage banking revenue
driven by increases in MSR valuations, net of hedging
activities, along with the impact of the MUB acquisition.
Noninterest expense increased $1.2 billion (20.5 percent)
in 2023, compared with 2022, primarily due to increases in
compensation and employee benefits expense and net
shared services expense due to investments in digital
capabilities, and the impact of the MUB acquisition,
including intangible amortization driven by the core deposit
intangible. The provision for credit losses increased $4
million (5.3 percent) in 2023, compared with 2022, due to
normalizing credit conditions, partially offset by declining
loan balances.
Payment Services Payment Services includes consumer
and business credit cards, stored-value cards, debit cards,
corporate, government and purchasing card services and
merchant processing. Payment Services contributed $1.2
billion of the Company’s net income in 2023, or a decrease
of $150 million (11.2 percent), compared with 2022.
Net revenue increased $460 million (7.3 percent) in
2023, compared with 2022. Net interest income, on a
taxable-equivalent basis, increased $198 million (7.9
percent) in 2023, compared with 2022, primarily due to
higher loan yields driven by higher interest rates and lower
payment rates, along with higher loan balances, partially
offset by higher funding costs. Noninterest income
increased $262 million (6.9 percent) in 2023, compared with
2022, driven by higher card revenue and merchant
processing services revenue due to higher spend volume,
along with higher corporate payment products revenue due
to product mix.
Noninterest expense increased $247 million (7.0 percent)
in 2023, compared with 2022, reflecting higher net shared
services expense driven by investment in infrastructure and
technology development, in addition to higher compensation
and employee benefits expense as a result of merit
increases and core business growth. The provision for credit
losses increased $414 million (42.2 percent) in 2023,
compared with 2022, primarily due to normalizing credit
conditions exhibited through increasing delinquency and
credit loss rates.
Treasury and Corporate Support Treasury and Corporate
Support includes the Company’s investment portfolios,
funding, capital management, interest rate risk
management, income taxes not allocated to the business
lines, including most investments in tax-advantaged
projects, and the residual aggregate of those expenses
associated with corporate activities that are managed on a
consolidated basis. Treasury and Corporate Support
recorded a net loss of $1.5 billion in 2023, compared with a
net loss of $716 million in 2022.
Net revenue increased $191 million (20.5 percent) in
2023, compared with 2022. Noninterest income increased
$191 million (33.8 percent) in 2023, compared with 2022,
primarily due to the impacts of balance sheet repositioning
and capital management actions taken in the fourth quarter
of 2022, partially offset by losses on the sale of investment
securities in the fourth quarter of 2023 related to balance
sheet repositioning. Net interest income, on a taxable-
equivalent basis, was unchanged in 2023, compared with
2022, driven by higher funding costs, offset by higher yields
on the investment portfolio and cash balances.
Noninterest expense increased $1.5 billion in 2023,
compared with 2022, primarily due to merger and integration
charges and operating expenses related to the acquisition of
MUB, the FDIC special assessment charge, higher
compensation and employee benefits expense reflecting
merit increases and hiring to support business growth, and
higher marketing and business development expense as the
Company continues to invest in its national brand and global
reach. These increases were partially offset by lower net
shared services expense. The provision for credit losses
was $300 million (39.1 percent) lower in 2023, compared
with 2022, primarily due to the initial provision for credit
losses recorded in the fourth quarter of 2022 related to the
MUB acquisition.
Income taxes are assessed to each line of business at a
managerial tax rate of 25.0 percent with the residual tax
expense or benefit to arrive at the consolidated effective tax
rate included in Treasury and Corporate Support.
57
TABLE 23 Line of Business Financial Performance
Year Ended December 31
(Dollars in Millions)
2023
2022
Percent
Change
2023
2022
Percent
Change
2023
2022
Percent
Change
Wealth, Corporate, Commercial and
Institutional Banking
Consumer and
Business Banking
Payment Services
Condensed Income Statement
Net interest income (taxable-equivalent
basis)
Noninterest income
Total net revenue
Noninterest expense
Income (loss) before provision and
income taxes
Provision for credit losses
Income (loss) before income taxes
Income taxes and taxable-equivalent
adjustment
Net income (loss)
Net (income) loss attributable to
noncontrolling interests
Net income (loss) attributable to U.S.
Bancorp
Average Balance Sheet
Loans
Goodwill
Other intangible assets
Assets
Noninterest-bearing deposits
Interest-bearing deposits
Total deposits
Total U.S. Bancorp shareholders’ equity
$ 6,129 $ 5,213
17.6% $ 8,331 $ 6,764
23.2% $ 2,702 $ 2,504
7.9%
4,143
10,272
5,183
3,561
8,774
4,135
5,089
4,639
334
154
4,755
4,485
1,190
3,565
1,122
3,363
16.3
17.1
25.3
9.7
*
6.0
6.1
6.0
1,662
9,993
6,964
1,536
8,300
5,779
3,029
2,521
79
75
2,950
2,446
738
612
2,212
1,834
8.2
20.4
20.5
20.2
5.3
20.6
20.6
20.6
4,056
6,758
3,772
2,986
1,394
1,592
3,794
6,298
3,525
2,773
980
6.9
7.3
7.0
7.7
42.2
1,793
(11.2)
398
449
1,194
1,344
(11.4)
(11.2)
—
—
—
—
—
—
—
—
—
$ 3,565 $ 3,363
6.0
$ 2,212 $ 1,834
20.6
$ 1,194 $ 1,344
(11.2)
$ 175,780 $ 150,512
16.8
$ 161,862 $ 144,441
4,682
1,007
3,634
365
202,642
169,554
70,977
82,671
199,780
175,345
270,757
258,016
22,362
18,159
28.8
*
19.5
(14.1)
13.9
4.9
23.1
4,466
5,265
3,250
3,784
179,103
160,174
31,082
31,719
189,148
163,190
220,230
194,909
16,016
12,678
12.1
37.4
39.1
11.8
(2.0)
15.9
13.0
26.3
$ 38,471 $ 34,627
11.1
3,327
350
3,305
423
44,292
41,072
2,981
103
3,084
9,310
3,410
162
3,572
8,233
.7
(17.3)
7.8
(12.6)
(36.4)
(13.7)
13.1
Year Ended December 31
(Dollars in Millions)
2023
2022
Percent
Change
2023
2022
Percent
Change
asury and
Tre
Corporate
Support
Consolidated
Company
Income (loss) before income taxes
(2,301)
(1,305)
(76.3)
Condensed Income Statement
Net interest income (taxable-equivalent
basis)
Noninterest income
Total net revenue
Noninterest expense
Income (loss) before provision and
income taxes
Provision for credit losses
Income taxes and taxable-equivalent
adjustment
Net income (loss)
Net (income) loss attributable to
noncontrolling interests
Net income (loss) attributable to U.S.
Bancorp
Average Balance Sheet
Loans
Goodwill
Other intangible assets
Assets
Noninterest-bearing deposits
Interest-bearing deposits
Total deposits
—% $ 17,527 $ 14,846
18.1%
$
365 $
756
1,121
2,954
365
565
930
1,467
(1,833)
(537)
33.8
20.5
*
*
468
768
(39.1)
(788)
(1,513)
(602)
(703)
(29)
(13)
$
(1,542) $
(716)
(30.9)
*
*
*
10,617
9,456
28,144
24,302
18,873
14,906
9,271
2,275
6,996
1,538
5,458
9,396
1,977
7,419
1,581
5,838
12.3
15.8
26.6
(1.3)
15.1
(5.7)
(2.7)
(6.5)
(29)
(13)
*
$ 5,429 $ 5,825
(6.8)
$ 5,162 $ 3,993
29.3
$ 381,275 $ 333,573
—
17
—
5
237,403
221,349
2,728
8,864
11,592
2,594
3,293
5,887
—
*
7.3
5.2
*
12,475
10,189
6,639
4,577
663,440
592,149
107,768
120,394
(10.5)
397,895
341,990
16.3
96.9
505,663
462,384
14.3
22.4
45.1
12.0
9.4
6.4
Total U.S. Bancorp shareholders’ equity
5,972
11,346
(47.4)
53,660
50,416
*Not meaningful
58 U.S. Bancorp 2023 Annual Report
Non-GAAP Financial Measures
In addition to capital ratios defined by banking regulators,
the Company considers various other measures when
evaluating capital utilization and adequacy, including:
• Tangible common equity to tangible assets,
• Tangible common equity to risk-weighted assets, and
• Common equity tier 1 capital to risk-weighted assets,
reflecting the full implementation of the CECL
methodology.
These capital measures are viewed by management as
useful additional methods of evaluating the Company’s
utilization of its capital held and the level of capital available
to withstand unexpected negative market or economic
conditions. Additionally, presentation of these measures
allows investors, analysts and banking regulators to assess
the Company’s capital position relative to other financial
services companies. These capital measures are not
defined in generally accepted accounting principles
(“GAAP”), or are not currently effective or defined in banking
regulations. In addition, certain of these measures differ
from currently effective capital ratios defined by banking
regulations principally in that the currently effective ratios,
which are subject to certain transitional provisions,
temporarily exclude the impact of the 2020 adoption of
accounting guidance related to impairment of financial
instruments based on the CECL methodology. As a result,
these capital measures disclosed by the Company may be
considered non-GAAP financial measures. Management
believes this information helps investors assess trends in
the Company’s capital adequacy.
The Company discloses the return on tangible common
equity ratio and tangible book value per share as it believes
they are useful financial measures to assess the Company's
use of equity.
The Company also discloses net interest income and
related ratios and analysis on a taxable-equivalent basis,
which may also be considered non-GAAP financial
measures. The Company believes this presentation to be
the preferred industry measurement of net interest income
as it provides a relevant comparison of net interest income
arising from taxable and tax-exempt sources. In addition,
certain performance measures, including the efficiency ratio
and net interest margin utilize net interest income on a
taxable-equivalent basis.
The Company also discloses the net charge-off ratio and
return on tangible common equity ratio excluding notable
items related to the acquisition of MUB, and other balance
sheet repositioning and capital management actions taken
by the Company. Management believes these measures
enhance comparability with prior periods.
The Company also discloses percent of net revenue for
its business lines excluding Treasury and Corporate Support
to highlight the contributions to net revenue from the
Company's core revenue-producing businesses.
There may be limits in the usefulness of these measures
to investors. As a result, the Company encourages readers
to consider the consolidated financial statements and other
financial information contained in this report in their entirety,
and not to rely on any single financial measure.
59
The following tables show the Company’s calculation of these non-GAAP financial measures:
At December 31 (Dollars in Millions)
Total equity
Preferred stock
Noncontrolling interests
Goodwill (net of deferred tax liability)(a)
Intangible assets (net of deferred tax liability), other than mortgage servicing rights
Tangible common equity(1)
Common equity tier 1 capital, determined in accordance with transitional regulatory capital
requirements related to the CECL methodology implementation
Adjustments(b)
2023
2022
2021
$ 55,771
$ 51,232
$ 55,387
(6,808)
(6,808)
(6,371)
(465)
(466)
(469)
(11,480)
(11,395)
(9,323)
(2,278)
(2,792)
(785)
34,740
29,771
38,439
44,947
41,560
41,701
(866)
(1,299)
(1,733)
Common equity tier 1 capital, reflecting the full implementation of the CECL methodology(2)
44,081
40,261
39,968
Total assets
Goodwill (net of deferred tax liability)(a)
Intangible assets (net of deferred tax liability), other than mortgage servicing rights
Tangible assets(3)
Risk-weighted assets, determined in accordance with prescribed regulatory capital
requirements effective for the Company(4)
Adjustments(c)
Risk-weighted assets, reflecting the full implementation of the CECL methodology(5)
Ratios
Tangible common equity to tangible assets(1)/(3)
Tangible common equity to risk-weighted assets(1)/(4)
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the
CECL methodology(2)/(5)
663,491
674,805
573,284
(11,480)
(11,395)
(9,323)
(2,278)
(2,792)
(785)
649,733
660,618
563,176
453,390
496,500
418,571
(736)
(620)
(357)
452,654
495,880
418,214
5.3%
7.7
4.5%
6.0
6.8%
9.2
9.7
8.1
9.6
(a) Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.
(b) Includes the estimated increase in the allowance for credit losses related to the adoption of the CECL methodology net of deferred taxes.
(c) Includes the impact of the estimated increase in the allowance for credit losses related to the adoption of the CECL methodology.
Year Ended December 31 (Dollars in Millions)
Net interest income
Taxable-equivalent adjustment(a)
Net interest income, on a taxable-equivalent basis
Net interest income, on a taxable-equivalent basis (as calculated above)
Noninterest income
Less: Securities gains (losses), net
Total net revenue, excluding net securities gains (losses)(1)
Noninterest expense(2)
Efficiency ratio(2)/(1)
2023
2022
2021
$ 17,396
$ 14,728
$ 12,494
131
118
106
17,527
14,846
12,600
17,527
10,617
(145)
28,289
18,873
14,846
9,456
20
24,282
14,906
12,600
10,227
103
22,724
13,728
66.7%
61.4%
60.4%
(a) Based on federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.
Year Ended December 31, 2023 (Dollars in Millions)
Net Revenue as a Net Revenue as a Percent of the
Percent of the Consolidated Company Excluding
Net Revenue Consolidated Company Treasury and Corporate Support
Wealth, Corporate, Commercial and Institutional Banking
$
10,272
Consumer and Business Banking
Payment Services
Treasury and Corporate Support
Consolidated Company
Less: Treasury and Corporate Support
9,993
6,758
1,121
28,144
1,121
Consolidated Company excluding Treasury and Corporate Support
$
27,023
36%
36
24
4
100%
38%
37
25
100%
60 U.S. Bancorp 2023 Annual Report
Year Ended December 31 (Dollars in Millions)
Net income applicable to U.S. Bancorp common shareholders
Intangible amortization (net-of-tax)
Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization(1)
Less: Notable items(a)
Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization and notable
items(2)
Average total equity
Average preferred stock
Average noncontrolling interests
Average goodwill (net of deferred tax liability)(b)
Average intangible assets (net of deferred tax liability), other than mortgage servicing rights
Average tangible equity(3)
Return on tangible common equity(1)/(3)
Return on tangible common equity, excluding notable items(2)/(3)
$
2023
5,051
502
5,553
(1,597)
7,150
54,125
(6,808)
(465)
(11,485)
(2,480)
32,887
16.9%
21.7%
(a) Notable items of $2.2 billion ($1.6 billion net-of-tax, including a $70 million discrete tax benefit) for the year ended December 31, 2023 included $(140) million of noninterest income
related to investment securities balance sheet repositioning and capital management actions, $1.0 billion of merger and integration-related charges, $734 million of FDIC special
assessment charges, a $110 million charitable contribution and $243 million of provision for credit losses related to balance sheet repositioning and capital management actions.
(b) Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.
Year Ended December 31 (Dollars in Millions)
Net charge-offs
Less: Notable items(a)
Net charge-offs, excluding notable items(1)
Average loan balances(2)
Net charge-off ratio, excluding notable items(1)/(2)
2023
2022
$
1,905
$
1,063
400
1,505
368
695
381,275
333,573
.39%
.21%
(a) Notable items for the year ended December 31, 2023 included $309 million of net charge-offs related to balance sheet repositioning and capital management actions and $91
million of net charge-offs related to the uncollectible amount of acquired MUB loans, which were considered purchased credit deteriorated as of the date of acquisition. Notable
items for the year ended December 31, 2022 included $179 million of net charge-offs related to uncollectible MUB acquired loans as well as $189 million of net charge-offs related
to balance sheet repositioning and capital management actions.
At December 31 (Dollars in Millions, Except Per Share Data)
Common equity
Goodwill (net of deferred tax liability)(a)
Intangible assets (net of deferred tax liability), other than mortgage servicing rights
Tangible common equity(1)
Common shares outstanding(2)
Tangible book value per common share(1)/(2)
(a) Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.
2023
2022
Percent
Change
$ 48,498 $ 43,958
(11,480)
(11,395)
(2,278)
(2,792)
34,740
29,771
1,558
1,531
$
22.30 $
19.45
14.7%
Accounting Changes
Note 2 of the Notes to Consolidated Financial Statements
discusses accounting standards recently issued but not yet
required to be adopted and the expected impact of these
changes in accounting standards. To the extent the
adoption of new accounting standards materially affects the
Company’s financial condition or results of operations, the
impacts are discussed in the applicable section(s) of the
Management’s Discussion and Analysis and the Notes to
Consolidated Financial Statements.
Critical Accounting Policies
The accounting and reporting policies of the Company
comply with accounting principles generally accepted in the
United States and conform to general practices within the
banking industry. The preparation of financial statements in
conformity with GAAP requires management to make
estimates and assumptions. The Company’s financial
position and results of operations can be affected by these
estimates and assumptions, which are integral to
understanding the Company’s financial statements. Critical
accounting policies are those policies management believes
are the most important to the portrayal of the Company’s
financial condition and results, and require management to
make estimates that are difficult, subjective or complex.
Most accounting policies are not considered by
management to be critical accounting policies. Several
factors are considered in determining whether or not a
policy is critical in the preparation of financial statements.
These factors include, among other things, whether the
estimates are significant to the financial statements, the
nature of the estimates, the ability to readily validate the
estimates with other information (including third-party
61
sources or available prices), sensitivity of the estimates to
changes in economic conditions and whether alternative
accounting methods may be utilized under GAAP.
Management has discussed the development and the
selection of critical accounting policies with the Company’s
Audit Committee.
inflationary pressures, continually elevated high interest
rates, declines in residential and commercial real estate
prices, high unemployment rates, supply shortages,
geopolitical risks, bank tightening and lingering concerns of
future bank failures, which could all precipitate a moderate
to severe recession and result in increased credit losses.
Significant accounting policies are discussed in Note 1 of
Under the range of economic scenarios considered, the
the Notes to Consolidated Financial Statements. Those
policies considered to be critical accounting policies are
described below.
Allowance for Credit Losses Management’s evaluation of
the appropriate allowance for credit losses is often the most
critical of all the accounting estimates for a banking
institution. It is an inherently subjective process impacted by
many factors as discussed throughout the Management’s
Discussion and Analysis section of the Annual Report.
The methods utilized to estimate the allowance for credit
losses, key assumptions and quantitative and qualitative
information considered by management in determining the
appropriate allowance for credit losses at December 31,
2023 are discussed in the “Credit Risk Management”
section. Although methodologies utilized to determine each
element of the allowance reflect management’s assessment
of credit risk, imprecision exists in these measurement tools
due in part to subjective judgments involved and an inherent
lag in the data available to quantify current conditions and
events that affect credit loss reserve estimates.
Given the many quantitative variables and subjective
factors affecting the credit portfolio, changes in the
allowance for credit losses may not directly coincide with
changes in risk ratings or delinquency status within loan and
lease portfolios. This is in part due to the timing of the risk
rating process in relation to changes in the business cycle,
the exposure and mix of loans within risk rating categories,
levels of nonperforming loans and the timing of charge-offs
and expected recoveries. The allowance for credit losses
measures the expected loss content on the remaining
portfolio exposure, while nonperforming loans and net
charge-offs are measures of specific impairment events that
have already been confirmed. Therefore, the degree of
change in the forward-looking expected loss in the
allowance may differ from the level of changes in
nonperforming loans and net charge-offs. Management
maintains an appropriate allowance for credit losses by
updating allowance rates to reflect changes in expected
losses, including expected changes in economic or business
cycle conditions. Some factors considered in determining
the appropriate allowance for credit losses are more readily
quantifiable while other factors require extensive qualitative
judgment in determining the overall level of the allowance
for credit losses.
The Company considers a range of economic scenarios
in its determination of the allowance for credit losses. These
scenarios are constructed with interrelated projections of
multiple economic variables, and loss estimates are
produced that consider the historical correlation of those
economic variables with credit losses, and also the
expectation that conditions will eventually normalize over
the longer run. Scenarios worse than the Company’s
expected outcome at December 31, 2023 include risks of
later than expected cuts in the federal funds rate, persisting
62 U.S. Bancorp 2023 Annual Report
allowance for credit losses would have been lower by
$1.1 billion or higher by $2.3 billion. This range reflects the
sensitivity of the allowance for credit losses specifically
related to the scenarios and weights considered as of
December 31, 2023, and does not consider other potential
adjustments that could increase or decrease loss estimates
calculated using alternative economic scenarios.
Because several quantitative and qualitative factors are
considered in determining the allowance for credit losses,
these sensitivity analyses do not necessarily reflect the
nature and extent of future changes in the allowance for
credit losses. They are intended to provide insights into the
impact of adverse changes in the economy on the
Company’s modeled loss estimates for the loan portfolio
and do not imply any expectation of future deterioration in
the risk rating or loss rates. Given current processes
employed by the Company, management believes the risk
ratings and loss model estimates currently assigned are
appropriate. It is possible that others, given the same
information, may at any point in time reach different
reasonable conclusions that could be significant to the
Company’s financial statements. Refer to the “Analysis and
Determination of the Allowance for Credit Losses” section
for further information.
Fair Value Estimates A portion of the Company’s assets
and liabilities are carried at fair value on the Consolidated
Balance Sheet, with changes in fair value recorded either
through earnings or other comprehensive income (loss) in
accordance with applicable accounting principles generally
accepted in the United States. These include all of the
Company’s available-for-sale investment securities,
derivatives and other trading instruments, MSRs and
MLHFS. The estimation of fair value also affects other loans
held for sale, which are recorded at the lower-of-cost-or-fair
value. The determination of fair value is important for certain
other assets that are periodically evaluated for impairment
using fair value estimates, including goodwill. Refer to Note
3 of the Notes to Consolidated Financial Statements for
additional information on fair value estimates of assets and
liabilities assumed in the MUB acquisition.
Fair value is generally defined as the exit price at which
an asset or liability could be exchanged in a current
transaction between willing, unrelated parties, other than in
a forced or liquidation sale. Fair value is based on quoted
market prices in an active market, or if market prices are not
available, is estimated using models employing techniques
such as matrix pricing or discounting expected cash flows.
The significant assumptions used in the models, which
include assumptions for interest rates, discount rates,
prepayments and credit losses, are independently verified
against observable market data where possible. Where
observable market data is not available, the estimate of fair
value becomes more subjective and involves a high degree
of judgment. In this circumstance, fair value is estimated
based on management’s judgment regarding the value that
market participants would assign to the asset or liability.
This valuation process takes into consideration factors such
as market illiquidity. Imprecision in estimating these factors
can impact the amount recorded on the balance sheet for a
particular asset or liability with related impacts to earnings or
other comprehensive income (loss).
When available, trading and available-for-sale securities
are valued based on quoted market prices. However, certain
securities are traded less actively and, therefore, quoted
market prices may not be available. The determination of
fair value may require benchmarking to similar instruments
or performing a discounted cash flow analysis using
estimates of future cash flows and prepayment, interest and
default rates. For more information on investment securities,
refer to Note 5 of the Notes to Consolidated Financial
Statements.
As few derivative contracts are listed on an exchange,
the majority of the Company’s derivative positions are
valued using valuation techniques that use readily
observable market inputs. Certain derivatives, however,
must be valued using techniques that include unobservable
inputs. For these instruments, the significant assumptions
must be estimated and, therefore, are subject to judgment.
Note 20 of the Notes to Consolidated Financial Statements
provides a summary of the Company’s derivative positions.
Refer to Note 22 of the Notes to Consolidated Financial
Statements for additional information regarding estimations
of fair value.
Mortgage Servicing Rights MSRs are capitalized as
separate assets when loans are sold and servicing is
retained, or may be purchased from others. The Company
records MSRs at fair value. Because MSRs do not trade in
an active market with readily observable prices, the
Company determines the fair value by estimating the
present value of the asset’s future cash flows utilizing
market-based prepayment rates, option adjusted spread,
and other assumptions validated through comparison to
trade information, industry surveys and independent third-
party valuations. Changes in the fair value of MSRs are
recorded in earnings during the period in which they occur.
Risks inherent in the valuation of MSRs include higher than
expected prepayment rates and/or delayed receipt of cash
flows. The Company utilizes derivatives, including interest
rate swaps, swaptions, forward commitments to buy TBAs,
U.S. Treasury and Eurodollar futures and options on U.S.
Treasury futures, to mitigate the valuation risk. Refer to
Notes 10 and 22 of the Notes to Consolidated Financial
Statements for additional information on the assumptions
used in determining the fair value of MSRs and an analysis
of the sensitivity to changes in interest rates of the fair value
of the MSRs portfolio and the related derivative instruments
used to mitigate the valuation risk.
Income Taxes The Company estimates income tax
expense based on amounts expected to be owed to the
various tax jurisdictions in which it operates, including
federal, state and local domestic jurisdictions, and an
insignificant amount to foreign jurisdictions. The estimated
income tax expense is reported in the Consolidated
Statement of Income. Accrued taxes are reported in other
assets or other liabilities on the Consolidated Balance Sheet
and represent the net estimated amount due to or to be
received from taxing jurisdictions either currently or deferred
to future periods. Deferred taxes arise from differences
between assets and liabilities measured for financial
reporting purposes versus income tax reporting purposes.
Deferred tax assets are recognized if, in management’s
judgment, their realizability is determined to be more likely
than not. Uncertain tax positions that meet the more likely
than not recognition threshold are measured to determine
the amount of benefit to recognize. An uncertain tax position
is measured at the largest amount of benefit management
believes is more likely than not to be realized upon
settlement. In estimating accrued taxes, the Company
assesses the relative merits and risks of the appropriate tax
treatment considering statutory, judicial and regulatory
guidance in the context of the tax position. Because of the
complexity of tax laws and regulations, interpretation can be
difficult and subject to legal judgment given specific facts
and circumstances. It is possible that others, given the same
information, may at any point in time reach different
reasonable conclusions regarding the estimated amounts of
accrued taxes.
Changes in the estimate of accrued taxes occur
periodically due to changes in tax rates, interpretations of
tax laws, the status of examinations being conducted by
various taxing authorities, and newly enacted statutory,
judicial and regulatory guidance that impacts the relative
merits and risks of tax positions. These changes, when they
occur, affect accrued taxes and can be significant to the
operating results of the Company. Refer to Note 19 of the
Notes to Consolidated Financial Statements for additional
information regarding income taxes.
Controls and Procedures
Under the supervision and with the participation of the
Company’s management, including its principal executive
officer and principal financial officer, the Company has
evaluated the effectiveness of the design and operation of
its disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934 (the “Exchange Act”)). Based upon this evaluation,
the principal executive officer and principal financial officer
have concluded that, as of the end of the period covered by
this report, the Company’s disclosure controls and
procedures were effective.
During the most recently completed fiscal quarter, there
was no change made in the Company’s internal control over
financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) that has materially
affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.
The annual report of the Company’s management on
internal control over financial reporting is provided on page
64. The audit report of Ernst & Young LLP, the Company’s
independent accountants, regarding the Company’s internal
control over financial reporting is provided on page 65.
63
Report of Management
Responsibility for the financial statements and other information presented throughout this Annual Report rests with the
management of U.S. Bancorp. The Company believes the consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States and present the substance of transactions based on the
circumstances and management’s best estimates and judgment.
In meeting its responsibilities for the reliability of the financial statements, management is responsible for establishing and
maintaining an adequate system of internal control over financial reporting as defined by Rules 13a-15(f) and 15d-15(f) under the
Securities Exchange Act of 1934. The Company’s system of internal control is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of publicly filed financial statements in accordance with
accounting principles generally accepted in the United States.
To test compliance, the Company carries out an extensive audit program. This program includes a review for compliance with
written policies and procedures and a comprehensive review of the adequacy and effectiveness of the system of internal control.
Although control procedures are designed and tested, it must be recognized that there are limits inherent in all systems of internal
control and, therefore, errors and irregularities may nevertheless occur. Projection of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
The Board of Directors of the Company has an Audit Committee composed of directors who are independent of U.S. Bancorp. The
Audit Committee meets periodically with management, the internal auditors and the independent accountants to consider audit
results and to discuss internal accounting control, auditing and financial reporting matters.
Management assessed the effectiveness of the Company’s system of internal control over financial reporting as of December 31,
2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in its Internal Control—Integrated Framework (2013 framework). Based on its assessment and those
criteria, management believes the Company maintained effective internal control over financial reporting as of December 31, 2023.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, as stated in their accompanying report appearing on page 65.
64 U.S. Bancorp 2023 Annual Report
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of U.S. Bancorp
Opinion on Internal Control Over Financial Reporting
We have audited U.S. Bancorp’s internal control over financial reporting as of December 31, 2023, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) (the COSO criteria). In our opinion, U.S. Bancorp (the Company) maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated
statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended
December 31, 2023, and the related notes and our report dated February 20, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management.
Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Minneapolis, Minnesota
February 20, 2024
65
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of U.S. Bancorp
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of U.S. Bancorp (the Company) as of December 31, 2023 and
2022, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the
three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2023 based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework), and our report dated February 20, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required
to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter
or on the accounts or disclosures to which it relates.
Description of the
Matter
Allowance for Credit Losses
The Company’s loan and lease portfolio and the associated allowance for credit losses (ACL), were
$373.8 billion and $7.8 billion as of December 31, 2023, respectively. The provision for credit losses was
$2.3 billion for the year ended December 31, 2023. As discussed in Notes 1 and 6 to the financial
statements, the ACL is established for current expected credit losses on the Company’s loan and lease
portfolio, including unfunded credit commitments, by utilizing forward-looking expected loss models.
When determining expected losses, the Company uses multiple probability weighted economic scenarios
over a reasonable and supportable forecast period and then fully reverts to historical loss experience to
estimate losses over the remaining asset lives. Model estimates are adjusted to consider any relevant
changes in portfolio composition, lending policies, underwriting standards, risk management practices or
economic conditions that would affect the accuracy of the model. Additionally, management may adjust
ACL for other qualitative factors such as model imprecision, imprecision in economic scenario
assumptions, and emerging risks related to either changes in the environment that are affecting specific
portfolio segments, or changes in portfolio concentrations.
Auditing management’s ACL estimate and related provision for credit losses was complex due to the
highly judgmental nature of the probability weighted economic scenarios, expected loss models, as well
as model and qualitative factor adjustments.
66 U.S. Bancorp 2023 Annual Report
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of the
Company’s process for establishing the ACL, including management’s controls over: 1) selection and
implementation of forward-looking economic scenarios and the probability weights assigned to them; 2)
expected loss models, including model validation, implementation, monitoring, the completeness and
accuracy of key inputs and assumptions used in the models, and management’s output assessment and
related adjustments; 3) adjustments to reflect management’s consideration of qualitative factors; 4) the ACL
methodology and governance process.
With the support of specialists, we assessed the economic scenarios and related probability weights by,
among other procedures, evaluating management’s methodology and agreeing a sample of key economic
variables used to external sources. We also performed and considered the results of various sensitivity
analyses and analytical procedures, including comparison of a sample of the key economic variables to
alternative external sources, historical statistics and peer bank information.
With respect to expected loss models, with the support of specialists, we evaluated model calculation
design and reperformed the calculation for a sample of models. We also tested the appropriateness of key
inputs and assumptions used in these models by agreeing a sample of inputs to internal and external
sources. As to model adjustments, with the support of specialists, we evaluated management’s estimate
methodology and assessment of factors that could potentially impact the accuracy of expected loss
models. We also recalculated a sample of model adjustments and tested internal and external data used by
agreeing a sample of inputs to internal and external sources.
Regarding the completeness of qualitative factors identified and incorporated into measuring the ACL, we
evaluated the potential impact of imprecision in the expected loss models and economic scenario
assumptions; emerging risks related to changes in the environment impacting specific portfolio segments
and portfolio concentrations. We also evaluated and tested internal and external data used in the qualitative
adjustments by agreeing significant inputs and underlying data to internal and external sources.
We evaluated the overall ACL amount, including model estimates and adjustments, qualitative factors
adjustments, and whether the recorded ACL appropriately reflects expected credit losses on the loan and
lease portfolio and unfunded credit commitments. We reviewed historical loss statistics, peer-bank
information, subsequent events and transactions and considered whether they corroborate or contradict the
Company’s measurement of the ACL. We searched for and evaluated information that corroborates or
contradicts management’s forecasted assumptions and related probability weights as well as identification
and measurement of adjustments to model estimates and qualitative factors.
We have served as the Company’s auditor since 2003.
Minneapolis, Minnesota
February 20, 2024
67
Consolidated Financial Statements and Notes Table of Contents
Consolidated Financial Statements
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Shareholders’ Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Note 1 — Significant Accounting Policies
Note 2 — Accounting Changes
Note 3 — Business Combinations
Note 4 — Restrictions on Cash and Due From Banks
Note 5 — Investment Securities
Note 6 — Loans and Allowance for Credit Losses
Note 7 — Leases
Note 8 — Accounting for Transfers and Servicing of Financial Assets and Variable Interest Entities
Note 9 — Premises and Equipment
Note 10 — Mortgage Servicing Rights
Note 11 — Intangible Assets
Note 12 — Deposits
Note 13 — Short-Term Borrowings
Note 14 — Long-Term Debt
Note 15 — Shareholders’ Equity
Note 16 — Earnings Per Share
Note 17 — Employee Benefits
Note 18 — Stock-Based Compensation
Note 19 — Income Taxes
Note 20 — Derivative Instruments
Note 21 — Netting Arrangements for Certain Financial Instruments and Securities Financing Activities
Note 22 — Fair Values of Assets and Liabilities
Note 23 — Guarantees and Contingent Liabilities
Note 24 — Business Segments
Note 25 — U.S. Bancorp (Parent Company)
Note 26 — Subsequent Events
69
70
71
72
73
74
80
81
84
85
88
95
96
98
98
99
100
101
101
102
107
107
112
114
116
121
124
130
133
136
137
68 U.S. Bancorp 2023 Annual Report
U.S. Bancorp
Consolidated Balance Sheet
At December 31 (Dollars in Millions)
Assets
Cash and due from banks
Investment securities
Held-to-maturity (fair value $74,088 and $77,874, respectively)
Available-for-sale ($338 and $858 pledged as collateral, respectively)(a)
Loans held for sale (including $2,011 and $1,849 of mortgage loans carried at fair value, respectively)
Loans
Commercial
Commercial real estate
Residential mortgages
Credit card
Other retail
Total loans
Less allowance for loan losses
Net loans
Premises and equipment
Goodwill
Other intangible assets
Other assets (including $3,548 and $702 of trading securities at fair value pledged as collateral,
respectively)(a)
Total assets
Liabilities and Shareholders’ Equity
Deposits
Noninterest-bearing
Interest-bearing (including $2,818 of time deposits carried at fair value at December 31, 2023)
Total deposits
Short-term borrowings
Long-term debt
Other liabilities
Total liabilities
Shareholders’ equity
Preferred stock
Common stock, par value $0.01 a share — authorized: 4,000,000,000 shares; issued: 2023 and 2022—
2,125,725,742 shares
Capital surplus
Retained earnings
Less cost of common stock in treasury: 2023 — 567,732,687 shares; 2022 — 594,747,484 shares
Accumulated other comprehensive income (loss)
Total U.S. Bancorp shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
(a) Includes only collateral pledged by the Company where counterparties have the right to sell or pledge the collateral.
See Notes to Consolidated Financial Statements.
2023
2022
$
61,192 $
53,542
84,045
69,706
2,201
88,740
72,910
2,200
131,881
135,690
53,455
55,487
115,530
115,845
28,560
44,409
26,295
54,896
373,835
388,213
(7,379)
(6,936)
366,456
381,277
3,623
3,858
12,489
12,373
6,084
7,155
57,695
52,750
$
663,491 $
674,805
$
89,989 $
137,743
422,323
387,233
512,312
524,976
15,279
51,480
28,649
31,216
39,829
27,552
607,720
623,573
6,808
6,808
21
8,673
21
8,712
74,026
71,901
(24,126)
(25,269)
(10,096)
(11,407)
55,306
50,766
465
466
55,771
51,232
$
663,491 $
674,805
69
U.S. Bancorp
Consolidated Statement of Income
Year Ended December 31 (Dollars and Shares in Millions, Except Per Share Data)
2023
2022
2021
Interest Income
Loans
Loans held for sale
Investment securities
Other interest income
Total interest income
Interest Expense
Deposits
Short-term borrowings
Long-term debt
Total interest expense
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Noninterest Income
Card revenue
Corporate payment products revenue
Merchant processing services
Trust and investment management fees
Service charges
Commercial products revenue
Mortgage banking revenue
Investment products fees
Securities gains (losses), net
Other
Total noninterest income
Noninterest Expense
Compensation and employee benefits
Net occupancy and equipment
Professional services
Marketing and business development
Technology and communications
Other intangibles
Merger and integration charges
Other
Total noninterest expense
Income before income taxes
Applicable income taxes
Net income
Net (income) loss attributable to noncontrolling interests
Net income attributable to U.S. Bancorp
Net income applicable to U.S. Bancorp common shareholders
Earnings per common share
Diluted earnings per common share
Average common shares outstanding
Average diluted common shares outstanding
See Notes to Consolidated Financial Statements.
70 U.S. Bancorp 2023 Annual Report
$ 22,324 $ 13,603 $ 10,747
147
4,485
3,051
201
232
3,378
2,365
763
143
30,007
17,945
13,487
8,775
1,971
1,865
1,872
565
780
12,611
3,217
320
70
603
993
17,396
14,728
12,494
2,275
1,977
(1,173)
15,121
12,751
13,667
1,630
1,512
1,507
759
1,659
2,459
1,306
1,372
540
279
(145)
758
698
1,579
2,209
1,298
1,105
527
235
20
273
575
1,449
1,832
1,338
1,102
1,361
239
103
721
10,617
9,456
10,227
10,416
1,266
560
726
9,157
1,096
529
456
8,728
1,048
492
366
2,049
1,726
1,728
636
1,009
2,211
215
329
159
—
1,398
1,207
18,873
14,906
13,728
6,865
1,407
5,458
7,301
1,463
5,838
10,166
2,181
7,985
(29)
(13)
(22)
$ 5,429 $ 5,825 $ 7,963
$ 5,051 $ 5,501 $ 7,605
$
$
3.27 $
3.69 $
3.27 $
3.69 $
1,543
1,543
1,489
1,490
5.11
5.10
1,489
1,490
U.S. Bancorp
Consolidated Statement of Comprehensive Income
Year Ended December 31 (Dollars in Millions)
Net income
Other Comprehensive Income (Loss)
2023
2022
2021
$ 5,458 $ 5,838 $ 7,985
Changes in unrealized gains (losses) on investment securities available-for-sale
1,500
(13,656)
(3,698)
Changes in unrealized gains (losses) on derivative hedges
Foreign currency translation
Changes in unrealized gains (losses) on retirement plans
Reclassification to earnings of realized (gains) losses
Income taxes related to other comprehensive income (loss)
Total other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive (income) loss attributable to noncontrolling interests
Comprehensive income (loss) attributable to U.S. Bancorp
See Notes to Consolidated Financial Statements.
(252)
21
(262)
748
(75)
(10)
526
544
(444)
3,207
125
35
400
104
769
1,311
(9,464)
(2,265)
6,769
(3,626)
5,720
(29)
(13)
(22)
$ 6,740 $ (3,639) $ 5,698
71
U.S. Bancorp
Consolidated Statement of Shareholders’ Equity
(Dollars and Shares in Millions,
Except Per Share Data)
Balance December 31, 2020
Net income (loss)
Other comprehensive income (loss)
Preferred stock dividends(a)
Common stock dividends ($1.76
per share)
Issuance of preferred stock
Call and redemption of preferred
stock
Issuance of common and treasury
stock
Purchase of treasury stock
Distributions to noncontrolling
interests
Purchase of noncontrolling
interests
Net other changes in noncontrolling
interests
Stock option and restricted stock
grants
Common
U.S. Bancorp Shareholders
Accumulated
Other
Total U.S.
Bancorp
Shares Preferred Common Capital Retained Treasury Comprehensive Shareholders’ Noncontrolling
Interests
Stock Surplus
Income (Loss)
Earnings
Equity
Stock
Stock
Outstanding
Total
Equity
1,507 $ 5,983 $
21 $ 8,511 $ 64,188 $ (25,930) $
322 $
53,095 $
630 $ 53,725
(2,265)
7,963
(303)
(2,630)
(17)
2,221
(1,833)
5
(28)
(169)
215
(1,556)
197
7,963
(2,265)
(303)
(2,630)
2,221
(1,850)
46
(1,556)
—
—
—
197
22
7,985
(2,265)
(303)
(2,630)
2,221
(1,850)
46
(1,556)
(20)
(20)
(167)
(167)
4
4
197
Balance December 31, 2021
1,484 $ 6,371 $
21 $ 8,539 $ 69,201 $ (27,271) $
(1,943) $
54,918 $
469 $ 55,387
Net income (loss)
Other comprehensive income (loss)
Preferred stock dividends(b)
Common stock dividends ($1.88
per share)
Issuance of preferred stock
Issuance of common and treasury
stock
Purchase of treasury stock
Distributions to noncontrolling
interests
Net other changes in noncontrolling
interests
Stock option and restricted stock
grants
Balance December 31, 2022
Change in accounting principle(c)
Net income (loss)
Other comprehensive income (loss)
Preferred stock dividends(d)
Common stock dividends ($1.93
per share)
Issuance of common and treasury
stock
Purchase of treasury stock
Distributions to noncontrolling
interests
Net other changes in noncontrolling
interests
Stock option and restricted stock
grants
(9,464)
5,825
(296)
(2,829)
2,071
(69)
5,825
(9,464)
(296)
(2,829)
437
2,039
(69)
—
—
205
13
5,838
(9,464)
(296)
(2,829)
437
2,039
(69)
(13)
(13)
(3)
(3)
205
437
48
(1)
(32)
205
1,531 $ 6,808 $
21 $ 8,712 $ 71,901 $ (25,269) $
(11,407) $
50,766 $
466 $ 51,232
46
5,429
(350)
(3,000)
1,311
28
(1)
(264)
1,205
(62)
225
46
5,429
1,311
(350)
(3,000)
941
(62)
—
—
225
29
46
5,458
1,311
(350)
(3,000)
941
(62)
(29)
(29)
(1)
(1)
225
Balance December 31, 2023
1,558 $ 6,808 $
21 $ 8,673 $ 74,026 $ (24,126) $
(10,096) $
55,306 $
465 $ 55,771
(a) Reflects dividends declared per share on the Company’s Series A, Series B, Series F, Series I, Series J, Series K, Series L, Series M, and Series N Non-Cumulative Perpetual
Preferred Stock of $3,548.61, $887.153, $1,625.00, $232.953, $1,325.00, $1,375.00, $937.50, $952.778, $202.986, respectively.
(b) Reflects dividends declared per share on the Company’s Series A, Series B, Series J, Series K, Series L, Series M, Series N, and Series O Non-Cumulative Perpetual Preferred
Stock of $3,965.458, $962.487, $1,325.00, $1,375.00, $937.50, $1,000.00, $925.00, and $1,050.00, respectively.
(c) Effective January 1, 2023, the Company adopted accounting guidance which removed the separate recognition and measurement of troubled debt restructurings. Upon adoption,
the Company reduced its allowance for credit losses and increased retained earnings net of deferred taxes through a cumulative-effect adjustment
(d) Reflects dividends declared per share on the Company’s Series A, Series B, Series J, Series K, Series L, Series M, Series N and Series O Non-Cumulative Perpetual Preferred
Stock of $6,439.904, $1,503.518, $1,325.00, $1,375.00, $937.50, $1,000.00, $925.00, and $1,125.00, respectively.
See Notes to Consolidated Financial Statements.
72 U.S. Bancorp 2023 Annual Report
U.S. Bancorp
Consolidated Statement of Cash Flows
Year Ended December 31 (Dollars in Millions)
2023
2022
2021
Operating Activities
Net income attributable to U.S. Bancorp
Adjustments to reconcile net income to net cash provided by operating activities
$
5,429 $
5,825 $
7,963
Provision for credit losses
Depreciation and amortization of premises and equipment
Amortization of intangibles
(Gain) loss on sale of loans held for sale
(Gain) loss on sale of securities and other assets
Loans originated for sale, net of repayments
Proceeds from sales of loans held for sale
Other, net
Net cash provided by operating activities
Investing Activities
Proceeds from sales of available-for-sale investment securities
Proceeds from maturities of held-to-maturity investment securities
Proceeds from maturities of available-for-sale investment securities
Purchases of held-to-maturity investment securities
Purchases of available-for-sale investment securities
Net decrease (increase) in loans outstanding
Proceeds from sales of loans
Purchases of loans
Net (increase) decrease in securities purchased under agreements to resell
Net cash (paid for) received from acquisitions
Other, net
Net cash provided by (used in) investing activities
Financing Activities
Net (decrease) increase in deposits
Net (decrease) increase in short-term borrowings
Proceeds from issuance of long-term debt
Principal payments or redemption of long-term debt
Proceeds from issuance of preferred stock
Proceeds from issuance of common stock
Repurchase of preferred stock
Repurchase of common stock
Cash dividends paid on preferred stock
Cash dividends paid on common stock
Purchase of noncontrolling interests
Net cash (used in) provided by financing activities
Change in cash and due from banks
Cash and due from banks at beginning of period
Cash and due from banks at end of period
Supplemental Cash Flow Disclosures
Cash paid for income taxes
Cash paid for interest
Noncash transfer of available-for-sale investment securities to held-to-maturity
Net noncash transfers to foreclosed property
Acquisitions
Assets (sold) acquired
Liabilities sold (assumed)
Net
See Notes to Consolidated Financial Statements.
2,275
382
636
7
119
(26,936)
26,686
(151)
8,447
11,209
6,164
6,314
(932)
(8,342)
3,829
5,707
(1,106)
(2,404)
(330)
(1,184)
18,925
(12,291)
(16,508)
15,583
(4,084)
—
951
—
(62)
(341)
1,977
345
215
387
(188)
(33,127)
38,895
6,790
21,119
36,391
5,759
14,927
(7,091)
(1,173)
338
159
(1,135)
(398)
(72,627)
74,315
2,428
9,870
16,075
1,093
41,199
(1,088)
(24,592)
(99,045)
(27,318)
4,420
(2,113)
252
12,257
(5,392)
7,500
(17,215)
15,213
8,732
(6,926)
437
21
(1,100)
(69)
(299)
(17,459)
6,183
(4,466)
18
(661)
664
(57,487)
26,313
30
2,626
(11,432)
2,221
43
(1,250)
(1,555)
(308)
(2,970)
—
(2,776)
—
(2,579)
(167)
13,942
(33,675)
62,580
$ 61,192 $ 53,542 $ 28,905
(19,722)
7,650
53,542
(3,982)
24,637
28,905
$
645 $
767 $
12,282
—
26
2,717
40,695
23
535
1,061
41,823
14
$
$
(83) $ 106,209 $
413
330 $ 10,456 $
(95,753)
749
(88)
661
73
Notes to Consolidated Financial Statements
NOTE 1
Significant Accounting Policies
U.S. Bancorp is a financial services holding company
headquartered in Minneapolis, Minnesota, serving millions
of local, national and global customers. U.S. Bancorp and its
subsidiaries (the “Company”) provide a full range of financial
services, including lending and depository services through
banking offices principally in the Midwest and West regions
of the United States, through online services, over mobile
devices and through other distribution channels. The
Company also engages in credit card, merchant, and ATM
processing, mortgage banking, cash management, capital
markets, insurance, trust and investment management,
brokerage, and leasing activities, principally in domestic
markets.
Basis of Presentation The consolidated financial
statements include the accounts of the Company and its
subsidiaries and all VIEs for which the Company has both
the power to direct the activities of the VIE that most
significantly impact the VIE’s economic performance, and
the obligation to absorb losses or right to receive benefits of
the VIE that could potentially be significant to the VIE.
Consolidation eliminates intercompany accounts and
transactions. Certain items in prior periods have been
reclassified to conform to the current period presentation.
Uses of Estimates The preparation of financial statements
in conformity with accounting principles generally accepted
in the United States requires management to make
estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
experience could differ from those estimates and
assumptions.
Securities
Realized gains or losses on securities are determined on a
trade date basis based on the specific amortized cost of the
investments sold.
Trading Securities Securities held for resale are classified
as trading securities and are included in other assets and
reported at fair value. Changes in fair value and realized
gains or losses are reported in noninterest income.
Available-for-sale Securities Debt securities that are not
trading securities but may be sold before maturity in
response to changes in the Company’s interest rate risk
profile, funding needs, demand for collateralized deposits by
public entities or other reasons, are carried at fair value with
unrealized net gains or losses reported within other
comprehensive income (loss). Declines in fair value related
to credit, if any, are recorded through the establishment of
an allowance for credit losses.
Held-to-maturity Securities Debt securities for which the
Company has the positive intent and ability to hold to
maturity are reported at historical cost adjusted for
amortization of premiums and accretion of discounts.
74 U.S. Bancorp 2023 Annual Report
Expected credit losses, if any, are recorded through the
establishment of an allowance for credit losses.
Securities Purchased Under Agreements to Resell and
Securities Sold Under Agreements to Repurchase
Securities purchased under agreements to resell and
securities sold under agreements to repurchase are
accounted for as collateralized financing transactions with a
receivable or payable recorded at the amounts at which the
securities were acquired or sold, plus accrued interest.
Collateral requirements are continually monitored and
additional collateral is received or provided as required. The
Company records a receivable or payable for cash collateral
paid or received.
Equity Investments
Equity investments in entities where the Company has a
significant influence (generally between 20 percent and 50
percent ownership), but does not control the entity, are
accounted for using the equity method. Investments in
limited partnerships and similarly structured limited liability
companies where the Company’s ownership interest is
greater than 5 percent are accounted for using the equity
method. Equity investments not using the equity method are
accounted for at fair value with changes in fair value and
realized gains or losses reported in noninterest income,
unless fair value is not readily determinable, in which case
the investment is carried at cost subject to adjustments for
any observable market transactions on the same or similar
instruments of the investee. Most of the Company’s equity
investments do not have readily determinable fair values. All
equity investments are evaluated for impairment at least
annually and more frequently if certain criteria are met.
Loans
The Company offers a broad array of lending products and
categorizes its loan portfolio into two segments, which is the
level at which it develops and documents a systematic
methodology to determine the allowance for credit losses.
The Company’s two loan portfolio segments are commercial
lending and consumer lending. The Company further
disaggregates its loan portfolio segments into various
classes based on their underlying risk characteristics. The
two classes within the commercial lending segment are
commercial loans and commercial real estate loans. The
three classes within the consumer lending segment are
residential mortgages, credit card loans and other retail
loans.
Originated Loans Held for Investment Loans the
Company originates as held for investment are reported at
the principal amount outstanding, net of unearned interest
income and deferred fees and costs, and any direct principal
charge-offs. Interest income is accrued on the unpaid
principal balances as earned. Loan and commitment fees
and certain direct loan origination costs are deferred and
recognized over the life of the loan and/or commitment
period as yield adjustments.
Purchased Loans All purchased loans are recorded at fair
value at the date of purchase and those acquired on or after
January 1, 2020 are divided into those considered PCD and
those not considered PCD. An allowance for credit losses is
established for each population and considers product mix,
risk characteristics of the portfolio, delinquency status and
refreshed loan-to-value ratios when possible. The allowance
established for purchased loans not considered PCD is
recognized through provision expense upon acquisition,
whereas the allowance established for loans considered
PCD at acquisition is offset by an increase in the basis of
the acquired loans. Any subsequent increases and
decreases in the allowance related to purchased loans,
regardless of PCD status, are recognized through provision
expense, with charge-offs charged to the allowance.
Commitments to Extend Credit Unfunded commitments
for residential mortgage loans intended to be held for sale
are considered derivatives and recorded in other assets and
other liabilities on the Consolidated Balance Sheet at fair
value with changes in fair value recorded in noninterest
income. All other unfunded loan commitments are not
considered derivatives and are not reported on the
Consolidated Balance Sheet. Reserves for credit exposure
on all other unfunded credit commitments are recorded in
other liabilities.
Allowance for Credit Losses The allowance for credit
losses is established for current expected credit losses on
the Company’s loan and lease portfolio, including unfunded
credit commitments. The allowance considers expected
losses for the remaining lives of the applicable assets,
inclusive of expected recoveries. The allowance for credit
losses is increased through provisions charged to earnings
and reduced by net charge-offs. Management evaluates the
appropriateness of the allowance for credit losses on a
quarterly basis.
Multiple economic scenarios are considered over a
three-year reasonable and supportable forecast period,
which includes increasing consideration of historical loss
experience over years two and three. These economic
scenarios are constructed with interrelated projections of
multiple economic variables, and loss estimates are
produced that consider the historical correlation of those
economic variables with credit losses. After the forecast
period, the Company fully reverts to long-term historical loss
experience, adjusted for prepayments and characteristics of
the current loan and lease portfolio, to estimate losses over
the remaining life of the portfolio. The economic scenarios
are updated at least quarterly and are designed to provide a
range of reasonable estimates, from better to worse than
current expectations. Scenarios are weighted based on the
Company’s expectation of economic conditions for the
foreseeable future and reflect significant judgment and
consideration of economic forecast uncertainty. Final loss
estimates also consider factors affecting credit losses not
reflected in the scenarios, due to the unique aspects of
current conditions and expectations. These factors may
include, but are not limited to, loan servicing practices,
regulatory guidance, and/or fiscal and monetary policy
actions.
The allowance recorded for credit losses utilizes forward-
looking expected loss models to consider a variety of factors
affecting lifetime credit losses. These factors include, but
are not limited to, macroeconomic variables such as
unemployment rates, real estate prices, gross domestic
product levels, inflation, interest rates and corporate bonds
spreads, as well as loan and borrower characteristics, such
as internal risk ratings on commercial loans and consumer
credit scores, delinquency status, collateral type and
available valuation information, consideration of end-of-term
losses on lease residuals, and the remaining term of the
loan, adjusted for expected prepayments. For each loan
portfolio, including those loans modified under various loan
modification programs, model estimates are adjusted as
necessary to consider any relevant changes in portfolio
composition, lending policies, underwriting standards, risk
management practices, economic conditions or other factors
that would affect the accuracy of the model. Expected credit
loss estimates also include consideration of expected cash
recoveries on loans previously charged-off or expected
recoveries on collateral dependent loans where recovery is
expected through sale of the collateral at fair value less
selling costs. Where loans do not exhibit similar risk
characteristics, an individual analysis is performed to
consider expected credit losses. The allowance recorded for
individually evaluated loans greater than $5 million in the
commercial lending segment is based on an analysis
utilizing expected cash flows discounted using the original
effective interest rate, the observable market price of the
loan, or the fair value of the collateral, less selling costs, for
collateral-dependent loans as appropriate. For smaller
commercial loans collectively evaluated for impairment,
historical loss experience is also incorporated into the
allowance methodology applied to this category of loans.
The Company’s methodology for determining the
appropriate allowance for credit losses also considers the
imprecision inherent in the methodologies used and
allocated to the various loan portfolios. As a result, amounts
determined under the methodologies described above are
adjusted by management to consider the potential impact of
other qualitative factors not captured in the quantitative
model adjustments which include, but are not limited to, the
following: model imprecision, imprecision in economic
scenario assumptions, and emerging risks related to either
changes in the environment that are affecting specific
portfolios, or changes in portfolio concentrations over time
that may affect model performance. The consideration of
these items results in adjustments to allowance amounts
included in the Company’s allowance for credit losses for
each loan portfolio.
The Company also assesses the credit risk associated
with off-balance sheet loan commitments, letters of credit,
investment securities and derivatives. Credit risk associated
with derivatives is reflected in the fair values recorded for
those positions. The liability for off-balance sheet credit
exposure related to loan commitments and other credit
guarantees is included in other liabilities. Because business
processes and credit risks associated with unfunded credit
commitments are essentially the same as for loans, the
Company utilizes similar processes to estimate its liability
for unfunded credit commitments.
75
The results of the analysis are evaluated quarterly to
confirm the estimates are appropriate for each specific loan
portfolio, as well as the entire loan portfolio, as the entire
allowance for credit losses is available for the entire loan
portfolio.
Credit Quality The credit quality of the Company’s loan
portfolios is assessed as a function of net credit losses,
levels of nonperforming assets and delinquencies, and
credit quality ratings as defined by the Company.
For all loan portfolio classes, loans are considered
past due based on the number of days delinquent except for
monthly amortizing loans which are classified delinquent
based upon the number of contractually required payments
not made (for example, two missed payments is considered
30 days delinquent). When a loan is placed on nonaccrual
status, unpaid accrued interest is reversed, reducing interest
income in the current period.
Commercial lending segment loans are generally placed
on nonaccrual status when the collection of principal and
interest has become 90 days past due or is otherwise
considered doubtful. Commercial lending segment loans are
generally fully charged down if unsecured by collateral or
partially charged down to the fair value of the collateral
securing the loan, less costs to sell, when the loan is placed
on nonaccrual.
Consumer lending segment loans are generally charged-
off at a specific number of days or payments past due.
Residential mortgages and other retail loans secured by 1-4
family properties are generally charged down to the fair
value of the collateral securing the loan, less costs to sell, at
180 days past due. Residential mortgage loans and lines in
a first lien position are placed on nonaccrual status in
instances where a partial charge-off occurs unless the loan
is well secured and in the process of collection. Residential
mortgage loans and lines in a junior lien position secured by
1-4 family properties are placed on nonaccrual status at 120
days past due or when they are behind a first lien that has
become 180 days or greater past due or placed on
nonaccrual status. Any secured consumer lending segment
loan whose borrower has had debt discharged through
bankruptcy, for which the loan amount exceeds the fair
value of the collateral, is charged down to the fair value of
the related collateral and the remaining balance is placed on
nonaccrual status. Credit card loans continue to accrue
interest until the account is charged-off. Credit cards are
charged-off at 180 days past due. Other retail loans not
secured by 1-4 family properties are charged-off at 120 days
past due; and revolving consumer lines are charged-off at
180 days past due. Similar to credit cards, other retail loans
are generally not placed on nonaccrual status because of
the relative short period of time to charge-off. Certain retail
customers having financial difficulties may have the terms of
their credit card and other loan agreements modified to
require only principal payments and, as such, are reported
as nonaccrual.
For all loan classes, interest payments received on
nonaccrual loans are generally recorded as a reduction to a
loan’s carrying amount while a loan is on nonaccrual and
are recognized as interest income upon payoff of the loan.
However, interest income may be recognized for interest
payments if the remaining carrying amount of the loan is
76 U.S. Bancorp 2023 Annual Report
believed to be collectible. In certain circumstances, loans in
any class may be restored to accrual status, such as when a
loan has demonstrated sustained repayment performance
or no amounts are past due and prospects for future
payment are no longer in doubt; or when the loan becomes
well secured and is in the process of collection. Loans
where there has been a partial charge-off may be returned
to accrual status if all principal and interest (including
amounts previously charged-off) is expected to be collected
and the loan is current.
The Company classifies its loan portfolio classes using
internal credit quality ratings on a quarterly basis. These
ratings include pass, special mention and classified, and are
an important part of the Company’s overall credit risk
management process and evaluation of the allowance for
credit losses. Loans with a pass rating represent those
loans not classified on the Company’s rating scale for
problem credits, as minimal credit risk has been identified.
Special mention loans are those loans that have a potential
weakness deserving management’s close attention.
Classified loans are those loans where a well-defined
weakness has been identified that may put full collection of
contractual cash flows at risk. It is possible that others,
given the same information, may reach different reasonable
conclusions regarding the credit quality rating classification
of specific loans.
Loan Modifications In certain circumstances, the Company
may modify the terms of a loan to maximize the collection of
amounts due when a borrower is experiencing financial
difficulties or is expected to experience difficulties in the
near-term. The Company recognizes interest on modified
loans if full collection of contractual principal and interest is
expected. The effects of modifications on credit loss
expectations, such as improved payment capacity, longer
expected lives and other factors, are considered when
measuring the allowance for credit losses. Modification
performance, including redefault rates and how these
compare to historical losses, are also considered.
Modifications generally do not result in significant changes
to the Company’s allowance for credit losses.
For the commercial lending segment, modifications
generally result in the Company working with borrowers on
a case-by-case basis. Commercial and commercial real
estate modifications generally include extensions of the
maturity date and may be accompanied by an increase or
decrease to the interest rate. In addition, the Company may
work with the borrower in identifying other changes that
mitigate loss to the Company, which may include additional
collateral or guarantees to support the loan. To a lesser
extent, the Company may provide an interest rate reduction.
Modifications for the consumer lending segment are
generally part of programs the Company has initiated. The
Company modifies residential mortgage loans under
Federal Housing Administration, United States Department
of Veterans Affairs, or its own internal programs. Under
these programs, the Company offers qualifying homeowners
the opportunity to permanently modify their loan and
achieve more affordable monthly payments. These
modifications may include adjustments to interest rates,
conversion of adjustable rates to fixed rates, extension of
maturity dates or deferrals of payments, capitalization of
accrued interest and/or outstanding advances, or in limited
situations, partial forgiveness of loan principal. In most
instances, participation in residential mortgage loan
restructuring programs requires the customer to complete a
short-term trial period. A permanent loan modification is
contingent on the customer successfully completing the trial
period arrangement, and the loan documents are not
modified until that time.
Credit card and other retail loan modifications are
generally part of distinct modification programs providing
customers experiencing financial difficulty with modifications
whereby balances may be amortized up to 60 months, and
generally include waiver of fees and reduced interest rates.
Leases The Company, as a lessor, originates retail and
commercial leases either directly to the consumer or
indirectly through dealer networks. Retail leases, primarily
automobiles, have terms up to 5 years. Commercial leases
may include high dollar assets such as aircraft or lower cost
items such as office equipment. At lease inception, retail
lease customers may be provided with an end-of-term
purchase option, which is based on the contractual residual
value of the automobile at the expiration of the lease.
Automobile leases do not typically contain options to extend
or terminate the lease. Equipment leases may contain
various types of purchase options. Some option amounts
are a stated value, while others are determined using the
fair market value at the time of option exercise.
Residual values on leased assets are reviewed regularly
for impairment. Residual valuations for retail leases are
based on independent assessments of expected used
automobile sale prices at the end of the lease term.
Impairment tests are conducted based on these valuations
considering the probability of the lessee returning the asset
to the Company, re-marketing efforts, insurance coverage
and ancillary fees and costs. Valuations for commercial
leases are based upon external or internal management
appraisals. The Company manages its risk to changes in
the residual value of leased vehicles, office and business
equipment, and other assets through disciplined residual
valuation setting at the inception of a lease, diversification of
its leased assets, regular residual asset valuation reviews
and monitoring of residual value gains or losses upon the
disposition of assets. Retail lease residual value risk is
mitigated further by the purchase of residual value
insurance coverage and effective end-of-term marketing of
off-lease vehicles.
The Company, as lessee, leases certain assets for use in
its operations. Leased assets primarily include retail
branches, operations centers and other corporate locations,
and, to a lesser extent, office and computer equipment. For
each lease with an original term greater than 12 months, the
Company records a lease liability and a corresponding right
of use (“ROU”) asset. The Company accounts for the lease
and non-lease components in the majority of its lease
contracts as a single lease component, with the
determination of the lease liability at lease inception based
on the present value of the consideration to be paid under
the contract. The discount rate used by the Company is
determined at commencement of the lease using a secured
rate for a similar term as the period of the lease. The
Company’s leases do not include significant variable lease
payments.
Certain of the Company’s real estate leases include
options to extend. Lease extension options are generally
exercisable at market rates. Such option periods do not
provide a significant incentive, and their exercise is not
reasonably certain. Accordingly, the Company does not
generally recognize payments occurring during option
periods in the calculation of its ROU assets and lease
liabilities.
Other Real Estate OREO is included in other assets, and is
property acquired through foreclosure or other proceedings
on defaulted loans. OREO is initially recorded at fair value,
less estimated selling costs. The fair value of OREO is
evaluated regularly and any decreases in value along with
holding costs, such as taxes and insurance, are reported in
noninterest expense.
Loans Held For Sale
Loans held for sale (“LHFS”) represent mortgage loans
intended to be sold in the secondary market and other loans
that management has an active plan to sell. LHFS are
carried at the lower-of-cost-or-fair value as determined on
an aggregate basis by type of loan with the exception of
loans for which the Company has elected fair value
accounting, which are carried at fair value. Any writedowns
to fair value upon the transfer of loans to LHFS are reflected
in loan charge-offs.
Where an election is made to carry the LHFS at fair
value, any change in fair value is recognized in noninterest
income. Where an election is made to carry LHFS at lower-
of-cost-or-fair value, any further decreases are recognized
in noninterest income and increases in fair value above the
loan cost basis are not recognized until the loans are sold.
Fair value elections are made at the time of origination or
purchase based on the Company’s fair value election policy.
The Company has elected fair value accounting for
substantially all its MLHFS.
Derivative Financial Instruments
In the ordinary course of business, the Company enters into
derivative transactions to manage various risks and to
accommodate the business requirements of its customers.
Derivative instruments are reported in other assets or other
liabilities at fair value. Changes in a derivative’s fair value
are recognized currently in earnings unless specific hedge
accounting criteria are met.
All derivative instruments that qualify and are designated
for hedge accounting are recorded at fair value and
classified as either a hedge of the fair value of a recognized
asset or liability (“fair value hedge”); a hedge of a forecasted
transaction or the variability of cash flows to be received or
paid related to a recognized asset or liability (“cash flow
hedge”); or a hedge of the volatility of a net investment in
foreign operations driven by changes in foreign currency
exchange rates (“net investment hedge”). Changes in the
fair value of a derivative that is highly effective and
designated as a fair value hedge, and the offsetting changes
in the fair value of the hedged item, are recorded in
earnings. Changes in the fair value of a derivative that is
77
highly effective and designated as a cash flow hedge are
recorded in other comprehensive income (loss) until cash
flows of the hedged item are realized. Changes in the fair
value of net investment hedges that are highly effective are
recorded in other comprehensive income (loss). The
Company performs an assessment, at inception and, at a
minimum, quarterly thereafter, to determine the
effectiveness of the derivative in offsetting changes in the
value or cash flows of the hedged item(s).
If a derivative designated as a cash flow hedge is
terminated or ceases to be highly effective, the gain or loss
in other comprehensive income (loss) is amortized to
earnings over the period the forecasted hedged transactions
impact earnings. If a hedged forecasted transaction is no
longer probable, hedge accounting is ceased and any gain
or loss included in other comprehensive income (loss) is
reported in earnings immediately, unless the forecasted
transaction is at least reasonably possible of occurring,
whereby the amounts remain within other comprehensive
income (loss).
Revenue Recognition
In the ordinary course of business, the Company recognizes
income derived from various revenue generating activities.
Certain revenues are generated from contracts where they
are recognized when, or as services or products are
transferred to customers for amounts the Company expects
to be entitled. Revenue generating activities related to
financial assets and liabilities are also recognized, including
mortgage servicing fees, loan commitment fees, foreign
currency remeasurements, and gains and losses on
securities, equity investments and unconsolidated
subsidiaries. Certain specific policies include the following:
Card Revenue Card revenue includes interchange from
credit, debit and stored-value cards processed through card
association networks, annual fees, and other transaction
and account management fees. Interchange rates are
generally set by the card associations and based on
purchase volumes and other factors. The Company records
interchange as services are provided. Transaction and
account management fees are recognized as services are
provided, except for annual fees which are recognized over
the applicable period. Costs for rewards programs and
certain payments to partners and card associations are also
recorded within card revenue when services are provided.
The Company predominately records card revenue within
the Payment Services line of business.
Corporate Payment Products Revenue Corporate
payment products revenue primarily includes interchange
from commercial card products processed through card
association networks and revenue from proprietary network
transactions. The Company records corporate payment
products revenue as services are provided. Certain
payments to card associations and customers are also
recorded within corporate payment products revenue as
services are provided. Corporate payment products revenue
is recorded within the Payment Services line of business.
Merchant Processing Services Merchant processing
services revenue consists principally of merchant discount
78 U.S. Bancorp 2023 Annual Report
and other transaction and account management fees
charged to merchants for the electronic processing of card
association network transactions, less interchange paid to
the card-issuing bank, card association assessments, and
revenue sharing amounts. All of these are recognized at the
time the merchant’s services are performed. The Company
may enter into revenue sharing agreements with referral
partners or in connection with purchases of merchant
contracts from sellers. The revenue sharing amounts are
determined primarily on sales volume processed or revenue
generated for a particular group of merchants. Merchant
processing revenue also includes revenues related to point-
of-sale equipment recorded as sales when the equipment is
shipped or as earned for equipment rentals. The Company
records merchant processing services revenue within the
Payment Services line of business.
Trust and Investment Management Fees Trust and
investment management fees are recognized over the
period in which services are performed and are based on a
percentage of the fair value of the assets under
management or administration, fixed based on account
type, or transaction-based fees. Services provided to clients
include trustee, transfer agent, custodian, fiscal agent,
escrow, fund accounting and administration services.
Services provided to mutual funds may include selling,
distribution and marketing services. Trust and investment
management fees are predominately recorded within the
Wealth, Corporate, Commercial and Institutional Banking
line of business.
Service Charges Service charges include fees received on
deposit accounts under depository agreements with
customers to provide access to deposited funds, serve as a
custodian of funds, and when applicable, pay interest on
deposits. Checking or savings accounts may contain fees
for various services used on a day-to-day basis by a
customer. Fees are recognized as services are delivered to
and consumed by the customer, or as fees are charged.
Service charges also include revenue generated from ATM
transaction processing and settlement services which is
recognized at the time the services are performed. Certain
payments to partners and card associations related to ATM
processing services are also recorded within service
charges as services are provided. Further, revenue
generated from treasury management services are included
in service charges and include fees for a broad range of
products and services that enable customers to manage
their cash more efficiently. These products and services
include cash and investment management, receivables
management, disbursement services, funds transfer
services, and information reporting. Treasury management
revenue is recognized as products and services are
provided to customers. The Company reflects a discount
calculated on monthly average collected customer balances.
Service charges are reported primarily within the Wealth,
Corporate, Commercial and Institutional Banking, and
Consumer and Business Banking lines of business.
Commercial Products Revenue Commercial products
revenue primarily includes revenue related to ancillary
services provided to Wealth, Corporate, Commercial and
Institutional Banking, and Consumer and Business Banking
customers, including standby letter of credit fees, non-yield
related loan fees, capital markets related revenue, sales of
direct financing leases, and loan and syndication fees. Sales
of direct financing leases are recognized at the point of sale.
In addition, the Company may lead or participate with a
group of underwriters in raising investment capital on behalf
of securities issuers and charge underwriting fees. These
fees are recognized at securities issuance. The Company,
in its role as lead underwriter, arranges deal structuring and
use of outside vendors for the underwriting group. The
Company recognizes only those fees and expenses related
to its underwriting commitment.
Mortgage Banking Revenue Mortgage banking revenue
includes revenue derived from mortgages originated and
subsequently sold, generally with servicing retained. The
primary components include: gains and losses on mortgage
sales; servicing revenue; changes in fair value for mortgage
loans originated with the intent to sell and measured at fair
value under the fair value option; changes in fair value for
derivative commitments to purchase and originate mortgage
loans; changes in the fair value of MSRs; and the impact of
risk management activities associated with the mortgage
origination pipeline, funded loans and MSRs. Net interest
income from mortgage loans is recorded in interest income.
Refer to Other Significant Policies in Note 1, as well as Note
10 and Note 22 for a further discussion of MSRs. Mortgage
banking revenue is reported within the Consumer and
Business Banking line of business.
Investment Products Fees Investment products fees
include commissions related to the execution of requested
security trades, distribution fees from sale of mutual funds,
and investment advisory fees. Commissions and investment
advisory fees are recognized as services are delivered to
and utilized by the customer. Distribution fees are received
over time, are dependent on the consumer maintaining their
mutual fund asset position and the value of such position.
These revenues are estimated and recognized at the point a
significant reversal of revenue becomes remote. Investment
products fees are predominately reported within the Wealth,
Corporate, Commercial and Institutional Banking line of
business.
Other Noninterest Income Other noninterest income is
primarily related to financial assets including income on
unconsolidated subsidiaries and equity method investments,
gains on sale of other investments and corporate owned life
insurance proceeds. The Company reports other noninterest
income across all lines of business.
Other Significant Policies
Goodwill and Other Intangible Assets Goodwill is
recorded on acquired businesses if the purchase price
exceeds the fair value of the net assets acquired. Goodwill
is not amortized but is subject, at a minimum, to annual
tests for impairment at a reporting unit level. In certain
situations, an interim impairment test may be required if
events occur or circumstances change that would more
likely than not reduce the fair value of a reporting unit below
its carrying amount. Determining the amount of goodwill
impairment, if any, includes assessing whether the carrying
value of a reporting unit exceeds its fair value. Other
intangible assets are recorded at their fair value upon
completion of a business acquisition or certain other
transactions, and generally represent the value of customer
contracts or relationships. Other intangible assets are
amortized over their estimated useful lives, using straight-
line and accelerated methods and are reviewed for
impairment when indicators of impairment are present.
Determining the amount of other intangible asset
impairment, if any, includes assessing the present value of
the estimated future cash flows associated with the
intangible asset and comparing it to the carrying amount of
the asset.
Income Taxes Deferred taxes are recorded to reflect the
tax consequences on future years of differences between
the tax basis of assets and liabilities and their financial
reporting carrying amounts. The Company uses the deferral
method of accounting on investments that generate
investment tax credits. Under this method, the investment
tax credits are recognized as a reduction to the related
asset. For investments in qualified affordable housing
projects and certain other tax-advantaged investments, the
Company presents the expense in tax expense rather than
noninterest expense.
Mortgage Servicing Rights MSRs are capitalized as
separate assets when loans are sold and servicing is
retained or if they are purchased from others. MSRs are
recorded at fair value. The Company determines the fair
value by estimating the present value of the asset’s future
cash flows utilizing market-based prepayment rates, option
adjusted spread, and other assumptions validated through
comparison to trade information, industry surveys and
independent third-party valuations. Changes in the fair value
of MSRs are recorded in earnings as mortgage banking
revenue during the period in which they occur.
Pensions For purposes of its pension plans, the Company
utilizes its fiscal year-end as the measurement date. At the
measurement date, plan assets are determined based on
fair value, generally representing observable market prices
or the net asset value provided by the funds’ trustee or
administrator. The actuarial cost method used to compute
the pension liabilities and related expense is the projected
unit credit method. The projected benefit obligation is
principally determined based on the present value of
projected benefit distributions at an assumed discount rate.
The discount rate utilized is based on the investment yield of
high quality corporate bonds available in the marketplace
with maturities equal to projected cash flows of future
benefit payments as of the measurement date. Periodic
pension expense (or income) includes service costs, interest
costs based on the assumed discount rate, the expected
return on plan assets based on an actuarially derived
market-related value and amortization of actuarial gains and
losses. Service cost is included in compensation and
employee benefits expense on the Consolidated Statement
of Income, with all other components of periodic pension
expense included in other noninterest expense on the
Consolidated Statement of Income. Pension accounting
79
reflects the long-term nature of benefit obligations and the
investment horizon of plan assets, and can have the effect
of reducing earnings volatility related to short-term changes
in interest rates and market valuations. Actuarial gains and
losses include the impact of plan amendments and various
unrecognized gains and losses which are deferred, and to
the extent exceed 10 percent of the greater of the projected
benefit obligation or the market-related value of plan assets,
are amortized over the future service periods of active
employees or the remaining life expectancies of inactive
participants. The market-related value utilized to determine
the expected return on plan assets is based on fair value
adjusted for the difference between expected returns and
actual performance of plan assets. The unrealized
difference between actual experience and expected returns
is included in expense over a period of approximately 15
years for active employees and approximately 30 years for
inactive participants. The overfunded or underfunded status
of each plan is recorded as an asset or liability on the
Consolidated Balance Sheet, with changes in that status
recognized through other comprehensive income (loss).
Premises and Equipment Premises and equipment are
stated at cost less accumulated depreciation and
depreciated primarily on a straight-line basis over the
estimated life of the assets. Estimated useful lives range up
to 40 years for newly constructed buildings and from 3 to 25
years for furniture and equipment.
The Company, as lessee, records an ROU asset for
each lease with an original term greater than 12 months.
ROU assets are included in premises and equipment, with
the corresponding lease liabilities included in long-term debt
and other liabilities.
Capitalized Software The Company capitalizes certain
costs associated with the acquisition or development of
internal-use software. Once the software is ready for its
intended use, these costs are amortized on a straight-line
basis over the software’s expected useful life and reviewed
for impairment on an ongoing basis. Estimated useful lives
are generally 3 to 5 years, but may range up to 7 years.
Stock-Based Compensation The Company grants stock-
based awards, which may include restricted stock, restricted
stock units and options to purchase common stock of the
Company. Stock option grants are for a fixed number of
shares to employees and directors with an exercise price
equal to the fair value of the shares at the date of grant.
Restricted stock and restricted stock unit grants are
awarded at no cost to the recipient. Stock-based
compensation for awards is recognized in the Company’s
results of operations over the vesting period. The Company
immediately recognizes compensation cost of awards to
employees that meet retirement status, despite their
continued active employment. The amortization of stock-
based compensation reflects estimated forfeitures adjusted
for actual forfeiture experience. As compensation expense
is recognized, a deferred tax asset is recorded that
represents an estimate of the future tax deduction from
exercise or release of restrictions. At the time stock-based
awards are exercised, cancelled, expire, or restrictions are
released, the Company may be required to recognize an
80 U.S. Bancorp 2023 Annual Report
adjustment to tax expense, depending on the market price
of the Company’s common stock at that time.
Per Share Calculations Earnings per common share is
calculated using the two-class method under which earnings
are allocated to common shareholders and holders of
participating securities. Unvested stock-based
compensation awards that contain nonforfeitable rights to
dividends or dividend equivalents are considered
participating securities under the two-class method. Net
income applicable to U.S. Bancorp common shareholders is
then divided by the weighted-average number of common
shares outstanding to determine earnings per common
share. Diluted earnings per common share is calculated by
adjusting income and outstanding shares, assuming
conversion of all potentially dilutive securities.
NOTE 2 Accounting Changes
Reference Interest Rate Transition In March 2020, the
Financial Accounting Standards Board (“FASB”) issued
accounting guidance, providing temporary optional
expedients and exceptions to the guidance in United States
generally accepted accounting principles on contract
modifications and hedge accounting, to ease the financial
reporting burdens related to the expected market transition
from the London Interbank Offered Rate (“LIBOR”) and
other interbank offered rates to alternative reference rates.
Under the guidance, a company can elect not to apply
certain modification accounting requirements to contracts
affected by reference rate transition, if certain criteria are
met. A company that makes this election would not be
required to remeasure the contracts at the modification date
or reassess a previous accounting determination. This
guidance also permits a company to elect various optional
expedients that would allow it to continue applying hedge
accounting for hedging relationships affected by reference
rate transition, if certain criteria are met. The guidance is
effective upon issuance and generally can be applied
through December 31, 2024. The Company is applying
certain optional expedients and exceptions for cash flow
hedges and will continue to evaluate these for eligible
contract modifications and hedging relationships.
Fair Value Hedging – Portfolio Layer Method Effective
January 1, 2023, the Company adopted accounting
guidance, issued by the FASB in March 2022, related to fair
value hedge accounting of portfolios of financial assets. This
guidance permits a company to designate multiple hedging
relationships on a single closed portfolio, resulting in a
larger portion of the interest rate risk associated with such a
portfolio being eligible to be hedged. The guidance also
expands the scope of the method to include non-prepayable
financial assets and clarifies other technical questions from
the original accounting guidance. The adoption of this
guidance is not material to the Company’s financial
statements.
Financial Instruments – Troubled Debt Restructurings
and Vintage Disclosures Effective January 1, 2023, the
Company adopted accounting guidance on a modified
retrospective basis, issued by the FASB in March 2022,
related to the recognition and measurement of TDRs by
creditors. This guidance removes the separate recognition
and measurement requirements for TDRs by replacing them
with a requirement for a company to apply existing
accounting guidance to determine whether a modification
results in a new loan or a continuation of an existing loan.
This guidance also replaces existing TDR disclosures with
similar but more expansive disclosures for certain
modifications of receivables made to borrowers
experiencing financial difficulty. Further, this guidance also
requires companies to disclose current-period gross write-
offs by year of origination for financing receivables. The
adoption of this guidance is not material to the Company’s
financial statements.
Accounting for Tax Credit Investments Using the
Proportional Amortization Method Effective January 1,
2023, the Company adopted accounting guidance on a
modified retrospective basis, issued by the FASB in March
2023, related to the accounting for tax credit investments.
This guidance allows the Company to elect to account for
tax credit investments using the proportional amortization
method on a program-by-program basis if certain conditions
are met, regardless of the program from which the income
tax credits are received. The adoption of this guidance was
not material to the Company’s financial statements.
NOTE 3 Business Combinations
MUFG Union Bank Acquisition On December 1, 2022, the
Company acquired MUB’s core regional banking franchise
from MUFG. Pursuant to the terms of the Share Purchase
Agreement, the Company acquired all of the issued and
outstanding shares of common stock of MUB for a purchase
price consisting of $5.5 billion in cash and approximately 44
million shares of common stock of the Company. Under the
terms of the Share Purchase Agreement, the purchase price
was based on MUB having a tangible book value of $6.25
billion at the closing of the acquisition. At the closing of the
acquisition, MUB had $3.5 billion of tangible book value over
the $6.25 billion target, consisting of additional cash. The
additional cash received is required to be repaid to MUFG
on or prior to the fifth anniversary date of the completion of
the purchase, in accordance with the terms of the Share
Purchase Agreement. As such, it is recognized as debt at
the parent company. During 2023, the Company repaid
$936 million of its debt obligation from the proceeds of the
issuance of 24 million shares of common stock of the
Income Taxes – Improvements to Income Tax
Disclosures In December 2023, the FASB issued
guidance, effective for the Company for annual reporting
periods beginning after December 15, 2024, related to
income tax disclosures. This guidance requires additional
information in income tax rate reconciliation disclosures and
additional disclosures about income taxes paid. The
guidance is required, at a minimum, to be adopted on a
prospective basis, with an option to apply it retrospectively.
The Company expects the adoption of this guidance will not
be material to its financial statements.
Segment Reporting – Improvements to Reportable
Segment Disclosures In November 2023, the FASB issued
guidance, effective for the Company for annual reporting
periods beginning after December 15, 2023, related to
segment disclosures. This guidance requires disclosures of
significant segment expenses and other segment items and
expands interim period disclosure requirements to include
segment profit or loss and assets, which are currently only
required to be disclosed annually. The guidance is required
to be adopted retrospectively to all periods presented in the
financial statements. The Company expects the adoption of
this guidance will not be material to its financial statements.
Company to an affiliate of MUFG. The acquisition has been
accounted for as a business combination. Accordingly, the
assets acquired and liabilities assumed from MUB were
recorded at fair value as of the acquisition date. The
determination of fair value requires management to make
estimates about discount rates, future expected cash flows,
market conditions and other future events that are highly
subjective in nature and subject to change. Fair value
estimates related to the assets and liabilities from MUB
were subject to adjustment for up to one year after the
closing date of the acquisition as additional information
became available. The Company merged MUB into USBNA
during 2023.
In connection with the transaction, the Company
recorded within noninterest expense nonrecurring merger
and integration charges of $1.0 billion and $329 million
during 2023 and 2022, respectively. These expenses were
primarily comprised of personnel, legal, advisory and
technology related costs.
81
The following table includes the fair value of consideration transferred and the fair value of the identifiable tangible and intangible
assets and liabilities from MUB:
December 1, 2022 (Dollars in Millions)
Acquisition consideration
Cash
Market value of shares of common stock
Total consideration transferred at acquisition close date
Discounted liability to MUFG(a)
Total
Fair Value of MUB assets and liabilities
Assets
Cash and due from banks
Investment securities
Loans held for sale
Loans
Less allowance for loan losses
Net loans
Premises and equipment
Other intangible assets (excluding goodwill)
Other assets
Total assets
Liabilities
Deposits
Short-term borrowings
Long-term debt
Other liabilities
Total liabilities
Less: Net assets
Goodwill
$
5,500
2,014
7,514
2,944
$ 10,458
$ 17,754
22,725
2,220
53,395
(463)
52,932
646
2,808
4,764
$ 103,849
$ 86,110
4,777
2,584
2,243
95,714
8,135
2,323
$
$
(a) Represents $3.5 billion of noninterest-bearing additional cash held by MUB upon close of the acquisition to be delivered to MUFG on or prior to December 1, 2027, discounted at
the Company’s 5-year unsecured borrowing rate as of the acquisition date, per authoritative accounting guidance.
Goodwill of $2.3 billion recorded in connection with the
transaction resulted from the reputation, operating model
and expertise of MUB. The amount of goodwill recorded
reflects the increased market share and related synergies
that are expected to result from the acquisition, and
represents the excess purchase price over the estimated
fair value of the net assets from MUB. The goodwill was
allocated to the Company’s business segments and is not
deductible for income tax purposes. Refer to Note 11 for the
amount of goodwill allocated to each business segment in
connection with the transaction.
During 2023, the Company completed the divestiture of
three MUB branches to HomeStreet Bank, a wholly owned
subsidiary of HomeStreet, Inc., to satisfy regulatory
requirements related to the acquisition. There were
approximately $400 million in deposits and $22 million in
loans divested as part of this transaction.
82 U.S. Bancorp 2023 Annual Report
The following table includes the fair value and unpaid principal balance of the loans from the MUB acquisition:
December 1, 2022 (Dollars in Millions)
Commercial
Commercial real estate
Residential mortgages
Credit card
Other retail
Total loans
Unpaid
Principal
Balance
Fair Value
$ 11,771 $ 11,366
14,397
13,737
28,256
26,247
299
212
1,397
1,370
$ 56,120 $ 52,932
Other intangible assets from the MUB acquisition, as of December 1, 2022, consisted of the following:
(Dollars in Millions)
Mortgage servicing rights
Core deposit benefits
Other
Total other intangible assets (excluding goodwill)
(a) Mortgage servicing rights are recorded at fair value and are not amortized.
Valuation Methodologies
The methods used to determine the fair values of the
significant assets acquired and liabilities assumed as part of
the MUB acquisition are described below.
Cash and Due from Banks The carrying amount of these
assets is a reasonable estimate of fair value based on the
short-term nature of these assets.
Investment Securities Fair value estimates for the
investment securities were determined by using quoted
market prices for identical securities in active markets when
available. For certain securities where quoted market prices
were not readily available, the Company utilized a third-
party pricing service. The third-party pricing service used a
variety of methods that incorporated relevant market data to
arrive at an estimate of what a buyer in the marketplace
would have paid for these securities under current market
conditions. These methods included the use of quoted
prices for similar securities, inactive transaction prices and
broker quotes, as well as discounted cash flow
methodologies.
Loans Held for Sale Fair value estimates for loans held for
sale were valued based on quoted market prices, where
available, and by comparison to instruments with similar
collateral and risk profiles.
Loans Fair value estimates for loans were based on
discounted cash flow methodologies that considered credit
loss and prepayment expectations, market interest rates
Weighted-Average
Estimated Life
Amortization
Method
Fair Value
—
(a) $
147
10 years
Accelerated
2,635
11 years
Accelerated
26
$ 2,808
and other market factors, such as liquidity, from the
perspective of a market participant. Loan cash flows were
generated on an individual loan basis. The probability of
default, loss given default, exposure at default and
prepayment assumptions were the key factors in
determining expected credit losses which were embedded
into the estimated cash flows.
Core Deposit Benefits This intangible asset represents the
economic benefit created by certain client deposit
relationships by way of favorable funding relative to
alternative sources. The fair value was estimated utilizing
the after-tax cost savings method of the income approach.
Appropriate consideration was given to deposit costs
including cost of funds, net maintenance costs or servicing
costs, client retention and alternative funding source costs
at the time of acquisition. The discount rate used was
derived taking into account the estimated cost of equity,
risk-free return rate and risk premium for the market and
specific risk related to the asset’s cash flows.
Other Assets Included in other assets are tax-advantaged
investments promoting affordable housing. The fair value of
these investments was estimated based on the value of the
expected future benefits.
Deposits and Borrowed Funds The fair values for
deposits, short-term borrowings and long-term debt were
estimated by discounting contractual cash flows using
current market rates for instruments with similar maturities.
83
The following table presents financial results of MUB included in the Consolidated Statement of Income from the date of
acquisition through December 31, 2022.
(Dollars in Millions)
Net interest income
Noninterest income
Net income (loss)
(a) Includes realized losses on investment securities sold.
One Month Ended
December 31, 2022
$
255
(38) (a)
(562)
The following table presents unaudited pro forma results as if the acquisition of MUB by the Company occurred on January 1,
2021 and includes the impact of amortizing and accreting certain estimated purchase accounting adjustments such as intangible
assets as well as fair value adjustments to investment securities, loans, deposits and long-term debt. The pro forma information
does not necessarily reflect the results that would have occurred had the Company acquired MUB on January 1, 2021.
Year Ended December 31 (Dollars in Millions)
Net interest income
Noninterest income
Net income
2022
2021
$ 17,541 $ 14,958
10,068
11,071
7,184
7,187
The Company initially measures the amortized cost of a
PCD loan by adding the acquisition date estimate of
expected credit losses to the loan’s purchase price. The
allowance for credit losses for PCD loans of $463 million
was established through an adjustment to the MUB loan
balance reflected in the related purchase accounting mark.
Non-PCD loans and PCD loans had a fair value of $48.5
billion and $4.4 billion, respectively, at the acquisition date
with unpaid principal balances of $51.0 billion and $5.1
billion, respectively. In accordance with authoritative
accounting guidance, there was no carryover of the
allowance for credit losses that had been previously
recorded by MUB. Subsequent to acquisition, the Company
recorded an allowance for credit losses primarily on non-
PCD loans of $662 million through an increase to the
provision for credit losses in 2022.
The following table provides information about the determination of the purchase price of PCD loans at the acquisition date:
December 1, 2022 (Dollars in Millions)
Principal balance
Allowance for credit losses at acquisition
Non-credit discount
Purchase price
$ 5,097
(463)
(213)
$ 4,421
NOTE 4 Restrictions on Cash and Due from Banks
Banking regulators require bank subsidiaries to maintain
minimum average reserve balances, either in the form of
vault cash or reserve balances held with central banks or
other financial institutions. The amount of required reserve
balances were approximately $53 million and $45 million at
December 31, 2023 and 2022, respectively. The Company
held balances at central banks and other financial
institutions of $49.5 billion and $41.6 billion at
December 31, 2023 and 2022, respectively, to meet these
requirements and for other purposes. These balances are
included in cash and due from banks on the Consolidated
Balance Sheet.
84 U.S. Bancorp 2023 Annual Report
NOTE 5
Investment Securities
The Company’s held-to-maturity investment securities are
carried at historical cost, adjusted for amortization of
premiums and accretion of discounts. The Company’s
available-for-sale investment securities are carried at fair
value with unrealized net gains or losses reported within
accumulated other comprehensive income (loss) in
shareholders’ equity.
The amortized cost, gross unrealized holding gains and losses, and fair value of held-to-maturity and available-for-sale investment
securities at December 31 were as follows:
2023
2022
(Dollars in Millions)
Held-to-maturity
U.S. Treasury and agencies
Mortgage-backed securities
Residential agency
Commercial agency
Other
Total held-to-maturity
Available-for-sale
U.S. Treasury and agencies
Mortgage-backed securities
Residential agency
Commercial
Agency
Non-agency
Asset-backed securities
Obligations of state and political subdivisions
Other
Total available-for-sale, excluding portfolio level
basis adjustments
Amortized Unrealized Unrealized
Losses
Gains
Cost
Fair Value
Amortized Unrealized Unrealized
Losses
Gains
Cost
Fair Value
$ 1,345 $
— $
(35) $ 1,310 $ 1,344 $
— $
(51) $ 1,293
80,997
1,695
8
6
6
—
(9,929)
71,074
85,693
(5)
—
1,696
1,703
8
—
2
1
—
(10,810)
74,885
(8)
—
1,696
—
$ 84,045 $
12 $ (9,969) $ 74,088 $ 88,740 $
3 $(10,869) $ 77,874
$ 21,768 $
8 $ (2,234) $ 19,542 $ 24,801 $
1 $ (2,769) $ 22,033
28,185
104
(2,211)
26,078
32,060
8
(2,797)
29,271
8,703
7
6,713
10,867
24
—
—
25
36
—
(1,360)
7,343
8,736
(1)
6
7
(14)
6,724
4,356
(914)
9,989
11,484
—
24
6
76,267
173
(6,734)
69,706
81,450
—
—
5
12
—
26
—
(1,591)
7,145
—
7
(38)
4,323
(1,371)
10,125
—
6
(8,566)
72,910
—
—
Portfolio level basis adjustments (a)
335
—
(335)
—
—
Total available-for-sale
$ 76,602 $
173 $ (7,069) $ 69,706 $ 81,450 $
26 $ (8,566) $ 72,910
(a) Represents fair value hedge basis adjustments related to active portfolio layer method hedges of available-for-sale investment securities, which are not allocated to individual
securities in the portfolio. For additional information, refer to Note 20.
Investment securities with a fair value of $20.5 billion at
December 31, 2023, and $15.3 billion at December 31,
2022, were pledged to secure public, private and trust
deposits, repurchase agreements and for other purposes
required by contractual obligation or law. Included in these
amounts were securities where the Company and certain
counterparties have agreements granting the counterparties
the right to sell or pledge the securities. Investment
securities securing these types of arrangements had a fair
value of $338 million at December 31, 2023, and $858
million at December 31, 2022.
The following table provides information about the amount of interest income from taxable and non-taxable investment securities:
Year Ended December 31 (Dollars in Millions)
Taxable
Non-taxable
Total interest income from investment securities
2023
2022
2021
$ 4,171 $ 3,081 $ 2,103
314
297
262
$ 4,485 $ 3,378 $ 2,365
85
The following table provides information about the amount of gross gains and losses realized through the sales of available-for-
sale investment securities:
Year Ended December 31 (Dollars in Millions)
Realized gains
Realized losses
Net realized gains (losses)
Income tax expense (benefit) on net realized gains (losses)
The Company conducts a regular assessment of its
available-for-sale investment securities with unrealized
losses to determine whether all or some portion of a
security’s unrealized loss is related to credit and an
allowance for credit losses is necessary. If the Company
intends to sell or it is more likely than not the Company will
be required to sell an investment security, the amortized
cost of the security is written down to fair value. When
evaluating credit losses, the Company considers various
factors such as the nature of the investment security, the
credit ratings or financial condition of the issuer, the extent
2023
2022
74 $
163 $
(219)
(143)
2021
122
(19)
(145) $
20 $
103
(37) $
5 $
26
$
$
$
of the unrealized loss, expected cash flows of underlying
collateral, the existence of any government or agency
guarantees, and market conditions. The Company
measures the allowance for credit losses using market
information where available and discounting the cash flows
at the original effective rate of the investment security. The
allowance for credit losses is adjusted each period through
earnings and can be subsequently recovered. The
allowance for credit losses on the Company’s available-for-
sale investment securities was immaterial at December 31,
2023 and December 31, 2022.
At December 31, 2023, certain investment securities had a fair value below amortized cost. The following table shows the gross
unrealized losses excluding portfolio level basis adjustments and fair value of the Company’s available-for-sale investment
securities with unrealized losses, aggregated by investment category and length of time the individual investment securities have
been in continuous unrealized loss positions, at December 31, 2023:
(Dollars in Millions)
U.S. Treasury and agencies
Mortgage-backed securities
Residential agency
Commercial
Agency
Non-agency
Asset-backed securities
Obligations of state and political subdivisions
Other
Total investment securities
Less Than 12 Months
12 Months or Greater
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
$
874 $
(3) $ 17,270 $
(2,231) $ 18,144 $
(2,234)
519
(8)
21,356
(2,203)
21,875
(2,211)
—
—
2,235
544
—
—
—
(14)
(3)
—
7,343
(1,360)
7,343
(1,360)
6
—
7,464
4
(1)
—
(911)
—
6
2,235
8,008
4
(1)
(14)
(914)
—
$
4,172 $
(28) $ 53,443 $
(6,706) $ 57,615 $
(6,734)
These unrealized losses primarily relate to changes in
interest rates and market spreads subsequent to purchase
of these available-for-sale investment securities. U.S.
Treasury and agencies securities and agency mortgage-
backed securities are issued, guaranteed or otherwise
supported by the United States government. The
Company’s obligations of state and political subdivisions are
generally high grade. Accordingly, the Company does not
consider these unrealized losses to be credit-related and an
allowance for credit losses is not necessary. In general, the
issuers of the investment securities are contractually
prohibited from prepayment at less than par, and the
Company did not pay significant purchase premiums for
these investment securities. At December 31, 2023, the
Company had no plans to sell investment securities with
unrealized losses, and believes it is more likely than not it
would not be required to sell such investment securities
before recovery of their amortized cost.
During the years ended December 31, 2023 and 2022,
the Company did not purchase any investment securities
that had more-than-insignificant credit deterioration.
Predominantly all of the Company’s held-to-maturity
investment securities are U.S. Treasury and agencies
securities and highly rated agency mortgage-backed
securities that are guaranteed or otherwise supported by the
United States government and have no history of credit
losses. Accordingly the Company does not expect to incur
any credit losses on held-to-maturity investment securities
and has no allowance for credit losses recorded for these
securities.
86 U.S. Bancorp 2023 Annual Report
The following table provides information about the amortized cost, fair value and yield by maturity date of the investment securities
outstanding at December 31, 2023:
(Dollars in Millions)
Held-to-maturity
U.S. Treasury and Agencies
Maturing in one year or less
Maturing after one year through five years
Maturing after five years through ten years
Maturing after ten years
Total
Mortgage-Backed Securities(a)
Maturing in one year or less
Maturing after one year through five years
Maturing after five years through ten years
Maturing after ten years
Total
Other
Maturing in one year or less
Maturing after one year through five years
Maturing after five years through ten years
Maturing after ten years
Total
Total held-to-maturity(b)
Available-for-sale
U.S. Treasury and Agencies
Maturing in one year or less
Maturing after one year through five years
Maturing after five years through ten years
Maturing after ten years
Total
Mortgage-Backed Securities(a)
Maturing in one year or less
Maturing after one year through five years
Maturing after five years through ten years
Maturing after ten years
Total
Asset-Backed Securities (a)
Maturing in one year or less
Maturing after one year through five years
Maturing after five years through ten years
Maturing after ten years
Total
Obligations of State and Political Subdivisions(c) (d)
Maturing in one year or less
Maturing after one year through five years
Maturing after five years through ten years
Maturing after ten years
Total
Other
Maturing in one year or less
Maturing after one year through five years
Maturing after five years through ten years
Maturing after ten years
Total
Total available-for-sale(b) (f)
Amortized
Cost
Fair Value
Weighted-
Average
Maturity in
Years
Weighted-
Average
Yield(e)
$
50 $
1,295
—
—
50
1,260
—
—
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1,345 $
1,310
22 $
1,268
75,984
5,418
22
1,266
67,094
4,388
82,692 $
72,770
— $
8
—
—
—
8
—
—
8 $
84,045 $
8
74,088
9 $
8,882
11,165
1,712
9
8,378
9,827
1,328
21,768 $
19,542
83 $
11,196
24,455
1,161
81
10,860
21,483
1,003
36,895 $
33,427
— $
5,834
879
—
—
5,844
880
—
6,713 $
6,724
225 $
3,546
1,453
5,643
10,867 $
— $
24
—
—
225
3,536
1,414
4,814
9,989
—
24
—
—
24 $
76,267 $
24
69,706
0.3
2.4
—
—
2.3
0.7
2.5
8.8
10.2
8.8
—
2.8
—
—
2.8
8.7
0.3
3.7
6.8
10.8
5.9
0.8
3.5
7.3
10.9
6.3
—
1.7
5.8
—
2.2
0.4
3.0
7.3
15.3
9.9
—
1.7
—
—
1.7
6.3
2.67%
2.85
—
—
2.85%
4.43%
4.52
2.19
1.91
2.21%
—%
2.56
—
—
2.56%
2.22%
5.28%
2.35
2.08
2.02
2.19%
2.26%
3.80
2.76
3.43
3.09%
—%
5.05
7.15
—
5.33%
5.52%
4.55
3.86
3.14
3.75%
—%
4.51
—
—
4.51%
3.12%
(a) Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities that take into account anticipated future
prepayments.
(b) The weighted-average maturity of total held-to-maturity investment securities was 9.2 years at December 31, 2022, with a corresponding weighted-average yield of 2.18 percent.
The weighted-average maturity of total available-for-sale investment securities was 7.4 years at December 31, 2022, with a corresponding weighted-average yield of 2.94 percent.
(c) Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, and yield to
maturity if the security is purchased at par or a discount.
(d) Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and the contractual maturity
date for securities with a fair value equal to or below par.
(e) Weighted-average yields for obligations of state and political subdivisions are presented on a fully-taxable equivalent basis based on a federal income tax rate of 21 percent. Yields
on investment securities are computed based on amortized cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair
value from available-for-sale to held-to maturity.
(f) Amortized cost excludes portfolio level basis adjustments of $335 million.
87
NOTE 6 Loans and Allowance for Credit Losses
The composition of the loan portfolio at December 31, by class and underlying specific portfolio type, was as follows:
(Dollars in Millions)
Commercial
Commercial
Lease financing
Total commercial
Commercial Real Estate
Commercial mortgages
Construction and development
Total commercial real estate
Residential Mortgages
Residential mortgages
Home equity loans, first liens
Total residential mortgages
Credit Card
Other Retail
Retail leasing
Home equity and second mortgages
Revolving credit
Installment
Automobile
Total other retail
Total loans
2023
2022
$ 127,676 $ 131,128
4,205
4,562
131,881
135,690
41,934
43,765
11,521
11,722
53,455
55,487
108,605
107,858
6,925
7,987
115,530
115,845
28,560
26,295
4,135
5,519
13,056
12,863
3,668
3,983
13,889
14,592
9,661
17,939
44,409
54,896
$ 373,835 $ 388,213
The Company had loans of $123.1 billion at
December 31, 2023, and $134.6 billion at December 31,
2022, pledged at the Federal Home Loan Bank, and loans
of $82.8 billion at December 31, 2023, and $85.8 billion at
December 31, 2022, pledged at the Federal Reserve Bank.
The Company offers a broad array of lending products to
consumer and commercial customers, in various industries,
across several geographical locations, predominately in the
states in which it has Consumer and Business Banking
offices. Collateral for commercial and commercial real
estate loans may include marketable securities, accounts
receivable, inventory, equipment, real estate, or the related
property.
Originated loans are reported at the principal amount
outstanding, net of unearned interest and deferred fees and
costs, and any partial charge-offs recorded. Purchased
loans are recorded at fair value at the date of purchase. Net
unearned interest and deferred fees and costs on originated
loans and unamortized premiums and discounts on
purchased loans amounted to $2.7 billion at December 31,
2023 and $3.1 billion at December 31, 2022. The Company
evaluates purchased loans for more-than-insignificant
deterioration at the date of purchase in accordance with
applicable authoritative accounting guidance. Purchased
loans that have experienced more-than-insignificant
deterioration from origination are considered purchased
credit deteriorated loans. All other purchased loans are
considered non-purchased credit deteriorated loans.
Allowance for Credit Losses The allowance for credit
losses is established for current expected credit losses on
the Company’s loan and lease portfolio, including unfunded
credit commitments. The allowance considers expected
losses for the remaining lives of the applicable assets,
inclusive of expected recoveries. The allowance for credit
losses is increased through provisions charged to earnings
and reduced by net charge-offs.
88 U.S. Bancorp 2023 Annual Report
Activity in the allowance for credit losses by portfolio class was as follows:
(Dollars in Millions)
Balance at December 31, 2022
Add
Change in accounting principle(a)
Allowance for acquired credit losses(b)
Provision for credit losses
Deduct
Loans charged-off
Less recoveries of loans charged-off
Net loan charge-offs (recoveries)
Balance at December 31, 2023
Balance at December 31, 2021
Add
Allowance for acquired credit losses(b)
Provision for credit losses(c)
Deduct
Loans charged-off(d)
Less recoveries of loans charged-off
Net loan charge-offs (recoveries)
Other Changes
Balance at December 31, 2022
Balance at December 31, 2020
Add
Provision for credit losses
Deduct
Loans charged-off
Less recoveries of loans charged-off
Net loan charge-offs (recoveries)
Balance at December 31, 2021
Commercial
Commercial
Real Estate
Residential
Mortgages
Credit
Card
Other
Retail
Total
Loans
$
2,163 $
1,325 $
926 $
2,020 $
970 $
7,404
—
—
270
389
(75)
314
—
127
431
281
(18)
263
(31)
—
41
129
(20)
109
(27)
—
(4)
—
(62)
127
1,259
274
2,275
1,014
(165)
849
478
(108)
370
2,291
(386)
1,905
2,119 $
1,620 $
827 $
2,403 $
870 $
7,839
1,849 $
1,123 $
565 $
1,673 $
945 $
6,155
163
378
319
(92)
227
—
87
152
54
(17)
37
—
36
302
13
(36)
(23)
—
45
826
696
(172)
524
—
5
319
336
1,977
418
(120)
298
(1)
1,500
(437)
1,063
(1)
2,163 $
1,325 $
926 $
2,020 $
970 $
7,404
2,423 $
1,544 $
573 $
2,355 $
1,115 $
8,010
$
$
$
$
(471)
(419)
(40)
(170)
(73)
(1,173)
222
(119)
103
29
(27)
2
18
(50)
(32)
686
(174)
512
253
(156)
97
1,208
(526)
682
$
1,849 $
1,123 $
565 $
1,673 $
945 $
6,155
(a) Effective January 1, 2023, the Company adopted accounting guidance which removed the separate recognition and measurement of troubled debt restructurings.
(b) Represents allowance for credit deteriorated and charged-off loans acquired from MUB.
(c) Includes $662 million of provision for credit losses related to the acquisition of MUB.
(d) Includes $179 million of total charge-offs primarily on loans previously charged-off by MUB, which were written up upon acquisition to unpaid principal balance as required by
purchase accounting.
The increase in the allowance for credit losses from December 31, 2022 to December 31, 2023 was primarily driven by
normalizing credit losses, credit card balance growth and commercial real estate credit quality.
89
The following table provides a summary of loans charged-off during the year ended December 31, 2023, by portfolio class and
year of origination:
(Dollars in Millions)
Originated in 2023
Originated in 2022
Originated in 2021
Originated in 2020
Originated in 2019
Originated prior to 2019
Revolving
Revolving converted to term
Total charge-offs
Residential
Commercial Real Estate(a) Mortgages(b) Credit Card(c) Other Retail(d)
Commercial
Total Loans
$
48 $
63 $
— $
— $
57 $
63
30
17
15
53
163
—
88
69
2
3
56
—
—
1
6
8
16
98
—
—
—
—
—
—
—
1,014
—
130
83
38
31
31
80
28
168
282
188
65
65
238
1,257
28
$
389 $
281 $
129 $
1,014 $
478 $
2,291
Note: Year of origination is based on the origination date of a loan, or for existing loans the date when the maturity date, pricing or commitment amount is amended.
(a) Includes $91 million in charge-offs related to uncollectible amounts on acquired loans.
(b) Includes $117 million of charge-offs related to balance sheet repositioning and capital management actions.
(c) Predominantly all credit card loans are considered revolving loans. Includes an immaterial amount of charge-offs related to revolving converted to term loans.
(d) Includes $192 million of charge-offs related to balance sheet repositioning and capital management actions.
Credit Quality The credit quality of the Company’s loan portfolios is assessed as a function of net credit losses, levels of
nonperforming assets and delinquencies, and credit quality ratings as defined by the Company. These credit quality ratings are an
important part of the Company’s overall credit risk management process and evaluation of the allowance for credit losses.
The following table provides a summary of loans by portfolio class, including the delinquency status of those that continue to
accrue interest, and those that are nonperforming:
(Dollars in Millions)
December 31, 2023
Commercial
Commercial real estate
Residential mortgages(a)
Credit card
Other retail
Total loans
December 31, 2022
Commercial
Commercial real estate
Residential mortgages(a)
Credit card
Other retail
Total loans
Accruing
30-89 Days
90 Days or
Current
Past Due More Past Due Nonperforming(b)
Total
$
130,925 $
464 $
116 $
376 $
131,881
52,619
115,067
27,779
43,926
55
169
406
278
4
136
375
67
777
158
—
138
53,455
115,530
28,560
44,409
$
370,316 $
1,372 $
698 $
1,449 $
373,835
$
135,077 $
350 $
94 $
169 $
135,690
55,057
115,224
25,780
54,382
87
201
283
309
5
95
231
66
338
325
1
139
55,487
115,845
26,295
54,896
$
385,520 $
1,230 $
491 $
972 $
388,213
(a) At December 31, 2023, $595 million of loans 30–89 days past due and $2.0 billion of loans 90 days or more past due purchased and that could be purchased from Government
National Mortgage Association (“GNMA”) mortgage pools under delinquent loan repurchase options whose repayments are insured by the Federal Housing Administration or
guaranteed by the United States Department of Veterans Affairs, were classified as current, compared with $647 million and $2.2 billion at December 31, 2022, respectively.
(b) Substantially all nonperforming loans at December 31, 2023 and 2022, had an associated allowance for credit losses. The Company recognized interest income on nonperforming
loans of $22 million and $19 million for the years ended December 31, 2023 and 2022, respectively, compared to what would have been recognized at the original contractual
terms of the loans of $49 million and $34 million, respectively.
At December 31, 2023, total nonperforming assets held
by the Company were $1.5 billion, compared with $1.0
billion at December 31, 2022. Total nonperforming assets
included $1.4 billion of nonperforming loans, $26 million of
OREO and $19 million of other nonperforming assets owned
by the Company at December 31, 2023, compared with
$972 million, $23 million and $21 million, respectively, at
December 31, 2022.
At December 31, 2023, the amount of foreclosed
residential real estate held by the Company, and included in
OREO, was $26 million, compared with $23 million at
December 31, 2022. These amounts excluded $47 million
and $54 million at December 31, 2023 and December 31,
2022, respectively, of foreclosed residential real estate
90 U.S. Bancorp 2023 Annual Report
related to mortgage loans whose payments are primarily
insured by the Federal Housing Administration or
guaranteed by the United States Department of Veterans
Affairs. In addition, the amount of residential mortgage loans
secured by residential real estate in the process of
foreclosure at December 31, 2023 and December 31, 2022,
was $728 million and $1.1 billion, respectively, of which
$487 million and $830 million, respectively, related to loans
purchased and that could be purchased from GNMA
mortgage pools under delinquent loan repurchase options
whose repayments are insured by the Federal Housing
Administration or guaranteed by the United States
Department of Veterans Affairs.
The following table provides a summary of loans by portfolio class and the Company’s internal credit quality rating:
(Dollars in Millions)
Commercial
Originated in 2023
Originated in 2022
Originated in 2021
Originated in 2020
Originated in 2019
Originated prior to 2019
Revolving(b)
Total commercial
Commercial real estate
Originated in 2023
Originated in 2022
Originated in 2021
Originated in 2020
Originated in 2019
Originated prior to 2019
Revolving
Revolving converted to term
December 31, 2023
Criticized
December 31, 2022
Criticized
Total
Pass Mention Classified(a) Criticized
Special
Total
Total
Pass Mention Classified(a) Criticized
Special
Total
$ 43,023 $
827 $
856 $ 1,683 $ 44,706
$
— $
— $
— $
— $
—
40,076
9,219
3,169
1,340
3,963
274
117
92
18
12
632
154
71
103
106
906
271
163
121
118
40,982
61,229
9,490
26,411
3,332
1,461
4,081
7,049
3,962
8,986
26,213
362
127,003
1,702
1,254
3,176
1,616
27,829
25,888
4,878
131,881
133,525
8,848
11,831
9,235
3,797
4,749
6,010
2,613
2
465
382
500
51
336
122
6
—
2,206
2,671
11,519
—
1,141
1,523
13,354
14,527
385
87
359
260
70
—
885
138
695
382
76
—
10,120
13,565
3,935
5,444
6,392
2,689
2
6,489
6,991
9,639
1,489
—
245
159
68
51
64
344
931
—
206
171
97
251
138
—
—
315
78
138
210
129
364
560
237
206
261
193
708
61,789
26,648
7,255
4,223
9,179
26,596
1,234
2,165
135,690
—
519
99
117
304
875
10
—
—
725
270
214
555
—
15,252
13,835
6,703
7,546
1,013
10,652
10
—
1,499
—
Total commercial real estate
47,085
1,862
4,508
6,370
53,455
52,700
863
1,924
2,787
55,487
Residential mortgages(c)
Originated in 2023
Originated in 2022
Originated in 2021
Originated in 2020
Originated in 2019
Originated prior to 2019
Revolving
Total residential mortgages
Credit card(d)
Other retail
Originated in 2023
Originated in 2022
Originated in 2021
Originated in 2020
Originated in 2019
Originated prior to 2019
Revolving
Revolving converted to term
Total other retail
Total loans
Total outstanding
commitments
9,734
29,146
36,365
14,773
5,876
19,326
1
115,221
28,185
5,184
5,607
10,398
4,541
1,793
2,215
13,720
735
44,193
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5
17
16
9
16
246
—
309
375
4
12
15
9
7
13
104
52
216
5
17
16
9
16
9,739
—
29,163
28,452
36,381
39,527
14,782
16,556
5,892
7,222
246
19,572
23,658
—
1
—
309
115,530
115,415
375
28,560
26,063
4
12
15
9
7
13
104
52
216
5,188
5,619
—
9,563
10,413
15,352
4,550
1,800
2,228
7,828
3,418
3,689
13,824
14,029
787
800
44,409
54,679
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7
8
18
397
—
430
232
—
6
12
11
13
31
98
46
—
—
7
8
18
397
—
—
28,452
39,534
16,564
7,240
24,055
—
430
115,845
232
26,295
—
6
12
11
13
31
98
46
—
9,569
15,364
7,839
3,431
3,720
14,127
846
217
217
54,896
$ 361,687 $ 3,564 $ 8,584 $ 12,148 $ 373,835
$ 382,382 $ 1,794 $ 4,037 $ 5,831 $ 388,213
$ 762,869 $ 5,053 $ 10,470 $ 15,523 $ 778,392
$ 772,804 $ 2,825 $ 5,041 $ 7,866 $ 780,670
Note: Year of origination is based on the origination date of a loan, or for existing loans the date when the maturity date, pricing or commitment amount is amended. Predominantly all
current year and nearer term loan origination years for criticized loans relate to existing loans that have had recent maturity date, pricing or commitment amount amendments.
(a) Classified rating on consumer loans primarily based on delinquency status.
(b) Includes an immaterial amount of revolving converted to term loans.
(c) At December 31, 2023, $2.0 billion of GNMA loans 90 days or more past due and $1.2 billion of modified GNMA loans whose repayments are insured by the Federal Housing
Administration or guaranteed by the United States Department of Veterans Affairs were classified with a pass rating, compared with $2.2 billion and $1.0 billion at December 31,
2022, respectively.
(d) Predominately all credit card loans are considered revolving loans. Includes an immaterial amount of revolving converted to term loans.
91
Loan Modifications In certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts
due when a borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term. The following
table provides a summary of loan balances at December 31, 2023, which were modified during the year ended December 31,
2023, by portfolio class and modification granted:
Interest Rate
Reduction Payment Delay
Term
Extension
Multiple
Modifications(a)
Total
Modifications
Percent of
Class Total
(Dollars in Millions)
Commercial
Commercial real estate
Residential mortgages(b)
Credit card
Other retail
Total loans, excluding loans purchased from
GNMA mortgage pools
Loans purchased from GNMA mortgage pools(b)
$
46 $
— $
286 $
33 $
—
—
349
7
402
—
—
234
1
21
645
26
—
144
256
1,263
1,101
255
72
20
—
3
128
321
365
717
280
350
175
1,887
1,839
3,726
.3%
1.3
.2
1.2
.4
.5
1.6
1.0%
Total loans
$
402 $
1,519 $
1,356 $
449 $
(a) Includes $329 million of total loans receiving a payment delay and term extension, $112 million of total loans receiving an interest rate reduction and term extension and $8 million
of total loans receiving an interest rate reduction, payment delay and term extension for the year ended December 31, 2023.
(b) Percent of class total amounts expressed as a percent of total residential mortgage loan balances.
Loan modifications included in the table above exclude
trial period arrangements offered to customers and secured
loans to consumer borrowers that have had debt discharged
through bankruptcy where the borrower has not reaffirmed
the debt during the periods presented. At December 31,
2023, the balance of loans modified in trial period
arrangements was $39 million, while the balance of secured
loans to consumer borrowers that have had debt discharged
through bankruptcy was not material.
The following table summarizes the effects of loan modifications made to borrowers on loans modified during the year ended
December 31, 2023:
(Dollars in Millions)
Commercial
Commercial real estate
Residential mortgages
Credit card
Other retail
Loans purchased from GNMA mortgage pools
Weighted-Average Weighted-Average
Months of Term
Extension
Interest Rate
Reduction
13.0 %
3.5
1.2
15.4
7.9
.6
12
11
98
—
4
103
Note: The weighted-average payment deferral for all portfolio classes was less than $1 million for the year ended December 31, 2023. Forbearance payments are required to be paid
at the end of the original term loan.
Loans that receive a forbearance plan generally remain
in default until they are no longer delinquent as the result of
the payment of all past due amounts or the borrower
receiving a term extension or modification. Therefore, loans
only receiving forbearance plans are not included in the
table below.
The following table provides a summary of loan balances at December 31, 2023, which were modified during the year ended
December 31, 2023, by portfolio class and delinquency status:
(Dollars in Millions)
Commercial
Commercial real estate
Residential mortgages(a)
Credit card
Other retail
Total loans
90 Days or
30-89 Days More Past
Due
Past Due
Current
$
255 $
12 $
98 $
524
1,385
251
133
—
24
67
21
193
16
32
8
Total
365
717
1,425
350
162
$ 2,548 $
124 $
347 $ 3,019
(a) At December 31, 2023, $372 million of loans 30-89 days past due and $175 million of loans 90 days or more past due purchased and that could be purchased from GNMA
mortgage pools under delinquent loan repurchase options whose payments are insured by the Federal Housing Administration or guaranteed by the United States Department of
Veterans Affairs, were classified as current.
92 U.S. Bancorp 2023 Annual Report
The following table provides a summary of loans that defaulted (fully or partially charged-off or became 90 days or more past due)
that were modified during the year ended December 31, 2023.
(Dollars in Millions)
Commercial
Commercial real estate
Residential mortgages
Credit card
Other retail
Total loans, excluding loans purchased from GNMA mortgage pools
Loans purchased from GNMA mortgage pools
Interest Rate
Reduction Payment Delay
Term
Multiple
Extension Modifications(a)
$
7 $
— $
— $
—
—
35
1
43
—
—
8
—
1
9
67
1
2
—
11
14
30
—
—
1
—
—
1
37
38
Total loans
$
43 $
76 $
44 $
(a) Represents loans receiving a payment delay and term extension.
As of December 31, 2023, the Company had $283 million of commitments to lend additional funds to borrowers whose terms of
their outstanding owed balances have been modified.
Prior Period Troubled Debt Restructuring Information
The following table provides a summary of loans modified as troubled debt restructurings for the years ended December 31, by
portfolio class:
(Dollars in Millions)
2022
Commercial
Commercial real estate
Residential mortgages
Credit card
Other retail
Total loans, excluding loans purchased from GNMA mortgage pools
Loans purchased from GNMA mortgage pools
Total loans
2021
Commercial
Commercial real estate
Residential mortgages
Credit card
Other retail
Total loans, excluding loans purchased from GNMA mortgage pools
Loans purchased from GNMA mortgage pools
Total loans
Number of
Loans
Pre-Modification Post-Modification
Outstanding
Loan Balance
Outstanding
Loan Balance
2,259 $
148 $
75
1,699
44,470
2,514
51,017
1,640
50
475
243
89
1,005
226
134
47
476
246
85
988
230
52,657 $
1,231 $
1,218
2,156 $
140 $
112
977
25,297
2,576
31,118
2,311
193
329
144
74
880
334
127
179
328
146
67
847
346
33,429 $
1,214 $
1,193
93
The following table provides a summary of troubled debt restructured loans that defaulted (fully or partially charged-off or became
90 days or more past due) for the years ended December 31, that were modified as troubled debt restructurings within 12 months
previous to default:
(Dollars in Millions)
2022
Commercial
Commercial real estate
Residential mortgages
Credit card
Other retail
Total loans, excluding loans purchased from GNMA mortgage pools
Loans purchased from GNMA mortgage pools
Total loans
2021
Commercial
Commercial real estate
Residential mortgages
Credit card
Other retail
Total loans, excluding loans purchased from GNMA mortgage pools
Loans purchased from GNMA mortgage pools
Total loans
Number of
Loans
Amount
Defaulted
767 $
20
235
7,904
307
9,233
282
24
11
28
42
5
110
59
9,515 $
169
1,084 $
32
16
81
7,700
714
9,595
176
7
9
43
11
102
26
9,771 $
128
94 U.S. Bancorp 2023 Annual Report
NOTE 7 Leases
The Company, as a lessor, originates retail and commercial
leases either directly to the consumer or indirectly through
dealer networks. Retail leases consist primarily of
automobiles, while commercial leases may include high
dollar assets such as aircraft or lower cost items such as
office equipment.
The components of the net investment in sales-type and direct financing leases, at December 31, were as follows:
(Dollars in Millions)
Lease receivables
Unguaranteed residual values accruing to the lessor’s benefit
Total net investment in sales-type and direct financing leases
The Company, as a lessor, recorded $738 million, $764
million and $888 million of revenue on its Consolidated
Statement of Income for the years ended December 31,
2023
2022
$ 7,239
$ 8,731
1,082
1,323
$ 8,321
$10,054
2023, 2022 and 2021, respectively, primarily consisting of
interest income on sales-type and direct financing leases.
The contractual future lease payments to be received by the Company, at December 31, 2023, were as follows:
(Dollars in Millions)
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Amounts representing interest
Lease receivables
Sales-type and
Direct Financing
Leases
$
3,069 $
2,182
1,333
690
260
369
Operating
Leases
138
110
66
42
27
57
7,903 $
440
(664)
$
7,239
The Company, as lessee, leases certain assets for use in
its operations. Leased assets primarily include retail
branches, operations centers and other corporate locations,
and, to a lesser extent, office and computer equipment. For
each lease with an original term greater than 12 months, the
Company records a lease liability and a corresponding ROU
asset. At December 31, 2023, the Company’s ROU assets
included in premises and equipment and lease liabilities
included in long-term debt and other liabilities, were $1.4
billion and $1.6 billion, respectively, compared with $1.6
billion of ROU assets and $1.7 billion of lease liabilities at
December 31, 2022, respectively.
Total costs incurred by the Company, as a lessee, were
$496 million, $390 million and $364 million for the years
ended December 31, 2023, 2022 and 2021, respectively,
and principally related to contractual lease payments on
operating leases. The Company’s leases do not impose
significant covenants or other restrictions on the Company.
The following table presents amounts relevant to the Company’s assets leased for use in its operations for the years ended
December 31:
(Dollars in Millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Right of use assets obtained in exchange for new operating lease liabilities
Right of use assets obtained in exchange for new finance lease liabilities
2023
2022
2021
$ 409 $ 294 $ 288
7
49
4
14
5
12
230
239
164
25
91
75
95
The following table presents the weighted-average remaining lease terms and discount rates of the Company’s assets leased for
use in its operations at December 31:
Weighted-average remaining lease term of operating leases (in years)
Weighted-average remaining lease term of finance leases (in years)
Weighted-average discount rate of operating leases
Weighted-average discount rate of finance leases
The contractual future lease obligations of the Company at December 31, 2023, were as follows:
(Dollars in Millions)
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Amounts representing interest
Lease liabilities
2023
2022
6.4
8.3
6.8
8.5
3.7%
3.3%
7.7%
7.9%
Operating
Leases
Finance
Leases
$
377 $
295
245
196
144
360
1,617
(211)
$
1,406 $
41
38
36
22
8
23
168
(18)
150
NOTE 8 Accounting for Transfers and Servicing of Financial Assets and Variable
Interest Entities
The Company transfers financial assets in the normal
course of business. The majority of the Company’s financial
asset transfers are residential mortgage loan sales primarily
to GSEs, transfers of tax-advantaged investments,
commercial loan sales through participation agreements,
and other individual or portfolio loan and securities sales. In
accordance with the accounting guidance for asset
transfers, the Company considers any ongoing involvement
with transferred assets in determining whether the assets
can be derecognized from the balance sheet. Guarantees
provided to certain third parties in connection with the
transfer of assets are further discussed in Note 23.
For loans sold under participation agreements, the
Company also considers whether the terms of the loan
participation agreement meet the accounting definition of a
participating interest. With the exception of servicing and
certain performance-based guarantees, the Company’s
continuing involvement with financial assets sold is minimal
and generally limited to market customary representation
and warranty clauses. Any gain or loss on sale depends on
the previous carrying amount of the transferred financial
assets, the consideration received, and any liabilities
incurred in exchange for the transferred assets. Upon
transfer, any servicing assets and other interests that
continue to be held by the Company are initially recognized
at fair value. For further information on MSRs, refer to Note
10. On a limited basis, the Company may acquire and
package high-grade corporate bonds for select corporate
customers, in which the Company generally has no
continuing involvement with these transactions. Additionally,
the Company is an authorized GNMA issuer and issues
GNMA securities on a regular basis. The Company has no
96 U.S. Bancorp 2023 Annual Report
other asset securitizations or similar asset-backed financing
arrangements that are off-balance sheet.
The Company previously provided financial support
primarily through the use of waivers of trust and investment
management fees associated with various unconsolidated
registered money market funds it manages. The Company
discontinued providing this support beginning in the third
quarter of 2022 due to rising interest rates in 2022. The
Company provided $65 million and $250 million of support
to the funds during the years ended December 31, 2022 and
2021, respectively.
The Company is involved in various entities that are
considered to be VIEs. The Company’s investments in VIEs
are primarily related to investments promoting affordable
housing, community development and renewable energy
sources. Some of these tax-advantaged investments
support the Company’s regulatory compliance with the
Community Reinvestment Act. The Company’s investments
in these entities generate a return primarily through the
realization of federal and state income tax credits, and other
tax benefits, such as tax deductions from operating losses
of the investments, over specified time periods. These tax
credits are recognized as a reduction of tax expense or, for
investments qualifying as investment tax credits, as a
reduction to the related investment asset. The Company
recognized federal and state income tax credits related to its
affordable housing and other tax-advantaged investments in
tax expense of $576 million, $461 million and $508 million
for the years ended December 31, 2023, 2022 and 2021,
respectively. The Company also recognized $318 million,
$527 million and $418 million of investment tax credits for
the years ended December 31, 2023, 2022 and 2021,
respectively. The Company recognized $582 million, $424
million and $468 million of expenses related to all of these
investments for the years ended December 31, 2023, 2022
and 2021, respectively, which were primarily included in tax
expense.
The Company is not required to consolidate VIEs in
which it has concluded it does not have a controlling
financial interest, and thus is not the primary beneficiary. In
such cases, the Company does not have both the power to
direct the entities’ most significant activities and the
obligation to absorb losses or the right to receive benefits
that could potentially be significant to the VIEs.
The Company’s investments in these unconsolidated
VIEs are carried in other assets on the Consolidated
Balance Sheet. The Company’s unfunded capital and other
commitments related to these unconsolidated VIEs are
generally carried in other liabilities on the Consolidated
Balance Sheet. The Company’s maximum exposure to loss
from these unconsolidated VIEs include the investment
recorded on the Company’s Consolidated Balance Sheet,
net of unfunded capital commitments, and previously
recorded tax credits which remain subject to recapture by
taxing authorities based on compliance features required to
be met at the project level. While the Company believes
potential losses from these investments are remote, the
maximum exposure was determined by assuming a
scenario where the community-based business and housing
projects completely fail and do not meet certain government
compliance requirements resulting in recapture of the
related tax credits.
The following table provides a summary of investments in
community development and tax-advantaged VIEs that the
Company has not consolidated:
At December 31 (Dollars in Millions)
2023
2022
Investment carrying amount
$ 6,659 $ 5,452
Unfunded capital and other
commitments
Maximum exposure to loss
3,619
9,002
2,416
9,761
The Company also has noncontrolling financial
investments in private investment funds and partnerships
considered to be VIEs, which are not consolidated. The
Company’s recorded investment in these entities, carried in
other assets on the Consolidated Balance Sheet, was
approximately $219 million at December 31, 2023 and $177
million at December 31, 2022. The maximum exposure to
loss related to these VIEs was $319 million at December 31,
2023 and $310 million at December 31, 2022, representing
the Company’s investment balance and its unfunded
commitments to invest additional amounts.
The Company also held senior notes of $5.3 billion as
available-for-sale investment securities at December 31,
2023, compared with $3.4 billion at December 31, 2022.
These senior notes were issued by third-party securitization
vehicles that held $6.1 billion at December 31, 2023 and
$4.0 billion at December 31, 2022 of indirect auto loans that
collateralize the senior notes. These VIEs are not
consolidated by the Company.
The Company’s individual net investments in
unconsolidated VIEs, which exclude any unfunded capital
commitments, ranged from less than $1 million to $86
million at December 31, 2023, compared with less than $1
million to $116 million at December 31, 2022.
The Company is required to consolidate VIEs in which it
has concluded it has a controlling financial interest. The
Company sponsors entities to which it transfers its interests
in tax-advantaged investments to third parties. At
December 31, 2023, approximately $6.1 billion of the
Company’s assets and $4.4 billion of its liabilities included
on the Consolidated Balance Sheet were related to
community development and tax-advantaged investment
VIEs which the Company has consolidated, primarily related
to these transfers. These amounts compared to $5.9 billion
and $4.2 billion, respectively, at December 31, 2022. The
majority of the assets of these consolidated VIEs are
reported in other assets, and the liabilities are reported in
long-term debt and other liabilities. The assets of a
particular VIE are the primary source of funds to settle its
obligations. The creditors of the VIEs do not have recourse
to the general credit of the Company. The Company’s
exposure to the consolidated VIEs is generally limited to the
carrying value of its variable interests plus any related tax
credits previously recognized or transferred to others with a
guarantee.
In addition, the Company sponsors a municipal bond
securities tender option bond program. The Company
controls the activities of the program’s entities, is entitled to
the residual returns and provides liquidity and remarketing
arrangements to the program. As a result, the Company has
consolidated the program’s entities. At December 31, 2023,
$607 million of available-for-sale investment securities and
$381 million of short-term borrowings on the Consolidated
Balance Sheet were related to the tender option bond
program, compared with $1.5 billion of available-for-sale
investment securities and $1.0 billion of short-term
borrowings at December 31, 2022.
97
NOTE 9
Premises and Equipment
Premises and equipment at December 31 consisted of the following:
(Dollars in Millions)
Land
Buildings and improvements
Furniture, fixtures and equipment
Right of use assets on operating leases
Right of use assets on finance leases
Construction in progress
Less accumulated depreciation and amortization
Total
NOTE 10 Mortgage Servicing Rights
The Company capitalizes MSRs as separate assets when
loans are sold and servicing is retained. MSRs may also be
purchased from others. The Company carries MSRs at fair
value, with changes in the fair value recorded in earnings
during the period in which they occur. The Company
serviced $233.4 billion of residential mortgage loans for
others at December 31, 2023, and $243.6 billion at
December 31, 2022, including subserviced mortgages with
no corresponding MSR asset. Included in mortgage banking
revenue are the MSR fair value changes arising from market
2023
2022
$
515 $
535
3,239
3,296
3,013
3,485
1,149
1,296
275
68
269
46
8,259
8,927
(4,636)
(5,069)
$ 3,623 $ 3,858
rate and model assumption changes, net of the value
change in derivatives used to economically hedge MSRs.
These changes resulted in net losses of $41 million, $45
million and $183 million for the years ended December 31,
2023, 2022 and 2021, respectively. Loan servicing and
ancillary fees, not including valuation changes, included in
mortgage banking revenue were $733 million, $754 million
and $725 million for the years ended December 31, 2023,
2022 and 2021, respectively.
Changes in fair value of capitalized MSRs are summarized as follows:
(Dollars in Millions)
Balance at beginning of period
Rights purchased
Rights capitalized
Rights sold(a)
Changes in fair value of MSRs
Due to fluctuations in market interest rates(b)
Due to revised assumptions or models(c)
Other changes in fair value(d)
Balance at end of period
2023
2022
2021
$ 3,755 $ 2,953 $ 2,210
5
373
156
590
42
1,136
(440)
(255)
2
66
12
804
272
(29)
(196)
(394)
(464)
(513)
$ 3,377 $ 3,755 $ 2,953
(a) MSRs sold include those having a negative fair value, resulting from the loans being severely delinquent.
(b) Includes changes in MSR value associated with changes in market interest rates, including estimated prepayment rates and anticipated earnings on escrow deposits.
(c) Includes changes in MSR value not caused by changes in market interest rates, such as changes in assumed cost to service, ancillary income and option adjusted spread, as well
as the impact of any model changes.
(d) Primarily the change in MSR value from passage of time and cash flows realized (decay), but also includes the impact of changes to expected cash flows not associated with
changes in market interest rates, such as the impact of delinquencies.
The estimated sensitivity to changes in interest rates of the fair value of the MSR portfolio and the related derivative instruments as
of December 31 follows:
2023
2022
(Dollars in Millions)
MSR portfolio
Down
100 bps
Down
50 bps
Down
25 bps
Up
25 bps
Up
50 bps
Up
100 bps
Down
100 bps
Down
50 bps
Down
25 bps
Up
25 bps
Up
50 bps
Up
100 bps
$ (370) $ (173) $
(84) $ 77 $ 147 $ 268 $ (334) $ (153) $
(73) $ 66 $ 125 $ 224
Derivative instrument hedges
381
178
86
(79)
(152)
(289)
337
153
73
(67)
(127)
(236)
Net sensitivity
$
11 $
5 $
2 $
(2) $
(5) $
(21) $
3 $ — $ — $
(1) $
(2) $
(12)
98 U.S. Bancorp 2023 Annual Report
The fair value of MSRs and their sensitivity to changes in
interest rates is influenced by the mix of the servicing
portfolio and characteristics of each segment of the portfolio.
The Company’s servicing portfolio consists of the distinct
portfolios of government-insured mortgages, conventional
mortgages and Housing Finance Agency (“HFA”)
mortgages. The servicing portfolios are predominantly
comprised of fixed-rate agency loans with limited adjustable-
rate or jumbo mortgage loans. The HFA servicing portfolio is
comprised of loans originated under state and local housing
authority program guidelines which assist purchases by first-
time or low- to moderate-income homebuyers through a
favorable rate subsidy, down payment and/or closing cost
assistance on government- and conventional-insured
mortgages.
A summary of the Company’s MSRs and related characteristics by portfolio as of December 31 follows:
2023
2022
(Dollars in Millions)
Servicing portfolio(a)
Fair value
Value (bps)(b)
HFA Government Conventional(d)
Total
HFA Government Conventional(d)
Total
$48,286
$ 25,996
$ 151,056
$225,338
$44,071
$ 23,141
$ 172,541
$239,753
$
769
$
507
$
2,101
$ 3,377
$
725
$
454
$
2,576
$ 3,755
159
195
139
150
165
196
149
157
Weighted-average servicing fees
(bps)
Multiple (value/servicing fees)
Weighted-average note rate
36
4.45
44
4.41
26
5.41
30
5.00
36
4.56
42
4.69
27
5.52
30
5.20
4.56%
4.23%
3.81%
4.02%
4.16%
3.81%
3.52%
3.67%
Weighted-average age (in years)
4.3
5.5
4.3
4.4
4.0
5.7
3.7
3.9
Weighted-average expected
prepayment (constant
prepayment rate)
Weighted-average expected life
(in years)
Weighted-average option
adjusted spread(c)
10.5%
11.1%
9.1%
9.6%
7.4%
8.5%
7.8%
7.8%
7.2
6.5
7.0
7.0
8.8
7.6
7.5
7.7
5.4%
5.9%
4.6%
4.9%
7.6%
6.9%
5.1%
5.8%
(a) Represents principal balance of mortgages having corresponding MSR asset.
(b) Calculated as fair value divided by the servicing portfolio.
(c) Option adjusted spread is the incremental spread added to the risk-free rate to reflect optionality and other risk inherent in the MSRs.
(d) Represents loans sold primarily to GSEs.
NOTE 11
Intangible Assets
Intangible assets consisted of the following:
At December 31 (Dollars in Millions)
Goodwill
Merchant processing contracts
Core deposit benefits
Mortgage servicing rights
Trust relationships
Other identified intangibles
Total
Aggregate amortization expense consisted of the following:
Year Ended December 31 (Dollars in Millions)
Merchant processing contracts
Core deposit benefits
Trust relationships
Other identified intangibles
Total
2023
2022
$ 12,489
$ 12,373
124
2,134
3,377
41
408
155
2,706
3,755
50
489
$ 18,573
$ 19,528
2023
2022
2021
$
31
$
38
$
481
10
114
53
12
112
45
15
10
89
$
636
$
215
$
159
99
The estimated amortization expense for the next five years is as follows:
(Dollars in Millions)
2024
2025
2026
2027
2028
$
566
484
415
344
281
The following table reflects the changes in the carrying value of goodwill for the years ended December 31, 2023, 2022 and 2021:
(Dollars in Millions)
Balance at December 31, 2020
Goodwill acquired
Foreign exchange translation and other
Balance at December 31, 2021
Goodwill acquired
Foreign exchange translation and other
Balance at December 31, 2022
Goodwill acquired
Foreign exchange translation and other
Balance at December 31, 2023
Wealth,
Corporate,
Commercial and
Institutional
Banking
Consumer and
Business
Banking
Payment
Services
Treasury and
Corporate
Support
Consolidated
Company
$
3,266 $
3,475 $
3,177 $
— $
9,918
144
263
35
(265)
192
(25)
—
—
371
(27)
$
3,673 $
3,245 $
3,344 $
— $ 10,262
918
(2)
1,220
—
11
(36)
—
—
2,149
(38)
$
4,589 $
4,465 $
3,319 $
— $ 12,373
235
1
(139)
—
—
19
—
—
96
20
$
4,825 $
4,326 $
3,338 $
— $ 12,489
NOTE 12
Deposits
The composition of deposits at December 31 was as follows:
(Dollars in Millions)
Noninterest-bearing deposits
Interest-bearing deposits
Interest checking
Money market savings
Savings accounts
Time deposits
Total interest-bearing deposits
Total deposits
The maturities of time deposits outstanding at December 31, 2023 were as follows:
(Dollars in Millions)
2024
2025
2026
2027
2028
Thereafter
Total
100 U.S. Bancorp 2023 Annual Report
2023
2022
$ 89,989 $ 137,743
127,453
134,491
199,378
148,014
43,219
71,782
52,273
32,946
422,323
387,233
$ 512,312 $ 524,976
$ 44,570
6,448
798
252
197
8
$ 52,273
NOTE 13 Short-Term Borrowings
Short-term borrowings at December 31 consisted of the following:
(Dollars in Millions)
Federal funds purchased
Securities sold under agreements to repurchase
Commercial paper
Other short-term borrowings
Total
(a) Balance primarily includes short-term FHLB advances.
NOTE 14 Long-Term Debt
2023
$
248 $
3,576
7,773
3,682
2022
226
1,431
8,145
21,414
(a)
$ 15,279 $ 31,216
Long-term debt (debt with original maturities of more than one year) at December 31 consisted of the following:
(Dollars in Millions)
U.S. Bancorp (Parent Company)
Subordinated notes
Medium-term notes
Other(b)
Subtotal
Subsidiaries
Federal Home Loan Bank advances
Bank notes
Other(c)
Subtotal
Total
Rate Type
Rate(a)
Maturity Date
2023
2022
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
3.600%
7.500%
3.100%
3.000%
4.967%
2.491%
2024 $ 1,000 $ 1,000
2026
2026
2029
2033
2036
199
1,000
1,000
1,300
1,300
199
1,000
1,000
1,300
1,300
.850% - 6.787%
2024 - 2034
26,618
18,468
Fixed
1.860% - 8.250%
2025 - 2026
Floating
6.080% - 6.100%
2025 - 2026
Fixed
2.050% - 5.550%
2025 - 2032
Floating
—% - 5.398%
2046 - 2062
1,915
2,716
34,332
26,983
9,051
3,000
2,289
1,324
1,484
2,051
3,000
4,800
1,352
1,643
17,148
12,846
$ 51,480 $ 39,829
(a) Weighted-average interest rates of medium-term notes, Federal Home Loan Bank advances and bank notes were 3.89 percent, 4.94 percent and 3.27 percent, respectively.
(b) Includes $2.1 billion and $2.9 billion at December 31, 2023 and 2022, respectively, of discounted noninterest-bearing additional cash received by the Company upon close of the
MUB acquisition to be delivered to MUFG on or prior to December 1, 2027, discounted at the Company’s 5-year unsecured borrowing rate as of the acquisition date, as well as
debt issuance fees and unrealized gains and losses and deferred amounts relating to derivative instruments.
(c) Includes consolidated community development and tax-advantaged investment VIEs, finance lease obligations, debt issuance fees, and unrealized gains and losses and deferred
amounts relating to derivative instruments.
The Company has arrangements with the Federal Home
Maturities of long-term debt outstanding at December 31,
Loan Bank and Federal Reserve Bank whereby the
Company could have borrowed an additional $215.8 billion
and $114.8 billion at December 31, 2023 and 2022,
respectively.
2023, were:
(Dollars in Millions)
2024
2025
2026
2027
2028
Thereafter
Total
Parent
Company Consolidated
$
5,475 $
6,663
2,030
3,906
4,763
3,824
6,559
13,381
4,796
3,835
14,334
16,246
$ 34,332 $ 51,480
101
NOTE 15 Shareholders' Equity
At December 31, 2023 and 2022, the Company had
authority to issue 4 billion shares of common stock and 50
million shares of preferred stock. The Company had 1.6
billion and 1.5 billion shares of common stock outstanding at
December 31, 2023 and 2022, respectively. The Company
had 27 million shares reserved for future issuances,
primarily under its stock incentive plans at December 31,
2023.
The number of shares issued and outstanding and the carrying amount of each outstanding series of the Company’s preferred
stock at December 31 were as follows:
(Dollars in Millions)
Series A
Series B
Series J
Series K
Series L
Series M
Series N
Series O
2023
2022
Shares
Issued and
Outstanding
Liquidation
Preference
Discount
Shares
Carrying
Issued and
Amount Outstanding
Liquidation
Preference
Discount
Carrying
Amount
12,510 $
1,251 $
145 $
1,106
12,510 $
1,251 $
145 $
1,106
40,000
40,000
23,000
20,000
30,000
60,000
18,000
1,000
1,000
575
500
750
1,500
450
—
7
10
14
21
8
13
1,000
40,000
993
565
486
729
40,000
23,000
20,000
30,000
1,000
1,000
575
500
750
1,492
60,000
1,500
437
18,000
450
—
7
10
14
21
8
13
1,000
993
565
486
729
1,492
437
Total preferred stock(a)
243,510 $
7,026 $
218 $
6,808
243,510 $
7,026 $
218 $
6,808
(a) The par value of all shares issued and outstanding at December 31, 2023 and 2022, was $1.00 per share.
Prior to July 1, 2023, dividends for the Company’s
outstanding Series A Preferred Stock, Series B Preferred
Stock and Series J Preferred Stock (each as defined below)
were calculated based on LIBOR. On July 1, 2023, the interest
rate on these series of preferred stock transitioned from a
LIBOR-based rate to a rate based on the Secured Overnight
Financing Rate (“SOFR”), including a credit spread
adjustment, pursuant to the Adjustable Interest Rate (LIBOR)
Act.
During 2022, the Company issued depositary shares
representing an ownership interest in 18,000 shares of Series
O Non-Cumulative Perpetual Preferred Stock with a liquidation
preference of $25,000 per share (the “Series O Preferred
Stock”). The Series O Preferred Stock has no stated maturity
and will not be subject to any sinking fund or other obligation
of the Company. Dividends, if declared, will accrue and be
payable quarterly, in arrears, at a rate per annum equal to 4.50
percent. The Series O Preferred Stock is redeemable at the
Company’s option, in whole or in part, on or after April 15,
2027. The Series O Preferred Stock is redeemable at the
Company’s option, in whole, but not in part, prior to April 15,
2027 within 90 days following an official administrative or
judicial decision, amendment to, or change in the laws or
regulations that would not allow the Company to treat the full
liquidation value of the Series O Preferred Stock as Tier 1
capital for purposes of the capital adequacy guidelines of the
Federal Reserve Board.
During 2021, the Company issued depositary shares
representing an ownership interest in 60,000 shares of Series
N Fixed Rate Reset Non-Cumulative Perpetual Preferred
Stock with a liquidation preference of $25,000 per share (the
“Series N Preferred Stock”). The Series N Preferred Stock has
no stated maturity and will not be subject to any sinking fund
or other obligation of the Company. Dividends, if declared, will
accrue and be payable quarterly, in arrears, at a rate per
annum equal to 3.70 percent from the date of issuance to, but
102 U.S. Bancorp 2023 Annual Report
excluding, January 15, 2027, and thereafter will accrue and be
payable quarterly at a floating rate per annum equal to the
five-year treasury rate plus 2.541 percent. The Series N
Preferred Stock is redeemable at the Company’s option, in
whole or in part, on or after January 15, 2027. The Series N
Preferred Stock is redeemable at the Company’s option, in
whole, but not in part, prior to January 15, 2027 within 90 days
following an official administrative or judicial decision,
amendment to, or change in the laws or regulations that would
not allow the Company to treat the full liquidation value of the
Series N Preferred Stock as Tier 1 capital for purposes of the
capital adequacy guidelines of the Federal Reserve Board.
During 2021, the Company issued depositary shares
representing an ownership interest in 30,000 shares of Series
M Non-Cumulative Perpetual Preferred Stock with a liquidation
preference of $25,000 per share (the “Series M Preferred
Stock”). The Series M Preferred Stock has no stated maturity
and will not be subject to any sinking fund or other obligation
of the Company. Dividends, if declared, will accrue and be
payable quarterly, in arrears, at a rate per annum equal to 4.00
percent. The Series M Preferred Stock is redeemable at the
Company’s option, in whole or in part, on or after April 15,
2026. The Series M Preferred Stock is redeemable at the
Company’s option, in whole, but not in part, prior to April 15,
2026 within 90 days following an official administrative or
judicial decision, amendment to, or change in the laws or
regulations that would not allow the Company to treat the full
liquidation value of the Series M Preferred Stock as Tier 1
capital for purposes of the capital adequacy guidelines of the
Federal Reserve Board.
During 2020, the Company issued depositary shares
representing an ownership interest in 20,000 shares of Series
L Non-Cumulative Perpetual Preferred Stock with a liquidation
preference of $25,000 per share (the “Series L Preferred
Stock”). The Series L Preferred Stock has no stated maturity
and will not be subject to any sinking fund or other obligation
of the Company. Dividends, if declared, will accrue and be
payable quarterly, in arrears, at a rate per annum equal to 3.75
percent. The Series L Preferred Stock is redeemable at the
Company’s option, in whole or in part, on or after January 15,
2026. The Series L Preferred Stock is redeemable at the
Company’s option, in whole, but not in part, prior to January
15, 2026 within 90 days following an official administrative or
judicial decision, amendment to, or change in the laws or
regulations that would not allow the Company to treat the full
liquidation value of the Series L Preferred Stock as Tier 1
capital for purposes of the capital adequacy guidelines of the
Federal Reserve Board.
During 2018, the Company issued depositary shares
representing an ownership interest in 23,000 shares of Series
K Non-Cumulative Perpetual Preferred Stock with a liquidation
preference of $25,000 per share (the “Series K Preferred
Stock”). The Series K Preferred Stock has no stated maturity
and will not be subject to any sinking fund or other obligation
of the Company. Dividends, if declared, will accrue and be
payable quarterly, in arrears, at a rate per annum equal to 5.50
percent. The Series K Preferred Stock is redeemable at the
Company’s option, in whole or in part.
During 2017, the Company issued depositary shares
representing an ownership interest in 40,000 shares of Series
J Non-Cumulative Perpetual Preferred Stock with a liquidation
preference of $25,000 per share (the “Series J Preferred
Stock”). The Series J Preferred Stock has no stated maturity
and will not be subject to any sinking fund or other obligation
of the Company. Dividends, if declared, will accrue and be
payable semiannually, in arrears, at a rate per annum equal to
5.300 percent from the date of issuance to, but excluding, April
15, 2027, and thereafter will accrue and be payable quarterly
at a floating rate per annum equal to 2.914 percent above
three-month CME Term SOFR plus a credit spread adjustment
of 0.26161 percent. The Series J Preferred Stock is
redeemable at the Company’s option, in whole or in part, on or
after April 15, 2027. The Series J Preferred Stock is
redeemable at the Company’s option, in whole, but not in part,
prior to April 15, 2027 within 90 days following an official
administrative or judicial decision, amendment to, or change in
the laws or regulations that would not allow the Company to
treat the full liquidation value of the Series J Preferred Stock
as Tier 1 capital for purposes of the capital adequacy
guidelines of the Federal Reserve Board.
During 2010, the Company issued depositary shares
representing an ownership interest in 5,746 shares of Series A
Non-Cumulative Perpetual Preferred Stock (the “Series A
Preferred Stock”) to investors, in exchange for their portion of
USB Capital IX Income Trust Securities. During 2011, the
Company issued depositary shares representing an ownership
interest in 6,764 shares of Series A Preferred Stock to USB
Capital IX, thereby settling the stock purchase contract
established between the Company and USB Capital IX as part
of the 2006 issuance of USB Capital IX Income Trust
Securities. The preferred shares were issued to USB Capital
IX for the purchase price specified in the stock forward
purchase contract. The Series A Preferred Stock has a
liquidation preference of $100,000 per share, no stated
maturity and will not be subject to any sinking fund or other
obligation of the Company. Dividends, if declared, will accrue
and be payable quarterly, in arrears, at a rate per annum equal
to the greater of 1.02 percent above three-month CME Term
SOFR plus a credit spread adjustment of 0.26161 percent, or
3.50 percent. The Series A Preferred Stock is redeemable at
the Company’s option, subject to prior approval by the Federal
Reserve Board.
During 2006, the Company issued depositary shares
representing an ownership interest in 40,000 shares of Series
B Non-Cumulative Perpetual Preferred Stock with a liquidation
preference of $25,000 per share (the “Series B Preferred
Stock”). The Series B Preferred Stock has no stated maturity
and will not be subject to any sinking fund or other obligation
of the Company. Dividends, if declared, will accrue and be
payable quarterly, in arrears, at a rate per annum equal to the
greater of 0.60 percent above three-month CME Term SOFR
plus a credit spread adjustment of 0.26161 percent, or 3.50
percent. The Series B Preferred Stock is redeemable at the
Company’s option, subject to the prior approval of the Federal
Reserve Board.
During 2023, 2022 and 2021, the Company repurchased
shares of its common stock under various authorizations
approved by its Board of Directors. The Company suspended
all common stock repurchases at the beginning of the third
quarter of 2021, except for those done exclusively in
connection with its stock-based compensation programs, due
to its acquisition of MUB. The Company will evaluate its future
share repurchases in connection with potential capital
requirements given proposed regulatory capital rules and the
related landscape.
The following table summarizes the Company’s common stock
repurchased in each of the last three years:
(Dollars and Shares in Millions)
Shares
Value
2023
2022
2021
1 $ 62
1
69
28 1,556
103
Shareholders’ equity is affected by transactions and valuations of asset and liability positions that require adjustments to
accumulated other comprehensive income (loss). The reconciliation of the transactions affecting accumulated other
comprehensive income (loss) included in shareholders’ equity for the years ended December 31, is as follows:
(Dollars in Millions)
2023
Balance at beginning of period
Changes in unrealized gains (losses)
Foreign currency translation adjustment(a)
Reclassification to earnings of realized (gains) losses
Applicable income taxes
Balance at end of period
2022
Balance at beginning of period
Changes in unrealized gains (losses)
Transfer of securities from available-for-sale to held-to-maturity
Foreign currency translation adjustment(a)
Reclassification to earnings of realized (gains) losses
Applicable income taxes
Balance at end of period
2021
Balance at beginning of period
Unrealized
Gains
(Losses) on
Investment
Securities
Transferred
From
Available-
For-Sale to
Held-To-
Maturity
Unrealized
Gains
(Losses) on
Investment
Securities
Available-
For-Sale
Unrealized
Gains
(Losses) on
Derivative
Hedges
Unrealized
Gains
(Losses) on
Retirement
Plans
Foreign
Currency
Translation
Total
$ (6,378) $ (3,933) $
(114) $
(939) $
(43) $ (11,407)
1,500
—
145
—
—
530
(418)
(134)
(252)
(262)
—
80
44
—
(7)
70
—
21
—
986
21
748
(6)
(444)
$ (5,151) $ (3,537) $
(242) $ (1,138) $
(28) $ (10,096)
$
540 $
(935) $
(85) $ (1,426) $
(37) $ (1,943)
(13,656)
—
(75)
526
4,413
(4,413)
—
(20)
—
400
2,345
1,015
—
—
36
10
—
—
128
(167)
—
—
(10)
—
4
(13,205)
—
(10)
544
3,207
$ (6,378) $ (3,933) $
(114) $
(939) $
(43) $ (11,407)
$ 2,417 $
— $
(189) $ (1,842) $
(64) $
322
Changes in unrealized gains and losses
(3,698)
—
125
400
Transfer of securities from available-for-sale to held-to-maturity
1,289
(1,289)
—
—
14
—
—
157
(35)
(141)
(8)
—
—
35
—
(3,173)
—
35
104
769
—
(103)
635
—
36
318
$
540 $
(935) $
(85) $ (1,426) $
(37) $ (1,943)
Foreign currency translation adjustment(a)
Reclassification to earnings of realized (gains) losses
Applicable income taxes
Balance at end of period
(a) Represents the impact of changes in foreign currency exchange rates on the Company’s investment in foreign operations and related hedges.
104 U.S. Bancorp 2023 Annual Report
Additional detail about the impact to net income for items reclassified out of accumulated other comprehensive income (loss) and
into earnings for the years ended December 31 is as follows:
(Dollars in Millions)
Unrealized gains (losses) on investment securities available-for-sale
Impact to Net Income
2023
2022
2021
Affected Line Item in the
Consolidated Statement of Income
Realized gains (losses) on sale of investment securities
$
(145) $
20 $
103 Securities gains (losses), net
Unrealized gains (losses) on investment securities transferred from
available-for-sale to held-to-maturity
Amortization of unrealized gains (losses)
Unrealized gains (losses) on derivative hedges
Realized gains (losses) on derivative hedges
Unrealized gains (losses) on retirement plans
Actuarial gains (losses) and prior service cost (credit) amortization
37
(108)
(5)
15
(26) Applicable income taxes
77 Net-of-tax
(530)
(400)
(36) Interest income
134
119
9 Applicable income taxes
(396)
(281)
(27) Net-of-tax
(80)
21
(59)
7
(2)
5
(36)
(14) Net interest income
9
4 Applicable income taxes
(27)
(10) Net-of-tax
(128)
(157) Other noninterest expense
33
40 Applicable income taxes
(95)
(117) Net-of-tax
Total impact to net income
$
(558) $
(388) $
(77)
Regulatory Capital The Company uses certain measures
defined by bank regulatory agencies to assess its capital. The
regulatory capital requirements effective for the Company
follow Basel III, with the Company being subject to calculating
its capital adequacy as a percentage of risk-weighted assets
under the standardized approach.
Tier 1 capital is considered core capital and includes
common shareholders’ equity adjusted for the aggregate
impact of certain items included in other comprehensive
income (loss) (“common equity tier 1 capital”), plus qualifying
preferred stock, trust preferred securities and noncontrolling
interests in consolidated subsidiaries subject to certain
limitations. Total risk-based capital includes Tier 1 capital and
other items such as subordinated debt and the allowance for
credit losses. Capital measures are stated as a percentage of
risk-weighted assets, which are measured based on their
perceived credit risks and include certain off-balance sheet
exposures, such as unfunded loan commitments, letters of
credit, and derivative contracts. Beginning in 2022, the
Company began to phase into its regulatory capital
requirements the cumulative deferred impact of its 2020
adoption of the accounting guidance related to the impairment
of financial instruments based on the CECL methodology plus
25 percent of its quarterly credit reserve increases over the
past two years. This cumulative deferred impact will be phased
into the Company’s regulatory capital through 2024,
culminating with a fully phased in regulatory capital calculation
beginning in 2025.
The Company is also subject to leverage ratio
requirements, which is defined as Tier 1 capital as a
percentage of adjusted average assets under the standardized
approach and Tier 1 capital as a percentage of total on- and
off-balance sheet leverage exposure under more risk-sensitive
advanced approaches.
105
The following table provides a summary of the regulatory capital requirements in effect, along with the actual components and
ratios for the Company and its bank subsidiaries, at December 31:
(Dollars in Millions)
Basel III Standardized Approach:
Common equity tier 1 capital
Tier 1 capital
Total risk-based capital
Risk-weighted assets
U.S. Bancorp
MUFG Union
Bank National
U.S. Bank National Association Association(a)
2023
2022
2023
2022
2022
$ 44,947
$ 41,560
$ 58,194
$ 46,681
$ 10,888
52,199
61,921
48,813
59,015
58,638
68,817
47,127
56,736
453,390
496,500
445,829
436,764
10,888
11,565
58,641
Common equity tier 1 capital as a percent of risk-weighted assets
9.9%
8.4%
13.1%
10.7%
18.6%
Tier 1 capital as a percent of risk-weighted assets
Total risk-based capital as a percent of risk-weighted assets
Tier 1 capital as a percent of adjusted quarterly average assets
(leverage ratio)
Tier 1 capital as a percent of total on- and off-balance sheet
leverage exposure (total leverage exposure ratio)
11.5
13.7
8.1
6.6
9.8
11.9
7.9
6.4
13.2
15.4
9.2
7.5
10.8
13.0
8.1
6.5
18.6
19.7
10.9
10.1
Bank Regulatory Capital Requirements
Common equity tier 1 capital as a percent of risk-weighted assets
Tier 1 capital as a percent of risk-weighted assets
Total risk-based capital as a percent of risk-weighted assets
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio)
Tier 1 capital as a percent of total on- and off-balance sheet leverage exposure (total leverage exposure ratio)(c)
Well-
Minimum(b) Capitalized
7.0%
6.5%
8.5
10.5
4.0
3.0
8.0
10.0
5.0
3.0
(a) MUFG Union Bank National Association merged into U.S. Bank National Association during 2023.
(b) The minimum common equity tier 1 capital, tier 1 capital and total risk-based capital ratio requirements reflect a stress capital buffer requirement of 2.5 percent. Banks and financial
services holding companies must maintain minimum capital levels, including a stress capital buffer requirement, to avoid limitations on capital distributions and certain discretionary
compensation payments.
(c) A minimum "well-capitalized" threshold does not apply to U.S. Bancorp for this ratio as it is not formally defined under applicable banking regulations for bank holding companies.
Noncontrolling interests principally represent third-party
investors’ interests in consolidated entities, including preferred
stock of consolidated subsidiaries. During 2006, the
Company’s banking subsidiary formed USB Realty Corp., a
real estate investment trust, for the purpose of issuing 5,000
shares of Fixed-to-Floating Rate Exchangeable Non-
cumulative Perpetual Series A Preferred Stock with a
liquidation preference of $100,000 per share (“Series A
Preferred Securities”) to third-party investors. Dividends on the
Series A Preferred Securities, if declared, will accrue and be
payable quarterly, in arrears, at a rate per annum equal to
1.147 percent above three-month CME Term SOFR plus a
credit spread adjustment of 0.26161 percent. Prior to July 1,
2023, dividends for the Series A Preferred Securities were
calculated based on LIBOR. On July 1, 2023, the interest rate
on these securities transitioned from a LIBOR-based rate to a
SOFR-based rate, including a credit spread adjustment,
pursuant to the Adjustable Interest Rate (LIBOR) Act. If USB
Realty Corp. has not declared a dividend on the Series A
Preferred Securities before the dividend payment date for any
dividend period, such dividend shall not be cumulative and
shall cease to accrue and be payable, and USB Realty Corp.
will have no obligation to pay dividends accrued for such
dividend period, whether or not dividends on the Series A
Preferred Securities are declared for any future dividend
period.
The Series A Preferred Securities will be redeemable, in
whole or in part, at the option of USB Realty Corp. on each
fifth anniversary after the dividend payment date occurring in
January 2012. Any redemption will be subject to the approval
of the Office of the Comptroller of the Currency (“OCC”).
During 2016, the Company purchased 500 shares of the
Series A Preferred Securities held by third-party investors. As
of December 31, 2023, 4,500 shares of the Series A Preferred
Securities remain outstanding.
106 U.S. Bancorp 2023 Annual Report
NOTE 16 Earnings Per Share
The components of earnings per share were:
Year Ended December 31
(Dollars and Shares in Millions, Except Per Share Data)
Net income attributable to U.S. Bancorp
Preferred dividends
Impact of preferred stock call and redemption
Earnings allocated to participating stock awards
Net income applicable to U.S. Bancorp common shareholders
Average common shares outstanding
Net effect of the exercise and assumed purchase of stock awards
Average diluted common shares outstanding
Earnings per common share
Diluted earnings per common share
2023
2022
2021
$ 5,429 $ 5,825 $ 7,963
(350)
(296)
(303)
—
(28)
—
(28)
(17) (a)
(38)
$ 5,051 $ 5,501 $ 7,605
1,543
1,489
1,489
—
1
1
1,543
1,490
1,490
$
$
3.27 $
3.69 $
5.11
3.27 $
3.69 $
5.10
(a) Represents stock issuance costs originally recorded in preferred stock upon the issuance of the Company’s Series I and Series F Preferred Stock that were reclassified to retained
earnings on the date the Company announced its intent to redeem the outstanding shares.
Options outstanding at December 31, 2023 and 2022, to purchase 3 million and 1 million common shares, respectively, were
not included in the computation of diluted earnings per share for the years ended December 31, 2023 and 2022, because they
were antidilutive.
NOTE 17 Employee Benefits
Employee Retirement Savings Plan The Company has a
defined contribution retirement savings plan that covers
substantially all its employees. Qualified employees are
allowed to contribute up to 75 percent of their annual
compensation, subject to Internal Revenue Service limits,
through salary deductions under Section 401(k) of the Internal
Revenue Code. Employee contributions are invested at their
direction among a variety of investment alternatives. Employee
contributions are 100 percent matched by the Company, up to
four percent of each employee’s eligible annual compensation.
The Company’s matching contribution vests immediately and
is invested in the same manner as each employee’s future
contribution elections. Total expense for the Company’s
matching contributions was $254 million, $211 million and
$213 million in 2023, 2022 and 2021, respectively.
Pension and Postretirement Welfare Plans The Company
has tax qualified noncontributory defined benefit pension
plans, nonqualified pension plans and postretirement welfare
plans.
Pension Plans The funded tax qualified noncontributory
defined benefit pension plans provide benefits to substantially
all the Company’s employees. Participants receive annual
cash balance pay credits based on eligible pay multiplied by a
percentage determined by their age and/or years of service, as
defined by the plan documents. Participants also receive an
annual interest credit. Generally, employees become vested
upon completing three years of vesting service. The Company
did not contribute to its qualified pension plans in 2023 and
2022 and does not expect to contribute to the plans in 2024.
The Company also maintains two non-qualified plans that
are unfunded and provide benefits to certain employees. The
assumptions used in computing the accumulated benefit
obligation, the projected benefit obligation and net pension
expense are substantially consistent with those assumptions
used for the funded qualified plans. In 2024, the Company
expects to contribute approximately $27 million to its non-
qualified pension plans, which equals the 2024 expected
benefit payments.
Postretirement Welfare Plans In addition to providing
pension benefits, the Company has funded and unfunded
postretirement welfare plans available to certain eligible
participants based on their hire or retirement date. The plans
are closed to new participants. In 2024, the Company does not
expect to contribute to its postretirement welfare plans.
107
The following table summarizes the changes in benefit obligations and plan assets for the years ended December 31, and the
funded status and amounts recognized in the Consolidated Balance Sheet at December 31 for the pension plans:
(Dollars in Millions)
Change In Projected Benefit Obligation(a)
Benefit obligation at beginning of measurement period
2023
2022
$
6,617 $
8,030
Service cost
Interest cost
Plan amendments
Actuarial (gain) loss
Lump sum settlements
Benefit payments
Acquisitions
Benefit obligation at end of measurement period(b)
Change In Fair Value Of Plan Assets
Fair value at beginning of measurement period
Actual return on plan assets
Employer contributions
Lump sum settlements
Benefit payments
Acquisitions(c)
Fair value at end of measurement period
Funded Status
Components Of The Consolidated Balance Sheet
Noncurrent benefit asset
Current benefit liability
Noncurrent benefit liability
Recognized amount
Accumulated Other Comprehensive Income (Loss), Pretax
Net actuarial loss
Net prior service credit
Recognized amount
223
370
(23)
398
(94)
(213)
—
280
248
2
(2,250)
(76)
(195)
578
7,278 $
6,617
7,375 $
8,113
658
28
(94)
(213)
25
(1,245)
28
(76)
(195)
750
7,779 $
7,375
501 $
758
1,072 $
1,286
(26)
(545)
501 $
(25)
(503)
758
(1,607) $
(1,326)
34
12
(1,573) $
(1,314)
$
$
$
$
$
$
$
$
Note: At December 31, 2023 and 2022, the postretirement welfare plans projected benefit obligation was $49 million and $51 million, respectively, the fair value of plan assets was
$45 million and $42 million, respectively, and the amount recognized in accumulated other comprehensive income (loss), pretax was $52 million and $62 million, respectively.
(a) The increase in the projected benefit obligation for 2023 was primarily due to a lower discount rate, and the decrease for 2022 was primarily due to a higher discount rate partially
offset by the acquired MUB benefit obligations.
(b) At December 31, 2023 and 2022, the accumulated benefit obligation for all pension plans was $6.8 billion and $5.0 billion, respectively.
(c) The increase in plan assets was related to the 2022 MUB acquisition.
The following table provides information for pension plans with benefit obligations in excess of plan assets at December 31:
(Dollars in Millions)
Plans with Projected Benefit Obligations in Excess of Plan Assets
Projected benefit obligation
Fair value of plan assets
Plans with Accumulated Benefit Obligations in Excess of Plan Assets
Accumulated benefit obligation
Fair value of plan assets
2023
2022
571 $
—
530 $
—
528
—
487
—
$
$
108 U.S. Bancorp 2023 Annual Report
The following table sets forth the components of net periodic pension cost and other amounts recognized in accumulated other
comprehensive income (loss) for the years ended December 31 for the pension plans:
(Dollars in Millions)
Components Of Net Periodic Pension Cost
Service cost
Interest cost
Expected return on plan assets
Prior service credit amortization
Actuarial loss amortization
Net periodic pension cost
Other Changes In Plan Assets And Benefit Obligations Recognized In Other
Comprehensive Income (Loss)
Net actuarial (loss) gain arising during the year
Net actuarial loss amortized during the year
Net prior service credit (cost) arising during the year
Net prior service credit amortized during the year
Total recognized in other comprehensive income (loss)
Total recognized in net periodic pension cost and other comprehensive income (loss)
2023
2022
2021
$
223 $
280 $
370
(546)
(1)
5
248
(481)
(2)
140
$
51 $
185 $
$
(286) $
523 $
5
23
(1)
$
$
(259) $
(310) $
140
(2)
(2)
659 $
474 $
265
219
(450)
(2)
169
201
398
169
—
(2)
565
364
Note: The net periodic benefit for the postretirement welfare plans was $10 million, $9 million and $9 million for the years end December 31, 2023, 2022 and 2021, respectively. The
total of other amounts recognized as other comprehensive loss was $10 million, $5 million and $8 million for the years ended December 31, 2023, 2022 and 2021, respectively.
The following table sets forth weighted-average assumptions used to determine the pension plans projected benefit obligations at
December 31:
Discount rate
Cash balance interest crediting rate
Rate of compensation increase(a)
(a) Determined on an active liability-weighted basis.
2023
5.12%
3.04
3.72
2022
5.55%
3.36
4.13
The following table sets forth weighted-average assumptions used to determine net periodic pension cost for the years ended
December 31:
Discount rate
Cash balance interest crediting rate
Expected return on plan assets(a)
Rate of compensation increase(b)
2023
2022
2021
5.55%
3.00%
2.75%
3.36
6.75
4.13
3.00
6.50
3.56
3.00
6.50
3.56
(a) With the help of an independent pension consultant, the Company considers several sources when developing its expected long-term rates of return on plan assets assumptions,
including, but not limited to, past returns and estimates of future returns given the plans’ asset allocation, economic conditions, and peer group long-term rate of return information.
The Company determines its expected long-term rates of return reflecting current economic conditions and plan assets.
(b) Determined on an active liability-weighted basis.
109
Investment Policies and Asset Allocation In establishing
its investment policies and asset allocation strategies, the
Company considers expected returns and the volatility
associated with different strategies. An independent
consultant performs modeling that projects numerous
outcomes using a broad range of possible scenarios,
including a mix of possible rates of inflation and economic
growth. Starting with current economic information, the
model bases its projections on past relationships between
inflation, fixed income rates and equity returns when these
types of economic conditions have existed over the previous
30 years, both in the United States and in foreign countries.
Estimated future returns and other actuarially determined
adjustments are also considered in calculating the estimated
return on assets.
Generally, based on historical performance of the various
investment asset classes, investments in equities have
outperformed other investment classes but are subject to
higher volatility. In an effort to minimize volatility, while
recognizing the long-term up-side potential of investing in
equities, the Committee has determined that a target asset
allocation of 35 percent long duration bonds, 30 percent
global equities, 10 percent real assets, 10 percent private
equity funds, 5 percent domestic mid-small cap equities, 5
percent emerging markets equities, and 5 percent hedge
funds is appropriate.
At December 31, 2023 and 2022, plan assets included
an asset management arrangement with a related party
totaling $62.6 million and $87.8 million, respectively.
In accordance with authoritative accounting guidance,
the Company groups plan assets into a three-level hierarchy
for valuation techniques used to measure their fair value
based on whether the valuation inputs are observable or
unobservable. Refer to Note 22 for further discussion on
these levels.
The assets of the qualified pension plans include
investments in equity and U.S. Treasury securities whose
fair values are determined based on quoted prices in active
markets and are classified within Level 1 of the fair value
hierarchy. The qualified pension plans also invest in U.S.
agency, corporate and municipal debt securities, which are
all valued based on observable market prices or data by
third party pricing services, and mutual funds which are
valued based on quoted net asset values provided by the
trustee of the fund; these assets are classified as Level 2.
Additionally, the qualified pension plans invest in certain
assets that are valued based on net asset values as a
practical expedient, including investments in collective
investment funds, hedge funds, and private equity funds; the
net asset values are provided by the fund trustee or
administrator and are not classified in the fair value
hierarchy.
The following table summarizes qualified pension plans investment assets measured at fair value at December 31:
(Dollars in Millions)
Cash and cash equivalents
Debt securities
Mutual funds
Debt securities
Emerging markets equity securities
Other
Plan investment assets not classified in fair value
hierarchy(a):
Collective investment funds
Domestic equity securities
Domestic mid-small cap equity securities
International equity securities
Domestic real estate securities
Fixed income
Real estate funds(b)
Hedge funds(c)
Private equity funds(d)
Total plan investment assets at fair value
2023
2022
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
$
68 $
— $
—
$
68
$
202
$ — $
—
$
202
—
—
—
—
961
855
—
1,816
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
382
156
—
$
68 $ — $ —
68 $ 1,163 $ 1,393 $
—
—
6
6
382
156
6
2,562
1,546
406
981
142
2,295
746
412
1,183
$ 7,779
1,494
313
620
144
—
763
451
1,028
$ 7,375
(a) These investments are valued based on net asset value per share as a practical expedient; fair values are provided to reconcile to total investment assets of the plans at fair value.
(b) This category consists of several investment strategies diversified across several real estate managers.
(c) This category consists of several investment strategies diversified across several hedge fund managers.
(d) This category consists of several investment strategies diversified across several private equity fund managers.
110 U.S. Bancorp 2023 Annual Report
The following table summarizes the changes in fair value for qualified pension plans investment assets measured at fair value
using significant unobservable inputs (Level 3) for the years ended December 31:
(Dollars in Millions)
Balance at beginning of period
Unrealized gains (losses) relating to assets still held at end of year
Purchases, sales, and settlements, net
Balance at end of period
2023
Other
2022
Other
2021
Other
$
6 $
4 $
—
(6)
2
—
$ — $
6 $
6
(2)
—
4
The following benefit payments are expected to be paid from the pension plans for the years ended December 31:
(Dollars in Millions)
2024
2025
2026
2027
2028
2029-2033
$
332
383
391
416
430
2,439
111
NOTE 18 Stock-Based Compensation
As part of its employee and director compensation
programs, the Company currently may grant certain stock
awards under the provisions of its stock incentive plan. The
plan provides for grants of options to purchase shares of
common stock at a fixed price equal to the fair value of the
underlying stock at the date of grant. Option grants are
generally exercisable up to ten years from the date of grant.
In addition, the plan provides for grants of shares of
common stock or stock units that are subject to restriction
on transfer prior to vesting. Most stock and unit awards vest
Stock Option Awards
over three to five years and are subject to forfeiture if certain
vesting requirements are not met. Stock incentive plans of
acquired companies are generally terminated at the merger
closing dates. Participants under such plans receive the
Company’s common stock, options to buy the Company’s
common stock, or long term cash incentives, based on the
conversion terms of the various merger agreements. At
December 31, 2023, there were 15 million shares (subject to
adjustment for forfeitures) available for grant under the
Company’s stock incentive plan.
The following is a summary of stock options outstanding and exercised under prior and existing stock incentive plans of the
Company:
Year Ended December 31
2023
Number outstanding at beginning of period
Exercised
Cancelled(a)
Number outstanding at end of period(b)
Exercisable at end of period
2022
Number outstanding at beginning of period
Exercised
Cancelled(a)
Number outstanding at end of period(b)
Exercisable at end of period
2021
Number outstanding at beginning of period
Exercised
Cancelled(a)
Number outstanding at end of period(b)
Exercisable at end of period
Stock
Options/
Shares
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value
(in millions)
3,253,090 $
(399,329)
(15,476)
2,838,285 $
2,838,285 $
3,890,131 $
(624,729)
(12,312)
3,253,090 $
3,253,090 $
5,180,391 $
(1,281,646)
(8,614)
3,890,131 $
3,890,131 $
44.42
38.15
47.88
45.28
45.28
42.58
32.87
50.97
44.42
44.42
40.38
33.66
48.20
42.58
42.58
2.0 $
2.0 $
2.7 $
2.7 $
—
—
—
—
3.3 $
3.3 $
53
53
Note: The Company did not grant any stock option awards during 2023, 2022, and 2021.
(a) Options cancelled include both non-vested (i.e., forfeitures) and vested options.
(b) Outstanding options include stock-based awards that may be forfeited in future periods. The impact of the estimated forfeitures is reflected in compensation expense.
Stock-based compensation expense is based on the
estimated fair value of the award at the date of grant or
modification. The fair value of each option award is
estimated on the date of grant using the Black-Scholes
option-pricing model, requiring the use of subjective
assumptions. Because employee stock options have
characteristics that differ from those of traded options,
including vesting provisions and trading limitations that
impact their liquidity, the determined value used to measure
compensation expense may vary from the actual fair value
of the employee stock options. To satisfy option exercises,
the Company predominantly uses treasury stock.
112 U.S. Bancorp 2023 Annual Report
The following summarizes certain stock option activity of the Company:
Year Ended December 31 (Dollars in Millions)
Fair value of options vested
Intrinsic value of options exercised
Cash received from options exercised
Tax benefit realized from options exercised
2023
2022
2021
$ — $ — $
2
15
1
15
21
4
3
27
43
7
Additional information regarding stock options outstanding as of December 31, 2023, is as follows:
Range of Exercise Prices
$35.01—$40.00
$40.01—$45.00
$45.01—$50.00
$50.01—$55.01
Outstanding Options
Exercisable Options
Weighted-
Average
Remaining
Contractual
Life (Years)
Weighted-
Average
Exercise
Price
Shares
Weighted-
Average
Exercise
Price
Shares
1,008,046
2.1 $
39.49 1,008,046 $
39.49
988,880
—
841,359
0.8
—
3.1
42.95
988,880
42.95
—
—
—
54.96
841,359
54.96
2,838,285
2.0 $
45.28 2,838,285 $
45.28
Restricted Stock and Unit Awards
A summary of the status of the Company’s restricted shares of stock and unit awards is presented below:
Year Ended December 31
Outstanding at beginning of period
Granted
Vested
Cancelled
2023
2022
2021
Weighted-
Average Grant-
Date Fair
Value
Shares
Weighted-
Average Grant-
Date Fair
Value
Shares
Weighted-
Average Grant-
Date Fair
Value
Shares
6,880,826 $
52.59
6,812,753 $
51.04
6,343,313 $
5,565,634
45.87
4,109,793
55.62
4,512,995
(3,872,874)
52.05
(3,690,666)
52.88
(3,793,978)
(257,015)
50.00
(351,054)
54.95
(249,577)
51.38
52.54
53.27
52.83
51.04
Outstanding at end of period
8,316,571 $
48.42
6,880,826 $
52.59
6,812,753 $
The total fair value of shares vested was $180 million,
$198 million and $191 million for the years ended
December 31, 2023, 2022 and 2021, respectively. Stock-
based compensation expense was $224 million, $202
million and $207 million for the years ended December 31,
2023, 2022 and 2021, respectively. On an after-tax basis,
stock-based compensation was $167 million, $152 million
and $155 million for the years ended December 31, 2023,
2022 and 2021, respectively. As of December 31, 2023,
there was $175 million of total unrecognized compensation
cost related to nonvested share-based arrangements
granted under the plans. That cost is expected to be
recognized over a weighted-average period of 1.8 years as
compensation expense.
113
NOTE 19
Income Taxes
The components of income tax expense were:
Year Ended December 31 (Dollars in Millions)
2023
2022
2021
Federal
Current
Deferred
Federal income tax
State
Current
Deferred
State income tax
Total income tax provision
$ 1,434 $
1,366 $
1,203
(326)
(108)
469
1,108
1,258
1,672
482
401
(183)
(196)
299
205
398
111
509
$
1,407 $
1,463 $
2,181
A reconciliation of expected income tax expense at the federal statutory rate of 21 percent to the Company’s applicable income tax
expense follows:
Year Ended December 31 (Dollars in Millions)
Tax at statutory rate
State income tax, at statutory rates, net of federal tax benefit
Tax effect of
Tax credits and benefits, net of related expenses
Tax-exempt income
Revaluation of tax related assets and liabilities(a)
Nondeductible legal and regulatory expenses
Other items
Applicable income taxes
2023
2022
2021
$ 1,442 $ 1,533 $ 2,135
322
305
439
(272)
(142)
15
76
(34)
(273)
(121)
(79)
37
61
(331)
(114)
—
24
28
$ 1,407 $ 1,463 $ 2,181
(a) The 2022 acquisition of MUB resulted in an increase in the Company’s state effective tax rate, requiring the Company to revalue its state deferred tax assets and liabilities. As a
result of this revaluation, the Company recorded an estimated net tax benefit of $79 million during 2022.
The tax effects of fair value adjustments on securities
available-for-sale, derivative instruments in cash flow
hedges, foreign currency translation adjustments, and
pension and post-retirement plans are recorded directly to
shareholders’ equity as part of other comprehensive income
(loss).
In preparing its tax returns, the Company is required to
interpret complex tax laws and regulations and utilize
income and cost allocation methods to determine its taxable
income. On an ongoing basis, the Company is subject to
examinations by federal, state, local and foreign taxing
authorities that may give rise to differing interpretations of
these complex laws, regulations and methods. Due to the
nature of the examination process, it generally takes years
before these examinations are completed and matters are
resolved. Federal tax examinations for all years ending
through December 31, 2016 are completed and resolved.
The Company’s tax returns for the years ended December
31, 2017 through December 31, 2020 are under
examination by the Internal Revenue Service. The years
open to examination by foreign, state and local government
authorities vary by jurisdiction.
A reconciliation of the changes in the federal, state and foreign uncertain tax position balances are summarized as follows:
Year Ended December 31 (Dollars in Millions)
Balance at beginning of period
Additions for tax positions taken in prior years
Additions for tax positions taken in the current year
Exam resolutions
Statute expirations
Balance at end of period
114 U.S. Bancorp 2023 Annual Report
2023
2022
$
513 $
487 $
141
3
(302)
(5)
35
3
(8)
(4)
2021
474
14
7
(1)
(7)
$
350 $
513 $
487
The total amount of uncertain tax positions that, if
recognized, would impact the effective income tax rate as of
December 31, 2023, 2022 and 2021, were $276 million,
$294 million and $285 million, respectively. The Company
classifies interest and penalties related to uncertain tax
positions as a component of income tax expense. At
December 31, 2023, the Company’s uncertain tax position
balance included $40 million of accrued interest and
penalties. During the years ended December 31, 2023,
2022 and 2021 the Company recorded approximately $(11)
million, $7 million and $5 million, respectively, in interest and
penalties on uncertain tax positions.
Deferred income tax assets and liabilities reflect the
tax effect of estimated temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for the same
items for income tax reporting purposes.
The significant components of the Company’s net deferred tax asset (liability) follows:
At December 31 (Dollars in Millions)
Deferred Tax Assets
Securities available-for-sale and financial instruments
Federal, state and foreign net operating loss, credit carryforwards and other carryforwards
Allowance for credit losses
Loans
Accrued expenses
Obligation for operating leases
Partnerships and other investment assets
Stock compensation
Other deferred tax assets, net
Gross deferred tax assets
Deferred Tax Liabilities
Leasing activities
Goodwill and other intangible assets
Mortgage servicing rights
Right of use operating leases
Pension and postretirement benefits
Fixed assets
Other deferred tax liabilities, net
Gross deferred tax liabilities
Valuation allowance
Net Deferred Tax Asset
2023
2022
$ 3,231 $ 3,992
2,836
2,051
1,013
838
348
271
87
370
2,677
1,980
1,287
618
368
112
81
501
11,045
11,616
(1,455)
(1,813)
(1,450)
(1,575)
(758)
(301)
(115)
(44)
(168)
(815)
(325)
(172)
(125)
(234)
(4,291)
(5,059)
(364)
(263)
$ 6,390 $ 6,294
The Company has approximately $2.7 billion of federal,
At December 31, 2023, retained earnings included
state and foreign net operating loss carryforwards which
expire at various times beginning in 2024. A substantial
portion of these carryforwards relate to state-only net
operating losses, for which the related deferred tax asset is
subject to a full valuation allowance as the carryforwards are
not expected to be realized within the carryforward period.
Management has determined it is more likely than not the
other net deferred tax assets could be realized through carry
back to taxable income in prior years, future reversals of
existing taxable temporary differences and future taxable
income.
In addition, the Company has $1.3 billion of federal
credit carryforwards which expire at various times through
2043 which are not subject to a valuation allowance as
management believes that it is more likely than not that the
credits will be utilized within the carryforward period.
approximately $102 million of base year reserves of
acquired thrift institutions, for which no deferred federal
income tax liability has been recognized. These base year
reserves would be recaptured if certain subsidiaries of the
Company cease to qualify as a bank for federal income tax
purposes. The base year reserves also remain subject to
income tax penalty provisions that, in general, require
recapture upon certain stock redemptions of, and excess
distributions to, stockholders.
115
NOTE 20 Derivative Instruments
In the ordinary course of business, the Company enters into
derivative transactions to manage various risks and to
accommodate the business requirements of its customers.
The Company recognizes all derivatives on the Consolidated
Balance Sheet at fair value in other assets or in other
liabilities. On the date the Company enters into a derivative
contract, the derivative is designated as either a fair value
hedge, cash flow hedge, net investment hedge, or a
designation is not made as it is a customer-related transaction,
an economic hedge for asset/liability risk management
purposes or another stand-alone derivative created through
the Company’s operations (“free-standing derivative”). When a
derivative is designated as a fair value, cash flow or net
investment hedge, the Company performs an assessment, at
inception and, at a minimum, quarterly thereafter, to determine
the effectiveness of the derivative in offsetting changes in the
value or cash flows of the hedged item(s).
Fair Value Hedges These derivatives are interest rate swaps
the Company uses to hedge the change in fair value related to
interest rate changes of its underlying available-for-sale
investment securities and fixed-rate debt. Changes in the fair
value of derivatives designated as fair value hedges, and
changes in the fair value of the hedged items, are recorded in
earnings.
Cash Flow Hedges These derivatives are interest rate swaps
the Company uses to hedge the forecasted cash flows from its
underlying variable-rate loans and debt. Changes in the fair
value of derivatives designated as cash flow hedges are
recorded in other comprehensive income (loss) until the cash
flows of the hedged items are realized. If a derivative
designated as a cash flow hedge is terminated or ceases to be
highly effective, the gain or loss in other comprehensive
income (loss) is amortized to earnings over the period the
forecasted hedged transactions impact earnings. If a hedged
forecasted transaction is no longer probable, hedge
accounting is ceased and any gain or loss included in other
comprehensive income (loss) is reported in earnings
immediately, unless the forecasted transaction is at least
reasonably possible of occurring, whereby the amounts remain
within other comprehensive income (loss). At December 31,
2023, the Company had $242 million (net-of-tax) of realized
and unrealized losses on derivatives classified as cash flow
hedges recorded in other comprehensive income (loss),
compared with $114 million (net-of-tax) of realized and
unrealized losses at December 31, 2022. The estimated
amount to be reclassified from other comprehensive income
(loss) into earnings during the next 12 months is a loss of
$78 million (net-of-tax). All cash flow hedges were highly
effective for the twelve months ended December 31, 2023.
Net Investment Hedges The Company uses forward
commitments to sell specified amounts of certain foreign
currencies, and non-derivative debt instruments, to hedge the
volatility of its net investment in foreign operations driven by
fluctuations in foreign currency exchange rates. The carrying
amount of non-derivative debt instruments designated as net
investment hedges was $1.3 billion at December 31, 2023 and
December 31, 2022.
Other Derivative Positions The Company enters into free-
standing derivatives to mitigate interest rate risk and for other
risk management purposes. These derivatives include forward
commitments to sell TBAs and other commitments to sell
residential mortgage loans, which are used to economically
hedge the interest rate risk related to MLHFS and unfunded
mortgage loan commitments. The Company also enters into
interest rate swaps, swaptions, forward commitments to buy
TBAs, U.S. Treasury and Eurodollar futures and options on
U.S. Treasury futures to economically hedge the change in the
fair value of the Company’s MSRs. The Company enters into
foreign currency forwards to economically hedge
remeasurement gains and losses the Company recognizes on
foreign currency denominated assets and liabilities. The
Company also enters into interest rate swaps as economic
hedges of fair value option elected deposits. In addition, the
Company acts as a seller and buyer of interest rate, foreign
exchange and commodity contracts for its customers. The
Company mitigates the market and liquidity risk associated
with these customer derivatives by entering into similar
offsetting positions with broker-dealers, or on a portfolio basis
by entering into other derivative or non-derivative financial
instruments that partially or fully offset the exposure to
earnings from these customer-related positions. The
Company’s customer derivatives and related hedges are
monitored and reviewed by the Company’s Market Risk
Committee, which establishes policies for market risk
management, including exposure limits for each portfolio. The
Company also has derivative contracts that are created
through its operations, including certain unfunded mortgage
loan commitments and swap agreements related to the sale of
a portion of its Class B common and preferred shares of Visa
Inc. Refer to Note 23 for further information on these swap
agreements. The Company uses credit derivatives to
economically hedge the credit risk on its derivative positions
and loan portfolios.
116 U.S. Bancorp 2023 Annual Report
The following table summarizes the asset and liability management derivative positions of the Company at December 31:
(Dollars in Millions)
Fair value hedges
Interest rate contracts
Receive fixed/pay floating swaps
Pay fixed/receive floating swaps
Cash flow hedges
Interest rate contracts
Receive fixed/pay floating swaps
Net investment hedges
Foreign exchange forward contracts
Other economic hedges
Interest rate contracts
Futures and forwards
Buy
Sell
Options
Purchased
Written
Receive fixed/pay floating swaps
Pay fixed/receive floating swaps
Foreign exchange forward contracts
Equity contracts
Credit contracts
Other (a)
Total
2023
Fair Value
2022
Fair Value
Notional
Value
Assets
Liabilities
Notional
Value
Assets
Liabilities
$ 12,100 $
— $
16 $ 17,400 $
— $
24,139
—
—
5,542
—
18,400
854
5,006
4,501
6,085
3,696
7,029
3,801
734
227
2,620
2,136
—
—
29
7
237
14
9
—
2
2
1
11
—
—
10
20
—
14,300
10
778
5
34
—
75
3
—
5
—
—
93
3,546
7,522
11,434
346
7,849
9,215
9,616
962
361
330
1,908
7
—
—
2
—
—
11
9
—
—
—
18
38
—
148
3
—
6
10
—
190
422
$ 91,328 $
312 $
241 $ 90,763 $
396 $
(a) Includes derivative liability swap agreements related to the sale of a portion of the Company’s Class B common and preferred shares of Visa Inc. The Visa swap agreements had a
total notional value and fair value of $2.0 billion and $91 million at December 31, 2023, respectively, compared to $1.8 billion and $190 million at December 31, 2022, respectively.
In addition, includes short-term underwriting purchase and sale commitments with total notional values of $28 million at December 31, 2023, and $13 million at December 31, 2022.
117
The following table summarizes the customer-related derivative positions of the Company at December 31:
(Dollars in Millions)
Interest rate contracts
Receive fixed/pay floating swaps
Pay fixed/receive floating swaps
Other(a)
Options
Purchased
Written
Futures
Buy
Sell
Foreign exchange rate contracts
Forwards, spots and swaps
Options
Purchased
Written
Commodity contracts
Swaps
Options
Purchased
Written
Credit contracts
Total
2023
Fair Value
2022
Fair Value
Notional
Value
Assets
Liabilities
Notional
Value
Assets
Liabilities
$ 363,375 $
791 $
4,395 $ 301,690 $
309 $
5,689
330,539
1,817
280
316,133
2,323
82,209
17
51
40,261
3
206
16
102,423
1,026
18
103,489
1,794
5
97,690
20
1,087
99,923
6
1,779
—
—
—
—
—
—
3,623
2,376
—
8
4
—
121,119
2,252
1,942
134,666
3,010
2,548
1,532
1,532
28
—
—
28
954
954
2,498
116
110
1,936
1,936
13,053
151
—
1
—
151
6
10,765
—
—
—
22
—
—
—
—
1
—
22
—
—
—
8
$1,119,842 $
6,219 $
8,068 $1,014,834 $
7,476 $ 10,277
(a) Primarily represents floating rate interest rate swaps that pay based on differentials between specified interest rate indexes.
The table below shows the effective portion of the gains (losses) recognized in other comprehensive income (loss) and the gains
(losses) reclassified from other comprehensive income (loss) into earnings (net-of-tax) for the years ended December 31:
(Dollars in Millions)
Asset and Liability Management Positions
Cash flow hedges
Interest rate contracts
Net investment hedges
Foreign exchange forward contracts
Non-derivative debt instruments
Gains (Losses) Recognized Gains (Losses) Reclassified
from Other Comprehensive
Income (Loss) into Earnings
in Other Comprehensive
Income (Loss)
2023
2022
2021
2023
2022
2021
$ (187) $
(56) $ 94 $
(59) $
(27) $
(10)
(11)
(33)
42
59
19
84
—
—
—
—
—
—
Note: The Company does not exclude components from effectiveness testing for cash flow and net investment hedges.
118 U.S. Bancorp 2023 Annual Report
The table below shows the effect of fair value and cash flow hedge accounting on the Consolidated Statement of Income for the
years ended December 31:
(Dollars in Millions)
2023
2022
2021
2023
2022
2021
Interest Income
Interest Expense
Total amount of income and expense line items presented in the
Consolidated Statement of Income in which the effects of fair value
or cash flow hedges are recorded
Asset and Liability Management Positions
Fair value hedges
Interest rate contract derivatives
Hedged items
Cash flow hedges
$ 30,007 $ 17,945 $ 13,487 $ 12,611 $ 3,217 $
993
(430)
427
138
(139)
17
(19)
(458)
461
482
232
(486)
(232)
Interest rate contract derivatives
(52)
—
—
28
—
14
Note: The Company does not exclude components from effectiveness testing for fair value and cash flow hedges. The Company reclassified losses of $28 million, $36 million and $53
million into earnings during the years ended December 31, 2023, 2022 and 2021, respectively, as a result of realized cash flows on discontinued cash flow hedges. No amounts were
reclassified into earnings on discontinued cash flow hedges because it is probable the original hedged forecasted cash flows will not occur.
The table below shows cumulative hedging adjustments and the carrying amount of assets and liabilities designated in fair value hedges at
December 31:
(Dollars in Millions)
Line Item in the Consolidated Balance Sheet
Available-for-sale investment securities(b)
Long-term debt
Carrying Amount of
the Hedged Assets Cumulative Hedging
and Liabilities
Adjustment (a)
2023
2022
2023
2022
$11,795 $ 4,937 $
(448) $
(552)
11,987 17,190
(148)
(142)
(a) The cumulative hedging adjustment related to discontinued hedging relationships on available-for-sale investment securities and long-term debt was $(379) million and $(68)
million, respectively, at December 31, 2023, compared with $(392) million and $399 million at December 31, 2022, respectively.
(b) Includes amounts related to available-for-sale investment securities currently designated as the hedged item in a fair value hedge using the portfolio layer method. At December
31, 2023, the amortized cost of the closed portfolios used in these hedging relationships was $15.6 billion, of which $9.1 billion was designated as hedged. At December 31, 2023,
the cumulative amount of basis adjustments associated with these hedging relationships was $(335) million.
119
The table below shows the gains (losses) recognized in earnings for other economic hedges and the customer-related positions for the
years ended December 31:
(Dollars in Millions)
Asset and Liability Management Positions
Location of Gains (Losses)
Recognized in Earnings
2023
2022
2021
Other economic hedges
Interest rate contracts
Futures and forwards
Purchased and written options
Swaps
Foreign exchange forward contracts
Equity contracts
Other
Customer-Related Positions
Interest rate contracts
Swaps
Purchased and written options
Futures
Foreign exchange rate contracts
Forwards, spots and swaps
Purchased and written options
Commodity contracts
Swaps
Credit contracts
Derivatives are subject to credit risk associated with
counterparties to the derivative contracts. The Company
measures that credit risk using a credit valuation adjustment
and includes it within the fair value of the derivative. The
Company manages counterparty credit risk through
diversification of its derivative positions among various
counterparties, by entering into derivative positions that are
centrally cleared through clearinghouses, by entering into
master netting arrangements and, where possible, by
requiring collateral arrangements. A master netting
arrangement allows two counterparties, who have multiple
derivative contracts with each other, the ability to net settle
amounts under all contracts, including any related collateral,
through a single payment and in a single currency.
Collateral arrangements generally require the counterparty
to deliver collateral (typically cash or U.S. Treasury and
agency securities) equal to the Company’s net derivative
receivable, subject to minimum transfer and credit rating
requirements.
Mortgage banking revenue $
71 $
407 $
511
Mortgage banking revenue
89
1
527
Mortgage banking revenue/Other
noninterest income/Interest expense
(19)
(1,010)
(197)
Other noninterest income
Compensation expense
Other noninterest income
(7)
(8)
1
(1)
(8)
(181)
1
7
5
Commercial products revenue
185
Commercial products revenue
Commercial products revenue
45
(1)
98
20
30
Commercial products revenue
195
100
Commercial products revenue
Commercial products revenue
Commercial products revenue
1
6
1
1
—
20
110
(5)
3
93
1
—
(7)
The Company’s collateral arrangements are
predominately bilateral and, therefore, contain provisions
that require collateralization of the Company’s net liability
derivative positions. Required collateral coverage is based
on net liability thresholds and may be contingent upon the
Company’s credit rating from two of the nationally
recognized statistical rating organizations. If the Company’s
credit rating were to fall below credit ratings thresholds
established in the collateral arrangements, the
counterparties to the derivatives could request immediate
additional collateral coverage up to and including full
collateral coverage for derivatives in a net liability position.
The aggregate fair value of all derivatives under collateral
arrangements that were in a net liability position at
December 31, 2023, was $2.0 billion. At December 31,
2023, the Company had $1.7 billion of cash posted as
collateral against this net liability position.
120 U.S. Bancorp 2023 Annual Report
NOTE 21 Netting Arrangements for Certain Financial Instruments and Securities
Financing Activities
The Company’s derivative portfolio consists of bilateral over-
the-counter trades, certain interest rate derivatives and
credit contracts required to be centrally cleared through
clearinghouses per current regulations, and exchange-
traded positions which may include U.S. Treasury and
Eurodollar futures or options on U.S. Treasury futures. Of
the Company’s $1.2 trillion total notional amount of
derivative positions at December 31, 2023, $548.9 billion
related to bilateral over-the-counter trades, $660.4 billion
related to those centrally cleared through clearinghouses
and $1.9 billion related to those that were exchange-traded.
The Company’s derivative contracts typically include
offsetting rights (referred to as netting arrangements), and
depending on expected volume, credit risk, and
counterparty preference, collateral maintenance may be
required. For all derivatives under collateral support
arrangements, fair value is determined daily and, depending
on the collateral maintenance requirements, the Company
and a counterparty may receive or deliver collateral, based
upon the net fair value of all derivative positions between
the Company and the counterparty. Collateral is typically
cash, but securities may be allowed under collateral
arrangements with certain counterparties. Receivables and
payables related to cash collateral are included in other
assets and other liabilities on the Consolidated Balance
Sheet, along with the related derivative asset and liability
fair values. Any securities pledged to counterparties as
collateral remain on the Consolidated Balance Sheet.
Securities received from counterparties as collateral are not
recognized on the Consolidated Balance Sheet, unless the
counterparty defaults. In general, securities used as
collateral can be sold, repledged or otherwise used by the
party in possession. No restrictions exist on the use of cash
collateral by either party. Refer to Note 20 for further
discussion of the Company’s derivatives, including collateral
arrangements.
As part of the Company’s treasury and broker-dealer
operations, the Company executes transactions that are
treated as securities sold under agreements to repurchase
or securities purchased under agreements to resell, both of
which are accounted for as collateralized financings.
Securities sold under agreements to repurchase include
repurchase agreements and securities loaned transactions.
Securities purchased under agreements to resell include
reverse repurchase agreements and securities borrowed
transactions. For securities sold under agreements to
repurchase, the Company records a liability for the cash
received, which is included in short-term borrowings on the
Consolidated Balance Sheet. For securities purchased
under agreements to resell, the Company records a
receivable for the cash paid, which is included in other
assets on the Consolidated Balance Sheet.
Securities transferred to counterparties under repurchase
agreements and securities loaned transactions continue to
be recognized on the Consolidated Balance Sheet, are
measured at fair value, and are included in investment
securities or other assets. Securities received from
counterparties under reverse repurchase agreements and
securities borrowed transactions are not recognized on the
Consolidated Balance Sheet unless the counterparty
defaults. The securities transferred under repurchase and
reverse repurchase transactions typically are U.S. Treasury
and agency securities, residential agency mortgage-backed
securities, corporate debt securities or asset-backed
securities. The securities loaned or borrowed typically are
corporate debt securities traded by the Company’s primary
broker-dealer subsidiary. In general, the securities
transferred can be sold, repledged or otherwise used by the
party in possession. No restrictions exist on the use of cash
collateral by either party. Repurchase/reverse repurchase
and securities loaned/borrowed transactions expose the
Company to counterparty risk. The Company manages this
risk by performing assessments, independent of business
line managers, and establishing concentration limits on each
counterparty. Additionally, these transactions include
collateral arrangements that require the fair values of the
underlying securities to be determined daily, resulting in
cash being obtained or refunded to counterparties to
maintain specified collateral levels.
121
The following table summarizes the maturities by category of collateral pledged for repurchase agreements and securities loaned
transactions:
(Dollars in Millions)
December 31, 2023
Repurchase agreements
U.S. Treasury and agencies
Residential agency mortgage-backed securities
Corporate debt securities
Asset-backed securities
Total repurchase agreements
Securities loaned
Corporate debt securities
Total securities loaned
Overnight
and
Continuous
Less Than
30 Days
30-89
Days
Greater
Than 90
Days
Total
$ 2,375 $
— $
— $
— $ 2,375
338
821
—
3,534
290
290
—
—
45
45
—
—
—
—
—
—
—
—
—
—
—
—
—
—
338
821
45
3,579
290
290
Gross amount of recognized liabilities
$ 3,824 $
45 $
— $
— $ 3,869
December 31, 2022
Repurchase agreements
U.S. Treasury and agencies
Residential agency mortgage-backed securities
Corporate debt securities
Total repurchase agreements
Securities loaned
Corporate debt securities
Total securities loaned
$
147 $
— $
— $
— $
846
439
1,432
120
120
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
147
846
439
1,432
120
120
Gross amount of recognized liabilities
$ 1,552 $
— $
— $
— $ 1,552
The Company executes its derivative, repurchase/
reverse repurchase and securities loaned/borrowed
transactions under the respective industry standard
agreements. These agreements include master netting
arrangements that allow for multiple contracts executed with
the same counterparty to be viewed as a single
arrangement. This allows for net settlement of a single
amount on a daily basis. In the event of default, the master
netting arrangement provides for close-out netting, which
allows all of these positions with the defaulting counterparty
to be terminated and net settled with a single payment
amount.
The Company has elected to offset the assets and
liabilities under netting arrangements for the balance sheet
presentation of the majority of its derivative counterparties.
The netting occurs at the counterparty level, and includes all
assets and liabilities related to the derivative contracts,
including those associated with cash collateral received or
delivered. The Company has not elected to offset the assets
and liabilities under netting arrangements for the balance
sheet presentation of repurchase/reverse repurchase and
securities loaned/borrowed transactions.
122 U.S. Bancorp 2023 Annual Report
The following tables provide information on the Company’s netting adjustments, and items not offset on the Consolidated Balance
Sheet but available for offset in the event of default:
(Dollars in Millions)
December 31, 2023
Derivative assets(d)
Reverse repurchase agreements
Securities borrowed
Total
December 31, 2022
Derivative assets(d)
Reverse repurchase agreements
Securities borrowed
Total
Gross Amounts
Net Amounts
Offset on the
Presented on
Consolidated
the
Balance
Consolidated
Sheet(a) Balance Sheet
Gross
Recognized
Assets
Gross Amounts Not Offset on the
Consolidated Balance Sheet
Financial
Instruments(b)
Collateral
Received(c)
Net Amount
$
6,504 $
(3,666) $
2,838 $
(141) $
(3) $
2,694
$
$
2,513
1,802
—
—
2,513
1,802
(568)
(14)
(1,941)
(1,717)
4
71
10,819 $
(3,666) $
7,153 $
(723) $
(3,661) $
2,769
7,852 $
(5,427) $
2,425 $
(231) $
(80) $
2,114
107
1,606
—
—
107
1,606
(102)
—
(5)
(1,548)
—
58
$
9,565 $
(5,427) $
4,138 $
(333) $
(1,633) $
2,172
(a) Includes $1.6 billion and $3.0 billion of cash collateral related payables that were netted against derivative assets at December 31, 2023 and 2022, respectively.
(b) For derivative assets this includes any derivative liability fair values that could be offset in the event of counterparty default; for reverse repurchase agreements this includes any
repurchase agreement payables that could be offset in the event of counterparty default; for securities borrowed this includes any securities loaned payables that could be offset in
the event of counterparty default.
(c) Includes the fair value of securities received by the Company from the counterparty. These securities are not included on the Consolidated Balance Sheet unless the counterparty
defaults.
(d) Excludes $27 million and $20 million at December 31, 2023 and 2022, respectively, of derivative assets not subject to netting arrangements.
(Dollars in Millions)
December 31, 2023
Derivative liabilities(d)
Repurchase agreements
Securities loaned
Total
December 31, 2022
Derivative liabilities(d)
Repurchase agreements
Securities loaned
Total
Net Amounts Gross Amounts Not Offset on the
Gross Amounts
Presented on
Offset on the
the
Consolidated
Balance
Consolidated
Sheet(a) Balance Sheet
Financial
Instruments(b)
Consolidated Balance Sheet
Collateral
Pledged(c)
Gross
Recognized
Liabilities
Net Amount
$
8,217 $
(3,720) $
4,497 $
(141) $
— $
4,356
$
$
3,579
290
—
—
3,579
290
(568)
(14)
(3,008)
(270)
3
6
12,086 $
(3,720) $
8,366 $
(723) $
(3,278) $
4,365
10,506 $
(4,551) $
5,955 $
(231) $
— $
5,724
1,432
120
—
—
1,432
120
(102)
—
(1,325)
(118)
5
2
$
12,058 $
(4,551) $
7,507 $
(333) $
(1,443) $
5,731
(a) Includes $1.7 billion and $2.1 billion of cash collateral related receivables that were netted against derivative liabilities at December 31, 2023 and 2022, respectively.
(b) For derivative liabilities this includes any derivative asset fair values that could be offset in the event of counterparty default; for repurchase agreements this includes any reverse
repurchase agreement receivables that could be offset in the event of counterparty default; for securities loaned this includes any securities borrowed receivables that could be
offset in the event of counterparty default.
(c) Includes the fair value of securities pledged by the Company to the counterparty. These securities are included on the Consolidated Balance Sheet unless the Company defaults.
(d) Excludes $92 million and $193 million at December 31, 2023 and 2022, respectively, of derivative liabilities not subject to netting arrangements.
123
NOTE 22 Fair Values of Assets and Liabilities
The Company uses fair value measurements for the initial
recording of certain assets and liabilities, periodic
remeasurement of certain assets and liabilities, and
disclosures. Derivatives, trading and available-for-sale
investment securities, MSRs, certain time deposits and
substantially all MLHFS are recorded at fair value on a
recurring basis. Additionally, from time to time, the Company
may be required to record at fair value other assets on a
nonrecurring basis, such as loans held for sale, loans held
for investment and certain other assets. These nonrecurring
fair value adjustments typically involve application of lower-
of-cost-or-fair value accounting or impairment write-downs
of individual assets. Other financial instruments, such as
held-to-maturity investment securities, loans, the majority of
time deposits, short-term borrowings and long-term debt,
are accounted for at amortized cost. See “Fair Value of
Financial Instruments” in this Note for further information on
the estimated fair value of these other financial instruments.
In accordance with disclosure guidance, certain financial
instruments, such as deposits with no defined or contractual
maturity, receivables and payables due in one year or less,
insurance contracts and equity investments not accounted
for at fair value, are excluded from this Note. In addition,
refer to Note 3 regarding the fair value of assets and
liabilities acquired in the MUB acquisition.
Fair value is defined as the exchange price that would be
received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market
participants on the measurement date. A fair value
measurement reflects all of the assumptions that market
participants would use in pricing the asset or liability,
including assumptions about the risk inherent in a particular
valuation technique, the effect of a restriction on the sale or
use of an asset and the risk of nonperformance.
The Company groups its assets and liabilities
measured at fair value into a three-level hierarchy for
valuation techniques used to measure financial assets and
financial liabilities at fair value. This hierarchy is based on
whether the valuation inputs are observable or
unobservable. These levels are:
• Level 1 — Quoted prices in active markets for identical
assets or liabilities. Level 1 includes U.S. Treasury
securities, as well as exchange-traded instruments.
• Level 2 — Observable inputs other than Level 1 prices,
such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by
observable market data for substantially the full term of
the assets or liabilities. Level 2 includes debt securities
that are traded less frequently than exchange-traded
instruments and which are typically valued using third
party pricing services; derivative contracts and other
assets and liabilities, including securities, and certain time
deposits, whose value is determined using a pricing
model with inputs that are observable in the market or can
be derived principally from or corroborated by observable
market data; and MLHFS whose values are determined
124 U.S. Bancorp 2023 Annual Report
using quoted prices for similar assets or pricing models
with inputs that are observable in the market or can be
corroborated by observable market data.
• Level 3 — Unobservable inputs that are supported by little
or no market activity and that are significant to the fair
value of the assets or liabilities. Level 3 assets and
liabilities include financial instruments whose values are
determined using pricing models, discounted cash flow
methodologies, or similar techniques, as well as
instruments for which the determination of fair value
requires significant management judgment or estimation.
This category includes MSRs and certain derivative
contracts.
Valuation Methodologies
The valuation methodologies used by the Company to
measure financial assets and liabilities at fair value are
described below. In addition, the following section includes
an indication of the level of the fair value hierarchy in which
the assets or liabilities are classified. Where appropriate, the
descriptions include information about the valuation models
and key inputs to those models. During the years ended
December 31, 2023, 2022 and 2021, there were no
significant changes to the valuation techniques used by the
Company to measure fair value.
Available-For-Sale Investment Securities When quoted
market prices for identical securities are available in an
active market, these prices are used to determine fair value
and these securities are classified within Level 1 of the fair
value hierarchy. Level 1 investment securities include U.S.
Treasury and exchange-traded securities.
For other securities, quoted market prices may not be
readily available for the specific securities. When possible,
the Company determines fair value based on market
observable information, including quoted market prices for
similar securities, inactive transaction prices, and broker
quotes. These securities are classified within Level 2 of the
fair value hierarchy. Level 2 valuations are generally
provided by a third-party pricing service. Level 2 investment
securities are predominantly agency mortgage-backed
securities, certain other asset-backed securities, obligations
of state and political subdivisions and agency debt
securities.
Mortgage Loans Held For Sale MLHFS measured at fair
value, for which an active secondary market and readily
available market prices exist, are initially valued at the
transaction price and are subsequently valued by
comparison to instruments with similar collateral and risk
profiles. MLHFS are classified within Level 2. Included in
mortgage banking revenue were net losses of $46 million,
$450 million and $145 million for the years ended
December 31, 2023, 2022 and 2021, respectively, from the
changes to fair value of these MLHFS under fair value
option accounting guidance. Changes in fair value due to
instrument specific credit risk were immaterial. Interest
income for MLHFS is measured based on contractual
interest rates and reported as interest income on the
Consolidated Statement of Income. Electing to measure
MLHFS at fair value reduces certain timing differences and
better matches changes in fair value of these assets with
changes in the value of the derivative instruments used to
economically hedge them without the burden of complying
with the requirements for hedge accounting.
Time Deposits The Company elects the fair value option to
account for certain time deposits that are hedged with
derivatives that do not qualify for hedge accounting. Electing
to measure these time deposits at fair value reduces certain
timing differences and better matches changes in fair value
of these deposits with changes in the value of the derivative
instruments used to economically hedge them. The time
deposits measured at fair value are valued using a
discounted cash flow model that utilizes market observable
inputs and are classified within Level 2. Included in interest
expense on deposits were net gains of $4 million for the
year ended December 31, 2023 from the changes in fair
value of time deposits under fair value option accounting
guidance.
Mortgage Servicing Rights MSRs are valued using a
discounted cash flow methodology, and are classified within
Level 3. The Company determines fair value of the MSRs by
projecting future cash flows for different interest rate
scenarios using prepayment rates and other assumptions,
and discounts these cash flows using a risk adjusted rate
based on option adjusted spread levels. There is minimal
observable market activity for MSRs on comparable
portfolios and, therefore, the determination of fair value
requires significant management judgment. Refer to Note 10
for further information on MSR valuation assumptions.
Derivatives The majority of derivatives held by the
Company are executed over-the-counter or centrally cleared
through clearinghouses and are valued using market
standard cash flow valuation techniques. The models
incorporate inputs, depending on the type of derivative,
including interest rate curves, foreign exchange rates and
volatility. All derivative values incorporate an assessment of
the risk of counterparty nonperformance, measured based
on the Company’s evaluation of credit risk including external
assessments of credit risk. The Company monitors and
manages its nonperformance risk by considering its ability to
net derivative positions under master netting arrangements,
as well as collateral received or provided under collateral
arrangements. Accordingly, the Company has elected to
measure the fair value of derivatives, at a counterparty level,
on a net basis. The majority of the derivatives are classified
within Level 2 of the fair value hierarchy, as the significant
inputs to the models, including nonperformance risk, are
observable. However, certain derivative transactions are
with counterparties where risk of nonperformance cannot be
observed in the market and, therefore, the credit valuation
adjustments result in these derivatives being classified
within Level 3 of the fair value hierarchy.
The Company also has other derivative contracts that
are created through its operations, including commitments
to purchase and originate mortgage loans and swap
agreements executed in conjunction with the sale of a
portion of its Class B common and preferred shares of Visa
Inc. (the “Visa swaps”). The mortgage loan commitments
are valued by pricing models that include market observable
and unobservable inputs, which result in the commitments
being classified within Level 3 of the fair value hierarchy.
The unobservable inputs include assumptions about the
percentage of commitments that actually become a closed
loan and the MSR value that is inherent in the underlying
loan value. The Visa swaps require payments by either the
Company or the purchaser of the Visa Inc. Class B common
and preferred shares when there are changes in the
conversion rate of the Visa Inc. Class B common and
preferred shares to Visa Inc. Class A common and preferred
shares, respectively, as well as quarterly payments to the
purchaser based on specified terms of the agreements.
Management reviews and updates the Visa swaps fair value
in conjunction with its review of Visa Inc. related litigation
contingencies, and the associated escrow funding. The
expected litigation resolution impacts the Visa Inc. Class B
common share to Visa Inc. Class A common share
conversion rate, as well as the ultimate termination date for
the Visa swaps. Accordingly, the Visa swaps are classified
within Level 3. Refer to Note 23 for further information on
the Visa Inc. restructuring and related card association
litigation.
Significant Unobservable Inputs of
Level 3 Assets and Liabilities
The following section provides information to facilitate an
understanding of the uncertainty in the fair value
measurements for the Company’s Level 3 assets and
liabilities recorded at fair value on the Consolidated Balance
Sheet. This section includes a description of the significant
inputs used by the Company and a description of any
interrelationships between these inputs. The discussion
below excludes nonrecurring fair value measurements of
collateral value used for impairment measures for loans and
OREO. These valuations utilize third party appraisal or
broker price opinions, and are classified as Level 3 due to
the significant judgment involved.
Mortgage Servicing Rights The significant unobservable
inputs used in the fair value measurement of the Company’s
MSRs are expected prepayments and the option adjusted
spread that is added to the risk-free rate to discount
projected cash flows. Significant increases in either of these
inputs in isolation would have resulted in a significantly
lower fair value measurement. Significant decreases in
either of these inputs in isolation would have resulted in a
significantly higher fair value measurement. There is no
direct interrelationship between prepayments and option
adjusted spread. Prepayment rates generally move in the
opposite direction of market interest rates. Option adjusted
spread is generally impacted by changes in market return
requirements.
125
The following table shows the significant valuation assumption ranges for MSRs at December 31, 2023:
Expected prepayment
Option adjusted spread
(a) Determined based on the relative fair value of the related mortgage loans serviced.
Derivatives The Company has two distinct Level 3
derivative portfolios: (i) the Company’s commitments to
purchase and originate mortgage loans that meet the
requirements of a derivative and (ii) the Company’s asset/
liability and customer-related derivatives that are Level 3
due to unobservable inputs related to measurement of risk
of nonperformance by the counterparty. In addition, the
Company’s Visa swaps are classified within Level 3.
The significant unobservable inputs used in the fair value
measurement of the Company’s derivative commitments to
purchase and originate mortgage loans are the percentage
Minimum
Maximum
7%
4
23%
11
Weighted-
Average(a)
10%
5
of commitments that actually become a closed loan and the
MSR value that is inherent in the underlying loan value. A
significant increase in the rate of loans that close would
have resulted in a larger derivative asset or liability. A
significant increase in the inherent MSR value would have
resulted in an increase in the derivative asset or a reduction
in the derivative liability. Expected loan close rates and the
inherent MSR values are directly impacted by changes in
market rates and will generally move in the same direction
as interest rates.
The following table shows the significant valuation assumption ranges for the Company’s derivative commitments to purchase and
originate mortgage loans at December 31, 2023:
Expected loan close rate
Inherent MSR value (basis points per loan)
(a) Determined based on the relative fair value of the related mortgage loans.
The significant unobservable input used in the fair value
measurement of certain of the Company’s asset/liability and
customer-related derivatives is the credit valuation
adjustment related to the risk of counterparty
nonperformance. A significant increase in the credit
valuation adjustment would have resulted in a lower fair
value measurement. A significant decrease in the credit
valuation adjustment would have resulted in a higher fair
value measurement. The credit valuation adjustment is
impacted by changes in market rates, volatility, market
implied credit spreads, and loss recovery rates, as well as
the Company’s assessment of the counterparty’s credit
position. At December 31, 2023, the minimum, maximum
and weighted-average credit valuation adjustment as a
Minimum
Maximum
17%
48
99%
177
Weighted-
Average(a)
74%
97
percentage of the net fair value of the counterparty’s
derivative contracts prior to adjustment was 0 percent, 507
percent and 2 percent, respectively.
The significant unobservable inputs used in the fair value
measurement of the Visa swaps are management’s
estimate of the probability of certain litigation scenarios
occurring, and the timing of the resolution of the related
litigation loss estimates in excess, or shortfall, of the
Company’s proportional share of escrow funds. An increase
in the loss estimate or a delay in the resolution of the related
litigation would have resulted in an increase in the derivative
liability. A decrease in the loss estimate or an acceleration
of the resolution of the related litigation would have resulted
in a decrease in the derivative liability.
126 U.S. Bancorp 2023 Annual Report
The following table summarizes the balances of assets and liabilities measured at fair value on a recurring basis:
(Dollars in Millions)
December 31, 2023
Available-for-sale securities
U.S. Treasury and agencies
Mortgage-backed securities
Residential agency
Commercial
Agency
Non-agency
Asset-backed securities
Obligations of state and political subdivisions
Other
Total available-for-sale
Mortgage loans held for sale
Mortgage servicing rights
Derivative assets
Other assets
Total
Time deposits
Derivative liabilities
Short-term borrowings and other liabilities(a)
Total
December 31, 2022
Available-for-sale securities
U.S. Treasury and agencies
Mortgage-backed securities
Residential agency
Commercial
Agency
Non-agency
Asset-backed securities
Obligations of state and political subdivisions
Other
Total available-for-sale
Mortgage loans held for sale
Mortgage servicing rights
Derivative assets
Other assets
Total
Derivative liabilities
Short-term borrowings and other liabilities(a)
Total
Level 1
Level 2
Level 3
Netting
Total
$
14,787 $
4,755 $
— $
— $
19,542
—
26,078
—
—
—
—
—
14,787
—
—
—
550
7,343
6
6,724
9,989
24
54,919
2,011
—
5,078
1,991
—
—
—
—
—
—
—
—
3,377
1,453
—
—
26,078
—
—
—
—
—
—
—
—
(3,666)
—
7,343
6
6,724
9,989
24
69,706
2,011
3,377
2,865
2,541
15,337 $
63,999 $
4,830 $
(3,666) $
80,500
$
$
— $
2,818 $
— $
— $
16
517
4,955
1,786
3,338
(3,720)
—
—
$
533 $
9,559 $
3,338 $
(3,720) $
2,818
4,589
2,303
9,710
$
13,723 $
8,310 $
— $
— $
22,033
—
29,271
—
—
—
—
—
13,723
—
—
9
248
7,145
7
4,323
10,124
6
59,186
1,849
—
6,608
1,756
—
—
—
—
1
—
1
—
3,755
1,255
—
—
29,271
—
—
—
—
—
—
—
—
(5,427)
—
7,145
7
4,323
10,125
6
72,910
1,849
3,755
2,445
2,004
$
$
$
13,980 $
69,399 $
5,011 $
(5,427) $
82,963
4 $
6,241 $
4,454 $
(4,551) $
125
1,564
—
—
129 $
7,805 $
4,454 $
(4,551) $
6,148
1,689
7,837
Note: Excluded from the table above are equity investments without readily determinable fair values. The Company has elected to carry these investments at historical cost, adjusted
for impairment and any changes resulting from observable price changes for identical or similar investments of the issuer. The aggregate carrying amount of these equity investments
was $133 million and $104 million at December 31, 2023 and 2022, respectively. The Company recorded a $5 million impairment on these equity investments during 2023, and the
cumulative impairment on these equity investments is $5 million at December 31, 2023. The Company has not recorded adjustments for observable price changes on these equity
investments during 2023 and 2022, or on a cumulative basis.
(a) Primarily represents the Company’s obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance.
127
The following table presents the changes in fair value for all assets and liabilities measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) for the years ended December 31:
Net Gains
(Losses)
Included
in Net
Income
Beginning
of Period
Balance
Net Gains
(Losses)
Included in
Other
Comprehensive
Income (Loss) Purchases
Principal
Sales Payments
Issuances
Net Change in
Unrealized Gains
(Losses) Relating to
End of Assets and Liabilities
Period
Held at End of
Period
Settlements Balance
(Dollars in Millions)
2023
Available-for-sale securities
Obligations of state and
political subdivisions
—
—
(316) (a)
(183) (d)
—
—
—
1
—
1
1
1
1
8
$
1 $ —
$
— $ — $ — $
(1) $ —
$
— $ — $
Total available-for-
sale
1
—
Mortgage servicing rights
3,755
(316) (a)
Net derivative assets and
liabilities
(3,199)
(2,696) (b)
—
—
—
—
5
—
(440)
(1)
—
—
373 (c)
—
—
—
3,377
552
(45)
—
1
3,502
(1,885)
2022
Available-for-sale securities
Asset-backed securities
$
7 $ —
$
(3) $ — $
(4) $ — $ —
$
— $ — $
Obligations of state and
political subdivisions
Total available-for-
sale
1
8
—
—
Mortgage servicing rights
2,953
311
(a)
—
—
—
(3)
—
—
(4)
156
(255)
Net derivative assets and
liabilities
799
(5,940) (e)
—
716
(36)
—
—
—
—
—
—
590
(c)
—
—
—
3,755
311
(a)
11
1,251
(3,199)
(3,538) (f)
2021
Available-for-sale securities
Asset-backed securities
$
7 $ —
$
1 $ — $ — $
(1) $ —
$
— $
7 $
Obligations of state and
political subdivisions
Total available-for-
sale
1
8
—
—
Mortgage servicing rights
2,210
(437) (a)
Net derivative assets and
liabilities
2,326
(924) (g)
—
1
—
—
—
—
—
—
42
—
2
(1)
—
—
—
1,136 (c)
—
—
—
2,953
(437) (a)
337
(3)
—
—
(937)
799
(968) (h)
(a) Included in mortgage banking revenue.
(b) Approximately $182 million, $(2.9) billion and $1 million included in mortgage banking revenue, commercial products revenue and other non-interest income, respectively.
(c) Represents MSRs capitalized during the period.
(d) Approximately $15 million, $(199) million and $1 million included in mortgage banking revenue, commercial products revenue and other non-interest income, respectively.
(e) Approximately $(141) million, $(5.6) billion and $(181) million included in mortgage banking revenue, commercial products revenue and other non-interest income, respectively.
(f) Approximately $5 million, $(3.4) billion and $(181) million included in mortgage banking revenue, commercial products revenue and other non-interest income, respectively.
(g) Approximately $666 million, $(1.6) billion and $5 million included in mortgage banking revenue, commercial products revenue and other non-interest income, respectively.
(h) Approximately $42 million, $(1.0) billion and $5 million included in mortgage banking revenue, commercial products revenue and other non-interest income, respectively.
The Company is also required periodically to measure certain other financial assets at fair value on a nonrecurring basis.
These measurements of fair value usually result from the application of lower-of-cost-or-fair value accounting or write-downs of
individual assets.
The following table summarizes the balances as of the measurement date of assets measured at fair value on a nonrecurring
basis, and still held as of December 31:
(Dollars in Millions)
Loans(a)
Other assets(b)
2023
2022
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
$ — $ — $
354 $
354 $ — $ — $
97 $
—
—
27
27
—
—
21
97
21
(a) Represents the carrying value of loans for which adjustments were based on the fair value of the collateral, excluding loans fully charged-off.
(b) Primarily represents the fair value of foreclosed properties that were measured at fair value based on an appraisal or broker price opinion of the collateral subsequent to their initial
acquisition.
128 U.S. Bancorp 2023 Annual Report
The following table summarizes losses recognized related to nonrecurring fair value measurements of individual assets or
portfolios for the years ended December 31:
(Dollars in Millions)
Loans(a)
Other assets(b)
2023
2022
2021
$
368
$
40
$
32
20
60
25
(a) Represents write-downs of loans which were based on the fair value of the collateral, excluding loans fully charged-off.
(b) Primarily represents related losses of foreclosed properties that were measured at fair value subsequent to their initial acquisition.
Fair Value Option
The following table summarizes the differences between the aggregate fair value carrying amount of the assets and liabilities for
which the fair value option has been elected and the aggregate remaining contractual principal balance outstanding as of
December 31:
(Dollars in Millions)
Total loans(a)
Time deposits
2023
2022
Fair Value
Carrying
Amount
Contractual
Principal
Outstanding
Carrying
Amount Over
(Under)
Contractual
Principal
Outstanding
Carrying
Amount Over
(Under)
Contractual
Contractual
Fair Value
Carrying
Principal
Principal
Amount Outstanding Outstanding
$
2,011 $
1,994 $
17
$
1,849 $
1,848 $
2,818
2,822
(4)
—
—
1
—
(a) Includes nonaccrual loans of $1 million carried at fair value with contractual principal outstanding of $1 million at December 31, 2023 and $1 million carried at fair value with
contractual principal outstanding of $1 million at December 31, 2022. Includes loans 90 days or more past due of $4 million carried at fair value with contractual principal
outstanding of $4 million at December 31, 2023 and $1 million carried at fair value with contractual principal outstanding of $1 million at December 31, 2022.
Fair Value of Financial Instruments
The following section summarizes the estimated fair value
for financial instruments accounted for at amortized cost as
of December 31, 2023 and 2022. In accordance with
disclosure guidance related to fair values of financial
instruments, the Company did not include assets and
liabilities that are not financial instruments, such as the
value of goodwill, long-term relationships with deposit, credit
card, merchant processing and trust customers, other
purchased intangibles, premises and equipment, deferred
taxes and other liabilities. Additionally, in accordance with
the disclosure guidance, receivables and payables due in
one year or less, insurance contracts, equity investments
not accounted for at fair value, and deposits with no defined
or contractual maturities are excluded.
The estimated fair values of the Company’s financial instruments as of December 31, are shown in the table below:
(Dollars in Millions)
Financial Assets
2023
Fair Value
Level 1
Level 2
Level 3
Total
2022
Fair Value
Level 1
Level 2
Level 3
Total
Carrying
Amount
Carrying
Amount
Cash and due from banks
$61,192 $61,192 $ — $ — $61,192 $53,542 $53,542 $ — $ — $53,542
Federal funds sold and securities
purchased under resale agreements
2,543
— 2,543
—
2,543
356
—
356
—
356
Investment securities held-to-maturity
84,045
1,310 72,778
— 74,088 88,740
1,293 76,581
— 77,874
Loans held for sale(a)
Loans
Other(b)
Financial Liabilities
Time deposits(c)
Short-term borrowings(d)
Long-term debt
Other(e)
190
366,456
—
—
—
190
190
351
— 362,849 362,849 381,277
—
—
—
351
351
— 368,874 368,874
2,377
— 1,863
514
2,377
2,962
— 2,224
738
2,962
49,455
12,976
51,480
5,432
— 49,607
— 49,607 32,946
— 32,338
— 32,338
— 12,729
— 12,729 29,527
— 29,145
— 29,145
— 49,697
— 49,697 39,829
— 37,622
— 37,622
— 1,406
4,026
5,432
5,137
— 1,500
3,637
5,137
(a) Excludes mortgages held for sale for which the fair value option under applicable accounting guidance was elected.
(b) Includes investments in Federal Reserve Bank and Federal Home Loan Bank stock and tax-advantaged investments.
(c) Excludes time deposits for which the fair value option under applicable accounting guidance was elected.
(d) Excludes the Company’s obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance.
(e) Includes operating lease liabilities and liabilities related to tax-advantaged investments.
129
The fair value of unfunded commitments, deferred non-
yield related loan fees, standby letters of credit and other
guarantees is approximately equal to their carrying value.
The carrying value of unfunded commitments, deferred non-
yield related loan fees and standby letters of credit was
$489 million and $498 million at December 31, 2023 and
2022, respectively. The carrying value of other guarantees
was $198 million and $241 million at December 31, 2023
and 2022, respectively.
NOTE 23 Guarantees and Contingent Liabilities
Visa Restructuring and Card Association Litigation The
Company’s Payment Services business issues credit and
debit cards and acquires credit and debit card transactions
through the Visa U.S.A. Inc. card association or its affiliates
(collectively “Visa”). In 2007, Visa completed a restructuring
and issued shares of Visa Inc. common stock to its financial
institution members in contemplation of its initial public
offering (“IPO”) completed in the first quarter of 2008 (the
“Visa Reorganization”). As a part of the Visa
Reorganization, the Company received its proportionate
number of shares of Visa Inc. common stock, which were
subsequently converted to Class B shares of Visa Inc.
(“Class B shares”). As of December 31, 2023, the Company
has sold substantially all of its Class B shares.
Visa U.S.A. Inc. (“Visa U.S.A.”) and MasterCard
International (collectively, the “Card Brands”) are defendants
in antitrust lawsuits challenging the practices of the Card
Brands (the “Visa Litigation”). Visa U.S.A. member banks
have a contingent obligation to indemnify Visa Inc. under the
Visa U.S.A. bylaws (which were modified at the time of the
restructuring in October 2007) for potential losses arising
from the Visa Litigation. The indemnification by the Visa
U.S.A. member banks has no specific maximum amount.
Using proceeds from its IPO and through reductions to the
conversion ratio applicable to the Class B shares held by
Visa U.S.A. member banks, Visa Inc. has funded an escrow
account for the benefit of member financial institutions to
fund their indemnification obligations associated with the
Visa Litigation. The receivable related to the escrow account
is classified in other liabilities and fully offsets the related
Visa Litigation contingent liability.
In October 2012, Visa signed a settlement agreement to
resolve class action claims associated with the multidistrict
interchange litigation pending in the United States District
Court for the Eastern District of New York (the “Multi-District
Litigation”). The U.S. Court of Appeals for the Second
Circuit reversed the approval of that settlement and
remanded the matter to the district court. Thereafter, the
case was split into two putative class actions, one seeking
damages (the “Damages Action”) and a separate class
action seeking injunctive relief only (the “Injunctive Action”).
In September 2018, Visa signed a new settlement
agreement, superseding the original settlement agreement,
to resolve the Damages Action. The Damages Action
settlement has received final court approval and is now
resolved. The Injunctive Action, which generally seeks
changes to Visa rules, is still pending.
Commitments to Extend Credit Commitments to extend
credit are legally binding and generally have fixed expiration
dates or other termination clauses. The contractual amount
represents the Company’s exposure to credit loss, in the
event of default by the borrower. The Company manages
this credit risk by using the same credit policies it applies to
130 U.S. Bancorp 2023 Annual Report
loans. Collateral is obtained to secure commitments based
on management’s credit assessment of the borrower. The
collateral may include marketable securities, receivables,
inventory, equipment and real estate. Since the Company
expects many of the commitments to expire without being
drawn, total commitment amounts do not necessarily
represent the Company’s future liquidity requirements. In
addition, the commitments include consumer credit lines
that are cancelable upon notification to the consumer.
The contract or notional amounts of unfunded commitments
to extend credit at December 31, 2023, excluding those
commitments considered derivatives, were as follows:
Term
Less Than
One Year
Greater
Than One
Year
Total
(Dollars in Millions)
Commercial and commercial
real estate loans
$ 43,385 $137,155 $180,540
Corporate and purchasing
card loans(a)
Residential mortgages
34,943
114
—
—
34,943
114
Retail credit card loans(a)
134,297
— 134,297
Other retail loans
15,616
27,430
43,046
Other
7,585
—
7,585
(a) Primarily cancellable at the Company’s discretion.
Other Guarantees and Contingent
Liabilities
The following table is a summary of other guarantees and
contingent liabilities of the Company at December 31, 2023:
(Dollars in Millions)
Collateral
Held
Carrying
Amount
Maximum
Potential
Future
Payments
Standby letters of credit
$
— $
20 $ 10,999
Third party borrowing
arrangements
Securities lending
indemnifications
Asset sales
Merchant processing
Tender option bond program
guarantee
Other
—
—
5
6,924
—
6,679
—
815
607
—
106
10,263
71 140,288
—
21
589
2,696
Letters of Credit Standby letters of credit are commitments
the Company issues to guarantee the performance of a
customer to a third party. The guarantees frequently support
public and private borrowing arrangements, including
commercial paper issuances, bond financings and other
similar transactions. The Company also issues and confirms
commercial letters of credit on behalf of customers to
ensure payment or collection in connection with trade
transactions. In the event of a customer’s or counterparty’s
nonperformance, the Company’s credit loss exposure is
similar to that in any extension of credit, up to the letter’s
contractual amount. Management assesses the borrower’s
credit to determine the necessary collateral, which may
include marketable securities, receivables, inventory,
equipment and real estate. Since the conditions requiring
the Company to fund letters of credit may not occur, the
Company expects its liquidity requirements to be less than
the total outstanding commitments. The maximum potential
future payments guaranteed by the Company under standby
letter of credit arrangements at December 31, 2023, were
approximately $11.0 billion with a weighted-average term of
approximately 16 months. The estimated fair value of
standby letters of credit was approximately $20 million at
December 31, 2023.
The contract or notional amount of letters of credit at
December 31, 2023, were as follows:
(Dollars in Millions)
Standby
Commercial
Term
Less Than
One Year
Greater
Than One
Year
Total
$ 6,444 $ 4,555 $ 10,999
559
59
618
Guarantees Guarantees are contingent commitments
issued by the Company to customers or other third parties.
The Company’s guarantees primarily include parent
guarantees related to subsidiaries’ third party borrowing
arrangements; third party performance guarantees inherent
in the Company’s business operations, such as indemnified
securities lending programs and merchant charge-back
guarantees; and indemnification or buy-back provisions
related to certain asset sales. For certain guarantees, the
Company has recorded a liability related to the potential
obligation, or has access to collateral to support the
guarantee or through the exercise of other recourse
provisions can offset some or all of the maximum potential
future payments made under these guarantees.
Third Party Borrowing Arrangements The Company
provides guarantees to third parties as a part of certain
subsidiaries’ borrowing arrangements. The maximum
potential future payments guaranteed by the Company
under these arrangements were approximately $5 million at
December 31, 2023.
Commitments from Securities Lending The Company
participates in securities lending activities by acting as the
customer’s agent involving the loan of securities. The
Company indemnifies customers for the difference between
the fair value of the securities lent and the fair value of the
collateral received. Cash collateralizes these transactions.
The maximum potential future payments guaranteed by the
Company under these arrangements were approximately
$6.7 billion at December 31, 2023, and represent the fair
value of the securities lent to third parties. At December 31,
2023, the Company held $6.9 billion of cash as collateral for
these arrangements.
Asset Sales The Company has provided guarantees to
certain third parties in connection with the sale or
syndication of certain assets, primarily loan portfolios and
tax-advantaged investments. These guarantees are
generally in the form of asset buy-back or make-whole
provisions that are triggered upon a credit event or a change
in the tax-qualifying status of the related projects, as
applicable, and remain in effect until the loans are collected
or final tax credits are realized, respectively. The maximum
potential future payments guaranteed by the Company
under these arrangements were approximately $10.3 billion
at December 31, 2023, and represented the proceeds
received from the buyer or the guaranteed portion in these
transactions where the buy-back or make-whole provisions
have not yet expired. At December 31, 2023, the Company
had reserved $93 million for potential losses related to the
sale or syndication of tax-advantaged investments.
The maximum potential future payments do not include
loan sales where the Company provides standard
representation and warranties to the buyer against losses
related to loan underwriting documentation defects that may
have existed at the time of sale that generally are identified
after the occurrence of a triggering event such as
delinquency. For these types of loan sales, the maximum
potential future payments is generally the unpaid principal
balance of loans sold measured at the end of the current
reporting period. Actual losses will be significantly less than
the maximum exposure, as only a fraction of loans sold will
have a representation and warranty breach, and any losses
on repurchase would generally be mitigated by any
collateral held against the loans.
The Company regularly sells loans to GSEs as part of its
mortgage banking activities. The Company provides
customary representations and warranties to GSEs in
conjunction with these sales. These representations and
warranties generally require the Company to repurchase
assets if it is subsequently determined that a loan did not
meet specified criteria, such as a documentation deficiency
or rescission of mortgage insurance. If the Company is
unable to cure or refute a repurchase request, the Company
is generally obligated to repurchase the loan or otherwise
reimburse the GSE for losses. At December 31, 2023, the
Company had reserved $13 million for potential losses from
representation and warranty obligations, compared with $17
million at December 31, 2022. The Company’s reserve
reflects management’s best estimate of losses for
representation and warranty obligations. The Company’s
repurchase reserve is modeled at the loan level, taking into
consideration the individual credit quality and borrower
activity that has transpired since origination. The model
applies credit quality and economic risk factors to derive a
probability of default and potential repurchase that are
based on the Company’s historical loss experience, and
estimates loss severity based on expected collateral value.
The Company also considers qualitative factors that may
result in anticipated losses differing from historical loss
trends.
131
As of December 31, 2023 and 2022, the Company had
$18 million and $39 million, respectively, of unresolved
representation and warranty claims from GSEs. The
Company does not have a significant amount of unresolved
claims from investors other than GSEs.
Merchant Processing The Company, through its
subsidiaries, provides merchant processing services. Under
the rules of credit card associations, a merchant processor
retains a contingent liability for credit card transactions
processed. This contingent liability arises in the event of a
billing dispute between the merchant and a cardholder that
is ultimately resolved in the cardholder’s favor. In this
situation, the transaction is “charged-back” to the merchant
and the disputed amount is credited or otherwise refunded
to the cardholder. If the Company is unable to collect this
amount from the merchant, it bears the loss for the amount
of the refund paid to the cardholder.
A cardholder, through its issuing bank, generally has
until the later of up to four months after the date the
transaction is processed or the receipt of the product or
service to present a charge-back to the Company as the
merchant processor. The absolute maximum potential
liability is estimated to be the total volume of credit card
transactions that meet the associations’ requirements to be
valid charge-back transactions at any given time.
Management estimates that the maximum potential
exposure for charge-backs would approximate the total
amount of merchant transactions processed through the
credit card associations for the last four months. For the last
four months of 2023 this amount totaled approximately
$140.3 billion. In most cases, this contingent liability is
unlikely to arise, as most products and services are
delivered when purchased and amounts are refunded when
items are returned to merchants. However, where the
product or service has been purchased but is not provided
until a future date (“future delivery”), the potential for this
contingent liability increases. To mitigate this risk, the
Company may require the merchant to make an escrow
deposit, place maximum volume limitations on future
delivery transactions processed by the merchant at any
point in time, or require various credit enhancements
(including letters of credit and bank guarantees). Also,
merchant processing contracts may include event triggers to
provide the Company more financial and operational control
in the event of financial deterioration of the merchant.
The Company currently processes card transactions in
the United States, Canada and Europe through wholly-
owned subsidiaries. In the event a merchant was unable to
fulfill product or services subject to future delivery, such as
airline tickets, the Company could become financially liable
for refunding the purchase price of such products or
services purchased through the credit card associations
under the charge-back provisions. Charge-back risk related
to these merchants is evaluated in a manner similar to credit
risk assessments and, as such, merchant processing
contracts contain various provisions to protect the Company
in the event of default. At December 31, 2023, the value of
airline tickets purchased to be delivered at a future date
through card transactions processed by the Company was
$13.1 billion. The Company held collateral of $679 million in
escrow deposits, letters of credit and indemnities from
132 U.S. Bancorp 2023 Annual Report
financial institutions, and liens on various assets. In addition
to specific collateral or other credit enhancements, the
Company maintains a liability for its implied guarantees
associated with future delivery. At December 31, 2023, the
liability was $50 million primarily related to these airline
processing arrangements.
In the normal course of business, the Company has
unresolved charge-backs. The Company assesses the
likelihood of its potential liability based on the extent and
nature of unresolved charge-backs and its historical loss
experience. At December 31, 2023, the Company held $135
million of merchant escrow deposits as collateral and had a
recorded liability for potential losses of $21 million.
Tender Option Bond Program Guarantee As discussed in
Note 8, the Company sponsors a municipal bond securities
tender option bond program and consolidates the program’s
entities on its Consolidated Balance Sheet. The Company
provides financial performance guarantees related to the
program’s entities. At December 31, 2023, the Company
guaranteed $589 million of borrowings of the program’s
entities, included on the Consolidated Balance Sheet in
short-term borrowings. The Company also included on its
Consolidated Balance Sheet the related $607 million of
available-for-sale investment securities serving as collateral
for this arrangement.
Other Guarantees and Commitments As of December 31,
2023, the Company sponsored, and owned 100 percent of
the common equity of, USB Capital IX, a wholly-owned
unconsolidated trust, formed for the purpose of issuing
redeemable Income Trust Securities (“ITS”) to third-party
investors, originally investing the proceeds in junior
subordinated debt securities (“Debentures”) issued by the
Company and entering into stock purchase contracts to
purchase the Company’s preferred stock in the future. As of
December 31, 2023, all of the Debentures issued by the
Company have either matured or been retired. Total assets
of USB Capital IX were $686 million at December 31, 2023,
consisting primarily of the Company’s Series A Preferred
Stock. The Company’s obligations under the transaction
documents, taken together, have the effect of providing a
full and unconditional guarantee by the Company, on a
junior subordinated basis, of the payment obligations of the
trust to third-party investors totaling $685 million at
December 31, 2023.
The Company has also made other financial
performance guarantees and commitments primarily related
to the operations of its subsidiaries. At December 31, 2023,
the maximum potential future payments guaranteed or
committed by the Company under these arrangements were
approximately $2.0 billion.
Litigation and Regulatory Matters
The Company is subject to various litigation and regulatory
matters that arise from the conduct of its business activities.
The Company establishes reserves for such matters when
potential losses become probable and can be reasonably
estimated. The Company believes the ultimate resolution of
existing legal and regulatory matters will not have a material
adverse effect on the financial condition, results of
operations or cash flows of the Company. However, in light
of the uncertainties inherent in these matters, it is possible
that the ultimate resolution of one or more of these matters
may have a material adverse effect on the Company’s
results of operations for a particular period, and future
changes in circumstances or additional information could
result in additional accruals or resolution in excess of
established accruals, which could adversely affect the
Company’s results of operations, potentially materially.
Residential Mortgage-Backed Securities Litigation
Starting in 2011, the Company and other large financial
institutions have been sued in their capacity as trustee for
residential mortgage–backed securities trusts for losses
arising out of the 2008 financial crisis. In the lawsuits
brought against the Company, the investors allege that the
Company’s banking subsidiary, USBNA, as trustee caused
them to incur substantial losses by failing to enforce loan
repurchase obligations and failing to abide by appropriate
standards of care after events of default allegedly occurred.
The plaintiffs in these matters seek monetary damages in
unspecified amounts and most also seek equitable relief.
Regulatory Matters The Company is continually subject to
examinations, inquiries, investigations and other forms of
regulatory and governmental inquiry or scrutiny covering a
wide range of issues in its financial services businesses
including in areas of heightened regulatory scrutiny, such as
compliance, risk management, third-party risk management
and consumer protection. In some cases, these matters are
part of reviews of specified activities at multiple industry
participants; in others, they are directed at the Company
individually. For example, the Division of Enforcement of the
SEC has been investigating U.S. Bancorp Fund Services,
LLC (“USBFS”), a subsidiary of USBNA, relating to its role
providing fund administration services to a third-party
investment fund. This investment fund was advised by an
investment adviser who engaged in fraud, and USBFS was
not affiliated with the investment adviser and did not provide
any advisory services to the fund. The Division of
Enforcement has made a preliminary determination to
recommend that the SEC file an enforcement action against
USBFS, and USBFS is in the process of responding to the
SEC on this matter. The Company is cooperating fully with
NOTE 24 Business Segments
Within the Company, financial performance is measured by
major lines of business based on the products and services
provided to customers through its distribution channels.
These operating segments are components of the Company
about which financial information is prepared and is
evaluated regularly by management in deciding how to
allocate resources and assess performance. The Company
has the following reportable operating segments:
Wealth, Corporate, Commercial and Institutional
Banking Wealth, Corporate, Commercial and Institutional
Banking provides core banking, specialized lending,
transaction and payment processing, capital markets, asset
management, and brokerage and investment related
all pending examinations, inquiries and investigations, any
of which could lead to administrative or legal proceedings or
settlements. Remedies in these proceedings or settlements
may include fines, penalties, restitution or alterations in the
Company’s business practices (which may increase the
Company’s operating expenses and decrease its revenue).
On December 19, 2023, USBNA agreed to the issuance
of consent orders with the OCC and the Consumer Financial
Protection Bureau (“CFPB”) resolving the previously
disclosed investigations of the Company's administration of
unemployment insurance benefit prepaid debit cards during
the pandemic timeframe. Also, on February 9, 2024, the
SEC announced a settlement with U.S. Bancorp
Investments, Inc., resolving the previously disclosed inquiry
regarding record retention requirements relating to
electronic business communications. The Commodity
Futures Trading Commission (“CFTC”) has conducted an
inquiry concerning similar issues and the Company is
currently in resolution discussions with the CFTC on that
matter. The financial impact of the resolution of these
matters was not material to the Company's financial
condition, results of operations or cash flows and the
anticipated resolution of the CFTC matter is also not
expected to be material.
Outlook Due to their complex nature, it can be years before
litigation and regulatory matters are resolved. The Company
may be unable to develop an estimate or range of loss
where matters are in early stages, there are significant
factual or legal issues to be resolved, damages are
unspecified or uncertain, or there is uncertainty as to a
litigation class being certified or the outcome of pending
motions, appeals or proceedings. For those litigation and
regulatory matters where the Company has information to
develop an estimate or range of loss, the Company believes
the upper end of the range of reasonably possible losses in
aggregate, in excess of any reserves established for matters
where a loss is considered probable, will not be material to
its financial condition, results of operations or cash flows.
The Company’s estimates are subject to significant
judgment and uncertainties, and the matters underlying the
estimates will change from time to time. Actual results may
vary significantly from the current estimates.
services to wealth, middle market, large corporate,
government and institutional clients.
Consumer and Business Banking Consumer and
Business Banking comprises consumer banking, small
business banking and consumer lending. Products and
services are delivered through banking offices, telephone
servicing and sales, online services, direct mail, ATM
processing, mobile devices, distributed mortgage loan
officers, and intermediary relationships including auto
dealerships, mortgage banks, and strategic business
partners.
Payment Services Payment Services includes consumer
and business credit cards, stored-value cards, debit cards,
133
corporate, government and purchasing card services and
merchant processing.
Treasury and Corporate Support Treasury and Corporate
Support includes the Company’s investment portfolios,
funding, capital management, interest rate risk
management, income taxes not allocated to business
segments, including most investments in tax-advantaged
projects, and the residual aggregate of those expenses
associated with corporate activities that are managed on a
consolidated basis.
Basis of Presentation Business segment results are
derived from the Company’s business unit profitability
reporting systems by specifically attributing managed
balance sheet assets, deposits and other liabilities and their
related income or expense. The allowance for credit losses
and related provision expense are allocated to the business
segments according to the volume and credit quality of the
loan balances managed, but with the impact of changes in
economic forecasts recorded in Treasury and Corporate
Support. Goodwill and other intangible assets are assigned
to the business segments based on the mix of business of
an entity acquired by the Company. Within the Company,
capital levels are evaluated and managed centrally;
however, capital is allocated to the business segments to
support evaluation of business performance. Business
segments are allocated capital on a risk-adjusted basis
considering economic and regulatory capital requirements.
Generally, the determination of the amount of capital
allocated to each business segment includes credit
allocations following a Basel III regulatory framework.
Interest income and expense is determined based on the
assets and liabilities managed by the business segment.
Because funding and asset/liability management is a central
function, funds transfer-pricing methodologies are utilized to
allocate a cost of funds used or credit for funds provided to
all business segment assets and liabilities, respectively,
using a matched funding concept. Also, each business unit
is allocated the taxable-equivalent benefit of tax-exempt
products. The residual effect on net interest income of
asset/liability management activities is included in Treasury
and Corporate Support. Noninterest income and expenses
directly managed by each business segment, including fees,
service charges, salaries and benefits, and other direct
revenues and costs are accounted for within each
segment’s financial results in a manner similar to the
consolidated financial statements. Occupancy costs are
allocated based on utilization of facilities by the business
segments. Generally, operating losses are charged to the
business segment when the loss event is realized in a
manner similar to a loan charge-off. Noninterest expenses
incurred by centrally managed operations or business
segments that directly support another business segment’s
operations are charged to the applicable business segment
based on its utilization of those services, primarily measured
by the volume of customer activities, number of employees
or other relevant factors. These allocated expenses are
reported as net shared services expense within noninterest
expense. Certain activities that do not directly support the
operations of the business segments or for which the
business segments are not considered financially
accountable in evaluating their performance are not charged
to the business segments. The income or expenses
associated with these corporate activities, including merger
and integration charges, are reported within the Treasury
and Corporate Support business segment. Income taxes are
assessed to each business segment at a standard tax rate
with the residual tax expense or benefit to arrive at the
consolidated effective tax rate included in Treasury and
Corporate Support.
Designations, assignments and allocations change from
time to time as management systems are enhanced,
methods of evaluating performance or product lines change
or business segments are realigned to better respond to the
Company’s diverse customer base. During 2023, certain
organization and methodology changes were made,
including the Company combining its Wealth Management
and Investment Services and Corporate and Commercial
Banking lines of businesses to create the Wealth,
Corporate, Commercial and Institutional Banking line of
business during the third quarter. Prior period results were
restated and presented on a comparable basis.
134 U.S. Bancorp 2023 Annual Report
Business segment results for the years ended December 31 were as follows:
Wealth, Corporate,
Commercial and
Institutional Banking
Consumer and Business
Banking
Payment Services
(Dollars in Millions)
2023
2022
2023
2022
2023
2022
Condensed Income Statement
Net interest income (taxable-equivalent basis)
$ 6,129 $ 5,213
$ 8,331
$ 6,764
$ 2,702
$ 2,504
Noninterest income
Total net revenue
Noninterest expense
Income (loss) before provision and income taxes
Provision for credit losses
Income (loss) before income taxes
Income taxes and taxable-equivalent adjustment
Net income (loss)
Net (income) loss attributable to noncontrolling interests
4,143
10,272
5,183
5,089
334
4,755
1,190
3,565
—
3,561
8,774
4,135
4,639
154
4,485
1,122
3,363
—
1,662
9,993
6,964
3,029
79
2,950
738
2,212
—
1,536
8,300
5,779
2,521
75
2,446
612
1,834
—
4,056
(a)
3,794
(a)
6,758
3,772
2,986
1,394
1,592
398
1,194
—
6,298
3,525
2,773
980
1,793
449
1,344
—
Net income (loss) attributable to U.S. Bancorp
$ 3,565 $ 3,363
$ 2,212
$ 1,834
$ 1,194
$ 1,344
Average Balance Sheet
Loans
Other earning assets
Goodwill
Other intangible assets
Assets
Noninterest-bearing deposits
Interest-bearing deposits
Total deposits
Total U.S. Bancorp shareholders’ equity
(Dollars in Millions)
Condensed Income Statement
$175,780 $150,512
$161,862
$144,441
$38,471
$34,627
6,615
4,682
1,007
4,771
3,634
365
2,388
4,466
5,265
3,117
3,250
3,784
97
3,327
350
634
3,305
423
202,642 169,554
179,103
160,174
44,292
41,072
70,977
82,671
31,082
199,780 175,345
189,148
270,757 258,016
220,230
22,362
18,159
16,016
31,719
163,190
194,909
12,678
2,981
103
3,084
9,310
3,410
162
3,572
8,233
Treasury and Corporate
Support
Consolidated Company
2023
2022
2023
2022
Net interest income (taxable-equivalent basis)
$
365 $
Noninterest income
Total net revenue
Noninterest expense
Income (loss) before provision and income taxes
Provision for credit losses
Income (loss) before income taxes
Income taxes and taxable-equivalent adjustment
Net income (loss)
Net (income) loss attributable to noncontrolling interests
756
1,121
2,954
(1,833)
468
365
565
930
1,467
(537)
768
(2,301)
(1,305)
(788)
(1,513)
(29)
(602)
(703)
(13)
$ 17,527
$ 14,846
10,617
(b)
9,456
(b)
28,144
18,873
9,271
2,275
6,996
1,538
5,458
24,302
14,906
9,396
1,977
7,419
1,581
5,838
(29)
(13)
Net income (loss) attributable to U.S. Bancorp
$ (1,542) $
(716) $ 5,429
$ 5,825
Average Balance Sheet
Loans
Other earning assets
Goodwill
Other intangible assets
Assets
Noninterest-bearing deposits
Interest-bearing deposits
Total deposits
Total U.S. Bancorp shareholders’ equity
$ 5,162 $ 3,993
$381,275
$333,573
214,824 203,248
223,924
211,770
—
17
—
5
12,475
6,639
237,403 221,349
663,440
2,728
8,864
11,592
2,594
3,293
5,887
107,768
397,895
505,663
5,972
11,346
53,660
10,189
4,577
592,149
120,394
341,990
462,384
50,416
(a) Presented net of related rewards and rebate costs and certain partner payments of $3.0 billion and $2.9 billion for 2023 and 2022, respectively.
(b) Includes revenue generated from certain contracts with customers of $8.8 billion and $8.0 billion for 2023 and 2022, respectively.
135
2023
2022
$ 11,585 $ 5,288
662
672
61,495
59,202
3,884
12,100
159
974
3,575
9,100
150
1,101
$ 90,859 $ 79,088
$ 34,332 $ 26,983
1,221
1,339
55,306
50,766
$ 90,859 $ 79,088
2023
2022
2021
$ 4,869 $ 4,750 $ 7,000
11
606
51
105
119
31
2
112
46
5,537
5,005
7,160
1,336
137
1,473
505
162
667
348
154
502
4,064
4,338
6,658
(170)
(138)
(53)
4,234
4,476
6,711
1,195
1,349
1,252
$ 5,429 $ 5,825 $ 7,963
NOTE 25 U.S. Bancorp (Parent Company)
Condensed Balance Sheet
At December 31 (Dollars in Millions)
Assets
Due from banks, principally interest-bearing
Available-for-sale investment securities
Investments in bank subsidiaries
Investments in nonbank subsidiaries
Advances to bank subsidiaries
Advances to nonbank subsidiaries
Other assets
Total assets
Liabilities and Shareholders’ Equity
Long-term debt
Other liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Condensed Income Statement
Year Ended December 31 (Dollars in Millions)
Income
Dividends from bank subsidiaries
Dividends from nonbank subsidiaries
Interest from subsidiaries
Other income
Total income
Expense
Interest expense
Other expense
Total expense
Income before income taxes and equity in undistributed income of subsidiaries
Applicable income taxes
Income of parent company
Equity in undistributed income of subsidiaries
Net income attributable to U.S. Bancorp
136 U.S. Bancorp 2023 Annual Report
Condensed Statement of Cash Flows
Year Ended December 31 (Dollars in Millions)
Operating Activities
Net income attributable to U.S. Bancorp
Adjustments to reconcile net income to net cash provided by operating activities
Equity in undistributed income of subsidiaries
Other, net
Net cash provided by operating activities
Investing Activities
Proceeds from sales and maturities of investment securities
Investments in subsidiaries
Net (increase) decrease in short-term advances to subsidiaries
Long-term advances to subsidiaries
Principal collected on long-term advances to subsidiaries
Cash paid for acquisition
Other, net
Net cash used in investing activities
Financing Activities
Proceeds from issuance of long-term debt
Principal payments or redemption of long-term debt
Proceeds from issuance of preferred stock
Proceeds from issuance of common stock
Repurchase of preferred stock
Repurchase of common stock
Cash dividends paid on preferred stock
Cash dividends paid on common stock
Net cash provided by (used in) financing activities
Change in cash and due from banks
Cash and due from banks at beginning of year
Cash and due from banks at end of year
2023
2022
2021
$ 5,429 $ 5,825 $ 7,963
(1,195)
(1,349)
(1,252)
83
(398)
(85)
4,317
4,078
6,626
25
—
(9)
423
(5,030)
557
200
—
411
(7,500)
(2,000)
(7,000)
4,500
2,500
1,250
—
(5,500)
—
172
(173)
(269)
(2,812)
(9,223)
(5,408)
8,150
8,150
1,300
(936)
(2,300)
(3,000)
—
951
437
21
2,221
43
—
(1,100)
(1,250)
(62)
(69)
(1,555)
(341)
(299)
(308)
(2,970)
(2,776)
(2,579)
4,792
6,297
5,288
2,064
(5,128)
(3,081)
(3,910)
8,369
12,279
$ 11,585 $ 5,288 $ 8,369
Transfer of funds (dividends, loans or advances) from bank
subsidiaries to the Company is restricted. Federal law requires
loans to the Company or its affiliates to be secured and
generally limits loans to the Company or an individual affiliate
to 10 percent of each bank’s unimpaired capital and surplus. In
the aggregate, loans to the Company and all affiliates cannot
exceed 20 percent of each bank’s unimpaired capital and
surplus.
Dividend payments to the Company by its subsidiary bank
are subject to regulatory review and statutory limitations and,
in some instances, regulatory approval. In general, dividends
by the Company’s bank subsidiary to the parent company are
limited by rules which compare dividends to net income for
regulatorily-defined periods. Furthermore, dividends are
restricted by minimum capital constraints for all national banks.
NOTE 26 Subsequent Events
The Company has evaluated the impact of events that have
occurred subsequent to December 31, 2023 through the
date the consolidated financial statements were filed with
the SEC. Based on this evaluation, the Company has
determined
none of these events were required to be recognized or
disclosed in the consolidated financial statements and
related notes.
137
U.S. Bancorp
Consolidated Daily Average Balance Sheet and Related Yields and Rates(a)
(Unaudited)
Year Ended December 31
(Dollars in Millions)
Assets
Investment securities
Loans held for sale
Loans(b)
Commercial
Commercial real estate
Residential mortgages
Credit card
Other retail
Total loans
Interest-bearing deposits with banks
Other earning assets
Total earning assets
Allowance for loan losses
Unrealized gain (loss) on investment securities
Other assets
Total assets
Liabilities and Shareholders’ Equity
Noninterest-bearing deposits
Interest-bearing deposits
Interest checking
Money market savings
Savings accounts
Time deposits
Total interest-bearing deposits
Short-term borrowings
Federal funds purchased
Securities sold under agreements to
repurchase
Commercial paper
Other short-term borrowings
Total short-term borrowings
Long-term debt
Total interest-bearing liabilities
Other liabilities
Shareholders’ equity
Preferred equity
Common equity
Total U.S. Bancorp shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
Net interest income
Gross interest margin
Gross interest margin without taxable-
equivalent increments
Percent of Earning Assets
Interest income
Interest expense
Net interest margin
Net interest margin without taxable-equivalent
increments
2023
2022
2021
Average
Balances
Interest
Yields
and
Rates
Average
Balances
Interest
Yields
and
Rates
Average
Balances
Interest
Yields
and
Rates
$162,757 $ 4,566 2.81% $169,442 $ 3,457 2.04% $154,702 $ 2,434 1.57%
2,461
147 5.98
3,829
201 5.26
8,024
232 2.89
134,883
54,646
115,922
26,570
49,254
8,662 6.42
3,384 6.19
4,305 3.71
3,429 12.91
2,599 5.28
381,275 22,379 5.87
2,581 5.27
471 4.85
605,199 30,144 4.98
49,000
9,706
123,797
41,098
84,749
23,478
60,451
4,340 3.51
1,655 4.03
2,775 3.27
2,583 11.00
2,292 3.79
333,573 13,645 4.09
559 1.78
204 2.89
545,343 18,066 3.31
31,425
7,074
102,855
38,781
74,629
21,645
59,055
2,684 2.61
1,219 3.14
2,477 3.32
2,278 10.52
2,126 3.60
296,965 10,784 3.63
.10
101 1.55
506,141 13,593 2.69
39,914
6,536
42
(7,138)
(7,985)
73,364
$663,440
(5,880)
(6,914)
59,600
$592,149
(6,326)
1,174
55,543
$556,532
$107,768
$120,394
$127,204
129,341
166,272
55,590
46,692
397,895
1,334 1.03
5,654 3.40
.16
1,697 3.63
8,775 2.21
90
117,471
126,221
67,722
30,576
341,990
277
1,220
10
.24
.97
.02
365 1.19
.55
1,872
103,198
117,093
62,294
24,492
307,077
24
199
7
90
320
.02
.17
.01
.37
.10
435
21 4.72
687
8 1.12
1,507
2
.10
2
1
.13
.01
65 1.54
.47
70
603 1.64
.28
993
20 1.00
.96
69
471 2.98
568 2.21
780 2.35
.80
3,220
3,103
7,800
22,803
34,141
44,142
125 4.04
268 3.44
1,563 6.85
1,977 5.79
1,865 4.22
476,178 12,617 2.65
25,369
6,808
46,852
53,660
465
54,125
$663,440
2,037
7,186
15,830
25,740
33,114
400,844
20,029
6,761
43,655
50,416
466
50,882
$592,149
1,790
7,228
4,249
14,774
36,682
358,533
16,353
6,255
47,555
53,810
632
54,442
$556,532
$17,527
$14,846
$12,600
2.33%
2.31%
4.98%
2.08
2.90%
2.88%
2.51%
2.49%
3.31%
.59
2.72%
2.70%
2.41%
2.39%
2.69%
.20
2.49%
2.47%
(a) Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent.
(b) Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances.
138 U.S. Bancorp 2023 Annual Report
U.S. Bancorp
Supplemental Financial Data (Unaudited)
Earnings Per Common Share Summary
Earnings per common share
Diluted earnings per common share
Dividends declared per common share
Other Statistics (Dollars and Shares in Millions)
Common shares outstanding(a)
Average common shares outstanding and common stock equivalents
Earnings per common share
Diluted earnings per common share
Number of shareholders(b)
Common dividends declared
(a) Defined as total common shares issued less common stock held in treasury at December 31.
(b) Based on number of common stock shareholders of record at December 31.
2023
2022
2021
$ 3.27
$ 3.69
$ 5.11
3.27
1.93
3.69
1.88
5.10
1.76
1,558
1,531
1,484
1,543
1,489
1,489
1,543
1,490
1,490
2
9,094
3
0,280
3
1,111
$
3,000
$
2,829
$
2,630
The common stock of U.S. Bancorp is traded on the New York Stock Exchange, under the ticker symbol “USB.” At January 31,
2024, there were 29,006 holders of record of the Company’s common stock.
Stock Performance Chart
The following chart compares the cumulative total shareholder return on the Company’s common stock during the five years
ended December 31, 2023, with the cumulative total return on the Standard & Poor’s 500 Index and the KBW Bank Index. The
comparison assumes $100 was invested on December 31, 2018, in the Company’s common stock and in each of the foregoing
indices and assumes the reinvestment of all dividends. The comparisons in the graph are based upon historical data and are not
indicative of, nor intended to forecast, future performance of the Company’s common stock.
139
Total Return134110136110116100131156200164207136122169133132USBS&P 500KBW Bank Index (BKX)201820192020202120222023100120140160180200220
Company Information
General Business Description U.S. Bancorp is a financial
services holding company headquartered in Minneapolis,
Minnesota, serving millions of local, national and global
customers. U.S. Bancorp is registered as a bank holding
company under the Bank Holding Company Act of 1956 (the
“BHC Act”), and has elected to be treated as a financial
holding company under the BHC Act. The Company
provides a full range of financial services, including lending
and depository services, cash management, capital
markets, and trust and investment management services. It
also engages in credit card services, merchant and ATM
processing, mortgage banking, insurance, brokerage and
leasing.
U.S. Bancorp’s banking subsidiary, USBNA, is engaged
in the general banking business, principally in domestic
markets, and holds all of the Company's consolidated
deposits of $512.3 billion at December 31, 2023. USBNA
provides a wide range of products and services to
individuals, businesses, institutional organizations,
governmental entities and other financial institutions.
Commercial and consumer lending services are principally
offered to customers within the Company’s domestic
markets, to domestic customers with foreign operations and
to large national customers operating in specific industries
targeted by the Company, such as healthcare, utilities, oil
and gas, and state and municipal government. Lending
services include traditional credit products as well as credit
card services, lease financing and import/export trade,
asset-backed lending, agricultural finance and other
products. Depository services include checking accounts,
savings accounts and time certificate contracts. Ancillary
services such as capital markets, treasury management and
receivable lock-box collection are provided to corporate and
governmental entity customers. U.S. Bancorp’s bank and
trust subsidiaries provide a full range of asset management
and fiduciary services for individuals, estates, foundations,
business corporations and charitable organizations.
Other U.S. Bancorp non-banking subsidiaries offer
investment and insurance products to the Company’s
customers principally within its domestic markets, and fund
administration services to a broad range of mutual and other
funds.
Banking and investment services are provided through a
network of 2,274 banking offices across 26 states as of
December 31, 2023, principally operating in the Midwest
and West regions of the United States. A significant
percentage of consumer transactions are completed using
USBNA's digital banking services, both online and through
its digital app. The Company operates a network of 4,524
ATMs as of December 31, 2023, and provides 24-hour,
seven day a week telephone customer service. Mortgage
banking services are provided through banking offices and
loan production offices throughout the Company’s domestic
markets. Lending products may be originated through
banking offices, indirect correspondents, brokers or other
lending sources. The Company is also one of the largest
providers of corporate and purchasing card services and
corporate trust services in the United States. The
140 U.S. Bancorp 2023 Annual Report
Company’s wholly-owned subsidiary, Elavon, Inc.
(“Elavon”), provides domestic merchant processing services
directly to merchants. Wholly-owned subsidiaries of Elavon
provide similar merchant services in Canada and segments
of Europe. The Company also provides corporate trust and
fund administration services in Europe. These foreign
operations are not significant to the Company.
As of December 31, 2023, U.S. Bancorp employed more
than 75,000 people.
Risk Factors
An investment in the Company involves risk, including the
possibility that the value of the investment could fall
substantially and that dividends or other distributions on the
investment could be reduced or eliminated. Below are
material risk factors that make an investment in the
Company speculative or risky.
Economic and Market Conditions Risk
Deterioration in business and economic conditions
could adversely affect the Company’s lending business
and the value of loans and debt securities it holds The
Company’s business activities and earnings are affected by
general business conditions in the United States and
abroad, including factors such as the level and volatility of
short-term and long-term interest rates, inflation, home
prices, unemployment and under-employment levels,
bankruptcies, household income, consumer spending,
fluctuations in both debt and equity capital markets, liquidity
of the global financial markets, the availability and cost of
capital and credit, investor sentiment and confidence in the
financial markets, the strength of the domestic and global
economies in which the Company operates, and customer
deposit behavior. These conditions can change suddenly
and negatively. For example, changes in these conditions
caused by the COVID-19 pandemic adversely affected the
Company’s consumer and commercial businesses and
securities portfolios, its level of charge-offs and provision for
credit losses, and its results of operations from the start of
the pandemic in early 2020 through 2022, and changes in
these conditions caused by Russia’s invasion of Ukraine
impacted the Company’s results of operations in 2022 and
2023. Inflation continued to impact the Company’s financial
condition in 2023, as the COVID-19 era fiscal and monetary
stimulus as well as geopolitical pressures continued to drive
inflationary pressure. Further, recent bank failures prompted
by sudden and significant withdrawals of deposits at the
failing banks resulted in significant volatility in the stock
prices of certain financial services institutions. In addition,
volatility due to failures of other banks or general uncertainty
regarding the health of banks may affect customer deposit
behavior and cause deposit withdrawals. Other future
changes in these conditions, whether related to a pandemic,
the war in Ukraine, conflict in the Middle East, the threat or
occurrence of a U.S. sovereign default or government
shutdown, disruptions in the financial services industry or
otherwise, could have additional adverse effects on the
Company and its businesses.
Given the high percentage of the Company’s assets
represented directly or indirectly by loans, and the
importance of lending to its overall business, weak
economic conditions have in the past negatively affected,
and may continue to negatively affect, the Company’s
business and results of operations, including new loan
origination activity, existing loan utilization rates and
delinquencies, defaults and the ability of customers to meet
obligations under the loans. In addition, future deterioration
in economic conditions could have adverse effects on loan
origination activity, loan utilization rates and delinquencies,
defaults and the ability of customers to meet loan
obligations. The value to the Company of other assets such
as investment securities, most of which are debt securities
or other financial instruments supported by loans, similarly
have been, and would be, negatively impacted by
widespread decreases in credit quality resulting from a
weakening of the economy.
In addition, volatility and uncertainty related to inflation or
a possible recession and their effects, which could
potentially continue to contribute to poor economic
conditions, may contribute to or enhance some of the risks
described herein. For example, higher inflation, slower
growth or a recession could reduce demand for the
Company’s products, adversely affect the creditworthiness
of its borrowers or result in lower values for its interest-
earning assets and investment securities. In 2023, demand
for borrowing from both corporate and consumer customers,
specifically for residential mortgage and auto loans, slowed
as borrowing costs rose due to increased interest rates.
Any of these effects, or others that the Company is not able
to predict, could adversely affect its financial condition or
results of operations.
Any deterioration in global economic conditions could
damage the domestic economy or negatively affect the
Company’s borrowers or other counterparties that have
direct or indirect exposure to these regions. Such global
disruptions, including disruptions in supply chains or
geopolitical risk, can undermine investor confidence, cause
a contraction of available credit, or create market volatility,
any of which could have material adverse effects on the
Company’s businesses, results of operations, financial
condition and liquidity, even if the Company’s direct
exposure to the affected region is limited. Global political
trends toward nationalism and isolationism could increase
the probability of a deterioration in global economic
conditions.
Changes in interest rates have in the past reduced, and
could in the future reduce, the Company’s net interest
income The Company’s earnings are dependent to a large
degree on net interest income, which is the difference
between interest income from loans and investments and
interest expense on deposits and borrowings. Net interest
income is significantly affected by market rates of interest,
which in turn are affected by prevailing economic conditions,
by the fiscal and monetary policies of the federal
government and by the policies of various regulatory
agencies. Volatility in interest rates can also result in the
flow of funds away from financial institutions into direct
investments. Direct investments, such as United States
government and corporate securities and other investment
vehicles (including mutual funds), generally pay higher rates
of return than financial institutions because of the absence
of federal insurance premiums. This may cause USBNA to
lose some of its low-cost deposit funding. Customers may
also continue to move noninterest-bearing deposits into
interest-bearing accounts, thus increasing overall deposit
costs. Higher funding costs may reduce the Company’s net
interest margin and net interest income. A prolonged period
of high or increasing interest rates may cause the Company
to experience an acceleration of deposit migration, which
could adversely affect the Company’s operations and
liquidity. This risk is exacerbated by technological
developments and trends in customer behavior, including
the ease and speed with which deposits may be transferred
electronically, particularly by a growing number of
customers who maintain accounts with multiple banks.
United States interest rates fell dramatically during the
first quarter of 2020 and remained low through 2021, which
adversely affected the Company’s net interest income. The
Federal Reserve Board raised benchmark interest rates
throughout 2022 and 2023, and may continue to raise
interest rates in response to economic conditions,
particularly inflationary pressures, or may lower interest
rates in future periods.
When interest rates are increasing, the Company can
generally be expected to earn higher net interest income,
and conversely, decreasing interest rates can adversely
impact the Company's net interest income. However, higher
interest rates can also lead to fewer originations of loans,
less liquidity in the financial markets, and higher funding
costs, each of which could adversely affect the Company’s
revenues and its liquidity and capital levels. In 2022 and
2023, as a result of the high interest rate environment, the
Company earned higher net interest income but
experienced fewer originations of mortgage loans and
higher funding costs, and the Company expects these
effects to continue in the future if interest rates remain
elevated or increase further. Higher interest rates can also
negatively affect the payment performance on loans that are
linked to variable interest rates. If borrowers of variable rate
loans are unable to afford higher interest payments, those
borrowers may reduce or stop making payments, thereby
causing the Company to incur losses and increased
operational costs related to servicing a higher volume of
delinquent loans.
The Company’s results may be materially affected by
market fluctuations and significant changes in the value
of financial instruments The value of securities,
derivatives and other financial instruments which the
Company owns or in which it makes markets can be
materially affected by market fluctuations. Market volatility,
illiquid market conditions and other disruptions in the
financial markets may make it extremely difficult to value
certain financial instruments. Subsequent valuations of
financial instruments in future periods, in light of factors then
prevailing, may result in significant changes in the value of
these instruments. In addition, at the time of any disposition
of these financial instruments, the price that the Company
ultimately realizes will depend on the demand and liquidity
in the market at that time and may be materially lower than
their current fair value. Any of these factors could cause a
decline in the value of financial instruments that the
Company owns or in which it makes markets, which may
141
have an adverse effect on the Company’s results of
operations. In addition, losses in the value of the Company’s
investment securities or loan portfolio could affect market
perception of the Company and create volatility in the
Company’s stock price. Losses in the value of the
Company’s investment securities, even if they do not affect
earnings or capital, could also cause some depositors,
particularly those who maintain uninsured and
uncollateralized deposits, to question the stability of USBNA
and to move their deposits away from USBNA. Such events
could negatively affect the Company’s liquidity, financial
condition and results of operations.
The Company’s risk management and monitoring
processes, including its stress testing framework, seek to
quantify and control the Company’s exposure to more
extreme market moves. However, the Company’s hedging
and other risk management strategies may not be effective,
and it could incur significant losses in the event of
unexpected or unmitigated market volatility.
Operations and Business Risk
A breach in the security of the Company’s information
systems, or the information systems of certain third
parties, could disrupt the Company’s businesses, result
in the disclosure of confidential information, damage its
reputation and create significant financial and legal
exposure The Company continues to experience an
increasing number of attempted attacks on its information
systems, software, networks and other technologies.
Although the Company devotes significant resources to
maintain, improve, and regularly upgrade its systems and
processes that are designed to protect the security of the
Company’s computer systems, software, networks,
technologies and intellectual property, and to protect the
confidentiality, integrity and availability of information
belonging to the Company, its employees, and its
customers, the Company’s security measures may not be
effective against new threats. Malicious actors continue to
develop increasingly sophisticated cyber attacks that could
impact the Company. Many financial institutions, retailers
and other companies engaged in data processing, including
software and information technology service providers, have
reported cyber attacks, some of which involved
sophisticated and targeted attacks intended to obtain
unauthorized access to confidential information, destroy
data, disable or degrade service, or sabotage systems,
often through the introduction of software that is intentionally
included or inserted in an information system for a harmful
purpose (malware).
Attacks on financial or other institutions important to the
overall functioning of the financial system could also
adversely affect, directly or indirectly, aspects of the
Company’s businesses. The increasing consolidation,
interdependence and complexity of financial entities and
technology systems increases the risk of operational failure,
both for the Company and on an industry-wide basis, and
means that a technology failure, cyber attack, or other
information or security breach that significantly degrades,
deletes or compromises the systems or data of one or more
financial entities could materially affect the Company,
counterparties or other market participants.
142 U.S. Bancorp 2023 Annual Report
Third parties that facilitate the Company’s business
activities, including exchanges, clearinghouses, payment
and ATM networks, financial intermediaries and vendors
that provide services or technology solutions for the
Company’s operations, are also sources of operational and
security risks to the Company due to operational or
technical failures of their systems, misconduct or negligence
by their employees or cyber attacks that could affect their
ability to deliver a product or service to the Company,
resulting in lost or compromised Company or customer
information. Furthermore, a third party may not reveal an
attack or system failure to the Company in a timely manner,
which could compromise the Company’s ability to respond
effectively. Some of these third parties may engage vendors
of their own, which introduces the risk that the third party’s
vendors and subcontractors could be the source of
operational and security failures. In addition, if a third party
obtains access to the customer account data on the
Company’s systems, and that party experiences a breach
via an external or internal threat or misappropriates such
data, the Company and its customers could suffer material
harm, including heightened risk of fraudulent transactions,
losses from fraudulent transactions, increased operational
costs to remediate any security breach and reputational
harm. These risks are expected to continue to increase as
the Company expands its interconnectivity with its
customers and other third parties.
Within the past several years, multiple companies have
disclosed significant cybersecurity breaches affecting debit
and credit card accounts of their customers, some of whom
were the Company’s cardholders and who may experience
fraud on their card accounts because of the breach. The
Company has suffered, and will in the future suffer, losses
associated with reimbursing its customers for such
fraudulent transactions and for other costs related to data
security compromise events, such as replacing cards
associated with compromised card accounts. These attacks
involving Company cards are likely to continue and could,
individually or in the aggregate, have a material adverse
effect on the Company’s financial condition or results of
operations.
The Company may not be able to anticipate or to
implement effective preventive measures against all
cyberattacks because malicious actor methods and
techniques change frequently, increase in sophistication,
often are not recognized until launched, sometimes go
undetected even when successful, and originate from a
wide variety of sources, including organized crime, hackers,
terrorists, activists, hostile foreign governments and other
external parties. Those parties may also attempt to
fraudulently induce employees, customers or other users of
the Company’s systems to disclose sensitive information to
gain access to the Company’s data or that of its customers
or clients, such as through “phishing” and other social
engineering schemes. For example, recent advances in
artificial intelligence may allow a bad actor to create so-
called “deep fakes” to impersonate the voice or likeness of
another individual, which could be used in social
engineering schemes that may be more difficult to detect
than other social engineering efforts. Other types of attacks
may include the introduction of computer viruses and/or
malicious or destructive code, denial-of-service attacks
(DDoS), and cyber extortion with accompanying ransom
demands. The Company’s information security risks may
increase in the future as the Company continues to increase
its mobile and internet-based product offerings and expands
its internal usage of web-based products and applications.
In addition, the Company’s customers often use their own
devices, such as computers, smart phones and tablet
computers, to make payments and manage their accounts,
and are subject to “phishing,” scam websites, and other
attempts from cyber criminals to compromise or deny
access to their accounts. The Company has limited ability to
assure the safety and security of its customers’ transactions
with the Company to the extent they are using their own
devices, which have been, and likely will continue to be,
subject to such threats.
If the Company’s physical or cybersecurity systems are
penetrated or circumvented, or an authorized user
intentionally or unintentionally removes, loses or destroys
critical business data, serious negative consequences for
the Company can follow, including significant disruption of
the Company’s operations, misappropriation of confidential
Company and/or customer information, or damage to the
Company’s, customers’ or counterparties’ computers or
systems. These consequences could result in violations of
applicable privacy and other laws; financial loss to the
Company or to its customers; loss of confidence in the
Company’s security measures; customer dissatisfaction;
significant litigation exposure; regulatory investigations,
fines, penalties or intervention; reimbursement or other
compensatory costs (including the costs of credit monitoring
services); additional compliance costs; and harm to the
Company’s reputation, all of which could adversely affect
the Company.
Because the investigation of any information security
breach is inherently unpredictable and would require
substantial time to complete, the Company may not be able
to quickly remediate the consequences of any breach, which
may increase the costs of, and enhance the negative
consequences associated with, a breach. In addition, to the
extent the Company’s insurance covers aspects of any
breach, such insurance may not be sufficient to cover all the
Company’s losses.
The Company relies on its employees, systems and
third parties to conduct its business, and certain
failures by systems or misconduct by employees or
third parties could adversely affect its operations The
Company operates in many different businesses in diverse
markets and relies on the ability of its employees and
systems to process a high number of transactions. The
Company’s business, financial, accounting, data processing,
and other operating systems and facilities may stop
operating properly or become disabled or damaged due to a
number of factors, including events that are out of its
control. In addition to the risks posed by information security
breaches, as discussed above, such systems could be
compromised because of spikes in transaction volume,
electrical or telecommunications outages, degradation or
loss of internet or website availability, natural disasters,
political or social unrest, and terrorist acts. The Company’s
business operations may be adversely affected by
significant disruption to the operating systems that support
its businesses and customers. The Company’s backup
systems could become compromised, which could
negatively impact the ability to back up data.
The Company could also incur losses resulting from the
risk of human error by employees, misconduct or fraud by
employees or persons outside the Company, unauthorized
access to its computer systems, the execution of
unauthorized transactions by employees, errors relating to
transaction processing and technology, breaches of the
internal control system and compliance requirements, and
failures of business continuation and disaster recovery
processes and systems. This risk of loss also includes
customer remediation costs, potential legal actions, fines or
civil money penalties that could arise resulting from an
operational deficiency or noncompliance with applicable
regulatory standards, adverse business decisions or their
implementation, and customer attrition due to potential
negative publicity.
Third parties provide key components of the Company’s
business infrastructure, such as internet connections, cloud
services, network access and mutual fund distribution. Any
problems caused by third-party service providers, including
failing to comply with their contractual obligations or
performing their services negligently, could adversely affect
the Company’s ability to deliver products and services to the
Company’s customers and otherwise to conduct its
business. Replacing third-party service providers could also
entail significant delay and expense. In addition, failure of
third-party service providers to handle current or higher
volumes of use could adversely affect the Company’s ability
to deliver products and services to clients and otherwise to
conduct business. Technological or financial difficulties of a
third-party service provider could adversely affect the
Company’s businesses to the extent those difficulties result
in the interruption or discontinuation of services provided by
that party.
Operational risks for large financial institutions such as
the Company have generally increased in recent years, in
part because of the proliferation of new technologies,
implementation of work-from-home and hybrid work
arrangements, the use of internet services and
telecommunications technologies to conduct financial
transactions, the increased number and complexity of
transactions being processed, and the increased
sophistication and activities of organized crime, hackers,
terrorists, activists, and other external parties. In the event
of a breakdown in the internal control system, improper
operation of systems or improper employee or third-party
actions, the Company could suffer financial loss, face legal
or regulatory action and suffer damage to its reputation.
The Company could face material legal and reputational
harm if it fails to safeguard personal information The
Company is subject to complex and evolving laws and
regulations, both inside and outside the United States,
governing the privacy and protection of personal
information. Individuals whose personal information may be
protected by law can include the Company’s customers and
their customers, prospective customers, job applicants,
current and former employees, employees of the
Company’s suppliers, and other individuals. Complying with
143
laws and regulations applicable to the Company’s collection,
use, transfer and storage of personal information can
increase operating costs, impact the development and
marketing of new products or services, and reduce
operational efficiency. Any mishandling or misuse of
personal information by the Company or its suppliers could
expose the Company to litigation or regulatory fines,
penalties or other sanctions. For example, a state attorney
general recently announced an action against a bank for
alleged failure to protect consumer accounts from fraud.
In the United States, several states have enacted
consumer privacy laws that impose compliance obligations
with respect to personal information. In particular, the
California Consumer Privacy Act (the “CCPA”), as amended
by the California Privacy Rights Act, and its implementing
regulations impose significant requirements on covered
businesses with respect to consumer data privacy rights.
Compliance with the CCPA and other state statutes,
common law, or regulations designed to protect personal
information could potentially require substantive technology
infrastructure and process changes across many of the
Company’s businesses. Non-compliance with the CCPA or
similar laws and regulations could lead to substantial
regulatory fines and penalties, damages from private causes
of action, compelled changes to the Company’s business
practices, and/or reputational harm. The Company cannot
predict whether any pending or future state or federal
legislation will be adopted, or the impact of any such
adopted legislation on the Company. Future legislation
could result in substantial costs to the Company and could
have an adverse effect on its business, financial condition,
and results of operations.
In addition, legal requirements for cross-border personal
data transfers are constantly changing, including the
revisions made by the European Economic Area (“EEA”)
that require the use of revised Standard Contractual
Clauses (“SCCs”) for international data transfers from the
EEA. The SCCs are required to be used for new
agreements involving the cross-border transfer of personal
data from the EEA and must be supplemented by an
assessment and due diligence of the legal and regulatory
landscape of the jurisdiction of the data importer, the
channels used to transmit personal data and any sub-
processors that may receive personal data. The United
Kingdom has developed its own set of SCCs that must be
used for transfers of personal data from the United Kingdom
to the United States. In July 2023, the European
Commission announced a final adequacy decision for the
EU-U.S. Data Privacy Framework, a cross-border data
transfer mechanism that replaced the EU-U.S. Privacy
Shield that was invalidated in 2020. Compliance with this
changing landscape of privacy requirements could
potentially compel the Company to make significant
technological and operational changes, any of which could
result in substantial costs to the Company, and failure to
comply with applicable data transfer or privacy requirements
could subject the Company to fines or regulatory
investigation or oversight.
Additional risks could arise from the failure of the
Company or third parties to provide adequate notice to the
Company’s customers about the personal information
144 U.S. Bancorp 2023 Annual Report
collected from them and the use of such information; to
receive, document, and honor the privacy preferences
expressed by the Company’s customers; to protect personal
information from unauthorized disclosure; or to maintain
proper training on privacy practices for all employees or
third parties who have access to personal information.
Concerns regarding the effectiveness of the Company’s
measures to safeguard personal information and abide by
privacy preferences, or even the perception that those
measures are inadequate or that the Company does not
abide by such privacy preferences, could cause the
Company to lose existing or potential customers and
thereby reduce its revenues. In addition, any failure or
perceived failure by the Company to comply with applicable
privacy or data protection laws and regulations could result
in requirements to modify or cease certain operations or
practices, and/or in material liabilities or regulatory fines,
penalties, or other sanctions. Refer to “Supervision and
Regulation” in the Company’s Annual Report on Form 10-K
for additional information regarding data privacy laws and
regulations. Any of these outcomes could materially damage
the Company’s reputation and otherwise adversely affect its
business.
The Company could lose market share and experience
increased costs if it does not effectively develop and
implement new technology The financial services industry
is continually undergoing rapid technological change with
frequent introductions of new technology-driven products
and services, including innovative ways that customers can
make payments or manage their accounts, such as through
the use of mobile payments, digital wallets or digital
currencies. The Company believes its success depends, in
part, upon its ability to address customer needs by using
technology to provide products and services and create
additional efficiencies in the Company’s operations. When
launching a new product or service or introducing a new
platform for the delivery of products and services, the
Company might not identify or fully appreciate new
operational risks arising from those innovations or might
inadvertently fail to implement adequate controls to mitigate
those risks. Developing and deploying new technology-
driven products and services can also involve costs that the
Company may not recover and divert resources away from
other product development efforts. The Company may not
be able to effectively develop and implement profitable new
technology-driven products and services or be successful in
marketing these products and services to its customers.
Failure to successfully keep pace with technological change
affecting the financial services industry, including because
larger competitors may have more resources to spend on
developing new technologies or because non-bank
competitors have a lower cost structure and more flexibility,
could harm the Company’s competitive position and
negatively affect its revenue and profit.
The use of new technologies, including artificial
intelligence (“AI”) and machine learning, may result in
reputational harm, increased regulatory scrutiny and
increased liability The banking industry is subject to rapid
and significant technological change. To compete
effectively, the Company may use new and evolving
technologies, including AI and machine learning, to help
improve its customer service and products and to automate
certain business decisions or risk management practices.
The Company's use of AI and machine learning is subject to
risks that algorithms and datasets are flawed or may be
insufficient or contain biased information. In addition, the
models and processes relating to AI and machine learning
are not always transparent, which could increase the risk of
unintended deficiencies. These deficiencies could result in
inaccurate or ineffective decisions, predictions or analysis,
which could subject the Company to competitive harm, legal
liability, increased regulatory scrutiny, reputational harm or
other consequences that the Company may not be able to
predict, any of which could negatively affect the Company's
financial condition and results of operations.
The Company may not realize the full value of its
strategic plans and initiatives As the Company develops
its strategic initiatives, it scans the internal and external
environment to inform any changes required, take
advantage of new opportunities and/or respond to
unexpected challenges. Initiatives include focusing on
customer growth with tailored products and experiences that
meet customer needs; executing disciplined strategies to
grow and maintain sufficient capital levels as part of
preserving the Company’s financial excellence and risk
appetite; acquiring and integrating financial services
businesses or assets; cultivating a future-focused and
diverse talent strategy; and increasing access to banking
services and economic empowerment. The Company’s
initiatives are impacted by internal factors, rapid pace of
change from an evolving competitive landscape, increased
cybersecurity threats, accelerated digitalization, and
emerging technologies. In addition, execution is impacted by
the Company’s response to external economic conditions,
global uncertainty, and regulatory factors that are beyond its
control. The Company’s future growth and the value of its
stock will depend, in part, on its ability to effectively
implement its business strategy. If the Company is not able
to successfully execute its business strategy, then the
Company’s competitive position, reputation, prospects for
growth, and results of operations may be adversely affected.
Damage to the Company’s reputation could adversely
impact its business and financial results Reputation risk,
or the risk to the Company’s business, earnings and capital
from negative public opinion, is inherent in the Company’s
business. Negative public opinion about the financial
services industry generally or the Company specifically
could adversely affect the Company’s ability to retain and
attract stakeholders such as customers, investors, and
employees and could expose the Company to litigation and
regulatory action. Negative public opinion can result from
the Company’s actual or alleged conduct in any number of
activities, including lending practices, cybersecurity
breaches, failures to safeguard personal information,
inability to meet community and other stakeholder
commitments, discriminating or harassing behavior of
employees toward other employees or customers, mortgage
servicing and foreclosure practices, compensation practices,
sales practices, regulatory compliance, mergers and
acquisitions, and actions taken by government regulators
and community organizations in response to that conduct.
Additionally, the Company’s stakeholders often hold
differing views on how the Company should address
environmental, social and governance (“ESG”) goals as it
relates to serving customers, including certain “anti-ESG”
sentiment among some individuals and government
institutions. The Company’s approach to ESG and
customers may result in negative attention in traditional and
social media, resulting in a negative perception of the
Company depending on an individual’s view. In addition,
failure to deliver against established ESG goals and
objectives could present reputational and financial harm to
the Company. The Company may also be targeted by
groups or influential individuals who disagree with its public
positions on social or environmental issues, which could
result in reduced revenue or reputational harm. If the
Company is unable to design or execute against business
strategies that balance conflicting views on how it supports
ESG initiatives, while continuing to support customers from
differing industries, reputational damage could result,
leading to a loss of customers or negative investor
sentiment. As a large diversified financial services company
with a high industry profile, the Company is inherently
exposed to this risk.
In addition, environmental matters have been the subject
of increased focus by regulators, particularly with respect to
the accuracy of statements made by issuers regarding their
ESG practices, initiatives and investment strategies. The
SEC has established an enforcement task force to examine
ESG practices and disclosures by public companies and
identify inaccurate or misleading statements, often referred
to as “greenwashing.” There have been enforcement actions
relating to ESG disclosures and policies and procedures
failures, and the Company expects that there will be a
greater level of enforcement activity in the future. A
perception or accusation of greenwashing could damage the
Company’s reputation, result in litigation or enforcement
actions, or adversely affect the Company’s ability to raise
capital and attract and retain customers.
The Company’s business and financial performance
could be adversely affected, directly or indirectly, by
natural disasters, pandemics, terrorist activities, civil
unrest or international hostilities Neither the occurrence
nor the potential impact of natural disasters, pandemics,
terrorist activities, civil unrest or international hostilities can
be predicted. However, these occurrences could impact the
Company directly (for example, by interrupting the
Company’s systems, which could prevent the Company
from obtaining deposits, originating loans and processing
and controlling its flow of business; causing significant
damage to the Company’s facilities; or otherwise preventing
the Company from conducting business in the ordinary
course), or indirectly as a result of their impact on the
Company’s borrowers, depositors, other customers, vendors
or other counterparties (for example, by damaging
properties pledged as collateral for the Company’s loans or
impairing the ability of certain borrowers to repay their
loans). The Company has also suffered, and could in the
future suffer, adverse consequences to the extent that
natural disasters, pandemics, including the COVID-19
pandemic, terrorist activities, civil unrest or international
145
hostilities, including Russia’s invasion of Ukraine and
conflict in the Middle East, affect the financial markets or the
economy in general or in any particular region.
For example, the COVID-19 pandemic created economic
and financial disruptions that have adversely affected, and
may in the future adversely affect, the Company’s business,
financial condition, capital and results of operations. During
the COVID-19 pandemic, the Company experienced
significant disruptions to its normal operations, including the
temporary closing of branches and a sudden increase in the
volume of work-from-home arrangements. In addition, the
Company has been indirectly negatively affected by the
pandemic’s effects on the Company’s borrowers and other
customers, and by its effects on global financial markets.
The COVID-19 pandemic caused, and other future natural
disasters, pandemics, terrorist activities, civil unrest or
international hostilities, may cause, an increase in
delinquencies, bankruptcies or defaults that could result in
the Company experiencing higher levels of nonperforming
assets, net charge-offs and provisions for credit losses.
Depending on the lingering impact of the pandemic and
the impact of current international hostilities on general
economic and market conditions, there is a risk that adverse
conditions could occur or worsen, including supply chain
disruptions; higher inflation; a possible recession; decreased
demand for the Company’s products and services or those
of its borrowers, which could increase credit risk; challenges
related to maintaining sufficient qualified personnel due to
labor shortages, talent attrition, employee illness, or
willingness to return to work; increased risk of cyber attacks;
increased volatility in commodity, currency and other
financial markets; and disruptions to business operations at
the Company and at counterparties, vendors and other
service providers.
The United States has in recent years faced periods of
significant civil unrest. Although civil unrest has not
materially affected the Company’s businesses to date,
similar events could, directly or indirectly, have a material
adverse effect on the Company’s operations (for example,
by causing shutdowns of branches or working locations of
vendors or other counterparties or damaging property
pledged as collateral for the Company’s loans).
The Company’s ability to mitigate the adverse
consequences of these occurrences is in part dependent on
the quality of the Company’s resiliency planning, and the
Company’s ability, if any, to anticipate the nature of any
such event that occurs. The adverse effects of natural
disasters, pandemics, terrorist activities, civil unrest or
international hostilities also could be increased to the extent
that there is a lack of preparedness on the part of national or
regional emergency responders or on the part of other
organizations and businesses that the Company transacts
with, particularly those that it depends upon, but has no
control over. Additionally, both the frequency and severity of
some kinds of natural disasters, including wildfires, flooding,
tornadoes and hurricanes, have increased, and the
Company expects will continue to increase, as a result of
climate change.
146 U.S. Bancorp 2023 Annual Report
The Company’s business strategy, operations, financial
performance and customers could be materially
adversely affected by the impacts related to climate
change There is an increasing concern over the risks of
climate change and the impact that climate change may
have on the Company and its customers and communities.
The physical risks of climate change include increasing
average global temperatures, rising sea levels and an
increase in the frequency and severity of extreme weather
events and natural disasters, including wildfires, floods,
tornadoes and hurricanes. Climate shifts and the increasing
frequency and severity of natural disasters reduce the
Company’s ability to predict accurately the effects of natural
disasters. Such disasters and chronic shifts caused by
climate change, such as rising sea levels, could disrupt the
Company’s operations or the operations of customers or
third parties on which the Company relies, particularly with
respect to customers located in low-lying areas and
coastlines that are more prone to flooding or other areas
that are prone to wildfires and other disasters. Such
disasters could also result in market volatility, negatively
impact customers’ ability to pay outstanding loans and fulfill
other contractual obligations, reduce future relationship
opportunities with clients, damage collateral or result in the
deterioration of the value of collateral. Such disasters may
also result in reduced availability or increased costs of
insurance, including insurance that protects property
pledged as collateral for Company loans, which could
negatively affect the Company’s ability to predict credit
losses accurately.
Additionally, climate change concerns could result in
transition risk. Transition risks could include changes in
consumer preferences, new technologies, and additional
legislation and regulatory requirements, including those
associated with the transition to a low-carbon economy.
New regulations or laws could result in significant costs as
the Company implements compliance, disclosure and other
programs. Failure to comply with any new laws or
regulations could result in legal or regulatory sanctions and
harm to the Company’s reputation. The transition to a low-
carbon economy could also negatively affect the business of
customers in carbon-intensive industries and reduce their
creditworthiness.
These physical risks and transition risks could increase
expenses or otherwise adversely impact the Company’s
business strategy, operations, financial performance and
customers. In particular, new regulations or guidance, or the
attitudes of regulators, shareholders and employees
regarding climate change, may affect the activities in which
the Company engages and the products that the Company
offers. An inability to adjust the Company’s business to
mitigate the effects of physical and transition risks could
result in higher operational and credit losses. In addition, an
increasing perspective that financial institutions, including
the Company, play an important role in managing risks
related to climate change, including indirectly with respect to
their customers, may result in increased pressure on the
Company to take additional steps to disclose and manage
its climate risks and related lending and other activities, and
the Company could suffer reputational harm related to the
environmental impacts of industries in which certain of the
Company’s customers do business. The Company could
also experience increased expenses resulting from strategic
planning, litigation and technology and market changes, and
reputational harm as a result of negative public sentiment,
regulatory scrutiny and reduced investor and stakeholder
confidence due to the Company’s response to climate
change and the Company’s climate change strategy.
Risks associated with climate change are continuing to
evolve rapidly, making it difficult to assess the effects of
climate change on the Company, and the Company expects
that climate change-related risks will continue to evolve and
increase over time.
Regulatory and Legal Risk
The Company is subject to extensive and evolving
government regulation and supervision, which can
increase the cost of doing business, limit the
Company’s ability to make investments and generate
revenue, and lead to costly enforcement actions
Banking regulations are primarily intended to protect
depositors’ funds, the federal Deposit Insurance Fund, and
the United States financial system as a whole, and not the
Company’s debt holders or shareholders. These
regulations, and the Company’s inability to act in certain
instances without receiving prior regulatory approval, affect
the Company’s lending practices, capital structure,
investment practices, dividend policy, ability to repurchase
common stock, and ability to pursue strategic acquisitions,
among other activities.
The Company expects that its business will remain
subject to extensive regulation and supervision and that the
level of scrutiny and the enforcement environment may
fluctuate over time, based on numerous factors, including
recent bank failures, changes in the United States
presidential administration or one or both houses of
Congress and public sentiment regarding financial
institutions (which can be influenced by scandals and other
incidents that involve participants in the industry). In
particular, changes in administration may result in the
Company and other large financial institutions becoming
subject to increased scrutiny and/or more extensive legal
and regulatory requirements than under prior presidential
and congressional regimes. In addition, changes in key
personnel at the agencies that regulate the Company,
including the federal banking regulators, may result in
differing interpretations of existing rules and guidelines and
potentially more stringent enforcement and more severe
penalties than previously experienced. New regulations or
modifications to existing regulations and supervisory
expectations have increased, and may in the future
increase, the Company’s costs over time and necessitate
changes to the Company’s existing regulatory compliance
and risk management infrastructure. In addition, regulatory
changes may reduce the Company’s revenues (including by
limiting the fees the Company may charge), limit the types
of financial services and products it may offer, alter the
investments it makes, affect the manner in which it operates
its businesses, increase its litigation and regulatory costs
should it fail to appropriately comply with new or modified
laws and regulatory requirements, and increase the ability of
non-banks to offer competing financial services and
products.
Changes to statutes, regulations or regulatory policies, or
their interpretation or implementation, and/or regulatory
practices, requirements or expectations, could affect the
Company in substantial and unpredictable ways. For
example, the Inflation Reduction Act of 2022 imposed a new
one percent excise tax on corporate stock repurchases,
which could impact the extent of the Company’s common
stock repurchases, preferred stock redemptions, and
mergers and acquisitions activity, as well as increase the
Company’s tax liability and reduce the Company’s net
income in connection with these activities. More recently,
U.S. banking regulators issued proposed capital rules,
commonly referred to as “Basel III Endgame”, that would
result in significant changes to the U.S. regulatory capital
rules for banking organizations with total consolidated
assets of $100 billion or more, including the Company. The
FDIC also issued its final rulemaking for special deposit
insurance assessments to recover losses to the Deposit
Insurance Fund arising from the protection of uninsured
deposits in connection with the closures of three banks in
early 2023, which resulted in a significant expense for the
Company. Complying with regulatory changes has at times
resulted in significant expense for the Company, and these
and other future regulatory changes could result in further
significant expenses which could materially affect the
Company’s financial condition and results of operations. In
addition, failure to comply with any new law or regulation
could result in litigation, regulatory enforcement actions and
harm to the Company’s reputation.
General regulatory practices, such as longer time frames
to obtain regulatory approvals for acquisitions and other
activities (and the resultant impact on businesses the
Company may seek to acquire), could affect the Company’s
ability or willingness to make certain acquisitions or
introduce new products or services. In addition, the Biden
Administration has called on all regulatory agencies to
reduce or eliminate certain fees relating to a number of
services, including banking services. Similarly, the CFPB
launched an initiative to reduce the amounts and types of
fees financial institutions may charge, including by issuing a
proposed rule that would significantly reduce the permissible
amount of credit card late fees. These and other changes
could affect the Company’s ability or willingness to provide
certain products or services, necessitate changes to the
Company’s business practices or reduce the Company’s
revenues.
Federal law grants substantial supervisory and
enforcement powers to federal banking regulators and law
enforcement agencies, including, among other things, the
ability to assess significant civil or criminal monetary
penalties, fines, or restitution; to issue cease and desist or
removal orders; and to initiate injunctive actions against
banking organizations and institution-affiliated parties. The
financial services industry continues to face scrutiny from
bank supervisors in the examination process and stringent
enforcement of regulations on both the federal and state
levels, including with respect to mortgage-related practices,
fair lending practices, fees charged by banks, student
lending practices, sales practices and related incentive
147
compensation programs, and other consumer compliance
matters, as well as compliance with Bank Secrecy Act/anti-
money laundering (“BSA/AML”) requirements and sanctions
compliance requirements as administered by the Office of
Foreign Assets Control, and consumer protection issues
more generally. This regulatory scrutiny, or the results of an
investigation or examination, may lead to additional
regulatory investigations or enforcement actions. There is
no assurance that those actions will not result in regulatory
settlements or other enforcement actions against the
Company or any of the Company’s subsidiaries (including
USBNA), which could cause the Company material financial
and reputational harm. Furthermore, a single event involving
a potential violation of law or regulation may give rise to
numerous and overlapping investigations and proceedings,
either by multiple federal and state agencies and officials in
the United States or, in some instances, regulators and
other governmental officials in foreign jurisdictions. In
addition, another financial institution’s violation of law or
regulation relating to a business activity or practice often will
give rise to an investigation of the same or similar activities
or practices of the Company.
In general, the amounts paid by financial institutions in
settlement of proceedings or investigations and the severity
of other terms of regulatory settlements are likely to remain
elevated. In some cases, governmental authorities have
required criminal pleas or other extraordinary terms,
including admissions of wrongdoing and the imposition of
monitors, as part of such settlements, which could have
significant consequences for a financial institution, including
loss of customers, reputational harm, increased exposure to
civil litigation, restrictions on the ability to access the capital
markets, and the inability to operate certain businesses or
offer certain products for a period of time.
Non-compliance with sanctions laws and/or BSA/AML
laws or failure to maintain an adequate BSA/AML
compliance program can lead to significant monetary
penalties and reputational damage. In addition, federal
regulators evaluate the effectiveness of an applicant in
combating money laundering when determining whether to
approve a proposed bank merger, acquisition, restructuring,
or other expansionary activity. There have been a number of
significant enforcement actions against banks, broker-
dealers and non-bank financial institutions with respect to
sanctions laws and BSA/AML laws, and some have resulted
in substantial penalties, including against the Company and
USBNA in 2018.
Violations of laws and regulations or deemed
deficiencies in risk management practices or consumer
compliance also may be incorporated into the Company’s
confidential supervisory ratings. A downgrade in these
ratings, or these or other regulatory actions and settlements,
could limit the Company’s ability to conduct expansionary
activities for a period of time and require new or additional
regulatory approvals before engaging in certain other
business activities.
Differences in regulation can affect the Company’s
ability to compete effectively The content and application
of laws and regulations applicable to financial institutions
vary according to the size of the institution, the jurisdictions
in which the institution is organized and operates and other
148 U.S. Bancorp 2023 Annual Report
factors. Large institutions, such as the Company, often are
subject to more stringent regulatory requirements and
supervision than smaller institutions. In addition, financial
technology companies and other non-bank competitors may
not be subject to the prudential and consumer protection
regulatory framework that applies to banks, or may be
regulated by a national or state agency that does not have
the same regulatory priorities or supervisory requirements
as the Company’s regulators. These differences in
regulation can impair the Company’s ability to compete
effectively with competitors that are less regulated and that
do not have similar compliance costs or restrictions on
activities.
Stringent requirements related to capital and liquidity
are applicable to larger banking organizations,
including the Company, that may limit the Company’s
ability to return earnings to shareholders or operate or
invest in its business The Basel III Endgame rules,
discussed above, would result in significant changes to
regulatory capital rules for banking organizations with total
consolidated assets of $100 billion or more, such as the
Company. The Company expects that the final rules will
result in requirements for the Company to hold significantly
more capital than is required under current regulations. In
addition, in response to bank failures that occurred in 2023,
the Federal Reserve Vice Chair for Supervision and the
Acting Comptroller of the Currency have indicated that the
Federal Reserve and OCC, respectively, are considering
additional liquidity risk management rules that they may
propose in 2024. These and other future changes to the
implementation of these rules including the stress capital
buffer, or additional capital- and liquidity-related rules, could
require the Company to take further steps to increase its
capital, increase its investment security holdings, divest
assets or operations, or otherwise change aspects of its
capital and/or liquidity measures, including in ways that may
be dilutive to shareholders or could limit the Company’s
ability to pay common stock dividends, repurchase its
common stock, invest in its businesses or provide loans to
its customers.
The effects of the COVID-19 pandemic and actions by
the Federal Reserve Board have in the past limited and may
in the future limit capital distributions, including suspension
of the Company’s share repurchase program or reduction or
suspension of the Company’s common stock dividend. In
addition, recent events in the banking industry, including
three high-profile bank failures in 2023, and the results of
regulatory investigations into the failures could result in
increased regulatory scrutiny and heightened regulatory
requirements, any of which could require the Company to
expend significant time and effort to implement appropriate
compliance procedures or to incur other expenses, and
could negatively affect the Company’s financial condition or
results of operations.
Further, in August 2023, the Federal Reserve Board,
OCC and FDIC issued a proposed rule that would require,
among other institutions, each Category III U.S. bank
holding company, including the Company, and each insured
depository institution with $100 billion or more in total
consolidated assets that is a consolidated subsidiary of a
Category III U.S. bank holding company, such as USBNA,
to have minimum levels of outstanding long-term debt. The
proposed rule is intended to improve the resolvability of the
banking organizations covered by the rule. The Company
continues to evaluate the potential effects of the proposed
rule. Although any effects on the Company and USBNA will
depend on the final form of any rulemaking, the Company
may need to change its current funding mix, including being
required to raise additional long-term debt, which could
adversely impact net interest margin and net interest
income.
Refer to “Supervision and Regulation” in the Company’s
Annual Report on Form 10-K for additional information
regarding the Company’s capital and liquidity requirements.
The Company is subject to significant financial and
reputation risks from potential legal liability and
governmental actions The Company faces significant legal
risks in its businesses, and the volume of claims and
amount of damages and penalties claimed in litigation and
governmental proceedings against it and other financial
institutions are substantial. Customers, clients and other
counterparties are making claims for substantial or
indeterminate amounts of damages, while banking
regulators and certain other governmental authorities have
focused on enforcement. The Company is named as a
defendant or is otherwise involved in many legal
proceedings, including class actions and other litigation. As
a participant in the financial services industry, it is likely that
the Company will continue to experience a high level of
litigation and government scrutiny related to its businesses
and operations in the future. Substantial legal liability or
significant governmental action against the Company could
materially impact the Company’s financial condition and
results of operations (including because such matters may
be resolved for amounts that exceed established accruals
for a particular period) or cause significant reputational harm
to the Company.
For example, banking organizations have been subject
to claims regarding patent infringement or other violations of
intellectual property rights in recent years which, in some
cases, have resulted in large judgments against the banks.
Such claims have in the past been brought against the
Company, and if the Company is not successful in
defending such claims or if new claims are brought or
damages sought increase, the Company may incur
substantial costs in defending such claims, regardless of
their merit. If such claims are successful, the Company
could be required to pay substantial damages and could
suffer reputational and other harm.
Additionally, the previously disclosed discontinuance of
LIBOR and the complex transition of relevant contracts from
LIBOR to alternative rates could still have a range of
adverse impacts on the Company's business and results of
operations as a result of future disputes, litigation or other
actions with clients, counterparties or investors related to
the transition. The transition may also result in additional
inquiries or other actions from regulators regarding the
Company's replacement of LIBOR.
In addition, there is an increasing focus from lawmakers
and regulators concerning ESG matters. Some states in
which the Company does business have implemented “anti-
ESG” measures and may seek to implement additional
measures in the future. Such measures may conflict with
other regulatory requirements or the expectations of the
Company's customers and shareholders. If the Company
fails to comply with evolving, and possibly conflicting, legal
and regulatory requirements, it could harm the Company’s
ability to continue to conduct business in one or more of the
jurisdictions in which the Company currently operates, or
could otherwise harm the Company’s business.
The Company assumed MUB’s liabilities as part of the
acquisition, which includes ensuring ongoing compliance
with an OCC consent order relating to MUB’s technology
and operational risk management, and could also include
other liabilities related to MUB’s compliance with banking
law. Although the Company may be entitled to
indemnification from Mitsubishi UFJ Financial Group, Inc. for
certain losses, such liabilities could result in additional
regulatory scrutiny, constraints on the Company’s business,
or enforcement actions, including civil money penalties or
fines. Any of those events could have a material adverse
impact on the Company’s future operations, financial
condition, growth, or other aspects of its business.
The Company may be required to repurchase mortgage
loans or indemnify mortgage loan purchasers as a
result of breaches in contractual representations and
warranties When the Company sells mortgage loans that it
has originated to various parties, including GSEs, it is
required to make customary representations and warranties
to the purchaser about the mortgage loans and the manner
in which they were originated. The Company may be
required to repurchase mortgage loans or be subject to
indemnification claims in the event of a breach of
contractual representations or warranties that is not
remedied within a certain period. Contracts for residential
mortgage loan sales to the GSEs include various types of
specific remedies and penalties that could be applied if the
Company does not adequately respond to repurchase
requests. If economic conditions and the housing market
deteriorate or the GSEs increase their claims for breached
representations and warranties, the Company could have
increased repurchase obligations and increased losses on
repurchases, requiring material increases to its repurchase
reserve.
The Company’s failure to satisfy its obligations as
servicer for automobile loan securitizations and
residential mortgage loans owned by other entities, and
other losses the Company could incur as servicer,
could adversely impact the Company’s reputation,
servicing costs or results of operations The Company
services automobile loans on behalf of third-party
securitization vehicles and also acts as servicer and master
servicer for mortgage loans included in securitizations and
for unsecuritized mortgage loans owned by investors. As a
servicer or master servicer for those loans, the Company
has certain contractual obligations to the securitization
trusts, investors, or other third parties. As a servicer, the
Company’s obligations include foreclosing on defaulted
loans or, to the extent consistent with the applicable
securitization or other investor agreement, considering
alternatives to foreclosure such as loan modifications or
short sales, as applicable. In the Company’s capacity as a
149
master servicer, obligations include overseeing the servicing
of mortgage loans by the servicer. Generally, the
Company’s servicing obligations are set by contract, for
which the Company receives a contractual fee. However,
with respect to mortgage loans, GSEs can amend their
servicing guidelines, which can increase the scope or costs
of the services required without any corresponding increase
in the Company’s servicing fee. As a servicer, the Company
also advances expenses on behalf of investors which it may
be unable to collect. A material breach of the Company’s
obligations as servicer or master servicer may result in
contract termination if the breach is not cured within a
specified period of time following notice. In addition, the
Company may be required to indemnify the securitization
trustee against losses from any failure by the Company, as
a servicer or master servicer, to perform the Company’s
servicing obligations or any act or omission on the
Company’s part that involves willful misfeasance, bad faith,
or gross negligence. For certain investors and certain
transactions, the Company may be contractually obligated
to repurchase a loan or reimburse the investor for credit
losses incurred on the loan as a remedy for servicing errors
with respect to the loan. The Company may be subject to
increased repurchase obligations as a result of claims made
that the Company did not satisfy its obligations as a servicer
or master servicer. The Company may also experience
increased loss severity on repurchases, which may require
a material increase to the Company’s repurchase reserve.
The Company has and may continue to receive
indemnification requests related to the Company’s servicing
of mortgage loans owned or insured by other parties,
primarily GSEs.
Credit and Mortgage Business Risk
Heightened credit risk could require the Company to
increase its provision for credit losses, which could
have a material adverse effect on the Company’s results
of operations and financial condition When the Company
lends money, or enters into commitments to lend money, it
incurs credit risk, or the risk of loss if its borrowers do not
repay their loans. The credit performance of the Company’s
loan portfolios significantly affects its financial results and
condition. If the current economic environment were to
worsen, the Company’s customers may have more difficulty
in repaying their loans or other obligations, which could
result in a higher level of credit losses and higher provisions
for credit losses. Stress on the United States economy or
the local economies in which the Company does business,
including the economic stress caused by the pandemic, high
commercial real estate vacancy rates, escalating
geopolitical tensions and elevated interest rates and
inflation, has resulted, and in the future may result, in,
among other things, borrowers’ inability to refinance loans at
maturity and unexpected deterioration in credit quality of the
loan portfolio or in the value of collateral securing those
loans, which has caused, and in the future could cause, the
Company to establish higher provisions for credit losses.
The Company reserves for credit losses by establishing
an allowance through a charge to earnings to provide for
loan defaults and nonperformance. The Company’s
allowance for credit losses is compliant with CECL
150 U.S. Bancorp 2023 Annual Report
accounting guidance, under which the allowance for credit
losses reflects the Company’s expected lifetime loss
estimates of the portfolio. The allowance for credit losses is
constructed based on an evaluation of the risks associated
with its loan portfolio, including the size and composition of
the loan portfolio, the portfolio’s historical loss experience,
current and foreseeable economic conditions and borrower
and collateral quality. These forecasts and estimates require
difficult, subjective, and complex judgments, including
forecasts of economic conditions and how these economic
predictions might impair the ability of the Company’s
borrowers to repay their loans. The Company may not be
able to accurately predict these economic conditions and/or
some or all of their effects, which may, in turn, negatively
impact the reliability of the process. The Company also
makes loans to borrowers where it does not have or service
the loan with the first lien on the property securing its loan.
For loans in a junior lien position, the Company may not
have access to information on the position or performance
of the first lien when it is held and serviced by a third party,
which may adversely affect the accuracy of the loss
estimates for loans of these types. Increases in the
Company’s allowance for loan losses may not be adequate
to cover actual loan losses, and future provisions for loan
losses could materially and adversely affect its financial
results. In addition, the Company’s ability to assess the
creditworthiness of its customers may be impaired if the
models and approaches it uses to select, manage, and
underwrite its customers become less predictive of future
behaviors.
A concentration of credit and market risk in the
Company’s loan portfolio could increase the potential
for significant losses The Company may have higher
credit risk, or experience higher credit losses, to the extent
its loans are concentrated by loan type, industry segment,
borrower type, or location of the borrower or collateral. For
example, high vacancy rates in commercial properties may
affect the value of commercial real estate, including by
causing the value of properties securing commercial real
estate loans to be less than the amounts owed on such
loans. In addition, elevated interest rates may make it more
difficult for borrowers to refinance maturing loans. Any of
these or other events could increase the level of defaults on
commercial real estate loans and result in higher credit
losses to the Company. The Company’s credit risk and
credit losses can also increase if borrowers who engage in
similar activities are uniquely or disproportionately affected
by economic or market conditions, or by regulation, such as
regulation related to climate change. Deterioration in
economic conditions or real estate values in states or
regions where the Company has relatively larger
concentrations of residential or commercial real estate could
result in higher credit costs. For example, the Company’s
acquisition of MUB increased the Company’s exposure to
the markets in California. Deterioration in real estate values
and underlying economic conditions in California could
result in higher credit losses to the Company.
Changes in interest rates can impact the value of the
Company’s mortgage servicing rights and mortgages
held for sale, and can make its mortgage banking
revenue volatile from quarter to quarter, which can
reduce its earnings The Company has a portfolio of MSRs,
which is the right to service a mortgage loan—collect
principal, interest and escrow amounts—for a fee. The
Company’s MSR portfolio had a fair value of $3.4 billion as
of December 31, 2023. The Company initially carries its
MSRs using a fair value measurement of the present value
of the estimated future net servicing income, which includes
assumptions about the likelihood of prepayment by
borrowers. Changes in interest rates can affect prepayment
assumptions and thus fair value. When interest rates fall,
prepayments tend to increase as borrowers refinance, and
the fair value of MSRs can decrease, which in turn reduces
the Company’s earnings. Further, it is possible that,
because of economic conditions such as a weak or
deteriorating housing market, even when interest rates fall,
mortgage originations may fall or any increase in mortgage
originations may not be enough to offset the decrease in the
MSRs’ value caused by the lower rates.
The Company relies on the mortgage secondary market
and GSEs for some of the Company’s revenue and
liquidity The Company sells a portion of the mortgage
loans that it originates to increase revenue through
origination fees and ongoing servicing of such loans and to
provide funding capacity for originating additional loans.
GSEs could limit their purchases of conforming loans due to
capital constraints, other changes in their criteria for
conforming loans or other reasons. This potential reduction
in purchases could limit the Company’s ability to fund new
loans. In addition, if GSEs limited their purchases of
conforming loans, the Company may limit its originations of
mortgage loans that it intends to sell, which could reduce
the Company’s revenue from origination fees of such loans
and the ongoing servicing fees it receives from such loans.
Proposals have been presented to reform the housing
finance market in the U.S., including the role of the GSEs in
the housing finance market. The extent and timing of any
such regulatory reform of the housing finance market and
the GSEs, as well as any effect on the Company’s business
and financial results, are uncertain.
A decline in the soundness, strength or stability of
other financial institutions could adversely affect the
Company’s results of operations Actual or perceived
issues with, or rumors or questions about, one or more
financial institutions, or about the financial services industry
more generally, have recently lead to, and may in the future
lead to, among other things, (i) market-wide liquidity
problems; (ii) rapid and significant deposit withdrawals at
certain institutions, particularly those with elevated levels of
uninsured deposits; (iii) losses or defaults by certain
institutions, up to and including failures of certain banks; and
(iv) significant volatility in the stock of financial services
institutions. In addition, the Company’s ability to engage in
routine funding or settlement transactions could be
adversely affected by any of these events or by other events
that affect the commercial soundness of other domestic or
foreign financial institutions. Failures of one or more banks
that are unrelated to USBNA have increased, and may in
the future increase, USBNA’s deposit insurance
assessments, such as the FDIC’s special assessment
relating to bank failures that occurred in 2023, and
customers and others may seek to make comparisons
between failed or failing banks and USBNA, which, even if
unfounded, can spread quickly through social media or
other online channels. Such comparisons could affect
customer confidence in USBNA and lead to deposit
withdrawals or other negative effects the Company is unable
to predict, any of which could materially and negatively
affect the Company’s results of operations and financial
condition.
Financial services institutions are interrelated as a result
of trading, clearing, counterparty or other relationships. The
Company has exposure to many different counterparties,
and the Company routinely executes and settles
transactions with counterparties in the financial services
industry, including brokers and dealers, commercial banks,
investment banks, mutual and hedge funds, and other
institutional clients. As a result, defaults by, or even rumors
or questions about, the soundness, strength or stability of
one or more financial services institutions, or the financial
services industry generally, could lead to losses or defaults
by the Company or by other institutions and impact the
Company’s predominately United States–based businesses
or the less significant merchant processing, corporate trust
and fund administration services businesses it operates in
foreign countries. Many of these transactions expose the
Company to credit risk in the event of a default by a
counterparty or client. In addition, the Company’s credit risk
may be further increased when the collateral held by the
Company cannot be realized upon or is liquidated at prices
not sufficient to recover the full amount of the financial
instrument exposure due the Company. Any such losses
could adversely affect the Company’s results of operations.
Change in residual value of leased assets may have an
adverse impact on the Company’s financial results The
Company engages in leasing activities and is subject to the
risk that the residual value of the property under lease will
be less than the Company’s recorded asset value. Adverse
changes in the residual value of leased assets can have a
negative impact on the Company’s financial results. The risk
of changes in the realized value of the leased assets
compared to recorded residual values depends on many
factors outside of the Company’s control, including supply
and demand for the assets, condition of the assets at the
end of the lease term, and other economic factors.
Liquidity Risk
If the Company does not effectively manage its liquidity,
its business could suffer The Company’s liquidity is
essential for the operation of its business. Market
conditions, the threat or occurrence of a U.S. sovereign
default, unforeseen outflows of funds or other events could
negatively affect the Company’s level or cost of funding,
affecting its ongoing ability to accommodate liability
maturities and deposit withdrawals, meet contractual
obligations, and fund asset growth and new business
transactions at a reasonable cost and in a timely manner. If
151
the Company’s access to stable and low-cost sources of
funding, such as customer deposits, is reduced, the
Company might need to use alternative funding, which could
be more expensive or of limited availability. Any substantial,
unexpected or prolonged changes in the level or cost of
liquidity could materially and adversely affect the Company’s
business.
In addition, recent bank failures led to significant volatility
in the financial services industry and to liquidity problems at
certain institutions. Although governmental support was
provided in connection with recent bank failures, including
the FDIC’s invoking the systemic risk exception to
guarantee uninsured deposits, there can be no guarantee
that the FDIC will invoke the systemic risk exception in
connection with any future bank failures or that the
government would otherwise take any action to provide
liquidity to troubled institutions. Further, even if
governmental support for financial institutions is available in
the future, it may not be sufficient to address systemic risks.
Loss of customer deposits could increase the
Company’s funding costs The Company relies on bank
deposits to be a low-cost and stable source of funding. The
Company competes with banks and other financial services
companies for deposits, including those that offer online
channels. Recent increases in short-term interest rates have
resulted in and are expected to continue to result in more
intense competition in deposit pricing. Competition and
increasing interest rates have caused the Company to
increase the interest rates it pays on deposits. If the
Company’s competitors raise the interest rates they pay on
deposits, the Company’s funding costs may increase, either
because the Company raises the interest rates it pays on
deposits to avoid losing deposits to competitors or because
the Company loses deposits to competitors and must rely
on more expensive sources of funding. Higher funding costs
reduce the Company’s net interest margin and net interest
income.
Checking and savings account balances and other
forms of customer deposits may decrease when customers
perceive alternative investments, such as the stock market,
as providing a better risk/return tradeoff. When customers
move money out of bank deposits and into other
investments, the Company may lose a relatively low-cost
source of funds, increasing the Company’s funding costs
and reducing the Company’s net interest income. In
addition, mass withdrawals of deposits occurred at certain
banks that failed in 2023, seemingly triggered by losses in
the banks’ investment securities portfolios and concerns
about uninsured and uncollateralized deposits. A loss in the
value of the Company’s investment or loan portfolio,
perceived concerns regarding the Company’s and USBNA’s
capital positions or perceived concerns regarding the level
of USBNA’s uninsured and uncollateralized deposits could
cause rapid and significant deposit outflows. This risk is
exacerbated by technological developments and changes in
banking relationships, such as customers maintaining
accounts at multiple banks, which increase the ease and
speed with which depositors are able to move their deposits,
as well as by the way information, including false
information or unfounded rumors, can be spread quickly
through social media and other online channels. If USBNA
152 U.S. Bancorp 2023 Annual Report
were to experience a significant outflow of deposits, the
Company may face significantly increased funding costs,
suffer significant losses and have a significantly reduced
ability to raise new capital.
The Company could lose access to sources of liquidity
if it were to experience financial or regulatory issues
The Company relies on sources of liquidity provided by the
Federal Reserve Bank, such as the Federal Reserve Bank
discount window and other liquidity facilities that the Federal
Reserve Board may establish from time to time, as well as
liquidity provided by the Federal Home Loan Bank of Des
Moines (the “FHLB”). To access these sources of liquidity,
the Federal Reserve Board or FHLB may impose conditions
that the Company and USBNA are in sound financial
condition (as determined by the Federal Reserve Board or
FHLB) or that the Company and USBNA maintain minimum
supervisory ratings. If the Company or USBNA were to
experience financial or regulatory issues, it could affect the
Company’s or USBNA's ability to access liquidity facilities,
including at times when the Company or USBNA needs
additional liquidity for the operation of its business. If the
Company or USBNA were to lose access to these liquidity
sources, it could have a material adverse effect on the
Company’s operations and financial condition.
The Company relies on dividends from its subsidiaries
for its liquidity needs, and the payment of those
dividends is limited by laws and regulations The
Company is a separate and distinct legal entity from USBNA
and the Company’s non-bank subsidiaries. The Company
receives a significant portion of its cash from dividends paid
by its subsidiaries. These dividends are the principal source
of funds to pay dividends on the Company’s stock and
interest and principal on its debt. Various federal and state
laws and regulations limit the amount of dividends that
USBNA and certain of the Company’s non-bank subsidiaries
may pay to the Company without regulatory approval. Also,
the Company’s right to participate in a distribution of assets
upon a subsidiary’s liquidation or reorganization is subject to
prior claims of the subsidiary’s creditors, except to the
extent that any of the Company’s claims as a creditor of that
subsidiary may be recognized. Refer to “Supervision and
Regulation” in the Company’s Annual Report on Form 10-K
for additional information regarding limitations on the
amount of dividends USBNA may pay.
Competitive and Strategic Risk
The financial services industry is highly competitive,
and competitive pressures could intensify and
adversely affect the Company’s financial results The
Company operates in a highly competitive industry that
could become even more competitive as a result of
legislative, regulatory and technological changes, as well as
continued industry consolidation, which may increase in
connection with current economic and market conditions.
This consolidation may produce larger, better-capitalized
and more geographically diverse companies that are
capable of offering a wider array of financial products and
services at more competitive prices. The Company
competes with other commercial banks, savings and loan
associations, mutual savings banks, finance companies,
mortgage banking companies, credit unions, investment
companies, credit card companies, and a variety of other
financial services and advisory companies. Legislative or
regulatory changes also could lead to increased competition
in the financial services sector.
The adoption and rapid growth of new technologies,
including generative artificial intelligence, cryptocurrencies
and blockchain and other distributed ledger technologies,
have required the Company to invest resources to adapt its
systems, products and services, and it expects to continue
to make similar investments. In addition, technology has
lowered barriers to entry and made it possible for non-banks
to offer products and services, such as loans and payment
services, that traditionally were banking products, and made
it possible for technology companies to compete with
financial institutions in providing electronic, internet-based,
and mobile phone–based financial solutions. Competition
with non-banks, including technology companies, to provide
financial products and services is intensifying. In particular,
the activity of financial technology companies (“fintechs”)
has grown significantly over recent years and is expected to
continue to grow. Fintechs have and may continue to offer
bank or bank-like products. For example, a number of
fintechs have applied for bank or industrial loan charters,
which, in some cases, have been granted. In addition, other
fintechs have partnered with existing banks to allow them to
offer deposit products or payment services to their
customers. Many of these companies, including the
Company’s competitors, have fewer regulatory constraints,
and some have lower cost structures, in part due to lack of
physical structures. Also, the potential need to adapt to
industry changes in information technology systems, on
which the Company and financial services industry are
highly dependent, could present operational issues and
require capital spending. The Company’s ability to compete
successfully depends on a number of factors, including,
among others, its ability to develop and execute strategic
plans and initiatives; developing, maintaining and building
long-term customer relationships based on quality service,
competitive prices, high ethical standards and safe, sound
assets; and industry and general economic trends. A failure
to compete effectively could contribute to downward price
pressure on the Company’s products or services or a loss of
market share.
The Company may need to lower prices on existing
products and services and develop and introduce new
products and services to maintain market share The
Company’s success depends, in part, on its ability to adapt
its products and services to evolving industry standards.
There is increasing pressure to provide products and
services at lower prices. Lower prices can reduce the
Company’s net interest margin and revenues from its fee-
based products and services. In addition, the adoption of
new technologies or further developments in current
technologies require the Company to make substantial
expenditures to modify or adapt its existing products and
services. Also, these and other capital investments in the
Company’s businesses may not produce expected growth in
earnings anticipated at the time of the expenditure. The
Company might not be successful in developing or
introducing new products and services, adapting to
changing customer preferences and spending and saving
habits (which may be altered significantly and with little
warning), achieving market acceptance of its products and
services, or sufficiently developing and maintaining loyal
customer relationships.
The Company may not be able to complete future
acquisitions, and completed acquisitions may not
produce revenue enhancements or cost savings at
levels or within timeframes originally anticipated, may
result in unforeseen integration difficulties, and may
dilute existing shareholders’ interests The Company
regularly explores opportunities to acquire financial services
businesses or assets and may also consider opportunities to
acquire other banks or financial institutions. The Company
cannot predict the number, size or timing of acquisitions it
might pursue.
The Company must generally receive federal regulatory
approval before it can acquire a bank or bank holding
company. The Company’s ability to pursue or complete an
attractive acquisition could be negatively impacted by
regulatory delay or other regulatory issues. The Company
cannot be certain when or if, or on what terms and
conditions, any required regulatory approvals will be
granted. For example, the Company may be required to sell
branches as a condition to receiving regulatory approval for
bank acquisitions. If the Company commits certain
regulatory violations, including those that result in a
downgrade in certain of the Company’s bank regulatory
ratings, governmental authorities could, as a consequence,
preclude it from pursuing future acquisitions for a period of
time. In addition, the Company’s ability to complete future
acquisitions may depend on factors outside its control,
including changes in the presidential administration or in
one or both houses of Congress and public sentiment
regarding bank mergers. Acquisition activity by large
banking organizations, such as the Company, continues to
draw regulatory and policy focus, and future changes could
impact consideration of and regulatory approval processes
for certain acquisitions. In addition, acquisitions by large
banking organizations such as the Company may receive
negative coverage in the media or negative attention by
certain members of Congress or other policymakers. If the
Company were to receive significant negative publicity in
connection with a proposed acquisition, it could damage the
Company’s reputation and impede the Company’s ability to
complete the acquisition.
There can be no assurance that acquisitions the
Company completes, including its recently completed
acquisition of MUB, will have the anticipated positive results,
including results related to expected revenue increases,
cost savings, increases in geographic or product presence,
and/or other projected benefits. The Company may incur
substantial expenses related to acquisitions and integration
of acquired companies. Successful integration of an
acquired company has in the past presented and may in the
future present challenges due to differences in systems,
operations, policies and procedures, management teams
and corporate cultures and may be more costly or difficult to
complete than anticipated or have unanticipated adverse
results. Integration efforts could divert management’s
153
attention and resources, which could adversely affect the
Company’s operations or results. Integration efforts could
result in higher than expected customer loss, deposit
attrition, loss of key employees, issues with systems and
technology, disruption of the Company’s businesses or the
businesses of the acquired company, or otherwise
adversely affect the Company’s ability to maintain
relationships with customers and employees or achieve the
anticipated benefits of the acquisition. Also, the negative
effect of any divestitures required by regulatory authorities in
acquisitions or business combinations may be greater than
expected. In addition, future acquisitions may also expose
the Company to increased legal or regulatory risks. Finally,
future acquisitions could be material to the Company, and it
may issue additional shares of stock to pay for those
acquisitions, which would dilute current shareholders’
ownership interests.
Accounting and Tax Risk
The Company’s reported financial results depend on
management’s selection of accounting methods and
certain assumptions and estimates, which, if incorrect,
could cause unexpected losses in the future The
Company’s accounting policies and methods are
fundamental to how the Company records and reports its
financial condition and results of operations. The Company’s
management must exercise judgment in selecting and
applying many of these accounting policies and methods, so
they comply with generally accepted accounting principles
and reflect management’s judgment regarding the most
appropriate manner to report the Company’s financial
condition and results of operations. In some cases,
management must select the accounting policy or method to
apply from two or more alternatives, any of which might be
reasonable under the circumstances, yet might result in the
Company’s reporting materially different results than would
have been reported under a different alternative.
Certain accounting policies are critical to presenting the
Company’s financial condition and results of operations.
They require management to make difficult, subjective or
complex judgments about matters that are uncertain.
Materially different amounts could be reported under
different conditions or using different assumptions or
estimates. These critical accounting policies include the
allowance for credit losses, estimations of fair value, the
valuation of MSRs, and income taxes. Because of the
uncertainty of estimates involved in these matters, the
Company may be required to do one or more of the
following: significantly increase the allowance for credit
losses and/or sustain credit losses that are significantly
higher than the reserve provided, recognize significant
losses on the remeasurement of certain asset and liability
balances, or significantly increase its accrued taxes liability.
For more information, refer to “Critical Accounting Policies”
in this Annual Report. In addition, the FASB, SEC and other
regulatory agencies may issue new or amend existing
accounting and reporting standards or change existing
interpretations of those standards that could materially affect
the Company's financial statements.
154 U.S. Bancorp 2023 Annual Report
The Company’s investments in certain tax-advantaged
projects may not generate returns as anticipated and
may have an adverse impact on the Company’s
financial results The Company invests in certain tax-
advantaged projects promoting affordable housing,
community development and renewable energy resources.
The Company’s investments in these projects are designed
to generate a return primarily through the realization of
federal and state income tax credits, and other tax benefits,
over specified time periods. The Company is subject to the
risk that previously recorded tax credits, which remain
subject to recapture by taxing authorities based on
compliance features required to be met at the project level,
will fail to meet certain government compliance
requirements and will not be able to be realized. The
possible inability to realize these tax credit and other tax
benefits can have a negative impact on the Company’s
financial results. The risk of not being able to realize the tax
credits and other tax benefits depends on many factors
outside of the Company’s control, including changes in the
applicable tax code and the ability of the projects to be
completed.
General Risk Factors
The Company’s framework for managing risks may not
be effective in mitigating risk and loss to the Company
The Company’s risk management framework seeks to
mitigate risk and loss. The Company has established
processes and procedures intended to identify, measure,
monitor, report, and analyze the types of risk to which it is
subject, including liquidity risk, credit risk, market risk,
interest rate risk, compliance risk, strategic risk, reputation
risk, and operational risk related to its employees, systems
and vendors, among others. However, as with any risk
management framework, there are inherent limitations to the
Company’s risk management strategies as there may exist,
or develop in the future, risks that it has not appropriately
anticipated or identified. In addition, the Company relies on
quantitative models to measure certain risks and to estimate
certain financial values, and these models could fail to
predict future events or exposures accurately. The
Company must also develop and maintain a culture of risk
management among its employees, as well as manage risks
associated with third parties, and could fail to do so
effectively. If the Company’s risk management framework
proves ineffective, the Company could incur litigation and
negative regulatory consequences, and suffer unexpected
losses that could affect its financial condition or results of
operations.
The Company’s business could suffer if it fails to attract
and retain skilled employees The Company’s success
depends, in large part, on its ability to attract and retain key
employees. Competition for the best people in most
activities the Company engages in can be intense.
The employment market has continued to evolve,
influenced by macroeconomic shifts, changes in social
norms post-pandemic and technology advancements.
Heightened pressures on competitive pay levels and flexible
work arrangements continue to be main focus areas.
Employees have also shifted their focus to expectations
that extend beyond traditional compensation and benefits,
including better work-life balance, improved advancement
opportunities and improved training, and many businesses,
including the Company, have had to adapt quickly to the
changing environment. The Company’s ability to compete
successfully for talent has been and may continue to be
affected by its ability to adapt quickly to such shifts in
employee focus, and there is no assurance that these
developments will not cause increased turnover or impede
the Company’s ability to retain and attract the highest
caliber employees.
A downgrade in the Company’s credit ratings could
have a material adverse effect on its liquidity, funding
costs and access to capital markets The Company’s
credit ratings, which are subject to credit agencies’ ongoing
review of a number of factors, including factors not within
the Company’s control, are important to the Company’s
liquidity. A reduction in one or more of the Company’s credit
ratings could adversely affect its liquidity, increase its
funding costs or limit its access to the capital markets.
Further, a downgrade could decrease the number of
investors and counterparties willing or able, contractually or
otherwise, to do business with or lend to the Company,
thereby adversely affecting the Company’s competitive
position. There can be no assurance that the Company will
maintain its current ratings and outlooks or whether or when
any downgrades could occur.
155
Managing Committee
Andrew Cecere
Mr. Cecere is Chairman, President and Chief Executive
Officer of U.S. Bancorp. Mr. Cecere, 63, has served as
President of U.S. Bancorp since January 2016, Chief
Executive Officer since April 2017 and Chairman since April
2018. He also served as Vice Chairman and Chief
Operating Officer from January 2015 to January 2016 and
was U.S. Bancorp’s Vice Chairman and Chief Financial
Officer from February 2007 until January 2015. Until that
time, he served as Vice Chairman, Wealth Management and
Investment Services, of U.S. Bancorp since the merger of
Firstar Corporation and U.S. Bancorp in February 2001.
Previously, he had served as an executive officer of the
former U.S. Bancorp, including as Chief Financial Officer
from 2000 through 2001.
Souheil S. Badran
Mr. Badran is Senior Executive Vice President and Chief
Operations Officer of U.S. Bancorp. Mr. Badran, 59, has
served in this position since joining U.S. Bancorp in
December 2022. From January 2019 until November 2022,
he served as Executive Vice President and Chief Operating
Officer at Northwestern Mutual, having also served as Chief
Innovation Officer from January 2019 until September 2019.
Previously Mr. Badran served as President of Alibaba’s
Alipay business in the Americas from August 2016 until
August 2018. From 2015 to 2016, Mr. Badran served as
CEO at Edo Interactive, and from 2011 to 2015, he served
as Senior Vice President and General Manager at Digital
River.
Elcio R.T. Barcelos
Mr. Barcelos is Senior Executive Vice President and Chief
Human Resources Officer of U.S. Bancorp. Mr. Barcelos,
53, has served in this position since joining U.S. Bancorp in
September 2020. From April 2018 until August 2020, he
served as Senior Vice President and Chief People and
Places Officer of the Federal National Mortgage Association
(Fannie Mae), having served as Senior Vice President,
Human Resources of the DXC Technology Company from
April 2017 to March 2018. Previously, Mr. Barcelos served
as Senior Vice President and Head of Human Resources for
the Enterprise Services business of Hewlett Packard
Enterprise Company from June 2015 to April 2017, and in
other human resources senior leadership positions at
Hewlett-Packard Company and Hewlett Packard Enterprise
Company from July 2009 to June 2015. He previously
served in various leadership roles at Wells Fargo and Bank
of America.
James L. Chosy
Mr. Chosy is Senior Executive Vice President and General
Counsel of U.S. Bancorp. Mr. Chosy, 60, has served in this
position since March 2013. He also served as Corporate
Secretary of U.S. Bancorp from June 2022 until December
2023 and from March 2013 until April 2016. From 2001 to
2013, he served as the General Counsel and Secretary of
Piper Jaffray Companies. From 1995 to 2001, Mr. Chosy
156 U.S. Bancorp 2023 Annual Report
was Vice President and Associate General Counsel of U.S.
Bancorp, having also served as Assistant Secretary of U.S.
Bancorp from 1995 through 2000 and as Secretary from
2000 until 2001.
Gregory G. Cunningham
Mr. Cunningham is Senior Executive Vice President and
Chief Diversity Officer of U.S. Bancorp. Mr. Cunningham,
60, has served in this position since July 2020. From July
2019 until July 2020, he served as Senior Vice President
and Chief Diversity Officer of U.S. Bancorp, having served
as Vice President of Customer Engagement of U.S.
Bancorp from October 2015, when he joined U.S. Bancorp,
until July 2019. Previously, Mr. Cunningham served in
various roles in the marketing department of Target
Corporation from January 1998 until March 2015.
Venkatachari Dilip
Mr. Dilip is Senior Executive Vice President and Chief
Information and Technology Officer of U.S. Bancorp. Mr.
Dilip, 64, previously was an Executive Vice President from
September 2018 to April 2023 and has served as Chief
Information and Technology Officer since September 2018,
when he joined U.S. Bancorp. From May 2014 until July
2017, he served as Vice President at McKinsey Digital
where he helped banks accelerate their digital
transformation. From April 2009 to September 2013, he
served as CEO at Compass Labs leading an innovative
marketing analytics company. From March 2006 until April
2008, he served as Director of Products at Google where he
led product teams for mobile ads and Google Checkout.
From March 2004 until March 2006, he served as Vice
President of PayPal/eBay and on the Board of PayPal
Europe, where he was responsible for Payments Services,
Risk and Fraud Management. Previously, Mr. Dilip co-
founded and led startup companies CashEdge and
CommerceSoft from 1996 until 2003.
Terrance R. Dolan
Mr. Dolan is Vice Chair and Chief Administration Officer of
U.S. Bancorp. Mr. Dolan, 62, has served in this position
since September 2023. From August 2016 to August 2023,
he served as Vice Chair and Chief Financial Officer of U.S.
Bancorp. From July 2010 to July 2016, he served as Vice
Chair, Wealth Management and Investment Services, of
U.S. Bancorp. From September 1998 to July 2010, Mr.
Dolan served as U.S. Bancorp’s Controller. He additionally
held the title of Executive Vice President from January 2002
until June 2010 and Senior Vice President from September
1998 until January 2002.
Revathi N. Dominski
Ms. Dominski is Senior Executive Vice President and Chief
Social Responsibility Officer of U.S. Bancorp and President
of the U.S. Bank Foundation. Ms. Dominski, 53, has served
as Senior Executive Vice President and Chief Social
Responsibility Officer since April 2023. She joined U.S.
Bancorp in June 2015 as President of the U.S. Bank
Foundation and Senior Vice President of Corporate Social
Responsibility. Before joining U.S. Bancorp, Ms. Dominski
spent 21 years with Target Corporation in leadership
positions including sourcing, merchandising, merchandise
planning and operations before moving to Target's
Corporate Social Responsibility team, where she served as
Senior Director of Education and Community Relations.
Gunjan Kedia
Ms. Kedia is Vice Chair, Wealth, Corporate, Commercial
and Institutional Banking, of U.S. Bancorp. Ms. Kedia, 53,
has served in this position since June 2023. From
December 2016 to June 2023, she served as Vice Chair,
Wealth Management and Investment Services, of U.S.
Bancorp. From October 2008 until May 2016, she served as
Executive Vice President of State Street Corporation where
she led the core investment servicing business in North and
South America and served as a member of State Street’s
management committee, its senior most strategy and policy
committee. Previously, Ms. Kedia was an Executive Vice
President of global product management at Bank of New
York Mellon from 2004 to 2008 and a Partner and associate
at McKinsey from 1996 to 2004.
Shailesh M. Kotwal
Mr. Kotwal is Vice Chair, Payment Services, of U.S.
Bancorp. Mr. Kotwal, 59, has served in this position since
joining U.S. Bancorp in March 2015. From July 2008 until
May 2014, he served as Executive Vice President of TD
Bank Group with responsibility for retail banking products
and services and as Chair of its enterprise payments
council. From 2006 until 2008, he served as President,
International, of eFunds Corporation. Previously, Mr. Kotwal
served in various leadership roles at American Express
Company from 1989 until 2006, including responsibility for
operations in North and South America, Europe and the
Asia-Pacific regions.
Stephen L. Philipson
Mr. Philipson is Senior Executive Vice President and Head
of Global Markets and Specialized Finance of U.S. Bancorp.
Mr. Philipson, 45, has served in this position since April
2023. From October 2017 to April 2023, he served as head
of Fixed Income and Capital Markets. Previously, he led
Credit & Municipal Fixed Income at U.S. Bank and, prior to
that, held roles in fixed income and capital markets at
Wachovia/Wells Fargo Securities and Morgan Stanley.
Jodi L. Richard
Ms. Richard is Vice Chair and Chief Risk Officer of U.S.
Bancorp. Ms. Richard, 55, has served in this position since
October 2018. She served as Executive Vice President and
Chief Operational Risk Officer of U.S. Bancorp from January
2018 until October 2018, having served as Senior Vice
President and Chief Operational Risk Officer from 2014 until
January 2018. Prior to that time, Ms. Richard held various
senior leadership roles at HSBC from 2003 until 2014,
including Executive Vice President and Head of Operational
Risk and Internal Control at HSBC North America from 2008
to 2014. Ms. Richard started her career at the Office of the
Comptroller of the Currency in 1990 as a national bank
examiner.
Mark G. Runkel
Mr. Runkel is Senior Executive Vice President and Chief
Transformation Officer of U.S. Bancorp. Mr. Runkel, 47, has
served in this position since August 2021. From December
2013 to August 2021, he served as Senior Executive Vice
President and Chief Credit Officer. From February 2011 until
December 2013, he served as Senior Vice President and
Credit Risk Group Manager of U.S. Bancorp Retail and
Payment Services Credit Risk Management, having served
as Senior Vice President and Risk Manager of U.S. Bancorp
Retail and Small Business Credit Risk Management from
June 2009 until February 2011. From March 2005 until May
2009, he served as Vice President and Risk Manager of
U.S. Bancorp.
John C. Stern
Mr. Stern is Senior Executive Vice President and Chief
Financial Officer of U.S. Bancorp. Mr. Stern, 46, has served
as Senior Executive Vice President since April 2023 and
Chief Financial Officer since September 2023. He also
served as Head of Finance from May 2023 to August 2023.
He served as Executive Vice President from July 2013
through April 2023. From May 2021 until May 2023, he
served as President of the Global Corporate Trust and
Custody business of U.S. Bancorp. Previously, he served as
Treasurer from July 2013 to May 2021 and has held various
other leadership positions in his nearly 25 years at U.S.
Bancorp.
Dominic V. Venturo
Mr. Venturo is Senior Executive Vice President and Chief
Digital Officer of U.S. Bancorp. Mr. Venturo, 57, has served
in this position since July 2020. From January 2015 until
July 2020, he served as Executive Vice President and Chief
Innovation Officer of U.S. Bancorp, having served as Senior
Vice President and Chief Innovation Officer of U.S. Bancorp
Payment Services from January 2010 until January 2015.
From January 2007 to December 2009, Mr. Venturo served
as Senior Vice President and Chief Innovation Officer of
U.S. Bancorp Retail Payment Solutions. Prior to that time,
he served as Senior Vice President and held product
management positions in various U.S. Bancorp Payment
Services business lines from December 1998 to December
2006.
Timothy A. Welsh
Mr. Welsh is Vice Chair, Consumer and Business Banking,
of U.S. Bancorp. Mr. Welsh, 58, has served in this position
since March 2019. Prior to that, he served as Vice Chair,
Consumer Banking Sales and Support since joining U.S.
Bancorp in July 2017. From July 2006 until June 2017, he
served as a Senior Partner at McKinsey & Company where
he specialized in financial services and the consumer
experience. Previously, Mr. Welsh served as a Partner at
McKinsey from 1999 to 2006.
157
Directors
Andrew Cecere1,6
Chairman, President and Chief Executive Officer
U.S. Bancorp
Warner L. Baxter1,2,3
Retired Executive Chairman and Former Chairman,
President and Chief Executive Officer
Ameren Corporation
(Energy)
Dorothy J. Bridges1,5,6
Chief Executive Officer
Roland A. Hernandez1,3,4
Founding Principal and Chief Executive Officer
Hernandez Media Ventures
(Media)
Richard P. McKenney1,4,6
President and Chief Executive Officer
Unum Group
(Financial protection benefits)
Yusuf I. Mehdi5,6
Executive Vice President,
Metropolitan Economic Development Association (Meda)
Consumer Chief Marketing Officer
(Economic Development)
Elizabeth L. Buse2,6
Former Chief Executive Officer
Monitise plc
(Financial services)
Microsoft Corporation
(Technology)
Loretta E. Reynolds6
Founder and Chief Executive Officer
LEReynolds Group, LLC
(Information Technology)
Alan B. Colberg2,5
Retired President and Chief Executive Officer
Assurant, Inc.
John P. Wiehoff6
Retired Chairman and Chief Executive Officer
(Financial services and specialty insurance)
C.H. Robinson Worldwide, Inc.
(Transportation and logistics services)
Scott W. Wine1,3,4
Chief Executive Officer
CNH Industrial N.V.
(Agricultural machinery)
Kimberly N. Ellison-Taylor2,5
Founder and Chief Executive Officer
KET Solutions, LLC
(Technology)
Kimberly J. Harris1,3,4
Retired President and Chief Executive Officer
Puget Energy, Inc.
(Energy)
1. Executive Committee
2. Audit Committee
3. Compensation and Human Resources Committee
4. Governance Committee
5. Public Responsibility Committee
6. Risk Management Committee
158 U.S. Bancorp 2023 Annual Report
C O R P O R A T E I N F O R M A T I O N
Executive offices
U.S. Bancorp
800 Nicollet Mall
Minneapolis, MN 55402
Common stock transfer
agent and registrar
Computershare acts as our transfer agent
and registrar, dividend paying agent and
dividend reinvestment plan administrator
and maintains all shareholder records
for the Company. Inquiries related to
shareholder records, stock transfers,
changes of ownership, lost stock
certificates, changes of address
and dividend payment should be
directed to the transfer agent at:
Computershare
P.O. Box 505000
Louisville, KY 40233
Phone: 888-778-1311 or
201-680-6578 (international calls)
computershare.com/investor
Registered or Certified Mail:
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
Telephone representatives are available
weekdays from 8 a.m. to 6 p.m., Central
Time, and automated support is available
24 hours a day, seven days a week.
Specific information about your account
is available on Computershare’s
Investor Center website.
Independent auditor
Ernst & Young LLP serves as the
independent auditor for U.S. Bancorp.
Common stock
listing and trading
U.S. Bancorp common stock is listed and
traded on the New York Stock Exchange
under the ticker symbol USB.
Dividends and
reinvestment plan
U.S. Bancorp currently pays quarterly
dividends on our common stock on or
about the 15th day of January, April,
July and October, subject to approval
by our Board of Directors. U.S. Bancorp
shareholders can choose to participate
in a plan that provides automatic
reinvestment of dividends and/or
optional cash purchase of additional
shares of U.S. Bancorp common stock.
For more information, please contact
our transfer agent, Computershare.
Investor relations contact
George Andersen
Senior Vice President
Director of Investor Relations
george.andersen@usbank.com
Phone: 612-303-3620
Financial information
U.S. Bancorp news and financial results are
available through our website and by mail.
Website: For information about
U.S. Bancorp, including news, financial
results, annual reports and other
documents filed with the Securities
and Exchange Commission, visit
usbank.com and click on About Us.
Mail: At your request, we will mail to you
our quarterly earnings, news releases,
quarterly financial data reported on Form
10-Q, Form 10-K and additional copies
of our annual reports. Please contact:
U.S. Bancorp Investor Relations
800 Nicollet Mall
Minneapolis, MN 55402
investorrelations@usbank.com
Phone: 866-775-9668
Media requests
David R. Palombi
Executive Vice President
Chief Communications Officer
Public Affairs and Communications
david.palombi@usbank.com
Phone: 612-303-3167
Privacy
U.S. Bancorp is committed to
respecting the privacy of our customers
and safeguarding the financial and
personal information provided to us.
To learn more about the U.S. Bancorp
commitment to protecting privacy, visit
usbank.com and click on Privacy.
Accessibility
U.S. Bancorp is committed to providing
ready access to our products and services
so all of our customers, including people
with disabilities, can succeed financially.
To learn more, visit usbank.com and click
on Accessibility.
Ethics
At U.S. Bancorp, our commitment to high
ethical standards guides everything we do.
Demonstrating this commitment through
our words and actions is how each of us
does the right thing every day for our
customers, shareholders, communities and
each other. Our ethical culture has been
recognized by the Ethisphere® Institute,
which named us to its World’s Most Ethical
Companies® list for the ninth time in 2023.
Each year, every employee certifies
compliance with the letter and spirit of our
Code of Ethics and Business Conduct.
For details about our Code of Ethics and
Business Conduct, visit usbank.com
and click on About Us and then Investor
Relations and then Corporate Governance
and then Governance Documents.
Diversity, equity and inclusion
At U.S. Bancorp, embracing diversity,
championing equity and fostering inclusion
are business imperatives. We view everything
we do through a diversity, equity and
inclusion lens to deepen our relationships
with our stakeholders: our employees,
customers, shareholders and communities.
Our employees bring their whole selves to
work. We respect and value each other’s
differences, strengths and perspectives,
and we embrace the communities we serve.
This makes us stronger, more innovative and
more responsive to our customers’ needs.
To learn more about our commitment
to diversity, equity and inclusion, visit
usbank.com/diversity.
Equal opportunity
and affirmative action
U.S. Bancorp and our subsidiaries are
committed to providing Equal Employment
Opportunity to all employees and applicants
for employment. In keeping with this
commitment, employment decisions are
made based on abilities, not race, color,
religion, creed, citizenship, national
origin or ancestry, gender, age, disability,
veteran status, sexual orientation, marital
status, gender identity or expression,
genetic information or any other factors
protected by law. The Company complies
with municipal, state and federal fair
employment laws, including regulations
applying to federal contractors.
U.S. Bancorp, including each of our
subsidiaries, is an equal opportunity
employer committed to creating a
diverse workforce.
©2024 U.S. Bancorp
800 Nicollet Mall
800 Nicollet Mall
Minneapolis, MN 55402
Minneapolis, MN 55402
800-USBANKS (872-2657)
800-USBANKS (872-2657)
usbank.com
usbank.com
Annual Report Cover.indd 1
Annual Report Cover.indd 1
BACK COVER
Color:
Black
PMS 199 C
PMS 2756 C
PMS 285 C
FRONT COVER
Lot: Annual Report Cover ART.p1.pdf Job Name: 73360_US Bank
Date: 24-02-12 Time: 11:43:20 Page Width 17.3269 Page Height 10.875
2/9/24 1:50 PM
2/9/24 1:50 PM