“In the fourth quarter, we reported diluted earnings per share of $0.99, excluding $(0.50) of notable items. This quarter we generated net revenue of $6.8 billion and increased our tangible book value per share to $22.30, an increase of 7% linked quarter. Full year results showcased solid fee revenue growth, prudent expense management, and the accretion of common equity tier 1 capital of 150 basis points, giving us a CET1 ratio of 9.9% as of December 31, 2023. We also met our goal this year of achieving full run-rate cost synergies of $900 million with the Union Bank acquisition. Looking ahead, we are making good progress on revenue growth opportunities with Union Bank and effectively managing the balance sheet for continued capital-efficient growth as we maintain our disciplined, through-the-cycle approach to credit risk management. In many ways, both fourth quarter and full year results highlighted the benefits of our well-diversified business model, enhanced scale, and operational resiliency, as we remained focused on delivering shareholder value. In what has been a meaningful year for the Company, I want to thank all of our employees for their valuable contributions and dedicated efforts to best serving our clients, communities and shareholders.”

(a)4Q23 excludes $1.1 billion ($780 million net-of-tax, including a $70 million discrete tax benefit) of notable items including: $(118) million of noninterest income related to investment securities balance sheet repositioning and capital management actions, $171 million of merger and integration-related charges, $734 million of FDIC special assessment charges and a $110 million charitable contribution. 3Q23 excludes $284 million ($213 million net-of-tax) of merger and integration-related charges. 4Q22 excludes $1.3 billion ($952 million net-of-tax) of notable items including: $(399) million of noninterest income related to balance sheet repositioning and capital management actions, $90 million of merger and integration-related charges and $791 million of provision for credit losses related to the acquisition of MUB and balance sheet optimization activities.

(b)See Non-GAAP Financial Measures reconciliation on page 18

(c)2023 excludes $2.2 billion ($1.6 billion net-of-tax, including a $70 million discrete tax benefit) of notable items including: $(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. 2022 excludes $1.5 billion ($1.1 billion net-of-tax) of notable items including: $(399) million of noninterest income related to balance sheet repositioning and capital management actions, $329 million of merger and integration-related charges and $791 million of provision for credit losses related to the acquisition of MUB and balance sheet optimization activities.

(d)See Non-GAAP Financial Measures reconciliation on page 18

                     

Net income attributable to U.S. Bancorp was $847 million for the fourth quarter of 2023, which was $78 million lower than the $925 million for the fourth quarter of 2022 and $676 million lower than the $1,523 million for the third quarter of 2023. Diluted earnings per common share was $0.49 in the fourth quarter of 2023, compared with $0.57 in the fourth quarter of 2022 and $0.91 in the third quarter of 2023. The fourth quarter of 2023 included $780 million, or $(0.50) per diluted common share, of notable items, net-of-tax, compared with $952 million or $(0.63) per diluted common share in the fourth quarter of 2022, and $213 million, or $(0.14) per diluted common share in the third quarter of 2023. On an adjusted basis, excluding the impacts of these notable items, net income applicable to common shareholders for the fourth quarter of 2023 was $1,541 million, which was $260 million lower than the fourth quarter of 2022 and $83 million lower than the third quarter of 2023. Adjusted diluted earnings per common share was $0.99 in the fourth quarter of 2023.

The decrease in net income attributable to U.S. Bancorp year-over-year was primarily due to the notable items and an increase in the provision for credit losses. Pretax income, excluding notable items, in the fourth quarter decreased 10.3 percent compared with a year ago. Net interest income decreased 4.2 percent on a year-over-year taxable-equivalent basis, due to the impact of higher interest rates on deposit mix and pricing, partially offset by the impact of the MUB acquisition and higher rates on earning assets. The net interest margin decreased to 2.78 percent in the fourth quarter of 2023 from 3.01 percent in the fourth quarter of 2022 driven by similar factors. Excluding the impact of notable items, noninterest income increased 12.1 percent compared with a year ago driven by the impact of the MUB acquisition and higher fee revenue across all categories. Excluding the impact of notable items, noninterest expense increased 6.3 percent primarily driven by MUB operating expenses, including core deposit intangible amortization expense, and higher compensation expense to support business growth, partially offset by a decrease in other expenses. Excluding the fourth quarter of 2022 notable items, the fourth quarter of 2023 provision for credit losses increased $111 million (27.7 percent) compared with the fourth quarter of 2022 driven by normalizing credit losses and commercial real estate credit quality, partially offset by relative stability in the economic outlook.

Net income attributable to U.S. Bancorp decreased on a linked quarter basis primarily due to the notable items. Pretax income, excluding notable items, decreased 4.7 percent on a linked quarter basis. Net interest income decreased 3.0 percent on a taxable-equivalent basis due to deposit mix and pricing, partially offset by the impact of higher interest rates on earning assets and balance sheet repositioning. The net interest margin decreased to 2.78 percent in the fourth quarter of 2023 from 2.81 percent in the third quarter of 2023 driven by similar factors. Noninterest income excluding notable items decreased 0.9 percent compared with the third quarter of 2023 driven primarily by lower payment services and commercial products revenue, partially offset by higher other noninterest income. Excluding notable items, noninterest expense decreased 1.0 percent due to prudent expense management. The provision for credit losses decreased $3 million (0.6 percent) compared with the third quarter of 2023 primarily due to relative stability in the economic outlook, partially offset by normalizing credit losses and credit card balance growth.

Net interest income on a taxable-equivalent basis in the fourth quarter of 2023 was $4,142 million, a decrease of $183 million (4.2 percent) from the fourth quarter of 2022. The decrease was primarily due to the impact of deposit mix and pricing, partially offset by the acquisition of MUB and higher rates on earning assets. Average earning assets were $21.6 billion (3.8 percent) higher than the fourth quarter of 2022, reflecting increases of $13.0 billion (3.6 percent) in average total loans and $12.0 billion (33.6 percent) in average interest-bearing deposits with banks. Average investment securities decreased $5.1 billion (3.1 percent) reflecting balance sheet repositioning and liquidity management.

Net interest income on a taxable-equivalent basis decreased $126 million (3.0 percent) on a linked quarter basis primarily due to the impact of deposit mix and pricing, partially offset by higher rates on earning assets due to balance sheet repositioning. Average earning assets were $11.0 billion (1.8 percent) lower on a linked quarter basis, reflecting decreases of $4.0 billion (1.1 percent) in average total loans and $5.6 billion (10.5 percent) in average interest-bearing deposits with banks. In addition, average investment securities decreased $1.4 billion (0.8 percent) reflecting balance sheet repositioning and liquidity management.

The net interest margin in the fourth quarter of 2023 was 2.78 percent, compared with 3.01 percent in the fourth quarter of 2022 and 2.81 percent in the third quarter of 2023. The decrease in the net interest margin from the prior year was primarily due to deposit mix and pricing, partially offset by higher rates on earning assets and the acquisition of MUB. The decrease in the net interest margin on a linked quarter basis reflected deposit mix and pricing, partially offset by the impact of higher interest rates on earning assets and balance sheet repositioning.

Average total loans for the fourth quarter of 2023 were $13.0 billion (3.6 percent) higher than the fourth quarter of 2022. The increase was driven by growth in the Company's legacy loan portfolio as well as from the MUB acquisition, which are primarily reflected in commercial loans, commercial mortgages and residential mortgages. Increases in total commercial real estate loans (17.7 percent), residential mortgages (18.6 percent) and credit card loans (10.2 percent) were partially offset by lower total commercial loans (1.4 percent) and total other retail loans (23.6 percent). The increase in total commercial real estate loans and residential mortgages was driven by the acquisition of MUB. The increase in credit card loans was primarily driven by higher spend volume. The decrease in other retail loans was primarily due to balance sheet repositioning and capital management activities.

Average total loans were $4.0 billion (1.1 percent) lower than the third quarter of 2023. Decreases in total commercial loans (2.7 percent), total commercial real estate loans (0.8 percent) and total other retail loans (3.0 percent) were partially offset by higher residential mortgages (0.5 percent) and credit card loans (3.2 percent).

Average total deposits for the fourth quarter of 2023 were $20.9 billion (4.3 percent) higher than the fourth quarter of 2022, including the impact of the MUB acquisition. Average noninterest-bearing deposits decreased $28.3 billion (23.8 percent) driven by decreases within Wealth, Corporate, Commercial and Institutional Banking and Consumer and Business Banking, partially offset by the impact of the acquisition of MUB. Average total savings deposits were $31.0 billion (9.4 percent) higher year-over-year driven by increases within Wealth, Corporate, Commercial and Institutional Banking and Consumer and Business Banking, including the impact of the acquisition of MUB. Average time deposits were $18.2 billion (52.9 percent) higher than the fourth quarter of 2022 due to the acquisition of MUB, partially offset by decreases within Wealth, Corporate, Commercial and Institutional Banking. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.

Average total deposits decreased $9.5 billion (1.9 percent) from the third quarter of 2023. On a linked quarter basis, average noninterest-bearing deposits decreased $6.9 billion (7.1 percent) driven by pricing pressures from higher interest rates. Average total savings deposits decreased $543 million (0.2 percent) driven by decreases within Wealth, Corporate, Commercial and Institutional Banking partially offset by increases in Consumer and Business Banking. Average time deposits were $2.0 billion (3.7 percent) lower on a linked quarter basis mainly within Wealth, Corporate, Commercial and Institutional Banking, partially offset by increases in Consumer and Business Banking. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.

Fourth quarter noninterest income of $2,620 million was $577 million (28.2 percent) higher than the fourth quarter of 2022 driven by higher payment services revenue, trust and investment management fees, commercial products revenue, mortgage banking revenue, and other noninterest income. Excluding the balance sheet optimization impact, noninterest income increased $296 million (12.1 percent). Payment services revenue increased $80 million (8.4 percent) compared with the fourth quarter of 2022. Within payment services revenue, card revenue increased $52 million (13.5 percent) driven by higher spend volume and favorable rates, and merchant processing revenue increased $24 million (6.2 percent) due to higher sales volume. Trust and investment management fees increased $50 million (8.8 percent) driven by the acquisition of MUB and core business growth. Commercial products revenue increased $62 million (23.5 percent) driven by higher trading revenue and corporate bond fees. Mortgage banking revenue increased $33 million (31.7 percent) primarily driven by a favorable change in the valuation of mortgage servicing rights, net of hedging activities. Other revenue, excluding notable items, increased $44 million (23.9 percent) driven by higher tax credit investment activity.

Noninterest income was $144 million (5.2 percent) lower in the fourth quarter of 2023 compared with the third quarter of 2023. Excluding the balance sheet optimization impact in the fourth quarter of 2023, fourth quarter noninterest income decreased $26 million (0.9 percent) compared with the third quarter of 2023. Payment services revenue decreased $10 million (1.0 percent) compared with the third quarter of 2023. Within payment services revenue, card revenue increased $24 million (5.8 percent) driven by seasonally higher spend volume and favorable rates, while corporate payment products revenue decreased $16 million (8.1 percent) and merchant processing revenue decreased $18 million (4.2 percent) both due to lower sales volume. Service charges decreased $10 million (3.0 percent) due to lower deposit service charges. Commercial products revenue decreased $28 million (7.9 percent) due to lower trading and capital markets origination and syndication activity. Other revenue increased $30 million (15.2 percent) driven by seasonally higher tax credit investment activity.

Fourth quarter noninterest expense of $5,219 million was $1,176 million (29.1 percent) higher than the fourth quarter of 2022. Excluding notable items of $1,015 million in the fourth quarter of 2023 and $90 million in the fourth quarter of 2022, fourth quarter noninterest expense increased $251 million (6.3 percent) compared with the fourth quarter of 2022, driven by the impact of MUB operating expenses, core deposit intangible amortization expense, and higher compensation expense. Compensation expense increased $107 million (4.5 percent) compared with the fourth quarter of 2022 primarily due to MUB expense as well as merit and hiring to support business growth. Intangible amortization increased $71 million (83.5 percent) driven by the core deposit intangible created as a result of the MUB acquisition.

Noninterest expense increased $689 million (15.2 percent) on a linked quarter basis. Excluding notable items of $1,015 million in the fourth quarter of 2023 and $284 million in the third quarter of 2023, fourth quarter noninterest expense decreased $42 million (1.0 percent) from the third quarter of 2023 driven by lower compensation expense offset by an increase in marketing and business development. Compensation expense decreased $106 million (4.1 percent) compared with the third quarter of 2023 primarily due to prudent expense management and continued focus on operational efficiency. Marketing and business development expense increased $20 million (11.4 percent) as the Company continues to invest in its national brand and global reach.

The provision for income taxes for the fourth quarter of 2023 resulted in a tax rate of 16.5 percent on a taxable-equivalent basis (effective tax rate of 13.9 percent), compared with 17.9 percent on a taxable-equivalent basis (effective tax rate of 15.5 percent) in the fourth quarter of 2022, and a tax rate of 23.3 percent on a taxable-equivalent basis (effective tax rate of 22.0 percent) in the third quarter of 2023. Excluding the impact of notable items, the fourth quarter 2023 tax rate was 24.2 percent on a taxable-equivalent basis, compared with 22.0 percent on a taxable-equivalent basis in the fourth quarter of 2022, and 23.5 percent on a taxable-equivalent basis in the third quarter of 2023. The fourth quarter of 2023 included $70 million of favorable tax settlements.

The Company’s provision for credit losses for the fourth quarter of 2023 was $512 million, compared with $515 million in the third quarter of 2023 and $1,192 million in the fourth quarter of 2022. The fourth quarter of 2023 provision was $3 million (0.6 percent) lower than the third quarter of 2023 and $680 million (57.0 percent) lower than the fourth quarter of 2022. Excluding the fourth quarter of 2022 notable item of $791 million related to the initial provision for credit losses related to the MUB acquisition and balance sheet optimization activities, the provision for credit losses for the fourth quarter of 2023 increased $111 million (27.7 percent) compared with the fourth quarter of 2022, driven by normalizing credit losses and stress in commercial real estate, partially offset by relative stability in the economic outlook. Expected loss estimates consider various factors including customer specific information impacting changes in risk ratings, projected delinquencies, and the impact of economic deterioration on borrowers’ liquidity and ability to repay. During 2023, economic uncertainty and recession risk increased due to rising interest rates, inflationary concerns, market volatility, and pressure on corporate earnings related to these factors, contributing to increased provision for credit losses. Consumer portfolio credit losses are normalizing amid rising delinquencies and lower collateral values. Some stress in commercial portfolios is anticipated as the impact of rising interest rates filters through companies’ financials. Commercial real estate valuations are also affected by rising interest rates and the changing demand for office properties.

Total net charge-offs in the fourth quarter of 2023 were $463 million, compared with $420 million in the third quarter of 2023 and $578 million in the fourth quarter of 2022. Net charge-offs for the fourth quarter of 2022 included $368 million of charge-offs related to uncollectible amounts on acquired loans and balance sheet optimization activities. The net charge-off ratio was 0.49 percent in the fourth quarter of 2023, compared with 0.44 percent in the third quarter of 2023 and 0.64 percent in the fourth quarter of 2022 (0.23 percent excluding the impact of notable items). Net charge-offs, excluding the impact of the fourth quarter of 2022 notable items, increased $253 million on a year-over-year basis reflecting higher charge-offs in most loan categories consistent with normalizing credit conditions and adverse conditions in commercial real estate.

The allowance for credit losses was $7,839 million at December 31, 2023, compared with $7,790 million at September 30, 2023, and $7,404 million at December 31, 2022. The linked quarter increase in the allowance for credit losses was primarily driven by normalizing credit losses and credit card balance growth. The ratio of the allowance for credit losses to period-end loans was 2.10 percent at December 31, 2023, compared with 2.08 percent at September 30, 2023, and 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 615 percent at September 30, 2023, and 762 percent at December 31, 2022.

Nonperforming assets were $1,494 million at December 31, 2023, compared with $1,310 million at September 30, 2023, and $1,016 million at December 31, 2022. The ratio of nonperforming assets to loans and other real estate was 0.40 percent at December 31, 2023, compared with 0.35 percent at September 30, 2023, and 0.26 percent at December 31, 2022. The increase in nonperforming assets on a linked quarter basis was primarily due to higher commercial and commercial real estate nonperforming loans. The increase in nonperforming assets on a year-over year basis was primarily due to higher commercial and commercial real estate nonperforming loans, partially offset by lower nonperforming residential mortgages. Accruing loans 90 days or more past due were $698 million at December 31, 2023, compared with $569 million at September 30, 2023, and $491 million at December 31, 2022.

Total U.S. Bancorp shareholders’ equity was $55.3 billion at December 31, 2023, compared with $53.1 billion at September 30,
2023 and $50.8 billion at December 31, 2022. In the third quarter of 2023 the Company issued 24 million shares of common stock to Mitsubishi UFG Financial Group, Inc. (“MUFG”), for which the proceeds from the issuance were used to repay a portion of the debt obligation with MUFG for the acquisition of MUB. 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 the 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.

All regulatory ratios continue to be in excess of “well-capitalized” requirements. The common equity tier 1 capital to risk-weighted assets ratio using the Basel III standardized approach was 9.9 percent at December 31, 2023, compared with 9.7 percent at September 30, 2023, and 8.4 percent at December 31, 2022. The common equity tier 1 capital to risk-weighted assets ratio, reflecting the full implementation of the current expected credit losses methodology was 9.7 percent at December 31, 2023, compared with 9.5 percent at September 30, 2023, and 8.1 percent at December 31, 2022.

On Wednesday, January 17, 2024 at 7 a.m. CT, Chairman, President and Chief Executive Officer Andy Cecere and Senior Executive Vice President and Chief Financial Officer John Stern will host a conference call to review the financial results. The live conference call will be available online or by telephone. To access the webcast and presentation, visit the U.S. Bancorp website at usbank.com and click on “About Us”, “Investor Relations” and “Webcasts & Presentations.” To access the conference call from locations within the United States and Canada, please dial 888-210-4659. Participants calling from outside the United States and Canada, please dial 646-960-0383. The access code for all participants is 7269933. For those unable to participate during the live call, a replay will be available at approximately 10 a.m. CT on Wednesday, January 17, 2024. To access the replay, please visit the U.S. Bancorp website at usbank.com and click on “About Us”, “Investor Relations” and “Webcasts & Presentations.”

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 customers 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 Fortune’s most admired superregional bank. To learn more, please visit the U.S. Bancorp website at usbank.com and click on “About Us.”

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

This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, 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;

•Actions taken by governmental agencies to stabilize the financial 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 its 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;

•Effects of climate change and related physical and transition risks;

•Changes in customer behavior and preferences and the ability to implement technological changes to respond to customer needs and meet competitive demands;

•Breaches in data security;

•Failures or disruptions in or breaches of U.S. Bancorp’s operational, technology or security systems or infrastructure, or those of third parties;

•Failures to safeguard personal information;

•Impacts of pandemics, natural disasters, terrorist activities, civil unrest, international hostilities and geopolitical events;

•Impacts of supply chain disruptions, rising inflation, slower growth or a recession;

•Failure to execute on strategic or operational plans;

•Effects of mergers and acquisitions and related integration;

•Effects of critical accounting policies and judgments;

•Effects of changes in or interpretations of tax laws and regulations;

•Management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk; and

•The risks and uncertainties more fully discussed in the section entitled “Risk Factors” of U.S. Bancorp’s Form 10-K for the year ended December 31, 2022, and subsequent filings with the Securities and Exchange Commission.

In addition, U.S. Bancorp’s acquisition of MUB 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.

In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including: 

•Tangible common equity to tangible assets

•Tangible common equity to risk-weighted assets

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

•Return on tangible common equity.

These 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 and use of capital relative to other financial services companies. These measures are not defined in generally accepted accounting principles (“GAAP”), or are not currently effective or defined in banking regulations. In addition, certain of these measures differ from currently effective capital ratios defined by banking regulations principally in that the currently effective ratios, which are subject to certain transitional provisions, temporarily exclude the impact of the 2020 adoption of accounting guidance related to impairment of financial instruments based on the current expected credit losses methodology. As a result, these 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 utilization and adequacy.

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

The adjusted return on average assets, adjusted return on average common equity, adjusted efficiency ratio, adjusted net income and adjusted diluted earnings per common share exclude notable items. Management uses these measures, as well as tangible book value per common share, in their analysis of the Company’s performance and believes these measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods.

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

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

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

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

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

(1)Notable items of $1.1 billion ($780 million net-of-tax, including a $70 million discrete tax benefit) for the three months ended December 31, 2023 included $(118) million of noninterest income related to investment securities balance sheet repositioning and capital management actions, $171 million of merger and integration-related charges, $734 million of FDIC special assessment charges and a $110 million charitable contribution. Notable items for the three months ended September 30, 2023 included $284 million ($213 million net-of-tax) of merger and integration-related charges. Notable items of $1.3 billion ($952 million net-of-tax) for the three months ended December 31, 2022 included $(399) million of noninterest income related to balance sheet repositioning and capital management actions, $90 million of merger and integration-related charges and $791 million of provision for credit losses related to the acquisition of MUB and balance sheet optimization activities.

(2)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.

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

(4)Notable items for the three months ended June 30, 2023 included $309 million of net charge-offs related to balance sheet repositioning and capital management actions. Notable items for the three months ended March 31, 2023 included $91 million of net charge-offs related to uncollectible acquired loans, considered purchase credit deteriorated as of the date of the acquisition. Notable items for the three months 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.

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

(2)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.

(3)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. Notable items of $1.5 billion ($1.1 billion net-of-tax) for the year ended December 31, 2022 included $(399) million of noninterest income related to balance sheet repositioning and capital management actions, $329 million of merger and integration-related charges and $791 million of provision for credit losses related to the acquisition of MUB and balance sheet optimization activities.