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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from (not applicable)
Commission file number: 1-6880
U.S. Bancorp
(Exact name of registrant as specified in its charter)
Delaware 41-0255900
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
800 Nicollet Mall, Minneapolis, Minnesota 55402
(Address of principal executive offices) (Zip Code)
(651) 466-3000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbols
Name of each exchange on which registered
Common Stock, $.01 par value per share USB New York Stock Exchange
Depositary Shares (each representing 1/100th interest in a share of Series A Non-Cumulative Perpetual Preferred Stock, par value $1.00) USB PrA New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series B Non-Cumulative Perpetual Preferred Stock, par value $1.00) USB PrH New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series K Non-Cumulative Perpetual Preferred Stock, par value $1.00) USB PrP New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series L Non-Cumulative Perpetual Preferred Stock, par value $1.00) USB PrQ New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series M Non-Cumulative Perpetual Preferred Stock, par value $1.00) USB PrR New York Stock Exchange
Depositary Shares (each representing 1/1,000th interest in a share of Series O Non-Cumulative Perpetual Preferred Stock, par value $1.00) USB PrS New York Stock Exchange
0.850% Medium-Term Notes, Series X (Senior), due June 7, 2024 USB/24B New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer              ☑         Accelerated filer             ☐
Non-accelerated filer               ☐         Smaller reporting company         ☐
Emerging growth company          ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☑
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $50.6 billion based on the closing sale price as reported on the New York Stock Exchange.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Class Outstanding at January 31, 2024
Common Stock, $.01 par value per share 1,558,133,431
Auditor Firm Id: 42                  Auditor Name: Ernst & Young LLP     Auditor Location: Minneapolis, Minnesota
DOCUMENTS INCORPORATED BY REFERENCE
Document Parts Into Which Incorporated
1.Portions of the Annual Report to Shareholders for the Fiscal Year Ended December 31, 2023 (the “2023 Annual Report”)
 Parts I and II
2.Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held April 16, 2024 (the “Proxy Statement”)
 Part III
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PART I
Item 1. Business
Forward-Looking Statements
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 (“U.S. Bancorp” or the “Company”). 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 ("USBNA"), 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 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;
•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;
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•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 the 2023 Annual Report.
In addition, U.S. Bancorp’s acquisition of MUFG Union Bank, N.A. (“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.
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 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.
MUFG Union Bank Acquisition
On December 1, 2022, the Company acquired MUB’s core regional banking franchise from Mitsubishi UFJ Financial Group, Inc. ("MUFG"). Pursuant to the terms of the Share Purchase Agreement, the Company acquired all 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.
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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 USBNA, the Company’s primary banking subsidiary. The Company’s 2023 results reflect the full financial results of the acquired business.
Business Segments
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.
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, an increase of $202 million (6.0 percent) compared with 2022.
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. Consumer and Business Banking contributed $2.2 billion of the Company’s net income in 2023, an increase of $378 million (20.6 percent) compared with 2022.
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, a decrease of $150 million (11.2 percent) compared with 2022.
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 of the Company’s net income in 2023, a decrease of $826 million compared with 2022.
Additional information regarding the Company’s business segments can be found on pages 56 to 58 of the Company’s 2023 Annual Report under the heading “Line of Business Financial Review,” which is incorporated herein by reference.
Human Capital
The Company’s success depends, in large part, on its ability to attract, develop and retain skilled employees. The Company recognizes that supporting, engaging and continuously upskilling its workforce is key to meeting evolving corporate and customer needs. To further those efforts, the Company is dedicated to fostering a diverse, equitable and inclusive work environment; providing pay that is competitive and fair, as well as other benefits and programs that promote wellness; and supporting employees’ professional development through programs that promote engagement, learning and productivity. As of December 31, 2023, the Company employed a total of 75,465 employees globally.
Diversity, Equity and Inclusion The Company continues to expand its talent pipeline to increase the representation of women at leadership levels and people of color at all levels, including at the executive and senior management levels. The Company’s hiring program strives to include the inclusion of at least one woman or one person of color on interview slates for all roles at the Company. In addition, the Company offers various mentorship, leadership and development opportunities that enable participants, including women and people of color, to enhance networks, key skills and work experiences. The Company also provides inclusive leadership learning journeys designed to coach and develop its leaders in driving employee and team performance through inclusive behaviors and best practices.
To help create and sustain an inclusive workforce, the Company sponsors Business Resource Groups (“BRGs”), including Asian heritage, Black heritage, Nosotros Latinos, Indigenous Peoples, U.S. Bank women, Spectrum LGBTQ, Proud to Serve: Military and Veterans, European Inclusion, and Disability employee groups, with chapters across the Company and membership available to all employees. These BRGs enable employees from a wide variety of backgrounds, identities and perspectives to connect in ways that empower them to contribute, innovate and grow. Through these BRGs, employees can come together to discuss topics of interest to them, develop professional skills and build overall employee engagement, helping to create and sustain an inclusive workforce that drives business growth and propels accountability for diversity and inclusion within the Company.
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These programs, practices and policies are part of the Company’s strategy to have an ethnically and gender diverse employee base. As of December 31, 2023, of the Company’s employees in the United States, 57 percent were women and 39 percent were people of color. As of December 31, 2023, 34 percent of the Company’s employees at the executive and senior management levels in the United States were women and 21 percent were people of color. In addition, as of December 31, 2023, of the Company’s 13 directors, 5 were women and 4 were people of color. All diversity information is based on information self-disclosed by the employee or director to the Company. To provide transparency on progress relating to its commitment to seek and promote diverse talent, the Company publicly discloses consolidated EEO-1 data on its website.
Equitable and Competitive Compensation, Health & Wellness Programs Maintaining competitive compensation and benefits practices is a continued focus for the Company, with periodic peer and benchmarking reviews used to assist with competitive alignment and employee retention. The Company remains committed to fair pay and continues to prioritize pay equity efforts. To further the Company’s efforts to provide fair and equitable compensation to its employees, the Company has processes to address any gender and racial pay inequities identified within its workforce. This work starts with fair hiring practices. The Company also has guidelines in place for both internal and external job postings to assist the Company’s leaders in making fair compensation decisions based on the demands and responsibilities of each role, candidate experience, and pay related to comparable internal positions. As part of the Company's efforts to enhance pay transparency, all open positions in the United States have a disclosed compensation range. The Company conducts periodic reviews of base pay of employee groups across gender and racial categories with the assistance of an independent third-party consultant. Should gender or race-based disparities in pay be identified, the Company adjusts compensation levels to eliminate those disparities. In the 2023 review, on average, employees of the Company in the United States who are women were paid greater than 99 percent of what their male counterparts were paid, and employees of the Company in the United States who are people of color were paid greater than 99 percent of what their white counterparts were paid, in each case taking into account several factors including comparable jobs, experience and location. The 2023 review excluded employees from the MUB acquisition who had not transitioned into the Company's pay structures.
The Company also provides its employees with comprehensive benefits programs, including competitive healthcare, retirement, leave, recognition, wellness, disability, life insurance, time-off, flexible work, and educational assistance programs, based on the Company’s recognition that such benefits are important to attract and retain employees. In addition to its competitive 401(k) matching program, the Company maintains an active cash balance pension program for its U.S. employees, including newly hired employees.
The Company continues to support flexible work programs with remote and in-person work arrangements, providing additional optionality and flexibility for most employees, which helps the Company attract and retain talent. The Company continues to adapt and evolve its flexible work programs as it recognizes the changes to employee and customer priorities and its customers’ and employees' changing needs.
Employee Engagement and Retention As part of its efforts to develop and retain skilled employees, the Company remains focused on monitoring employee engagement. The Company’s employee listening program enables the Company to collect quantitative and qualitative feedback from employees on an ongoing basis, which then supports and informs the Company on human capital strategies and decisions.
As part of its talent strategy, the Company strives to support continuous employee learning and development. The Company provides a number of talent development opportunities for employees to enhance skills that are critical in the current and future working environment and empowers employees to discover ways to thrive and grow their careers, which aligns with the Company’s Employment Value Proposition. For example, the Company’s learning programs include the Digital and Leadership Academies, which focus on digital and core leadership skill development. The Company continues to deploy cultural sensitivity and customer interaction training for its frontline employees that focuses on building skills to serve all the Company's customers with excellence. In addition, every employee is automatically included in the Company’s Development Network that provides all employees with opportunities to network, learn, develop leadership skills and contribute to the Company and its communities. Succession planning and talent development processes remain a top priority for the Company along with continuous improvements to its training and development programs. During 2023, employees completed over 3 million hours of training through the Company’s enterprise learning programs to better support their professional development and customer and business needs.
Human Capital Governance The Company’s Board of Directors oversees the Company’s human capital management. The Board’s Compensation and Human Resources Committee discharges the Board’s oversight responsibilities relating to the Company’s compensation programs and employee benefit plans, overseeing the Company’s human capital strategy and talent management program and employee diversity, equity and inclusion initiatives. Coordinating with the Compensation and Human Resources Committee, the Board’s Public Responsibility Committee also oversees the Company’s diversity, equity and inclusion strategy.
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The Company’s Chief Human Resources Officer regularly reports to the Board’s Compensation and Human Resources Committee on human capital matters such as human resource practices and programs, including employee benefits and compensation programs. To promote accountability for the Company’s diversity, equity and inclusion efforts, the Company’s Chief Diversity Officer reports directly to the Chief Executive Officer and serves as a member of its senior management team.
Competition
The financial services industry is highly competitive. 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, advisory and technology companies. The financial services industry continues to undergo 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. In recent years, competition has increased from institutions not subject to the same regulatory restrictions as domestic banks and bank holding companies, including by financial technology companies, or “fintechs,” which may offer bank-like products or services that compete directly with the Company’s products and services. Competition is based on a number of factors, including, among others, customer service, quality and range of products and services offered, price, reputation, interest rates on loans and deposits, lending limits and customer convenience, including the ability to address customer needs by using technology to provide products and services that customers want to adopt. The Company’s ability to continue to compete effectively also depends in large part on its ability to attract new employees and retain and motivate existing employees, while managing compensation and other costs. For additional information relating to how the Company attracts and retains employees, see “Human Capital” above.
Government Policies
The operations of the Company’s various businesses are affected by federal and state laws and legislative changes and by policies of various regulatory authorities of the numerous states in which they operate, the United States and foreign governments. These laws, rules and policies include, for example, statutory maximum legal lending rates, domestic monetary policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve”), United States fiscal policy, international currency regulations and monetary policies and capital adequacy and liquidity constraints imposed by bank regulatory agencies.
Supervision and Regulation
U.S. Bancorp and its subsidiaries are subject to the extensive regulatory framework applicable to bank holding companies (“BHCs”) and their subsidiaries. This regulatory framework is intended primarily for the protection of depositors, the deposit insurance fund (the “DIF”) of the Federal Deposit Insurance Corporation (the “FDIC”), consumers, the stability of the financial system in the United States, and the health of the national economy, and not for investors in the Company.
This section summarizes certain provisions of the principal laws and regulations applicable to the Company and its subsidiaries. The descriptions are not intended to be complete and are qualified in their entirety by reference to the full text of the statutes and regulations described below.
General As a BHC, the Company is subject to regulation under the BHC Act and to inspection, examination and supervision by the Federal Reserve. USBNA and its subsidiaries are subject to regulation, examination and supervision primarily by the Office of the Comptroller of the Currency (the “OCC”) and also by the FDIC, the Federal Reserve, the Consumer Financial Protection Bureau (the “CFPB”), the Securities and Exchange Commission (the “SEC”) and the Commodities Futures Trading Commission (the “CFTC”) in certain areas.
Supervision and regulation by the responsible regulatory agencies generally include comprehensive annual reviews of all major aspects of the Company’s and USBNA’s business and condition, regular on-site examinations, and imposition of periodic reporting requirements and limitations on investments and certain types of activities. If an applicable regulatory agency deems the Company to be operating in a manner that is inconsistent with safe and sound banking practices, such agency can require the entry into informal or formal supervisory agreements, including board resolutions, memoranda of understanding, written agreements and consent or cease and desist orders, pursuant to which the Company would be required to take identified corrective actions to address cited concerns and to refrain from taking certain actions. Supervision and examinations are confidential, and the outcomes of these actions generally are not made public.
Banking and other financial services statutes, regulations and policies are continually under review by the United States Congress, state legislatures and federal and state regulatory agencies. In addition to laws and regulations, state and federal bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance applicable to the Company and its subsidiaries.
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Any change in the statutes, regulations or regulatory policies applicable to the Company, including changes in their interpretation or implementation, could have a material effect on its business or organization.
As a BHC with over $100 billion in total consolidated assets, the Company is subject to the Dodd-Frank Act’s enhanced prudential standards, as applied to “Category III” institutions under the federal banking regulators’ rules that tailor how enhanced prudential standards apply to large U.S. banking organizations (the “Tailoring Rules”). The Tailoring Rules also apply certain enhanced prudential standards to its subsidiary depository institution, USBNA, as described in more detail below.
In connection with the Company’s acquisition of MUB, the Company committed (the “Federal Reserve Commitments”) to submit to the Federal Reserve quarterly implementation plans for complying with requirements applicable to “Category II” institutions (i.e., institutions with $700 billion or more in total assets or $75 billion or more in cross-jurisdictional activities). The Company also committed to meet requirements applicable to Category II institutions by the earlier of (i) the date required under the Tailoring Rules; and (ii) December 31, 2024, if the Federal Reserve notifies the Company by January 1, 2024, that the Company must comply with such rules. On October 16, 2023, the Federal Reserve granted the Company relief from both of these commitments. As a result, the Company will continue to be subject to the regulatory capital and liquidity requirements applicable to Category III institutions until otherwise required under the Tailoring Rules (i.e., until the Company’s total average consolidated assets for the then most recent four quarters equal $700 billion or more or the amount of the Company’s average cross-jurisdictional activities for the then most recent four quarters equals $75 billion or more).
Supervisory Ratings Federal banking regulators regularly examine the Company and its insured depository institution subsidiary, USBNA. Following those exams, the Company (under the Federal Reserve’s Large Financial Institution Rating System) and USBNA (under the CAMELS rating system) are assigned supervisory ratings. Disclosure of these ratings to third parties is not allowed without permission of the issuing regulator. A downgrade in these ratings could limit the Company’s ability to pursue acquisitions or conduct other expansionary activities for a period of time, require new or additional regulatory approvals before engaging in certain other business activities or investments, affect USBNA’s deposit insurance assessment rates, limit the Company's access to funding through government-sponsored liquidity programs, and impose additional recordkeeping and corporate governance requirements, as well as generally increase regulatory scrutiny of the Company.
BHC Activities The Company is a BHC under the BHC Act and has elected to be a financial holding company (“FHC”). BHCs that qualify and elect to be treated as FHCs may engage in, and affiliate with financial companies engaging in, a broader range of activities than would otherwise be permitted for a BHC.
If an FHC or a depository institution controlled by an FHC ceases to be well-capitalized or well-managed, the Federal Reserve may impose corrective capital and managerial requirements on the FHC and may place limitations on its ability to conduct all of the business activities that FHCs are generally permitted to conduct and its ability to make certain acquisitions. See “Permissible Business Activities” below. Disclosure of any failure to meet these standards is not allowed without permission of the Federal Reserve. If the failure to meet these standards persists, the FHC may be required to divest its depository institution subsidiaries or cease all activities other than those activities that may be conducted by BHCs that are not FHCs. In addition, if a depository institution controlled by an FHC does not receive a Community Reinvestment Act (“CRA”) rating of at least “satisfactory” at its most recent examination, the Federal Reserve will prohibit the FHC from conducting new business activities that FHCs are generally permitted to conduct and from making certain acquisitions.
The Federal Reserve also requires BHCs to meet certain applicable capital and management standards. Failure by the Company to meet these standards could limit the Company from engaging in any new activity or acquiring other companies without the prior approval of the Federal Reserve.
Permissible Business Activities As an FHC, the Company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or incidental or complementary to activities that are financial in nature. “Financial in nature” activities include securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; merchant banking; and activities that the Federal Reserve, in consultation with the Secretary of the United States Treasury, determines to be financial in nature or incidental to such financial activity. “Complementary activities” are activities that the Federal Reserve determines upon application to be complementary to a financial activity and that do not pose a safety and soundness risk.
The Company generally is not required to obtain Federal Reserve approval to acquire a company engaged in activities that are financial in nature or incidental to activities that are financial in nature, as long as the Company meets the capital, managerial and CRA requirements to qualify as an FHC. However, the Company is required to receive approval for an acquisition in which the total consolidated assets to be acquired exceed $10 billion. FHCs are also required to obtain the approval of the Federal Reserve before they may acquire more than five percent of the voting shares or substantially all of the assets of an unaffiliated BHC, bank or savings association.
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In addition, banks must receive approval before they may acquire, merge with, acquire substantially all of the assets of or assume any deposits of a bank or savings association and may be required to receive approval for acquisitions of other companies.
Interstate Banking A BHC may acquire banks in states other than its home state, subject to any state requirement that the bank has been organized and operating for a minimum period of time (not to exceed five years). Also, such an acquisition is not permitted if the BHC controls, prior to or following the proposed acquisition, more than 10 percent of the total amount of deposits of insured depository institutions nationwide or, if the acquisition is the BHC’s initial entry into the state, more than 30 percent of the deposits of insured depository institutions in the state (or any lesser or greater amount set by the state). Banks may merge across state lines to create interstate branches and are permitted to establish new branches in another state to the same extent as banks chartered by that state.
Regulatory Approval for Acquisitions In determining whether to approve a proposed bank acquisition, federal bank regulators will consider a number of factors, including the effect of the acquisition on competition, financial condition and future prospects (including current and projected capital ratios and levels); the competence, experience and integrity of management and its record of compliance with laws and regulations; the convenience and needs of the communities to be served (including the acquiring institution’s record of compliance under the CRA); the effectiveness of the acquiring institution in combating money laundering activities; and the extent to which the transaction would result in greater or more concentrated risks to the stability of the United States banking or financial system. In addition, approval of interstate transactions requires that the acquiror satisfy regulatory standards for well-capitalized and well-managed institutions.
Source of Strength The Company is required to act as a source of strength to USBNA, and to commit capital and financial resources to support USBNA in circumstances where the Company might not otherwise do so. Under these requirements, the Federal Reserve may in the future require the Company to provide financial assistance to USBNA, should it experience financial distress. Capital loans by the Company to USBNA would be subordinate in right of payment to deposits and certain other debts of USBNA.
OCC Heightened Standards USBNA is subject to the OCC’s guidelines establishing heightened standards for large national banks, which establish minimum standards for the design and implementation of a risk governance framework for banks. The OCC may take action against institutions that fail to meet these standards.
Enhanced Prudential Standards Under the Dodd-Frank Act, as modified by the Economic Growth, Regulatory Relief and Consumer Protection Act and the Tailoring Rules, large bank holding companies, such as the Company, are subject to certain enhanced prudential standards based on the banking organization’s size and certain “risk-based indicators.” The prudential standards include enhanced risk-based capital and leverage requirements, enhanced liquidity requirements, enhanced risk management and risk committee requirements, a requirement to submit a resolution plan, single-counterparty credit limits and stress tests. Certain of the enhanced prudential standards applicable to the Company are described below in further detail.
Dividend Restrictions The Company is a legal entity separate and distinct from its subsidiaries. Typically, the majority of the Company’s operating funds are received in the form of dividends paid to the Company by USBNA. Federal law imposes limitations on the payment of dividends by national banks. In general, dividends payable by USBNA and the Company’s trust bank subsidiaries, as national banking associations, are limited by rules that compare dividends to net income for periods defined by regulation.
The OCC, the Federal Reserve and the FDIC also have authority to prohibit or limit the payment of dividends by the banking organizations they supervise (including the Company and USBNA) if, in the banking regulator’s opinion, payment of a dividend would constitute an unsafe or unsound practice in light of the financial condition of the banking organization.
In addition, the Federal Reserve’s final rule implementing the stress capital buffer (“SCB”) provides that a BHC must receive prior approval for any dividend, stock repurchase or other capital distribution, other than a capital distribution on a newly issued capital instrument, if the BHC is required to resubmit its capital plan. The rule also provides that a BHC must resubmit its capital plan if, among other things, the BHC determines there has been or will be a material change in the BHC’s risk profile, financial condition, or corporate structure since the BHC last submitted its capital plan.
Capital Requirements The Company is subject to certain regulatory risk-based capital and leverage requirements under capital rules adopted by the Federal Reserve, and USBNA is subject to substantially similar rules adopted by the OCC. These rules implement the Basel Committee’s framework for strengthening the regulation, supervision and risk management of banks (“Basel III”), as well as certain provisions of the Dodd-Frank Act. These quantitative calculations are minimums, and the Federal Reserve and OCC may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.
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Under the Tailoring Rules, the Company and USBNA are each currently subject to “Category III” standards, and are “standardized approach” banking organizations that are subject to rules that provide for simplified capital requirements relating to the threshold deductions for mortgage servicing assets, deferred tax assets arising from temporary differences that a banking organization could not realize through net operating loss carry backs, and investments in the capital of unconsolidated financial institutions, as well as the inclusion of minority interests in regulatory capital. Growth in total consolidated assets (including assets obtained in acquisitions) or cross-jurisdictional activity (as defined in the Tailoring Rules) could affect the Company’s continued classification as a “Category III” institution, which could result in the Company and its insured depository institution subsidiary becoming “advanced approaches” banking organizations, a requirement to recognize elements of accumulated other comprehensive income in regulatory capital, as well as other more stringent capital, liquidity, and other regulatory requirements.
Under the United States Basel III-based capital rules, the Company is subject to a minimum common equity tier 1 (“CET1”) capital ratio (CET1 capital to risk-weighted assets) of 4.5 percent, a minimum tier 1 capital ratio of 6.0 percent and a minimum total capital ratio of 8.0 percent. At December 31, 2023, the Company exceeded these minimum capital ratio requirements. The Company is also subject to the SCB, which is based on the results of the Federal Reserve’s supervisory stress tests and the Company’s planned common stock dividends, and, if deployed by the Federal Reserve, up to a 2.5 percent common equity tier 1 countercyclical capital buffer. These additional requirements must be satisfied entirely with capital that qualifies as CET1. Although the Federal Reserve has not to date raised the countercyclical capital buffer above zero percent, the countercyclical capital buffer could change in the future. The SCB generally is assigned on an annual basis and becomes effective on October 1 of each year, subject to a 2.5 percent floor, and may vary over time. As of December 31, 2023, the SCB applicable to the Company is 2.5 percent. If the Federal Reserve were to raise the countercyclical capital buffer, or if the SCB applicable to the Company were to exceed 2.5 percent, this would also change the effective minimum capital ratios to which the Company is subject. For USBNA, the buffer requirement consists of the static capital conservation buffer equal to 2.5 percent of risk-weighted assets.
Banking organizations that fail to meet the effective minimum ratios will be subject to constraints on capital distributions, including dividends and share repurchases, and certain discretionary executive compensation, with the severity of the constraints depending on the extent of the shortfall and “eligible retained income” (defined as the greater of (i) net income for the four preceding quarters, net of distributions and associated tax effects not reflected in net income; and (ii) the average of all net income over the preceding four quarters).
United States banking organizations are also subject to a minimum tier 1 leverage ratio of 4.0 percent. As a Category III banking organization, the Company is also subject to a minimum Supplementary Leverage Ratio (“SLR”) of 3.0 percent that takes into account both on-balance sheet and certain off-balance sheet exposures. At December 31, 2023, the Company exceeded the applicable minimum tier 1 leverage ratio and SLR 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, commonly referred to as “Basel III Endgame.” The proposal provides for a July 1, 2025 effective date, subject to a three-year transition period. The proposal would set stricter criteria for the use of internal models by replacing the market risk rule with the “Fundamental Review of the Trading Book,” and would introduce new standardized approaches for credit risk, operational risk and credit valuation adjustment risk, which would replace the current models-based approaches. In addition, under the proposed rule, also subject to a phase-in period, Category III banking institutions, such as the Company, would no longer be permitted to opt out of including certain components of accumulated other comprehensive income in regulatory capital, which would result in unrealized gains and losses on available-for-sale securities being included in the calculation of the Company’s regulatory capital ratios. The Company continues to evaluate the potential effects of the proposed rule, and the effects on the Company will depend on the final form of any rulemaking. However, the Company expects that any final rule would result in the Company being required to maintain increased levels of regulatory capital.
In 2020, the United States federal banking agencies adopted a rule that allowed banking organizations, including the Company and USBNA, to elect to delay temporarily the estimated effects of adopting the current expected credit loss accounting standard (“CECL”) on regulatory capital until January 2022 and subsequently to phase in the effects through January 2025. Through the 2023 stress test cycle, the Federal Reserve has not yet incorporated CECL into the calculation of the allowance for credit losses in supervisory stress tests, and the Federal Reserve issued guidance in December 2023 to indicate that it will maintain the current framework for allowance for credit losses in the supervisory stress test through the 2024 stress test cycle. For further discussion of CECL, see Notes 1 and 6 of the Notes to Consolidated Financial Statements in the 2023 Annual Report. The Company and USBNA elected to delay and subsequently phase in the regulatory capital impact of CECL in accordance with this rule.
For additional information regarding the Company’s regulatory capital, see “Capital Management” in the 2023 Annual Report.
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Comprehensive Capital Analysis and Review As required by the Federal Reserve’s Comprehensive Capital Analysis and Review (“CCAR”) rules, the Company submits a capital plan to the Federal Reserve on an annual basis. As part of the CCAR process, the Federal Reserve evaluates the Company’s plans to make capital distributions, including by repurchasing stock or making dividend payments, under a number of macroeconomic and Company-specific assumptions based on the Company’s and the Federal Reserve’s stress tests described under “Stress Testing” below. These capital plans consist of a number of mandatory elements, including an assessment of a company’s sources and uses of capital over a nine-quarter planning horizon assuming both expected and stressful conditions; a detailed description of a company’s process for assessing capital adequacy; and a demonstration of a company’s ability to maintain capital above each minimum regulatory capital ratio (without taking the buffers into account) under expected and stressful conditions.
Stress Testing The Federal Reserve’s CCAR framework and the Dodd-Frank Act stress testing framework require BHCs subject to Category III standards such as the Company to conduct an annual internal stress test in connection with its annual capital plan submission as well as biennial company-run stress tests, and subject such BHCs to annual supervisory stress tests conducted by the Federal Reserve. Among other things, the company-run stress tests employ stress scenarios developed by the Company as well as stress scenarios provided by the Federal Reserve and incorporate the Dodd-Frank Act capital actions (as opposed to the Company’s planned capital actions), which are intended to normalize capital distributions across large U.S. BHCs. The Federal Reserve conducts CCAR and Dodd-Frank Act supervisory stress tests employing stress scenarios and internal supervisory models and incorporates the Company’s planned capital actions and the Dodd-Frank Act capital actions, respectively, into its stress tests. The Federal Reserve and the Company are currently required to publish the results of the annual supervisory and biennial company-run stress tests, respectively, no later than June 30 of each applicable year. If the Company were to become a “Category II” institution for purposes of the Tailoring Rules, the Company would become subject to annual (rather than biennial) company-run stress tests.
Under the OCC’s rules, national banks with assets in excess of $250 billion, including USBNA, are required to submit company-run stress test results to the OCC concurrently with their parent BHC’s CCAR submission to the Federal Reserve. The stress test is based on the OCC’s stress scenarios (which are typically the same as the Federal Reserve’s stress scenarios) and capital actions that are appropriate for the economic conditions assumed in each scenario.
Basel III Liquidity Requirements As Category III banking organizations, the Company and USBNA are each subject to a minimum liquidity coverage ratio ("LCR") under the Tailoring Rules. The LCR is designed to ensure that BHCs have sufficient high-quality liquid assets to survive a significant liquidity stress event lasting for 30 calendar days. In addition, the Company and USBNA are subject to the net stable funding ratio ("NSFR") rule, which is designed to promote stable, longer-term funding of assets and business activities over a one-year time horizon. Under the Tailoring Rules and NSFR rule, the Company and USBNA, as Category III banking organizations with less than $75 billion of weighted short-term wholesale funding, qualify for reduced LCR and NSFR requirements calibrated at 85 percent of the full requirements. If the Company were to become a “Category II” institution for purposes of the Tailoring Rules, the Company would become subject to the full (100 percent) LCR and NSFR requirements, as well as daily (rather than monthly) liquidity reporting requirements.
Prompt Corrective Action The Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) provides a framework for regulation of depository institutions and their affiliates (including parent holding companies) by federal banking regulators. As part of that framework, the FDICIA requires the relevant federal banking regulator to take “prompt corrective action” with respect to an FDIC-insured depository institution, such as USBNA, if that institution does not meet certain capital adequacy standards. Supervisory actions by the appropriate federal banking regulator under the “prompt corrective action” rules generally depend upon an institution’s classification within five capital categories. An institution that fails to remain well-capitalized becomes subject to a series of restrictions that increase in severity as its capital condition weakens. Such restrictions may include a prohibition on capital distributions, restrictions on asset growth or restrictions on the ability to receive regulatory approval of applications. The FDICIA also provides for enhanced supervisory authority over undercapitalized institutions, including authority for the appointment of a conservator or receiver for the institution.
Prompt corrective action regulations apply only to banks and not to BHCs such as the Company. However, the Federal Reserve is authorized to take appropriate action at the BHC level, based on the undercapitalized status of the BHC’s subsidiary banking institutions. In certain instances, relating to an undercapitalized bank, the BHC would be required to guarantee the performance of the undercapitalized subsidiary’s capital restoration plan and could be liable for civil money damages for failure to fulfill those guarantee commitments.
Long-Term Debt Requirements In August 2023, the Federal Reserve, OCC and FDIC issued a proposed rule that would require, among other institutions, each Category III U.S. BHC, 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. BHC, 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. Under the proposed rule, covered banking organizations would be required to maintain long-term debt in an amount that is equal to the greater of (i) 6% of the organization’s risk-weighted assets; (ii) 3.5% of the organization’s average total consolidated assets; and (iii) 2.5% of the organization’s total leverage exposure, if the organization is subject to the SLR rule.
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The requirement would be phased in over three years, with covered banking organizations being required to meet 25% of the requirement within one year after finalization of the rule, 50% after two years and 100% after three years. 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 expects that under any final rule, it and USBNA would be required to maintain substantially more long-term debt than it currently maintains.
Deposit Insurance The DIF provides insurance coverage for certain deposits, up to a standard maximum deposit insurance amount of $250,000 per depositor. Deposits at USBNA are insured up to the applicable limits. The DIF is funded through assessments on insured depository institutions, including USBNA, based on the risk each institution poses to the DIF. The FDIC may increase USBNA’s insurance premiums based on various factors, including the FDIC’s assessment of its risk profile.
In addition, large insured depository institutions, including USBNA, are subject to enhanced deposit account recordkeeping and related information technology system requirements meant to facilitate prompt payment of insured deposits if such an institution were to fail.
In October 2022, the FDIC finalized a rule to increase the initial base deposit insurance assessment rate schedules for all insured depository institutions by two basis points, beginning with the first quarterly assessment period of 2023. The increased assessment rate is intended to improve the likelihood that the DIF reserve ratio would reach the required minimum of 1.35 percent by the statutory deadline of September 30, 2028.
In November 2023, the FDIC released a final rule to impose a special assessment to recover the losses to the DIF resulting from failures of other banking institutions during 2023. The Company expects the special assessments will be tax deductible. As a result of this rule, in the fourth quarter of 2023, the Company recognized additional noninterest expense of $734 million for the FDIC special assessment.
Depositor Preference Under federal law, in the event of the liquidation or other resolution of an insured depository institution, the claims of a receiver of the institution for administrative expense and the claims of holders of domestic deposit liabilities have priority over the claims of other unsecured creditors of the institution, including holders of publicly issued senior or subordinated debt and depositors in non-domestic offices. As a result, those debtholders and depositors would be treated differently from, and could receive, if anything, substantially less than, the depositors in domestic offices of the depository institution.
Orderly Liquidation Authority Upon the insolvency of a BHC, such as the Company, the FDIC may be appointed as conservator or receiver of the BHC if the Secretary of the Treasury determines (upon the written recommendation of the FDIC and the Federal Reserve and after consultation with the President of the United States) that certain conditions set forth in the Dodd-Frank Act regarding the potential impact on financial stability of a financial company’s failure have been met. FDIC rules set forth a comprehensive method for the receivership of a covered financial company. Acting as a conservator or receiver, the FDIC would have broad powers to transfer any assets or liabilities of a BHC without the approval of its creditors.
Resolution Plans The Company is required by the Federal Reserve and the FDIC to submit a periodic plan for the rapid and orderly resolution of the Company and its significant legal entities in the event of future material financial distress or failure. If the Federal Reserve and the FDIC jointly determine that the resolution plan is not credible and such deficiencies are not cured in a timely manner, the regulators may jointly impose on the Company more stringent capital, leverage or liquidity requirements or restrictions on the Company’s growth, activities or operations. If the Company were to fail to address the deficiencies in its resolution plan when required, it could eventually be required to divest certain assets or operations. As a Category III banking organization, the Company is required to submit resolution plans on a triennial cycle (alternating between targeted and full submissions). The Company submitted its targeted resolution plan in December 2021 and is scheduled to file its next full resolution plan in July 2024. In addition, in connection with the MUB acquisition, the Company committed to the Federal Reserve that it would, within six months of completing the acquisition of MUB, provide the Federal Reserve and the FDIC with an interim update to its resolution plan. The Company submitted the update to its resolution plan within the required time period.
In August 2023, the Federal Reserve and the FDIC released proposed guidance for 2024 and subsequent resolution plan submissions that would apply to certain institutions including Category III institutions such as the Company. The guidance addresses the core elements of an organization's resolution strategy and is intended, among other things, to reduce inconsistencies in the amounts and types of information filed by different organizations. The guidance is also intended to reflect the regulators' experience with bank failures that occurred during 2023. The effects on the Company's resolution planning, including the timing of submission, will depend on the final form of any guidance.
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USBNA is required to file periodically separate resolution plans with the FDIC that should enable the FDIC, as receiver, to resolve USBNA under applicable receivership provisions of the Federal Deposit Insurance Act in a manner that ensures that depositors receive access to their insured deposits within one business day of the institution’s failure, maximizes the net present value return from the sale or disposition of its assets and minimizes the amount of any loss to the institution’s creditors. In June 2021, the FDIC issued a Statement on Resolution Plans for Insured Depository Institutions (the “FDIC Statement”). Among other things, the FDIC Statement established a three-year filing cycle for banks with $100 billion or more in total assets and provided details regarding the content that filers will be expected to prepare. Under this filing cycle, USBNA submitted its most recent resolution plan to the FDIC in November 2022. In August 2023, the FDIC issued a proposed rule that would require insured depository institutions with $100 billion or more in total assets, such as USBNA, to submit biennial resolution plans that include a comprehensive strategy from the point of potential failure to liquidation, which would be required to ensure timely access to insured deposits, maximize value from the disposition of assets, minimize losses to creditors and address potential risks to the U.S. economy or financial stability. Under the proposed rule, USBNA would be required to file resolution plans biennially beginning in 2025. The effects of the proposed rule on USBNA, including the timing of submission, will depend on the final form of any rulemaking.
In addition, in connection with the approval by the OCC of the merger of MUB into USBNA, USBNA committed (the “OCC Commitments”) to the OCC that it would (i) develop a list of business lines and/or portfolios (each an “object of sale”) that could be sold quickly in the event of stress; and (ii) prepare a plan, including a timeline, to effectuate such separability, including through the establishment of “data rooms” for each object of sale. USBNA was required to submit these items to the OCC for a written determination of no supervisory objection within six months of consummation of the merger of MUB into USBNA. USBNA submitted all items within the required timeframe.
Recovery Plans The OCC has established enforceable guidelines for recovery planning by insured national banks with average total consolidated assets of $250 billion or more, including USBNA. The guidelines provide that a covered bank should develop and maintain a recovery plan that is appropriate for its individual risk profile, size, activities, and complexity, including the complexity of its organizational and legal entity structure. The guidelines state that a recovery plan should, among other elements, (i) establish triggers, which are quantitative or qualitative indicators of the risk or existence of severe stress that should always be escalated to management or the board of directors, as appropriate, for purposes of initiating a response; (ii) identify a wide range of credible options that a covered bank could undertake to restore financial and operational strength and viability; and (iii) address escalation procedures, management reports, and communication procedures. USBNA’s recovery plan was reviewed and approved pursuant to these guidelines in December 2023.
Transactions with Affiliates There are various legal restrictions on the extent to which the Company and its non-bank subsidiaries may borrow or otherwise engage in certain types of transactions with USBNA or its subsidiaries. Under the Federal Reserve Act and the Federal Reserve’s Regulation W, USBNA and its subsidiaries are subject to quantitative and qualitative limits on extensions of credit (including credit exposure arising from repurchase and reverse repurchase agreements, securities borrowing and derivative transactions), purchases of assets, and certain other transactions with the Company or its other non-bank subsidiaries and affiliates. Additionally, transactions between USBNA or its subsidiaries, on the one hand, and the Company or its other non-bank subsidiaries and affiliates, on the other hand, are required to be on arm’s length terms. Transactions between USBNA and its affiliates and the Company and its other non-bank subsidiaries and its affiliates must be consistent with standards of safety and soundness.
Anti-Money Laundering and Sanctions The Company is subject to several federal laws that are designed to combat money laundering and terrorist financing, and to restrict transactions with persons, companies, or foreign governments sanctioned by United States authorities. This category of laws includes the Bank Secrecy Act (the “BSA”), the Money Laundering Control Act, the USA PATRIOT Act (collectively, “AML laws”), and implementing regulations for the International Emergency Economic Powers Act and the Trading with the Enemy Act, as administered by the United States Treasury Department’s Office of Foreign Assets Control (“sanctions laws”).
As implemented by federal banking and securities regulators and the U.S. Department of the Treasury, AML laws obligate depository institutions and broker-dealers to verify their customers’ identity, verify the identity of beneficial owners of legal entity customers, conduct customer due diligence, report on suspicious activity, file reports of certain transactions in currency, and conduct enhanced due diligence on certain accounts. Sanctions laws prohibit United States persons and certain foreign affiliates from engaging in any transaction with a restricted person or restricted country. Depository institutions and broker-dealers are required by their respective federal regulators to maintain policies and procedures in order to ensure compliance with the above obligations. Federal regulators regularly examine BSA/Anti-Money Laundering (“AML”) and sanctions compliance programs to ensure their adequacy and effectiveness, and the frequency and extent of such examinations and related remedial actions have been increasing.
In January 2021, the Anti-Money Laundering Act of 2020 (“AMLA”), which amends the BSA, was enacted.
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Among other things, the AMLA codified a risk-based approach to anti-money laundering compliance for financial institutions; required the development of standards by the U.S. Department of the Treasury for evaluating technology and internal processes for BSA compliance; and expanded enforcement- and investigation-related authority, including a significant expansion in the available sanctions for certain BSA violations. Many of the statutory provisions in the AMLA will require additional rulemakings, reports and other measures, and the impact of the AMLA will depend on, among other things, rulemaking and implementation guidance. In June 2021, the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury, issued the priorities for anti-money laundering and countering the financing of terrorism policy required under the AMLA. The priorities include corruption, cybercrime, terrorist financing, fraud, transnational crime, drug trafficking, human trafficking and proliferation financing.
Community Reinvestment Act USBNA is subject to the provisions of the CRA. Under the terms of the CRA, banks have a continuing and affirmative obligation, consistent with safe and sound operation, to help meet the credit needs of their communities, including providing credit to individuals residing in low- and moderate-income neighborhoods. The OCC assesses USBNA on its record in meeting the credit needs of the community served by USBNA, including low- and moderate-income neighborhoods. CRA assessments also are considered by the Federal Reserve or OCC when reviewing applications by banking institutions to acquire, merge or consolidate with another banking institution or its holding company, to establish a new branch office that will accept deposits, or to relocate an office. In the case of a BHC applying for approval to acquire a bank or other BHC, the Federal Reserve will assess the CRA records of each subsidiary depository institution of the applicant BHC, and those records may be the basis for denying the application. USBNA received an “Outstanding” CRA rating in its most recent examination, covering the period from January 1, 2016 through December 31, 2020. Prior to merging into USBNA, MUB received an “Outstanding” CRA rating in its most recent examination, covering the period from January 1, 2015 through December 31, 2018.
In October 2023, the OCC, together with the Federal Reserve and FDIC, issued a final rule to modernize the CRA regulatory framework. The final rule is intended, among other things, to strengthen the achievement of the core purpose of the CRA, to adapt to changes in the banking industry, including the expanded role of mobile and online banking, and to tailor performance standards to account for differences in bank size and business models. The final rule tracks the proposed rule issued by the agencies in May 2022 and adjusts CRA evaluations based on bank size and type, with many of the changes applying only to banks with over $2 billion in assets and several applying only to banks with over $10 billion in assets, such as USBNA. The final rule introduces major changes to the CRA regulatory framework: (i) the delineation of assessment areas; (ii) the overall evaluation framework and performance standards and metrics; (iii) the definition of community development activities; and (iv) data collection and reporting. The final rule will become effective on April 1, 2024, but most provisions of the rule will not become applicable until January 1, 2026. The Company continues to evaluate the effect of the final rule on USBNA, and any effects may depend on further guidance from the regulators with respect to interpretive and implementation-related issues that may arise.
Regulation of Brokerage, Investment Advisory and Insurance Activities The Company conducts a broad range of securities activities, both retail and institutional, in the United States through U.S. Bancorp Investments, Inc., PFM Fund Distributors, Inc. and U.S. Bancorp Advisors, LLC (collectively, “broker-dealer entities”). These activities are subject to regulations of the SEC, the Financial Industry Regulatory Authority and other authorities, including state regulators. These regulations generally cover licensing of securities personnel, interactions with customers and counterparties, trading operations, securities underwriting compensation and arrangements, customer suitability, recordkeeping, reporting and communications. Securities regulators impose capital requirements on the Company’s broker-dealer entities and conduct audits or other periodic reviews of their sales practice and financial operations. In addition, the Company’s broker-dealer entities are members of the Securities Investor Protection Corporation, which oversees the liquidation of member broker-dealers that close when the broker-dealer is bankrupt or in financial distress and imposes membership fee assessments and other reporting requirements on the broker-dealer entities.
The operations of the First American family of funds, the Company’s proprietary money market fund complex, also are subject to regulation by the SEC, including rules requiring a floating net asset value for institutional prime and tax-free money market funds and permitting the board of directors of the money market funds the ability to limit redemptions during periods of stress (allowing for the use of liquidity fees and redemption gates during such times). In July 2023, the SEC finalized amendments to the rules that govern money market funds. These amendments will, among other things, increase liquidity requirements for money market funds by requiring funds to hold greater proportions of their total assets in securities that can be liquidated in one business day, and will require institutional prime and institutional tax-exempt money market funds to impose liquidity fees on investors that redeem their investments during times of stress.
The Company’s operations in the areas of insurance brokerage and reinsurance of credit life insurance are subject to regulation and supervision by various state insurance regulatory authorities, including the licensing of insurance brokers and agents.
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Regulation of Derivatives and the Swaps Marketplace Under the Dodd-Frank Act, USBNA, as a CFTC registered swap dealer, is subject to rules regarding the regulation of the swaps marketplace and over-the-counter derivatives, including rules that require swap dealers and major swap participants to register with the CFTC, to meet robust business conduct standards to lower risk and promote market integrity, to meet certain recordkeeping and reporting requirements so that regulators can better monitor the markets, to centrally clear and trade swaps on regulated exchanges or execution facilities, and to be subject to certain capital and margin requirements. CFTC rules also require USBNA to be a member of the National Futures Association, a self-regulatory organization with authority over swap dealers.
In addition, the OCC’s rules concerning swap margin and capital requirements for swap dealers regulated by the OCC mandate the exchange of initial and variation margin for non-cleared swaps and non-cleared security-based swaps between swap entities regulated by five federal agencies and certain counterparties. The amount of margin will vary based on the relative risk of the non-cleared swap or non-cleared security-based swap. Other rules generally exempt inter-affiliate transactions from initial margin requirements to the extent a depository institution’s total exposure to all affiliates is less than 15 percent of its tier 1 capital.
The Volcker Rule Section 13 of the BHC Act and its implementing regulations, commonly referred to as the “Volcker Rule,” prohibit banking entities from engaging in proprietary trading, and prohibit certain interests in, or relationships with, hedge funds or private equity funds. The Volcker Rule applies to the Company, USBNA and their affiliates, and compliance requirements are tailored based on the size and scope of trading activities. The Company has a Volcker Rule compliance program in place that covers all of its subsidiaries and affiliates, including USBNA.
Privacy and Data Protection Federal and state laws contain extensive consumer privacy and data protection provisions. The Gramm Leach-Bliley Act (“GLBA”) requires financial institutions to periodically disclose their privacy policies and practices relating to sharing nonpublic personal information and enables retail customers to opt out of the sharing of such information with nonaffiliated third parties under certain circumstances. Other federal and state laws and regulations impact the Company’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing offers. The GLBA also requires financial institutions to implement a comprehensive information security program. Security and privacy policies and procedures for the protection of personal and confidential information are in effect across all the Company’s businesses and geographic locations.
Data privacy and data protection are areas of increasing legislative focus in the United States, and several U.S. states have enacted comprehensive consumer privacy laws that impose compliance obligations with respect to personal information. The Company has made and will make operational adjustments in accordance with the requirements of applicable privacy and data protection laws. For example, the Company is subject to the California Consumer Protection Act of 2018 and its implementing regulations, as amended in 2020 by the California Privacy Rights Act (the "CCPA"), which provided residents of California with specific rights with respect to the collection of their personal information. The process of drafting and finalizing implementing regulations for the CCPA is ongoing. The Company continues to evaluate the new regulations, and the effects on the Company will depend on the form of any additional rulemakings.
Similar comprehensive consumer privacy laws have been adopted by other states where the Company does business. Each of these state laws, however, includes an entity level exemption for “financial institutions” that are subject to the GLBA like the Company. The United States Congress has also proposed legislation relating to data privacy and data protection, and the federal government may in the future pass such legislation.
In addition, in the European Union (“EU”), privacy law is governed by the General Data Protection Regulation (“GDPR”), which is directly binding and applicable in each EU member state. The GDPR contains enhanced compliance obligations and increased penalties for non-compliance compared to the prior law governing data privacy in the EU and is regularly enforced by European regulators. Canada is in the process of replacing its federal privacy law, the Personal Information Protection and Electronic Documents Act, with a new privacy framework that the Company expects will impose additional compliance obligations on the Company’s Canadian operations.
In October 2023, the CFPB issued a proposed rule regarding personal financial data rights that would apply to financial institutions that offer consumer deposit accounts and credit card issuers. Under the proposed rule, USBNA would be required to provide consumers and their authorized third parties electronic access to 24 months of transaction data, certain account information, account balance, upcoming bill information, information to initiate payment to and from accounts, and the terms and conditions under which an account or credit card was provided. USBNA would be prohibited from imposing any fees or charges for maintaining or providing access to such data. USBNA would also be obligated to comply with data accuracy, retention and other requirements contained in the proposed rule. The Company continues to evaluate the proposed rule, and the impact on USBNA and the Company will depend on the final form of any rulemaking.
Like other lenders, USBNA and other subsidiaries of the Company use consumer reports in their underwriting activities. Use of such information is regulated under the Fair Credit Reporting Act (“FCRA”), and the FCRA also regulates reporting information to consumer reporting agencies, prescreening individuals for credit offers, sharing of consumer reports between affiliates, and using affiliate credit data for marketing purposes.
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Similar state laws may impose additional requirements on the Company and its subsidiaries. A significant overhaul of the FCRA is expected to be issued in the first half of 2024, which will impact USBNA and its subsidiaries.
The federal banking regulators, as well as the SEC, CFPB, CFTC, and related self-regulatory organizations, regularly issue guidance on cybersecurity that is intended to enhance cyber risk management among financial institutions. A financial institution’s management is required to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institution’s operations after a cybersecurity incident. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations if the institution or its critical service providers experience a cybersecurity incident.
In November 2021, the United States federal bank regulatory agencies adopted a rule regarding notification requirements for banking organizations related to significant computer-security incidents. Under the final rule, which was effective April 1, 2022, a banking organization, such as the Company and USBNA, is required to notify their primary federal regulator within 36 hours of a computer-security incident that results in actual harm to the confidentiality, integrity, or availability of an information system or the information that the system processes, stores or transmits, which has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or impact the stability of the financial sector. Similarly, the Office of the Superintendent of Financial Institutions in Canada requires Federally Regulated Financial Institutions to report qualifying technology and cybersecurity incidents under the provisions of the August 13, 2021 Technology and Cyber Security Incident Reporting Advisory.
Consumer Protection USBNA’s retail banking activities are subject to a variety of federal and state statutes and regulations designed to protect consumers. These laws and regulations require, among other things, disclosures of the cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate the use of credit report information, provide financial privacy protections, prohibit unfair, deceptive and abusive practices and subject USBNA to substantial regulatory oversight. Violations of applicable consumer protection laws can result in significant potential liability from litigation brought by customers, including actual damages, restitution and attorneys’ fees, and may also result in significant reputational harm. USBNA’s regulators may also seek to enforce consumer protection requirements and obtain these and other remedies, including regulatory sanctions and civil money penalties.
USBNA and its subsidiaries are subject to supervision and regulation by the CFPB with respect to federal consumer laws. The CFPB has undertaken numerous rule-making and other initiatives, including launching an initiative to reduce the amounts and types of fees financial institutions may charge, including by recently proposing a rule that would significantly reduce the permissible amount of credit card late fees, issuing informal guidance and taking enforcement actions against certain financial institutions. The CFPB’s rulemaking, examination and enforcement authority has affected and will continue to affect financial institutions that provide consumer financial products and services, including the Company, USBNA and the Company’s other subsidiaries. These regulatory activities may limit the types of financial services and products the Company may offer, which in turn may reduce the Company’s revenues.
Executive and Incentive Compensation Guidelines adopted by the federal banking agencies prohibit excessive compensation as an unsafe and unsound practice and describe compensation as “excessive” when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal stockholder. The Federal Reserve has issued comprehensive guidance on incentive compensation policies (the “Incentive Compensation Guidance”) intended to ensure that the incentive compensation policies of banking organizations do not undermine safety and soundness organizations by encouraging excessive risk-taking. The Incentive Compensation Guidance is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks; (ii) be compatible with effective internal controls and risk management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors. The Incentive Compensation Guidance states that enforcement actions may be taken against a banking organization if its incentive compensation arrangements or related risk-management control or governance processes pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.
During 2016, the federal bank regulatory agencies and the SEC proposed revised rules on incentive-based payment arrangements at specified regulated entities having at least $1 billion of total assets. These proposed rules have not been finalized.
In October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including the New York Stock Exchange (the “NYSE”), to implement listing standards that require all listed companies to adopt policies mandating the recovery or “clawback” of excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding a required accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period.
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The excess compensation would be based on the amount the executive officer would have received had the incentive-based compensation been determined using the restated financial statements. The NYSE and other exchanges issued proposed standards in February 2023, which were approved by the SEC in June 2023. The final standards became effective on October 2, 2023 and the Company adopted a clawback policy within 60 days after the NYSE's listing standard became effective, in compliance with the NYSE's listing standard.
Climate-Related Financial Risk Management In October 2023, the United States federal banking agencies issued a set of principles relating to the management of climate-related financial risks. The principles apply to banking organizations with over $100 billion in total consolidated assets, including the Company and USBNA. The principles are intended to provide a framework for large banking organizations to guide their efforts to identify, measure, monitor, and mitigate physical and transition risks associated with climate change. Among other guidance, the principles describe how climate-related financial risks can be addressed in connection with specific risk categories, including credit risk, liquidity risk, operational risk, and legal and compliance risk.
Other Supervision and Regulation As a public company, the Company is subject to the requirements of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated by the SEC thereunder, as administered by the SEC. As a listed company on the NYSE, the Company is subject to the rules of the NYSE for listed companies.
Capital Covenants
The Company has entered into several transactions involving the issuance of capital securities (“Capital Securities”) by certain Delaware statutory trusts formed by the Company (the “Trusts”), the issuance by the Company of preferred stock (“Preferred Stock”) or the issuance by a subsidiary of USBNA of preferred stock exchangeable for the Company’s Preferred Stock under certain circumstances (“Exchangeable Preferred Stock”). Simultaneously with the closing of certain of those transactions, the Company entered into a replacement capital covenant, as amended from time to time (as amended, each, a “Replacement Capital Covenant” and collectively, the “Replacement Capital Covenants”) for the benefit of persons that buy, hold or sell a specified series of long-term indebtedness of the Company or USBNA (the “Covered Debt”). Each of the Replacement Capital Covenants provides that neither the Company nor any of its subsidiaries (including any of the Trusts) will repay, redeem or purchase any of the Preferred Stock, Exchangeable Preferred Stock or the Capital Securities and the securities held by the Trust (the “Other Securities”), as applicable, on or before the date specified in the applicable Replacement Capital Covenant, unless the Company has received proceeds from the sale of qualifying securities that (a) have equity-like characteristics that are the same as, or more equity-like than, the applicable characteristics of the Preferred Stock, the Exchangeable Preferred Stock, the Capital Securities or Other Securities, as applicable, at the time of repayment, redemption or purchase, and (b) the Company has obtained the prior approval of the Federal Reserve, if such approval is then required by the Federal Reserve or, in the case of the Exchangeable Preferred Stock, the approval of the OCC.
The Company will provide a copy of any Replacement Capital Covenant to a holder of the relevant Covered Debt upon request. For copies of any of these documents, holders should write to Investor Relations, U.S. Bancorp, 800 Nicollet Mall, Minneapolis, Minnesota 55402, or call (866) 775-9668.
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The following table identifies the closing date for each transaction, issuer, series of Capital Securities, Preferred Stock or Exchangeable Preferred Stock issued in the relevant transaction, Other Securities, if any, and applicable Covered Debt as of February 20, 2024, for those securities that remain outstanding.
Closing
Date
 Issuer Capital Securities, Preferred Stock
or Exchangeable Preferred Stock		 Other Securities Covered Debt
3/17/06
USB Capital
IX and
U.S. Bancorp
 USB Capital IX’s $675,378,000 of 6.189% Fixed-to-Floating Rate Normal Income Trust Securities U.S. Bancorp’s Series A Non-Cumulative Perpetual Preferred Stock U.S. Bancorp’s 7.50% Subordinated Debentures due 2026 (CUSIP No. 911596AL8)
3/27/06 U.S. Bancorp
U.S. Bancorp’s 40,000,000 Depositary Shares ($25 per Depositary Share) each representing a 1/1000th interest in a share of Series B Non-Cumulative Perpetual Preferred Stock
 Not Applicable U.S. Bancorp’s 7.50% Subordinated Debentures due 2026 (CUSIP No. 911596AL8)
12/22/06
USB Realty
Corp.(a) and U.S. Bancorp
USB Realty Corp.’s 4,500 shares of Fixed-to-Floating-Rate Exchangeable Non-Cumulative Perpetual Series A Preferred Stock exchangeable for shares of U.S. Bancorp’s Series C Non-Cumulative Perpetual Preferred Stock(b)
 Not Applicable U.S. Bancorp’s 7.50% Subordinated Debentures due 2026 (CUSIP No. 911596AL8)
(a)    USB Realty Corp. is a subsidiary of USBNA.
(b)    Under certain circumstances, upon the direction of the OCC, each share of USB Realty Corp.’s Series A Preferred Stock will be automatically exchanged for one share of U.S. Bancorp’s Series C Non-Cumulative Perpetual Preferred Stock.
Available Information
U.S. Bancorp’s internet website can be found at www.usbank.com. U.S. Bancorp makes available free of charge on its website, by clicking on “About us” and then clicking on “Investor relations” and then clicking on "SEC & Other Filings," its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act, as well as all other reports filed by U.S. Bancorp with the SEC as soon as reasonably practicable after electronically filed with, or furnished to, the SEC.
Additional Information
Additional information in response to this Item 1 can be found in the 2023 Annual Report on pages 56 to 58 under the heading “Line of Business Financial Review.” That information is incorporated into this report by reference.
Item 1A. Risk Factors
Information in response to this Item 1A can be found in the 2023 Annual Report on pages 140 to 155 under the heading “Risk Factors.” That information is incorporated into this report by reference.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
The Company is committed to managing risks that may impact the Company and incorporating risk considerations into its business activities at all levels, including strategic planning, risk identification inventory and assessment, and day-to-day business decisions. The Company’s Board of Directors has approved a risk management framework that establishes governance and risk management requirements for all the Company’s key risk areas and risk-taking activities. The Board oversees management’s performance relative to the risk management framework and risk appetite. Management is responsible for defining the various risks facing the Company, formulating risk management policies and procedures, and managing risk exposures on a day-to-day basis. The Company’s Executive Risk Committee (ERC), which is chaired by the Chief Risk Officer, oversees execution of the risk management framework. The ERC is supported by management’s senior operating committees, each responsible for a specified risk category.
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The Company’s Information Security Risk Committee (ISRC), which is co-chaired by the Chief Information Security Officer (CISO) and the Chief Technology Risk Officer, is a senior operating committee under this risk governance structure and is responsible for the management of information security risk at the Company. The ISRC provides direction and oversight of the information security risk management framework and corporate control programs of the Company, including significant information security risk events, and mitigation strategies. Further, the ISRC facilitates communication across business lines to provide for effective and consistent information security risk identification and control infrastructure to mitigate and manage material information security risks. The ISRC serves as an escalation, decision making, and approval body for information security risk items, including key policies and programs, issue resolution, emerging risks, and key program adherence. The ISRC escalates matters as appropriate to executive management, the ERC, which reports to the Board’s Risk Management Committee, or a relevant committee of the Board. Generally, each of the ERC and ISRC meet at least monthly.
As part of the Company’s risk management framework, risk management programs and processes are in place to incorporate risk considerations into day-to-day business activities across the Company’s risk categories, business lines, and functions. Risk programs may manage all or certain components of a particular risk type. The Company’s cybersecurity risk program 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.
The Company’s processes for assessing, identifying, and managing material risks from cybersecurity threats is integrated into the Company’s overall risk governance and oversight structures through its “three lines of defense” model for establishing effective checks and balances within the risk management framework. In this model, specific to cybersecurity threats, the first line of defense is Information Security Services (ISS), which is responsible for identifying and implementing cybersecurity controls in accordance with policy requirements and industry best practices, to meet regulatory requirements and to safeguard the business. The second line of defense, Cybersecurity Risk Oversight within the Company's Operational Risk Management group, provides reporting and escalation of emerging risks related to cybersecurity and other concerns to senior management, the ERC, the ISRC, other designated senior operating committees, and the Risk Management Committee of the Board of Directors. The third line of defense, the Company’s internal audit function, provides independent assessment and assurance regarding the effectiveness of the Company’s governance, risk management, and control processes with respect to cybersecurity threats, and provides challenge and recommendations for improvement.
The Company uses reporting and metrics frameworks and regular internal and external oversight to assess the health of the cybersecurity risk program. At the first level, the ISS team identifies, assesses, and manages cybersecurity risk and threats. The Company manages cybersecurity issues and findings through remediation and/or closure, with escalation processes if an issue or finding cannot be remediated within required timeframes. The Company engages external assessors, consultants, and auditors to review the Company’s cybersecurity risk program against those of industry peers. The Company also uses consultants periodically to provide recommendations to improve and enhance the program. Additionally, the Company continually works to align its policies and practices with industry-accepted information security practices as provided by the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF), Payment Card Industry Data Security Standards (PCI DSS), and other applicable standards, laws, and regulations.
The Company also maintains a third-party risk management program responsible for the oversight of outsourced operations, which enables the Company to oversee and identify risks related to engaging third-party service providers, including risks from cybersecurity threats to third-party service providers. The Company conducts due diligence using a risk-based approach in selecting and monitoring third-party service providers. The Company also obtains contractual assurances from third-party service providers relating to their security responsibilities, controls, reporting, and roles and responsibilities as it pertains to cybersecurity incident response policies and notification requirements. As appropriate, the Company obtains independent reviews of the third parties’ security through audit reports and testing and conducts verification and validation with third parties to confirm cybersecurity and information security risks are appropriately identified, measured, mitigated, monitored, and reported by the third party to the Company.
As part of its responsibility to oversee the management, business, and strategy of the Company, the Company’s Board of Directors reviews and approves the Company’s risk management framework annually through its Risk Management Committee and oversees the Company’s risk management processes by informing itself about the Company’s key risks and evaluating whether management has reasonable risk management and control processes in place to address those risks. The Board carries out its risk management oversight responsibilities primarily through its committees. Each Board committee is responsible for overseeing certain risks under its charter. The Board’s Risk Management Committee, with support from its Cybersecurity and Technology Subcommittee, has primary oversight responsibility for cybersecurity risk, including risks from any cybersecurity threats. The Risk Management Committee monitors the Company’s compliance with the risk management framework and risk limits established under the Company’s risk appetite statement approved by the Board. The Risk Management Committee also oversees the Company’s independent risk management function. The Board’s Risk Management Committee has a Cybersecurity and Technology Subcommittee that provides dedicated oversight to cybersecurity risk management and cyber resiliency and certain technology matters.
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The Risk Management Committee and its Cybersecurity and Technology Subcommittee receive quarterly reports from management on cybersecurity issues, including cybersecurity threats. The Board’s Risk Management Committee and Audit Committee also hold a joint meeting annually at which they receive a report from the Company’s CISO on cybersecurity threats facing the Company and its preparedness to meet and respond to those threats. In addition, the full Board typically holds an annual cybersecurity education session, which features the perspective of an outside expert on current cybersecurity topics. The Company also typically conducts an annual executive-level cybersecurity exercise to test its cyber incident response, completeness of playbooks, and communication protocols. This exercise involves Board members, managing committee members, third-party companies, and regulators as appropriate.
The Company’s risk management framework includes its risk appetite statement, which is approved annually by the Board’s Risk Management Committee and defines acceptable levels of risk-taking and risk limits and establishes the governance and oversight activities over risk management and reporting. Management monitors and measures the Company’s risk appetite using a quantitative risk scorecard, which consists of risk appetite metrics and associated limits reported to the Board’s Risk Management Committee on a quarterly basis. The Company’s risk appetite statement includes specific information security metrics and associated limits. These limits also inform how matters, including cybersecurity incidents or threats, are escalated to specific members of management, appropriate senior operating committee (including the ISRC and/or ERC), and/or the Board of Directors or appropriate Board committee. The Board’s Risk Management Committee oversees the Company’s risk profile relative to its risk appetite and compliance with risk limits.
The members of the Company’s management that are primarily responsible for assessing and managing risks from cybersecurity threats, including monitoring risk appetite metrics and limits related to cybersecurity, include the Company’s CISO, Chief Risk Officer, and Chief Information and Technology Officer.
The Company’s CISO is primarily responsible for the implementation of defense capabilities and risk mitigation strategies. The Company’s CISO, Timothy J. Held, has over 26 years of information technology and cybersecurity experience. He holds the title of Executive Vice President and Chief Information Security Officer and has been in his role since 2018, having served as the Company’s Deputy CISO from 2015 to 2018 and Head of Cyber Defense, Threat Intelligence, and Incident Response from 2012 to 2018. The CISO is supported by his direct reports and their teams, many of whom hold cybersecurity-related certifications.
The Company’s CISO reports to the Vice Chair and Chief Risk Officer, Jodi L. Richard, who has served in that position since October 2018. She served as Executive Vice President and Chief Operational Risk Officer of the Company 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.
Venkatachari Dilip, the Company’s Senior Executive Vice President and Chief Information and Technology Officer, has oversight of technology-related risk management issues and controls that align to the NIST CSF. Mr. Dilip previously was an Executive Vice President from September 2018 to April 2023 and has served as Chief Information and Technology Officer since joining the Company in September 2018. 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.
The CISO and his leadership team generally meet each business day to discuss security item triage and emerging threats and trends identified by the Threat Intelligence Team. The CISO shares pertinent information from those meetings with the Chief Risk Officer. During a cyber incident, which could involve the Company or a third-party service provider to the Company, the Company’s Cyber Security Incident Response Team (CSIRT) leads the response and internal communication. CSIRT manages low and moderate severity incidents, and Enterprise Crisis Management manages high and very high severity incidents. The risk rating of an incident may change throughout the incident investigation period as new information is learned or the environment changes. Depending on severity level, CSIRT or Enterprise Crisis Management distributes incident communications to senior management, including the Chief Executive Officer, Chief Risk Officer, Board of Directors or appropriate Board committee, and if applicable, the Company’s regulators.
ISS leadership reports prevention, detection, mitigation, and remediation activities through various working groups and committees. Certain working groups meet with the CISO monthly to review completed risk assessments, and items that require escalation are reported up using the internal committee structure and ad hoc communications if time sensitive.
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Additionally, working group and committee meetings report up issues to Operational Risk Management, which may decide to open a formal Risk Management Issue (RMI) based on the severity of the issue or other factors and which are subject to specific governance processes. All security-related RMI remediation activities are reviewed with the Chief Risk Officer and Chief Information and Technology Officer on a bi-weekly basis.
During the fiscal year ended December 31, 2023, the Company has not identified any specific risks from cybersecurity threats that have materially affected, or are reasonably likely to affect, the Company’s business strategy, results of operations, or financial condition, other than the risks described under “Risk Factors – Operations and Business Risk” in the 2023 Annual Report.
Item 2. Properties
U.S. Bancorp and its significant subsidiaries occupy headquarter offices under a long-term lease in Minneapolis, Minnesota. The Company also leases 5 freestanding operations centers in Kansas City, Little Rock, Atlanta, Minneapolis and Chicago. The Company owns 8 principal operations centers in Cincinnati, Fargo, Knoxville, Oshkosh, Olathe, Owensboro, Portland and St. Paul. At December 31, 2023, the Company’s subsidiaries owned and operated a total of 1,219 facilities and leased an additional 1,576 facilities. The Company believes its current facilities are adequate to meet its needs. Additional information with respect to the Company’s premises and equipment is presented in Note 9 of the Notes to Consolidated Financial Statements included in the 2023 Annual Report. That information is incorporated into this report by reference.
Item 3. Legal Proceedings
Information in response to this Item 3 can be found in Note 23 of the Notes to Consolidated Financial Statements included in the 2023 Annual Report under the heading, “Litigation and Regulatory Matters.” That information is incorporated into this report by reference.
Item 4. Mine Safety Disclosures
Not Applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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 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 the 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. The following table provides a detailed analysis of all shares of common stock of the Company purchased by the Company or any affiliated purchaser during the fourth quarter of 2023:
Period
Total Number
of Shares
Purchased
Average
Price Paid
per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Program
 Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (In Millions)
October 1-31 273,451
(a)
$36.08  13,451 $1,330 
November 1-30 4,183 37.20  4,183 1,330 
December 1-31 359,226 45.31  359,226 1,314 
Total 636,860
(a)
$41.29  376,860 $1,314 
(a)Includes 260,000 shares of common stock purchased, at an average price per share of $36.34, in open-market transactions by USBNA, the Company’s banking subsidiary, in its capacity as trustee of the U.S. Bank 401(k) Savings Plan, which is the Company’s employee retirement savings plan.


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Additional Information
Additional information in response to this Item 5 can be found in the 2023 Annual Report on page 139 under the heading “U.S. Bancorp Supplemental Financial Data (Unaudited).” That information is incorporated into this report by reference.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Information in response to this Item 7 can be found in the 2023 Annual Report on pages 22 to 58 under the heading “Management’s Discussion and Analysis.” That information is incorporated into this report by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Information in response to this Item 7A can be found in the 2023 Annual Report on pages 35 to 55 under the heading “Corporate Risk Profile.” That information is incorporated into this report by reference.
Item 8. Financial Statements and Supplementary Data
Information in response to this Item 8 can be found in the 2023 Annual Report on pages 64 to 139 under the headings “Report of Management,” “Report of Independent Registered Public Accounting Firm,” “Report of Independent Registered Public Accounting Firm,” “U.S. Bancorp Consolidated Balance Sheet,” “U.S. Bancorp Consolidated Statement of Income,” “U.S. Bancorp Consolidated Statement of Comprehensive Income,” “U.S. Bancorp Consolidated Statement of Shareholders’ Equity,” “U.S. Bancorp Consolidated Statement of Cash Flows,” “Notes to Consolidated Financial Statements,” “U.S. Bancorp Consolidated Daily Average Balance Sheet and Related Yields and Rates (Unaudited)” and “U.S. Bancorp Supplemental Financial Data (Unaudited).” That information is incorporated into this report by reference.
The consolidated financial statements included in the 2023 Annual Report reflect a correction of a transposition error of the previously reported December 31, 2022 carrying amount of loans in Note 22. The correct amount was reflected in the Consolidated Balance Sheet and other disclosures of the carrying amount of loans in the Company's previously reported consolidated financial statements as of and for the year ended December 31, 2022. The correction in Note 22 had no other impact on the consolidated financial statements.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Information in response to this Item 9A can be found in the 2023 Annual Report on page 63 under the heading “Controls and Procedures” and on pages 64 and 65 under the headings “Report of Management” and “Report of Independent Registered Public Accounting Firm.” That information is incorporated into this report by reference.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Item 10.
Not Applicable.
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PART III
Directors, Executive Officers and Corporate Governance
Code of Ethics and Business Conduct
The Company has adopted a Code of Ethics and Business Conduct that applies to its principal executive officer, principal financial officer and principal accounting officer. The Company’s Code of Ethics and Business Conduct can be found at www.usbank.com by clicking on “About us” and then clicking on “Investor relations” and then clicking on “Corporate Governance” and then clicking on “Governance documents” and then clicking on “Code of Ethics” and then clicking on “Code of Ethics and Business Conduct.” The Company intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, certain provisions of the Code of Ethics and Business Conduct that apply to its principal executive officer, principal financial officer and principal accounting officer by posting such information on its website, at the address and location specified above.
Information About the Company’s Managing Committee1
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 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
1 This section includes the biographies of the members of the Managing Committee of U.S. Bancorp. Each member of the Managing Committee, except for Gregory G. Cunningham, Revathi N. Dominski, Stephen L. Philipson and Dominic V. Venturo, is deemed to be an executive officer of U.S. Bancorp.
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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.
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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.
Additional Information
Additional information in response to this Item 10 can be found in the Proxy Statement under the headings “Proposal 1 — Election of directors,” “Other matters — Delinquent Section 16(a) reports,” “Corporate governance — Committee responsibilities” and “Corporate governance — Committee member qualifications.” That information is incorporated into this report by reference.
Item 11.     Executive Compensation
Information required to be furnished in response to this Item 11 can be found in the Proxy Statement under the headings “Compensation discussion and analysis,” “Compensation Committee report,” “Corporate governance – Compensation Committee Interlocks and Insider Participation,” “Executive compensation” and “Director compensation.” That information is incorporated into this report by reference.
Item 12.     Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information in response to this Item 12 can be found in the Proxy Statement under the headings "Equity compensation plan information" and “Security ownership of certain beneficial owners and management.” That information is incorporated into this report by reference.
24

Item 13.     Certain Relationships and Related Transactions, and Director Independence
Information in response to this Item 13 can be found in the Proxy Statement under the headings “Corporate governance — Director independence,” “Corporate Governance — Committee member qualifications” and “Certain relationships and related transactions.” That information is incorporated into this report by reference.
Item 14.     Principal Accountant Fees and Services
Information in response to this Item 14 can be found in the Proxy Statement under the headings “Audit Committee report and payment of fees to auditor — Fees to independent auditor” and “Audit Committee report and payment of fees to auditor — Administration of engagement of independent auditor.” That information is incorporated into this report by reference.
PART IV
Item 15.     Exhibits and Financial Statement Schedules
List of documents filed as part of this report:
1. Financial Statements
•Report of Management
•Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
•Report of Independent Registered Public Accounting Firm on the Financial Statements
•U.S. Bancorp Consolidated Balance Sheet as of December 31, 2023 and 2022
•U.S. Bancorp Consolidated Statement of Income for each of the three years in the period ended December 31, 2023
•U.S. Bancorp Consolidated Statement of Comprehensive Income for each of the three years in the period ended December 31, 2023
•U.S. Bancorp Consolidated Statement of Shareholders’ Equity for each of the three years in the period ended December 31, 2023
•U.S. Bancorp Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, 2023
•Notes to Consolidated Financial Statements
•U.S. Bancorp Consolidated Daily Average Balance Sheet and Related Yields and Rates (Unaudited)
•U.S. Bancorp Supplemental Financial Data (Unaudited)
2. Financial Statement Schedules
All financial statement schedules for the Company have been included in the consolidated financial statements or the related footnotes, or are either inapplicable or not required.
3. Exhibits
Shareholders may obtain a copy of any of the exhibits to this report upon payment of a fee covering the Company’s reasonable expenses in furnishing the exhibits. You can request exhibits by writing to Investor Relations, U.S. Bancorp, 800 Nicollet Mall, Minneapolis, Minnesota 55402.
(1)3.1
(1)3.2
4.1 Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, copies of instruments defining the rights of holders of long-term debt are not filed. U.S. Bancorp agrees to furnish a copy thereof to the SEC upon request.
25

4.2
(1)10.0
(1)(2)10.1(a)
(1)(2)10.1(b)
(1)(2)10.2
(1)(2)10.3
(1)(2)(3)10.4
(1)(2)10.5(a)
(1)(2)10.5(b)
(1)(2)10.6
(1)(2)10.7(a)
(1)(2)10.7(b)
(1)(2)10.8(a)
(1)(2)10.8(b)
(1)(2)10.8(c)
(1)(2)10.9(a)
(1)(2)10.9(b)
(1)(2)10.10
(1)(2)10.11
(1)(2)10.12
(1)(2)10.13
(1)(2)10.14
26

(1)(2)10.15
(1)(2)10.16
(1)(2)10.17
(1)(2)10.18
(1)(2)10.19
(1)(2)10.20
(1)(2)10.21
(1)(2)10.22
(1)(2)10.23
(1)(2)10.24
(1)(2)10.25
(1)(2)10.26
(1)(2)10.27
(1)(2)10.28
(1)(2)10.29
(2)10.30
(2)10.31
13
21
23
27

24
31.1
31.2
32
97
101
The following financial statements from the Company’s Annual Report for the year ended December 31, 2023, formatted in Inline XBRL: (i) Consolidated Balance Sheet, (ii) Consolidated Statement of Income, (iii) Consolidated Statement of Comprehensive Income, (iv) Consolidated Statement of Shareholders’ Equity, (v) Consolidated Statement of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).
(1)Exhibit has been previously filed with the SEC and is incorporated herein as an exhibit by reference to the prior filing.
(2)Management contracts or compensatory plans or arrangements.
(3)Certain appendices have been omitted. The Company will furnish copies of any such appendix to the U.S. Securities and Exchange Commission upon its request.
Item 16.
Not applicable.
28

SIGNATURES
Form 10-K Summary Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on February 20, 2024, on its behalf by the undersigned, thereunto duly authorized.
U.S. BANCORP
By
/s/ ANDREW CECERE
Andrew Cecere
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on February 20, 2024, by the following persons on behalf of the registrant and in the capacities indicated.
Signature and Title
/s/ ANDREW CECERE
Andrew Cecere,
Chairman, President and Chief Executive Officer, Director
(principal executive officer)
/s/ JOHN C. STERN
John C. Stern,
Senior Executive Vice President and Chief Financial Officer
(principal financial officer)
/s/ LISA R. STARK
Lisa R. Stark,
Executive Vice President and Controller
(principal accounting officer)
WARNER L. BAXTER*
Warner L. Baxter, Director
DOROTHY J. BRIDGES*
Dorothy J. Bridges, Director
ELIZABETH L. BUSE*
Elizabeth L. Buse, Director
ALAN B. COLBERG*
Alan B. Colberg, Director
KIMBERLY N. ELLISON-TAYLOR*
Kimberly N. Ellison-Taylor, Director
KIMBERLY J. HARRIS*
Kimberly J. Harris, Director
ROLAND A. HERNANDEZ*
Roland A. Hernandez, Director
RICHARD P. MCKENNEY*
Richard P. McKenney, Director
29

YUSUF I. MEHDI*
Yusuf I. Mehdi, Director
LORETTA E. REYNOLDS*
Loretta E. Reynolds, Director
JOHN P. WIEHOFF*
John P. Wiehoff, Director
SCOTT W. WINE*
Scott W. Wine, Director
*Andrew Cecere, by signing his name hereto, does hereby sign this document on behalf of each of the above named directors of the registrant pursuant to powers of attorney duly executed by such persons.
Dated: February 20, 2024
By:
/s/ ANDREW CECERE
Andrew Cecere
Attorney-In-Fact
30
EX-4.2 2 ex-42xdescriptionofregiste.htm EX-4.2 Document

Exhibit 4.2

DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES
EXCHANGE ACT OF 1934

U.S. Bancorp (“USB”) has registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (1) its common stock, (2) depositary shares representing shares of Series A preferred stock, (3) depositary shares representing shares of Series B preferred stock, (4) depositary shares representing shares of Series K preferred stock, (5) depositary shares representing shares of Series L preferred stock, (6) depositary shares representing shares of Series M preferred stock, (7) depositary shares representing shares of Series O preferred stock and (8) its 0.850% Medium-Term Notes, Series X (Senior), due June 7, 2024.

DESCRIPTION OF CAPITAL STOCK

The following description of the capital stock of USB and certain other matters does not purport to be complete and is subject, in all respects, to the provisions of the restated certificate of incorporation (the “Certificate of Incorporation”) and amended and restated bylaws (the “Bylaws”) of USB, as well as applicable Delaware law and applicable provisions of the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) and implementing rules thereunder issued by the Board of Governors of the Federal Reserve System (the “LIBOR Rule”). The following description is qualified by reference to the Certificate of Incorporation, the certificate of designations for each series of preferred stock of USB and the Bylaws, copies of which are incorporated by reference as exhibits to USB’s Annual Report on Form 10-K.

Authorized Capital Stock

The authorized capital stock of USB consists of 4,000,000,000 shares of common stock, par value $0.01 per share (“Common Stock”), and 50,000,000 shares of preferred stock, par value $1.00 per share (“Preferred Stock”). As of December 31, 2023, there were 1,557,993,055 shares of Common Stock issued and outstanding and 243,510 shares of Preferred Stock issued and outstanding, of which:

•20,010 were designated as Series A Non-Cumulative Perpetual Preferred Stock (the “Series A Preferred Stock”), 12,510 of which were issued and outstanding;
•40,000 were designated as Series B Non-Cumulative Perpetual Preferred Stock (the “Series B Preferred Stock”), 40,000 of which were issued and outstanding;
•40,000 were designated as Series J Non-Cumulative Perpetual Preferred Stock (the “Series J Preferred Stock”), 40,000 of which were issued and outstanding;
•23,000 were designated as Series K Non-Cumulative Perpetual Preferred Stock (the “Series K Preferred Stock”), 23,000 of which were issued and outstanding;
•20,000 were designated as Series L Non-Cumulative Perpetual Preferred Stock (the “Series L Preferred Stock”), 20,000 of which were issued and outstanding;


•30,000 were designated as Series M Non-Cumulative Perpetual Preferred Stock (the “Series M Preferred Stock”), 30,000 of which were issued and outstanding;
•60,000 were designated as Series N Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock (the “Series N Preferred Stock”), 60,000 of which were issued and outstanding; and
•20,000 were designated as Series O Non-Cumulative Perpetual Preferred Stock (the “Series O Preferred Stock”), 18,000 of which were issued and outstanding.

All outstanding shares of USB’s capital stock are fully paid and non-assessable.

Common Stock

Holders of shares of Common Stock are entitled to one vote per share. Unless a greater number of affirmative votes is required by the Certificate of Incorporation, the Bylaws, the rules or regulations of any stock exchange on which the Common Stock is traded, or as otherwise required by law or pursuant to any regulation applicable to USB, if a quorum exists at any meeting of stockholders, stockholders may take action on all matters, other than the election of directors, by a majority of the voting power of the stock present, in person or by proxy, at the meeting and entitled to vote on the matter. A nominee for director will be elected if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election; provided, however, that if USB’s board of directors determines that the number of nominees for director exceeds the number of directors to be elected at such meeting by the date that is 10 days prior to the date that USB first mails its notice of meeting for such meeting to the stockholders, each of the directors to be elected at such meeting will be elected by a plurality of the votes cast at such meeting assuming a quorum is present. Holders of shares of Common Stock do not have the right to cumulate their votes in the election of directors.

Subject to the prior or equal rights, if any, of any series of Preferred Stock outstanding, the holders of Common Stock are entitled to such dividends as may from time to time be declared by USB’s board of directors from any funds legally available for dividends. USB is subject to various general regulatory policies and requirements relating to the payment of dividends on its capital stock, including requirements to maintain adequate capital above regulatory minimums. The Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) is authorized to determine, under certain circumstances relating to the financial condition of a bank holding company, such as USB, that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. In addition, USB is subject to Delaware state laws relating to the payment of dividends.

Holders of shares of Common Stock do not have any preemptive right to purchase or subscribe for any additional securities of USB.

In the event of liquidation of USB, after the payment or provision for payment of all debts and liabilities and subject to the prior or equal rights, if any, of the Preferred Stock of any and all outstanding series, the holders of Common Stock will be entitled to share ratably in the remaining assets of USB. Shares of USB Common Stock are fully paid and non-assessable.
    2


The Common Stock has no conversion rights.

The transfer agent and registrar for USB Common Stock is Computershare, Inc. USB’s Common Stock is listed on the NYSE under the symbol “USB.”

Preferred Stock

General

USB’s board of directors or a duly authorized committee thereof has the authority, without further action by USB’s stockholders, unless action is required by applicable laws or regulations or by the terms of any Preferred Stock, to provide for the issuance of Preferred Stock in one or more series and to fix the voting rights, designations, preferences, and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, by adopting a resolution or resolutions creating and designating such series.

The rights of holders of Common Stock will be subject to, and may be adversely affected by, the rights of holders of any Preferred Stock. Any issuance of Preferred Stock may adversely affect the interests of holders of the Common Stock by limiting the control which such holders may exert by exercise of their voting rights, by subordinating their rights in liquidation to the rights of the holders of the Preferred Stock, and otherwise.
As of December 31, 2023, the following depositary shares representing shares of Preferred Stock have been registered pursuant to Section 12 of the Exchange Act:

•Depositary Shares each representing a 1/100th interest in a share of Series A Preferred Stock;
•Depositary Shares each representing a 1/1,000th interest in a share of Series B Preferred Stock;
•Depositary Shares each representing a 1/1,000th interest in a share of Series K Preferred Stock;
•Depositary Shares each representing a 1/1,000th interest in a share of Series L Preferred Stock;
•Depositary Shares each representing a 1/1,000th interest in a share of Series M Preferred Stock; and
•Depositary Shares, each representing a 1/1,000th interest in a share of Series O Preferred Stock.

The depositary shares representing the Series J Preferred Stock and the Series N Preferred Stock described herein have not been registered pursuant to Section 12 of the Exchange Act.

Series A Preferred Stock

    3

General — The depositary is the sole holder of the Series A Preferred Stock, as described below under the section entitled “—Description of Depositary Shares,” and all references herein to the holders of the Series A Preferred Stock mean the depositary. However, the holders of depositary shares will be entitled, through the depositary, to exercise the rights and preferences of the holders of the Series A Preferred Stock, as described below under “—Description of Depositary Shares.” The holders of the Series A Preferred Stock have no preemptive rights with respect to any shares of USB’s capital stock or any of its other securities convertible into or carrying rights or options to purchase any such capital stock.
 
The holders of Series A Preferred Stock will be entitled to receive non-cumulative cash dividends when, as and if declared out of assets legally available for payment of dividends. In the event USB does not declare dividends or does not pay dividends in full on the Series A Preferred Stock on any date on which dividends are due, then such unpaid dividends will not cumulate and will no longer accrue and be payable.
 
The Series A Preferred Stock is perpetual and will not be convertible into shares of USB’s Common Stock or any other class or series of USB’s capital stock, and will not be subject to any sinking fund or other obligation for their repurchase or retirement.
 
Rank — With respect to the payment of dividends and amounts upon liquidation, the Series A Preferred Stock ranks equally with the Series B Preferred Stock, the Series J Preferred Stock, the Series K Preferred Stock, the Series L Preferred Stock, the Series M Preferred Stock, the Series N Preferred Stock and the Series O Preferred Stock and with any future class or series of USB’s capital stock that ranks on a par with the Series A Preferred Stock in the payment of dividends and in the distribution of assets on USB’s liquidation, dissolution or winding up. Such capital stock is referred to as “Parity Stock.” With respect to the payment of dividends and amounts upon liquidation, the Series A Preferred Stock ranks senior to USB’s Common Stock and any other future class or series of USB’s capital stock over which the Series A Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up. USB’s Common Stock and any such capital stock are referred to as “Junior Stock.” USB may not issue any class or series of capital stock having a preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up over the Series A Preferred Stock without the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series A Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series.

In particular, during a dividend period (as defined below) and subject to certain exceptions, no dividend will be paid or declared and no distribution will be made on any Junior Stock, other than a dividend payable solely in Junior Stock, no shares of Junior Stock may be repurchased, redeemed or otherwise acquired for consideration by USB, directly or indirectly (other than as a result of reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other than through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock), nor will any monies be paid to or made available for a sinking fund for the redemption of any such securities by USB, and no shares of Parity Stock may be purchased, redeemed or otherwise acquired for consideration by USB otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series A Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, unless full dividends for such dividend period on all outstanding shares of Series A Preferred Stock have been paid or declared and a sum sufficient for the payment thereof set aside.
    4


Dividends — Dividends on shares of the Series A Preferred Stock will not be mandatory. Holders of the Series A Preferred Stock will be entitled to receive, if, when and as declared by USB’s board of directors or a duly authorized committee of the board, out of assets legally available for the payment of dividends under Delaware law, non-cumulative cash dividends payable quarterly in arrears on each January 15, April 15, July 15 or October 15 (or, if such day is not a business day, the next business day). The period from and including the date of issuance of the Series A Preferred Stock or any dividend payment date to but excluding the next dividend payment date is referred to as a “dividend period.” Dividends on each share of Series A Preferred Stock will accrue on the liquidation preference amount of $100,000 per share at a rate per annum equal to the greater of (i) three-month LIBOR1 (computed as provided below) plus 1.02% or (ii) 3.50%. In the case that any date on which dividends are payable on the Series A Preferred Stock is not a business day, then payment of the dividend payable on that date will be made on the next succeeding day that is a business day. However, no interest or other payment will be paid in respect of the delay. The record date for payment of dividends on the Series A Preferred Stock will be the last day of the immediately preceding calendar month during which the dividend payment date falls. The amount of dividends payable for any dividend period will be calculated on the basis of a 360-day year and the number of days actually elapsed. For purposes of the Series A Preferred Stock, a “business day” means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in Minneapolis, Minnesota, New York, New York or Wilmington, Delaware are not authorized or obligated by law, regulation or executive order to close.

For any dividend period, three-month LIBOR will be determined by the calculation agent on the second London Banking Day immediately preceding the first day of such dividend period in the following manner:

•Three-month LIBOR will be the rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-month period commencing on the first day of a dividend period that appears on Reuters Screen LIBOR01 Page as of 11:00 a.m. (London time) on the second London Banking Day preceding the first day of that dividend period.

•If the rate described above does not appear on Reuters Screen LIBOR01, three-month LIBOR will be determined on the basis of the rates at which deposits in U.S. dollars for a three-month period commencing on the first day of that dividend period and in a principal amount of not less than $1,000,000 are offered to prime banks in the London
1 Following the cessation of representative three-month LIBOR, after June 30, 2023, this three-month LIBOR rate transitioned to three-month CME Term SOFR plus a tenor spread adjustment of 0.26161% in accordance with the LIBOR Act and LIBOR Rule.
    5

interbank market by four major banks in the London interbank market selected by USB, at approximately 11:00 a.m., London time, on the second London Banking Day preceding the first day of that dividend period. U.S. Bank National Association, as Calculation Agent for the Series A Preferred Stock, will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, three-month LIBOR with respect to that dividend period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of such quotations.

•If fewer than two quotations are provided, three-month LIBOR with respect to that dividend period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of the rates quoted by three major banks in New York, New York, selected by the Calculation Agent, at approximately 11:00 a.m., New York City time, on the first day of that dividend period for loans in U.S. dollars to leading European banks for a three-month period commencing on the first day of that dividend period and in a principal amount of not less than $1,000,000.

•If the banks selected by the Calculation Agent to provide quotations are not quoting as described above, three-month LIBOR for that dividend period will be the same as three-month LIBOR as determined for the previous dividend period.

The calculation agent’s establishment of three-month LIBOR and calculation of the amount of dividends for each dividend period will be on file at USB’s principal offices, will be made available to any holder of Series A Preferred Stock upon request and will be final and binding in the absence of manifest error.
 
“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London.
 
“Reuters Screen LIBOR01 Page” means the display designated on the Reuters 3000 Xtra (or such other page as may replace that page on that service or such other service as may be nominated by the British Bankers’ Association for the purpose of displaying London interbank offered rates for U.S. dollar deposits).
 
The right of holders of the Series A Preferred Stock to receive dividends is non-cumulative. If USB’s board of directors does not declare a dividend on the Series A Preferred Stock or declares less than a full dividend in respect of any dividend period, the holders of the Series A Preferred Stock will have no right to receive any dividend or a full dividend, as the case may be, for that dividend period, and USB will have no obligation to pay a dividend or to pay full dividends for that dividend period, whether or not dividends are declared and paid for any future dividend period with respect to the Series A Preferred Stock, Parity Stock, Junior Stock or any other class or series of USB’s authorized Preferred Stock.
 
When dividends are not paid in full upon the Series A Preferred Stock and any other Parity Stock, dividends upon that stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the current dividend period per share on the Series A Preferred Stock, and accrued dividends, including any accumulations, on such Parity Stock, bear to each other.
    6

No interest will be payable in respect of any dividend payment on the Series A Preferred Stock that may be in arrears.
 
Redemption — The Series A Preferred Stock is not subject to any mandatory redemption, sinking fund or other similar provisions.

So long as full dividends on all outstanding shares of the Series A Preferred Stock for the then-current dividend period have been paid or declared and a sum sufficient for the payment thereof is set aside, and subject to receipt of the regulatory approvals discussed below, USB may redeem the Series A Preferred Stock in whole or in part at any time, at a redemption price equal to $100,000 per share plus dividends that have been declared but not paid plus accrued and unpaid dividends for the then current dividend period to the redemption date.
 
If shares of the Series A Preferred Stock are to be redeemed, the notice of redemption will be given by first class mail to the holders of record of the Series A Preferred Stock to be redeemed, mailed not less than 30 days nor more than 60 days prior to the date fixed for redemption thereof (provided that, if the depositary shares representing the Series A Preferred Stock are held in book-entry form through DTC, USB may give such notice in any manner permitted by the DTC). Each notice of redemption will include a statement setting forth: (i) the redemption date, (ii) the number of shares of the Series A Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder, (iii) the redemption price, (iv) the place or places where the certificates evidencing shares of Series A Preferred Stock are to be surrendered for payment of the redemption price and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date. If notice of redemption of any shares of Series A Preferred Stock has been duly given and if the funds necessary for such redemption have been set aside by USB for the benefit of the holders of any shares of Series A Preferred Stock so called for redemption, then, on and after the redemption date, dividends will cease to accrue on such shares of Series A Preferred Stock, such shares of Series A Preferred Stock will no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price.

In case of any redemption of only part of the shares of the Series A Preferred Stock at the time outstanding, the shares to be redeemed will be selected either pro rata or in such other manner as USB may determine to be fair and equitable.
  
Under the Federal Reserve Board’s risk-based capital guidelines applicable to bank holding companies, any redemption of the Series A Preferred Stock is subject to prior approval of the Federal Reserve Board.
 
    7

Rights Upon Liquidation, Dissolution or Winding Up — In the event of USB’s liquidation, dissolution or winding up, the holders of the Series A Preferred Stock at the time outstanding will be entitled to receive a liquidating distribution in the amount of the liquidation preference of $100,000 per share, plus any authorized, declared and unpaid dividends for the then-current dividend period to the date of liquidation, out of USB’s assets legally available for distribution to USB’s stockholders, before any distribution is made to holders of USB’s Common Stock or any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with the Series A Preferred Stock upon liquidation and the rights of USB’s depositors and other creditors.

If the amounts available for distribution upon USB’s liquidation, dissolution or winding up are not sufficient to satisfy the full liquidation rights of all the outstanding Series A Preferred Stock and all stock ranking equal to the Series A Preferred Stock, then the holders of each series of Preferred Stock will share ratably in any distribution of assets in proportion to the full respective preferential amount to which they are entitled. After the full amount of the liquidation preference is paid, the holders of Series A Preferred Stock will not be entitled to any further participation in any distribution of USB’s assets.

For such purposes, USB’s consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into USB, or the sale of all or substantially all of USB’s property or business will not be deemed to constitute USB’s liquidation, dissolution or winding up.
 
    Voting Rights — Except as provided below, the holders of the Series A Preferred Stock will have no voting rights.

Whenever dividends on any shares of the Series A Preferred Stock or any other class or series of Parity Stock have not been declared and paid for an amount equal to six or more quarterly dividend periods, whether consecutive or not (a “Nonpayment”), the holders of the Series A Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) will be entitled to vote as a single class for the election of a total of two additional members of USB’s board of directors (the “Preferred Directors”), provided that the election of any such directors will not cause USB to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which USB’s securities may be listed) that listed companies must have a majority of independent directors and provided further that USB’s board of directors will at no time include more than two Preferred Directors. In that event, the number of directors on USB’s board of directors will automatically increase by two and, at the request of any holder of Series A Preferred Stock, a special meeting of the holders of Series A Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series A Preferred Stock as to payment of dividends and for which dividends have not been paid, will be called for the election of the two directors (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election will be held at such next annual or special meeting of stockholders), followed by such election at each subsequent annual meeting. These voting rights will continue until full dividends have been paid regularly on the shares of the Series A Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series A Preferred Stock as to payment of dividends for at least four consecutive dividend periods following the Nonpayment.
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If and when full dividends have been regularly paid for at least four consecutive dividend periods following a Nonpayment on the Series A Preferred Stock and any other class or series of Parity Stock, the holders of the Series A Preferred Stock will be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment) and the term of office of each Preferred Director so elected will terminate and the number of directors on USB’s board of directors will automatically decrease by two. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series A Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described above. So long as a Nonpayment continues, any vacancy in the office of a Preferred Director (other than prior to the initial election of the Preferred Directors) may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by a vote of the holders of the outstanding shares of Series A Preferred Stock (together with holders of any and all other class of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of stockholders. The Preferred Directors will each be entitled to one vote per director on any matter.
 
If the holders of Series A Preferred Stock become entitled to vote for the election of directors, the Series A Preferred Stock may be considered a class of voting securities under interpretations adopted by the Federal Reserve Board. As a result, certain holders of the Series A Preferred Stock may become subject to regulations under the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”) and/or certain acquisitions of the Series A Preferred Stock may be subject to prior approval by the Federal Reserve Board.
 
So long as any shares of Series A Preferred Stock remain outstanding:

•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series A Preferred Stock and all other Parity Stock at the time outstanding, voting as a single class without regard to series, will be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any class or series of stock ranking senior to the Series A Preferred Stock and all other Parity Stock with respect to payment of dividends or the distribution of assets upon USB’s liquidation, dissolution or winding up; and

•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series A Preferred Stock at the time outstanding, voting separately as a class, will be required to amend the provisions of USB’s Certificate of Incorporation or the Certificate of Designations of the Series A Preferred Stock or any other series of Preferred Stock so as to materially and adversely affect the powers, preferences, privileges or rights of the
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Series A Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series A Preferred Stock or authorized Preferred Stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of Preferred Stock and/or Junior Stock will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series A Preferred Stock.

The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding shares of Series A Preferred Stock have been redeemed or called for redemption upon proper notice and sufficient funds have been set aside by USB for the benefit of the holders of the Series A Preferred Stock to effect such redemption.

Series B Preferred Stock

General — The depositary is the sole holder of the Series B Preferred Stock, as described below under the section entitled “—Description of Depositary Shares,” and all references herein to the holders of the Series B Preferred Stock mean the depositary. However, the holders of depositary shares will be entitled, through the depositary, to exercise the rights and preferences of the holders of the Series B Preferred Stock, as described below under “—Description of Depositary Shares.” The holders of the Series B Preferred Stock have no preemptive rights with respect to any shares of USB’s capital stock or any of its other securities convertible into or carrying rights or options to purchase any such capital stock.

The holders of Series B Preferred Stock will be entitled to receive non-cumulative cash dividends when, as and if declared out of assets legally available for payment of dividends. In the event USB does not declare dividends or does not pay dividends in full on the Series B Preferred Stock on any date on which dividends are due, then such unpaid dividends will not cumulate and will no longer accrue and be payable.

The Series B Preferred Stock is perpetual and will not be convertible into shares of USB’s Common Stock or any other class or series of USB’s capital stock, and will not be subject to any sinking fund or other obligation for their repurchase or retirement.

Rank — With respect to the payment of dividends and amounts upon liquidation, the Series B Preferred Stock ranks equally with the Series A Preferred Stock, the Series J Preferred Stock, the Series K Preferred Stock, the Series L Preferred Stock, the Series M Preferred Stock, the Series N Preferred Stock and the Series O Preferred Stock and with any future class or series of USB’s capital stock that ranks on a par with the Series B Preferred Stock in the payment of dividends and in the distribution of assets on USB’s liquidation, dissolution or winding up. With respect to the payment of dividends and amounts upon liquidation, the Series B Preferred Stock ranks senior to USB’s Common Stock and any other future class or series of USB’s capital stock over which the Series B Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up. USB may not issue any class of series of capital stock having a preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up over the Series B Preferred Stock without the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series B Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series.
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In particular, during a dividend period and subject to certain exceptions, no dividend will be paid or declared and no distribution will be made on any Junior Stock, other than a dividend payable solely in Junior Stock, no shares of Junior Stock may be repurchased, redeemed or otherwise acquired for consideration by USB, directly or indirectly (other than as a result of reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other than through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock), nor will any monies be paid to or made available for a sinking fund for the redemption of any such securities by USB, and no shares of Parity Stock may be purchased, redeemed or otherwise acquired for consideration by USB otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series B Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, unless full dividends for such dividend period on all outstanding shares of Series B Preferred Stock have been paid or declared and a sum sufficient for the payment thereof set aside.  

Dividends — Dividends on shares of the Series B Preferred Stock will not be mandatory. Holders of Series B Preferred Stock will be entitled to receive, when, as and if declared by USB’s board of directors or a duly authorized committee of the board, out of assets legally available for the payment of dividends under Delaware law, non-cumulative cash dividends payable quarterly in arrears on each January 15, April 15, July 15 or October 15 (or, if such day is not a business day, the next business day). Dividends on each share of Series B Preferred Stock will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to the greater of (1) three-month LIBOR2 (computed as provided below) plus 0.60% or (2) 3.50%. In the case that any date on which dividends are payable on the Series B Preferred Stock is not a business day, then payment of the dividend payable on that date will be made on the next succeeding day that is a business day. However, no interest or other payment will be paid in respect of the delay. The record date for payment of dividends on the Series B Preferred Stock will be the last day of the immediately preceding calendar month during which the dividend payment date falls. The amount of dividends payable for any dividend period will be calculated on the basis of a 360-day year and the number of days actually elapsed. For purposes of the Series B Preferred Stock, the term “business day” means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York.

For any dividend period, three-month LIBOR will be determined by the calculation agent on the second London Banking Day immediately preceding the first day of such dividend period in the following manner:
        
2 Following the cessation of representative three-month LIBOR, after June 30, 2023, this three-month LIBOR rate transitioned to three-month CME Term SOFR plus a tenor spread adjustment of 0.26161% in accordance with the LIBOR Act and LIBOR Rule.
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•Three-month LIBOR will be the offered rate per annum for three-month deposits in U.S. dollars, beginning on the first day of such period, as that rate appears on Moneyline Telerate Page 3750 as of 11:00 A.M., London time, on the second London Banking Day immediately preceding the first day of such dividend period.

•If the rate described above does not appear on Moneyline Telerate page 3750, three-month LIBOR will be determined on the basis of the rates, at approximately 11:00 A.M., London time, on the second London Banking Day immediately preceding the first day of such dividend period, at which deposits of the following kind are offered to prime banks in the London interbank market by four major banks in that market selected by USB: three-month deposits in U.S. dollars, beginning on the first day of such dividend period, and in a principal amount of not less than $1,000,000. The calculation agent will request the principal London office of each of these banks to provide a quotation of its rate. If at least two quotations are provided, three-month LIBOR for the second London Banking Day immediately preceding the first day of such dividend period will be the arithmetic mean of the quotations.

•If fewer than two quotations are provided as described above, three-month LIBOR for the second London Banking Day immediately preceding the first day of such dividend period will be the arithmetic mean of the rates for loans of the following kind to leading European banks quoted, at approximately 11:00 A.M. New York City time on the second London Banking Day immediately preceding the first day of such dividend period, by three major banks in New York City selected by USB: three-month loans of U.S. dollars, beginning on the first day of such dividend period, and in a principal amount of not less than $1,000,000.

•If fewer than three banks selected by USB are quoting as described above, three-month LIBOR for the new dividend period will be three-month LIBOR in effect for the prior dividend period.
  
The calculation agent’s establishment of three-month LIBOR and calculation of the amount of dividends for each dividend period will be on file at USB’s principal offices, will be made available to any holder of Series B Preferred Stock upon request and will be final and binding in the absence of manifest error.

      The term “Moneyline Telerate Page” means the display on Moneyline Telerate, Inc., or any successor service, on the page or pages referred to above or any replacement page or pages on that service.

The right of holders of the Series B Preferred Stock to receive dividends is non-cumulative. If USB’s board of directors does not declare a dividend on the Series B Preferred Stock or declares less than a full dividend in respect of any dividend period, the holders of the Series B Preferred Stock will have no right to receive any dividend or a full dividend, as the case may be, for that dividend period, and USB will have no obligation to pay a dividend or to pay full dividends for that dividend period, whether or not dividends are declared and paid for any future dividend period with respect to the Series B Preferred Stock, Parity Stock, Junior Stock or any other class or series of USB’s authorized Preferred Stock.
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When dividends are not paid in full upon the Series B Preferred Stock and any other Parity Stock, dividends upon that stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the current dividend period per share on the Series B Preferred Stock, and accrued dividends, including any accumulations, on such Parity Stock, bear to each other. No interest will be payable in respect of any dividend payment on the Series B Preferred Stock that may be in arrears.

Redemption —The Series B Preferred Stock is not subject to any mandatory redemption, sinking fund or other similar provisions.

The Series B Preferred Stock is redeemable at USB’s option, in whole or in part, at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends.

If shares of the Series B Preferred Stock are to be redeemed, the notice of redemption will be given by first class mail to the holders of record of the Series B Preferred Stock to be redeemed, mailed not less than 30 days nor more than 60 days prior to the date fixed for redemption thereof (provided that, if the depositary shares representing the Series B Preferred Stock are held in book-entry form through DTC, USB may give such notice in any manner permitted by the DTC). Each notice of redemption will include a statement setting forth: (i) the redemption date, (ii) the number of shares of the Series B Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder, (iii) the redemption price, (iv) the place or places where the certificates evidencing shares of Series B Preferred Stock are to be surrendered for payment of the redemption price and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date. If notice of redemption of any shares of Series B Preferred Stock has been duly given and if the funds necessary for such redemption have been set aside by USB for the benefit of the holders of any shares of Series B Preferred Stock so called for redemption, then, on and after the redemption date, dividends will cease to accrue on such shares of Series B Preferred Stock, such shares of Series B Preferred Stock will no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price.

In case of any redemption of only part of the shares of the Series B Preferred Stock at the time outstanding, the shares to be redeemed will be selected either pro rata or in such other manner as USB may determine to be fair and equitable.

Under the Federal Reserve Board’s risk-based capital guidelines applicable to bank holding companies, any redemption of the Series B Preferred Stock is subject to prior approval of the Federal Reserve Board.

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Additionally, the Series B Preferred Stock is subject to a “Replacement Capital Covenant,” which will limit USB’s right to redeem the Series B Preferred Stock. In the Replacement Capital Covenant, USB covenants to redeem or repurchase shares of Series B Preferred Stock only if and to the extent that (a) the total redemption or repurchase price is equal to or less than the sum, as of the date of redemption or repurchase, of (i) 133.33% of the aggregate net cash proceeds USB or its subsidiaries have received during the 180 days prior to such date from the issuance and sale of Common Stock plus (ii) 100% of the aggregate net cash proceeds USB or its subsidiaries have received during the 180 days prior to such date from the issuance of certain other specified securities that (A) have equity-like characteristics that satisfy the requirements of the Replacement Capital Covenant, which means generally that such other securities have characteristics that are the same as, or more equity-like than, the applicable characteristics of the Series B Preferred Stock at that time, and (B) qualify as tier 1 capital of USB under the risk-based capital guidelines of the Federal Reserve Board; and (b) USB has obtained the prior approval of the Federal Reserve Board, if such approval is then required by the Federal Reserve Board.

Rights Upon Liquidation, Dissolution or Winding Up — In the event of USB’s liquidation, dissolution or winding up, the holders of the Series B Preferred Stock at the time outstanding will be entitled to receive a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any authorized, declared and unpaid dividends for the then-current dividend period to the date of liquidation, out of USB’s assets legally available for distribution to USB’s stockholders, before any distribution is made to holders of USB’s Common Stock or any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with the Series B Preferred Stock upon liquidation and the rights of USB’s depositors and other creditors.

If the amounts available for distribution upon USB’s liquidation, dissolution or winding up are not sufficient to satisfy the full liquidation rights of all the outstanding Series B Preferred Stock and all stock ranking equal to the Series B Preferred Stock, then the holders of each series of Preferred Stock will share ratably in any distribution of assets in proportion to the full respective preferential amount to which they are entitled. After the full amount of the liquidation preference is paid, the holders of Series B Preferred Stock will not be entitled to any further participation in any distribution of USB’s assets.

For such purposes, USB’s consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into USB, or the sale of all or substantially all of USB’s property or business will not be deemed to constitute USB’s liquidation, dissolution or winding up.

Voting Rights — Except as provided below, the holders of the Series B Preferred Stock will have no voting rights.

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Whenever dividends on any shares of the Series B Preferred Stock or any other class or series of Parity Stock have not been declared and paid for an amount equal to six or more quarterly dividend periods, whether consecutive or not, the holders of the Series B Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) will be entitled to vote as a single class for the election of a total of two additional members of USB’s board of directors, provided that the election of any such directors will not cause USB to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which USB’s securities may be listed) that listed companies must have a majority of independent directors and provided further that USB’s board of directors will at no time include more than two Preferred Directors. In that event, the number of directors on USB’s board of directors will automatically increase by two and, at the request of any holder of Series B Preferred Stock, a special meeting of the holders of Series B Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series B Preferred Stock as to payment of dividends and for which dividends have not been paid, will be called for the election of the two directors (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election will be held at such next annual or special meeting of stockholders), followed by such election at each subsequent annual meeting. These voting rights will continue until full dividends have been paid regularly on the shares of the Series B Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series B Preferred Stock as to payment of dividends for at least four consecutive dividend periods following the Nonpayment.
 
If and when full dividends have been regularly paid for at least four consecutive dividend periods following a Nonpayment on the Series B Preferred Stock and any other class or series of Parity Stock, the holders of the Series B Preferred Stock will be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment) and the term of office of each Preferred Director so elected will terminate and the number of directors on USB’s board of directors will automatically decrease by two. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series B Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described above. So long as a Nonpayment continues, any vacancy in the office of a Preferred Director (other than prior to the initial election of the Preferred Directors) may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by a vote of the holders of the outstanding shares of Series B Preferred Stock (together with holders of any and all other class of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of stockholders. The Preferred Directors will each be entitled to one vote per director on any matter.
 
If the holders of Series B Preferred Stock become entitled to vote for the election of directors, the Series B Preferred Stock may be considered a class of voting securities under interpretations adopted by the Federal Reserve Board. As a result, certain holders of the Series B Preferred Stock may become subject to regulations under the Bank Holding Company Act and/or certain acquisitions of the Series B Preferred Stock may be subject to prior approval by the Federal Reserve Board.
    15

 
So long as any shares of Series B Preferred Stock remain outstanding:

•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series B Preferred Stock and all other Parity Stock at the time outstanding, voting as a single class without regard to series, will be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any class or series of stock ranking senior to the Series B Preferred Stock and all other Parity Stock with respect to payment of dividends or the distribution of assets upon USB’s liquidation, dissolution or winding up; and

•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series B Preferred Stock at the time outstanding, voting separately as a class, will be required to amend the provisions of USB’s Certificate of Incorporation or the Certificate of Designations of the Series B Preferred Stock or any other series of Preferred Stock so as to materially and adversely affect the powers, preferences, privileges or rights of the Series B Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series B Preferred Stock or authorized Preferred Stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of Preferred Stock and/or Junior Stock will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series B Preferred Stock.

The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding shares of Series B Preferred Stock have been redeemed or called for redemption upon proper notice and sufficient funds have been set aside by USB for the benefit of the holders of the Series B Preferred Stock to effect such redemption.

Series J Preferred Stock

General — The depositary is the sole holder of the Series J Preferred Stock, as described below under the section entitled “—Description of Depositary Shares,” and all references herein to the holders of the Series J Preferred Stock mean the depositary. However, the holders of depositary shares will be entitled, through the depositary, to exercise the rights and preferences of the holders of the Series J Preferred Stock, as described below under “—Description of Depositary Shares.” The holders of the Series J Preferred Stock have no preemptive rights with respect to any shares of USB’s capital stock or any of its other securities convertible into or carrying rights or options to purchase any such capital stock.

The holders of Series J Preferred Stock will be entitled to receive non-cumulative cash dividends when, as and if declared out of assets legally available for payment of dividends. In the event USB does not declare dividends or does not pay dividends in full on the Series J Preferred The Series J Preferred Stock is perpetual and will not be convertible into shares of USB’s Common Stock or any other class or series of USB’s capital stock, and will not be subject to any sinking fund or other obligation for their repurchase or retirement.
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Stock on any date on which dividends are due, then such unpaid dividends will not cumulate and will no longer accrue and be payable.


Rank — With respect to the payment of dividends and amounts upon liquidation, the Series J Preferred Stock ranks equally with the Series A Preferred Stock, the Series B Preferred Stock, the Series K Preferred Stock, the Series L Preferred Stock, the Series M Preferred Stock, the Series N Preferred Stock and the Series O Preferred Stock and with any future class or series of USB’s capital stock that ranks on a par with the Series J Preferred Stock in the payment of dividends and in the distribution of assets on USB’s liquidation, dissolution or winding up. With respect to the payment of dividends and amounts upon liquidation, the Series J Preferred Stock ranks senior to USB’s Common Stock and any other future class or series of USB’s capital stock over which the Series J Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up. USB may not issue any class of series of capital stock having a preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up over the Series J Preferred Stock without the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series J Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series.

In particular, during a dividend period and subject to certain exceptions, no dividend will be paid or declared and no distribution will be made on any Junior Stock, other than a dividend payable solely in Junior Stock, no shares of Junior Stock may be repurchased, redeemed or otherwise acquired for consideration by USB, directly or indirectly (other than as a result of reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other than through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock), nor will any monies be paid to or made available for a sinking fund for the redemption of any such securities by USB, and no shares of Parity Stock may be purchased, redeemed or otherwise acquired for consideration by USB otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series J Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, unless full dividends for such dividend period on all outstanding shares of Series J Preferred Stock have been paid or declared and a sum sufficient for the payment thereof set aside.

Dividends — Dividends on shares of the Series J Preferred Stock will not be mandatory. Holders of Series J Preferred Stock will be entitled to receive, when, as and if declared by USB’s board of directors or a duly authorized committee of the board, out of assets legally available for the payment of dividends under Delaware law, non-cumulative cash dividends. Dividends on each share of Series J Preferred Stock will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to (1) from the date of issuance of the Series J Preferred Stock to but excluding April 15, 2027 at a rate per annum equal to 5.300% payable semi-annually in arrears on each April 15 and October 15, through and including, April 15, 2027 and (2) from and including April 15, 2027, at a rate per annum equal to three-month LIBOR3 (computed as provided below) plus 2.914% payable quarterly in arrears on each January 15, April 15, July 15 and October 15, commencing on July 15, 2027.
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In the case that any date or on prior April 15, 2027 on which dividends are payable on the Series J Preferred Stock is not a business day, then payment of the dividend payable on that date will be made on the next succeeding day that is a business day, without any interest or other payment in respect of such delay, and if any date after April 15, 2027 on which dividends otherwise would be payable is not a business day, then payment of any dividend otherwise payable on that date will be made on the next succeeding business day unless that day falls in the next calendar month, in which case payment of any dividend otherwise payable on that date will be the immediately preceding business day, and dividends will accrue to the actual payment date. The record date for payment of dividends on the Series J Preferred Stock will be the last day of the immediately preceding calendar month during which the dividend payment date falls. The amount of dividends payable for any period prior to April 15, 2027 will be computed on the basis of a 360-day year consisting of twelve 30-day months and dividends for periods thereafter will be computed on the basis of a 360-day year and the actual number of days elapsed. For purposes of the Series J Preferred Stock, the term “business day” means, for dividend periods prior to April 15, 2027, each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York, and for dividend periods on and after April 15, 2027, it means any date that would be considered a Business Day for dividend periods prior to April 15, 2027 that is also a London Banking Day. Dividends on the Series J Preferred Stock will not be declared, paid or set aside for payment to the extent such act would cause USB to fail to comply with any applicable laws and regulations, including applicable capital adequacy guidelines.

    For any dividend period beginning on or after April 15, 2027, three-month LIBOR will be determined by the calculation agent on the second London Banking Day immediately preceding the first day of such dividend period in the following manner:

•Three-month LIBOR will be the offered rate per annum for three-month deposits in U.S. dollars, beginning on the first day of such period, as that rate appears on the Designated LIBOR Page as of 11:00 A.M., London time, on the second London Banking Day immediately preceding the first day of such dividend period.

•If the rate described above does not appear on the Designated LIBOR Page, three-month LIBOR will be determined on the basis of the rates at which deposits in U.S. dollars for a three-month period commencing on the first day of that dividend period and in a principal amount of not less than $1,000,000 are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by USB, at approximately 11:00 a.m. (London time), on the second London Banking Day preceding the first day of that dividend period. The calculation agent will request the principal
3 Following the cessation of representative three-month LIBOR, after June 30, 2023, this three-month LIBOR rate transitioned to three-month CME Term SOFR plus a tenor spread adjustment of 0.26161% in accordance with the LIBOR Act and LIBOR Rule.
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London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, three-month LIBOR with respect to that dividend period will be the arithmetic mean of such quotations.

•If fewer than two quotations are provided as described above, three-month LIBOR will be the arithmetic mean of the rates quoted by three major banks in New York, New York, selected by the calculation agent, at approximately 11:00 a.m. (New York City time), on the first day of that dividend period for loans in U.S. dollars to leading European banks for a three-month period commencing on the first day of that dividend period and in a principal amount of not less than $1,000,000.

•If fewer than three banks are not quoting as described above, three-month LIBOR for the new dividend period will be three-month LIBOR in effect for the prior dividend period or, in the case of the first dividend period beginning on or after April 15, 2027, the most recent rate that could have been determined had the dividend rate been a floating rate during the period prior to April 15, 2027.

The calculation agent’s establishment of three-month LIBOR and calculation of the amount of dividends for each dividend period will be on file at USB’s principal offices, will be made available to any holder of Series J Preferred Stock upon request and will be final and binding in the absence of manifest error. 

The term “Designated LIBOR Page” means the display on Bloomberg Page BBAM (or any successor or substitute page of such service, or any successor to such service selected by USB), for the purpose of displaying the London interbank offered rates for U.S. dollars.

The right of holders of the Series J Preferred Stock to receive dividends is non-cumulative. If USB’s board of directors does not declare a dividend on the Series J Preferred Stock or declares less than a full dividend in respect of any dividend period, the holders of the Series J Preferred Stock will have no right to receive any dividend or a full dividend, as the case may be, for that dividend period, and USB will have no obligation to pay a dividend or to pay full dividends for that dividend period, whether or not dividends are declared and paid for any future dividend period with respect to the Series J Preferred Stock, Parity Stock, Junior Stock or any other class or series of USB’s authorized Preferred Stock.

When dividends are not paid in full upon the Series J Preferred Stock and any other Parity Stock, dividends upon that stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the current dividend period per share on the Series J Preferred Stock, and accrued dividends, including any accumulations, on such Parity Stock, bear to each other. No interest will be payable in respect of any dividend payment on the Series J Preferred Stock that may be in arrears.

Redemption —The Series J Preferred Stock is not subject to any mandatory redemption, sinking fund or other similar provision.
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The Series J Preferred Stock will be redeemable at USB’s option, in whole or in part, at any time on or after April 15, 2027 at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends.

In addition, within 90 days following the occurrence of a Regulatory Capital Treatment Event, USB, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, at any time, all (but not less than all) of the shares of Series J Preferred Stock at the time outstanding, at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends. For purposes of the Series J Preferred Stock, “Regulatory Capital Treatment Event” means the good faith determination by USB that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of Series J Preferred Stock, (ii) any proposed change in those laws or regulations that is announced after the initial issuance of any share of Series J Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after the initial issuance of any share of Series J Preferred Stock, there is more than an insubstantial risk that USB will not be entitled to treat the full liquidation value of the shares of Series J Preferred Stock then outstanding as “additional tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency), as then in effect and applicable, for as long as any share of Series J Preferred Stock is outstanding.

If shares of the Series J Preferred Stock are to be redeemed, the notice of redemption will be given by first class mail to the holders of record of the Series J Preferred Stock to be redeemed, mailed not less than 30 days nor more than 60 days prior to the date fixed for redemption thereof (provided that, if the depositary shares representing the Series J Preferred Stock are held in book-entry form through DTC, USB may give such notice in any manner permitted by the DTC). Each notice of redemption will include a statement setting forth: (i) the redemption date, (ii) the number of shares of the Series J Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder, (iii) the redemption price, (iv) the place or places where the certificates evidencing shares of Series J Preferred Stock are to be surrendered for payment of the redemption price and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date. If notice of redemption of any shares of Series J Preferred Stock has been duly given and if the funds necessary for such redemption have been set aside by USB for the benefit of the holders of any shares of Series J Preferred Stock so called for redemption, then, on and after the redemption date, dividends will cease to accrue on such shares of Series J Preferred Stock, such shares of Series J Preferred Stock will no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price.

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In case of any redemption of only part of the shares of the Series J Preferred Stock at the time outstanding, the shares to be redeemed will be selected either pro rata or in such other manner as USB may determine to be fair and equitable.

Under the Federal Reserve Board’s risk-based capital guidelines applicable to bank holding companies, any redemption of the Series J Preferred Stock is subject to prior approval of the Federal Reserve Board.

Rights Upon Liquidation, Dissolution or Winding Up — In the event of USB’s liquidation, dissolution or winding up, the holders of the Series J Preferred Stock at the time outstanding will be entitled to receive a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any authorized, declared and unpaid dividends for the then-current dividend period to the date of liquidation, out of USB’s assets legally available for distribution to USB’s stockholders, before any distribution is made to holders of USB’s Common Stock or any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with the Series J Preferred Stock upon liquidation and the rights of USB’s depositors and other creditors.

If the amounts available for distribution upon USB’s liquidation, dissolution or winding up are not sufficient to satisfy the full liquidation rights of all the outstanding Series J Preferred Stock and all stock ranking equal to the Series J Preferred Stock, then the holders of each series of Preferred Stock will share ratably in any distribution of assets in proportion to the full respective preferential amount to which they are entitled. After the full amount of the liquidation preference is paid, the holders of Series J Preferred Stock will not be entitled to any further participation in any distribution of USB’s assets.

For such purposes, USB’s consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into USB, or the sale of all or substantially all of USB’s property or business will not be deemed to constitute USB’s liquidation, dissolution or winding up.

Voting Rights — Except as provided below, the holders of the Series J Preferred Stock will have no voting rights.

Whenever dividends on any shares of the Series J Preferred Stock or any other class or series of Parity Stock have not been declared and paid for an amount equal to six or more quarterly dividend periods (whether consecutive or not) or their equivalent, the holders of the Series J Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) will be entitled to vote as a single class for the election of a total of two additional members of USB’s board of directors, provided that the election of any such directors will not cause USB to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which USB’s securities may be listed) that listed companies must have a majority of independent directors and provided further that USB’s board of directors will at no time include more than two Preferred Directors.
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In that event, the number of directors on USB’s board of directors will automatically increase by two and, at the request of any holder of Series J Preferred Stock, a special meeting of the holders of Series J Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series J Preferred Stock as to payment of dividends and for which dividends have not been paid, will be called for the election of the two directors (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election will be held at such next annual or special meeting of stockholders), followed by such election at each subsequent annual meeting. These voting rights will continue until full dividends have been paid regularly on the shares of the Series J Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series J Preferred Stock as to payment of dividends for at least four consecutive quarterly dividend periods or their equivalent following the Nonpayment.
 
If and when full dividends have been regularly paid for at least four consecutive quarterly dividend periods or their equivalent following a Nonpayment on the Series J Preferred Stock and any other class or series of Parity Stock, the holders of the Series J Preferred Stock will be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment) and the term of office of each Preferred Director so elected will terminate and the number of directors on USB’s board of directors will automatically decrease by two. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series J Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described above. So long as a Nonpayment continues, any vacancy in the office of a Preferred Director (other than prior to the initial election of the Preferred Directors) may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by a vote of the holders of the outstanding shares of Series J Preferred Stock (together with holders of any and all other class of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of stockholders. The Preferred Directors will each be entitled to one vote per director on any matter.
 
If the holders of Series J Preferred Stock become entitled to vote for the election of Preferred Directors, the Series J Preferred Stock may be considered a class of voting securities under interpretations adopted by the Federal Reserve Board. As a result, certain holders of the Series J Preferred Stock may become subject to regulations under the Bank Holding Company Act and/or certain acquisitions of the Series J Preferred Stock may be subject to prior approval by the Federal Reserve Board.
 
So long as any shares of Series J Preferred Stock remain outstanding:

•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series J Preferred Stock and all other Parity Stock at the time outstanding, voting as a single class without regard to series, will be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any class or series of stock ranking senior to the Series J Preferred Stock and all other Parity Stock with respect to payment of dividends or the distribution of assets upon USB’s liquidation, dissolution or winding up; and
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•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series J Preferred Stock at the time outstanding, voting separately as a class, will be required to amend the provisions of USB’s Certificate of Incorporation or the Certificate of Designations of the Series J Preferred Stock or any other series of Preferred Stock so as to materially and adversely affect the powers, preferences, privileges or rights of the Series J Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series J Preferred Stock or authorized Preferred Stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of Preferred Stock and/or Junior Stock will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series J Preferred Stock.

The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding shares of Series J Preferred Stock have been redeemed or called for redemption upon proper notice and sufficient funds have been set aside by USB for the benefit of the holders of the Series J Preferred Stock to effect such redemption.

Series K Preferred Stock

General — The depositary is the sole holder of the Series K Preferred Stock, as described below under the section entitled “—Description of Depositary Shares,” and all references herein to the holders of the Series K Preferred Stock mean the depositary. However, the holders of depositary shares will be entitled, through the depositary, to exercise the rights and preferences of the holders of the Series K Preferred Stock, as described below under “—Description of Depositary Shares.” The holders of the Series K Preferred Stock have no preemptive rights with respect to any shares of USB’s capital stock or any of its other securities convertible into or carrying rights or options to purchase any such capital stock.

The holders of Series K Preferred Stock will be entitled to receive non-cumulative cash dividends when, as and if declared out of assets legally available for payment of dividends. In the event USB does not declare dividends or does not pay dividends in full on the Series K Preferred Stock on any date on which dividends are due, then such unpaid dividends will not cumulate and will no longer accrue and be payable.

The Series K Preferred Stock is perpetual and will not be convertible into shares of USB’s Common Stock or any other class or series of USB’s capital stock, and will not be subject to any sinking fund or other obligation for their repurchase or retirement.

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Rank — With respect to the payment of dividends and amounts upon liquidation, the Series K Preferred Stock ranks equally with the Series A Preferred Stock, the Series B Preferred Stock, the Series J Preferred Stock, the Series L Preferred Stock, the Series M Preferred Stock, the Series N Preferred Stock and the Series O Preferred Stock and with any future class or series of USB’s capital stock that ranks on a par with the Series K Preferred Stock in the payment of dividends and in the distribution of assets on USB’s liquidation, dissolution or winding up. With respect to the payment of dividends and amounts upon liquidation, the Series K Preferred Stock ranks senior to USB’s Common Stock and any other future class or series of USB’s capital stock over which the Series K Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up. USB may not issue any class of series of capital stock having a preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up over the Series K Preferred Stock without the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series K Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series.

In particular, during a dividend period and subject to certain exceptions, no dividend will be paid or declared and no distribution will be made on any Junior Stock, other than a dividend payable solely in Junior Stock, no shares of Junior Stock may be repurchased, redeemed or otherwise acquired for consideration by USB, directly or indirectly (other than as a result of reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other than through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock), nor will any monies be paid to or made available for a sinking fund for the redemption of any such securities by USB, and no shares of Parity Stock may be purchased, redeemed or otherwise acquired for consideration by USB otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series K Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, unless full dividends for such dividend period on all outstanding shares of Series K Preferred Stock have been paid or declared and a sum sufficient for the payment thereof set aside.  

Dividends — Dividends on shares of the Series K Preferred Stock will not be mandatory. Holders of Series K Preferred Stock will be entitled to receive, when, as and if declared by USB’s board of directors or a duly authorized committee of the board, out of assets legally available for the payment of dividends under Delaware law, non-cumulative cash dividends. Dividends on each share of Series K Preferred Stock will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to 5.50% payable quarterly in arrears on each January 15, April 15, July 15 and October 15. If any day on which dividends are payable on the Series K Preferred Stock is not a business day, then payment of the dividend payable on that date will be made on the next succeeding day that is a business day, without any interest or other payment in respect of such delay. The record date for payment of dividends on the Series K Preferred Stock will be the last day of the immediately preceding calendar month during which the dividend payment date falls. The amount of dividends payable for any period will be computed on the basis of a 360-day year consisting of twelve 30-day months. For purposes of the Series K Preferred Stock, the term “business day” means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York. Dividends on the Series K Preferred Stock will not be declared, paid or set aside for payment to the extent such act would cause USB to fail to comply with any applicable laws and regulations, including applicable capital adequacy guidelines.
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    The right of holders of the Series K Preferred Stock to receive dividends is non-cumulative. If USB’s board of directors does not declare a dividend on the Series K Preferred Stock or declares less than a full dividend in respect of any dividend period, the holders of the Series K Preferred Stock will have no right to receive any dividend or a full dividend, as the case may be, for that dividend period, and USB will have no obligation to pay a dividend or to pay full dividends for that dividend period, whether or not dividends are declared and paid for any future dividend period with respect to the Series K Preferred Stock, Parity Stock, Junior Stock or any other class or series of USB’s authorized Preferred Stock.

When dividends are not paid in full upon the Series K Preferred Stock and any other Parity Stock, dividends upon that stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the current dividend period per share on the Series K Preferred Stock, and accrued dividends, including any accumulations, on such Parity Stock, bear to each other. No interest will be payable in respect of any dividend payment on the Series K Preferred Stock that may be in arrears.

Redemption —The Series K Preferred Stock is not subject to any mandatory redemption, sinking fund or other similar provision.

The Series K Preferred Stock will be redeemable at USB’s option, in whole or in part, at any time on or after October 15, 2023 at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends.

In addition, within 90 days following the occurrence of a Regulatory Capital Treatment Event, USB, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, at any time, all (but not less than all) of the shares of Series K Preferred Stock at the time outstanding, at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends. For purposes of the Series K Preferred Stock, “Regulatory Capital Treatment Event” means the good faith determination by USB that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of Series K Preferred Stock, (ii) any proposed change in those laws or regulations that is announced after the initial issuance of any share of Series K Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after the initial issuance of any share of Series K Preferred Stock, there is more than an insubstantial risk that USB will not be entitled to treat the full liquidation value of the shares of Series K Preferred Stock then outstanding as “additional tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency), as then in effect and applicable, for as long as any share of Series K Preferred Stock is outstanding.
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If shares of the Series K Preferred Stock are to be redeemed, the notice of redemption will be given by first class mail to the holders of record of the Series K Preferred Stock to be redeemed, mailed not less than 30 days nor more than 60 days prior to the date fixed for redemption thereof (provided that, if the depositary shares representing the Series K Preferred Stock are held in book-entry form through DTC, USB may give such notice in any manner permitted by the DTC). Each notice of redemption will include a statement setting forth: (i) the redemption date, (ii) the number of shares of the Series K Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder, (iii) the redemption price, (iv) the place or places where the certificates evidencing shares of Series K Preferred Stock are to be surrendered for payment of the redemption price and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date. If notice of redemption of any shares of Series K Preferred Stock has been duly given and if the funds necessary for such redemption have been set aside by USB for the benefit of the holders of any shares of Series K Preferred Stock so called for redemption, then, on and after the redemption date, dividends will cease to accrue on such shares of Series K Preferred Stock, such shares of Series K Preferred Stock will no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price.

In case of any redemption of only part of the shares of the Series K Preferred Stock at the time outstanding, the shares to be redeemed will be selected either pro rata or in such other manner as USB may determine to be fair and equitable.

Under the Federal Reserve Board’s risk-based capital guidelines applicable to bank holding companies, any redemption of the Series K Preferred Stock is subject to prior approval of the Federal Reserve Board.

Rights Upon Liquidation, Dissolution or Winding Up — In the event of USB’s liquidation, dissolution or winding up, the holders of the Series K Preferred Stock at the time outstanding will be entitled to receive a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any authorized, declared and unpaid dividends for the then-current dividend period to the date of liquidation, out of USB’s assets legally available for distribution to USB’s stockholders, before any distribution is made to holders of USB’s Common Stock or any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with the Series K Preferred Stock upon liquidation and the rights of USB’s depositors and other creditors.

If the amounts available for distribution upon USB’s liquidation, dissolution or winding up are not sufficient to satisfy the full liquidation rights of all the outstanding Series K Preferred Stock and all stock ranking equal to the Series K Preferred Stock, then the holders of each series of Preferred Stock will share ratably in any distribution of assets in proportion to the full respective preferential amount to which they are entitled. After the full amount of the liquidation preference is paid, the holders of Series K Preferred Stock will not be entitled to any further participation in any distribution of USB’s assets.
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For such purposes, USB’s consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into USB, or the sale of all or substantially all of USB’s property or business will not be deemed to constitute USB’s liquidation, dissolution or winding up.

Voting Rights — Except as provided below, the holders of the Series K Preferred Stock will have no voting rights.

Whenever dividends on any shares of the Series K Preferred Stock or any other class or series of Parity Stock have not been declared and paid for an amount equal to six or more quarterly dividend periods (whether consecutive or not) or their equivalent, the holders of the Series K Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) will be entitled to vote as a single class for the election of a total of two additional members of USB’s board of directors, provided that the election of any such directors will not cause USB to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which USB’s securities may be listed) that listed companies must have a majority of independent directors and provided further that USB’s board of directors will at no time include more than two Preferred Directors. In that event, the number of directors on USB’s board of directors will automatically increase by two and, at the request of any holder of Series K Preferred Stock, a special meeting of the holders of Series K Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series K Preferred Stock as to payment of dividends and for which dividends have not been paid, will be called for the election of the two directors (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election will be held at such next annual or special meeting of stockholders), followed by such election at each subsequent annual meeting. These voting rights will continue until full dividends have been paid regularly on the shares of the Series K Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series K Preferred Stock as to payment of dividends for at least four consecutive quarterly dividend periods or their equivalent following the Nonpayment.
 
If and when full dividends have been regularly paid for at least four consecutive quarterly dividend periods or their equivalent following a Nonpayment on the Series K Preferred Stock and any other class or series of Parity Stock, the holders of the Series K Preferred Stock will be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment) and the term of office of each Preferred Director so elected will terminate and the number of directors on USB’s board of directors will automatically decrease by two. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series K Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described above.
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So long as a Nonpayment continues, any vacancy in the office of a Preferred Director (other than prior to the initial election of the Preferred Directors) may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by a vote of the holders of the outstanding shares of Series K Preferred Stock (together with holders of any and all other class of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of stockholders. The Preferred Directors will each be entitled to one vote per director on any matter.
 
If the holders of Series K Preferred Stock become entitled to vote for the election of Preferred Directors, the Series K Preferred Stock may be considered a class of voting securities under interpretations adopted by the Federal Reserve Board. As a result, certain holders of the Series K Preferred Stock may become subject to regulations under the Bank Holding Company Act and/or certain acquisitions of the Series K Preferred Stock may be subject to prior approval by the Federal Reserve Board.
 
So long as any shares of Series K Preferred Stock remain outstanding:

•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series K Preferred Stock and all other Parity Stock at the time outstanding, voting as a single class without regard to series, will be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any class or series of stock ranking senior to the Series K Preferred Stock and all other Parity Stock with respect to payment of dividends or the distribution of assets upon USB’s liquidation, dissolution or winding up; and

•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series K Preferred Stock at the time outstanding, voting separately as a class, will be required to amend the provisions of USB’s Certificate of Incorporation or the Certificate of Designations of the Series K Preferred Stock or any other series of Preferred Stock so as to materially and adversely affect the powers, preferences, privileges or rights of the Series K Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series K Preferred Stock or authorized Preferred Stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of Preferred Stock and/or Junior Stock will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series K Preferred Stock.

The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding shares of Series K Preferred Stock have been redeemed or called for redemption upon proper notice and sufficient funds have been set aside by USB for the benefit of the holders of the Series K Preferred Stock to effect such redemption.

Series L Preferred Stock
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General — The depositary is the sole holder of the Series L Preferred Stock, as described below under the section entitled “—Description of Depositary Shares,” and all references herein to the holders of the Series L Preferred Stock mean the depositary. However, the holders of depositary shares will be entitled, through the depositary, to exercise the rights and preferences of the holders of the Series L Preferred Stock, as described below under “—Description of Depositary Shares.” The holders of the Series L Preferred Stock have no preemptive rights with respect to any shares of USB’s capital stock or any of its other securities convertible into or carrying rights or options to purchase any such capital stock.

The holders of Series L Preferred Stock will be entitled to receive non-cumulative cash dividends when, as and if declared out of assets legally available for payment of dividends. In the event USB does not declare dividends or does not pay dividends in full on the Series L Preferred Stock on any date on which dividends are due, then such unpaid dividends will not cumulate and will no longer accrue and be payable.

The Series L Preferred Stock is perpetual and will not be convertible into shares of USB’s Common Stock or any other class or series of USB’s capital stock, and will not be subject to any sinking fund or other obligation for their repurchase or retirement.

Rank — With respect to the payment of dividends and amounts upon liquidation, the Series L Preferred Stock ranks equally with the Series A Preferred Stock, the Series B Preferred Stock, the Series J Preferred Stock, the Series K Preferred, the Series M Preferred Stock, the Series N Preferred Stock and the Series O Preferred Stock and with any future class or series of USB’s capital stock that ranks on a par with the Series L Preferred Stock in the payment of dividends and in the distribution of assets on USB’s liquidation, dissolution or winding up. With respect to the payment of dividends and amounts upon liquidation, the Series L Preferred Stock ranks senior to USB’s Common Stock and any other future class or series of USB’s capital stock over which the Series L Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up. USB may not issue any class of series of capital stock having a preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up over the Series L Preferred Stock without the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series L Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series.

In particular, during a dividend period and subject to certain exceptions, no dividend will be paid or declared and no distribution will be made on any Junior Stock, other than a dividend payable solely in Junior Stock, no shares of Junior Stock may be repurchased, redeemed or otherwise acquired for consideration by USB, directly or indirectly (other than as a result of reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other than through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock), nor will any monies be paid to or made available for a sinking fund for the redemption of any such securities by USB, and no shares of Parity Stock may be purchased, redeemed or otherwise acquired for consideration by USB otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series L Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, unless full dividends for such dividend period on all outstanding shares of Series L Preferred Stock have been paid or declared and a sum sufficient for the payment thereof set aside.
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Dividends — Dividends on shares of the Series L Preferred Stock will not be mandatory. Holders of Series L Preferred Stock will be entitled to receive, when, as and if declared by USB’s board of directors or a duly authorized committee of the board, out of assets legally available for the payment of dividends under Delaware law, non-cumulative cash dividends. Dividends on each share of Series L Preferred Stock will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to 3.75% payable quarterly in arrears on each January 15, April 15, July 15 and October 15. If any day on which dividends are payable on the Series L Preferred Stock is not a business day, then payment of the dividend payable on that date will be made on the next succeeding day that is a business day, without any interest or other payment in respect of such delay. The record date for payment of dividends on the Series L Preferred Stock will be the last day of the immediately preceding calendar month during which the dividend payment date falls. The amount of dividends payable for any period will be computed on the basis of a 360-day year consisting of twelve 30-day months. For purposes of the Series L Preferred Stock, the term “business day” means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York. Dividends on the Series L Preferred Stock will not be declared, paid or set aside for payment to the extent such act would cause USB to fail to comply with any applicable laws and regulations, including applicable capital adequacy guidelines.    

    The right of holders of the Series L Preferred Stock to receive dividends is non-cumulative. If USB’s board of directors does not declare a dividend on the Series L Preferred Stock or declares less than a full dividend in respect of any dividend period, the holders of the Series L Preferred Stock will have no right to receive any dividend or a full dividend, as the case may be, for that dividend period, and USB will have no obligation to pay a dividend or to pay full dividends for that dividend period, whether or not dividends are declared and paid for any future dividend period with respect to the Series L Preferred Stock, Parity Stock, Junior Stock or any other class or series of USB’s authorized Preferred Stock.

When dividends are not paid in full upon the Series L Preferred Stock and any other Parity Stock, dividends upon that stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the current dividend period per share on the Series L Preferred Stock, and accrued dividends, including any accumulations, on such Parity Stock, bear to each other. No interest will be payable in respect of any dividend payment on the Series L Preferred Stock that may be in arrears.

Redemption —The Series L Preferred Stock is not subject to any mandatory redemption, sinking fund or other similar provision.
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The Series L Preferred Stock will be redeemable at USB’s option, in whole or in part, at any time on or after January 15, 2026 at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends.

In addition, within 90 days following the occurrence of a Regulatory Capital Treatment Event, USB, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, at any time, all (but not less than all) of the shares of Series L Preferred Stock at the time outstanding, at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends. For purposes of the Series L Preferred Stock, “Regulatory Capital Treatment Event” means the good faith determination by USB that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of Series L Preferred Stock, (ii) any proposed change in those laws or regulations that is announced after the initial issuance of any share of Series L Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after the initial issuance of any share of Series L Preferred Stock, there is more than an insubstantial risk that USB will not be entitled to treat the full liquidation value of the shares of Series L Preferred Stock then outstanding as “additional tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency), as then in effect and applicable, for as long as any share of Series L Preferred Stock is outstanding.

If shares of the Series L Preferred Stock are to be redeemed, the notice of redemption will be given by first class mail to the holders of record of the Series L Preferred Stock to be redeemed, mailed not less than 30 days nor more than 60 days prior to the date fixed for redemption thereof (provided that, if the depositary shares representing the Series L Preferred Stock are held in book-entry form through DTC, USB may give such notice in any manner permitted by the DTC). Each notice of redemption will include a statement setting forth: (i) the redemption date, (ii) the number of shares of the Series L Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder, (iii) the redemption price, (iv) the place or places where the certificates evidencing shares of Series L Preferred Stock are to be surrendered for payment of the redemption price and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date. If notice of redemption of any shares of Series L Preferred Stock has been duly given and if the funds necessary for such redemption have been set aside by USB for the benefit of the holders of any shares of Series L Preferred Stock so called for redemption, then, on and after the redemption date, dividends will cease to accrue on such shares of Series L Preferred Stock, such shares of Series L Preferred Stock will no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price.

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In case of any redemption of only part of the shares of the Series L Preferred Stock at the time outstanding, the shares to be redeemed will be selected either pro rata or in such other manner as USB may determine to be fair and equitable.

Under the Federal Reserve Board’s risk-based capital guidelines applicable to bank holding companies, any redemption of the Series L Preferred Stock is subject to prior approval of the Federal Reserve Board.

Rights Upon Liquidation, Dissolution or Winding Up — In the event of USB’s liquidation, dissolution or winding up, the holders of the Series L Preferred Stock at the time outstanding will be entitled to receive a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any authorized, declared and unpaid dividends for the then-current dividend period to the date of liquidation, out of USB’s assets legally available for distribution to USB’s stockholders, before any distribution is made to holders of USB’s Common Stock or any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with the Series L Preferred Stock upon liquidation and the rights of USB’s depositors and other creditors.

If the amounts available for distribution upon USB’s liquidation, dissolution or winding up are not sufficient to satisfy the full liquidation rights of all the outstanding Series L Preferred Stock and all stock ranking equal to the Series L Preferred Stock, then the holders of each series of Preferred Stock will share ratably in any distribution of assets in proportion to the full respective preferential amount to which they are entitled. After the full amount of the liquidation preference is paid, the holders of Series L Preferred Stock will not be entitled to any further participation in any distribution of USB’s assets.

For such purposes, USB’s consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into USB, or the sale of all or substantially all of USB’s property or business will not be deemed to constitute USB’s liquidation, dissolution or winding up.

Voting Rights — Except as provided below, the holders of the Series L Preferred Stock will have no voting rights.

Whenever dividends on any shares of the Series L Preferred Stock or any other class or series of Parity Stock have not been declared and paid for an amount equal to six or more quarterly dividend periods (whether consecutive or not) or their equivalent, the holders of the Series L Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) will be entitled to vote as a single class for the election of a total of two additional members of USB’s board of directors, provided that the election of any such directors will not cause USB to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which USB’s securities may be listed) that listed companies must have a majority of independent directors and provided further that USB’s board of directors will at no time include more than two Preferred Directors.
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In that event, the number of directors on USB’s board of directors will automatically increase by two and, at the request of any holder of Series L Preferred Stock, a special meeting of the holders of Series L Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series L Preferred Stock as to payment of dividends and for which dividends have not been paid, will be called for the election of the two directors (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election will be held at such next annual or special meeting of stockholders), followed by such election at each subsequent annual meeting. These voting rights will continue until full dividends have been paid regularly on the shares of the Series L Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series L Preferred Stock as to payment of dividends for at least four consecutive quarterly dividend periods or their equivalent following the Nonpayment.
 
If and when full dividends have been regularly paid for at least four consecutive quarterly dividend periods or their equivalent following a Nonpayment on the Series L Preferred Stock and any other class or series of Parity Stock, the holders of the Series L Preferred Stock will be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment) and the term of office of each Preferred Director so elected will terminate and the number of directors on USB’s board of directors will automatically decrease by two. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series L Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described above. So long as a Nonpayment continues, any vacancy in the office of a Preferred Director (other than prior to the initial election of the Preferred Directors) may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by a vote of the holders of the outstanding shares of Series L Preferred Stock (together with holders of any and all other class of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of stockholders. The Preferred Directors will each be entitled to one vote per director on any matter.
 
If the holders of Series L Preferred Stock become entitled to vote for the election of Preferred Directors, the Series L Preferred Stock may be considered a class of voting securities under interpretations adopted by the Federal Reserve Board. As a result, certain holders of the Series L Preferred Stock may become subject to regulations under the Bank Holding Company Act and/or certain acquisitions of the Series L Preferred Stock may be subject to prior approval by the Federal Reserve Board.
 
So long as any shares of Series L Preferred Stock remain outstanding:

•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series L Preferred Stock and all other Parity Stock at the time outstanding, voting as a single class without regard to series, will be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any class or series of stock ranking senior to the Series L Preferred Stock and all other Parity Stock with respect to payment of dividends or the distribution of assets upon USB’s liquidation, dissolution or winding up; and
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•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series L Preferred Stock at the time outstanding, voting separately as a class, will be required to amend the provisions of USB’s Certificate of Incorporation or the Certificate of Designations of the Series L Preferred Stock or any other series of Preferred Stock so as to materially and adversely affect the powers, preferences, privileges or rights of the Series L Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series L Preferred Stock or authorized Preferred Stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of Preferred Stock and/or Junior Stock will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series L Preferred Stock.

The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding shares of Series L Preferred Stock have been redeemed or called for redemption upon proper notice and sufficient funds have been set aside by USB for the benefit of the holders of the Series L Preferred Stock to effect such redemption.

Series M Preferred Stock

General — The depositary is the sole holder of the Series M Preferred Stock, as described below under the section entitled “—Description of Depositary Shares,” and all references herein to the holders of the Series M Preferred Stock mean the depositary. However, the holders of depositary shares will be entitled, through the depositary, to exercise the rights and preferences of the holders of the Series M Preferred Stock, as described below under “—Description of Depositary Shares.” The holders of the Series M Preferred Stock have no preemptive rights with respect to any shares of USB’s capital stock or any of its other securities convertible into or carrying rights or options to purchase any such capital stock.

The holders of Series M Preferred Stock will be entitled to receive non-cumulative cash dividends when, as and if declared out of assets legally available for payment of dividends. In the event USB does not declare dividends or does not pay dividends in full on the Series M Preferred Stock on any date on which dividends are due, then such unpaid dividends will not cumulate and will no longer accrue and be payable.

The Series M Preferred Stock is perpetual and will not be convertible into shares of USB’s Common Stock or any other class or series of USB’s capital stock, and will not be subject to any sinking fund or other obligation for their repurchase or retirement.

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Rank — With respect to the payment of dividends and amounts upon liquidation, the Series M Preferred Stock ranks equally with the Series A Preferred Stock, the Series B Preferred Stock, the Series J Preferred Stock, the Series K Preferred Stock, the Series L Preferred Stock, the Series N Preferred Stock and the Series O Preferred Stock and with any future class or series of USB’s capital stock that ranks on a par with the Series M Preferred Stock in the payment of dividends and in the distribution of assets on USB’s liquidation, dissolution or winding up. With respect to the payment of dividends and amounts upon liquidation, the Series M Preferred Stock ranks senior to USB’s Common Stock and any other future class or series of USB’s capital stock over which the Series M Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up. USB may not issue any class of series of capital stock having a preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up over the Series M Preferred Stock without the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series M Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series.

In particular, during a dividend period and subject to certain exceptions, no dividend will be paid or declared and no distribution will be made on any Junior Stock, other than a dividend payable solely in Junior Stock, no shares of Junior Stock may be repurchased, redeemed or otherwise acquired for consideration by USB, directly or indirectly (other than (i) as a result of reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, (ii) through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock, (iii) purchases of shares of Junior Stock pursuant to a contractually binding requirement to buy such Junior Stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan, (iv) any purchase, redemption or other acquisition of Junior Stock pursuant to any employee, consultant or director incentive or benefit plans or arrangements of USB’s or any of USB’s subsidiaries (including any employment, severance or consulting arrangements adopted before or after the issuance of the Series M Preferred Stock) and (v) in connection with any underwriting, stabilization, market-making or similar transactions in USB’s capital stock by an investment banking subsidiary of USB in the ordinary course of such subsidiary’s business), nor will any monies be paid to or made available for a sinking fund for the redemption of any such securities by USB, and no shares of Parity Stock may be purchased, redeemed or otherwise acquired for consideration by USB otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series M Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, unless full dividends for the most recently completed dividend period on all outstanding shares of Series M Preferred Stock have been paid or declared and a sum sufficient for the payment thereof set aside.

Dividends — Dividends on shares of the Series M Preferred Stock will not be mandatory. Holders of Series M Preferred Stock will be entitled to receive, when, as and if declared by USB’s board of directors or a duly authorized committee of the board, out of assets legally available for the payment of dividends under Delaware law, non-cumulative cash dividends. Dividends on each share of Series M Preferred Stock will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to 4.00% payable quarterly in arrears on each January 15, April 15, July 15 and October 15. If any day on which dividends are payable on the Series M Preferred Stock is not a business day, then payment of the dividend payable on that date will be made on the next succeeding day that is a business day, without any interest or other payment in respect of such delay.
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The record date for payment of dividends on the Series M Preferred Stock will be the last day of the immediately preceding calendar month during which the dividend payment date falls. The amount of dividends payable for any period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dollar amounts resulting from that calculation will be rounded to three decimal places, with $0.0005 being rounded upward. For purposes of the Series M Preferred Stock, the term “business day” means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York. Dividends on the Series M Preferred Stock will not be declared, paid or set aside for payment to the extent such act would cause USB to fail to comply with any applicable laws and regulations, including applicable capital adequacy guidelines.

    The right of holders of the Series M Preferred Stock to receive dividends is non-cumulative. If USB’s board of directors does not declare a dividend on the Series M Preferred Stock or declares less than a full dividend in respect of any dividend period, the holders of the Series M Preferred Stock will have no right to receive any dividend or a full dividend, as the case may be, for that dividend period, and USB will have no obligation to pay a dividend or to pay full dividends for that dividend period, whether or not dividends are declared and paid for any future dividend period with respect to the Series M Preferred Stock, Parity Stock, Junior Stock or any other class or series of USB’s authorized Preferred Stock.

When dividends are not paid in full upon the Series M Preferred Stock and any other Parity Stock, dividends upon that stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the current dividend period per share on the Series M Preferred Stock, and accrued dividends, including any accumulations, on such Parity Stock, bear to each other. No interest will be payable in respect of any dividend payment on the Series M Preferred Stock that may be in arrears.

Redemption —The Series M Preferred Stock is not subject to any mandatory redemption, sinking fund or other similar provision.

The Series M Preferred Stock will be redeemable at USB’s option, in whole or in part, at any time on or after April 15, 2026 at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends.

In addition, within 90 days following the occurrence of a Regulatory Capital Treatment Event, USB, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, at any time, all (but not less than all) of the shares of Series M Preferred Stock at the time outstanding, at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends.
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For purposes of the Series M Preferred Stock, “Regulatory Capital Treatment Event” means the good faith determination by USB that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of Series M Preferred Stock, (ii) any proposed change in those laws or regulations that is announced after the initial issuance of any share of Series M Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after the initial issuance of any share of Series M Preferred Stock, there is more than an insubstantial risk that USB will not be entitled to treat the full liquidation value of the shares of Series M Preferred Stock then outstanding as “additional tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency), as then in effect and applicable, for as long as any share of Series M Preferred Stock is outstanding.

If shares of the Series M Preferred Stock are to be redeemed, the notice of redemption will be given by first class mail to the holders of record of the Series M Preferred Stock to be redeemed, mailed not less than 30 days nor more than 60 days prior to the date fixed for redemption thereof (provided that, if the depositary shares representing the Series M Preferred Stock are held in book-entry form through DTC, USB may give such notice in any manner permitted by the DTC). Each notice of redemption will include a statement setting forth: (i) the redemption date, (ii) the number of shares of the Series M Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder, (iii) the redemption price, (iv) the place or places where the certificates evidencing shares of Series M Preferred Stock are to be surrendered for payment of the redemption price and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date. If notice of redemption of any shares of Series M Preferred Stock has been duly given and if the funds necessary for such redemption have been set aside by USB for the benefit of the holders of any shares of Series M Preferred Stock so called for redemption, then, on and after the redemption date, dividends will cease to accrue on such shares of Series M Preferred Stock, such shares of Series M Preferred Stock will no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price.

In case of any redemption of only part of the shares of the Series M Preferred Stock at the time outstanding, the shares to be redeemed will be selected either pro rata or in such other manner as USB may determine to be fair and equitable.

Under the Federal Reserve Board’s risk-based capital guidelines applicable to bank holding companies, any redemption of the Series M Preferred Stock is subject to prior approval of the Federal Reserve Board.

Rights Upon Liquidation, Dissolution or Winding Up — In the event of USB’s liquidation, dissolution or winding up, the holders of the Series M Preferred Stock at the time outstanding will be entitled to receive a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any authorized, declared and unpaid dividends for the then-current dividend period to the date of liquidation, out of USB’s assets legally available for distribution to USB’s stockholders, before any distribution is made to holders of USB’s Common Stock or any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with the Series M Preferred Stock upon liquidation and the rights of USB’s depositors and other creditors.
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If the amounts available for distribution upon USB’s liquidation, dissolution or winding up are not sufficient to satisfy the full liquidation rights of all the outstanding Series M Preferred Stock and all stock ranking equal to the Series M Preferred Stock, then the holders of each series of Preferred Stock will share ratably in any distribution of assets in proportion to the full respective preferential amount to which they are entitled. After the full amount of the liquidation preference is paid, the holders of Series M Preferred Stock will not be entitled to any further participation in any distribution of USB’s assets.

For such purposes, USB’s consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into USB, or the sale of all or substantially all of USB’s property or business will not be deemed to constitute USB’s liquidation, dissolution or winding up.

Voting Rights — Except as provided below, the holders of the Series M Preferred Stock have no voting rights.

Whenever dividends on any shares of the Series M Preferred Stock or any other class or series of Parity Stock have not been declared and paid for an amount equal to six or more quarterly dividend periods (whether consecutive or not) or their equivalent, the holders of the Series M Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) will be entitled to vote as a single class for the election of a total of two additional members of USB’s board of directors, provided that the election of any such directors will not cause USB to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which USB’s securities may be listed) that listed companies must have a majority of independent directors and provided further that USB’s board of directors will at no time include more than two Preferred Directors. In that event, the number of directors on USB’s board of directors will automatically increase by two and, at the request of any holder of Series M Preferred Stock, a special meeting of the holders of Series M Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series M Preferred Stock as to payment of dividends and for which dividends have not been paid, will be called for the election of the two directors (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election will be held at such next annual or special meeting of stockholders), followed by such election at each subsequent annual meeting. These voting rights will continue until full dividends have been paid regularly on the shares of the Series M Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series M Preferred Stock as to payment of dividends for at least four consecutive quarterly dividend periods or their equivalent following the Nonpayment.
 
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If and when full dividends have been regularly paid for at least four consecutive quarterly dividend periods or their equivalent following a Nonpayment on the Series M Preferred Stock and any other class or series of Parity Stock, the holders of the Series M Preferred Stock will be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment) and the term of office of each Preferred Director so elected will terminate and the number of directors on USB’s board of directors will automatically decrease by two. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series M Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described above. So long as a Nonpayment continues, any vacancy in the office of a Preferred Director (other than prior to the initial election of the Preferred Directors) may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by a vote of the holders of the outstanding shares of Series M Preferred Stock (together with holders of any and all other class of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of stockholders. The Preferred Directors will each be entitled to one vote per director on any matter.
 
If the holders of Series M Preferred Stock become entitled to vote for the election of Preferred Directors, the Series M Preferred Stock may be considered a class of voting securities under interpretations adopted by the Federal Reserve Board. As a result, certain holders of the Series M Preferred Stock may become subject to regulations under the Bank Holding Company Act and/or certain acquisitions of the Series M Preferred Stock may be subject to prior approval by the Federal Reserve Board.
 
So long as any shares of Series M Preferred Stock remain outstanding:

•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series M Preferred Stock and all other Parity Stock at the time outstanding, voting as a single class without regard to series, will be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any class or series of stock ranking senior to the Series M Preferred Stock and all other Parity Stock with respect to payment of dividends or the distribution of assets upon USB’s liquidation, dissolution or winding up; and

•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series M Preferred Stock at the time outstanding, voting separately as a class, will be required to amend the provisions of USB’s Certificate of Incorporation or the Certificate of Designations of the Series M Preferred Stock or any other series of Preferred Stock so as to materially and adversely affect the powers, preferences, privileges or rights of the Series M Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series M Preferred Stock or authorized Preferred Stock or the creation and issuance, or an increase in the authorized or issued amount, of
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other series of Preferred Stock and/or Junior Stock will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series M Preferred Stock.

The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding shares of Series M Preferred Stock have been redeemed or called for redemption upon proper notice and sufficient funds have been set aside by USB for the benefit of the holders of the Series M Preferred Stock to effect such redemption.

Series N Preferred Stock

General — The depositary is the sole holder of the Series N Preferred Stock, as described below under the section entitled “—Description of Depositary Shares,” and all references herein to the holders of the Series N Preferred Stock mean the depositary. However, the holders of depositary shares will be entitled, through the depositary, to exercise the rights and preferences of the holders of the Series N Preferred Stock, as described below under “—Description of Depositary Shares.” The holders of the Series N Preferred Stock have no preemptive rights with respect to any shares of USB’s capital stock or any of its other securities convertible into or carrying rights or options to purchase any such capital stock.

The holders of Series N Preferred Stock will be entitled to receive non-cumulative cash dividends when, as and if declared out of assets legally available for payment of dividends. In the event USB does not declare dividends or does not pay dividends in full on the Series N Preferred Stock on any date on which dividends are due, then such unpaid dividends will not cumulate and will no longer accrue and be payable.

The Series N Preferred Stock is perpetual and will not be convertible into shares of USB’s Common Stock or any other class or series of USB’s capital stock, and will not be subject to any sinking fund or other obligation for their repurchase or retirement.

Rank — With respect to the payment of dividends and amounts upon liquidation, the Series N Preferred Stock ranks equally with the Series A Preferred Stock, the Series B Preferred Stock, the Series J Preferred Stock, the Series K Preferred Stock, the Series L Preferred Stock, the Series M Preferred Stock and the Series O Preferred Stock and with any future class or series of USB’s capital stock that ranks on a par with the Series N Preferred Stock in the payment of dividends and in the distribution of assets on USB’s liquidation, dissolution or winding up. With respect to the payment of dividends and amounts upon liquidation, the Series N Preferred Stock ranks senior to USB’s Common Stock and any other future class or series of USB’s capital stock over which the Series N Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up. USB may not issue any class of series of capital stock having a preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up over the Series N Preferred Stock without the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series N Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series.
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In particular, during a dividend period and subject to certain exceptions, no dividend will be paid or declared and no distribution will be made on any Junior Stock, other than a dividend payable solely in Junior Stock, no shares of Junior Stock may be repurchased, redeemed or otherwise acquired for consideration by USB, directly or indirectly (other than (i) as a result of reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, (ii) through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock, (iii) purchases of shares of Junior Stock pursuant to a contractually binding requirement to buy such Junior Stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan, (iv) any purchase, redemption or other acquisition of Junior Stock pursuant to any employee, consultant or director incentive or benefit plans or arrangements of USB’s or any of USB’s subsidiaries (including any employment, severance or consulting arrangements adopted before or after the issuance of the Series N Preferred Stock) and (v) in connection with any underwriting, stabilization, market-making or similar transactions in USB’s capital stock by an investment banking subsidiary of USB in the ordinary course of such subsidiary’s business), nor will any monies be paid to or made available for a sinking fund for the redemption of any such securities by USB, and no shares of Parity Stock may be purchased, redeemed or otherwise acquired for consideration by USB otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series N Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, unless full dividends for the most recently completed dividend period on all outstanding shares of Series N Preferred Stock have been paid or declared and a sum sufficient for the payment thereof set aside.

Dividends — Dividends on shares of the Series N Preferred Stock will not be mandatory. Holders of Series N Preferred Stock will be entitled to receive, when, as and if declared by USB’s board of directors or a duly authorized committee of the board, out of assets legally available for the payment of dividends under Delaware law, non-cumulative cash dividends. Dividends on each share of Series N Preferred Stock will accrue on the liquidation preference amount of $25,000 per share, payable quarterly in arrears on each January 15, April 15, July 15 and October 15 (each, a “dividend payment date”). Dividends declared will accrue (i) from the original issue date to, but excluding, January 15, 2027 (the “first reset date”), at a rate per annum of 3.70% and (ii) from and including the first reset date, during each reset period (as defined below), at a rate per annum equal to the five-year treasury rate (as defined below) as of the most recent reset dividend determination date (as defined below), plus a spread of 2.541%. In the event that USB issues additional shares of Series N Preferred Stock after the original issue date, dividends on such shares may accrue from the original issue or any other date specified by USB at the time such additional shares are issued.

As used herein:

“dividend period” is the period from, and including, a dividend payment date to, but excluding, the next dividend payment date, except that the initial dividend period will commence on and include the original issue date of the Series N Preferred Stock.

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“five-year treasury rate” will be determined by the calculation agent on the applicable reset dividend determination date as the average of the yields on actively traded U.S. treasury securities adjusted to constant maturity, for five-year maturities, for the five business days preceding the applicable reset dividend determination date appearing (or, if fewer than five business days so appear, for such number of business days appearing) under the caption “Treasury Constant Maturities” in the most recently published H.15.

Notwithstanding the foregoing, if USB or USB’s designee (which may be an affiliate of USB), after consulting with USB, determines on the relevant reset dividend determination date that the then-current reference rate (which as of the original issue date of the Series N Preferred Stock is the five-year treasury rate) cannot be determined in the manner applicable for such reference rate (a “rate substitution event”), USB or such designee, after consulting with USB, may determine whether there is an industry-accepted successor rate to the then-applicable reference rate (such successor rate, the “replacement rate”). If USB or such designee, after consultation with USB, determines there is such a replacement rate, then the replacement rate will replace the then-current reference rate for all purposes relating to the Series N Preferred Stock (including the dividend rate) on such reset dividend determination date and thereafter. In addition, if a replacement rate is selected, USB or USB’s designee (which may be an affiliate of USB), after consulting with USB, may then adopt and make changes to (i) the reset date, the reset period, the reset dividend determination date, the day count convention, the business day convention, the definition of business day and the rounding conventions to be used and (ii) any other relevant methodology or definition for determining or otherwise calculating such replacement rate, including any spread or adjustment factor needed to make such replacement rate comparable to the then-current reference rate (which as of the original issue date of the Series N Preferred Stock is the five-year treasury rate), in each case in a manner that is substantially consistent with industry-accepted practices for the use of such replacement rate (the “adjustments”). If USB or USB’s designee (which may be an affiliate of USB), after consulting with USB, determines that there is no such replacement rate, then the reference rate for the applicable reset dividend determination date will be deemed to be the same rate determined for the prior reset dividend determination date or, in the case of the first reset dividend determination date, 3.70%.

“H.15” means the daily statistical release designated as such, or any successor publication, published by the Federal Reserve Board or any successor.

“reference rate” means, initially, the five-year treasury rate; provided that if a rate substitution event has occurred with respect to the five-year treasury rate or the then-current reference rate, then “reference rate” means the applicable replacement rate.

“reset date” means the first reset date and each date falling on the fifth anniversary of the preceding reset date, subject to adjustment as provided above. Reset dates, including the first reset date, will not be adjusted for business days.

“reset dividend determination date” means, in respect of any reset period, the day falling three business days prior to the beginning of such reset period.
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“reset period” means the period from and including the first reset date to, but excluding, the next following reset date and thereafter each period from, and including, each reset date to, but excluding, the next following reset date, subject to adjustment as provided above.

The applicable dividend rate for each reset period from and including the first reset date will be determined by the calculation agent, as of the applicable reset dividend determination date. Promptly upon such determination, the calculation agent will notify USB of the dividend rate for the reset period. Any calculation or determination by the calculation agent with respect to the dividend rate will be made in the calculation agent’s sole discretion and will be conclusive and binding absent manifest error.

Any determination, decision or selection that may be made by USB or USB’s designee pursuant to the provisions of the Series N Preferred Stock (including provisions relating to a rate substitution event, such as any determination with respect to tenor, rate or adjustment, or of the occurrence or non-occurrence of an event, circumstance or date, and any decision to take or refrain from taking any action or make or refrain from making any selection) will be made in USB’s or such designee’s sole discretion, will be conclusive and binding absent manifest error and will become effective without consent from the holders of the Series N Preferred Stock.

If any day on which dividends are payable on the Series N Preferred Stock is not a business day, then payment of the dividend payable on that date will be made on the next succeeding day that is a business day, without any interest or other payment in respect of such delay. The record date for payment of dividends on the Series N Preferred Stock will be the last day of the immediately preceding calendar month during which the dividend payment date falls. The amount of dividends payable for any period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dollar amounts resulting from that calculation will be rounded to three decimal places, with $0.0005 being rounded upward. For purposes of the Series N Preferred Stock, the term “business day” means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York. Dividends on the Series N Preferred Stock will not be declared, paid or set aside for payment to the extent such act would cause USB to fail to comply with any applicable laws and regulations, including applicable capital adequacy guidelines.    

    The right of holders of the Series N Preferred Stock to receive dividends is non-cumulative. If USB’s board of directors does not declare a dividend on the Series N Preferred Stock or declares less than a full dividend in respect of any dividend period, the holders of the Series N Preferred Stock will have no right to receive any dividend or a full dividend, as the case may be, for that dividend period, and USB will have no obligation to pay a dividend or to pay full dividends for that dividend period, whether or not dividends are declared and paid for any future dividend period with respect to the Series N Preferred Stock, Parity Stock, Junior Stock or any other class or series of USB’s authorized Preferred Stock.

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When dividends are not paid in full upon the Series N Preferred Stock and any other Parity Stock, dividends upon that stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the current dividend period per share on the Series N Preferred Stock, and accrued dividends, including any accumulations, on such Parity Stock, bear to each other. No interest will be payable in respect of any dividend payment on the Series N Preferred Stock that may be in arrears.

Redemption —The Series N Preferred Stock is not subject to any mandatory redemption, sinking fund or other similar provision.

The Series N Preferred Stock will be redeemable at USB’s option, in whole or in part, at any time on or after January 15, 2027 at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends.

In addition, within 90 days following the occurrence of a Regulatory Capital Treatment Event, USB, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, at any time, all (but not less than all) of the shares of Series N Preferred Stock at the time outstanding, at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends. For purposes of the Series N Preferred Stock, “Regulatory Capital Treatment Event” means the good faith determination by USB that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of Series N Preferred Stock, (ii) any proposed change in those laws or regulations that is announced after the initial issuance of any share of Series N Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after the initial issuance of any share of Series N Preferred Stock, there is more than an insubstantial risk that USB will not be entitled to treat the full liquidation value of the shares of Series N Preferred Stock then outstanding as “additional tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency), as then in effect and applicable, for as long as any share of Series N Preferred Stock is outstanding.

If shares of the Series N Preferred Stock are to be redeemed, the notice of redemption will be given by first class mail to the holders of record of the Series N Preferred Stock to be redeemed, mailed not less than 10 days nor more than 60 days prior to the date fixed for redemption thereof (provided that, if the depositary shares representing the Series N Preferred Stock are held in book-entry form through DTC, USB may give such notice in any manner permitted by the DTC). Each notice of redemption will include a statement setting forth: (i) the redemption date, (ii) the number of shares of the Series N Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder, (iii) the redemption price, (iv) the place or places where the certificates evidencing shares of Series N Preferred Stock are to be surrendered for payment of the redemption price and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
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If notice of redemption of any shares of Series N Preferred Stock has been duly given and if the funds necessary for such redemption have been set aside by USB for the benefit of the holders of any shares of Series N Preferred Stock so called for redemption, then, on and after the redemption date, dividends will cease to accrue on such shares of Series N Preferred Stock, such shares of Series N Preferred Stock will no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price.

In case of any redemption of only part of the shares of the Series N Preferred Stock at the time outstanding, the shares to be redeemed will be selected either pro rata or in such other manner as USB may determine to be fair and equitable.

Under the Federal Reserve Board’s risk-based capital guidelines applicable to bank holding companies, any redemption of the Series N Preferred Stock is subject to prior approval of the Federal Reserve Board.

Rights Upon Liquidation, Dissolution or Winding Up — In the event of USB’s liquidation, dissolution or winding up, the holders of the Series N Preferred Stock at the time outstanding will be entitled to receive a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any authorized, declared and unpaid dividends for the then-current dividend period to the date of liquidation, out of USB’s assets legally available for distribution to USB’s stockholders, before any distribution is made to holders of USB’s Common Stock or any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with the Series N Preferred Stock upon liquidation and the rights of USB’s depositors and other creditors.

If the amounts available for distribution upon USB’s liquidation, dissolution or winding up are not sufficient to satisfy the full liquidation rights of all the outstanding Series N Preferred Stock and all stock ranking equal to the Series N Preferred Stock, then the holders of each series of Preferred Stock will share ratably in any distribution of assets in proportion to the full respective preferential amount to which they are entitled. After the full amount of the liquidation preference is paid, the holders of Series N Preferred Stock will not be entitled to any further participation in any distribution of USB’s assets.

For such purposes, USB’s consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into USB, or the sale of all or substantially all of USB’s property or business will not be deemed to constitute USB’s liquidation, dissolution or winding up.

Voting Rights — Except as provided below, the holders of the Series N Preferred Stock have no voting rights.

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Whenever dividends on any shares of the Series N Preferred Stock or any other class or series of Parity Stock have not been declared and paid for an amount equal to six or more quarterly dividend periods (whether consecutive or not) or their equivalent, the holders of the Series N Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) will be entitled to vote as a single class for the election of a total of two additional members of USB’s board of directors, provided that the election of any such directors will not cause USB to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which USB’s securities may be listed) that listed companies must have a majority of independent directors and provided further that USB’s board of directors will at no time include more than two Preferred Directors. In that event, the number of directors on USB’s board of directors will automatically increase by two and, at the request of any holder of Series N Preferred Stock, a special meeting of the holders of Series N Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series N Preferred Stock as to payment of dividends and for which dividends have not been paid, will be called for the election of the two directors (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election will be held at such next annual or special meeting of stockholders), followed by such election at each subsequent annual meeting. These voting rights will continue until full dividends have been paid regularly on the shares of the Series N Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series N Preferred Stock as to payment of dividends for at least four consecutive quarterly dividend periods or their equivalent following the Nonpayment.
 
If and when full dividends have been regularly paid for at least four consecutive quarterly dividend periods or their equivalent following a Nonpayment on the Series N Preferred Stock and any other class or series of Parity Stock, the holders of the Series N Preferred Stock will be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment) and the term of office of each Preferred Director so elected will terminate and the number of directors on USB’s board of directors will automatically decrease by two. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series N Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described above. So long as a Nonpayment continues, any vacancy in the office of a Preferred Director (other than prior to the initial election of the Preferred Directors) may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by a vote of the holders of the outstanding shares of Series N Preferred Stock (together with holders of any and all other class of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of stockholders. The Preferred Directors will each be entitled to one vote per director on any matter.
 
If the holders of Series N Preferred Stock become entitled to vote for the election of Preferred Directors, the Series N Preferred Stock may be considered a class of voting securities under interpretations adopted by the Federal Reserve Board. As a result, certain holders of the Series N Preferred Stock may become subject to regulations under the Bank Holding Company Act and/or certain acquisitions of the Series N Preferred Stock may be subject to prior approval by the Federal Reserve Board.
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So long as any shares of Series N Preferred Stock remain outstanding:

•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series N Preferred Stock and all other Parity Stock at the time outstanding, voting as a single class without regard to series, will be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any class or series of stock ranking senior to the Series N Preferred Stock and all other Parity Stock with respect to payment of dividends or the distribution of assets upon USB’s liquidation, dissolution or winding up; and

•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series N Preferred Stock at the time outstanding, voting separately as a class, will be required to amend the provisions of USB’s Certificate of Incorporation or the Certificate of Designations of the Series N Preferred Stock or any other series of Preferred Stock so as to materially and adversely affect the powers, preferences, privileges or rights of the Series N Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series N Preferred Stock or authorized Preferred Stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of Preferred Stock and/or Junior Stock will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series N Preferred Stock.

The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding shares of Series N Preferred Stock have been redeemed or called for redemption upon proper notice and sufficient funds have been set aside by USB for the benefit of the holders of the Series N Preferred Stock to effect such redemption.

Series O Preferred Stock

General — The depositary is the sole holder of the Series O Preferred Stock, as described below under the section entitled “—Description of Depositary Shares,” and all references herein to the holders of the Series O Preferred Stock mean the depositary. However, the holders of depositary shares will be entitled, through the depositary, to exercise the rights and preferences of the holders of the Series O Preferred Stock, as described below under “—Description of Depositary Shares.” The holders of the Series O Preferred Stock have no preemptive rights with respect to any shares of USB’s capital stock or any of its other securities convertible into or carrying rights or options to purchase any such capital stock.

The holders of Series O Preferred Stock will be entitled to receive non-cumulative cash dividends when, as and if declared out of assets legally available for payment of dividends. In the event USB does not declare dividends or does not pay dividends in full on the Series O Preferred The Series O Preferred Stock is perpetual and will not be convertible into shares of USB’s Common Stock or any other class or series of USB’s capital stock, and will not be subject to any sinking fund or other obligation for their repurchase or retirement.
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Stock on any date on which dividends are due, then such unpaid dividends will not cumulate and will no longer accrue and be payable.


Rank — With respect to the payment of dividends and amounts upon liquidation, the Series O Preferred Stock ranks equally with the Series A Preferred Stock, the Series B Preferred Stock, the Series J Preferred Stock, the Series K Preferred Stock, the Series L Preferred Stock, the Series M Preferred Stock and the Series N Preferred Stock and with any future class or series of USB’s capital stock that ranks on a par with the Series O Preferred Stock in the payment of dividends and in the distribution of assets on USB’s liquidation, dissolution or winding up. With respect to the payment of dividends and amounts upon liquidation, the Series O Preferred Stock ranks senior to USB’s Common Stock and any other future class or series of USB’s capital stock over which the Series O Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up. USB may not issue any class of series of capital stock having a preference or priority in the payment of dividends or in the distribution of assets on USB’s liquidation, dissolution or winding up over the Series O Preferred Stock without the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series O Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series.

In particular, during a dividend period and subject to certain exceptions, no dividend will be paid or declared and no distribution will be made on any Junior Stock, other than a dividend payable solely in Junior Stock, no shares of Junior Stock may be repurchased, redeemed or otherwise acquired for consideration by USB, directly or indirectly (other than (i) as a result of reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, (ii) through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock, (iii) purchases of shares of Junior Stock pursuant to a contractually binding requirement to buy such Junior Stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan, (iv) any purchase, redemption or other acquisition of Junior Stock pursuant to any employee, consultant or director incentive or benefit plans or arrangements of USB’s or any of USB’s subsidiaries (including any employment, severance or consulting arrangements adopted before or after the issuance of the Series O Preferred Stock) and (v) in connection with any underwriting, stabilization, market-making or similar transactions in USB’s capital stock by an investment banking subsidiary of USB in the ordinary course of such subsidiary’s business), nor will any monies be paid to or made available for a sinking fund for the redemption of any such securities by USB, and no shares of Parity Stock may be purchased, redeemed or otherwise acquired for consideration by USB otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series O Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, unless full dividends for the most recently completed dividend period on all outstanding shares of Series O Preferred Stock have been paid or declared and a sum sufficient for the payment thereof set aside.
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Dividends — Dividends on shares of the Series O Preferred Stock will not be mandatory. Holders of Series O Preferred Stock will be entitled to receive, when, as and if declared by USB’s board of directors or a duly authorized committee of the board, out of assets legally available for the payment of dividends under Delaware law, non-cumulative cash dividends. Dividends on each share of Series O Preferred Stock will accrue on the liquidation preference amount of $25,000 per share at a rate per annum equal to 4.50% payable quarterly in arrears on each January 15, April 15, July 15 and October 15. If any day on which dividends are payable on the Series O Preferred Stock is not a business day, then payment of the dividend payable on that date will be made on the next succeeding day that is a business day, without any interest or other payment in respect of such delay. The record date for payment of dividends on the Series O Preferred Stock will be the last day of the immediately preceding calendar month during which the dividend payment date falls. The amount of dividends payable for any period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dollar amounts resulting from that calculation will be rounded to three decimal places, with $0.0005 being rounded upward. For purposes of the Series O Preferred Stock, the term “business day” means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York. Dividends on the Series O Preferred Stock will not be declared, paid or set aside for payment to the extent such act would cause USB to fail to comply with any applicable laws and regulations, including applicable capital adequacy guidelines.    

    The right of holders of the Series O Preferred Stock to receive dividends is non-cumulative. If USB’s board of directors does not declare a dividend on the Series O Preferred Stock or declares less than a full dividend in respect of any dividend period, the holders of the Series O Preferred Stock will have no right to receive any dividend or a full dividend, as the case may be, for that dividend period, and USB will have no obligation to pay a dividend or to pay full dividends for that dividend period, whether or not dividends are declared and paid for any future dividend period with respect to the Series O Preferred Stock, Parity Stock, Junior Stock or any other class or series of USB’s authorized Preferred Stock.

When dividends are not paid in full upon the Series O Preferred Stock and any other Parity Stock, dividends upon that stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the current dividend period per share on the Series O Preferred Stock, and accrued dividends, including any accumulations, on such Parity Stock, bear to each other. No interest will be payable in respect of any dividend payment on the Series O Preferred Stock that may be in arrears.

Redemption —The Series O Preferred Stock is not subject to any mandatory redemption, sinking fund or other similar provision.

The Series O Preferred Stock will be redeemable at USB’s option, in whole or in part, at any time on or after April 15, 2027 at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends.
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In addition, within 90 days following the occurrence of a Regulatory Capital Treatment Event, USB, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, at any time, all (but not less than all) of the shares of Series O Preferred Stock at the time outstanding, at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends. For purposes of the Series O Preferred Stock, “Regulatory Capital Treatment Event” means the good faith determination by USB that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of Series O Preferred Stock, (ii) any proposed change in those laws or regulations that is announced after the initial issuance of any share of Series O Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after the initial issuance of any share of Series O Preferred Stock, there is more than an insubstantial risk that USB will not be entitled to treat the full liquidation value of the shares of Series O Preferred Stock then outstanding as “additional tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve Board (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency), as then in effect and applicable, for as long as any share of Series O Preferred Stock is outstanding.

If shares of the Series O Preferred Stock are to be redeemed, the notice of redemption will be given by first class mail to the holders of record of the Series O Preferred Stock to be redeemed, mailed not less than 10 days nor more than 60 days prior to the date fixed for redemption thereof (provided that, if the depositary shares representing the Series O Preferred Stock are held in book-entry form through DTC, USB may give such notice in any manner permitted by the DTC). Each notice of redemption will include a statement setting forth: (i) the redemption date, (ii) the number of shares of the Series O Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder, (iii) the redemption price, (iv) the place or places where the certificates evidencing shares of Series O Preferred Stock are to be surrendered for payment of the redemption price and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date. If notice of redemption of any shares of Series O Preferred Stock has been duly given and if the funds necessary for such redemption have been set aside by USB for the benefit of the holders of any shares of Series O Preferred Stock so called for redemption, then, on and after the redemption date, dividends will cease to accrue on such shares of Series O Preferred Stock, such shares of Series O Preferred Stock will no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price.

In case of any redemption of only part of the shares of the Series O Preferred Stock at the time outstanding, the shares to be redeemed will be selected either pro rata or in such other manner as USB may determine to be fair and equitable.

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Under the Federal Reserve Board’s risk-based capital guidelines applicable to bank holding companies, any redemption of the Series O Preferred Stock is subject to prior approval of the Federal Reserve Board.

Rights Upon Liquidation, Dissolution or Winding Up — In the event of USB’s liquidation, dissolution or winding up, the holders of the Series O Preferred Stock at the time outstanding will be entitled to receive a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any authorized, declared and unpaid dividends for the then-current dividend period to the date of liquidation, out of USB’s assets legally available for distribution to USB’s stockholders, before any distribution is made to holders of USB’s Common Stock or any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with the Series O Preferred Stock upon liquidation and the rights of USB’s depositors and other creditors.

If the amounts available for distribution upon USB’s liquidation, dissolution or winding up are not sufficient to satisfy the full liquidation rights of all the outstanding Series O Preferred Stock and all stock ranking equal to the Series O Preferred Stock, then the holders of each series of Preferred Stock will share ratably in any distribution of assets in proportion to the full respective preferential amount to which they are entitled. After the full amount of the liquidation preference is paid, the holders of Series O Preferred Stock will not be entitled to any further participation in any distribution of USB’s assets.

For such purposes, USB’s consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into USB, or the sale of all or substantially all of USB’s property or business will not be deemed to constitute USB’s liquidation, dissolution or winding up.

Voting Rights — Except as provided below, the holders of the Series O Preferred Stock have no voting rights.

Whenever dividends on any shares of the Series O Preferred Stock or any other class or series of Parity Stock have not been declared and paid for an amount equal to six or more quarterly dividend periods (whether consecutive or not) or their equivalent, the holders of the Series O Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) will be entitled to vote as a single class for the election of a total of two additional members of USB’s board of directors, provided that the election of any such directors will not cause USB to violate the corporate governance requirement of the New York Stock Exchange (or any other exchange on which USB’s securities may be listed) that listed companies must have a majority of independent directors and provided further that USB’s board of directors will at no time include more than two Preferred Directors. In that event, the number of directors on USB’s board of directors will automatically increase by two and, at the request of any holder of Series O Preferred Stock, a special meeting of the holders of Series O Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series O Preferred Stock as to payment of dividends and for which dividends have not been paid, will be called for the election of the two directors (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election will be held at such next annual or special meeting of stockholders), followed by such election at each subsequent annual meeting.
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These voting rights will continue until full dividends have been paid regularly on the shares of the Series O Preferred Stock and any other class or series of Preferred Stock that ranks on parity with the Series O Preferred Stock as to payment of dividends for at least four consecutive quarterly dividend periods or their equivalent following the Nonpayment.

     If and when full dividends have been regularly paid for at least four consecutive quarterly dividend periods or their equivalent following a Nonpayment on the Series O Preferred Stock and any other class or series of Parity Stock, the holders of the Series O Preferred Stock will be divested of the foregoing voting rights (subject to revesting in the event of each subsequent Nonpayment) and the term of office of each Preferred Director so elected will terminate and the number of directors on USB’s board of directors will automatically decrease by two. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series O Preferred Stock (together with holders of any and all other classes of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described above. So long as a Nonpayment continues, any vacancy in the office of a Preferred Director (other than prior to the initial election of the Preferred Directors) may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by a vote of the holders of the outstanding shares of Series O Preferred Stock (together with holders of any and all other class of USB’s authorized Preferred Stock having equivalent voting rights, whether or not the holders of such Preferred Stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of stockholders. The Preferred Directors will each be entitled to one vote per director on any matter.
 
If the holders of Series O Preferred Stock become entitled to vote for the election of Preferred Directors, the Series O Preferred Stock may be considered a class of voting securities under interpretations adopted by the Federal Reserve Board. As a result, certain holders of the Series O Preferred Stock may become subject to regulations under the Bank Holding Company Act and/or certain acquisitions of the Series O Preferred Stock may be subject to prior approval by the Federal Reserve Board.
 
So long as any shares of Series O Preferred Stock remain outstanding:

•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series O Preferred Stock and all other Parity Stock at the time outstanding, voting as a single class without regard to series, will be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any class or series of stock ranking senior to the Series O Preferred Stock and all other Parity Stock with respect to payment of dividends or the distribution of assets upon USB’s liquidation, dissolution or winding up; and
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•the affirmative vote or consent of the holders of at least two-thirds of all of the shares of the Series O Preferred Stock at the time outstanding, voting separately as a class, will be required to amend the provisions of USB’s Certificate of Incorporation or the Certificate of Designations of the Series O Preferred Stock or any other series of Preferred Stock so as to materially and adversely affect the powers, preferences, privileges or rights of the Series O Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series O Preferred Stock or authorized Preferred Stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of Preferred Stock and/or Junior Stock will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series O Preferred Stock.

The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding shares of Series O Preferred Stock have been redeemed or called for redemption upon proper notice and sufficient funds have been set aside by USB for the benefit of the holders of the Series O Preferred Stock to effect such redemption.

Description of Depositary Shares 

In this “Description of Capital Stock,” references to “holders” of depositary shares mean those who own depositary shares registered in their own names, on the books that USB or the depositary maintain for this purpose, and not indirect holders who own beneficial interests in depositary shares registered in street name or issued in book-entry form through DTC.

This “Description of Capital Stock” summarizes specific terms and provisions of the depositary shares relating to USB’s outstanding series of Preferred Stock. As described above, all of USB’s outstanding series of Preferred Stock were offered as fractional interests in such shares of Preferred Stock in the form of depositary shares. Each depositary share represents a fractional ownership interest in a share of Preferred Stock, and will be evidenced by a depositary receipt. The shares of each series of Preferred Stock represented by depositary shares have been deposited under a deposit agreement among USB, U.S. Bank National Association, as depositary, and the holders from time to time of the depositary receipts evidencing the depositary shares. Subject to the terms of the deposit agreement, each holder of a depositary share will be entitled, through the depositary, in proportion to the applicable fraction of a share of Preferred Stock represented by such depositary share, to all the rights and preferences of the applicable series of Preferred Stock represented thereby (including dividend, voting, redemption and liquidation rights).

The depositary will distribute any cash dividends or other cash distributions received in respect of the deposited Preferred Stock to the record holders of depositary shares relating to the underlying Preferred Stock in proportion to the number of depositary shares held by the holders. The depositary will distribute any property received by it other than cash to the record holders of depositary shares entitled to those distributions, unless it determines that the distribution cannot be made proportionally among those holders or that it is not feasible to make a distribution. In that event, the depositary may, with USB’s approval, sell the property and distribute the net proceeds from the sale to the holders of the depositary shares in proportion to the number of depositary shares they hold.
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Record dates for the payment of dividends and other matters relating to the depositary shares will be the same as the corresponding record dates for the applicable series of Preferred Stock. The amounts distributed to holders of depositary shares will be reduced by any amounts required to be withheld by the depositary or by USB on account of taxes or other governmental charges.

If USB redeems any shares of Preferred Stock represented by depositary shares, the corresponding depositary shares will be redeemed from the proceeds received by the depositary resulting from the redemption of the Preferred Stock held by the depositary. The redemption price per depositary share will be equal to the fraction of the share of Preferred Stock represented by the depositary share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends. Whenever USB redeems shares of Preferred Stock held by the depositary, the depositary will redeem, as of the same redemption date, the number of depositary shares representing the shares of Preferred Stock so redeemed. In case of any redemption of less than all of the outstanding depositary shares, the depositary shares to be redeemed will be selected by the depositary pro rata or in such other manner determined by the depositary to be equitable. In any such case, USB will redeem depositary shares only in increments equal to the denominator of the fraction of the share of Preferred Stock represented by one depositary share.

When the depositary receives notice of any meeting at which the holders of the applicable series of Preferred Stock are entitled to vote, the depositary will mail the information contained in the notice to the record holders of the depositary shares relating to such Preferred Stock. Each record holder of the depositary shares on the record date, which will be the same date as the record date for the applicable series of Preferred Stock, may instruct the depositary to vote the amount of the Preferred Stock represented by the holder’s depositary shares. To the extent possible, the depositary will vote the amount of the Preferred Stock represented by depositary shares in accordance with the instructions it receives. USB will agree to take all reasonable actions that the depositary determines are necessary to enable the depositary to vote as instructed. If the depositary does not receive specific instructions from the holders of any depositary shares, it will vote all depositary shares of that series held by it proportionately with instructions received.
Anti-Takeover Provisions

Provisions of federal banking law, the Delaware General Corporation Law and USB’s Certificate of Incorporation and Bylaws described below may be deemed to have an anti-takeover effect and, together with the ability of USB’s board of directors to issue shares of Preferred Stock and to set the voting rights, preferences and other terms of Preferred Stock, may discourage, delay or prevent takeover attempts not first approved by USB’s board of directors. These provisions also could discourage, delay or prevent the removal of incumbent directors or the assumption of control by stockholders. USB believes that these provisions are appropriate to protect its interests and USB’s stockholders.
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Restrictions on Ownership. The Bank Holding Company Act requires a “bank holding company” (as defined in the Bank Holding Company Act) to obtain the approval of the Federal Reserve Board prior to acquiring more than five percent (5%) of USB’s outstanding Common Stock. Any person, other than a bank holding company, is required to obtain prior approval of the Federal Reserve Board to acquire ten percent (10%) or more of USB’s outstanding Common Stock under the Change in Bank Control Act. Any holder of twenty-five percent (25%) or more of USB’s outstanding Common Stock, other than an individual, is subject to regulation as a bank holding company, under the Bank Holding Company Act.

Stockholder Action by Written Consent. USB’s Certificate of Incorporation authorizes action by the stockholders of USB only pursuant to a meeting and not by a written consent.

Special Meetings of Stockholders. USB’s Bylaws provide that special meetings of stockholders may be called only by USB’s board of directors, USB’s chief executive officer or by USB’s secretary at the written request (a “Special Meeting Request”) of holders of record of at least 25% of the voting power of the outstanding stock of USB entitled to vote on the matter or matters to be brought before the proposed special meeting (the “Requisite Percentage”) (such percentage to be based on the number of outstanding voting shares of USB most recently disclosed prior to the date of the request for the special meeting by USB in its filings with the Securities and Exchange Commission (the “SEC”)). A Special Meeting Request must be signed by each stockholder requesting the special meeting (each, a “Requesting Stockholder”) and must be accompanied by a notice setting forth the information specified in USB’s Bylaws. Requesting Stockholders who collectively hold at least the Requisite Percentage on the date the Special Meeting Request is submitted to USB’s secretary must: (i) continue to hold at least the number of shares of stock set forth in the Special Meeting Request with respect to each such Requesting Stockholder through the date of the special meeting; and (ii) submit a written certification (an “Ownership Certification”) confirming the continuation of such holdings on the business day immediately preceding the special meeting, which Ownership Certification must include the information specified in USB’s Bylaws.

A special meeting requested by stockholders will not be held if: (i) the Special Meeting Request does not comply with the substantive and procedural requirements of the Certificate of Incorporation; (ii) the Special Meeting Request relates to an item of business that is not a proper subject for stockholder action under applicable law; (iii) the Special Meeting Request is received by USB during the period commencing 90 days prior to the first anniversary of the date of the immediately preceding annual meeting of stockholders and ending on the date of the next annual meeting; (iv) an annual or special meeting of stockholders that included a substantially similar item of business (“Similar Business”) (as determined in good faith by USB’s board of directors) was held not more than 120 days before the Special Meeting Request was received by USB’s secretary; provided, however, that this clause (iv) does not apply if a material corporate event relating to the item of business has occurred since the date of such prior annual or special meeting; (v) two or more special meetings of stockholders called pursuant to the request of stockholders have been held within the 12-month period before the Special Meeting Request was received by the secretary; (vi) USB’s board of directors has called or calls for an annual or special meeting of stockholders to be held within 90 days after the Special Meeting Request is received by USB’s secretary, and USB’s board of directors determines in good faith that the business to be conducted at such meeting includes the Similar Business; or (vii) such Special Meeting Request was made in a manner that involved a violation of the proxy rules of the SEC or other applicable law.
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Advance Notice to Nominate Directors. Nominations of persons for election as directors at a meeting of stockholders called for the purpose of electing directors may be made: (i) as specified in the notice of meeting (or any supplement thereto) given by or at the direction of USB’s board of directors, including nominations made as described below under “—Stockholder Nominations Included in USB’s Proxy Materials” or nominations to be made pursuant to a Special Meeting Request; or (ii) by any stockholder in the following manner.
For any nomination to be properly made by a stockholder, other than nominations described below under “—Stockholder Nominations Included in USB’s Proxy Materials” or nominations to be made pursuant to a Special Meeting Request, the stockholder must: (i) be a stockholder of record both at the time of giving of the notice referred to in the following clause and at the time of the meeting of stockholders called for the purpose of electing directors and be entitled to vote at such meeting; and (ii) give written notice to USB’s secretary so as to be received at USB’s principal executive offices not less than (A) with respect to an annual meeting of stockholders, 120 days in advance of the date of USB’s previous year’s annual meeting of stockholders, except that if no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than 30 days from the date contemplated at the time of the previous year’s proxy statement, such notice must be so received by the later of: (1) the close of business on the date 90 days prior to the meeting date; or (2) the close of business on the tenth day following the date on which such meeting date is first publicly announced or disclosed; and (B) with respect to a special meeting of stockholders for the election of directors, the close of business on the seventh day following the date on which the notice of such meeting is first given to stockholders.

    The required notice must contain the information specified in USB’s Bylaws. To be eligible as a nominee for election or reelection as a director, an individual must deliver (in accordance with the time periods prescribed for delivery of notice under USB’s Bylaws) to USB’s secretary at USB’s principal executive offices a completed written questionnaire with respect to the matters specified in USB’s Bylaws and a written representation and agreement as to the matters specified in USB’s Bylaws.

Stockholder Nominations Included in USB’s Proxy Materials. If expressly requested in a Nomination Notice (as defined below), USB will, subject to certain exceptions specified in USB’s Bylaws, include in its proxy statement for any annual meeting of stockholders specified information regarding person(s) nominated for election (the “Nominee(s)”) by a Nominating Stockholder (as defined below), including any statement included in support of the election of the Nominee(s) to the board by the Nominating Stockholder in the Nomination Notice for inclusion in the proxy statement and other information that USB or its board of directors determines, in their discretion, to include in the proxy statement relating to the nomination of the Nominee(s), including a statement in opposition to the nomination.
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Any Nominee(s) will also be included on USB’s form of proxy and ballot.

A Nomination Notice may only be submitted by an Eligible Holder (as defined below) or group of up to 20 Eligible Holders that has (individually and collectively, in the case of a group) satisfied, as determined by USB’s board of directors, all applicable conditions and complied with all applicable procedures set forth in USB’s Bylaws (such Eligible Holder or group of Eligible Holders being a “Nominating Stockholder”), including those described below.

USB is not be required to include in the proxy statement for an annual meeting of stockholders more Nominees than that number of directors constituting the greater of (A) two and (B) 20% of the total number of USB directors on the last day on which a Nomination Notice may be submitted.

An “Eligible Holder” is a person who has either: (A) been a record holder of the Minimum Number (as defined below) of shares of Common Stock continuously throughout the three-year period preceding and including the date of submission of the Nomination Notice, and continues to own at least such shares of Common Stock through the date of the annual meeting; or (B) provides to the secretary, within the time period specified in USB’s Bylaws, appropriate evidence of continuous ownership of such shares for such three-year period from one or more securities intermediaries.

An Eligible Holder or group of up to 20 Eligible Holders may submit a Nomination Notice only if the person or group (in the aggregate) has continuously owned at least 3% of the number of outstanding shares of Common Stock as of the most recent date for which such amount is given in any filing by USB with the SEC prior to the submission of the Nomination Notice for the three–year period specified above.

To nominate a Nominee (or Nominees), the Nominating Stockholder must, no earlier than 150 calendar days and no later than 120 calendar days before the anniversary of the date that USB mailed its proxy statement for the prior year’s annual meeting of stockholders, submit to the secretary at USB’s principal executive office a notice (the “Nomination Notice”) containing all of the information and accompanied by the documents specified in USB’s Bylaws; provided, however, that if the annual meeting is not scheduled to be held within a period that commences 30 days before such anniversary date and ends 30 days after such anniversary date (an annual meeting date outside such period being referred to herein as an “Other Meeting Date”), the Nomination Notice will be given in the manner provided herein by the later of the close of business on the date that is 180 days prior to such Other Meeting Date or
the tenth day following the date such Other Meeting Date is first publicly announced or disclosed:

Advance Notice of Other Proposals. For business other than a nomination for director to be properly brought before an annual meeting by a stockholder, the stockholder must have given written notice to the secretary so as to be received at USB’s principal executive offices not less than 120 days in advance of the date of USB’s proxy statement released to stockholders in connection with the previous year’s annual meeting of stockholders, except that if no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than 30 days from the date contemplated at the time of the previous year’s proxy statement, such notice must be so received a reasonable time before the solicitation is made.
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Each such notice must set forth as to each matter the stockholder proposes to bring before the annual meeting the information specified in USB’s Bylaws.


DESCRIPTION OF NOTES

The following description of the 0.850% Medium-Term Notes, Series X (Senior), due June 7, 2024 (the “Notes”) of USB was provided in the pricing supplement dated May 31, 2017 and filed with the Securities and Exchange Commission (the “Commission”) on June 1, 2017, and USB’s pricing supplement dated November 22, 2019 and filed with the Commission on November 22, 2019. The following description is qualified by reference to such pricing supplements and the description of the general terms and provisions of the Notes set forth in (i) USB’s prospectus dated April 21, 2017 and filed with the Commission on April 21, 2017 and (ii) USB’s prospectus supplement dated April 21, 2017 and filed with the Commission on April 21, 2017. The following description of specified provisions of the senior indenture, dated as of October 3, 1991, as amended by a first supplemental indenture, dated as of April 21, 2017, and as further amended or supplemented from time to time (the “Indenture”), between USB and Citibank, N.A., as trustee, and the Notes is qualified by reference to the actual provisions of the Indenture, including the definitions contained in the Indenture of some of the terms used below, and the Notes, copies of which are incorporated by reference as exhibits to USB’s Annual Report on Form 10-K.

The Notes are a tranche of USB’s Medium-Term Notes, Series X (Senior). As of December 31, 2020, the outstanding aggregate principal amount of the Notes was €1,175,000,000.
The Notes were issued in minimum denominations of €100,000 and integral multiples of €1,000 in excess thereof.
USB may from time to time, without giving notice to or seeking the consent of the holders of the Notes, issue additional debt securities having the same terms (except for the issue date, the offering price and, if applicable, the first interest payment date) and ranking equally and ratably with the Notes. Any such additional debt securities having such similar terms, together with the Notes, will constitute a single series of debt securities for all purposes under the Indenture, including, without limitation, waivers, amendments and redemptions.
The Notes are USB’s general unsecured and unsubordinated obligations, rank equally with all of USB’s existing and future unsecured and unsubordinated indebtedness from time to time outstanding and are considered part of the same series of notes as any of USB’s other Medium-Term Notes, Series X (Senior), previously issued or issued in the future. The Notes will not be subject to any sinking fund provisions and will not be convertible into or exchangeable for any of USB’s equity interests.
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The Notes are listed on the New York Stock Exchange under the symbol “USB24B”.
Interest and Principal Payments
The entire principal amount of the Notes will mature and become payable, together with unpaid interest, if any, accrued thereon on June 7, 2024 (the “Stated Maturity Date”) unless redeemed earlier as described below under “— Redemption for Tax Reasons.” The principal of each Note payable at maturity or earlier redemption, together with unpaid interest, if any, will be paid in euro against presentation and surrender at the office or agency maintained for such purpose.
The Notes bear interest at a rate of 0.850% per year. Interest on the Notes is payable annually in arrears on June 7 (each an “Interest Payment Date”). Interest payable on an Interest Payment Date will be paid to the persons in whose names the Notes are registered at the close of business on the regular record date; provided, however, that interest payable at the Stated Maturity Date or earlier redemption date will be payable to the person to whom principal shall be payable. The regular record date for the Notes will be May 23, whether or not a Business Day, immediately preceding the related Interest Payment Date; provided, however, that so long as the relevant global note is held by or on behalf of a common depositary for Euroclear Bank SA/NV (“Euroclear”), Clearstream Banking S.A. (“Clearstream”) or any other clearing system, “record date” shall be a day when Euroclear, Clearstream or such other clearing system, as the case may be, is open for business. Interest payable on an Interest Payment Date will be computed on the basis of an Actual/Actual (ICMA) (as defined in the rulebook of the International Capital Market Association) day count convention.
If any Interest Payment Date, the Stated Maturity Date or earlier redemption date falls on a day that is not a Business Day, the related payment of principal, premium, if any, or interest will be made on the next succeeding Business Day as if made on the date the applicable payment was due, and no interest will accrue on the amount so payable for the period from and after such Interest Payment Date, the Stated Maturity Date or such redemption date, as the case may be, to the date of such payment on the next succeeding Business Day. For purposes of the Notes, “Business Day” means any day, other than a Saturday or Sunday, (i) which is not a day on which banking institutions in The City of New York or London are authorized or required by law, regulation or executive order to close and (ii) on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET 2) system (the TARGET 2 system) or any successor thereto, is open.
So long as the relevant global note is held on behalf of Euroclear, Clearstream or any other clearing system, notices to holders of Notes represented by the global note may be given by delivery of the relevant notice to Euroclear, Clearstream or such other clearing system, as the case may be.
Currency of Payment
Principal, premium, if any, and interest payments in respect of the Notes, including any payments made upon any redemption of the Notes, will be payable in euro.
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If the euro is unavailable in USB’s good faith judgment for the payment of principal, premium, if any, or interest with respect to the Notes, including any payments made upon any redemption of the Notes, due to the imposition of exchange controls or other circumstances beyond USB’s control, is no longer used by the member states of the European Monetary Union that have adopted the euro as their currency or is no longer used for the settlement of transactions by public institutions of or within the international banking community (and is not replaced by another currency), USB is entitled to satisfy its obligations to holders of the Notes by making that payment in U.S. dollars on the basis of the Market Exchange Rate as computed by the exchange rate agent on the second Business Day before that payment is due, or if such Market Exchange Rate is not then available, on the basis of the most recently available Market Exchange Rate on or before the date that payment is due or as otherwise determined by USB in good faith, if the foregoing is impracticable. Any payment in respect of the Notes so made in U.S. dollars will not constitute a default under the Indenture. Neither the trustee nor the paying agent shall be responsible for obtaining exchange rates, effecting conversions or otherwise handling redenominations.
The “Market Exchange Rate” means the noon buying rate in The City of New York for cable transfers of euros as certified for customs purposes (or, if not so certified, as otherwise determined) by the Federal Reserve Bank of New York.
In the event that the euro is no longer used by the member states of the European Monetary Union that have adopted the euro as their currency or an official redenomination of the euro, USB’s obligations with respect to payments on the Notes shall, in all cases, be regarded immediately following such redenomination as providing for the payment of that amount of euros representing the amount of such obligations immediately before such redenomination. The Notes do not provide for any adjustment to any amount payable under the Notes as a result of any change in the value of the euro relative to any other currency due solely to fluctuations in exchange rates.
All determinations referred to above made by the exchange rate agent will be at its sole discretion and will, in the absence of clear error, be conclusive for all purposes and binding on the holders of the Notes.
Payment of Additional Amounts
USB will, subject to the exceptions and limitations set forth below, pay as additional interest such additional amounts (“Additional Amounts”) as are necessary in order that the net amount of such payment of the principal of and interest on a Note to a holder who is a U.S. Alien (as such term is defined below), after deduction for any present or future tax, assessment or governmental charge of (a) the United States (as such term is defined below), or a political subdivision or authority thereof or therein or (b) any other jurisdiction in which any paying agent appointed by USB is organized or the location from which payment is made, or any political subdivision or authority thereof (each of (a) and (b), a “Relevant Jurisdiction”), imposed by withholding with respect to the payment, will not be less than the amount provided for in such Note to be then due and payable. However, the foregoing obligation to pay Additional Amounts shall not apply:
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•to any tax, assessment or governmental charge that would not have been so imposed but for the existence of any present or former connection between such holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or holder of power over, such holder, if such holder is an estate, trust, partnership or corporation) and a Relevant Jurisdiction, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, member, shareholder or holder of a power) being considered as:
obeing or having been present or engaged in a trade or business in the Relevant Jurisdiction or having had a permanent establishment therein;
ohaving a current or former relationship with the Relevant Jurisdiction, including a relationship as a citizen or resident or being treated as a resident thereof; or
obeing or having been, for United States federal income tax purposes, a “controlled foreign corporation,” a “passive foreign investment company” (including a qualified electing fund), a corporation that has accumulated earnings to avoid United States federal income tax or a private foundation or other tax-exempt organization;
•to any tax, assessment or other governmental charge imposed by reason of the holder (i) owning or having owned, directly or indirectly, actually or constructively, 10% or more of the total combined voting power of all classes of stock of USB entitled to vote, (ii) receiving interest described in Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “Code”) or (iii) being a controlled foreign corporation with respect to the United States that is related to USB by actual or constructive stock ownership;
•to any holder who is a fiduciary or partnership or other than the sole beneficial owner of the Note, but only to the extent that a beneficiary or settlor with respect to such fiduciary or member of such partnership or a beneficial owner of the Note would not have been entitled to the payment of such Additional Amounts had such beneficiary, settlor, member or beneficial owner been the holder of such Note;
•to any tax, assessment or governmental charge that would not have been imposed or withheld but for the failure of the holder to comply with certification, identification or information reporting requirements under the Relevant Jurisdiction’s income tax laws, without regard to any tax treaty, with respect to the payment, concerning the nationality, residence, identity or connection with the Relevant Jurisdiction of the holder or a beneficial owner of such Note, if such compliance is required by the Relevant Jurisdiction’s income tax laws, without regard to any tax treaty, as a precondition to relief or exemption from such tax, assessment or governmental charge;
•to any tax, assessment or governmental charge that would not have been so imposed or withheld but for the presentation by the holder of such Note for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later;
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•to any estate, inheritance, gift, sales, transfer, excise, wealth or personal property tax or any similar tax, assessment or governmental charge;
•to any tax, assessment or governmental charge that is payable otherwise than by withholding by USB or the paying agent from the payment of the principal of or interest on such Note;
•to any tax, assessment or governmental charge required to be withheld by any paying agent from such payment of principal of or interest on any Note, if such payment can be made without such withholding by any other paying agent;
•to any withholding or deduction on or in respect of any Note pursuant to sections 1471 through 1474 of the Code, and the regulations, administrative guidance and official interpretations promulgated thereunder (“FATCA”), any agreement between USB and the United States or any authority thereof entered into for FATCA purposes or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of FATCA; or
•to any tax imposed as a result of any combination of the above.
The term “United States” means the United States of America, the States thereof (including the District of Columbia) and any other political subdivision or taxing authority thereof or therein affecting taxation, and the term “U.S. Alien” means any beneficial owner of a Note other than a beneficial owner of a Note that is (A) a citizen or resident of the United States; (B) a corporation, partnership or other entity treated as a corporation or a partnership for U.S. federal income tax purposes created or organized in or under the laws of the United States, any of its states or the District of Columbia; (C) an estate whose income is subject to U.S. federal income tax regardless of its source; or (D) a trust which is subject to the supervision of a court within the United States and the control of one or more United States persons as described in Section 7701(a)(30) of the Code or that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.
Redemption for Tax Reasons
If USB has or will become obliged to pay Additional Amounts as a result of any change in, or amendment to, the laws or regulations of a Relevant Jurisdiction affecting taxation, or any change in official position regarding the application or interpretation of such laws, regulations or rulings, which change or amendment becomes effective on or after June 7, 2017, and USB determines that such obligation cannot be avoided by the use of reasonable measures then available to it, USB may, at its option, at any time, having given not less than 10 nor more than 60 days’ prior written notice to holders of the Notes, redeem, in whole, but not in part, the Notes at a redemption price equal to 100% of their principal amount, together with unpaid interest, if any, on the Notes accrued to, but excluding, the redemption date, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which USB would be obliged to pay such Additional Amounts if a payment in respect to the Notes were due on such date.
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Prior to the transmission or publication of any notice of redemption pursuant to this paragraph, USB will deliver to the trustee an officer’s certificate stating that it is entitled to effect such redemption and setting forth a statement of facts and including a written opinion of independent counsel selected by USB showing that the conditions precedent to its right to so redeem the Notes has occurred.
Restrictive Covenants
Subject to the provisions described under the section “—Consolidation, Merger and Sale of Assets,” the Indenture prohibits:
•     the issue, sale or other disposition of shares of or securities convertible into, or options, warrants or rights to subscribe for or purchase shares of, voting stock of a principal subsidiary bank;
•the merger or consolidation of a principal subsidiary bank with or into any other corporation; or

•the sale or other disposition of all or substantially all of the assets of a principal subsidiary bank,
if, after giving effect to the transaction and issuing the maximum number of shares of voting stock that can be issued after the conversion or exercise of the convertible securities, options, warrants or rights, USB would own, directly or indirectly, 80% or less of the shares of voting stock of the principal subsidiary bank or of the successor bank or the bank which acquires the assets.
In the Indenture, USB also agreed that it will not create, assume, incur or cause to exist any pledge, encumbrance or lien, as security for indebtedness for money borrowed on:
•any shares of or securities convertible into voting stock of a principal subsidiary bank that USB owns directly or indirectly; or

•options, warrants or rights to subscribe for or purchase shares of, voting stock of a principal subsidiary bank that USB owns directly or indirectly,
without providing that the senior debt securities of all series, including the Notes, will be equally secured if, after treating the pledge, encumbrance or lien as a transfer to the secured party, and after giving effect to the issuance of the maximum number of shares of voting stock issuable after conversion or exercise of the convertible securities, options, warrants or rights, USB would own, directly or indirectly 80% or less of the shares of voting stock of the principal subsidiary bank.
The Indenture defines the term “principal subsidiary bank” as U.S. Bank National Association.
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The Indenture does not contain covenants specifically designed to protect holders from a highly leveraged transaction in which USB is involved.
Events of Default
The only events that constitute events of default under the Indenture with respect to the Notes are:
•USB’s failure to pay any interest on any Note when due, which failure continues for 30 days;

•USB’s failure to pay any principal of or premium on any Note when due;

•USB’s failure to make any sinking fund payment, when due, for any Note, if applicable;

•USB’s failure to perform any other covenant in the Indenture (other than a covenant included in the Indenture solely for the benefit of a series of senior debt securities other than the Notes), which failure continues for 60 days after written notice;

•default in the payment of indebtedness for money borrowed under any indenture or instrument under which USB has or a principal subsidiary bank has outstanding indebtedness in an amount in excess of $5,000,000 which has become due and has not been paid, or whose maturity has been accelerated and the default has not been cured or acceleration annulled within 60 days after written notice; and

•some events of bankruptcy, insolvency or reorganization which involve USB or a principal subsidiary bank.
If an event of default occurs and is continuing on any Notes outstanding under the Indenture, then the trustee or the holders of at least 25% in aggregate principal amount of the outstanding Notes may declare the principal amount (or, if any of the Notes are original issue discount notes, the amount payable at acceleration of maturity of such Notes to such holders) of all of the Notes to be due and payable immediately, by notice as provided in the Indenture. At any time after a declaration of acceleration has been made on the Notes, but before the trustee has obtained a judgment for payment, the holders of a majority in aggregate principal amount of the outstanding Notes may, under some circumstances, rescind and annul this acceleration.
Subject to provisions in the Indenture relating to the duties of the trustee during a default, the trustee will not be under any obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the holders of any Notes then outstanding under the Indenture, unless the holders offer to the trustee reasonable indemnity. The holders of a majority in aggregate principal amount of the outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee for such series, or exercising any trust or power conferred on such trustee.
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USB must furnish to the trustee, annually, a statement regarding its performance on some of its obligations under the Indenture and any default in its performance.
Modification and Waiver
Except as otherwise specifically provided in the Indenture, modifications and amendments of the Indenture generally will be permitted only with the consent of the holders of at least a majority in aggregate principal amount of the outstanding Notes affected by the modification or amendment. However, none of the following modifications are effective against any holder without the consent of the holders of each outstanding Note affected by the modification or amendment:
•changing the stated maturity of the principal of or any installment of principal or interest on any debt security;

•reducing the principal amount of, or premium or interest on any debt security;

•changing any of USB’s obligations to pay additional amounts;

•reducing the amount of principal of an original issue discount debt security that would be due and payable at declaration of acceleration of its maturity;

•changing the place for payment where, or coin or currency in which, any principal of, or premium or interest on, any debt security is payable;

•impairing the right to take legal action to enforce any payment of or related to any debt security;

•reducing the percentage in principal amount of outstanding debt securities of any series required to modify, amend, or waive compliance with some provisions of the Indenture or to waive some defaults; or

•modifying any of the above provisions.
The holders of at least a majority in aggregate principal amount of the outstanding Notes can waive, as far as that series is concerned, USB’s compliance with some restrictive provisions of the Indenture.
The holders of at least a majority in aggregate principal amount of the outstanding Notes may waive any past default under the Indenture, except:
•a default in the payment of principal of, or premium, or interest on any senior debt security; or

•a default in a covenant or provision of the Indenture that cannot be modified or amended without the consent of the holder of each outstanding debt security of the series affected.
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The Indenture provides that, in determining whether holders of the requisite principal amount of the outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver, or whether a quorum is present at a meeting of holders of Notes:
•the principal amount of an original issue discount note considered to be outstanding will be the amount of the principal of that original issue discount debt security that would be due and payable as of the date that the principal is determined at declaration of acceleration of the maturity of that original issue discount note; and

•the principal amount of a note denominated in a foreign currency or currency unit that is deemed to be outstanding will be the U.S. dollar equivalent, determined on the date of original issuance for that note, of the principal amount (or, in the case of an original issue discount note, the U.S. dollar equivalent, determined on the date of original issuance for that debt security, of the amount determined as provided in the bullet point above).
Consolidation, Merger and Sale of Assets
Without the consent of the holders of the outstanding Notes, USB cannot consolidate with or merge into another corporation, partnership or trust, or convey, transfer or lease substantially all of its properties and its assets, to a corporation, partnership or trust organized or validly existing under the laws of any domestic jurisdiction unless:
•the successor entity assumes USB’s obligations on the Notes and under the Indenture;

•immediately after the transaction, USB would not be in default under the Indenture and no event which, after notice or the lapse of time, would become an event of default under the Indenture, shall have occurred and be continuing; and

•other conditions are met.
Trustee, Paying Agent and Exchange Rate Agent
The Trustee for the Notes is Citibank, N.A. USB has designated Elavon Financial Services DAC as its paying agent and U.S. Bank Trust National Association as its exchange rate agent for the Notes.
Governing Law
The Indenture is, and the Notes are, governed by, and construed in accordance with, the laws of the State of New York.
Book-Entry Delivery and Settlement
The Notes were issued in the form of one or more global notes in fully registered form, without coupons, and were deposited with, or on behalf of, a common depositary for, and in respect of interests held through, Euroclear and Clearstream. Except as described herein, certificates will not be issued in exchange for beneficial interests in the global notes.
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Exchange of Global Notes for Certificated Notes
Subject to certain conditions, the Notes represented by the global notes are exchangeable for notes in definitive form of like tenor in minimum denominations of €100,000 principal amount and multiples of €1,000 in excess thereof if:
•Clearstream, Euroclear or any successor thereto notifies USB that it is unwilling to act as a clearing system for the Notes;
•USB, at its option, notifies the trustee in writing that it elects to cause the issuance of certificated notes; or
•there has occurred and is continuing an event of default with respect to the Notes.
In all cases, definitive notes delivered in exchange for any global note or beneficial interest therein will be registered in the names, and issued in any approved denominations, requested by or on behalf of the common depositary (in accordance with its customary procedures).

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EX-10.30 3 ex-1030formofperformancere.htm EX-10.30 Document

Exhibit 10.30

U.S. BANCORP
PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT

THIS AGREEMENT is made as of <Grant Date> (the “Grant Date”), by and between U.S. Bancorp (the “Company”) and <Participant Name> (the “Participant”), together with the Completed Exhibit A which is incorporated herein by reference (collectively, the “Agreement”), sets forth the terms and conditions of a performance restricted stock unit award representing the right to receive <Number of Target Awards Granted> shares of common stock of the Company, par value $0.01 per share (the “Common Stock”). The grant of this performance restricted stock unit award is made pursuant to the Company’s 2015 Stock Incentive Plan, which was approved by shareholders on April 21, 2015 (as has been and may be further amended, the “Plan”) and is subject to its terms. Capitalized terms that are not defined in the Agreement shall have the meaning ascribed to such terms in the Plan.
The Company and Participant agree as follows:
1.Award
Subject to the terms and conditions of the Plan and the Agreement, the Company grants to Participant a performance restricted stock unit award (the “Units”) entitling Participant to < Number of Target Awards Granted > performance restricted stock units (such number of units, the “Target Award Number”). The Target Award Number shall be adjusted upward or downward as provided in the Completed Exhibit A. The number of Units that Participant will receive under the Agreement, after giving effect to such adjustment, is referred to herein as the “Final Award Number.” Each Unit represents the right to receive one share of Common Stock, subject to the vesting requirements and distribution provisions of the Agreement and the terms of the Plan. The shares of Common Stock distributable to Participant with respect to the Units granted hereunder are referred to as the “Shares.” The Completed Exhibit A sets forth (a) the performance period over which the Final Award Number will be determined (the “Performance Period”), and (b) the date on which the Final Award Number will be determined (the “Determination Date”).
2.    Vesting; Forfeiture
(a)    Subject to Sections 2(b) and 2(c), the Units shall vest pursuant to the following rules:
    (i)    Time-Based Vesting Conditions. Except as otherwise provided in subsections (ii) through (v) below, if the Participant remains continuously employed by the Company or an Affiliate of the Company through the Scheduled Vesting Date as set forth in Exhibit A, the number of Units equal to the Final Award Number shall become vested on the Scheduled Vesting Date and will be settled in accordance with Section 3(a).


    (ii)     Continued Vesting Upon Separation From Service Due to Retirement or Disability. If Participant remains continuously employed by the Company or an Affiliate of the Company through the date of his or her Separation From Service (as defined in Section 10) with the Company or the Affiliate by reason of Retirement (as defined in Section 10) or Disability (as defined in Section 10) prior to the Scheduled Vesting Date, and provided such Separation From Service is not a Qualifying Termination (as defined in Section 10), the Final Award Number will be determined in accordance with Section 1 and a number of Units equal to the Final Award Number shall continue to vest on the Scheduled Vesting Date and will be settled in accordance with Section 3(a).
    (iii)    Acceleration of Vesting Upon Death. If, prior to the Scheduled Vesting Date, Participant (A) ceases to be an employee by reason of death while in the employ of the Company or any Affiliate, or (B) dies after a Separation From Service by reason of Retirement or Disability, then the Units will become vested in accordance with this subsection (iii). If such death occurs prior to the last day of the Performance Period, a number of Units equal to the Target Award Number will vest upon Participant’s death. If the death occurs on or after the last day of the Performance Period, then a number of Units equal to the Final Award Number will vest. Units that vest in accordance with this subsection (iii) shall be distributed to the Participant in accordance with Section 3(c).
    (iv)     Acceleration of Vesting Following a Qualifying Termination. If Participant remains continuously employed by the Company or an Affiliate of the Company through the date of a Qualifying Termination prior to the Scheduled Vesting Date, then the Units will become vested in accordance with this subsection (iv). If the Qualifying Termination occurs prior to the last day of the Performance Period, a number of Units equal to the Target Award Number will vest upon Participant’s Qualifying Termination. If the Qualifying Termination occurs on or after the last date of the Performance Period, then a number of Units equal to the Final Award Number will vest. Units that vest in accordance with this subsection (iv) shall be distributed to the Participant in accordance with Section 3(b). Notwithstanding the foregoing, if in connection with a Change in Control the Units are adjusted, or units in the acquiring or surviving entity are substituted for the Units, or the Plan is terminated, in each case as permitted under the Plan and in accordance with Section 409A, then the terms of such adjustment, substitution or plan termination will govern the treatment of the Units.
    (v)    Continued Vesting As a Result of Qualifying Severance. If Participant has been continuously employed by the Company or any Affiliate from the Grant Date until the date of a Qualifying Severance (as defined in Section 10) and the Scheduled Vesting Date is on or before the second anniversary of the Qualifying Severance, then the Units will become vested such that the Final Award Number will be determined in accordance with Section 1 and a number of Units equal to the Final Award Number shall continue to vest on the Scheduled Vesting Date. Units that vest in accordance with this subsection (v) shall be distributed to the Participant in accordance with Section 3(a).
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Except as provided above in this Section 2(a), if Participant’s employment with the Company or an Affiliate terminates, any Units that have not vested at the time of the termination shall be immediately and irrevocably forfeited.
(b)    Forfeiture if Violation of any Restrictive Covenant Agreement. Notwithstanding any other provision of this Agreement, Units that have not become vested previously may also be forfeited if Participant has not complied with the terms of any confidentiality, non-solicitation, or other restrictive covenant agreement between the Company or an Affiliate and the Participant at all times since the Grant Date.
(c)    Special Risk-Related Cancellation Provisions. Notwithstanding any other provision of the Agreement, if at any time subsequent to the Grant Date the Committee determines, in its sole discretion, that Participant has subjected the Company to significant financial, reputational, or other risk by (i) failing to comply with Company policies and procedures, including the Code of Ethics and Business Conduct, (ii) violating any law or regulation, (iii) engaging in negligence or willful misconduct, or (iv) engaging in activity resulting in a significant or material control deficiency under the Sarbanes-Oxley Act of 2002, then all or part of the Units granted under the Agreement that have not been settled (and Shares delivered) at the time of such determination may be cancelled. If any Units are cancelled pursuant to this provision, Participant will have no rights with respect to the Units (including, without limitation, any rights to receive a distribution of Shares with respect to the Units and the right to receive Dividend Equivalents).
3.    Distribution of Shares with Respect to Units
Following the vesting of Units and following the payment of any applicable withholding taxes pursuant to Section 7 hereof, the Company shall cause to be issued and delivered to Participant (including through book entry) Shares registered in the name of Participant or in the name of Participant’s legal representatives, beneficiaries or heirs, as the case may be, as follows:
(a)    Distribution on Schedule Vesting Date (Including for Retirement, Disability, and Qualifying Severance). As soon as administratively feasible following the Scheduled Vesting Date (but in no event later than December 31st of the year in which such Scheduled Vesting Date occurs), all Shares issuable pursuant to Units that become vested in accordance with subsections (i), (ii), and (v) of Section 2(a) shall be distributed to Participant.
(b) Qualifying Termination Distributions. As soon as administratively feasible following a Separation From Service in connection with a Qualifying Termination (and in any case no later than 60 days following such Separation From Service except as otherwise provided in this Section 3(b)), all Shares issuable pursuant to Units that become vested in accordance with Section 2(a)(iv) shall be distributed to Participant. Notwithstanding the foregoing, any Shares issuable to a Specified Employee (as defined in Section 10) as a result of a Separation From Service in connection with a Qualifying Termination will not be delivered to such Specified Employee until the date that is six months and one day after the date of the Separation From Service. If in connection with a Change in Control the Units are adjusted, or units in the acquiring or surviving entity are substituted for the Units, or the Plan is terminated, in each case as permitted under the Plan and in accordance with Section 409A, then the terms of such adjustment, substitution or plan termination will govern the treatment of the Units, including the time and manner of settlement of the Units.
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(c)    Distributions Following Death. As soon as administratively feasible following the death of a Participant (but in no event later than December 31 of the first calendar year following the calendar year in which the death occurred) all Shares issuable pursuant to Units that become vested pursuant to Section 2(a)(iii) shall be distributed to the representatives of Participant or to any Person to whom the Units have been transferred by will or the applicable laws of descent and distribution.
In the event that the number of Shares distributable pursuant to this Section 3 is a number that is not a whole number, then the number of Shares distributed shall be rounded down to the nearest whole number.
4.    Rights as Shareholder; Dividend Equivalents
Prior to the distribution of Shares with respect to Units pursuant to Section 3 above, Participant shall not have ownership or rights of ownership of any Shares underlying the Units; provided, however, that Participant shall be entitled to accrue cash Dividend Equivalents on outstanding Units (i.e. Units that have not been forfeited, cancelled or settled), whether vested or unvested, if cash dividends on the Common Stock are declared by the Board on or after the Grant Date. Prior to the Determination Date, Participant will accrue cash Dividend Equivalents on Units equal to the Target Award Number. Specifically, when cash dividends are paid with respect to a share of outstanding Common Stock, an amount of cash per Unit equal to the cash dividend paid with respect to a share of outstanding Common Stock will be accrued with respect to each Unit in Participant’s Target Award Number. On the Determination Date, the dollar amount of Participant’s cumulative accrued Dividend Equivalents as of the Determination Date will be multiplied by Participant’s Target Award Number Percentage to determine the amount of cash Dividend Equivalents that will be paid to Participant. Dividend Equivalents will be paid in cash as soon as administratively feasible following the date on which the underlying Units giving rise to the Dividend Equivalents are settled and paid out, but in no event later than December 31st of the year in which the underlying Units are distributed in accordance with Section 3. The Dividend Equivalents shall be treated as earnings on, and as a separate amount from, the Units for purposes of Section 409A of the Code.
5.    Restriction on Transfer
Except for transfers by will or the applicable laws of descent and distribution, the Units cannot be sold, assigned, transferred, gifted, pledged, or in any manner encumbered, alienated, attached or disposed of, and any purported sale, assignment, transfer, gift, pledge, alienation, attachment or encumbrance shall be void and unenforceable against the Company and its Affiliates. No such attempt to transfer the Units, whether voluntary or involuntary, by operation of law or otherwise (except by will or laws of descent and distribution), shall vest the purported transferee with any interest or right in or with respect to the Units or the Shares issuable with respect to the Units.
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6.    Securities Law Compliance
The delivery of all or any of the Shares in accordance with this Award shall be effective only at such time that the issuance of such Shares will not violate any state or federal securities or other laws. The Company is under no obligation to effect any registration of the Shares under the Securities Act of 1933 or to effect any state registration or qualification of the Shares. The Company may, in its sole discretion, delay the delivery of the Shares or place restrictive legends on such Shares in order to ensure that the issuance of any Shares will be in compliance with federal or state securities laws and the rules of the New York Stock Exchange or any other exchange upon which the Common Stock is traded.
7.    Tax Withholding
In order to comply with all applicable federal, state, local and foreign income and payroll tax laws or regulations, the Company and its Affiliates may take such action as it deems appropriate to ensure that all applicable withholding, income or other taxes, which are the sole and absolute responsibility of Participant, are withheld or collected from Participant. Without limiting the foregoing, the Company and its Affiliates may, but are not obligated to, permit or require the satisfaction of tax withholding obligations through net Share settlement at the time of delivery of Shares (i.e. the Company or Affiliate withholds a portion of the Shares otherwise to be delivered with a Fair Market Value, as such term is defined in the Plan, equal to the amount of such taxes, but only to the extent necessary to satisfy certain statutory withholding requirements to avoid adverse accounting treatment under ASC 718) or through an open market sale of Shares otherwise to be delivered, in each case pursuant to such rules and procedures as may be established by the Company.

8.    Miscellaneous
(a)    The Agreement is issued pursuant to the Plan and is subject to its terms. The Plan is available for inspection during business hours at the principal office of the Company. In addition, the Plan may be viewed on the Fidelity Website at www.netbenefits.com (or the website of any other stock plan administrator selected by the Company in the future).
(b)    The Agreement shall not confer on Participant any right with respect to continuance of employment with the Company or any Affiliate, nor will it interfere in any way with the right of the Company or any Affiliate to terminate such employment at any time.
(c) Participant acknowledges that the grant, vesting or any payment with respect to this Award, and the sale or other taxable disposition of the Shares issued with respect to the Units hereunder may have tax consequences pursuant to the Code or under local, state or international tax laws. It is intended that the Award shall comply with Section 409A of the Code, and the provisions of the Agreement and the Plan shall be construed and administered accordingly. Any amendment or modification of the Award (to the extent permitted under the terms of the Plan), will be undertaken in a manner intended to comply with Section 409A, to the extent applicable. Notwithstanding the foregoing, there is no guaranty or assurance as to the tax treatment of the Award. Participant acknowledges that Participant is relying solely and exclusively on Participant’s own professional tax and investment advisors with respect to any and all such matters (and is not relying, in any manner, on the Company, its Affiliates, or any of their employees or representatives). Participant understands and agrees that any and all tax consequences resulting from the Award and its grant, vesting, amendment, or any payment with respect thereto, and the sale or other taxable disposition of the Shares acquired pursuant to the Award, is solely and exclusively the responsibility of Participant without any expectation or understanding that the Company, its Affiliates, or any of their employees or representatives will pay or reimburse Participant for such taxes or other items.
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(d)    Participant acknowledges and agrees that all amounts payable under the Award are subject to the terms of any applicable clawback or recoupment policy, as in effect from time to time, whether approved before or after the effective date of this Agreement and, to the extent permitted by applicable law, including without limitation Section 409A of the Code, all amounts payable under the Award are subject to offset in the event that Participant has an outstanding clawback, recoupment or forfeiture obligation to the Company under the terms of any such policy. In the event of a clawback, recoupment or forfeiture event under any such policy, the amount required to be clawed back, recouped or forfeited pursuant to such policy shall be deemed not to have been earned under the terms of the Award, and the Company shall be entitled to recover from the Participant the amount specified under the policy to be clawed back, recouped or forfeited.
9.    Venue; Governing Law
The validity, construction and effect of the Award shall be determined in accordance with the laws of the State of Delaware. Any claim or action brought with respect to this Award shall be brought in a federal or state court located in Minneapolis, Minnesota.
10.    Definitions
For purposes of the Agreement, the following terms shall have the definitions as set forth below:
(a)    “Change in Control” shall have the meaning ascribed to it in the Plan, but only if the event or circumstances constituting such change in control also constitute a change in ownership or effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A of the Code.
(b)    “Disability” means leaving active employment and qualifying for and receiving disability benefits under the Company’s long-term disability programs as in effect from time to time.
(c) “Qualifying Severance” means Participant’s Separation From Service at least six months from the Grant Date pursuant to which the Participant is entitled (or would be entitled if he or she were a U.S. employee performing services in the U.S. for an eligible employer) to severance benefits under the U.S. Bank Severance Pay Program; provided, however, that if the Separation From Service occurs immediately following a leave of absence, the Separation From Service shall constitute a Qualifying Severance only if the leave of absence ends within six months of its commencement.
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(d)    “Qualifying Termination” means:
(i)    Participant’s Separation From Service as a result of the Company’s termination of Participant’s employment for any reason other than Cause within 12 months following a Change in Control; or
(ii)    Participant’s Separation From Service as a result of Disability within 12 months following a Change in Control; or
(iii)    Participant’s Separation From Service (other than as a result of Participant’s termination of employment by the Company for Cause) within 12 months following a Change in Control, if, at the time of such Separation From Service, Participant is age 55 or older and has had 10 or more years of employment with the Company or its Affiliates following such Participant’s most recent date of hire by the Company or its Affiliates.
For purposes of this definition, the term Company shall be deemed to include any Person that has assumed this Award (or provided a substitute award to Participant) in connection with a Change in Control.
(e)    “Retirement” means a Separation From Service (other than for Cause) by a Participant who is age 55 or older and has had 10 or more years of employment with the Company or its Affiliates following such Participant’s most recent date of hire by the Company or its Affiliates.
(f)     “Separation From Service” means a Participant’s separation from service with the Company and its affiliates, as determined under Treasury Regulation section 1.409A-1(h)(1), provided, that the term “affiliate” shall mean a business entity which is affiliated in ownership with the Company and that is treated as a single employer under the rules of section 414(b) and (c) of the Code (applying the eighty percent common ownership standard).
(f)    “Specified Employee” shall mean any Participant who is a specified employee for purposes of section 1.409A-1(i) of the U.S. Treasury Regulations, determined in accordance with the rules set forth in the separate document entitled “U.S. Bank Specified Employee Determination.”
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EXHIBIT A TO
PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT
This Exhibit A to the Performance Restricted Stock Unit Award Agreement sets forth the manner in which the Final Award Number will be determined for each Participant.
Definitions
Capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan, and the Performance Restricted Stock Unit Award Agreement. The following terms used in the text of this Exhibit A and in the ROE Performance Matrix shall have the meanings set forth below:
“Company ROE Maximum” means ____%.
“Company ROE Minimum” means ____%.
“Company ROE Result” means the ROE achieved by the Company during the Performance Period.
“Company ROE Target” means ____%.
“Determination Date” means the date on which the Final Award Number is determined, which date shall not be later than 45 days after the last day of the Performance Period.
“Final Award Number” means the “Final Award Number” determined in accordance with this Exhibit A.
“Peer Group Companies” means the following companies: ____.

“Peer Group ROE Ranking Maximum” means the ____ percentile.
“Peer Group ROE Ranking Minimum” means the ____ percentile.
“Peer Group ROE Ranking Target” means the ____ percentile.
“Peer Group ROE” means the ROE achieved by the Peer Group Companies during the Performance Period.
“Peer Group ROE Ranking” means the percentile rank of the Company ROE Result relative to Peer Group ROE.
“Performance Period” means the three-year period commencing on January 1, 20____ and ending December 31, 20____; provided, that performance shall be measured annually during the Performance Period.
“ROE” means the adjusted return on equity determined based on (a) net income applicable to the common shareholders of the company during the Performance Period, adjusted by: (i) deducting the provision for credit losses determined under the Current Expected Credit Losses (CECL) methodology net of the effective tax for the Performance Period, and (ii) adding net charge-offs net of the effective tax for the Performance Period, the sum of which is divided by (b) that company’s average common shareholders’ equity during the Performance Period.
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“ROE Performance Matrix” means the ROE Performance Matrix set forth in this Exhibit A.
“Scheduled Vesting Date” means ____, 20____.
“Target Award Number” means the “Target Award Number” set forth in a Participant’s Performance Restricted Stock Unit Award Agreement.
“Target Award Number Percentage” means the “Target Award Number Percentage” determined in accordance with the ROE Performance Matrix and the related rules set forth in this Exhibit A.
Determination of Final Award Number
Each Participant has been granted a number of Units equal to the Target Award Number. The Target Award Number will be adjusted upward or downward depending on (a) whether the Company ROE Result is greater or less than the Company ROE Target, and (b) the Peer Group ROE Ranking. The Committee shall measure performance with respect to these performance goals following each calendar year during the Performance Period by calculating the Target Award Number Percentage for the year in accordance with the ROE Performance Matrix and related rules below. At the end of the Performance Period, the Target Award Number Percentage for each of the three years in the Performance Period will be averaged, and the Final Award Number for each Participant will be determined by multiplying (i) the average of the three Target Award Number Percentages by (ii) the Target Award Number.
ROE PERFORMANCE MATRIX
Company
ROE
Result
(Vertical Axis)
 Target Award Number Percentage
Company ROE Maximum (____%) or more
 75% 125% 150%
 
Company ROE Target (____%) 
 50% 100% 125%
 
Company ROE Minimum (____%) or less (but greater than zero)
 25% 50% 75%
Company ROE is 0% or less 0% 0% 0%
Peer Group ROE Ranking Minimum
or below		 Peer Group
ROE
Ranking
Target		 Peer Group
ROE Ranking Maximum
or above
Peer Group ROE Ranking
(Horizontal Axis)
In determining the Target Award Number Percentage in accordance with the ROE Performance Matrix, the following rules will apply:
•If the Company ROE Result is greater than the Company ROE Minimum and less than the Company ROE Target, the Target Award Number Percentage on the vertical axis will be determined by interpolation of the Company ROE Result between the Company ROE Minimum and the Company ROE Target.
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•If the Company ROE Result is greater than the Company ROE Target and less than the Company ROE Maximum, the Target Award Number Percentage on the vertical axis will be determined by interpolation of the Company ROE Result between the Company ROE Target and the Company ROE Maximum.
•If the Peer Group ROE Ranking is greater than the Peer Group ROE Ranking Minimum and less than the Peer Group ROE Ranking Target, the Target Award Number Percentage on the horizontal axis will be determined by interpolation of the Peer Group ROE Ranking between the Peer Group ROE Minimum and the Peer Group ROE Target.
•If the Peer Group ROE Ranking is greater than the Peer ROE Group Ranking Target and less than the Peer Group ROE Ranking Maximum, the Target Award Number Percentage on the horizontal axis will be determined by interpolation of the Peer Group ROE Ranking between the Peer Group ROE Target and the Peer Group ROE Maximum.
•After the Target Award Number Percentage on each of the vertical axis and horizontal axis has been determined, the actual Target Award Number Percentage will be determined by interpolation of the data points (i.e., the percentages) set forth in the ROE Performance Matrix.
•In no event shall the Target Award Number Percentage be greater than 150.0%.
The Final Award Number for each Participant shall be determined by the Committee on the Determination Date.
Committee Determinations
The Committee shall make all determinations necessary to arrive at the Final Award Number for each Participant. The Committee shall determine the Company ROE Result by reference to the Company’s audited financial statements as of and for each calendar year during the Performance Period. The Committee shall determine the Peer Group ROE Ranking by reference to publicly available financial information regarding the Peer Companies for each calendar year during the Performance Period. The Committee may adjust ROE during each calendar year during the Performance Period to exclude the impact of any of the following events or occurrences which the Committee determines should appropriately be excluded: (a) asset write-downs and discontinued operations; (b) litigation, claims, judgments or settlements; (c) the effect of changes in tax law or other such laws or regulations affecting reported results; (d) acquisitions, mergers or restructuring costs; (e) any change in applicable accounting rules or principles or the Company’s method of accounting; and (f) any other extraordinary or unusual items or events applied on a consistent basis. The Committee also may adjust the Peer Group Companies to account for members that cease to be a public company during the Performance Period (whether by merger, consolidation, liquidation or otherwise) and include additional companies consistent with previously approved methodology for selecting Peer Group Companies. Any determination by the Committee pursuant to this Exhibit A will be binding upon each Participant and the Company.
No Fractional Units
In the event the Final Award Number is a number of Units that is not a whole number, then the Final Award Number shall be rounded down to the nearest whole number.
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EX-10.31 4 ex-1031formofrestrictedsto.htm EX-10.31 Document

Exhibit 10.31

U.S. BANCORP
RESTRICTED STOCK UNIT AWARD AGREEMENT

THIS AGREEMENT is made as of <Grant Date> (the “Grant Date”) by and between U.S. Bancorp (the “Company”) and <Participant Name> (the “Participant”). This Agreement (the “Agreement”) sets forth the terms and conditions of a restricted stock unit award representing the right to receive <Number of Awards Granted> shares of common stock of the Company, par value $0.01 per share (the “Common Stock”). The grant of this restricted stock unit award is made pursuant to the Company’s 2015 Stock Incentive Plan, which was approved by shareholders on April 21, 2015 (as has been and may be further amended, the “Plan”) and is subject to its terms. Capitalized terms that are not defined in the Agreement shall have the meaning ascribed to such terms in the Plan.
The Company and Participant agree as follows:
1.Award
Subject to the terms and conditions of the Plan and the Agreement, the Company grants to Participant a restricted stock unit award (the “Units”) entitling the Participant to <Number of Awards Granted> restricted stock units. Each Unit represents the right to receive one share of Common Stock, subject to the vesting requirements and distribution provisions of the Agreement and the terms of the Plan. The shares of Common Stock distributable to Participant with respect to the Units granted hereunder are referred to as the “Shares.”

2.    Vesting; Forfeiture
(a)    Subject to Sections 2(b) and 2(c), the Units shall vest pursuant to the following rules:
(i)    Time-Based Vesting Conditions. Except as otherwise provided in subsections (ii) through (v) below, the Units shall vest in installments on the date or dates set forth in the vesting schedule (the “Vesting Schedule”) detailed at the end of this Agreement in the Appendix: Vesting Schedule (the “Scheduled Vesting Date”) and will be settled in accordance with Section 3(a).
(ii)    Continued Vesting Upon Separation From Service Due to Retirement or Disability. If Participant remains continuously employed by the Company or an Affiliate of the Company through the date of his or her Separation From Service (as defined in Section 10) with the Company or the Affiliate by reason of Retirement (as defined in Section 10) or Disability (as defined in Section 10) prior to the Scheduled Vesting Date, the Units shall continue to vest on the remaining Scheduled Vesting Dates and will be settled in accordance with Section 3(a).
(iii) Acceleration of Vesting upon Death. If, prior to the Scheduled Vesting Date, Participant (A) ceases to be an employee by reason of death while in the employ of the Company or any Affiliate, or (B) dies after a Separation From Service by reason of Retirement or Disability, then the Units will become vested as of the date of death and will be settled in accordance with Section 3(c).


(iv)    Acceleration of Vesting Upon Qualifying Termination. If Participant has been continuously employed by the Company or any Affiliate until the date such Participant experiences a Qualifying Termination (as defined in Section 10) that occurs prior to a Scheduled Vesting Date, then, immediately upon such Qualifying Termination, the Units shall become vested and will be settled in accordance with Section 3(b).
(v)    Continued Vesting Upon Qualifying Severance. If Participant has been continuously employed by the Company or any Affiliate from the Grant Date until the date of a Qualifying Severance (as defined in Section 10), then the Units that are not vested at the time of the Qualifying Severance and that would vest under subsection (i) if Participant remained continuously employed through solely the second anniversary of the Qualifying Severance, shall continue to vest on the remaining Scheduled Vesting Dates that are on or before the second anniversary of the Qualifying Severance. Units vested in accordance with this subsection (v) will be settled in accordance with Section 3(a).
Except as provided above in this Section 2(a), if Participant’s employment with the Company or an Affiliate terminates, any Units that have not vested at the time of the termination shall be immediately and irrevocably forfeited.
(b)    Forfeiture if Violation of any Restrictive Covenant Agreement. Notwithstanding any other provision of this Agreement, Units that have not become vested previously may also be forfeited if Participant has not complied with the terms of any confidentiality, non-solicitation, or other restrictive covenant agreement between the Company or an Affiliate and the Participant at all times since the Grant Date.
(c)    Special Risk-Related Cancellation Provisions. Notwithstanding any other provision of the Agreement, if at any time subsequent to the Grant Date the Committee determines, in its sole discretion, that Participant has subjected the Company to significant financial, reputational, or other risk by (i) failing to comply with Company policies and procedures, including the Code of Ethics and Business Conduct, (ii) violating any law or regulation, (iii) engaging in negligence or willful misconduct, or (iv) engaging in activity resulting in a significant or material control deficiency under the Sarbanes-Oxley Act of 2002, then all or part of the Units granted under the Agreement that have not been settled (and Shares delivered) at the time of such determination may be cancelled. If any Units are cancelled pursuant to this provision, Participant will have no rights with respect to the Units (including, without limitation, any rights to receive a distribution of Shares with respect to the Units and the right to receive Dividend Equivalents).
3.    Distribution of Shares with Respect to Units
Following the vesting of Units and following the payment of any applicable withholding taxes pursuant to Section 7 hereof, the Company shall cause to be issued and delivered to Participant (including through book entry) Shares registered in the name of Participant or in the name of Participant’s legal representatives, beneficiaries or heirs, as the case may be, as follows:
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(a)    Distributions on Scheduled Vesting Dates (Including for Retirement, Disability, and Qualifying Severance). As soon as administratively feasible following each Scheduled Vesting Date (but in no event later than December 31st of the year in which such Scheduled Vesting Date occurs), all Shares issuable pursuant to Units that become vested pursuant to subsections (i), (ii), and (v) of Section 2(a) (and with respect to which Shares have not been distributed previously) shall be distributed to Participant.
(b)    Qualifying Termination Distributions. As soon as administratively feasible following a Separation From Service in connection with a Qualifying Termination (and in any case no later than 60 days following such Separation From Service except as otherwise provided in this Section 3(b)), all Shares issuable pursuant to Units that become vested as a result of such Qualifying Termination (and with respect to which Shares have not been distributed previously) shall be distributed to Participant. Notwithstanding the foregoing, any Shares issuable to a Specified Employee (as defined in Section 10) as a result of a Separation From Service in connection with a Qualifying Termination will not be delivered to such Specified Employee until the date that is six months and one day after the date of the Separation From Service. If in connection with a Change in Control the Units are adjusted, or units in the acquiring or surviving entity are substituted for the Units, or the Plan is terminated, in each case as permitted under the Plan and in accordance with Section 409A, then the terms of such adjustment, substitution or plan termination will govern the treatment of the Units, including the time and manner of settlement of the Units.
(c)    Distributions Following Death. As soon as administratively feasible following the death of a Participant (but in no event later than December 31 of the first calendar year following the calendar year in which the death occurred) all Shares issuable pursuant to Units that become vested pursuant to Section 2(a)(iii) (and with respect to which Shares have not been distributed previously) shall be distributed to the representatives of Participant or to any Person to whom the Units have been transferred by will or the applicable laws of descent and distribution.
In the event that the number of Shares distributable pursuant to this Section 3 is a number that is not a whole number, then the number of Shares distributed shall be rounded down to the nearest whole number.
4.    Rights as Shareholder; Dividend Equivalents
Prior to the distribution of Shares with respect to Units pursuant to Section 3 above, Participant shall not have ownership or rights of ownership of any Shares underlying the Units; provided, however, that Participant shall be entitled to receive cash Dividend Equivalents on outstanding Units (i.e. Units that have not been forfeited, cancelled or settled), whether vested or unvested, if cash dividends on the Common Stock are declared by the Board on or after the Grant Date. Such Dividend Equivalents will be in an amount of cash per Unit equal to the cash dividend paid with respect to a share of outstanding Common Stock.
-3-


The Dividend Equivalents shall be treated as earnings on, and as a separate amount from, the Units for purposes of Section 409A of the Code and will be paid out as soon as administratively feasible following the Common Stock dividend payable date, but in no event later than December 31st of the year in which the payable date is declared. Dividend Equivalents paid with respect to dividends declared before the delivery of the Shares underlying the Units will be treated as compensation income for tax purposes and will be subject to income and payroll tax withholding by the Company.

5.    Restriction on Transfer
Except for transfers by will or the applicable laws of descent and distribution, the Units cannot be sold, assigned, transferred, gifted, pledged, or in any manner encumbered, alienated, attached or disposed of, and any purported sale, assignment, transfer, gift, pledge, alienation, attachment or encumbrance shall be void and unenforceable against the Company and its Affiliates. No such attempt to transfer the Units, whether voluntary or involuntary, by operation of law or otherwise (except by will or laws of descent and distribution), shall vest the purported transferee with any interest or right in or with respect to the Units or the Shares issuable with respect to the Units.
6.    Securities Law Compliance
The delivery of all or any of the Shares in accordance with this Award shall be effective only at such time that the issuance of such Shares will not violate any state or federal securities or other laws. The Company is under no obligation to effect any registration of the Shares under the Securities Act of 1933 or to effect any state registration or qualification of the Shares. The Company may, in its sole discretion, delay the delivery of the Shares or place restrictive legends on such Shares in order to ensure that the issuance of any Shares will be in compliance with federal or state securities laws and the rules of the New York Stock Exchange or any other exchange upon which the Common Stock is traded.
7.    Tax Withholding
In order to comply with all applicable federal, state, local and foreign income and payroll tax laws or regulations, the Company and its Affiliates may take such action as it deems appropriate to ensure that all applicable withholding, income or other taxes, which are the sole and absolute responsibility of Participant, are withheld or collected from Participant. Without limiting the foregoing, the Company and its Affiliates may, but are not obligated to, permit or require the satisfaction of tax withholding obligations through net Share settlement at the time of delivery of Shares (i.e. the Company or the Affiliate withholds a portion of the Shares otherwise to be delivered with a Fair Market Value, as such term is defined in the Plan, equal to the amount of such taxes, but only to the extent necessary to satisfy certain statutory withholding requirements to avoid adverse accounting treatment under ASC 718) or through an open market sale of Shares otherwise to be delivered, in each case pursuant to such rules and procedures as may be established by the Company.

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8.    Miscellaneous
(a)    The Agreement is issued pursuant to the Plan and is subject to its terms. The Plan is available for inspection during business hours at the principal office of the Company. In addition, the Plan may be viewed on the Fidelity Website at www.netbenefits.com (or the website of any other stock plan administrator selected by the Company in the future).
(b)    The Agreement shall not confer on Participant any right with respect to continuance of employment with the Company or any Affiliate, nor will it interfere in any way with the right of the Company or any Affiliate to terminate such employment at any time.
(c)    Participant acknowledges that the grant, vesting or any payment with respect to this Award, and the sale or other taxable disposition of the Shares issued with respect to the Units hereunder may have tax consequences pursuant to the Code or under local, state or international tax laws. It is intended that the Award shall comply with Section 409A of the Code, and the provisions of the Agreement and the Plan shall be construed and administered accordingly. Any amendment or modification of the Award (to the extent permitted under the terms of the Plan), will be undertaken in a manner intended to comply with Section 409A, to the extent applicable. Notwithstanding the foregoing, there is no guaranty or assurance as to the tax treatment of the Award. Participant acknowledges that Participant is relying solely and exclusively on Participant’s own professional tax and investment advisors with respect to any and all such matters (and is not relying, in any manner, on the Company, its Affiliates, or any of their employees or representatives). Participant understands and agrees that any and all tax consequences resulting from the Award and its grant, vesting, amendment, or any payment with respect thereto, and the sale or other taxable disposition of the Shares acquired pursuant to the Award, is solely and exclusively the responsibility of Participant without any expectation or understanding that the Company, its Affiliates, or any of their employees or representatives will pay or reimburse Participant for such taxes or other items.
(d)    Participant acknowledges and agrees that all amounts payable under the Award are subject to the terms of any applicable clawback or recoupment policy, as in effect from time to time, whether approved before or after the effective date of this Agreement and, to the extent permitted by applicable law, including without limitation Section 409A of the Code, all amounts payable under the Award are subject to offset in the event that Participant has an outstanding clawback, recoupment or forfeiture obligation to the Company under the terms of any such policy. In the event of a clawback, recoupment or forfeiture event under any such policy, the amount required to be clawed back, recouped or forfeited pursuant to such policy shall be deemed not to have been earned under the terms of the Award, and the Company shall be entitled to recover from the Participant the amount specified under the policy to be clawed back, recouped or forfeited.
9.    Venue; Governing Law
The validity, construction and effect of the Award shall be determined in accordance with the laws of the State of Delaware. Any claim or action brought with respect to this Award shall be brought in a federal or state court located in Minneapolis, Minnesota.
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10.    Definitions
For purposes of the Agreement, the following terms shall have the definitions as set forth below:
(a)    “Change in Control” shall have the meaning ascribed to it in the Plan, but only if the event or circumstances constituting such change in control also constitute a change in ownership or effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A of the Code.
(b)    “Disability” means leaving active employment and qualifying for and receiving disability benefits under the Company’s long-term disability programs as in effect from time to time.
(c)    “Qualifying Severance” means Participant’s Separation From Service at least six months from the Grant Date pursuant to which the Participant is entitled (or would be entitled if he or she were a U.S. employee performing services in the U.S. for an eligible employer) to severance benefits under the U.S. Bank Severance Pay Program; provided, however, that if the Separation From Service occurs immediately following a leave of absence, the Separation From Service shall constitute a Qualifying Severance only if the leave of absence ends within six months of its commencement.
(d)    “Qualifying Termination” means:
(i)    Participant’s Separation From Service as a result of the Company’s termination of Participant’s employment for any reason other than Cause within 12 months following a Change in Control;
(ii)    Participant’s Separation From Service as a result of Disability within 12 months following a Change in Control; or
(iii)    Participant’s Separation From Service (other than as a result of Participant’s termination of employment by the Company for Cause) within 12 months following a Change in Control, if, at the time of such Separation From Service, Participant is age 55 or older and has had 10 or more years of employment with the Company or its Affiliates following such Participant’s most recent date of hire by the Company or its Affiliates.
For purposes of this definition, the term Company shall be deemed to include any Person that has assumed this Award (or provided a substitute award to Participant) in connection with a Change in Control.
(e)    “Retirement” means a Separation From Service (other than for Cause) by a Participant who is age 55 or older and has had 10 or more years of employment with the Company or its Affiliates following such Participant’s most recent date of hire by the Company or its Affiliates.
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(f)     “Separation From Service” means a Participant’s separation from service with the Company and its affiliates, as determined under Treasury Regulation section 1.409A-1(h)(1), provided, that the term “affiliate” shall mean a business entity which is affiliated in ownership with the Company and that is treated as a single employer under the rules of section 414(b) and (c) of the Code (applying the eighty percent common ownership standard).
(g)    “Specified Employee” shall mean any Participant who is a specified employee for purposes of section 1.409A-1(i) of the U.S. Treasury Regulations, determined in accordance with the rules set forth in the separate document entitled “U.S. Bank Specified Employee Determination.”
Appendix
Vesting Schedule

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Exhibit 13
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;
•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 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;
•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 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.
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.
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.

22 U.S. Bancorp 2023 Annual Report

TABLE 1 Selected Financial Data
Year Ended December 31
(Dollars and Shares in Millions, Except Per Share Data)
 2023 2022 2021
Condensed Income Statement
Net interest income $ 17,396  $ 14,728  $ 12,494 
Taxable-equivalent adjustment(a)
 131  118  106 
Net interest income (taxable-equivalent basis)(b)
 17,527  14,846  12,600 
Noninterest income 10,617  9,456  10,227 
Total net revenue 28,144  24,302  22,827 
Noninterest expense 18,873  14,906  13,728 
Provision for credit losses 2,275  1,977  (1,173)
Income before taxes 6,996  7,419  10,272 
Income taxes and taxable-equivalent adjustment 1,538  1,581  2,287 
Net income 5,458  5,838  7,985 
Net (income) loss attributable to noncontrolling interests (29) (13) (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 $ 3.27  $ 3.69  $ 5.11 
Diluted earnings per share 3.27  3.69  5.10 
Dividends declared per share 1.93  1.88  1.76 
Book value per share(c)
 31.13  28.71  32.71 
Market value per share 43.28  43.61  56.17 
Average common shares outstanding 1,543  1,489  1,489 
Average diluted common shares outstanding 1,543  1,490  1,490 
Financial Ratios
Return on average assets .82  % .98  % 1.43  %
Return on average common equity 10.8  12.6  16.0 
Net interest margin (taxable-equivalent basis)(a)
 2.90  2.72  2.49 
Efficiency ratio(b)
 66.7  61.4  60.4 
Net charge-offs as a percent of average loans outstanding .50  .32  .23 
Average Balances
Loans $ 381,275  $ 333,573  $ 296,965 
Loans held for sale 2,461  3,829  8,024 
Investment securities(d)
 162,757  169,442  154,702 
Earning assets 605,199  545,343  506,141 
Assets 663,440  592,149  556,532 
Noninterest-bearing deposits 107,768  120,394  127,204 
Deposits 505,663  462,384  434,281 
Short-term borrowings 34,141  25,740  14,774 
Long-term debt 44,142  33,114  36,682 
Total U.S. Bancorp shareholders’ equity 53,660  50,416  53,810 
Period End Balances
Loans $ 373,835  $ 388,213  $ 312,028 
Investment securities 153,751  161,650  174,821 
Assets 663,491  674,805  573,284 
Deposits 512,312  524,976  456,083 
Long-term debt 51,480  39,829  32,125 
Total U.S. Bancorp shareholders’ equity 55,306  50,766  54,918 
Asset Quality
Nonperforming assets $ 1,494  $ 1,016  $ 878 
Allowance for credit losses 7,839  7,404  6,155 
Allowance for credit losses as a percentage of period-end loans 2.10  % 1.91  % 1.97  %
Capital Ratios
Common equity tier 1 capital 9.9  % 8.4  % 10.0  %
Tier 1 capital 11.5  9.8  11.6 
Total risk-based capital 13.7  11.9  13.4 
Leverage 8.1  7.9  8.6 
Total leverage exposure 6.6  6.4  6.9 
Tangible common equity to tangible assets(b)
 5.3  4.5  6.8 
Tangible common equity to risk-weighted assets(b)
 7.7  6.0  9.2 
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology(b)
 9.7  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) 2023 2022 2021 2023
v 2022		 2022
v 2021
Components of Net Interest Income
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 $ 17,396  $ 14,728  $ 12,494  $ 2,668  $ 2,234 
Average Yields and Rates Paid
Earning assets yield (taxable-equivalent basis) 4.98  % 3.31  % 2.69  % 1.67  % .62  %
Rate paid on interest-bearing liabilities (taxable-equivalent basis) 2.65  .80  .28  1.85  .52 
Gross interest margin (taxable-equivalent basis) 2.33  % 2.51  % 2.41  % (.18) % .10  %
Net interest margin (taxable-equivalent basis) 2.90  % 2.72  % 2.49  % .18  % .23  %
Average Balances
Investment securities(c)
 $ 162,757  $ 169,442  $ 154,702  $ (6,685) $ 14,740 
Loans 381,275  333,573  296,965  47,702  36,608 
Earning assets 605,199  545,343  506,141  59,856  39,202 
Noninterest-bearing deposits 107,768  120,394  127,204  (12,626) (6,810)
Interest-bearing deposits 397,895  341,990  307,077  55,905  34,913 
Total deposits 505,663  462,384  434,281  43,279  28,103 
Interest-bearing liabilities 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)
2023 v 2022 2022 v 2021
Year Ended December 31 (Dollars in Millions) Volume Yield/Rate Total Volume Yield/Rate Total
Increase (decrease) in
Interest Income
Investment securities $ (136) $ 1,245  $ 1,109  $ 231  $ 792  $ 1,023 
Loans held for sale (72) 18  (54) (121) 90  (31)
Loans
Commercial 389  3,933  4,322  547  1,109  1,656 
Commercial real estate 546  1,183  1,729  73  363  436 
Residential mortgages 1,019  511  1,530  336  (38) 298 
Credit card 340  506  846  193  112  305 
Other retail (424) 731  307  50  116  166 
Total loans 1,870  6,864  8,734  1,199  1,662  2,861 
Interest-bearing deposits with banks 313  1,709  2,022  (8) 525  517 
Other earning assets 76  191  267  8  95  103 
Total earning assets 2,051  10,027  12,078  1,309  3,164  4,473 
Interest Expense
Interest-bearing deposits
Interest checking 28  1,029  1,057  3  250  253 
Money market savings 388  4,046  4,434  16  1,005  1,021 
Savings accounts (2) 82  80  1  2  3 
Time deposits 192  1,140  1,332  23  252  275 
Total interest-bearing deposits 606  6,297  6,903  43  1,509  1,552 
Short-term borrowings 186  1,223  1,409  52  446  498 
Long-term debt 259  826  1,085  (59) 236  177 
Total interest-bearing liabilities 1,051  8,346  9,397  36  2,191  2,227 
Increase (decrease) in net interest income $ 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) 2023 2022 2021 2023
v 2022		 2022
v 2021
Card revenue $ 1,630  $ 1,512  $ 1,507  7.8  % .3  %
Corporate payment products revenue 759  698  575  8.7  21.4 
Merchant processing services 1,659  1,579  1,449  5.1  9.0 
Trust and investment management fees 2,459  2,209  1,832  11.3  20.6 
Service charges 1,306  1,298  1,338  .6  (3.0)
Commercial products revenue 1,372  1,105  1,102  24.2  .3 
Mortgage banking revenue 540  527  1,361  2.5  (61.3)
Investment products fees 279  235  239  18.7  (1.7)
Securities gains (losses), net (145) 20  103  * (80.6)
Other 758  273  721  * (62.1)
Total noninterest income $ 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
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.
TABLE 5   Noninterest Expense
Year Ended December 31 (Dollars in Millions) 2023 2022 2021 2023
v 2022		 2022
v 2021
Compensation and employee benefits $ 10,416  $ 9,157  $ 8,728  13.7  % 4.9  %
Net occupancy and equipment 1,266  1,096  1,048  15.5  4.6 
Professional services 560  529  492  5.9  7.5 
Marketing and business development 726  456  366  59.2  24.6 
Technology and communications 2,049  1,726  1,728  18.7  (.1)
Other intangibles 636  215  159  * 35.2 
Other 2,211  1,398  1,207  58.2  15.8 
Total before merger and integration charges 17,864  14,577  13,728  22.5  6.2 
Merger and integration charges 1,009  329  —  * *
Total noninterest expense $ 18,873  $ 14,906  $ 13,728  26.6  % 8.6  %
Efficiency ratio(a)
 66.7  % 61.4  % 60.4  %
*Not meaningful
(a)See Non-GAAP Financial Measures beginning on page 59.

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
2023 2022
At December 31 (Dollars in Millions) Amount Percent
of Total		 Amount Percent
of Total
Commercial
Commercial $ 127,676  34.2  % $ 131,128  33.8  %
Lease financing 4,205  1.1  4,562  1.2 
Total commercial 131,881  35.3  135,690  35.0 
Commercial Real Estate
Commercial mortgages 41,934  11.2  43,765  11.3 
Construction and development 11,521  3.1  11,722  3.0 
Total commercial real estate 53,455  14.3  55,487  14.3 
Residential Mortgages
Residential mortgages 108,605  29.0  107,858  27.8 
Home equity loans, first liens 6,925  1.9  7,987  2.0 
Total residential mortgages 115,530  30.9  115,845  29.8 
Credit Card 28,560  7.6  26,295  6.8 
Other Retail
Retail leasing 4,135  1.1  5,519  1.4 
Home equity and second mortgages 13,056  3.5  12,863  3.3 
Revolving credit 3,668  1.0  3,983  1.0 
Installment 13,889  3.7  14,592  3.8 
Automobile 9,661  2.6  17,939  4.6 
Total other retail 44,409  11.9  54,896  14.1 
Total loans $ 373,835  100.0  % $ 388,213  100.0  %
TABLE 7 Selected Loan Maturity Distribution
At December 31, 2023 (Dollars in Millions) One Year
or Less		 Over One
Through
Five Years		 Over Five
Through
Fifteen Years		 Over Fifteen
Years		 Total
Commercial $ 37,097  $ 85,548  $ 9,055  $ 181  $ 131,881 
Commercial real estate 14,724  23,149  6,870  8,712 
(a)
53,455 
Residential mortgages 182  2,125  6,572  106,651  115,530 
Credit card 28,560  —  —  —  28,560 
Other retail 2,367  12,561  13,342  16,139  44,409 
Total loans $ 82,930  $ 123,383  $ 35,839  $ 131,683  $ 373,835 
Total of loans due after one year with:
Predetermined
Interest Rates
Floating
Interest Rates
Commercial $ 13,786  $ 80,998 
Commercial real estate 12,585  26,147 
Residential mortgages 63,080  52,267 
Credit card —  — 
Other retail 29,359  12,683 
Total $ 118,810  $ 172,095 
(a)Primarily represents construction loans for single-family residences or loans guaranteed by the Small Business Administration.

29

TABLE 8 Commercial Loans by Industry Group and Geography
2023 2022
At December 31 (Dollars in Millions) Loans Percent
of Total		 Loans Percent
of Total
Industry Group
Financial institutions $ 20,016  15.2  % $ 17,381  12.8  %
Real-estate related 19,108  14.5  19,539  14.4 
Personal, professional and commercial services 10,273  7.8  10,106  7.5 
Healthcare 8,240  6.2  8,536  6.3 
Automotive 6,678  5.1  7,154  5.3 
Media and entertainment 6,265  4.8  5,867  4.3 
Capital goods 5,315  4.0  5,332  3.9 
Retail 4,970  3.8  5,128  3.8 
Transportation 4,467  3.4  4,988  3.7 
Food and beverage 4,053  3.1  5,574  4.1 
Technology 3,963  3.0  5,425  4.0 
Energy 3,744  2.8  3,811  2.8 
Power 3,435  2.6  4,945  3.6 
Metals and mining 3,332  2.5  3,700  2.7 
Education and non-profit 3,330  2.5  3,609  2.7 
State and municipal government 3,217  2.4  3,240  2.4 
Building materials 3,008  2.3  3,293  2.4 
Agriculture 1,778  1.3  1,909  1.4 
Other 16,689  12.7  16,153  11.9 
Total $ 131,881  100.0  % $ 135,690  100.0  %
Geography
California $ 21,275  16.1  % $ 23,736  17.5  %
New York 9,393  7.1  8,989  6.6 
Texas 9,092  6.9  10,244  7.6 
Illinois 6,861  5.2  7,626  5.6 
Minnesota 6,365  4.8  6,707  4.9 
Ohio 4,291  3.3  4,497  3.3 
Wisconsin 4,129  3.1  4,112  3.0 
Colorado 3,675  2.8  3,613  2.7 
Washington 3,604  2.7  3,721  2.7 
Missouri 3,454  2.6  3,503  2.6 
All other states 59,742  45.4  58,942  43.5 
Total $ 131,881  100.0  % $ 135,690  100.0  %
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
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
2023 2022
At December 31 (Dollars in Millions) Loans Percent
of Total		 Loans Percent
of Total
Property Type
Multi-family $ 17,786  33.3  % $ 16,722  30.1  %
Business owner occupied 10,795  20.2  11,487  20.7 
Office 6,948  13.0  7,239  13.1 
Industrial 5,608  10.5  5,258  9.5 
Residential land and development 4,419  8.3  4,454  8.0 
Retail 3,806  7.1  4,011  7.2 
Lodging 1,661  3.1  1,932  3.5 
Other 2,432  4.5  4,384  7.9 
Total $ 53,455  100.0  % $ 55,487  100.0  %
Geography
California $ 20,130  37.7  % $ 22,250  40.1  %
Washington 4,245  7.9  4,235  7.6 
Texas 2,669  5.0  2,337  4.2 
Florida 1,843  3.4  1,276  2.3 
Oregon 1,809  3.4  1,622  2.9 
Illinois 1,516  2.8  1,830  3.3 
Minnesota 1,497  2.8  1,470  2.7 
Colorado 1,476  2.8  1,648  3.0 
New York 1,273  2.4  2,547  4.6 
Wisconsin 1,266  2.4  1,236  2.2 
All other states 15,731  29.4  15,036  27.1 
Total $ 53,455  100.0  % $ 55,487  100.0  %
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
$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
At December 31 (Dollars in Millions) Loans Percent
of Total		 Loans Percent
of Total
California $ 52,584  45.5  % $ 53,967  46.6  %
Washington 6,678  5.8  6,343  5.5 
Colorado 3,881  3.4  4,192  3.6 
Florida 3,767  3.3  3,946  3.4 
Illinois 3,630  3.1  3,592  3.1 
Minnesota 3,600  3.1  3,692  3.2 
Texas 3,287  2.8  2,801  2.4 
Arizona 3,134  2.7  3,178  2.7 
New York 2,726  2.4  2,315  2.0 
Massachusetts 2,680  2.3  2,536  2.2 
All other states 29,563  25.6  29,283  25.3 
Total $ 115,530  100.0  % $ 115,845  100.0  %
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.
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.
 TABLE 11 Credit Card Loans by Geography
2023 2022
At December 31 (Dollars in Millions) Loans Percent
of Total		 Loans Percent
of Total
California $ 2,928  10.3  % $ 2,609  9.9  %
Texas 1,719  6.0  1,584  6.0 
Illinois 1,472  5.2  1,330  5.1 
Ohio 1,406  4.9  1,320  5.0 
Florida 1,363  4.8  1,252  4.8 
Minnesota 1,333  4.7  1,257  4.8 
Wisconsin 1,177  4.1  1,029  3.9 
Colorado 964  3.3  862  3.3 
Michigan 948  3.3  925  3.5 
Missouri 918  3.2  850  3.2 
All other states 14,332  50.2  13,277  50.5 
Total $ 28,560  100.0  % $ 26,295  100.0  %
32 U.S. Bancorp 2023 Annual Report

TABLE 12 Other Retail Loans by Geography
2023 2022
At December 31 (Dollars in Millions) Loans Percent
of Total		 Loans Percent
of Total
California $ 9,506  21.4  % $ 11,098  20.2  %
Texas 3,505  7.9  5,149  9.4 
Florida 2,729  6.1  3,449  6.3 
Minnesota 1,943  4.4  2,527  4.6 
Washington 1,800  4.1  1,999  3.6 
Ohio 1,752  3.9  2,083  3.8 
Illinois 1,704  3.8  2,180  4.0 
New York 1,444  3.3  1,878  3.4 
Colorado 1,440  3.2  1,673  3.0 
Oregon 1,313  3.0  1,414  2.6 
All other states 17,273  38.9  21,446  39.1 
Total $ 44,409  100.0  % $ 54,896  100.0  %
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
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”).
TABLE 13 Investment Securities
2023 2022
At December 31 (Dollars in Millions) Amortized
Cost		 Fair Value Weighted-
Average
Maturity in
Years
Weighted-
Average
Yield(e)
 Amortized
Cost		 Fair Value Weighted-
Average
Maturity in
Years
Weighted-
Average
Yield(e)
Held-to-maturity
U.S. Treasury and agencies $ 1,345  $ 1,310  2.3 2.85  % $ 1,344  $ 1,293  3.3 2.85  %
Mortgage-backed securities(a)
 82,692  72,770  8.8 2.21  87,396  76,581  9.3 2.17 
Other 8  8  2.8 2.56  —  —  —  — 
Total held-to-maturity $ 84,045  $ 74,088  8.7 2.22  % $ 88,740  $ 77,874  9.2 2.18  %
Available-for-sale
U.S. Treasury and agencies $ 21,768  $ 19,542  5.9 2.19  % $ 24,801  $ 22,033  7.1 2.43  %
Mortgage-backed securities(a)
 36,895  33,427  6.3 3.09  40,803  36,423  6.6 2.83 
Asset-backed securities(a)
 6,713  6,724  2.2 5.33  4,356  4,323  1.3 4.59 
Obligations of state and political subdivisions(b)(c)
 10,867  9,989  9.9 3.75  11,484  10,125  13.6 3.76 
Other 24  24  1.7 4.51  6  6  0.1 1.99 
Total available-for-sale (d)
 $ 76,267  $ 69,706  6.3 3.12  % $ 81,450  $ 72,910  7.4 2.94  %
(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:
2023 2022
At December 31 (Dollars in Millions) Amount Percent
of Total		 Amount Percent
of Total
Noninterest-bearing deposits $ 89,989  17.6  % $ 137,743  26.2  %
Interest-bearing deposits
Interest checking 127,453  24.9  134,491  25.6 
Money market savings 199,378  38.9  148,014  28.2 
Savings accounts 43,219  8.4  71,782  13.7 
Total savings deposits 370,050  72.2  354,287  67.5 
Domestic time deposits less than $250,000 35,700  7.0  16,329  3.1 
Domestic time deposits greater than $250,000 15,336  3.0  11,999  2.3 
Foreign time deposits 1,237  .2  4,618  .9 
Total interest-bearing deposits 422,323  82.4  387,233  73.8 
Total deposits(a)
 $ 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)
Domestic Time Deposits
Greater Than $250,000
Foreign Time
Deposits
 Total
Three months or less $ 5,538  $ 1,237  $ 6,775 
Three months through six months 3,624  —  3,624 
Six months through one year 4,247  —  4,247 
Thereafter 1,927  —  1,927 
Total $ 15,336  $ 1,237  $ 16,573 
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.

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
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
36 U.S. Bancorp 2023 Annual Report

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

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.

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% $ 13,945  $ 86,758  $ 100,703  87.2  %
Over 80% through 90% 255  6,326  6,581  5.7 
Over 90% through 100% 30  1,062  1,092  .9 
Over 100% 6  370  376  .3 
No LTV available 1  10  11  — 
Loans purchased from GNMA mortgage pools(a)
 —  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.
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% $ 10,406  $ 1,904  $ 12,310  94.3  %
Over 80% through 90% 492  103  595  4.5 
Over 90% through 100% 70  16  86  .7 
Over 100% 32  4  36  .3 
No LTV/CLTV available 29  —  29  .2 
Total $ 11,029  $ 2,027  $ 13,056  100.0  %
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
(Dollars in Millions) Company Owned
or Serviced
First Lien 		Third Party
First Lien 		Total
Total $ 3,108  $ 7,351  $ 10,459 
Percent 30 - 89 days past due .38  % .58  % .52  %
Percent 90 days or more past due .05  % .08  % .07  %
Weighted-average CLTV 70  % 68  % 69  %
Weighted-average credit score 784 785 785
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.
The following table provides a summary of the Company’s credit card loan balances disaggregated based upon updated credit score at December 31, 2023:
Percent
of Total(a)
Credit score > 660 86  %
Credit score < 660 14 
No credit score — 
(a)Credit score distribution excludes loans serviced by others.

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TABLE 15 Delinquent Loan Ratios as a Percent of Ending Loan Balances
At December 31
90 days or more past due
 2023 2022
Commercial
Commercial .09  % .07  %
Lease financing —  — 
Total commercial .09  .07 
Commercial Real Estate
Commercial mortgages —  — 
Construction and development .03  .03 
Total commercial real estate .01  .01 
Residential Mortgages(a)
 .12  .08 
Credit Card 1.31  .88 
Other Retail
Retail leasing .05  .04 
Home equity and second mortgages .26  .28 
Other .11  .08 
Total other retail .15  .12 
Total loans .19  % .13  %
At December 31
90 days or more past due and nonperforming loans
 2023 2022
Commercial .37  % .19  %
Commercial real estate 1.46  .62 
Residential mortgages(a)
 .25  .36 
Credit card 1.31  .88 
Other retail .46  .37 
Total loans .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.
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.
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.
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)
 Amount As a Percent of Ending
Loan Balances
2023 2022 2023 2022
Residential Mortgages(a)
30-89 days $ 169  $ 201  .15  % .17  %
90 days or more 136  95  .12  .08 
Nonperforming 158  325  .14  .28 
Total $ 463  $ 621  .40  % .54  %
Credit Card
30-89 days $ 406  $ 283  1.42  % 1.08  %
90 days or more 375  231  1.31  .88 
Nonperforming —  1  —  — 
Total $ 781  $ 515  2.73  % 1.96  %
Other Retail
Retail Leasing
30-89 days $ 25  $ 27  .60  % .49  %
90 days or more 2  2  .05  .04 
Nonperforming 8  8  .19  .14 
Total $ 35  $ 37  .85  % .67  %
Home Equity and Second Mortgages
30-89 days $ 77  $ 65  .59  % .51  %
90 days or more 34  36  .26  .28 
Nonperforming 113  110  .87  .86 
Total $ 224  $ 211  1.72  % 1.64  %
Other(b)
30-89 days $ 176  $ 217  .65  % .59  %
90 days or more 31  28  .11  .08 
Nonperforming 17  21  .06  .06 
Total $ 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.
The Company also makes short-term modifications, in 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

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.
At December 31, 2023, total nonperforming assets were $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
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.
OREO was $26 million at December 31, 2023, compared 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) 2023 2022
Commercial
Commercial $ 349  $ 139 
Lease financing 27  30 
Total commercial 376  169 
Commercial Real Estate
Commercial mortgages 675  251 
Construction and development 102  87 
Total commercial real estate 777  338 
Residential Mortgages(b)
 158  325 
Credit Card —  1 
Other Retail
Retail leasing 8  8 
Home equity and second mortgages 113  110 
Other 17  21 
Total other retail 138  139 
Total nonperforming loans(1)
 1,449  972 
Other Real Estate(c)
 26  23 
Other Assets 19  21 
Total nonperforming assets $ 1,494  $ 1,016 
Accruing loans 90 days or more past due(b)
 $ 698  $ 491 
Period-end loans(2)
 $ 373,835  $ 388,213 
Nonperforming assets to total loans(1)/(2)
 .39  % .25  %
Nonperforming assets to total loans plus other real estate(c)
 .40  % .26  %
Changes in Nonperforming Assets
(Dollars in Millions)
Commercial and
Commercial
Real Estate
Residential
Mortgages,
Credit Card and
Other Retail
Total
Balance December 31, 2022 $ 509  $ 507  $ 1,016 
Additions to nonperforming assets
New nonaccrual loans and foreclosed properties 1,403  174  1,577 
Advances on loans 49  1  50 
Acquired nonperforming assets —  —  — 
Total additions 1,452  175  1,627 
Reductions in nonperforming assets
Paydowns, payoffs (415) (109) (524)
Net sales (51) (23) (74)
Return to performing status (32) (199) (231)
Charge-offs(d)
 (308) (12) (320)
Total reductions (806) (343) (1,149)
Net additions to (reductions in) nonperforming assets 646  (168) 478 
Balance December 31, 2023 $ 1,155  $ 339  $ 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.
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TABLE 17 Net Charge-offs as a Percent of Average Loans Outstanding
2023 2022 2021
Year Ended December 31
(Dollars in Millions)
Average
Loan
Balance
Net
Charge-offs
Percent
Average
Loan
Balance
Net
Charge-offs
Percent
Average
Loan
Balance
Net
Charge-offs
Percent
Commercial
Commercial $ 130,544  $ 293  .22  % $ 118,967  $ 211  .18  % $ 97,649  $ 97  .10  %
Lease financing 4,339  21  .48  4,830  16  .33  5,206  6  .12 
Total commercial 134,883  314  .23  123,797  227  .18  102,855  103  .10 
Commercial real estate
Commercial mortgages 42,894  265  .62  30,890  17  .06  27,997  (14) (.05)
Construction 11,752  (2) (.02) 10,208  20  .20  10,784  16  .15 
Total commercial real estate 54,646  263  .48  41,098  37  .09  38,781  2  .01 
Residential mortgages 115,922  109  .09  84,749  (23) (.03) 74,629  (32) (.04)
Credit card 26,570  849  3.20  23,478  524  2.23  21,645  512  2.37 
Other retail
Retail leasing 4,665  6  .13  6,459  3  .05  7,710  2  .03 
Home equity and second mortgages 12,829  (2) (.02) 11,051  (7) (.06) 11,228  (10) (.09)
Other 31,760  366  1.15  42,941  302  .70  40,117  105  .26 
Total other retail 49,254  370  .75  60,451  298  .49  59,055  97  .16 
Total loans $ 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.
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
44 U.S. Bancorp 2023 Annual Report

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:
December 31,
2023		 December 31,
2022
United States unemployment rate for the three months ending(a)
December 31, 2023 3.8  % 4.2  %
June 30, 2024 3.9  4.1 
December 31, 2024 4.0  3.9 
United States real gross domestic product for the three months ending(b)
December 31, 2023 2.5  % 1.0  %
June 30, 2024 2.0  1.9 
December 31, 2024 1.3  2.5 
(a)Reflects quarterly average of forecasted reported United States unemployment rate.
(b)Reflects year-over-year growth rates.
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) 2023 2022 2021
Balance at beginning of year $ 7,404  $ 6,155  $ 8,010 
Change in accounting principle(a)
 (62) —  — 
Allowance for acquired credit losses(b)
 127  336  — 
Charge-Offs
Commercial
Commercial 357  294  206 
Lease financing 32  25  16 
Total commercial 389  319  222 
Commercial real estate
Commercial mortgages 278  28  9 
Construction and development 3  26  20 
Total commercial real estate 281  54  29 
Residential mortgages 129  13  18 
Credit card 1,014  696  686 
Other retail
Retail leasing 18  18  26 
Home equity and second mortgages 12  9  12 
Other 448  391  215 
Total other retail 478  418  253 
Total charge-offs(c)
 2,291  1,500  1,208 
Recoveries
Commercial
Commercial 64  83  109 
Lease financing 11  9  10 
Total commercial 75  92  119 
Commercial real estate
Commercial mortgages 13  11  23 
Construction and development 5  6  4 
Total commercial real estate 18  17  27 
Residential mortgages 20  36  50 
Credit card 165  172  174 
Other retail
Retail leasing 12  15  24 
Home equity and second mortgages 14  16  22 
Other 82  89  110 
Total other retail 108  120  156 
Total recoveries 386  437  526 
Net Charge-Offs
Commercial
Commercial 293  211  97 
Lease financing 21  16  6 
Total commercial 314  227  103 
Commercial real estate
Commercial mortgages 265  17  (14)
Construction and development (2) 20  16 
Total commercial real estate 263  37  2 
Residential mortgages 109  (23) (32)
Credit card 849  524  512 
Other retail
Retail leasing 6  3  2 
Home equity and second mortgages (2) (7) (10)
Other 366  302  105 
Total other retail 370  298  97 
Total net charge-offs 1,905  1,063  682 
Provision for credit losses(d)
 2,275  1,977  (1,173)
Other changes —  (1) — 
Balance at end of year $ 7,839  $ 7,404  $ 6,155 
Components
Allowance for loan losses $ 7,379  $ 6,936  $ 5,724 
Liability for unfunded credit commitments 460  468  431 
Total allowance for credit losses(1)
 $ 7,839  $ 7,404  $ 6,155 
Period-end loans(2)
 $ 373,835  $ 388,213  $ 312,028 
Nonperforming loans(3)
 1,449  972  834 
Allowance for Credit Losses as a Percentage of
Period-end loans(1)/(2)
 2.10  % 1.91  % 1.97  %
Nonperforming loans(1)/(3)
 541  762  738 
Nonperforming and accruing loans 90 days or more past due 365  506  471 
Nonperforming assets 525  729  701 
Net charge-offs 411  697  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
Allowance Amount Allowance as a Percent of Loans
At December 31 (Dollars in Millions) 2023 2022 2023 2022
Commercial
Commercial $ 2,038  $ 2,087  1.60  % 1.59  %
Lease financing 81  76  1.91  1.67 
Total commercial 2,119  2,163  1.61  1.59 
Commercial Real Estate
Commercial mortgages 1,068  878  2.55  2.01 
Construction and development 552  447  4.79  3.81 
Total commercial real estate 1,620  1,325  3.03  2.39 
Residential Mortgages 827  926  .72  .80 
Credit Card 2,403  2,020  8.41  7.68 
Other Retail
Retail leasing 95  127  2.30  2.30 
Home equity and second mortgages 321  298  2.46  2.32 
Other 454  545  1.67  1.49 
Total other retail 870  970  1.96  1.77 
Total allowance $ 7,839  $ 7,404  2.10  % 1.91  %
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.
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
48 U.S. Bancorp 2023 Annual Report

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.
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TABLE 20 Sensitivity of Net Interest Income
December 31, 2023 December 31, 2022
Down 50 bps
Immediate		 Up 50 bps
Immediate		 Down 200 bps
Gradual		 Up 200 bps
Gradual		 Down 50 bps
Immediate		 Up 50 bps
Immediate		 Down 200 bps
Gradual		 Up 200 bps
Gradual
Net interest income (.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
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)
 2023 2022
Average $ 4  $ 2 
High 7  7 
Low 2  1 
Period-end 3  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
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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)
 2023 2022
Average $ 10  $ 10 
High 16  19 
Low 6  6 
Period-end 8  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)
 2023 2022
Residential Mortgage Loans Held For Sale and Related Hedges
Average $ 1  $ 2 
High 2  5 
Low —  — 
Mortgage Servicing Rights and Related Hedges
Average $ 7  $ 8 
High 12  20 
Low 2  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.
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The following table summarizes the Company's total available liquidity from on-balance sheet and off-balance sheet funding sources:
(Dollars in millions) December 31,
2023		 December 31,
2022
Cash held at the Federal Reserve Bank and other central banks $ 52,403  $ 44,428 
Available investment securities 34,220  131,962 
Borrowing capacity from the Federal Reserve Bank and FHLB 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.
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.
TABLE 21 Credit Ratings
Moody's S&P Global Ratings Fitch Ratings DBRS Morningstar
U.S. Bancorp
Long-term issuer rating A3 A A+ AA
Short-term issuer rating N/A A-1 F1 R-1 (middle)
Senior unsecured debt A3 A A AA
Subordinated debt A3 A- A- AA (low)
Junior subordinated debt Baa1 N/A N/A N/A
Preferred stock Baa2 BBB BBB A
Commercial paper P-2 N/A F1 N/A
U.S. Bank National Association
Long-term issuer rating A2 A+ A+ AA (high)
Short-term issuer rating P-1 A-1 F1 R-1 (high)
Long-term deposits Aa3 N/A AA- AA (high)
Short-term deposits P-1 N/A F1+ N/A
Senior unsecured debt A2 A+ A+ AA (high)
Subordinated debt A2 A N/A AA
Commercial paper P-1 A-1 N/A R-1 (high)
Counterparty risk assessment A1(cr)/P-1(cr)
Counterparty risk rating A2/P-1
Baseline credit assessment 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
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
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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
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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
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
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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
considered “well-capitalized”. There are no conditions or events since December 31, 2023 that management believes have changed the risk-based category of USBNA.

TABLE 22 Regulatory Capital Ratios
At December 31 (Dollars in Millions) 2023 2022
Basel III standardized approach:
Common shareholders’ equity $ 48,498  $ 43,958 
Less intangible assets
Goodwill (net of deferred tax liability) (11,480) (11,395)
Other disallowed intangible assets (net of deferred tax liability) (2,278) (2,792)
Other(a)
 10,207  11,789 
Common equity tier 1 capital 44,947  41,560 
Qualifying preferred stock 6,808  6,808 
Noncontrolling interests eligible for tier 1 capital 450  450 
Other(b)
 (6) (5)
Tier 1 capital 52,199  48,813 
Eligible portion of allowance for credit losses 5,645  5,682 
Subordinated debt and noncontrolling interests eligible for tier 2 capital 4,077  4,520 
Tier 2 capital 9,722  10,202 
Total risk-based capital $ 61,921  $ 59,015 
Risk-weighted assets $ 453,390  $ 496,500 
Common equity tier 1 capital as a percent of risk-weighted assets 9.9  % 8.4  %
Tier 1 capital as a percent of risk-weighted assets 11.5  9.8 
Total risk-based capital as a percent of risk-weighted assets 13.7  11.9 
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio) 8.1  7.9 
Tier 1 capital as a percent of total on- and off-balance sheet leverage exposure (total leverage exposure ratio) 6.6  6.4 
(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.
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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
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,
56 U.S. Bancorp 2023 Annual Report

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.

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TABLE 23   Line of Business Financial Performance
Wealth, Corporate, Commercial and Institutional Banking
Consumer and
Business Banking
Payment Services
Year Ended December 31
(Dollars in Millions)
 2023 2022 Percent
Change		 2023 2022 Percent
Change		 2023 2022 Percent
Change
Condensed Income Statement
Net interest income (taxable-equivalent basis) $ 6,129  $ 5,213  17.6  % $ 8,331  $ 6,764  23.2  % $ 2,702  $ 2,504  7.9  %
Noninterest income 4,143  3,561  16.3  1,662  1,536  8.2  4,056  3,794  6.9 
Total net revenue 10,272  8,774  17.1  9,993  8,300  20.4  6,758  6,298  7.3 
Noninterest expense 5,183  4,135  25.3  6,964  5,779  20.5  3,772  3,525  7.0 
Income (loss) before provision and income taxes 5,089  4,639  9.7  3,029  2,521  20.2  2,986  2,773  7.7 
Provision for credit losses 334  154  * 79  75  5.3  1,394  980  42.2 
Income (loss) before income taxes 4,755  4,485  6.0  2,950  2,446  20.6  1,592  1,793  (11.2)
Income taxes and taxable-equivalent adjustment 1,190  1,122  6.1  738  612  20.6  398  449  (11.4)
Net income (loss) 3,565  3,363  6.0  2,212  1,834  20.6  1,194  1,344  (11.2)
Net (income) loss attributable to noncontrolling interests —  —  —  —  —  —  —  —  — 
Net income (loss) attributable to U.S. Bancorp $ 3,565  $ 3,363  6.0  $ 2,212  $ 1,834  20.6  $ 1,194  $ 1,344  (11.2)
Average Balance Sheet
Loans $ 175,780  $ 150,512  16.8  $ 161,862  $ 144,441  12.1  $ 38,471  $ 34,627  11.1 
Goodwill 4,682  3,634  28.8  4,466  3,250  37.4  3,327  3,305  .7 
Other intangible assets 1,007  365  * 5,265  3,784  39.1  350  423  (17.3)
Assets 202,642  169,554  19.5  179,103  160,174  11.8  44,292  41,072  7.8 
Noninterest-bearing deposits 70,977  82,671  (14.1) 31,082  31,719  (2.0) 2,981  3,410  (12.6)
Interest-bearing deposits 199,780  175,345  13.9  189,148  163,190  15.9  103  162  (36.4)
Total deposits 270,757  258,016  4.9  220,230  194,909  13.0  3,084  3,572  (13.7)
Total U.S. Bancorp shareholders’ equity 22,362  18,159  23.1  16,016  12,678  26.3  9,310  8,233  13.1 
Treasury and
Corporate Support
Consolidated
Company
Year Ended December 31
(Dollars in Millions)
 2023 2022 Percent
Change		 2023 2022 Percent
Change
Condensed Income Statement
Net interest income (taxable-equivalent basis) $ 365  $ 365  —  % $ 17,527  $ 14,846  18.1  %
Noninterest income 756  565  33.8  10,617  9,456  12.3 
Total net revenue 1,121  930  20.5  28,144  24,302  15.8 
Noninterest expense 2,954  1,467  * 18,873  14,906  26.6 
Income (loss) before provision and income taxes (1,833) (537) * 9,271  9,396  (1.3)
Provision for credit losses 468  768  (39.1) 2,275  1,977  15.1 
Income (loss) before income taxes (2,301) (1,305) (76.3) 6,996  7,419  (5.7)
Income taxes and taxable-equivalent adjustment (788) (602) (30.9) 1,538  1,581  (2.7)
Net income (loss) (1,513) (703) * 5,458  5,838  (6.5)
Net (income) loss attributable to noncontrolling interests (29) (13) * (29) (13) *
Net income (loss) attributable to U.S. Bancorp $ (1,542) $ (716) * $ 5,429  $ 5,825  (6.8)
Average Balance Sheet
Loans $ 5,162  $ 3,993  29.3  $ 381,275  $ 333,573  14.3 
Goodwill —  —  —  12,475  10,189  22.4 
Other intangible assets 17  5  * 6,639  4,577  45.1 
Assets 237,403  221,349  7.3  663,440  592,149  12.0 
Noninterest-bearing deposits 2,728  2,594  5.2  107,768  120,394  (10.5)
Interest-bearing deposits 8,864  3,293  * 397,895  341,990  16.3 
Total deposits 11,592  5,887  96.9  505,663  462,384  9.4 
Total U.S. Bancorp shareholders’ equity 5,972  11,346  (47.4) 53,660  50,416  6.4 
*Not meaningful
58 U.S. Bancorp 2023 Annual Report In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:

Non-GAAP Financial Measures
•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) 2023 2022 2021
Total equity $ 55,771  $ 51,232  $ 55,387 
Preferred stock (6,808) (6,808) (6,371)
Noncontrolling interests (465) (466) (469)
Goodwill (net of deferred tax liability)(a)
 (11,480) (11,395) (9,323)
Intangible assets (net of deferred tax liability), other than mortgage servicing rights (2,278) (2,792) (785)
Tangible common equity(1)
 34,740  29,771  38,439 
Common equity tier 1 capital, determined in accordance with transitional regulatory capital requirements related to the CECL methodology implementation 44,947  41,560  41,701 
Adjustments(b)
 (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 663,491  674,805  573,284 
Goodwill (net of deferred tax liability)(a)
 (11,480) (11,395) (9,323)
Intangible assets (net of deferred tax liability), other than mortgage servicing rights (2,278) (2,792) (785)
Tangible assets(3)
 649,733  660,618  563,176 
Risk-weighted assets, determined in accordance with prescribed regulatory capital requirements effective for the Company(4)
 453,390  496,500  418,571 
Adjustments(c)
 (736) (620) (357)
Risk-weighted assets, reflecting the full implementation of the CECL methodology(5)
 452,654  495,880  418,214 
Ratios
Tangible common equity to tangible assets(1)/(3)
 5.3  % 4.5  % 6.8  %
Tangible common equity to risk-weighted assets(1)/(4)
 7.7  6.0  9.2 
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the CECL methodology(2)/(5)
 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) 2023 2022 2021
Net interest income $ 17,396  $ 14,728  $ 12,494 
Taxable-equivalent adjustment(a)
 131  118  106 
Net interest income, on a taxable-equivalent basis 17,527  14,846  12,600 
Net interest income, on a taxable-equivalent basis (as calculated above) 17,527  14,846  12,600 
Noninterest income 10,617  9,456  10,227 
Less: Securities gains (losses), net (145) 20  103 
Total net revenue, excluding net securities gains (losses)(1)
 28,289  24,282  22,724 
Noninterest expense(2)
 18,873  14,906  13,728 
Efficiency ratio(2)/(1)
 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 Net Revenue as a Percent of the Consolidated Company
Net Revenue as a Percent of the Consolidated Company Excluding Treasury and Corporate Support
Wealth, Corporate, Commercial and Institutional Banking $ 10,272  36  % 38  %
Consumer and Business Banking 9,993  36  37 
Payment Services 6,758  24  25 
Treasury and Corporate Support 1,121  4 
Consolidated Company 28,144  100  %
Less: Treasury and Corporate Support 1,121 
Consolidated Company excluding Treasury and Corporate Support $ 27,023  100  %


60 U.S. Bancorp 2023 Annual Report

Year Ended December 31 (Dollars in Millions) 2023
Net income applicable to U.S. Bancorp common shareholders $ 5,051 
Intangible amortization (net-of-tax) 502 
Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization(1)
 5,553 
Less: Notable items(a)
 (1,597)
Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization and notable items(2)
 7,150 
Average total equity 54,125 
Average preferred stock (6,808)
Average noncontrolling interests (465)
Average goodwill (net of deferred tax liability)(b)
 (11,485)
Average intangible assets (net of deferred tax liability), other than mortgage servicing rights (2,480)
Average tangible equity(3)
 32,887 
Return on tangible common equity(1)/(3)
 16.9  %
Return on tangible common equity, excluding notable items(2)/(3)
 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) 2023 2022
Net charge-offs $ 1,905  $ 1,063 
Less: Notable items(a)
 400  368 
Net charge-offs, excluding notable items(1)
 1,505  695 
Average loan balances(2)
 381,275  333,573 
Net charge-off ratio, excluding notable items(1)/(2)
 .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) 2023 2022 Percent Change
Common equity $ 48,498  $ 43,958 
Goodwill (net of deferred tax liability)(a)
 (11,480) (11,395)
Intangible assets (net of deferred tax liability), other than mortgage servicing rights (2,278) (2,792)
Tangible common equity(1)
 34,740  29,771 
Common shares outstanding(2)
 1,558  1,531 
Tangible book value per common share(1)/(2)
 $ 22.30  $ 19.45  14.7  %
(a)Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.
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.
Significant accounting policies are discussed in Note 1 of 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
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.
Under the range of economic scenarios considered, the 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
62 U.S. Bancorp 2023 Annual Report

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.
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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.
Allowance for Credit Losses
Description of the
Matter
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.

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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
68 U.S. Bancorp 2023 Annual Report

U.S. Bancorp
Consolidated Balance Sheet
At December 31 (Dollars in Millions) 2023 2022
 
Assets    
Cash and due from banks $ 61,192  $ 53,542 
Investment securities    
Held-to-maturity (fair value $74,088 and $77,874, respectively)
 84,045  88,740 
Available-for-sale ($338 and $858 pledged as collateral, respectively)(a)
 69,706  72,910 
Loans held for sale (including $2,011 and $1,849 of mortgage loans carried at fair value, respectively)
 2,201  2,200 
Loans    
Commercial 131,881  135,690 
Commercial real estate 53,455  55,487 
Residential mortgages 115,530  115,845 
Credit card 28,560  26,295 
Other retail 44,409  54,896 
Total loans 373,835  388,213 
Less allowance for loan losses (7,379) (6,936)
Net loans 366,456  381,277 
Premises and equipment 3,623  3,858 
Goodwill 12,489  12,373 
Other intangible assets 6,084  7,155 
Other assets (including $3,548 and $702 of trading securities at fair value pledged as collateral, respectively)(a)
 57,695  52,750 
Total assets $ 663,491  $ 674,805 
   
Liabilities and Shareholders’ Equity    
Deposits    
Noninterest-bearing $ 89,989  $ 137,743 
Interest-bearing (including $2,818 of time deposits carried at fair value at December 31, 2023)
 422,323  387,233 
Total deposits 512,312  524,976 
Short-term borrowings 15,279  31,216 
Long-term debt 51,480  39,829 
Other liabilities 28,649  27,552 
Total liabilities 607,720  623,573 
Shareholders’ equity    
Preferred stock 6,808  6,808 
Common stock, par value $0.01 a share — authorized: 4,000,000,000 shares; issued: 2023 and 2022—2,125,725,742 shares
 21  21 
Capital surplus 8,673  8,712 
Retained earnings 74,026  71,901 
Less cost of common stock in treasury: 2023 — 567,732,687 shares; 2022 — 594,747,484 shares
 (24,126) (25,269)
Accumulated other comprehensive income (loss) (10,096) (11,407)
Total U.S. Bancorp shareholders’ equity 55,306  50,766 
Noncontrolling interests 465  466 
Total equity 55,771  51,232 
Total liabilities and equity $ 663,491  $ 674,805 
(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.
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 $ 22,324  $ 13,603  $ 10,747 
Loans held for sale 147  201  232 
Investment securities 4,485  3,378  2,365 
Other interest income 3,051  763  143 
Total interest income 30,007  17,945  13,487 
Interest Expense
Deposits 8,775  1,872  320 
Short-term borrowings 1,971  565  70 
Long-term debt 1,865  780  603 
Total interest expense 12,611  3,217  993 
Net interest income 17,396  14,728  12,494 
Provision for credit losses 2,275  1,977  (1,173)
Net interest income after provision for credit losses 15,121  12,751  13,667 
Noninterest Income
Card revenue 1,630  1,512  1,507 
Corporate payment products revenue 759  698  575 
Merchant processing services 1,659  1,579  1,449 
Trust and investment management fees 2,459  2,209  1,832 
Service charges 1,306  1,298  1,338 
Commercial products revenue 1,372  1,105  1,102 
Mortgage banking revenue 540  527  1,361 
Investment products fees 279  235  239 
Securities gains (losses), net (145) 20  103 
Other 758  273  721 
Total noninterest income 10,617  9,456  10,227 
Noninterest Expense
Compensation and employee benefits 10,416  9,157  8,728 
Net occupancy and equipment 1,266  1,096  1,048 
Professional services 560  529  492 
Marketing and business development 726  456  366 
Technology and communications 2,049  1,726  1,728 
Other intangibles 636  215  159 
Merger and integration charges 1,009  329  — 
Other 2,211  1,398  1,207 
Total noninterest expense 18,873  14,906  13,728 
Income before income taxes 6,865  7,301  10,166 
Applicable income taxes 1,407  1,463  2,181 
Net income 5,458  5,838  7,985 
Net (income) loss attributable to noncontrolling interests (29) (13) (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 
Earnings per common share $ 3.27  $ 3.69  $ 5.11 
Diluted earnings per common share $ 3.27  $ 3.69  $ 5.10 
Average common shares outstanding 1,543  1,489  1,489 
Average diluted common shares outstanding 1,543  1,490  1,490 
See Notes to Consolidated Financial Statements.
70 U.S. Bancorp 2023 Annual Report

U.S. Bancorp
Consolidated Statement of Comprehensive Income
Year Ended December 31 (Dollars in Millions) 2023 2022 2021
Net income $ 5,458  $ 5,838  $ 7,985 
Other Comprehensive Income (Loss)      
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 (252) (75) 125 
Foreign currency translation 21  (10) 35 
Changes in unrealized gains (losses) on retirement plans (262) 526  400 
Reclassification to earnings of realized (gains) losses 748  544  104 
Income taxes related to other comprehensive income (loss) (444) 3,207  769 
Total other comprehensive income (loss) 1,311  (9,464) (2,265)
Comprehensive income (loss) 6,769  (3,626) 5,720 
Comprehensive (income) loss attributable to noncontrolling interests (29) (13) (22)
Comprehensive income (loss) attributable to U.S. Bancorp $ 6,740  $ (3,639) $ 5,698 
See Notes to Consolidated Financial Statements.
71

U.S. Bancorp
Consolidated Statement of Shareholders’ Equity
  U.S. Bancorp Shareholders
(Dollars and Shares in Millions, Except Per Share Data) Common
 Shares
 Outstanding 		Preferred
 Stock 		Common
 Stock		 Capital
 Surplus 		Retained
 Earnings 		Treasury
 Stock 		Accumulated
 Other
 Comprehensive
 Income (Loss) 		Total U.S.
 Bancorp
 Shareholders’
 Equity 		Noncontrolling
 Interests 		Total
 Equity
Balance December 31, 2020 1,507  $ 5,983  $ 21  $ 8,511  $ 64,188  $ (25,930) $ 322  $ 53,095  $ 630  $ 53,725 
Net income (loss)         7,963      7,963  22  7,985 
Other comprehensive income (loss)             (2,265) (2,265)   (2,265)
Preferred stock dividends(a)
         (303)     (303)   (303)
Common stock dividends ($1.76 per share)
         (2,630)     (2,630)   (2,630)
Issuance of preferred stock   2,221            2,221    2,221 
Call and redemption of preferred stock   (1,833)     (17)     (1,850)   (1,850)
Issuance of common and treasury stock 5      (169)   215    46    46 
Purchase of treasury stock (28)         (1,556)   (1,556)   (1,556)
Distributions to noncontrolling interests               —  (20) (20)
Purchase of noncontrolling interests —  (167) (167)
Net other changes in noncontrolling interests               —  4  4 
Stock option and restricted stock grants       197        197    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)         5,825      5,825  13  5,838 
Other comprehensive income (loss)             (9,464) (9,464)   (9,464)
Preferred stock dividends(b)
         (296)     (296)   (296)
Common stock dividends ($1.88 per share)
         (2,829)     (2,829)   (2,829)
Issuance of preferred stock   437            437    437 
Issuance of common and treasury stock 48      (32)   2,071    2,039    2,039 
Purchase of treasury stock (1)       (69)   (69)   (69)
Distributions to noncontrolling interests               —  (13) (13)
Net other changes in noncontrolling interests               —  (3) (3)
Stock option and restricted stock grants       205        205    205 
Balance December 31, 2022 1,531  $ 6,808  $ 21  $ 8,712  $ 71,901  $ (25,269) $ (11,407) $ 50,766  $ 466  $ 51,232 
Change in accounting principle(c)
 46  46  46 
Net income (loss)   5,429      5,429  29  5,458 
Other comprehensive income (loss)             1,311  1,311    1,311 
Preferred stock dividends(d)
         (350)     (350)   (350)
Common stock dividends ($1.93 per share)
         (3,000)     (3,000)   (3,000)
Issuance of common and treasury stock 28      (264)   1,205    941    941 
Purchase of treasury stock (1)         (62)   (62)   (62)
Distributions to noncontrolling interests               —  (29) (29)
Net other changes in noncontrolling interests               —  (1) (1)
Stock option and restricted stock grants       225        225    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 $ 5,429  $ 5,825  $ 7,963 
Adjustments to reconcile net income to net cash provided by operating activities      
Provision for credit losses 2,275  1,977  (1,173)
Depreciation and amortization of premises and equipment 382  345  338 
Amortization of intangibles 636  215  159 
(Gain) loss on sale of loans held for sale 7  387  (1,135)
(Gain) loss on sale of securities and other assets 119  (188) (398)
Loans originated for sale, net of repayments (26,936) (33,127) (72,627)
Proceeds from sales of loans held for sale 26,686  38,895  74,315 
Other, net (151) 6,790  2,428 
Net cash provided by operating activities 8,447  21,119  9,870 
Investing Activities
Proceeds from sales of available-for-sale investment securities 11,209  36,391  16,075 
Proceeds from maturities of held-to-maturity investment securities 6,164  5,759  1,093 
Proceeds from maturities of available-for-sale investment securities 6,314  14,927  41,199 
Purchases of held-to-maturity investment securities (932) (7,091) (1,088)
Purchases of available-for-sale investment securities (8,342) (24,592) (99,045)
Net decrease (increase) in loans outstanding 3,829  (27,318) (17,459)
Proceeds from sales of loans 5,707  4,420  6,183 
Purchases of loans (1,106) (2,113) (4,466)
Net (increase) decrease in securities purchased under agreements to resell (2,404) 252  18 
Net cash (paid for) received from acquisitions (330) 12,257  (661)
Other, net (1,184) (5,392) 664 
Net cash provided by (used in) investing activities 18,925  7,500  (57,487)
Financing Activities
Net (decrease) increase in deposits (12,291) (17,215) 26,313 
Net (decrease) increase in short-term borrowings (16,508) 15,213  30 
Proceeds from issuance of long-term debt 15,583  8,732  2,626 
Principal payments or redemption of long-term debt (4,084) (6,926) (11,432)
Proceeds from issuance of preferred stock —  437  2,221 
Proceeds from issuance of common stock 951  21  43 
Repurchase of preferred stock —  (1,100) (1,250)
Repurchase of common stock (62) (69) (1,555)
Cash dividends paid on preferred stock (341) (299) (308)
Cash dividends paid on common stock (2,970) (2,776) (2,579)
Purchase of noncontrolling interests —  —  (167)
Net cash (used in) provided by financing activities (19,722) (3,982) 13,942 
Change in cash and due from banks 7,650  24,637  (33,675)
Cash and due from banks at beginning of period 53,542  28,905  62,580 
Cash and due from banks at end of period $ 61,192  $ 53,542  $ 28,905 
Supplemental Cash Flow Disclosures
Cash paid for income taxes $ 645  $ 767  $ 535 
Cash paid for interest 12,282  2,717  1,061 
Noncash transfer of available-for-sale investment securities to held-to-maturity —  40,695  41,823 
Net noncash transfers to foreclosed property 26  23  14 
Acquisitions
Assets (sold) acquired $ (83) $ 106,209  $ 749 
Liabilities sold (assumed) 413  (95,753) (88)
Net $ 330  $ 10,456  $ 661 
See Notes to Consolidated Financial Statements.
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.
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.
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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.
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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
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
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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
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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
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
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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
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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
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,
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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.
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.
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
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 $ 5,500 
Market value of shares of common stock 2,014 
Total consideration transferred at acquisition close date 7,514 
Discounted liability to MUFG(a)
 2,944 
Total $ 10,458 
Fair Value of MUB assets and liabilities
Assets
Cash and due from banks $ 17,754 
Investment securities 22,725 
Loans held for sale 2,220 
Loans 53,395 
Less allowance for loan losses (463)
Net loans 52,932 
Premises and equipment 646 
Other intangible assets (excluding goodwill) 2,808 
Other assets 4,764 
Total assets $ 103,849 
Liabilities
Deposits $ 86,110 
Short-term borrowings 4,777 
Long-term debt 2,584 
Other liabilities 2,243 
Total liabilities 95,714 
Less: Net assets $ 8,135 
Goodwill $ 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)
Unpaid Principal Balance
 Fair Value
Commercial $ 11,771  $ 11,366 
Commercial real estate 14,397  13,737 
Residential mortgages 28,256  26,247 
Credit card 299  212 
Other retail 1,397  1,370 
Total loans $ 56,120  $ 52,932 
Other intangible assets from the MUB acquisition, as of December 1, 2022, consisted of the following:
(Dollars in Millions) Weighted-Average Estimated Life
Amortization Method
 Fair Value
Mortgage servicing rights — (a) $ 147 
Core deposit benefits 10 years Accelerated 2,635
Other 11 years Accelerated 26 
Total other intangible assets (excluding goodwill) $ 2,808 
(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
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) One Month Ended December 31, 2022
Net interest income $ 255 
Noninterest income (38)
(a)
Net income (loss) (562)
(a)Includes realized losses on investment securities sold.

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) 2022 2021
Net interest income $ 17,541  $ 14,958 
Noninterest income 10,068  11,071 
Net income 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 $ 5,097 
Allowance for credit losses at acquisition (463)
Non-credit discount (213)
Purchase price $ 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) Amortized Cost Unrealized Gains Unrealized Losses Fair Value Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Held-to-maturity
U.S. Treasury and agencies $ 1,345  $ —  $ (35) $ 1,310  $ 1,344  $ —  $ (51) $ 1,293 
Mortgage-backed securities
Residential agency 80,997  6  (9,929) 71,074  85,693  2  (10,810) 74,885 
Commercial agency 1,695  6  (5) 1,696  1,703  1  (8) 1,696 
Other 8  —  —  8  —  —  —  — 
Total held-to-maturity $ 84,045  $ 12  $ (9,969) $ 74,088  $ 88,740  $ 3  $ (10,869) $ 77,874 
Available-for-sale
U.S. Treasury and agencies $ 21,768  $ 8  $ (2,234) $ 19,542  $ 24,801  $ 1  $ (2,769) $ 22,033 
Mortgage-backed securities                
Residential agency 28,185  104  (2,211) 26,078  32,060  8  (2,797) 29,271 
Commercial
Agency 8,703  —  (1,360) 7,343  8,736  —  (1,591) 7,145 
Non-agency 7  —  (1) 6  7  —  —  7 
Asset-backed securities 6,713  25  (14) 6,724  4,356  5  (38) 4,323 
Obligations of state and political subdivisions 10,867  36  (914) 9,989  11,484  12  (1,371) 10,125 
Other 24  —  —  24  6  —  —  6 
Total available-for-sale, excluding portfolio level basis adjustments 76,267  173  (6,734) 69,706  81,450  26  (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) 2023 2022 2021
Taxable $ 4,171  $ 3,081  $ 2,103 
Non-taxable 314  297  262 
Total interest income from investment securities $ 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) 2023 2022 2021
Realized gains $ 74  $ 163  $ 122 
Realized losses (219) (143) (19)
Net realized gains (losses) $ (145) $ 20  $ 103 
Income tax expense (benefit) on net realized gains (losses) $ (37) $ 5  $ 26 
The Company conducts a regular assessment of its available-for-sale investment securities with unrealized losses to determine whether all or some portion of a security’s unrealized loss is related to credit and an allowance for credit losses is necessary. If the Company intends to sell or it is more likely than not the Company will be required to sell an investment security, the amortized cost of the security is written down to fair value. When evaluating credit losses, the Company considers various factors such as the nature of the investment security, the credit ratings or financial condition of the issuer, the extent
of the unrealized loss, expected cash flows of underlying collateral, the existence of any government or agency guarantees, and market conditions. The Company measures the allowance for credit losses using market information where available and discounting the cash flows at the original effective rate of the investment security. The allowance for credit losses is adjusted each period through earnings and can be subsequently recovered. The allowance for credit losses on the Company’s available-for-sale investment securities was immaterial at 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:
Less Than 12 Months 12 Months or Greater Total
(Dollars in Millions) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
U.S. Treasury and agencies $ 874  $ (3) $ 17,270  $ (2,231) $ 18,144  $ (2,234)
Mortgage-backed securities
Residential agency 519  (8) 21,356  (2,203) 21,875  (2,211)
Commercial
Agency —  —  7,343  (1,360) 7,343  (1,360)
Non-agency —  —  6  (1) 6  (1)
Asset-backed securities 2,235  (14) —  —  2,235  (14)
Obligations of state and political subdivisions 544  (3) 7,464  (911) 8,008  (914)
Other —  —  4  —  4  — 
Total investment securities $ 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) Amortized
 Cost		 Fair Value Weighted-
 Average
 Maturity in
 Years
Weighted-Average Yield(e)
 
Held-to-maturity
U.S. Treasury and Agencies
Maturing in one year or less $ 50  $ 50  0.3 2.67  %
Maturing after one year through five years 1,295  1,260  2.4 2.85 
Maturing after five years through ten years —  —  — — 
Maturing after ten years —  —  — — 
Total $ 1,345  $ 1,310  2.3 2.85  %
Mortgage-Backed Securities(a)
Maturing in one year or less $ 22  $ 22  0.7 4.43  %
Maturing after one year through five years 1,268  1,266  2.5 4.52 
Maturing after five years through ten years 75,984  67,094  8.8 2.19 
Maturing after ten years 5,418  4,388  10.2 1.91 
Total $ 82,692  $ 72,770  8.8 2.21  %
Other
Maturing in one year or less $ —  $ —  — —  %
Maturing after one year through five years 8  8  2.8 2.56 
Maturing after five years through ten years —  —  — — 
Maturing after ten years —  —  — — 
Total $ 8  $ 8  2.8 2.56  %
Total held-to-maturity(b)
 $ 84,045  $ 74,088  8.7 2.22  %
Available-for-sale
U.S. Treasury and Agencies
Maturing in one year or less $ 9  $ 9  0.3 5.28  %
Maturing after one year through five years 8,882  8,378  3.7 2.35 
Maturing after five years through ten years 11,165  9,827  6.8 2.08 
Maturing after ten years 1,712  1,328  10.8 2.02 
Total $ 21,768  $ 19,542  5.9 2.19  %
Mortgage-Backed Securities(a)
Maturing in one year or less $ 83  $ 81  0.8 2.26  %
Maturing after one year through five years 11,196  10,860  3.5 3.80 
Maturing after five years through ten years 24,455  21,483  7.3 2.76 
Maturing after ten years 1,161  1,003  10.9 3.43 
Total $ 36,895  $ 33,427  6.3 3.09  %
Asset-Backed Securities (a)
Maturing in one year or less $ —  $ —  — —  %
Maturing after one year through five years 5,834  5,844  1.7 5.05 
Maturing after five years through ten years 879  880  5.8 7.15 
Maturing after ten years —  —  — — 
Total $ 6,713  $ 6,724  2.2 5.33  %
Obligations of State and Political Subdivisions(c) (d)
Maturing in one year or less $ 225  $ 225  0.4 5.52  %
Maturing after one year through five years 3,546  3,536  3.0 4.55 
Maturing after five years through ten years 1,453  1,414  7.3 3.86 
Maturing after ten years 5,643  4,814  15.3 3.14 
Total $ 10,867  $ 9,989  9.9 3.75  %
Other
Maturing in one year or less $ —  $ —  — —  %
Maturing after one year through five years 24  24  1.7 4.51 
Maturing after five years through ten years —  —  — — 
Maturing after ten years —  —  — — 
Total $ 24  $ 24  1.7 4.51  %
Total available-for-sale(b) (f)
 $ 76,267  $ 69,706  6.3 3.12  %
(a)Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities that take into account anticipated future prepayments.
(b)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) 2023 2022
Commercial
Commercial $ 127,676  $ 131,128 
Lease financing 4,205  4,562 
Total commercial 131,881  135,690 
Commercial Real Estate
Commercial mortgages 41,934  43,765 
Construction and development 11,521  11,722 
Total commercial real estate 53,455  55,487 
Residential Mortgages
Residential mortgages 108,605  107,858 
Home equity loans, first liens 6,925  7,987 
Total residential mortgages 115,530  115,845 
Credit Card 28,560  26,295 
Other Retail
Retail leasing 4,135  5,519 
Home equity and second mortgages 13,056  12,863 
Revolving credit 3,668  3,983 
Installment 13,889  14,592 
Automobile 9,661  17,939 
Total other retail 44,409  54,896 
Total loans $ 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) Commercial Commercial Real Estate Residential Mortgages Credit
Card		 Other
Retail		 Total
Loans
Balance at December 31, 2022 $ 2,163  $ 1,325  $ 926  $ 2,020  $ 970  $ 7,404 
Add
Change in accounting principle(a)
 —  —  (31) (27) (4) (62)
Allowance for acquired credit losses(b)
 —  127  —  —  —  127 
Provision for credit losses 270  431  41  1,259  274  2,275 
Deduct
Loans charged-off 389  281  129  1,014  478  2,291 
Less recoveries of loans charged-off (75) (18) (20) (165) (108) (386)
Net loan charge-offs (recoveries) 314  263  109  849  370  1,905 
Balance at December 31, 2023 $ 2,119  $ 1,620  $ 827  $ 2,403  $ 870  $ 7,839 
Balance at December 31, 2021 $ 1,849  $ 1,123  $ 565  $ 1,673  $ 945  $ 6,155 
Add
Allowance for acquired credit losses(b)
 163  87  36  45  5  336 
Provision for credit losses(c)
 378  152  302  826  319  1,977 
Deduct          
Loans charged-off(d)
 319  54  13  696  418  1,500 
Less recoveries of loans charged-off (92) (17) (36) (172) (120) (437)
Net loan charge-offs (recoveries) 227  37  (23) 524  298  1,063 
Other Changes —  —  —  —  (1) (1)
Balance at December 31, 2022 $ 2,163  $ 1,325  $ 926  $ 2,020  $ 970  $ 7,404 
Balance at December 31, 2020 $ 2,423  $ 1,544  $ 573  $ 2,355  $ 1,115  $ 8,010 
Add
Provision for credit losses (471) (419) (40) (170) (73) (1,173)
Deduct
Loans charged-off 222  29  18  686  253  1,208 
Less recoveries of loans charged-off (119) (27) (50) (174) (156) (526)
Net loan charge-offs (recoveries) 103  2  (32) 512  97  682 
Balance at December 31, 2021 $ 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) Commercial
Commercial Real Estate(a)
Residential Mortgages(b)
Credit Card(c)
Other Retail(d)
 Total Loans
Originated in 2023 $ 48  $ 63  $ —  $ —  $ 57  $ 168 
Originated in 2022 63  88  1  —  130  282 
Originated in 2021 30  69  6  —  83  188 
Originated in 2020 17  2  8  —  38  65 
Originated in 2019 15  3  16  —  31  65 
Originated prior to 2019 53  56  98  —  31  238 
Revolving 163  —  —  1,014  80  1,257 
Revolving converted to term —  —  —  —  28  28 
Total charge-offs $ 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:
Accruing
(Dollars in Millions) Current
30-89 Days Past Due
90 Days or More Past Due
Nonperforming(b)
 Total
December 31, 2023          
Commercial $ 130,925  $ 464  $ 116  $ 376  $ 131,881 
Commercial real estate 52,619  55  4  777  53,455 
Residential mortgages(a)
 115,067  169  136  158  115,530 
Credit card 27,779  406  375  —  28,560 
Other retail 43,926  278  67  138  44,409 
Total loans $ 370,316  $ 1,372  $ 698  $ 1,449  $ 373,835 
December 31, 2022
Commercial $ 135,077  $ 350  $ 94  $ 169  $ 135,690 
Commercial real estate 55,057  87  5  338  55,487 
Residential mortgages(a)
 115,224  201  95  325  115,845 
Credit card 25,780  283  231  1  26,295 
Other retail 54,382  309  66  139  54,896 
Total loans $ 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
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.
90 U.S. Bancorp 2023 Annual Report

The following table provides a summary of loans by portfolio class and the Company’s internal credit quality rating:
  December 31, 2023 December 31, 2022
    Criticized     Criticized  
(Dollars in Millions) Pass Special Mention
Classified(a)
 Total Criticized Total Pass Special Mention
Classified(a)
 Total Criticized Total
Commercial          
Originated in 2023 $ 43,023  $ 827  $ 856  $ 1,683  $ 44,706  $ —  $ —  $ —  $ —  $ — 
Originated in 2022 40,076  274  632  906  40,982  61,229  245  315  560  61,789 
Originated in 2021 9,219  117  154  271  9,490  26,411  159  78  237  26,648 
Originated in 2020 3,169  92  71  163  3,332  7,049  68  138  206  7,255 
Originated in 2019 1,340  18  103  121  1,461  3,962  51  210  261  4,223 
Originated prior to 2019 3,963  12  106  118  4,081  8,986  64  129  193  9,179 
Revolving(b)
 26,213  362  1,254  1,616  27,829  25,888  344  364  708  26,596 
Total commercial 127,003 1,702 3,176 4,878 131,881 133,525 931 1,234 2,165 135,690
Commercial real estate                    
Originated in 2023 8,848  465  2,206  2,671  11,519  —  —  —  —  — 
Originated in 2022 11,831  382  1,141  1,523  13,354  14,527  206  519  725  15,252 
Originated in 2021 9,235  500  385  885  10,120  13,565  171  99  270  13,835 
Originated in 2020 3,797  51  87  138  3,935  6,489  97  117  214  6,703 
Originated in 2019 4,749  336  359  695  5,444  6,991  251  304  555  7,546 
Originated prior to 2019 6,010  122  260  382  6,392  9,639  138  875  1,013  10,652 
Revolving 2,613  6  70  76  2,689  1,489  —  10  10  1,499 
Revolving converted to term 2  —  —  —  2  —  —  —  —  — 
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 9,734  —  5  5  9,739  —  —  —  —  — 
Originated in 2022 29,146  —  17  17  29,163  28,452  —  —  —  28,452 
Originated in 2021 36,365  —  16  16  36,381  39,527  —  7  7  39,534 
Originated in 2020 14,773  —  9  9  14,782  16,556  —  8  8  16,564 
Originated in 2019 5,876  —  16  16  5,892  7,222  —  18  18  7,240 
Originated prior to 2019 19,326  —  246  246  19,572  23,658  —  397  397  24,055 
Revolving 1  —  —  —  1  —  —  —  —  — 
Total residential mortgages 115,221  —  309  309  115,530  115,415  —  430  430  115,845 
Credit card(d)
 28,185  —  375  375  28,560  26,063  —  232  232  26,295 
Other retail                    
Originated in 2023 5,184  —  4  4  5,188  —  —  —  —  — 
Originated in 2022 5,607  —  12  12  5,619  9,563  —  6  6  9,569 
Originated in 2021 10,398  —  15  15  10,413  15,352  —  12  12  15,364 
Originated in 2020 4,541  —  9  9  4,550  7,828  —  11  11  7,839 
Originated in 2019 1,793  —  7  7  1,800  3,418  —  13  13  3,431 
Originated prior to 2019 2,215  —  13  13  2,228  3,689  —  31  31  3,720 
Revolving 13,720  —  104  104  13,824  14,029  —  98  98  14,127 
Revolving converted to term 735  —  52  52  787  800  —  46  46  846 
Total other retail 44,193  —  216  216  44,409  54,679  —  217  217  54,896 
Total loans $ 361,687  $ 3,564  $ 8,584  $ 12,148  $ 373,835  $ 382,382  $ 1,794  $ 4,037  $ 5,831  $ 388,213 
Total outstanding commitments $ 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:

(Dollars in Millions) Interest Rate Reduction Payment Delay Term Extension
Multiple Modifications(a)
 Total Modifications Percent of Class Total
Commercial $ 46  $ —  $ 286  $ 33  $ 365  .3  %
Commercial real estate —  —  645  72  717  1.3 
Residential mortgages(b)
 —  234  26  20  280  .2 
Credit card 349  1  —  —  350  1.2 
Other retail 7  21  144  3  175  .4 
Total loans, excluding loans purchased from GNMA mortgage pools 402  256  1,101  128  1,887  .5 
Loans purchased from GNMA mortgage pools(b)
 —  1,263  255  321  1,839  1.6 
Total loans $ 402  $ 1,519  $ 1,356  $ 449  $ 3,726  1.0  %
(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) Weighted-Average Interest Rate Reduction Weighted-Average Months of Term Extension
Commercial 13.0  % 12
Commercial real estate 3.5  11
Residential mortgages 1.2  98
Credit card 15.4  — 
Other retail 7.9  4
Loans purchased from GNMA mortgage pools .6  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) Current 30-89 Days Past Due 90 Days or More Past Due Total
Commercial $ 255  $ 12  $ 98  $ 365 
Commercial real estate 524  —  193  717 
Residential mortgages(a)
 1,385  24  16  1,425 
Credit card 251  67  32  350 
Other retail 133  21  8  162 
Total loans $ 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) Interest Rate Reduction Payment Delay Term Extension
Multiple Modifications(a)
Commercial $ 7  $ —  $ —  $ — 
Commercial real estate —  —  1  — 
Residential mortgages —  8  2  1 
Credit card 35  —  —  — 
Other retail 1  1  11  — 
Total loans, excluding loans purchased from GNMA mortgage pools 43  9  14  1 
Loans purchased from GNMA mortgage pools —  67  30  37 
Total loans $ 43  $ 76  $ 44  $ 38 
(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) Number of Loans Pre-Modification Outstanding Loan Balance Post-Modification Outstanding Loan Balance
2022      
Commercial 2,259 $ 148  $ 134 
Commercial real estate 75 50  47 
Residential mortgages 1,699 475  476 
Credit card 44,470 243  246 
Other retail 2,514 89  85 
Total loans, excluding loans purchased from GNMA mortgage pools 51,017 1,005  988 
Loans purchased from GNMA mortgage pools 1,640 226  230 
Total loans 52,657 $ 1,231  $ 1,218 
2021      
Commercial 2,156 $ 140  $ 127 
Commercial real estate 112 193  179 
Residential mortgages 977 329  328 
Credit card 25,297 144  146 
Other retail 2,576 74  67 
Total loans, excluding loans purchased from GNMA mortgage pools 31,118 880  847 
Loans purchased from GNMA mortgage pools 2,311 334  346 
Total loans 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) Number of Loans Amount Defaulted
2022    
Commercial 767 $ 24 
Commercial real estate 20 11 
Residential mortgages 235 28 
Credit card 7,904 42 
Other retail 307 5 
Total loans, excluding loans purchased from GNMA mortgage pools 9,233 110 
Loans purchased from GNMA mortgage pools 282 59 
Total loans 9,515 $ 169 
2021    
Commercial 1,084 $ 32 
Commercial real estate 16 7 
Residential mortgages 81 9 
Credit card 7,700 43 
Other retail 714 11 
Total loans, excluding loans purchased from GNMA mortgage pools 9,595 102 
Loans purchased from GNMA mortgage pools 176 26 
Total loans 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) 2023 2022
Lease receivables $ 7,239  $ 8,731 
Unguaranteed residual values accruing to the lessor’s benefit 1,082  1,323 
Total net investment in sales-type and direct financing leases $ 8,321  $ 10,054 
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 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) Sales-type and Direct Financing Leases Operating Leases
2024 $ 3,069  $ 138 
2025 2,182  110 
2026 1,333  66 
2027 690  42 
2028 260  27 
Thereafter 369  57 
Total lease payments 7,903  $ 440 
Amounts representing interest (664)
Lease receivables $ 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) 2023 2022 2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases $ 409  $ 294  $ 288 
Operating cash flows from finance leases 7  4  5 
Financing cash flows from finance leases 49  14  12 
Right of use assets obtained in exchange for new operating lease liabilities 230  239  164 
Right of use assets obtained in exchange for new finance lease liabilities 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:
  2023 2022
Weighted-average remaining lease term of operating leases (in years) 6.4 6.8
Weighted-average remaining lease term of finance leases (in years) 8.3 8.5
Weighted-average discount rate of operating leases 3.7  % 3.3  %
Weighted-average discount rate of finance leases 7.7  % 7.9  %
The contractual future lease obligations of the Company at December 31, 2023, were as follows:
(Dollars in Millions) Operating Leases Finance
Leases
2024 $ 377  $ 41 
2025 295  38 
2026 245  36 
2027 196  22 
2028 144  8 
Thereafter 360  23 
Total lease payments 1,617  168 
Amounts representing interest (211) (18)
Lease liabilities $ 1,406  $ 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
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
96 U.S. Bancorp 2023 Annual Report

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 3,619  2,416 
Maximum exposure to loss 9,002  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) 2023 2022
Land $ 515  $ 535 
Buildings and improvements 3,239  3,296 
Furniture, fixtures and equipment 3,013  3,485 
Right of use assets on operating leases 1,149  1,296 
Right of use assets on finance leases 275  269 
Construction in progress 68  46 
8,259  8,927 
Less accumulated depreciation and amortization (4,636) (5,069)
Total $ 3,623  $ 3,858 
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
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) 2023 2022 2021
Balance at beginning of period $ 3,755  $ 2,953  $ 2,210 
Rights purchased 5  156  42 
Rights capitalized 373  590  1,136 
Rights sold(a)
 (440) (255) 2 
Changes in fair value of MSRs
Due to fluctuations in market interest rates(b)
 66  804  272 
Due to revised assumptions or models(c)
 12  (29) (196)
Other changes in fair value(d)
 (394) (464) (513)
Balance at end of period $ 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) Down
 100 bps 		Down
 50 bps 		Down
 25 bps 		Up
 25 bps 		Up
 50 bps 		Up
 100 bps		 Down
 100 bps 		Down
 50 bps 		Down
 25 bps 		Up
 25 bps		 Up
 50 bps		 Up
 100 bps
MSR portfolio $ (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) HFA Government
Conventional(d)
Total HFA Government
Conventional(d)
 Total
Servicing portfolio(a)
 $ 48,286  $ 25,996  $ 151,056  $ 225,338  $ 44,071  $ 23,141  $ 172,541  $ 239,753 
Fair value $ 769  $ 507  $ 2,101  $ 3,377  $ 725  $ 454  $ 2,576  $ 3,755 
Value (bps)(b)
 159  195  139  150  165  196  149  157 
Weighted-average servicing fees (bps) 36  44  26  30  36  42  27  30 
Multiple (value/servicing fees) 4.45  4.41  5.41  5.00  4.56  4.69  5.52  5.20 
Weighted-average note rate 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) 10.5  % 11.1  % 9.1  % 9.6  % 7.4  % 8.5  % 7.8  % 7.8  %
Weighted-average expected life (in years) 7.2 6.5 7.0 7.0 8.8 7.6 7.5 7.7
Weighted-average option adjusted spread(c)
 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) 2023 2022
Goodwill $ 12,489  $ 12,373 
Merchant processing contracts 124  155 
Core deposit benefits 2,134  2,706 
Mortgage servicing rights 3,377  3,755 
Trust relationships 41  50 
Other identified intangibles 408  489 
Total $ 18,573  $ 19,528 
Aggregate amortization expense consisted of the following:
Year Ended December 31 (Dollars in Millions) 2023 2022 2021
Merchant processing contracts $ 31  $ 38  $ 45 
Core deposit benefits 481  53  15 
Trust relationships 10  12  10 
Other identified intangibles 114  112  89 
Total $ 636  $ 215  $ 159 

99

The estimated amortization expense for the next five years is as follows:
(Dollars in Millions)  
2024 $ 566 
2025 484 
2026 415 
2027 344 
2028 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) Wealth, Corporate, Commercial and Institutional Banking Consumer and Business Banking Payment Services Treasury and Corporate Support Consolidated Company
Balance at December 31, 2020 $ 3,266  $ 3,475  $ 3,177  $ —  $ 9,918 
Goodwill acquired 144  35  192  —  371 
Foreign exchange translation and other 263  (265) (25) —  (27)
Balance at December 31, 2021 $ 3,673  $ 3,245  $ 3,344  $ —  $ 10,262 
Goodwill acquired 918  1,220  11  —  2,149 
Foreign exchange translation and other (2) —  (36) —  (38)
Balance at December 31, 2022 $ 4,589  $ 4,465  $ 3,319  $ —  $ 12,373 
Goodwill acquired 235  (139) —  —  96 
Foreign exchange translation and other 1  —  19  —  20 
Balance at December 31, 2023 $ 4,825  $ 4,326  $ 3,338  $ —  $ 12,489 
NOTE 12   Deposits
The composition of deposits at December 31 was as follows:
(Dollars in Millions) 2023 2022
Noninterest-bearing deposits $ 89,989  $ 137,743 
Interest-bearing deposits
Interest checking 127,453  134,491 
Money market savings 199,378  148,014 
Savings accounts 43,219  71,782 
Time deposits 52,273  32,946 
Total interest-bearing deposits 422,323  387,233 
Total deposits $ 512,312  $ 524,976 
The maturities of time deposits outstanding at December 31, 2023 were as follows:
(Dollars in Millions)  
2024 $ 44,570 
2025 6,448 
2026 798 
2027 252 
2028 197 
Thereafter 8 
Total $ 52,273 
100 U.S. Bancorp 2023 Annual Report

NOTE 13 Short-Term Borrowings
Short-term borrowings at December 31 consisted of the following:
(Dollars in Millions) 2023 2022
Federal funds purchased $ 248  $ 226 
Securities sold under agreements to repurchase 3,576  1,431 
Commercial paper 7,773  8,145 
Other short-term borrowings 3,682  21,414 
(a)
Total $ 15,279  $ 31,216 
(a)Balance primarily includes short-term FHLB advances.
NOTE 14 Long-Term Debt
Long-term debt (debt with original maturities of more than one year) at December 31 consisted of the following:
(Dollars in Millions) Rate Type
Rate(a)
Maturity Date 2023 2022
U.S. Bancorp (Parent Company)
Subordinated notes Fixed 3.600  % 2024 $ 1,000  $ 1,000 
Fixed 7.500  % 2026 199  199 
Fixed 3.100  % 2026 1,000  1,000 
Fixed 3.000  % 2029 1,000  1,000 
Fixed 4.967  % 2033 1,300  1,300 
Fixed 2.491  % 2036 1,300  1,300 
Medium-term notes Fixed
.850% - 6.787%
2024 - 2034
 26,618  18,468 
Other(b)
 1,915  2,716 
Subtotal 34,332  26,983 
Subsidiaries
Federal Home Loan Bank advances Fixed
1.860% - 8.250%
2025 - 2026
 9,051  2,051 
Floating
6.080% - 6.100%
2025 - 2026
 3,000  3,000 
Bank notes Fixed
2.050% - 5.550%
2025 - 2032
 2,289  4,800 
Floating
—% - 5.398%
2046 - 2062
 1,324  1,352 
Other(c)
 1,484  1,643 
Subtotal 17,148  12,846 
Total $ 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 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.
Maturities of long-term debt outstanding at December 31, 2023, were:
(Dollars in Millions)
Parent Company
 Consolidated
2024 $ 5,475  $ 6,663 
2025 2,030  6,559 
2026 3,906  13,381 
2027 4,763  4,796 
2028 3,824  3,835 
Thereafter 14,334  16,246 
Total $ 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:
  2023 2022
(Dollars in Millions) Shares
 Issued and
 Outstanding		 Liquidation
 Preference		 Discount Carrying
 Amount		 Shares
 Issued and
 Outstanding		 Liquidation
 Preference		 Discount Carrying
 Amount
Series A 12,510 $ 1,251  $ 145  $ 1,106  12,510 $ 1,251  $ 145  $ 1,106 
Series B 40,000 1,000  —  1,000  40,000 1,000  —  1,000 
Series J 40,000 1,000  7  993  40,000 1,000  7  993 
Series K 23,000 575  10  565  23,000 575  10  565 
Series L 20,000 500  14  486  20,000 500  14  486 
Series M 30,000 750  21  729  30,000 750  21  729 
Series N 60,000 1,500  8  1,492  60,000 1,500  8  1,492 
Series O 18,000 450  13  437  18,000 450  13  437 
Total preferred stock(a)
 243,510 $ 7,026  $ 218  $ 6,808  243,510 $ 7,026  $ 218  $ 6,808 
(a)The par value of all shares issued and outstanding at 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
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
102 U.S. Bancorp 2023 Annual Report

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 1 $ 62 
2022 1 69 
2021 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) Unrealized Gains (Losses) on Investment Securities Available-For-Sale Unrealized Gains (Losses) on Investment Securities Transferred From Available-For-Sale to Held-To-Maturity Unrealized Gains (Losses) on Derivative Hedges Unrealized Gains (Losses) on Retirement Plans Foreign Currency Translation Total
2023            
Balance at beginning of period $ (6,378) $ (3,933) $ (114) $ (939) $ (43) $ (11,407)
Changes in unrealized gains (losses) 1,500  —  (252) (262) —  986 
Foreign currency translation adjustment(a)
 —  —  —  —  21  21 
Reclassification to earnings of realized (gains) losses 145  530  80  (7) —  748 
Applicable income taxes (418) (134) 44  70  (6) (444)
Balance at end of period $ (5,151) $ (3,537) $ (242) $ (1,138) $ (28) $ (10,096)
2022            
Balance at beginning of period $ 540  $ (935) $ (85) $ (1,426) $ (37) $ (1,943)
Changes in unrealized gains (losses) (13,656) —  (75) 526  —  (13,205)
Transfer of securities from available-for-sale to held-to-maturity 4,413  (4,413) —  —  —  — 
Foreign currency translation adjustment(a)
 —  —  —  —  (10) (10)
Reclassification to earnings of realized (gains) losses (20) 400  36  128  —  544 
Applicable income taxes 2,345  1,015  10  (167) 4  3,207 
Balance at end of period $ (6,378) $ (3,933) $ (114) $ (939) $ (43) $ (11,407)
2021            
Balance at beginning of period $ 2,417  $ —  $ (189) $ (1,842) $ (64) $ 322 
Changes in unrealized gains and losses (3,698) —  125  400  —  (3,173)
Transfer of securities from available-for-sale to held-to-maturity 1,289  (1,289) —  —  —  — 
Foreign currency translation adjustment(a)
 —  —  —  —  35  35 
Reclassification to earnings of realized (gains) losses (103) 36  14  157  —  104 
Applicable income taxes 635  318  (35) (141) (8) 769 
Balance at end of period $ 540  $ (935) $ (85) $ (1,426) $ (37) $ (1,943)
(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:
Impact to Net Income Affected Line Item in the Consolidated Statement of Income
(Dollars in Millions) 2023 2022 2021
Unrealized gains (losses) on investment securities available-for-sale
Realized gains (losses) on sale of investment securities $ (145) $ 20  $ 103  Securities gains (losses), net
37  (5) (26) Applicable income taxes
(108) 15  77  Net-of-tax
Unrealized gains (losses) on investment securities transferred from available-for-sale to held-to-maturity
Amortization of unrealized gains (losses) (530) (400) (36) Interest income
134  119  9  Applicable income taxes
(396) (281) (27) Net-of-tax
Unrealized gains (losses) on derivative hedges
Realized gains (losses) on derivative hedges (80) (36) (14) Net interest income
21  9  4  Applicable income taxes
(59) (27) (10) Net-of-tax
Unrealized gains (losses) on retirement plans
Actuarial gains (losses) and prior service cost (credit) amortization 7  (128) (157) Other noninterest expense
(2) 33  40  Applicable income taxes
5  (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:
U.S. Bancorp U.S. Bank National Association
MUFG Union Bank National Association(a)
(Dollars in Millions) 2023 2022 2023 2022 2022
Basel III Standardized Approach:
Common equity tier 1 capital $ 44,947  $ 41,560  $ 58,194  $ 46,681  $ 10,888 
Tier 1 capital 52,199  48,813  58,638  47,127  10,888 
Total risk-based capital 61,921  59,015  68,817  56,736  11,565 
Risk-weighted assets 453,390  496,500  445,829  436,764  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 11.5  9.8  13.2  10.8  18.6 
Total risk-based capital as a percent of risk-weighted assets 13.7  11.9  15.4  13.0  19.7 
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio) 8.1  7.9  9.2  8.1  10.9 
Tier 1 capital as a percent of total on- and off-balance sheet leverage exposure (total leverage exposure ratio) 6.6  6.4  7.5  6.5  10.1 
Minimum(b)
Well- Capitalized
Bank Regulatory Capital Requirements    
Common equity tier 1 capital as a percent of risk-weighted assets 7.0  % 6.5  %
Tier 1 capital as a percent of risk-weighted assets 8.5  8.0 
Total risk-based capital as a percent of risk-weighted assets 10.5  10.0 
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio) 4.0  5.0 
Tier 1 capital as a percent of total on- and off-balance sheet leverage exposure (total leverage exposure ratio)(c)
 3.0  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)
 2023 2022 2021
Net income attributable to U.S. Bancorp $ 5,429  $ 5,825  $ 7,963 
Preferred dividends (350) (296) (303)
Impact of preferred stock call and redemption —  —  (17)
(a)
Earnings allocated to participating stock awards (28) (28) (38)
Net income applicable to U.S. Bancorp common shareholders $ 5,051  $ 5,501  $ 7,605 
Average common shares outstanding 1,543  1,489  1,489 
Net effect of the exercise and assumed purchase of stock awards —  1  1 
Average diluted common shares outstanding 1,543  1,490  1,490 
Earnings per common share $ 3.27  $ 3.69  $ 5.11 
Diluted earnings per common share $ 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) 2023 2022
Change In Projected Benefit Obligation(a)
Benefit obligation at beginning of measurement period $ 6,617  $ 8,030 
Service cost 223  280 
Interest cost 370  248 
Plan amendments (23) 2 
Actuarial (gain) loss 398  (2,250)
Lump sum settlements (94) (76)
Benefit payments (213) (195)
Acquisitions —  578 
Benefit obligation at end of measurement period(b)
 $ 7,278  $ 6,617 
Change In Fair Value Of Plan Assets
Fair value at beginning of measurement period $ 7,375  $ 8,113 
Actual return on plan assets 658  (1,245)
Employer contributions 28  28 
Lump sum settlements (94) (76)
Benefit payments (213) (195)
Acquisitions(c)
 25  750 
Fair value at end of measurement period $ 7,779  $ 7,375 
Funded Status $ 501  $ 758 
Components Of The Consolidated Balance Sheet
Noncurrent benefit asset $ 1,072  $ 1,286 
Current benefit liability (26) (25)
Noncurrent benefit liability (545) (503)
Recognized amount $ 501  $ 758 
Accumulated Other Comprehensive Income (Loss), Pretax
Net actuarial loss $ (1,607) $ (1,326)
Net prior service credit 34  12 
Recognized amount $ (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) 2023 2022
Plans with Projected Benefit Obligations in Excess of Plan Assets
Projected benefit obligation $ 571  $ 528 
Fair value of plan assets —  — 
Plans with Accumulated Benefit Obligations in Excess of Plan Assets
Accumulated benefit obligation $ 530  $ 487 
Fair value of plan assets —  — 

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) 2023 2022 2021
Components Of Net Periodic Pension Cost
Service cost $ 223  $ 280  $ 265 
Interest cost 370  248  219 
Expected return on plan assets (546) (481) (450)
Prior service credit amortization (1) (2) (2)
Actuarial loss amortization 5  140  169 
Net periodic pension cost $ 51  $ 185  $ 201 
Other Changes In Plan Assets And Benefit Obligations Recognized In Other Comprehensive Income (Loss)
Net actuarial (loss) gain arising during the year $ (286) $ 523  $ 398 
Net actuarial loss amortized during the year 5  140  169 
Net prior service credit (cost) arising during the year 23  (2) — 
Net prior service credit amortized during the year (1) (2) (2)
Total recognized in other comprehensive income (loss) $ (259) $ 659  $ 565 
Total recognized in net periodic pension cost and other comprehensive income (loss) $ (310) $ 474  $ 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:
2023 2022
Discount rate 5.12  % 5.55  %
Cash balance interest crediting rate 3.04  3.36 
Rate of compensation increase(a)
 3.72  4.13 
(a)Determined on an active liability-weighted basis.
The following table sets forth weighted-average assumptions used to determine net periodic pension cost for the years ended December 31:
2023 2022 2021
Discount rate 5.55  % 3.00  % 2.75  %
Cash balance interest crediting rate 3.36  3.00  3.00 
Expected return on plan assets(a)
 6.75  6.50  6.50 
Rate of compensation increase(b)
 4.13  3.56  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:
2023 2022
(Dollars in Millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Cash and cash equivalents $ 68  $ —  $ —  $ 68  $ 202  $ —  $ —  $ 202 
Debt securities —  —  —  —  961  855  —  1,816 
Mutual funds
Debt securities —  —  —  —  —  382  —  382 
Emerging markets equity securities —  —  —  —  —  156  —  156 
Other —  —  —  —  —  —  6  6 
  $ 68  $ —  $ —  68 $ 1,163  $ 1,393  $ 6  2,562
Plan investment assets not classified in fair value hierarchy(a):
Collective investment funds
Domestic equity securities 1,546  1,494 
Domestic mid-small cap equity securities 406  313 
International equity securities 981  620 
Domestic real estate securities 142  144 
Fixed income 2,295  — 
Real estate funds(b)
 746  763 
Hedge funds(c)
 412  451 
Private equity funds(d)
 1,183  1,028 
Total plan investment assets at fair value $ 7,779  $ 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:
  2023 2022 2021
(Dollars in Millions) Other Other Other
Balance at beginning of period $ 6  $ 4  $ 6 
Unrealized gains (losses) relating to assets still held at end of year —  2  (2)
Purchases, sales, and settlements, net (6) —  — 
Balance at end of period $ —  $ 6  $ 4 
The following benefit payments are expected to be paid from the pension plans for the years ended December 31:
(Dollars in Millions)
2024 $ 332 
2025 383 
2026 391 
2027 416 
2028 430 
2029-2033 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
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.
Stock Option Awards
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 Stock
 Options/Shares		 Weighted- Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in millions)
 
2023
Number outstanding at beginning of period 3,253,090  $ 44.42 
Exercised (399,329) 38.15 
Cancelled(a)
 (15,476) 47.88 
Number outstanding at end of period(b)
 2,838,285  $ 45.28  2.0 $ — 
Exercisable at end of period 2,838,285  $ 45.28  2.0 $ — 
2022
Number outstanding at beginning of period 3,890,131  $ 42.58 
Exercised (624,729) 32.87 
Cancelled(a)
 (12,312) 50.97 
Number outstanding at end of period(b)
 3,253,090  $ 44.42  2.7 $ — 
Exercisable at end of period 3,253,090  $ 44.42  2.7 $ — 
2021
Number outstanding at beginning of period 5,180,391  $ 40.38 
Exercised (1,281,646) 33.66 
Cancelled(a)
 (8,614) 48.20 
Number outstanding at end of period(b)
 3,890,131  $ 42.58  3.3 $ 53 
Exercisable at end of period 3,890,131  $ 42.58  3.3 $ 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) 2023 2022 2021
Fair value of options vested $ —  $ —  $ 3 
Intrinsic value of options exercised 2  15  27 
Cash received from options exercised 15  21  43 
Tax benefit realized from options exercised 1  4  7 
Additional information regarding stock options outstanding as of December 31, 2023, is as follows:
  Outstanding Options Exercisable Options
Range of Exercise Prices Shares Weighted- Average Remaining Contractual Life (Years) Weighted- Average Exercise Price Shares Weighted- Average Exercise Price
$35.01—$40.00
 1,008,046 2.1 $ 39.49  1,008,046 $ 39.49 
$40.01—$45.00
 988,880 0.8 42.95  988,880 42.95 
$45.01—$50.00
 — — — — — 
$50.01—$55.01
 841,359 3.1 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:
  2023 2022 2021
Year Ended December 31 Shares Weighted-Average Grant-Date Fair Value Shares Weighted-Average Grant-Date Fair Value Shares Weighted-Average Grant-Date Fair Value
Outstanding at beginning of period 6,880,826  $ 52.59  6,812,753  $ 51.04  6,343,313  $ 51.38 
Granted 5,565,634  45.87  4,109,793  55.62  4,512,995  52.54 
Vested (3,872,874) 52.05  (3,690,666) 52.88  (3,793,978) 53.27 
Cancelled (257,015) 50.00  (351,054) 54.95  (249,577) 52.83 
Outstanding at end of period 8,316,571  $ 48.42  6,880,826  $ 52.59  6,812,753  $ 51.04 
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 $ 1,434  $ 1,366  $ 1,203 
Deferred (326) (108) 469 
Federal income tax 1,108  1,258  1,672 
State      
Current 482  401  398 
Deferred (183) (196) 111 
State income tax 299  205  509 
Total income tax provision $ 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) 2023 2022 2021
Tax at statutory rate $ 1,442  $ 1,533  $ 2,135 
State income tax, at statutory rates, net of federal tax benefit 322  305  439 
Tax effect of      
Tax credits and benefits, net of related expenses (272) (273) (331)
Tax-exempt income (142) (121) (114)
Revaluation of tax related assets and liabilities(a)
 15  (79) — 
Nondeductible legal and regulatory expenses 76  37  24 
Other items (34) 61  28 
Applicable income taxes $ 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) 2023 2022 2021
Balance at beginning of period $ 513  $ 487  $ 474 
Additions for tax positions taken in prior years 141  35  14 
Additions for tax positions taken in the current year 3  3  7 
Exam resolutions (302) (8) (1)
Statute expirations (5) (4) (7)
Balance at end of period $ 350  $ 513  $ 487 

114 U.S. Bancorp 2023 Annual Report

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) 2023 2022
Deferred Tax Assets    
Securities available-for-sale and financial instruments $ 3,231  $ 3,992 
Federal, state and foreign net operating loss, credit carryforwards and other carryforwards 2,836  2,677 
Allowance for credit losses 2,051  1,980 
Loans 1,013  1,287 
Accrued expenses 838  618 
Obligation for operating leases 348  368 
Partnerships and other investment assets 271  112 
Stock compensation 87  81 
Other deferred tax assets, net 370  501 
Gross deferred tax assets 11,045  11,616 
Deferred Tax Liabilities
Leasing activities (1,455) (1,813)
Goodwill and other intangible assets (1,450) (1,575)
Mortgage servicing rights (758) (815)
Right of use operating leases (301) (325)
Pension and postretirement benefits (115) (172)
Fixed assets (44) (125)
Other deferred tax liabilities, net (168) (234)
Gross deferred tax liabilities (4,291) (5,059)
Valuation allowance (364) (263)
Net Deferred Tax Asset $ 6,390  $ 6,294 
The Company has approximately $2.7 billion of federal, 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.
At December 31, 2023, retained earnings included 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:
  2023 2022
 
Notional Value
 Fair Value
Notional Value
 Fair Value
(Dollars in Millions) Assets Liabilities Assets Liabilities
Fair value hedges            
Interest rate contracts            
Receive fixed/pay floating swaps $ 12,100  $ —  $ 16  $ 17,400  $ —  $ 9 
Pay fixed/receive floating swaps 24,139  —  —  5,542  —  — 
Cash flow hedges            
Interest rate contracts            
Receive fixed/pay floating swaps 18,400  —  —  14,300  —  — 
Net investment hedges            
Foreign exchange forward contracts 854  —  10  778  —  — 
Other economic hedges            
Interest rate contracts            
Futures and forwards            
Buy 5,006  29  5  3,546  10  18 
Sell 4,501  7  34  7,522  20  38 
Options            
Purchased 6,085  237  —  11,434  346  — 
Written 3,696  14  75  7,849  7  148 
Receive fixed/pay floating swaps 7,029  9  3  9,215  —  3 
Pay fixed/receive floating swaps 3,801  —  —  9,616  —  — 
Foreign exchange forward contracts 734  2  5  962  2  6 
Equity contracts 227  2  —  361  —  10 
Credit contracts 2,620  1  —  330  —  — 
Other (a)
 2,136  11  93  1,908  11  190 
Total $ 91,328  $ 312  $ 241  $ 90,763  $ 396  $ 422 
(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:
  2023 2022
 
Notional Value
 Fair Value
Notional Value
 Fair Value
(Dollars in Millions) Assets Liabilities Assets Liabilities
Interest rate contracts            
Receive fixed/pay floating swaps $ 363,375  $ 791  $ 4,395  $ 301,690  $ 309  $ 5,689 
Pay fixed/receive floating swaps 330,539  1,817  280  316,133  2,323  206 
Other(a)
 82,209  17  51  40,261  3  16 
Options            
Purchased 102,423  1,026  18  103,489  1,794  5 
Written 97,690  20  1,087  99,923  6  1,779 
Futures            
Buy —  —  —  3,623  —  4 
Sell —  —  —  2,376  8  — 
Foreign exchange rate contracts            
Forwards, spots and swaps 121,119  2,252  1,942  134,666  3,010  2,548 
Options            
Purchased 1,532  28  —  954  22  — 
Written 1,532  —  28  954  —  22 
Commodity contracts
Swaps 2,498 116 110 — — —
Options
Purchased 1,936 151 — — — —
Written 1,936 — 151 — — —
Credit contracts 13,053  1  6  10,765  1  8 
Total $ 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:

  Gains (Losses) Recognized in Other Comprehensive Income (Loss) Gains (Losses) Reclassified from Other Comprehensive Income (Loss) into Earnings
(Dollars in Millions) 2023 2022 2021 2023 2022 2021
Asset and Liability Management Positions    
  
Cash flow hedges    
  
Interest rate contracts $ (187) $ (56) $ 94  $ (59) $ (27) $ (10)
Net investment hedges    
  
      
Foreign exchange forward contracts (11) 42  19  —  —  — 
Non-derivative debt instruments (33) 59  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:
  Interest Income Interest Expense
(Dollars in Millions) 2023 2022 2021 2023 2022 2021
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 $ 30,007  $ 17,945  $ 13,487  $ 12,611  $ 3,217  $ 993 
Asset and Liability Management Positions       
Fair value hedges             
Interest rate contract derivatives (430) 138  17  (458) 482  232 
Hedged items 427  (139) (19) 461  (486) (232)
Cash flow hedges             
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:
  Carrying Amount of the Hedged Assets and Liabilities
Cumulative Hedging Adjustment (a)
(Dollars in Millions) 2023 2022 2023 2022
Line Item in the Consolidated Balance Sheet        
Available-for-sale investment securities(b)
 $ 11,795  $ 4,937  $ (448) $ (552)
Long-term debt 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.


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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) Location of Gains (Losses) Recognized in Earnings 2023 2022 2021
Asset and Liability Management Positions        
Other economic hedges        
Interest rate contracts        
Futures and forwards Mortgage banking revenue $ 71  $ 407  $ 511 
Purchased and written options Mortgage banking revenue 89  1  527 
Swaps Mortgage banking revenue/Other noninterest income/Interest expense (19) (1,010) (197)
Foreign exchange forward contracts Other noninterest income (7) (1) 1 
Equity contracts Compensation expense (8) (8) 7 
Other Other noninterest income 1  (181) 5 
Customer-Related Positions        
Interest rate contracts        
Swaps Commercial products revenue 185  98  110 
Purchased and written options Commercial products revenue 45  20  (5)
Futures Commercial products revenue (1) 30  3 
Foreign exchange rate contracts        
Forwards, spots and swaps Commercial products revenue 195  100  93 
Purchased and written options Commercial products revenue 1  1  1 
Commodity contracts
Swaps Commercial products revenue 6  —  — 
Credit contracts Commercial products revenue 1  20  (7)
Derivatives are subject to credit risk associated with counterparties to the derivative contracts. The Company measures that credit risk using a credit valuation adjustment and includes it within the fair value of the derivative. The Company manages counterparty credit risk through diversification of its derivative positions among various counterparties, by entering into derivative positions that are centrally cleared through clearinghouses, by entering into master netting arrangements and, where possible, by requiring collateral arrangements. A master netting arrangement allows two counterparties, who have multiple derivative contracts with each other, the ability to net settle amounts under all contracts, including any related collateral, through a single payment and in a single currency. Collateral arrangements generally require the counterparty to deliver collateral (typically cash or U.S. Treasury and agency securities) equal to the Company’s net derivative receivable, subject to minimum transfer and credit rating requirements.

The Company’s collateral arrangements are predominately bilateral and, therefore, contain provisions that require collateralization of the Company’s net liability derivative positions. Required collateral coverage is based on net liability thresholds and may be contingent upon the Company’s credit rating from two of the nationally recognized statistical rating organizations. If the Company’s credit rating were to fall below credit ratings thresholds established in the collateral arrangements, the counterparties to the derivatives could request immediate additional collateral coverage up to and including full collateral coverage for derivatives in a net liability position. The aggregate fair value of all derivatives under collateral arrangements that were in a net liability position at 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.
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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.
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The following table summarizes the maturities by category of collateral pledged for repurchase agreements and securities loaned transactions:
(Dollars in Millions)
Overnight and Continuous
 Less Than 30 Days
30-89 Days
 Greater Than 90 Days Total
December 31, 2023
Repurchase agreements
U.S. Treasury and agencies $ 2,375  $ —  $ —  $ —  $ 2,375 
Residential agency mortgage-backed securities 338  —  —  —  338 
Corporate debt securities 821  —  —  —  821 
Asset-backed securities —  45  —  —  45 
Total repurchase agreements 3,534  45  —  —  3,579 
Securities loaned
Corporate debt securities 290  —  —  —  290 
Total securities loaned 290  —  —  —  290 
Gross amount of recognized liabilities $ 3,824  $ 45  $ —  $ —  $ 3,869 
December 31, 2022
Repurchase agreements
U.S. Treasury and agencies $ 147  $ —  $ —  $ —  $ 147 
Residential agency mortgage-backed securities 846  —  —  —  846 
Corporate debt securities 439  —  —  —  439 
Total repurchase agreements 1,432  —  —  —  1,432 
Securities loaned
Corporate debt securities 120  —  —  —  120 
Total securities loaned 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)
Gross Recognized Assets
Gross Amounts Offset on the Consolidated Balance Sheet(a)
 Net Amounts Presented on the Consolidated Balance Sheet Gross Amounts Not Offset on the Consolidated Balance Sheet
Financial Instruments(b)
Collateral Received(c)
Net Amount
December 31, 2023
Derivative assets(d)
 $ 6,504  $ (3,666) $ 2,838  $ (141) $ (3) $ 2,694 
Reverse repurchase agreements 2,513  —  2,513  (568) (1,941) 4 
Securities borrowed 1,802  —  1,802  (14) (1,717) 71 
Total $ 10,819  $ (3,666) $ 7,153  $ (723) $ (3,661) $ 2,769 
December 31, 2022
Derivative assets(d)
 $ 7,852  $ (5,427) $ 2,425  $ (231) $ (80) $ 2,114 
Reverse repurchase agreements 107  —  107  (102) (5) — 
Securities borrowed 1,606  —  1,606  —  (1,548) 58 
Total $ 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)
Gross Recognized Liabilities
Gross Amounts Offset on the Consolidated Balance Sheet(a)
 Net Amounts Presented on the Consolidated Balance Sheet Gross Amounts Not Offset on the Consolidated Balance Sheet Net Amount
Financial Instruments(b)
Collateral Pledged(c)
December 31, 2023
Derivative liabilities(d)
 $ 8,217  $ (3,720) $ 4,497  $ (141) $ —  $ 4,356 
Repurchase agreements 3,579  —  3,579  (568) (3,008) 3 
Securities loaned 290  —  290  (14) (270) 6 
Total $ 12,086  $ (3,720) $ 8,366  $ (723) $ (3,278) $ 4,365 
December 31, 2022
Derivative liabilities(d)
 $ 10,506  $ (4,551) $ 5,955  $ (231) $ —  $ 5,724 
Repurchase agreements 1,432  —  1,432  (102) (1,325) 5 
Securities loaned 120  —  120  —  (118) 2 
Total $ 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.
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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
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
124 U.S. Bancorp 2023 Annual Report

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.
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The following table shows the significant valuation assumption ranges for MSRs at December 31, 2023:
  Minimum Maximum
Weighted- Average(a)
Expected prepayment 7  % 23  % 10  %
Option adjusted spread 4  11  5 
(a)Determined based on the relative fair value of the related mortgage loans serviced.
Derivatives The Company has two distinct Level 3 derivative portfolios: (i) the Company’s commitments to purchase and originate mortgage loans that meet the requirements of a derivative and (ii) the Company’s asset/liability and customer-related derivatives that are Level 3 due to unobservable inputs related to measurement of risk of nonperformance by the counterparty. In addition, the Company’s Visa swaps are classified within Level 3.
The significant unobservable inputs used in the fair value measurement of the Company’s derivative commitments to purchase and originate mortgage loans are the percentage
of commitments that actually become a closed loan and the MSR value that is inherent in the underlying loan value. A significant increase in the rate of loans that close would have resulted in a larger derivative asset or liability. A significant increase in the inherent MSR value would have resulted in an increase in the derivative asset or a reduction in the derivative liability. Expected loan close rates and the inherent MSR values are directly impacted by changes in market rates and will generally move in the same direction as interest rates.
The following table shows the significant valuation assumption ranges for the Company’s derivative commitments to purchase and originate mortgage loans at December 31, 2023:
  Minimum Maximum
Weighted- Average(a)
Expected loan close rate 17  % 99  % 74  %
Inherent MSR value (basis points per loan) 48  177  97 
(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
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) Level 1 Level 2 Level 3 Netting Total
December 31, 2023          
Available-for-sale securities          
U.S. Treasury and agencies $ 14,787  $ 4,755  $ —  $ —  $ 19,542 
Mortgage-backed securities          
Residential agency —  26,078  —  —  26,078 
Commercial          
Agency —  7,343  —  —  7,343 
Non-agency —  6  —  —  6 
Asset-backed securities —  6,724  —  —  6,724 
Obligations of state and political subdivisions —  9,989  —  —  9,989 
Other —  24  —  —  24 
Total available-for-sale 14,787  54,919  —  —  69,706 
Mortgage loans held for sale —  2,011  —  —  2,011 
Mortgage servicing rights —  —  3,377  —  3,377 
Derivative assets —  5,078  1,453  (3,666) 2,865 
Other assets 550  1,991  —  —  2,541 
Total $ 15,337  $ 63,999  $ 4,830  $ (3,666) $ 80,500 
Time deposits $ —  $ 2,818  $ —  $ —  $ 2,818 
Derivative liabilities 16  4,955  3,338  (3,720) 4,589 
Short-term borrowings and other liabilities(a)
 517  1,786  —  —  2,303 
Total $ 533  $ 9,559  $ 3,338  $ (3,720) $ 9,710 
December 31, 2022          
Available-for-sale securities          
U.S. Treasury and agencies $ 13,723  $ 8,310  $ —  $ —  $ 22,033 
Mortgage-backed securities          
Residential agency —  29,271  —  —  29,271 
Commercial
Agency —  7,145  —  —  7,145 
Non-agency —  7  —  —  7 
Asset-backed securities —  4,323  —  —  4,323 
Obligations of state and political subdivisions —  10,124  1  —  10,125 
Other —  6  —  —  6 
Total available-for-sale 13,723  59,186  1  —  72,910 
Mortgage loans held for sale —  1,849  —  —  1,849 
Mortgage servicing rights —  —  3,755  —  3,755 
Derivative assets 9  6,608  1,255  (5,427) 2,445 
Other assets 248  1,756  —  —  2,004 
Total $ 13,980  $ 69,399  $ 5,011  $ (5,427) $ 82,963 
Derivative liabilities $ 4  $ 6,241  $ 4,454  $ (4,551) $ 6,148 
Short-term borrowings and other liabilities(a)
 125  1,564  —  —  1,689 
Total $ 129  $ 7,805  $ 4,454  $ (4,551) $ 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.
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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:
(Dollars in Millions)
Beginning of Period Balance
 Net Gains (Losses) Included in Net Income   Net Gains (Losses) Included in Other Comprehensive Income (Loss) Purchases Sales
Principal Payments
Issuances   Settlements
End of Period Balance
 Net Change in Unrealized Gains (Losses) Relating to Assets and Liabilities Held at End of Period
2023                          
Available-for-sale securities                          
Obligations of state and political subdivisions $ 1  $ —    $ —  $ —  $ —  $ (1) $ —    $ —  $ —  $ —   
Total available-for-sale 1  —    —  —  —  (1) —    —  —  —   
Mortgage servicing rights 3,755  (316)
(a)
—  5  (440) —  373 
(c)
—  3,377  (316)
(a)
Net derivative assets and liabilities (3,199) (2,696)
(b)
—  552  (45) —  1    3,502  (1,885) (183)
(d)
2022                          
Available-for-sale securities                          
Asset-backed securities $ 7  $ —    $ (3) $ —  $ (4) $ —  $ —    $ —  $ —  $ —   
Obligations of state and political subdivisions 1  —    —  —  —  —  —    —  1  —   
Total available-for-sale 8  —    (3) —  (4) —  —    —  1  —   
Mortgage servicing rights 2,953  311 
(a)
—  156  (255) —  590 
(c)
 —  3,755  311 
(a)
Net derivative assets and liabilities 799  (5,940)
(e)
 —  716  (36) —  11    1,251  (3,199) (3,538)
(f)
2021                          
Available-for-sale securities                          
Asset-backed securities $ 7  $ —    $ 1  $ —  $ —  $ (1) $ —    $ —  $ 7  $ 1   
Obligations of state and political subdivisions 1  —    —  —  —  —  —    —  1  —   
Total available-for-sale 8  —    1  —  —  (1) —    —  8  1   
Mortgage servicing rights 2,210  (437)
(a)
—  42  2  —  1,136 
(c)
—  2,953  (437)
(a)
Net derivative assets and liabilities 2,326  (924)
(g)
 —  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:
  2023 2022
(Dollars in Millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Loans(a)
 $ —  $ —  $ 354  $ 354  $ —  $ —  $ 97  $ 97 
Other assets(b)
 —  —  27  27  —  —  21  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.
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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) 2023 2022 2021
Loans(a)
 $ 368  $ 40  $ 60 
Other assets(b)
 32  20  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:
  2023 2022
(Dollars in Millions) Fair Value Carrying Amount Contractual Principal Outstanding Carrying Amount Over (Under) Contractual Principal Outstanding Fair Value Carrying Amount Contractual Principal Outstanding Carrying Amount Over (Under) Contractual Principal Outstanding
Total loans(a)
 $ 2,011  $ 1,994  $ 17  $ 1,849  $ 1,848  $ 1 
Time deposits 2,818  2,822  (4) —  —  — 
(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:
  2023 2022
 
Carrying Amount
 Fair Value
Carrying Amount
 Fair Value
(Dollars in Millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
 
Financial Assets                    
Cash and due from banks $ 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)
 190  —  —  190  190  351  —  —  351  351 
Loans 366,456  —  —  362,849  362,849  381,277  —  —  368,874  368,874 
Other(b)
 2,377  —  1,863  514  2,377  2,962  —  2,224  738  2,962 
Financial Liabilities                    
Time deposits(c)
 49,455  —  49,607  —  49,607  32,946  —  32,338  —  32,338 
Short-term borrowings(d)
 12,976  —  12,729  —  12,729  29,527  —  29,145  —  29,145 
Long-term debt 51,480  —  49,697  —  49,697  39,829  —  37,622  —  37,622 
Other(e)
 5,432  —  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.
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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
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  
(Dollars in Millions)
Less Than One Year
 Greater Than One Year Total
Commercial and commercial real estate loans $ 43,385  $ 137,155  $ 180,540 
Corporate and purchasing card loans(a)
 34,943  —  34,943 
Residential mortgages 114  —  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 —  —  5 
Securities lending indemnifications 6,924  —  6,679 
Asset sales —  106  10,263 
Merchant processing 815  71  140,288 
Tender option bond program guarantee 607  —  589 
Other —  21  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
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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:
  Term  
(Dollars in Millions)
Less Than One Year
 Greater Than One Year Total
Standby $ 6,444  $ 4,555  $ 10,999 
Commercial 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.
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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
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
132 U.S. Bancorp 2023 Annual Report

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
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.
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
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,
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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 4,143  3,561  1,662  1,536  4,056 
(a)
 3,794 
(a)
Total net revenue 10,272  8,774  9,993  8,300  6,758  6,298 
Noninterest expense 5,183  4,135  6,964  5,779  3,772  3,525 
Income (loss) before provision and income taxes 5,089  4,639  3,029  2,521  2,986  2,773 
Provision for credit losses 334  154  79  75  1,394  980 
Income (loss) before income taxes 4,755  4,485  2,950  2,446  1,592  1,793 
Income taxes and taxable-equivalent adjustment 1,190  1,122  738  612  398  449 
Net income (loss) 3,565  3,363  2,212  1,834  1,194  1,344 
Net (income) loss attributable to noncontrolling interests —  —  —  —  —  — 
Net income (loss) attributable to U.S. Bancorp $ 3,565  $ 3,363  $ 2,212  $ 1,834  $ 1,194  $ 1,344 
 
Average Balance Sheet
Loans $ 175,780  $ 150,512  $ 161,862  $ 144,441  $ 38,471  $ 34,627 
Other earning assets 6,615  4,771  2,388  3,117  97  634 
Goodwill 4,682  3,634  4,466  3,250  3,327  3,305 
Other intangible assets 1,007  365  5,265  3,784  350  423 
Assets 202,642  169,554  179,103  160,174  44,292  41,072 
Noninterest-bearing deposits 70,977  82,671  31,082  31,719  2,981  3,410 
Interest-bearing deposits 199,780  175,345  189,148  163,190  103  162 
Total deposits 270,757  258,016  220,230  194,909  3,084  3,572 
Total U.S. Bancorp shareholders’ equity 22,362  18,159  16,016  12,678  9,310  8,233 
 
  Treasury and Corporate Support Consolidated Company
(Dollars in Millions) 2023 2022 2023 2022
Condensed Income Statement        
Net interest income (taxable-equivalent basis) $ 365  $ 365  $ 17,527  $ 14,846 
Noninterest income 756  565  10,617 
(b)
 9,456 
(b)
Total net revenue 1,121  930  28,144  24,302 
Noninterest expense 2,954  1,467  18,873  14,906 
Income (loss) before provision and income taxes (1,833) (537) 9,271  9,396 
Provision for credit losses 468  768  2,275  1,977 
Income (loss) before income taxes (2,301) (1,305) 6,996  7,419 
Income taxes and taxable-equivalent adjustment (788) (602) 1,538  1,581 
Net income (loss) (1,513) (703) 5,458  5,838 
Net (income) loss attributable to noncontrolling interests (29) (13) (29) (13)
Net income (loss) attributable to U.S. Bancorp $ (1,542) $ (716) $ 5,429  $ 5,825 
 
Average Balance Sheet
Loans $ 5,162  $ 3,993  $ 381,275  $ 333,573 
Other earning assets 214,824  203,248  223,924  211,770 
Goodwill —  —  12,475  10,189 
Other intangible assets 17  5  6,639  4,577 
Assets 237,403  221,349  663,440  592,149 
Noninterest-bearing deposits 2,728  2,594  107,768  120,394 
Interest-bearing deposits 8,864  3,293  397,895  341,990 
Total deposits 11,592  5,887  505,663  462,384 
Total U.S. Bancorp shareholders’ equity 5,972  11,346  53,660  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.
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NOTE 25 U.S. Bancorp (Parent Company)
Condensed Balance Sheet
At December 31 (Dollars in Millions) 2023 2022
Assets    
Due from banks, principally interest-bearing $ 11,585  $ 5,288 
Available-for-sale investment securities 662  672 
Investments in bank subsidiaries 61,495  59,202 
Investments in nonbank subsidiaries 3,884  3,575 
Advances to bank subsidiaries 12,100  9,100 
Advances to nonbank subsidiaries 159  150 
Other assets 974  1,101 
Total assets $ 90,859  $ 79,088 
Liabilities and Shareholders’ Equity
Long-term debt $ 34,332  $ 26,983 
Other liabilities 1,221  1,339 
Shareholders’ equity 55,306  50,766 
Total liabilities and shareholders’ equity $ 90,859  $ 79,088 
Condensed Income Statement
Year Ended December 31 (Dollars in Millions) 2023 2022 2021
Income      
Dividends from bank subsidiaries $ 4,869  $ 4,750  $ 7,000 
Dividends from nonbank subsidiaries 11  105  2 
Interest from subsidiaries 606  119  112 
Other income 51  31  46 
Total income 5,537  5,005  7,160 
Expense      
Interest expense 1,336  505  348 
Other expense 137  162  154 
Total expense 1,473  667  502 
Income before income taxes and equity in undistributed income of subsidiaries 4,064  4,338  6,658 
Applicable income taxes (170) (138) (53)
Income of parent company 4,234  4,476  6,711 
Equity in undistributed income of subsidiaries 1,195  1,349  1,252 
Net income attributable to U.S. Bancorp $ 5,429  $ 5,825  $ 7,963 
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Condensed Statement of Cash Flows
Year Ended December 31 (Dollars in Millions) 2023 2022 2021
Operating Activities      
Net income attributable to U.S. Bancorp $ 5,429  $ 5,825  $ 7,963 
Adjustments to reconcile net income to net cash provided by operating activities      
Equity in undistributed income of subsidiaries (1,195) (1,349) (1,252)
Other, net 83  (398) (85)
Net cash provided by operating activities 4,317  4,078  6,626 
Investing Activities      
Proceeds from sales and maturities of investment securities 25  423  200 
Investments in subsidiaries —  (5,030) — 
Net (increase) decrease in short-term advances to subsidiaries (9) 557  411 
Long-term advances to subsidiaries (7,500) (2,000) (7,000)
Principal collected on long-term advances to subsidiaries 4,500  2,500  1,250 
Cash paid for acquisition —  (5,500) — 
Other, net 172  (173) (269)
Net cash used in investing activities (2,812) (9,223) (5,408)
Financing Activities      
Proceeds from issuance of long-term debt 8,150  8,150  1,300 
Principal payments or redemption of long-term debt (936) (2,300) (3,000)
Proceeds from issuance of preferred stock —  437  2,221 
Proceeds from issuance of common stock 951  21  43 
Repurchase of preferred stock —  (1,100) (1,250)
Repurchase of common stock (62) (69) (1,555)
Cash dividends paid on preferred stock (341) (299) (308)
Cash dividends paid on common stock (2,970) (2,776) (2,579)
Net cash provided by (used in) financing activities 4,792  2,064  (5,128)
Change in cash and due from banks 6,297  (3,081) (3,910)
Cash and due from banks at beginning of year 5,288  8,369  12,279 
Cash and due from banks at end of year $ 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.
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U.S. Bancorp
Consolidated Daily Average Balance Sheet and Related Yields and Rates(a) (Unaudited)
2023 2022 2021
Year Ended December 31
(Dollars in Millions)
 
Average
Balances
 Interest
Yields
and
Rates
Average
Balances
Interest
Yields
and
Rates
 
 
Average
Balances
 Interest
Yields
and
Rates
Assets
Investment securities $ 162,757  $ 4,566  2.81  % $ 169,442  $ 3,457  2.04  % $ 154,702  $ 2,434  1.57  %
Loans held for sale 2,461  147  5.98  3,829  201  5.26  8,024  232  2.89 
Loans(b)
Commercial 134,883  8,662  6.42  123,797  4,340  3.51  102,855  2,684  2.61 
Commercial real estate 54,646  3,384  6.19  41,098  1,655  4.03  38,781  1,219  3.14 
Residential mortgages 115,922  4,305  3.71  84,749  2,775  3.27  74,629  2,477  3.32 
Credit card 26,570  3,429  12.91  23,478  2,583  11.00  21,645  2,278  10.52 
Other retail 49,254  2,599  5.28  60,451  2,292  3.79  59,055  2,126  3.60 
Total loans 381,275  22,379  5.87  333,573  13,645  4.09  296,965  10,784  3.63 
Interest-bearing deposits with banks 49,000  2,581  5.27  31,425  559  1.78  39,914  42  .10 
Other earning assets 9,706  471  4.85  7,074  204  2.89  6,536  101  1.55 
Total earning assets 605,199  30,144  4.98  545,343  18,066  3.31  506,141  13,593  2.69 
Allowance for loan losses (7,138) (5,880) (6,326)
Unrealized gain (loss) on investment securities (7,985) (6,914) 1,174 
Other assets 73,364  59,600  55,543 
Total assets $ 663,440  $ 592,149  $ 556,532 
Liabilities and Shareholders’ Equity
Noninterest-bearing deposits $ 107,768  $ 120,394  $ 127,204 
Interest-bearing deposits
Interest checking 129,341  1,334  1.03  117,471  277  .24  103,198  24  .02 
Money market savings 166,272  5,654  3.40  126,221  1,220  .97  117,093  199  .17 
Savings accounts 55,590  90  .16  67,722  10  .02  62,294  7  .01 
Time deposits 46,692  1,697  3.63  30,576  365  1.19  24,492  90  .37 
Total interest-bearing deposits 397,895  8,775  2.21  341,990  1,872  .55  307,077  320  .10 
Short-term borrowings
Federal funds purchased 435  21  4.72  687  8  1.12  1,507  2  .10 
Securities sold under agreements to repurchase 3,103  125  4.04  2,037  20  1.00  1,790  2  .13 
Commercial paper 7,800  268  3.44  7,186  69  .96  7,228  1  .01 
Other short-term borrowings 22,803  1,563  6.85  15,830  471  2.98  4,249  65  1.54 
Total short-term borrowings 34,141  1,977  5.79  25,740  568  2.21  14,774  70  .47 
Long-term debt 44,142  1,865  4.22  33,114  780  2.35  36,682  603  1.64 
Total interest-bearing liabilities 476,178  12,617  2.65  400,844  3,220  .80  358,533  993  .28 
Other liabilities 25,369  20,029  16,353 
Shareholders’ equity
Preferred equity 6,808  6,761  6,255 
Common equity 46,852  43,655  47,555 
Total U.S. Bancorp shareholders’ equity 53,660  50,416  53,810 
Noncontrolling interests 465  466  632 
Total equity 54,125  50,882  54,442 
Total liabilities and equity $ 663,440  $ 592,149  $ 556,532 
Net interest income $ 17,527  $ 14,846  $ 12,600 
Gross interest margin 2.33  % 2.51  % 2.41  %
Gross interest margin without taxable-equivalent increments 2.31  % 2.49  % 2.39  %
Percent of Earning Assets
Interest income 4.98  % 3.31  % 2.69  %
Interest expense 2.08  .59  .20 
Net interest margin 2.90  % 2.72  % 2.49  %
Net interest margin without taxable-equivalent increments 2.88  % 2.70  % 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 2023 2022 2021
Earnings per common share $ 3.27  $ 3.69  $ 5.11 
Diluted earnings per common share 3.27 3.69 5.10
Dividends declared per common share 1.93 1.88 1.76
Other Statistics (Dollars and Shares in Millions)
Common shares outstanding(a)
 1,558 1,531 1,484
Average common shares outstanding and common stock equivalents
Earnings per common share 1,543  1,489  1,489 
Diluted earnings per common share 1,543  1,490  1,490 
Number of shareholders(b)
 29,094 30,280 31,111
Common dividends declared $ 3,000  $ 2,829  $ 2,630 
(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.
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.
1003
139

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
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
140 U.S. Bancorp 2023 Annual Report

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.
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
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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
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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
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
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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
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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.

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
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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
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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
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,
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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
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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
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.

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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
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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
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
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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
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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.
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.
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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.
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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
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
156 U.S. Bancorp 2023 Annual Report

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
Metropolitan Economic Development Association (Meda)
(Economic Development)
Elizabeth L. Buse2,6
Former Chief Executive Officer
Monitise plc
(Financial services)
Alan B. Colberg2,5
Retired President and Chief Executive Officer
Assurant, Inc.
(Financial services and specialty insurance)
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)

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,
Consumer Chief Marketing Officer
Microsoft Corporation
(Technology)
Loretta E. Reynolds6
Founder and Chief Executive Officer
LEReynolds Group, LLC
(Information Technology)
John P. Wiehoff6
Retired Chairman and Chief Executive Officer
C.H. Robinson Worldwide, Inc.
(Transportation and logistics services)
Scott W. Wine1,3,4
Chief Executive Officer
CNH Industrial N.V.
(Agricultural machinery)

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
EX-21 6 ex-21subsidiariesoftheregi.htm EX-21 Document

EXHIBIT 21
SUBSIDIARIES OF U.S. BANCORP
(JURISDICTIONS OF ORGANIZATION SHOWN IN PARENTHESES)

111 Tower Investors, Inc. (Minnesota)
Banctech Processing Services, LLC (Florida)
Bento Technologies, Inc. (Delaware)
BondResource Partners, LLC (Pennsylvania)
BondResource Partners, LP (Delaware)
CenPOS, LLC (Florida)
Collateral Title Co. (Delaware)
DM Liens Inc. (Delaware)
DSL Service Company (California)
Eclipse Funding LLC (Delaware)
EFS Depositary Nominees Limited (Ireland)
Elavon Canada Company (Canada)
Elavon Digital (GB) Limited (United Kingdom)
Elavon Digital Europe Limited (United Kingdom)
Elavon European Holdings B.V. (Ireland)
Elavon Financial Services DAC (Ireland)
Elavon Latin American Holdings, LLC (Delaware)
Elavon Puerto Rico, Inc. (Puerto Rico)
Elavon, Inc. (Georgia)
Fairfield Financial Group, Inc. (Illinois)
Finn Title Co. (Delaware)
First Bank LaCrosse Building Corp. (Wisconsin)
First LaCrosse Properties (Wisconsin)
First Payment System Holdings, Inc. (Florida)
First Payment Systems, LLC (Florida)
Firstar Capital Corporation (Ohio)
Firstar Development, LLC (Delaware)
Firstar Realty, L.L.C. (Illinois)
Fixed Income Client Solutions LLC (Delaware)
FSV Payment Systems, Inc. (Delaware)
HighMark Capital Management, Inc. (California)
HTD Leasing LLC (Delaware)
HVT, Inc. (Delaware)
Integrated Logistics, LLC (Georgia)


Mercantile Mortgage Financial Company (Illinois)
Midwest Indemnity Inc. (Vermont)
Mississippi Valley Company (Arizona)
MMCA Lease Services, Inc. (Delaware)
Norse Nordics AB (Sweden)
NuMaMe, LLC (Delaware)
One Eleven Investors LLC (Delaware)
Park Bank Initiatives, Inc. (Illinois)
PFM Asset Management LLC (Delaware)
PFM Financial Services LLC (Delaware)
PFM Fund Distributors, Inc. (Pennsylvania)
Pomona Financial Services, Inc. (California)
Pullman Transformation, Inc. (Delaware)
Red Sky Risk Services, LLC (Delaware)
RTRT, Inc. (Delaware)
Rushmore Loan Solutions, LLC (Delaware)
SCBD, LLC (Delaware)
SCDA, LLC (Delaware)
SCFD LLC (Delaware)
SFS Lien Agent, LLC (Delaware)
Syncada Asia Pacific Private Limited (Singapore)
Syncada Canada ULC (Canada)
Syncada India Operations Private Limited (India)
Syncada LLC (Delaware)
Talech Belize Limited (Belize)
Talech International Limited (Ireland)
Talech Lithuania, UAB (Lithuania)
Talech, Inc. (Delaware)
Tarquad Corporation (Missouri)
The Miami Valley Insurance Company (Arizona)
TLT Leasing Corp. (Delaware)
TMTT, Inc. (Delaware)
Travelator Inc. (Delaware)
U.S. Bancorp Advisors, LLC (Delaware)
U.S. Bancorp Asset Management, Inc. (Delaware)
U.S. Bancorp Community Development Corporation (Minnesota)
U.S. Bancorp Community Investment Corporation (Delaware)
U.S. Bancorp Fund Services, LLC (Wisconsin)
U.S. Bancorp Government Leasing and Finance, Inc. (Minnesota)


U.S. Bancorp Insurance Company, Inc. (Vermont)
U.S. Bancorp Insurance Services, LLC (Wisconsin)
U.S. Bancorp Investments, Inc. (Delaware)
U.S. Bancorp Missouri Low-Income Housing Tax Credit Fund, L.L.C. (Missouri)
U.S. Bancorp Municipal Lending and Finance, Inc. (Minnesota)
U.S. Bank Global Corporate Trust Limited (United Kingdom)
U.S. Bank Global Fund Services (Cayman) Limited (Cayman Islands)
U.S. Bank Global Fund Services (Guernsey) Limited (Guernsey)
U.S. Bank Global Fund Services (Ireland) Limited (Ireland)
U.S. Bank Global Fund Services (Luxembourg) S.a.r.l. (Luxembourg)
U.S. Bank National Association (a nationally chartered banking association)
U.S. Bank Trust Company, National Association (a nationally chartered banking association)
U.S. Bank Trust National Association (a nationally chartered banking association)
U.S. Bank Trust National Association SD (a nationally chartered banking association)
U.S. Bank Trustees Limited (United Kingdom)
UBOC Community Development Corporation (California)
UnionBanCal Mortgage Corporation (California)
USB Americas Holdings Company (Delaware)
USB Capital IX (Delaware)
USB European Holdings Company (Delaware)
USB Investment Services (Holdings) Limited (Ireland)
USB Leasing LLC (Delaware)
USB Leasing LT (Delaware)
USB Nominees (GCT) Limited (Ireland)
USB Nominees (UK) Limited (United Kingdom)
USB Realty Corp. (Delaware)
USB Securities Data Services Limited (Ireland)
USB Service Company Holdings, Inc. (Delaware)
USBCDE, LLC (Delaware)
VT Inc. (Alabama)
Wideworld Payment Solutions, LLC (Florida)

EX-23 7 ex-23consentofernstyoungllp.htm EX-23 Document

 
Exhibit 23
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
 
Form
Registration
Statement No.
Purpose 
S-3 333-270467
Shelf Registration Statement
S-8 333-74036
U.S. Bancorp 2001 Stock Incentive Plan
S-8 333-100671
U.S. Bancorp 401(k) Savings Plan
S-8 333-203620
U.S. Bancorp 2015 Stock Incentive Plan
S-8 333-142194
Various benefit plans of U.S. Bancorp
S-8 333-166193
Various benefit plans of U.S. Bancorp
S-8 333-189506
Various benefit plans of U.S. Bancorp
S-8 333-195375
Various benefit plans of U.S. Bancorp
S-8 333-227999
Various benefit plans of U.S. Bancorp
S-8 333-268116
Various benefit plans of U.S. Bancorp
of our reports dated February 20, 2024, with respect to the consolidated financial statements of U.S. Bancorp and the effectiveness of internal control over financial reporting of U.S. Bancorp, included in this 2023 Annual Report to Shareholders of U.S. Bancorp, which is incorporated by reference in this Annual Report (Form 10-K) of U.S. Bancorp for the year ended December 31, 2023.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
February 20, 2024
 


EX-24 8 ex-24powerofattorney.htm EX-24 Document

Exhibit 24

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned directors of U.S. Bancorp, a Delaware corporation, hereby makes, constitutes and appoints Andrew Cecere and James L. Chosy, and each of them acting individually, his or her true and lawful attorney-in-fact and agent, with power to act without any other, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead in any and all capacities, to sign one or more Annual Reports for the Company’s fiscal year ended December 31, 2023 on Form 10-K under the Securities Exchange Act of 1934, as amended, or such other form as any such attorney-in-fact may deem necessary or desirable, any amendments or supplements thereto, and all additional amendments or supplements thereto, each in such form as they or any one of them may approve, and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done so that such Annual Report shall comply with the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations adopted or issued pursuant thereto, as fully and to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitute or resubstitute, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, each of the undersigned has set his or her hand this 23rd day of January, 2024.


/s/ Warner L. Baxter /s/ Roland A. Hernandez
Warner L. Baxter Roland A. Hernandez
/s/ Dorothy J. Bridges /s/ Richard P. McKenney
Dorothy J. Bridges Richard P. McKenney
/s/ Elizabeth L. Buse /s/ Yusuf I. Mehdi
Elizabeth L. Buse Yusuf I. Mehdi
/s/ Alan B. Colberg /s/ Loretta E. Reynolds
Alan B. Colberg Loretta E. Reynolds
/s/ Kimberly N. Ellison-Taylor /s/ John P. Wiehoff
Kimberly N. Ellison-Taylor John P. Wiehoff
/s/ Kimberly J. Harris /s/ Scott W. Wine
Kimberly J. Harris Scott W. Wine


EX-31.1 9 ex-311certificationofchief.htm EX-31.1 Document

EXHIBIT 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Andrew Cecere, certify that:
(1)I have reviewed this Annual Report on Form 10-K of U.S. Bancorp;
(2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4)The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(5)The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ ANDREW CECERE
Andrew Cecere
Dated: February 20, 2024 Chief Executive Officer

EX-31.2 10 ex-312certificationofchief.htm EX-31.2 Document

EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, John C. Stern, certify that:
(1)I have reviewed this Annual Report on Form 10-K of U.S. Bancorp;
(2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4)The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(5)The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ JOHN C. STERN
 
John C. Stern
Dated: February 20, 2024 Chief Financial Officer

EX-32 11 ex-32certificationofchiefe.htm EX-32 Document

EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Chief Executive Officer and Chief Financial Officer of U.S. Bancorp, a Delaware corporation (the “Company”), do hereby certify that:
(1)The Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Form 10-K”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ ANDREW CECERE /s/ JOHN C. STERN
Andrew Cecere John C. Stern
Chief Executive Officer Chief Financial Officer
Dated: February 20, 2024

EX-97 12 ex-97incentivexbasedcompen.htm EX-97 Document

Exhibit 97
U.S. BANCORP
INCENTIVE-BASED COMPENSATION RECOVERY POLICY
dated as of December 1, 2023

1.Purpose. This U.S. Bancorp Incentive Compensation Recovery Policy (this “Policy”) applies to U.S. Bancorp (the “Company”) and its subsidiaries and is designed to implement a mandatory incentive-based compensation recovery policy in compliance with applicable U.S. Securities and Exchange Commission (“SEC”) and New York Stock Exchange (“NYSE”) rules.
2.Administration. This Policy shall be administered in the sole discretion of the Compensation and Human Resources Committee (the “Committee”) of the Company’s Board of Directors (the “Board”). The Committee shall have the discretion to interpret the Policy and make all determinations with respect to this Policy, consistent with applicable law and this Policy. Any interpretations and determinations made by the Committee shall be final and binding on all affected individuals. Without limiting the foregoing, this Policy shall be interpreted in a manner that is consistent with the requirements of the Applicable Rules, and compliance with this Policy shall not be waived by the Committee, the Board or the Company in any respect. Subject to any limitation under the Applicable Rules, the Committee may authorize and empower any officer or employee of the Company or its subsidiaries to take any and all actions necessary or appropriate to carry out the purposes and intent of this Policy (other than with respect to any recovery under this Policy involving such officer or employee).
3.Defined Terms. The following capitalized terms used in this Policy have the following meanings:

(a)“Applicable Rules” means Section 10D of the Securities Exchange Act of 1934, as amended, and Rule 10D-1 promulgated thereunder and Section 303A.14 of the NYSE Listed Company Manual.
(b)“Accounting Restatement” means an accounting restatement required to be prepared by the Company due to a material noncompliance of the Company with any financial reporting requirement under the securities laws, including (i) any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or (ii) that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
(c)“Effective Date” means October 2, 2023, which is the effective date of the Applicable Rules.
(d)“Erroneously Awarded Compensation” has the meaning set forth in Section 5 of this Policy.
1


(e)“Executive Officer” means any person who is or was designated by the Board as an “executive officer” of the Company as set forth in Section 303A.14 of the NYSE Listed Company Manual and under applicable SEC rules.
(f)“Financial Reporting Measures” means (i) measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measures that are derived wholly or in part from such measures, (ii) the Company’s stock price, and (iii) total shareholder return in respect of the Company. A “Financial Reporting Measure” need not be presented within the financial statements or included in a filing with the SEC.
(g)“Incentive-Based Compensation” means any compensation that is granted, earned, or vested, based wholly or in part upon the attainment of a Financial Reporting Measure.
(h)“Received” means, with respect to any Incentive-Based Compensation, actual or deemed receipt and any Incentive-Based Compensation shall be deemed “Received” in the Company’s fiscal period during which the Financial Reporting Measure applicable to the Incentive-Based Compensation award is attained, even if the payment or grant of the Incentive-Based Compensation occurs after the end of that period.
(i)“Recovery Period” means, with respect to any Accounting Restatement, the three completed fiscal years immediately preceding the Restatement Date and any transition period (that results from a change in the Company’s fiscal year) of less than nine months within or immediately following those three completed fiscal years.
(j)“Restatement Date” means the date on which the Company is required to prepare an Accounting Restatement, which date is the earlier of (i) the date the Board, a committee of the Board, or the officer or officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement or (ii) a date that a court, regulator or other legally authorized body directs the Company to prepare an Accounting Restatement.
4.Recovery of Erroneously Awarded Compensation. In the event of an Accounting Restatement, the Company shall reasonably promptly recover from an Executive Officer the amount of any Erroneously Awarded Compensation that is Received by such Executive Officer during the Recovery Period. The amount of “Erroneously Awarded Compensation” subject to recovery under the Policy, as determined by the Committee, is the amount of Incentive-Based Compensation Received by the Executive Officer that exceeds the amount of Incentive-Based Compensation that would have been Received by the Executive Officer had it been determined based on the restated results, without respect to any tax liabilities incurred or paid by the Executive Officer; provided, however, that for Incentive-Based Compensation based on the Company’s stock price or total shareholder return, where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in the Accounting Restatement: (i) the amount to be repaid or returned shall be determined by the Committee based on a reasonable estimate of the effect of the Accounting Restatement on the Company’s stock price or total shareholder return upon which the Incentive-Based Compensation was Received; and (ii) the Company shall maintain documentation of the determination of such reasonable estimate and provide the relevant documentation as required to the NYSE.
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5.Coverage and Application. This Policy covers all persons who are Executive Officers at any time during the Recovery Period for which Incentive-Based Compensation is Received or during the performance period applicable to such Incentive-Based Compensation. Incentive-Based Compensation shall not be recovered under this Policy to the extent Received by any person before the date the person served as an Executive Officer. Subsequent changes in an Executive Officer’s employment status, including retirement or termination of employment, do not affect the Company’s right to recover Incentive-Based Compensation pursuant to this Policy.
This Policy shall apply to Incentive-Based Compensation that is Received by any Executive Officer on or after the Effective Date and that results from attainment of a Financial Reporting Measure based on or derived from financial information for any fiscal period ending on or after the Effective Date.
Recovery of any Erroneously Awarded Compensation under this Policy is not dependent on fraud or misconduct by any Executive Officer in connection with a Restatement.
6.Methods of Recovery; Limited Exceptions. The Committee shall determine, in its sole discretion, the method of recovering any Erroneously Awarded Compensation pursuant to this Policy, consistent with applicable law. In the event of an Accounting Restatement contemplated by this Policy, to the extent permitted by applicable law, the Company shall, as determined by the Committee in its sole discretion, take any such actions as it deems necessary or appropriate to recover Erroneously Awarded Compensation. The actions may include, without limitation (and as applicable):

(a)forfeit, reduce or cancel any Erroneously Awarded Compensation (whether vested or unvested) that has not been distributed or otherwise settled;
(b)seek recovery of any Erroneously Awarded Compensation that was previously paid to the Executive Officer;
(c)seek recovery of any amounts realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based Erroneously Awarded Compensation;
(d)recoup any amount in respect of Erroneously Awarded Compensation that was contributed or deferred to a plan that takes into account Erroneously Awarded Compensation (excluding certain tax-qualified plans, but including deferred compensation plans, and supplemental executive retirement plans, and insurance plans) and any earnings accrued on such Erroneously Awarded Compensation;
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(e)offset, withhold or eliminate any compensation that could be paid or awarded to the Executive Officer after the date of determination; and
(f)take any other remedial and recovery action permitted by law, as determined by the Committee.
In addition, in the event that an Executive Officer fails to repay or reimburse Erroneously Awarded Compensation that is subject to recovery, the Committee may require such individual to reimburse the Company for any and all expenses reasonably incurred (including legal fees) by the Company in recovering Erroneously Awarded Compensation under this Policy.
No recovery shall be required if any of the following conditions are met and the Committee determines that, on such basis, recovery would be impracticable:

(a)the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered; provided that prior to making a determination that it would be impracticable to recover any Incentive-Based Compensation based on the expense of enforcement, the Company shall (i) have made a reasonable attempt to recover the Incentive-Based Compensation, (ii) have documented such reasonable attempts to recover, and (iii) provide the documentation to the NYSE;
(b)recovery would violate home country law where that law was adopted prior to November 28, 2022; provided that, prior to making a determination that it would be impracticable to recover any Incentive-Based Compensation based on a violation of home country law, the Company shall (i) have obtained an opinion of home country counsel, acceptable to the NYSE, that recovery would result in such violation, and (ii) provide a copy of such opinion to the NYSE; or
(c)recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees, to fail to meet the requirements of Section 401(a)(13) or Section 411(a) of the Internal Revenue Code of 1986, as amended, and U.S. Treasury regulations promulgated thereunder.
7.Reporting; Disclosure; Monitoring. The Company shall make all required disclosures and filings with the SEC and NYSE with respect to this Policy in accordance with the requirements of the Applicable Rules, and any other requirements applicable to the Company, including the disclosures required in connection with SEC filings.
8.No Substitution of Rights; Non-Exhaustive Rights. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights that may be available to the Company under any similar policy, or any compensatory or employment agreement, plan or arrangement or any other legal remedies available to the Company under applicable law. This Policy shall not limit the rights of the Company to take any other actions or pursue other remedies that the Company may deem appropriate under the circumstances and under applicable law.
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9.No Indemnification. As required under Applicable Rules relating to this Policy, the Company shall not indemnify any current or former Executive Officer against the loss of erroneously awarded compensation and shall not pay or reimburse any Executive Officer for premiums incurred or paid for any insurance policy to fund such Executive Officer’s potential recovery obligations.
10.Amendment. The Board or the Committee may amend this Policy from time to time in its discretion, subject to any limitations under applicable law or listing standards, including the Applicable Rules.
11.Governing Law. This Policy and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Applicable Rules, shall be governed by and construed in accordance with the laws of the State of Delaware without regard to choice of law principles.

12.Severability. If any provision of this Policy shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of this Policy, but this Policy shall be construed and enforced as if the illegal or invalid provision had never been included in this Policy.

13.Acknowledgement. Each Executive Officer shall sign and return to the Company an acknowledgement in the form attached hereto as Exhibit A pursuant to which the Executive Officer agrees to be bound by, and comply with, the terms and conditions of this Policy.



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Exhibit A

Attestation and Acknowledgement of
U.S. Bancorp Incentive-Based Compensation Recovery Policy

By my signature below, I acknowledge and agree that:

•I have received and read the U.S. Bancorp Incentive-Based Compensation Recovery Policy; and

•I hereby agree to abide by all of the terms of such Policy both during and after my employment with the Company, including, without limitation, by promptly repaying or returning any Erroneously Awarded Compensation to the Company as determined in accordance with such Policy.


Signature: _____________________________________

Printed Name: _________________________________

Date: _________________________________________

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