Table of Contents
Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Form
10-Q
 
☑ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 20212022
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, including zip code)
651-466-3000
(Registrant’s telephone number, including area code)
(not applicable)
(Former name, former address and former fiscal year, if changed since last report)
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 F
Non-Cumulative
Perpetual Preferred Stock, par value $1.00)
USB PrMNew 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 PrPPr
P		 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 PrRNew 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
 
 
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, 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 checkmark 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 is a shell company (as defined in Rule
12b-2
of the Exchange Act).
YES ☐    NO ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Class  Outstanding as of April 30, 20212022
Common Stock, $0.01 Par Value  1,489,677,9421,485,740,142 shares
 
 
 
Table of Contents
Table of Contents and
Form 10-Q
Cross Reference Index
 
Part I — Financial Information
    
1) Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2)
     34 
a) Overview
     34 
b) Statement of Income Analysis
     34 
c) Balance Sheet Analysis
     6 
d) Non-GAAP Financial Measures
     30 
e) Critical Accounting Policies
     32 
f) Controls and Procedures (Item 4)
     32 
2) Quantitative and Qualitative Disclosures About Market Risk/Corporate Risk Profile (Item 3)
     79 
a) Overview
     79 
b) Credit Risk Management
     810 
c) Residual Value Risk Management
     21 
d) Operational Risk Management
     21 
e) Compliance Risk Management
     21 
f) Interest Rate Risk Management
     21 
g) Market Risk Management
     23 
h) Liquidity Risk Management
     24 
i) Capital Management
     2526 
3) Line of Business Financial Review
     27 
4) Financial Statements (Item 1)
     33 
Part II — Other Information
    
1) Legal Proceedings (Item 1)
     7172 
2) Risk Factors (Item 1A)
     7172 
3) Unregistered Sales of Equity Securities and Use of Proceeds (Item 2)
     7172 
4) Exhibits (Item 6)
     7172 
5) Signature
     7273 
6) Exhibits
     7374 
U.S. Bancorp
1
Table of Contents
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995.
This quarterly report on
Form 10-Q
contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements 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, including the following risks and important factorsuncertainties and the risks and uncertainties more fully discussed in the section entitled “Risk Factors” of Exhibit 13 to U.S. Bancorp’s Annual Report on Form
10-K
for the year ended December 31, 2021, which could cause actual results to differ materially from those anticipated. The
COVID-19
pandemic is adversely affecting U.S. Bancorp, its customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit, and increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorp’s results could also be adversely affected by changes in interest rates; further increases in unemployment rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and
non-banks;
civil unrest; the effects of climate change; changes in customer behavior and preferences; breaches in data security, including as a result of work-from-home arrangements; failures to safeguard personal information; the impacts of international hostilities or geopolitical events; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputation risk. In addition, U.S. Bancorp’s proposed acquisition of MUFG Union Bank presents risks and uncertainties, including, among others: the risk that the cost savings, any revenue synergies and other anticipated benefits of the proposed acquisition may not be realized or may take longer than anticipated to be realized; the risk that U.S. Bancorp’s business could be disrupted as a result of the announcement and pendency of the proposed acquisition and diversion of management’s attention from ongoing business operations and opportunities; the possibility that the proposed acquisition, including the integration of MUFG Union Bank, may be more costly or difficult to complete than anticipated; delays in closing the proposed acquisition; and the failure of required governmental approvals to be obtained or any other closing conditions in the definitive purchase agreement to be satisfied.
For discussion of these and other risks that may cause actual results to differ from expectations,those described in forward-looking statements, refer to U.S. Bancorp’s Annual Report on Form
10-K
for the year ended December 31, 2020,2021, on file with the Securities and Exchange Commission, including the sections entitled “Corporate Risk Profile” and “Risk Factors” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. In addition, factors other than these risks also could adversely affect U.S. Bancorp’s results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. 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.
 
U.S. Bancorp
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U.S. Bancorp
Table of Contents
 Table 1
 
   Selected Financial Data
 
 
Three Months Ended
March 31
  
Three Months Ended
March 31
 
(Dollars and Shares in Millions, Except Per Share Data) 2021 2020 Percent
Change		  2022 2021 Percent
Change		 
Condensed Income Statement
   
Condensed Income Statement
 
    
Net interest income
 $3,063  $3,223  (5.0)%  $3,173  $3,063  3.6% 
Taxable-equivalent adjustment (a)
 26  24  8.3  27  26  3.8 
Net interest income (taxable-equivalent basis) (b)
 3,089  3,247  (4.9)  3,200  3,089  3.6 
Noninterest income
 2,381  2,525  (5.7)  2,396  2,381  .6 
Total net revenue
 5,470  5,772  (5.2)  5,596  5,470  2.3 
Noninterest expense
 3,379  3,316  1.9  3,502  3,379  3.6 
Provision for credit losses
 (827)  993  *  112  (827)  * 
Income before taxes
 2,918  1,463  99.5  1,982  2,918  (32.1) 
Income taxes and taxable-equivalent adjustment
 633  284  *  424  633  (33.0) 
Net income
 2,285  1,179  93.8  1,558  2,285  (31.8) 
Net (income) loss attributable to noncontrolling interests
 (5)  (8)  37.5  (1)  (5)  80.0 
Net income attributable to U.S. Bancorp
 $2,280  $1,171  94.7  $1,557  $2,280  (31.7) 
Net income applicable to U.S. Bancorp common shareholders
 $2,175  $1,088  99.9  $1,466  $2,175  (32.6) 
Per Common Share
   
Per Common Share
 
    
Earnings per share
 $1.45  $.72  *%  $.99  $1.45  (31.7)% 
Diluted earnings per share
 1.45  .72  *  .99  1.45  (31.7) 
Dividends declared per share
 .42  .42   —  .46  .42  9.5 
Book value per share (c)
 30.53  30.24  1.0  29.87  30.53  (2.2) 
Market value per share
 55.31  34.45  60.6  53.15  55.31  (3.9) 
Average common shares outstanding
 1,502  1,518  (1.1)  1,485  1,502  (1.1) 
Average diluted common shares outstanding
 1,503  1,519  (1.1)  1,486  1,503  (1.1) 
Financial Ratios
         
Return on average assets
 1.69%  .95%   1.09%  1.69%   
Return on average common equity
 19.0  9.7   12.7  19.0   
Net interest margin (taxable-equivalent basis) (a)
 2.50  2.91   2.44  2.50   
Efficiency ratio (b)
 62.1  58.0   62.8  62.1   
Net charge-offs as a percent of average loans outstanding
 .31  .53   .21  .31   
Average Balances
   
Average Balances
 
    
Loans
 $293,989  $297,657  (1.2)%  $312,966  $293,989  6.5% 
Loans held for sale
 10,032  4,748  *  5,479  10,032  (45.4) 
Investment securities (d)
 145,520  120,843  20.4  174,762  145,520  20.1 
Earning assets
 497,711  447,722  11.2  529,837  497,711  6.5 
Assets
 548,734  494,807  10.9  577,402  548,734  5.2 
Noninterest-bearing deposits
 118,352  74,142  59.6  127,963  118,352  8.1 
Deposits
 426,364  362,804  17.5  454,176  426,364  6.5 
Short-term borrowings
 13,107  20,253  (35.3)  19,038  13,107  45.3 
Long-term debt
 39,463  43,846  (10.0)  32,972  39,463  (16.4) 
Total U.S. Bancorp shareholders’ equity
 52,729  51,146  3.1  53,466  52,729  1.4 
 
     March 31,
2021		 December 31,
2020		         March 31,
2022		 December 31,
2021		    
Period End Balances
   
Period End Balances
 
    
Loans
 $294,427  $297,707  (1.1)%  $318,934  $312,028  2.2% 
Investment securities
 156,003  136,840  14.0  167,247  174,821  (4.3) 
Assets
 553,375  553,905  (.1)  586,517  573,284  2.3 
Deposits
 433,761  429,770  .9  461,546  456,083  1.2 
Long-term debt
 37,419  41,297  (9.4)  32,931  32,125  2.5 
Total U.S. Bancorp shareholders’ equity
 51,678  53,095  (2.7)  51,200  54,918  (6.8) 
Asset Quality
         
Nonperforming assets
 $1,202  $1,298  (7.4)%  $811  $878  (7.6)% 
Allowance for credit losses
 6,960  8,010  (13.1)  6,105  6,155  (.8) 
Allowance for credit losses as a percentage of
period-end
loans
 2.36%  2.69%   1.91%  1.97%   
Capital Ratios
         
Common equity tier 1 capital
 9.9%  9.7%   9.8%  10.0%   
Tier 1 capital
 11.5  11.3   11.5  11.6   
Total risk-based capital
 13.5  13.4   13.4  13.4   
Leverage
 8.4  8.3   8.6  8.6   
Total leverage exposure
 7.4  7.3   7.0  6.9   
Tangible common equity to tangible assets (b)
 6.6  6.9   6.0  6.8   
Tangible common equity to risk-weighted assets (b)
 9.1  9.5   8.0  9.2   
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology (b)
 9.5  9.3    9.5  9.6   
 
*
Not meaningful
(a)
Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.
(b)
See
Non-GAAP
Financial Measures beginning on page 30.
(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.
 
2
U.S. Bancorp		 U.S. Bancorp
3
Table of Contents
Management’s Discussion and Analysis
 
OVERVIEW
Earnings Summary
U.S. Bancorp and its subsidiaries (the “Company”) reported net income attributable to U.S. Bancorp of $2.3$1.6 billion for the first quarter of 2021,2022, or $1.45$0.99 per diluted common share, compared with $1.2$2.3 billion, or $0.72$1.45 per diluted common share, for the first quarter of 2020.2021. Return on average assets and return on average common equity were 1.09 percent and 12.7 percent, respectively, for the first quarter of 2022, compared with 1.69 percent and 19.0 percent, respectively, for the first quarter of 2021, compared with 0.95 percent and 9.7 percent, respectively, for the first quarter of 2020.2021.
Total net revenue for the first quarter of 20212022 was $302$126 million (5.2(2.3 percent) lowerhigher than the first quarter of 2020,2021, reflecting a 5.03.6 percent decreaseincrease in net interest income (4.9 percent on a taxable-equivalent basis) and a 5.70.6 percent decreaseincrease in noninterest income. The decreaseincrease in net interest income from the first quarter of 20202021 was primarily due to the impact of lower interest rates compared with the prior yearhigher loan and higher premium amortization in the investment portfolio related to mortgage refinance activities, partially offset by changes insecurities balances and favorable deposit and funding mix due in part to higher noninterest-bearing deposits, partially offset by lower loan yields and changes in loan mix, as well as higherlower loan fees driven by the impact of loan forgiveness related to the Small Business Administration (“SBA”) Paycheck Protection Program.Program in the first quarter of 2021. The noninterest income decrease was drivenincrease primarily reflected stronger payment services revenue, trust and investment management fees, deposit service charges and treasury management fees, mostly offset by lower mortgage banking revenue deposit service charges, securities gainsas refinancing activities decline, lower commercial products revenue related to capital markets activities and lower other noninterest income, partially offset by improvement in trust and investment management fees and commercial products revenue.income.
Noninterest expense in the first quarter of 20212022 was $63$123 million (1.9(3.6 percent) higher than the first quarter of 2020,2021, reflecting increases in personnelcompensation expense, primarily related to performance-based incentive compensation, as well as technologyprofessional services expense and communications expense, partially offset by lower net occupancy and equipment expense, marketing and business development expense, and other noninterest expense.
The provision for credit losses for the first quarter of 20212022 was $112 million, compared with a benefit of $827 million which was $1.8 billion lower thanfor the first quarter of 2020, reflecting2021. The provision for credit losses in the first quarter of 2022 reflected the impact of improving credit quality, partially offset by loan growth and increasing economic uncertainty. The provision for credit losses for the first quarter of 2021 reflected a decrease in the allowance for credit losses during the first quarteras a result of 2021 primarily due to improving economic conditions.conditions and credit quality. Net charge-offs in the first quarter of 20212022 were $223$162 million, compared with $393$223 million in the first quarter of 2020.2021. 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.
Pending Acquisition
 In September 2021, the Company announced that it entered into a definitive agreement to acquire MUFG Union Bank’s core regional banking franchise from Mitsubishi UFJ Financial Group (“MUFG”), for an expected purchase price of approximately $8.0 billion, including $5.5 billion in cash and approximately 44 million shares of U.S. Bancorp common stock. The transaction excludes the purchase of MUFG Union Bank’s Global Corporate & Investment Bank, certain middle and back office functions, and other assets. MUFG Union Bank currently has approximately 300 branches in California, Washington and Oregon and is expected to add approximately $105 billion in total assets, $58 billion of loans and $90 billion of deposits to the Company’s consolidated balance sheet. Closing of the transaction is subject to customary closing conditions, including regulatory approvals which are not within the Company’s control. The Company expects to close the transaction approximately 45 days after being granted U.S. regulatory approvals. At this time, it is uncertain whether such approvals will be received in time to allow for closing to occur in the first half of 2022; however, the parties continue to make significant progress in planning for closing and integration while awaiting regulatory approvals.
STATEMENT OF INCOME ANALYSIS
Net Interest Income
 Net interest income, on a taxable-equivalent basis, was $3.1$3.2 billion in the first quarter of 2021,2022, representing a decreasean increase of $158$111 million (4.9(3.6 percent) compared with the first quarter of 2020.2021. The decreaseincrease was primarily due to the impact of lower interest rates compared with the prior yearhigher loan and higher premium amortization related toinvestment securities prepayments, partially offset by changes inbalances and favorable deposit and funding mix due in part to higher noninterest-bearing deposits, partially offset by lower loan yields and changes in loan mix, as well as higherlower loan fees.fees driven by the impact of loan forgiveness related to the SBA Paycheck Protection Program in the first quarter of 2021. Average earning assets were $50.0$32.1 billion (11.2(6.5 percent) higher than the first quarter of 2020,2021, reflecting increases of $24.7$29.2 billion (20.4(20.1 percent) in investment securities and $23.7$19.0 billion (96.8(6.5 percent) in other earning assets, including cash balances being maintained for liquidity given the current economic environment, while average loans, decreased $3.7partially offset by a decrease of $11.9 billion (1.2(28.6 percent) due to continued paydowns by corporate customers that accessed the capital markets.in interest-bearing deposits with banks. The net interest margin, on a taxable-equivalent basis, in the first quarter of 20212022 was 2.502.44 percent, compared with 2.912.50 percent in the first quarter of 2020.2021. The decrease in net interest margin from the first quarter of 20202021 was primarily due to the impactmix of aloans and lower yield curve on earning assets, higher premium amortizationloan spreads within the investment portfolio and decisions to maintain higher levels of liquidity,fixed-rate portfolios, partially offset by favorable changes in funding mix and the net benefit of deposit repricing and funding composition and higher loan fees.yield curve. Refer to the “Consolidated Daily Average Balance Sheet and Related Yields and Rates” table for further information on net interest income.
 
U.S. Bancorp
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U.S. Bancorp
Table of Contents
 Table 2
 
   Noninterest Income
 
      
Three Months Ended
March 31
  
Three Months Ended
March 31
 
(Dollars in Millions)      2021   2020   Percent
Change		  2022   2021   
Percent
Change
 
Credit and debit card revenue
Credit and debit card revenue
 
  $336   $304    10.5%  $338   $336    .6% 
Corporate payment products revenue
Corporate payment products revenue
 
   126    145    (13.1)  158    126    25.4 
Merchant processing services
Merchant processing services
 
   318    337    (5.6)  363    318    14.2 
Trust and investment management fees
Trust and investment management fees
 
   444    427    4.0  500    444    12.6 
Deposit service charges
Deposit service charges
 
   161    209    (23.0)  177    161    9.9 
Treasury management fees
Treasury management fees
 
   147    143    2.8  156    147    6.1 
Commercial products revenue
Commercial products revenue
 
   280    246    13.8  266    280    (5.0) 
Mortgage banking revenue
Mortgage banking revenue
 
   299    395    (24.3)  200    299    (33.1) 
Investment products fees
Investment products fees
 
   55    49    12.2  62    55    12.7 
Securities gains (losses), net
Securities gains (losses), net
 
   25    50    (50.0)  18    25    (28.0) 
Other
    190    220    (13.6)  158    190    (16.8) 
Total noninterest income
Total noninterest income
 
  $2,381   $2,525    (5.7)%  $2,396   $2,381    .6% 
 
Average total loans in the first quarter of 20212022 were $3.7$19.0 billion (1.2(6.5 percent) lowerhigher than the first quarter of 2020.2021. The decreaseincrease was primarily due to lowergrowth in commercial loans (3.7(11.4 percent), residential mortgages (3.0 percent) and other retail loans (8.8 percent). The increase in commercial loans was primarily due to higher utilization driven by continued paydowns byworking capital needs of corporate customers that accessedand slower payoffs given higher volatility in the capital markets, lower credit cardas well as core growth, partially offset by expected reductions related to the forgiveness of loans (11.3 percent)in the SBA Paycheck Protection Program. The increase in residential mortgages was driven by higher customer payment rates, lower commercial real estate loans (3.2 percent) reflecting customer paydownsstronger
on-balance
sheet loan activities and a decreaseslower refinance activity. The increase in new loan origination activity, and lower total other retail loans (0.2 percent). The decrease in total other retail loans reflected the net impact ofwas driven by auto and recreational vehicle lending during 2021, partially offset by lower home equity and second mortgages (18.7 percent) as more customers chose to refinance their existing first lien residential mortgage balances during the prior year due to the low interest rate environment, partially offset by higher other retail loans (9.5 percent) driven by growth in installment loans due to the impact of
COVID-19
on recreational vehicle sales. The decrease in average total loans was further offset by growth in residential mortgages (6.1 percent) driven by loan repurchases from the Government National Mortgage Association (“GNMA”).mortgages.
Average investment securities in the first quarter of 20212022 were $24.7$29.2 billion (20.4(20.1 percent) higher than the first quarter of 2020,2021, primarily due to purchases of mortgage-backed and U.S. Treasury and state and political securities, net of prepayments, sales and maturities.
Average total deposits for the first quarter of 20212022 were $63.6$27.8 billion (17.5(6.5 percent) higher than the first quarter of 2020, including approximately $10 billion related to2021. Average total savings deposits for the acquisition of deposit balances from State Farm Bank in the fourthfirst quarter of 2020.2022 were $20.6 billion (7.3 percent) higher than the first quarter of 2021, driven by increases in Consumer and Business Banking, and Corporate and Commercial Banking balances, partially offset by a decrease in Wealth Management and Investment Services balances. Average noninterest-bearing deposits were $44.2$9.6 billion (59.6(8.1 percent) higher than the prior year, reflecting increases across all business lines.primarily due to higher Corporate and Commercial Banking, and Wealth Management and Investment Services balances. Average total savingstime deposits were $33.7$2.4 billion (13.6(8.8 percent) higherlower than the prior year, primarily driven by increasesdecreases in Consumer and Business Banking, and Wealth Management and Investment Services balances, partially offset by a decreasean increase in Corporate and Commercial Banking balances. The growthChanges in average noninterest-bearing and total savings deposits was primarily a result of the actions by the federal government to increase liquidity in the financial system, customers maintaining balance sheet liquidity by utilizing existing credit facilities and government stimulus programs. Average time deposits for the first quarter of 2021 were $14.4 billion (34.8 percent) lower than the first quarter of 2020,are primarily driven by decreases inrelated to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.
Provision for Credit Losses
 The provision for credit losses was $112 million for the first quarter of 2021 was2022, compared with a benefit of $827 million representing a decrease of $1.8 billion fromfor the first quarter of 2020.2021. The decreaseprovision for credit losses in the first quarter of 2022 reflected factors affectingthe impact of improving credit quality, partially offset by loan growth and increasing economic conditions duringuncertainty associated with rising inflation and geopolitical tensions. The provision for credit losses in the first quarter of 2021 includingreflected the enactment of additional benefits from government stimulus programs and widespread vaccine availability, contributing to economic improvement during the period, which resulted in a significant decrease in the United States and reduced levels of new
COVID-19
cases.allowance for credit losses. Net charge-offs decreased $170$61 million (43.3(27.4 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020, primarily due to lower commercial, credit card2021, reflecting improvement across most loan categories, associated with strong asset values and other retail loan net charge-offs.borrower liquidity. 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.
Noninterest Income
 Noninterest income was $2.4 billion in the first quarter of 2022, representing an increase of $15 million (0.6 percent) compared with the first quarter of 2021. The increase from a year ago reflected strong payment services revenue, growth in trust and investment management fees, improving deposit service charges and higher treasury management fees, mostly offset by lower commercial products revenue, mortgage banking revenue and other noninterest income. Payment services revenue increased $79 million (10.1 percent) as corporate payment products revenue increased $32 million (25.4 percent) primarily due to higher sales volume, while merchant processing services revenue increased $45 million
 
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 Table 3
 
   Noninterest Expense
 
  
Three Months Ended
March 31
  
Three Months Ended
March 31
 
(Dollars in Millions)  2021 2020 Percent
Change		  2022 2021 
Percent
Change
 
Compensation
  $1,803  $1,620  11.3%  $1,853  $1,803  2.8% 
Employee benefits
   384  352  9.1  396  384  3.1 
Net occupancy and equipment
   263  276  (4.7)  269  263  2.3 
Professional services
   98  99  (1.0)  114  98  16.3 
Marketing and business development
   48  74  (35.1)  80  48  66.7 
Technology and communications
   359  289  24.2  349  359  (2.8) 
Postage, printing and supplies
   69  72  (4.2)  72  69  4.3 
Other intangibles
   38  42  (9.5)  47  38  23.7 
Other
   317  492  (35.6)  322  317  1.6 
Total noninterest expense
  $3,379  $3,316  1.9%  $3,502  $3,379  3.6% 
Efficiency ratio (a)
   62.1%  58.0%    62.8%  62.1%   
 
(a)
See
Non-GAAP
Financial Measures beginning on page 30.
 
(14.2 percent) driven by higher sales volumes and merchant fees. Trust and investment management fees increased $56 million (12.6 percent) driven by business growth, favorable market conditions and activity related to the fourth quarter of 2021 acquisition of PFM Asset Management LLC (“PFM”), partially offset by higher fee waivers. Deposit service charges increased $16 million (9.9 percent) primarily due to higher customer spend activity, net of the impact of the elimination of certain consumer
Noninterest Incomenon-sufficient
 Noninterest income was $2.4 billionfunds fees in the first quarter of 2021, representing a decrease of $1442022. Treasury management fees increased $9 million (5.7(6.1 percent), compared with primarily due to core growth given the first quarter of 2020. The decrease from a year ago reflected lower mortgage banking revenue, deposit service charges, securities gains and other noninterest income, partially offset by higher commercial products revenue and trust and investment management fees.continued recovery in the economy. Mortgage banking revenue decreased $96$99 million (24.3(33.1 percent) due to declineslower application volume, given declining refinance activities, and lower related gain on sale margins, partially offset by increases in mortgage servicing rights (“MSRs”) valuations, net of hedging activities, as well as higher performing loan sales. Commercial products revenue decreased $14 million (5.0 percent) primarily due to lower corporate bond fees and trading revenue within the capital markets business. Other noninterest income decreased $32 million (16.8 percent) driven by the impact of prepayments on the servicing portfolio, partially offset by higher production volumeprior year asset sales and related gain on sale margins compared with the prior year. Deposit service charges decreased $48 million (23.0 percent) primarily due to lower consumer spending activities and higher consumer deposit levels related to government stimulus. Other noninterest income decreased $30 million (13.6 percent) primarily due to lowerretail leasing
end-of-term
residual gains on sales of certain businesses and
tax-advantaged
investment syndication revenue in the first quarter of 2021, partially offset by higher retail leasing end of term residual gains. Commercial products revenue increased $34 million (13.8 percent) primarily due to better market conditions and higher
non-yield
loan fees on unused commitments, while trust and investment management fees increased $17 million (4.0 percent) driven by business growth and favorable market conditions. During the past year, payment services revenue has been adversely affected by the impact of the
COVID-19
pandemic on consumer spending, particularly related to travel and entertainment activities. However, consumer spending continues to strengthen across most sectors driven by government stimulus, local jurisdictions reducing restrictions and consumer behaviors normalizing. As a result, payment services revenue was essentially flat compared with the first quarter of 2020. The components of payment services revenue included higher credit and debit card revenue of $32 million (10.5 percent) driven by higher net interchange revenue related to sales volumes and higher prepaid fees as a result of government stimulus programs. This increase in payment services revenue was more than offset by lower corporate payment products revenue of $19 million (13.1 percent) primarily due to lower business spending related to travel and entertainment as well as lower merchant processing services revenue of $19 million (5.6 percent) driven by lower sales volume and merchant fees.
2022.
Noninterest Expense
 Noninterest expense was $3.4$3.5 billion in the first quarter of 2021,2022, representing an increase of $63$123 million (1.9(3.6 percent) over the first quarter of 2020.2021. The increase from the prior year reflected higher compensation expense, employee benefitsprofessional services expense and technologymarketing and communicationsbusiness development expense. Compensation expense increased $50 million (2.8 percent) primarily due to merit increases and hiring to support business growth, partially offset by lower marketing and business development expense, net occupancy and equipment expense, and other noninterest expense. Compensationperformance-based incentives. Professional services expense increased $183$16 million (11.3 percent) due to merit increases, higher revenue-related compensation driven by business production within mortgage banking, and higher performance-based incentives and stock-based compensation. Employee benefits expense increased $32 million (9.1(16.3 percent) primarily due to higher payroll taxesan increase in business investment and related benefits, as well as higher medical claims expense compared with the first quarter of 2020. Technology and communications expense increased $70 million (24.2 percent) primarily due to higher call center volume related to prepaid cards and capital expenditures supporting business technology investments. Other noninterest expense decreased $175 million (35.6 percent) primarily due to higher
COVID-19
related accruals in the first quarter of 2020 including recognizing liabilities related to future delivery exposures related to merchant and airline processing.initiatives. Marketing and business development expense decreased $26increased $32 million (35.1(66.7 percent) due to a reduction inthe timing of marketing campaigns as well as increased travel as a result of
COVID-19,
while net occupancy and equipment expense decreased $13 million (4.7 percent) primarily due to branch closures.entertainment.
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Income Tax Expense
 The provision for income taxes was $397 million (an effective rate of 20.3 percent) for the first quarter of 2022, compared with $607 million (an effective rate of 21.0 percent) for the first quarter of 2021, compared with $260 million (an effective rate of 18.1 percent) for the first quarter of 2020. The increase in the tax rate is due to the marginal impact of providing taxes on higher pretax earnings in the first quarter of 2021. For further information on income taxes, refer to Note 1112 of the Notes to Consolidated Financial Statements.
BALANCE SHEET ANALYSIS
Loans
 The Company’s loan portfolio was $294.4$318.9 billion at March 31, 2021,2022, compared with $297.7$312.0 billion at December 31, 2020, a decrease2021, an increase of $3.3$6.9 billion (1.1(2.2 percent). The decreaseincrease was driven by lowerhigher commercial loans and residential mortgages, credit card loans and commercial real estate loans, partially offset by higher commerciallower credit card loans and other retail loans.
Commercial loans increased $5.4 billion (4.9 percent) at March 31, 2022, compared with December 31, 2021, due to higher utilization driven by working capital needs of corporate customers and slower payoffs given higher volatility in the capital markets, as well as core growth.
Residential mortgages held in the loan portfolio decreased $2.5increased $2.0 billion (3.3(2.6 percent) at March 31, 2021,2022, compared with December 31, 2020,2021, due to customers paying down balances in the first quarter of 2021.stronger
on-balance
sheet loan activities and slower refinance activity. Residential mortgages originated and placed in the Company’s loan portfolio include well-secured jumbo mortgages and branch-originated first lien home equity loans to borrowers with high credit quality.
Credit card loans decreased $1.5 billion (6.6$337 million (1.5 percent) at March 31, 2021,2022, compared with December 31, 2020, reflecting higher customer payment rates.
Commercial real estate loans decreased $879 million (2.2 percent) at March 31, 2021, compared with December 31, 2020,primarily the result of customers seasonally paying down balances and a decrease in new loan origination activity.
Commercial loans increased $1.3 billion (1.3 percent) at March 31, 2021, compared with December 31, 2020, reflecting the impact of loans made under the SBA Paycheck Protection Program during the first quarter of 2021, partially offset by paydowns by corporate customers that accessed the capital markets.
Other retail loans increased $317 million (0.6 percent) at March 31, 2021, compared with December 31, 2020, due to increases in auto loans and installment loans, partially offset by decreases in home equity loans, retail leasing balances and revolving credit balances.
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
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Table 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.
Contents
Loans Held for Sale
 Loans held for sale, consisting primarily of residential mortgages to be sold in the secondary market, were $9.0 billion at March 31, 2021, compared with $8.8 billion at December 31, 2020. 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”).
Investment Securities
 Available-for-sale
investment securities totaled $156.0 billion at March 31, 2021, compared with $136.8 billion at December 31, 2020. The $19.2 billion (14.0 percent) increase was primarily due to $22.6 billion of net investment purchases, partially offset by a $3.4 billion unfavorable change in net unrealized gains (losses) on
available-for-sale
 Table 4
 
   Available-for-Sale Investment Securities
 
 March 31, 2021   December 31, 2020  March 31, 2022   December 31, 2021 
(Dollars in Millions) Amortized
Cost		   Fair Value Weighted-
Average
Maturity in
Years		   Weighted-
Average
Yield (d)		   Amortized
Cost		   Fair Value Weighted-
Average
Maturity in
Years		   Weighted-
Average
Yield (d)		  
Amortized
Cost
   Fair Value 
Weighted-
Average
Maturity in
Years
   
Weighted-
Average
Yield (d)
   
Amortized
Cost
   Fair Value 
Weighted-
Average
Maturity in
Years
   
Weighted-
Average
Yield (d)
 
Held-to-maturity
              
Mortgage-backed securities (a)
 $43,654   $40,572  9.7    1.64%   $41,858   $41,812  7.4    1.45% 
Total
held-to-maturity
 $43,654   $40,572  9.7    1.64%   $41,858   $41,812  7.4    1.45% 
Available-for-sale
              
U.S. Treasury and agencies
 $24,401   $24,317  4.4    1.31%   $21,954   $22,391  3.8    1.37%  $27,653   $26,350  7.2    1.83%   $36,648   $36,609  6.7    1.54% 
Mortgage-backed securities (a)
 122,883    122,262  6.1    1.44    103,282    105,374  3.0    1.47  91,277    86,955  7.3    1.80    85,394    85,564  4.9    1.58 
Asset-backed securities (a)
 197    202  5.9    1.09    200    205  6.2    1.47  4    7  4.1    2.00    62    66  5.2    1.53 
Obligations of state and political subdivisions (b) (c)
 8,687    9,215  6.7    3.89    8,166    8,861  6.3    3.99  10,701    10,274  9.5    3.64    10,130    10,717  6.6    3.67 
Other
 7    7  .1    2.07    9    9  .1    1.81  7    7  .1    2.07    7    7  3.4    2.07 
Total investment securities
 $156,175   $156,003  5.9    1.55%   $133,611   $136,840  3.4    1.61% 
Total
available-for-sale
 $129,642   $123,593  7.5    1.96%   $132,241   $132,963  5.5    1.73% 
 
(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)
Yields on investment securities are computed based on amortized cost balances. 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.
 
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investment securities. The Company had no outstanding investment securities classified as
held-to-maturity
Other retail loans decreased $336 million (0.5 percent) at March 31, 2021 and2022, compared with December 31, 2020.2021, due to decreases in retail leasing balances and auto loans, partially offset by an increase in installment loans.
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 $3.3 billion at March 31, 2022, compared with $7.8 billion at December 31, 2021. The decrease in loans held for sale was principally due to a lower level of mortgage loan closings in the first quarter of 2022, compared with the fourth quarter of 2021. 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”).
Investment Securities
 Investment securities totaled $167.2 billion at March 31, 2022, compared with $174.8 billion at December 31, 2021. The $7.6 billion (4.3 percent) decrease was primarily due to a $6.8 billion unfavorable change in net unrealized gains (losses) on
available-for-sale
investment securities.
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 March 31, 2021,2022, the Company’s net unrealized losses on
available-for-sale
investment securities were $172 million,$6.0 billion, compared with $3.2 billion$722 million of net unrealized gains at December 31, 2020.2021. The unfavorable change in net unrealized gains (losses) was primarily due to decreases in the fair value of mortgage-backed, U.S. Treasury and state and political securities as a result of changes in interest rates. Gross unrealized losses on
available-for-sale
investment securities totaled $2.3$6.3 billion at March 31, 2021,2022, compared with $53$812 million at December 31, 2020.2021. At March 31, 2021,2022, 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 34 and 1415 in the Notes to Consolidated Financial Statements for further information on investment securities.
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Deposits
 Total deposits were $433.8$461.5 billion at March 31, 2021,2022, compared with $429.8$456.1 billion at December 31, 2020.2021. The $4.0$5.5 billion (0.9(1.2 percent) increase in total deposits reflected increases in noninterest-bearingtotal savings deposits and total savingstime deposits, partially offset by a decrease in timenoninterest-bearing deposits. Noninterest-bearing depositsMoney market deposit balances increased $8.7$3.7 billion (7.3(3.2 percent) at March 31, 2021,2022, compared with December 31, 2020,2021, primarily due to higher Corporate and Commercial Banking, Consumer and Business Banking, and Wealth Management and Investment Services balances. Interest checkingSavings account balances increased $7.9$2.6 billion (8.3(4.0 percent), driven by higher Consumer and Business Banking Wealth Management and Investment Services, and Corporate and Commercial Banking balances. Savings accountInterest checking balances increased $4.4$2.6 billion (7.7(2.2 percent), primarily due to higher Corporate and Commercial Banking, and Consumer and Business Banking balances, partially offset by a decrease in Wealth Management and Investment Services balances. Time deposits increased $1.6 billion (7.2 percent) at March 31, 2022, compared with December 31, 2021, driven by higher Corporate and Commercial Banking balances, partially offset by lower Consumer and Business Banking balances. Money market deposit balances decreased $10.0 billion (7.8 percent) at March 31, 2021, compared with December 31, 2020,Changes in time deposits are primarily duerelated to lower Wealth Management and Investment Services, and Corporate and Commercial Banking balances. Time deposits decreased $7.0 billion (22.8 percent) at March 31, 2021, compared with December 31, 2020, driven by a decrease in those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics. Noninterest-bearing deposits decreased $5.1 billion (3.8 percent) at March 31, 2022, compared with December 31, 2021, primarily due to lower Wealth Management and Investment Services balances.
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 $12.1$21.0 billion at March 31, 2021,2022, compared with $11.8 billion at December 31, 2020.2021. The $332 million (2.8$9.2 billion (78.4 percent) increase in short-term borrowings was primarily due to higher repurchase agreement and other an increase in
short-term borrowings balances.
Federal Home Loan Bank (“FHLB”) advances. Long-term debt was $37.4$32.9 billion at March 31, 2021,2022, compared with $41.3$32.1 billion at December 31, 2020.2021. The $3.9 billion (9.4$806 million (2.5 percent) decreaseincrease was primarily due to $3.7$2.1 billion of bankmedium-term note repayments and maturities.issuances, partially offset by $1.0 billion of medium-term note repayments. Refer to the “Liquidity Risk Management” section for discussion of liquidity management of the Company.
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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.
The Company’s most prominent risk exposures are credit, interest rate, market, liquidity, operational, compliance, strategic, and reputation. Leveraging the Company’s risk management framework, the specific impacts of
COVID-19
and related risks are identified for each of the most prominent exposures. With respect to direct impacts from
COVID-19,
oversight and governance is managed through a centralized command center with frequent reporting to the Managing
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Committee and ERC. The Board of Directors also oversees the Company’s responsiveness to the
COVID-19
pandemic. 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 potential reduction of net interest incomecurrent or prospective risk to earnings and capital, or market valuations, as a resultarising 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
securities, mortgage loans held for sale (“MLHFS”), MSRs and derivatives that are accounted for on a fair value basis. Liquidity risk is the possiblerisk that financial condition or overall safety and soundness is adversely affected by the Company’s inability, or perceived inability, to fundmeet its cash flow obligations or new business at a reasonable cost and in a timely manner.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” in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2020,2021, 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
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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. In evaluating its credit risk, the Company considers changes, if any, in underwriting activities, the loan portfolio composition
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(including (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 and consumer bankruptcy filings, as well as the potential impact on customers and the domestic economy resulting from the
COVID-19
pandemic.filings. The Risk Management Committee oversees the Company’s credit risk management process.
In addition, credit quality ratings as defined by the Company are an important part of the Company’s overall credit risk management and evaluation of its allowance for credit losses. Loans with a pass rating represent those loans not classified on the Company’s rating scale for problem credits, as minimal credit risk has been identified. Loans with a special mention or classified rating, including consumer lending and small business loans that are 90 days or more past due and still accruing, nonaccrual loans, those loans considered troubled debt restructurings (“TDRs”), 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 Note 45 in the Notes to Consolidated Financial Statements for further discussion of the Company’s loan portfolios including internal credit quality ratings. In addition, refer to “Management’s Discussion and Analysis — Credit Risk Management” in the Company’s Annual Report on
Form 10-K
for the year ended December 31, 2020,2021, for a more detailed discussion on credit risk management processes.
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 lending products. 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, all of which have been impacted by the
COVID-19
pandemic.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
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mortgages, credit card loans, and other retail loans such as revolving consumer lines, auto loans and leases, home equity loans and lines, and student loans, a
run-off
portfolio. 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-
or
15-year
draw period during which a minimum payment is equivalent to the monthly interest, followed by a
20-
or
10-year
amortization period, respectively. At March 31, 2021,2022, substantially all of the Company’s home equity lines were in the draw period. Approximately $1.2 billion, or 12 percent, of the outstanding home equity line balances at March 31, 2021, will enter the amortization period within the next 36 months. 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
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market conditions on real estate-based loans. These and other risk characteristics including elevated risk resulting from the
COVID-19
pandemic, 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.
The Company’s consumer lending segment utilizes several distinct business processes and channels to originate consumer credit, including traditional branch lending, mobile and
on-line
banking, indirect lending, alliance partnerships and correspondent banks and loan brokers.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
on-line
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 also diversified by geography and 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 March 31, 2021:2022:
 
Residential Mortgages
(Dollars in Millions)
 Interest
Only		 Amortizing Total Percent
of Total		  Interest
Only		 Amortizing Total Percent
of Total		 
Loan-to-Value
            
Less than or equal to 80%
 $3,138  $55,505  $58,643  79.7%  $4,097  $64,696  $68,793  87.6% 
Over 80% through 90%
 7  3,146  3,153  4.3  1  2,277  2,278  2.9 
Over 90% through 100%
  —  291  291  .4   —  210  210  .3 
Over 100%
  —  91  91  .1   —  63  63  .1 
No LTV available
  —  10  10   —   —  19  19   — 
Loans purchased from GNMA mortgage pools (a)
  —  11,436  11,436  15.5   —  7,124  7,124  9.1 
Total (b)
 $3,145  $70,479  $73,624  100.0%  $4,098  $74,389  $78,487  100.0% 
 
(a)
Represents loans purchased from Government National Mortgage Association (“GNMA”) mortgage pools whose payments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.
(b)
At March 31, 2021,2022, approximately $494$399 million of residential mortgage balances were considered
sub-prime.
 
Home Equity and Second Mortgages
(Dollars in Millions)
 Lines Loans Total Percent
of Total		  Lines Loans Total Percent
of Total		 
Loan-to-Value
    
Loan-to-Value
/ Combined
Loan-to-Value
        
Less than or equal to 80%
 $9,796  $654  $10,450  89.5%  $9,065  $681  $9,746  93.2% 
Over 80% through 90%
 625  317  942  8.1  340  215  555  5.3 
Over 90% through 100%
 98  36  134  1.1  38  21  59  .6 
Over 100%
 67  6  73  .6  39  4  43  .4 
No LTV/CLTV available
 76  4  80  .7  52  2  54  .5 
Total (a)
 $10,662  $1,017  $11,679  100.0%  $9,534  $923  $10,457  100.0% 
 
(a)
At March 31, 2020,2022, approximately $46$29 million of home equity and second mortgage balances were considered
sub-prime.
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Home equity and second mortgages were $11.7$10.5 billion at March 31, 2021,2022, compared with $12.5$10.4 billion at December 31, 2020,2021, and included $3.3$3.0 billion of home equity lines in a first lien position and $8.4$7.5 billion of home equity and second mortgage loans and lines in a junior lien position. Loans and lines in a junior lien position at March 31, 2021,2022, included approximately $3.2$2.7 billion of loans and lines for which the Company also serviced the related first lien loan, and approximately $5.2$4.8 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.
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The following table provides a summary of delinquency statistics and other credit quality indicators for the Company’s junior lien positions at March 31, 2021:2022:
 
 Junior Liens Behind    Junior Liens Behind   
(Dollars in Millions) Company Owned
or Serviced First
Lien		 Third Party
First Lien		 Total  Company Owned
or Serviced First
Lien		 Third Party
First Lien		 Total 
Total
 $3,145  $5,225  $8,370  $2,644  $4,840  $7,484 
Percent 30—89 days past due
 .31%  .34%  .33%  .43%  .33%  .36% 
Percent 90 days or more past due
 .07%  .06%  .07%  .10%  .09%  .09% 
Weighted-average CLTV
 64%  62%  62%  59%  57%  58% 
Weighted-average credit score
 780  778  779  782  783  783 
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.
Loan Delinquencies
Trends in delinquency ratios are an indicator, among other considerations, of credit risk within the Company’s loan portfolios. The Company measures delinquencies, both including and excluding nonperforming loans, to enable comparability with other companies. Accruing loans 90 days or more past due totaled $476$450 million at March 31, 2021,2022, compared with $477$472 million at December 31, 2020.2021. These balances exclude loans purchased from GNMA mortgage pools whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. 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 0.160.14 percent at March 31, 2021 and2022 compared with 0.15 percent at December 31, 2020.
2021.
 
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 Table 5
    Delinquent Loan Ratios as a Percent of Ending Loan Balances
 
90 days or more past due
excluding
nonperforming loans		      March 31,
2021		 December 31,
2020		   March 31,
2022		 December 31,
2021		 
Commercial
       
Commercial
    .06%  .06%    .07%  .05% 
Lease financing
     —   —    —   — 
Total commercial
    .06  .05    .06  .04 
Commercial Real Estate
       
Commercial mortgages
    —   —    —   — 
Construction and development
     .03  .02    .01  .10 
Total commercial real estate
    .01  .01    —  .03 
Residential Mortgages (a)
    .19  .18    .18  .24 
Credit Card
    .95  .88    .74  .73 
Other Retail
       
Retail leasing
    .01  .05    .03  .04 
Home equity and second mortgages
    .36  .36    .42  .35 
Other
     .07  .10    .05  .06 
Total other retail
     .12  .15    .11  .11 
Total loans
     .16%  .16%    .14%  .15% 
90 days or more past due
including
nonperforming loans		      March 31,
2021		 December 31,
2020		   March 31,
2022		 December 31,
2021		 
Commercial
    .39%  .42%    .21%  .20% 
Commercial real estate
    .94  1.15    .55  .76 
Residential mortgages (a)
    .54  .50    .45  .53 
Credit card
    .95  .88    .74  .73 
Other retail
     .42  .42    .37  .35 
Total loans
     .54%  .57%    .38%  .42% 
 
(a)
Delinquent loan ratios exclude $1.7$1.3 billion at March 31, 2021,2022, and $1.8$1.5 billion at December 31, 2020,2021, of loans purchased from GNMA mortgage pools 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 including all nonperforming loans was 2.812.08 percent at March 31, 2021,2022, and 2.872.43 percent at December 31, 2020.2021.
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The following table provides summary delinquency information for residential mortgages, credit card and other retail loans included in the consumer lending segment:
 
 
Amount
        
As a Percent of Ending
Loan Balances
  Amount        As a Percent of Ending
Loan Balances		 
(Dollars in Millions) March 31,
2021		   December 31,
2020		        March 31,
2021		 December 31,
2020		  March 31,
2022		   December 31,
2021		        March 31,
2022		 December 31,
2021		 
Residential Mortgages (a)
                  
30-89
days
 $204   $244       .28%  .32%  $105   $124       .13%  .15% 
90 days or more
 143    137       .19  .18  140    181       .18  .24 
Nonperforming
 253    245        .34  .32  214    226        .27  .30 
Total
 $600   $626       .81%  .82%  $459   $531       .58%  .69% 
Credit Card
                  
30-89
days
 $188   $231       .90%  1.04%  $194   $193       .88%  .86% 
90 days or more
 198    197       .95  .88  165    165       .74  .73 
Nonperforming
  —    —        —   —   —    —        —   — 
Total
 $386   $428       1.85%  1.92%  $359   $358       1.62%  1.59% 
Other Retail
                  
Retail Leasing
                  
30-89
days
 $  27   $  35       .34%  .43%  $  27   $  29       .39%  .40% 
90 days or more
 1    4       .01  .05  2    3       .03  .04 
Nonperforming
 14    13        .18  .16  10    10        .14  .14 
Total
 $  42   $  52       .53%  .64%  $  39   $  42       .56%  .58% 
Home Equity and Second Mortgages
                  
30-89
days
 $  44   $  68       .37%  .54%  $  41   $  55       .40%  .53% 
90 days or more
 42    45       .36  .36  44    37       .42  .35 
Nonperforming
 127    107        1.09  .86  129    116        1.23  1.11 
Total
 $213   $220       1.82%  1.76%  $214   $208       2.05%  1.99% 
Other (b)
                  
30-89
days
 $150   $215       .40%  .60%  $169   $191       .38%  .43% 
90 days or more
 27    37       .07  .10  22    26       .05  .06 
Nonperforming
 31    34        .08  .09  22    24        .05  .05 
Total
 $208   $286        .55%  .79%  $213   $241        .48%  .54% 
 
(a)
Excludes $1.5 billion$662 million of loans
30-89
days past due and $1.7$1.3 billion of loans 90 days or more past due at March 31, 2021,2022, purchased from GNMA mortgage pools that continue to accrue interest, compared with $1.4 billion$791 million and $1.8$1.5 billion at December 31, 2020,2021, respectively.
(b)
Includes revolving credit, installment, automobile and student loans.
 
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Restructured 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.
Troubled Debt Restructurings
Concessionary modifications are classified as TDRs unless the modification results in only an insignificant delay in the payments to be received. TDRs 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. At March 31, 2022 and December 31, 2021, performing TDRs were $3.5 billion, compared with $3.6 billion at December 31, 2020.$3.1 billion.
The Company continues to work with customers to modify loans for borrowers who are experiencing financial difficulties. Many of the Company’s TDRs 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 TDRs 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 restructuring programs that may result in TDRs. 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 by providing loan concessions. These concessions 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 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
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arrangement, and the loan documents are not modified until that time. The Company reports loans in a trial period arrangement as TDRs and continues to report them as TDRs after the trial period.
Credit card and other retail loan TDRs are generally part of distinct restructuring programs providing customers modification solutions over a specified time period, generally up to 60 months.
In accordance with regulatory guidance, the Company considers secured consumer loans that have had debt discharged through bankruptcy where the borrower has not reaffirmed the debt to be TDRs. If the loan amount exceeds the collateral value, the loan is charged down to collateral value and the remaining amount is reported as nonperforming.
Loan modifications or concessions granted to customers resulting directly from the effects of the
COVID-19
pandemic, who were otherwise in current payment status, are not considered to be TDRs.
 
The following table provides a summary of TDRs by loan class, including the delinquency status for TDRs that continue to accrue interest and TDRs included in nonperforming assets:
 
     As a Percent of Performing TDRs          As a Percent of Performing TDRs     
At March 31, 2021
(Dollars in Millions)		 Performing
TDRs		   
30-89 Days

Past Due		 90 Days or More
Past Due		 Nonperforming
TDRs		 Total
TDRs		 
At March 31, 2022
(Dollars in Millions)
 
Performing
TDRs
   
30-89 Days
Past Due
 
90 Days or More
Past Due
 
Nonperforming
TDRs
 Total
TDRs		 
Commercial
 $183    5.1%   2.6%  $212(a)  $395  $137    5.3%   2.2%  $76(a)  $213 
Commercial real estate
  139    1.8   —   156(b)   295   86    2.0   —   145(b)   231 
Residential mortgages
  1,449    6.0   4.2   140   1,589(d)   1,521    3.3   3.5   116   1,637(d) 
Credit card
  235    8.4   4.2   —   235   243    11.8   5.6   —   243 
Other retail
  198    10.1   5.4   46(c)   244(e)   179    9.4   4.8   39(c)   218(e) 
TDRs, excluding loans purchased from GNMA mortgage pools
  2,204    6.3   3.9   554   2,758   2,166    4.9   3.6   376   2,542 
Loans purchased from GNMA mortgage pools (g)
  1,322    —   —   —   1,322(f)   978    —   —   —   978(f) 
Total
 $3,526    3.9%   2.4%  $554  $4,080  $3,144    3.4%   2.5%  $376  $3,520 
 
(a)
Primarily represents loans less than six months from the modification date that have not met the performance period required to return to accrual status (generally six months) and small business credit cards with a modified rate equal to 0 percent.
(b)
Primarily represents loans less than six months from the modification date that have not met the performance period required to return to accrual status (generally six months).
(c)
Primarily represents loans with a modified rate equal to 0 percent.
(d)
Includes $264$222 million of residential mortgage loans to borrowers that have had debt discharged through bankruptcy and $57$21 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed.
(e)
Includes $80$65 million of other retail loans to borrowers that have had debt discharged through bankruptcy and $17$14 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed.
(f)
Includes $169$165 million of Federal Housing Administration and United States Department of Veterans Affairs residential mortgage loans to borrowers that have had debt discharged through bankruptcy and $269$132 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed.
(g)
Approximately 14.99.6 percent and 39.034.9 percent of the total TDR loans purchased from GNMA mortgage pools are
30-89
days past due and 90 days or more past due, respectively, but are not classified as delinquent as their repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.
 
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Short-term and Other Loan Modifications
The Company makes short-term and other modifications that it does not consider to be TDRs, in limited circumstances, to assist borrowers experiencing temporary hardships.hardships, including previously offering payment relief to borrowers that have 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.
COVID-19
Payment Relief
The Company has offered payment relief, including forbearance, payment deferrals and other customer accommodations, to assist borrowers that have experienced financial hardship resulting from the effects of the
COVID-19
pandemic. The majority of these borrowers were not delinquent on payments at the time they received the payment relief. From March 2020 through March 31, 2021, the Company had approved approximately 385,000 loan modifications for these borrowers, representing approximately $27.0 billion. The loans modified consisted primarily of payment forbearance or deferrals of 90 days or less. A portion of the borrowers who received account modifications are no longer participating in these payment relief programs, as the programs are generally short-term; and at March 31, 2021, approximately 57,000 accounts, representing approximately $7.3 billion, were currently in an active payment relief program. The recognition of delinquent or nonaccrual loans and loan net charge-offs may be delayed for those customers enrolled in these payment relief programs who would have otherwise moved into past due or nonaccrual status, as these customer accounts do not continue to age during the period the payment delay is provided.
The following table summarizes borrowers enrolled in payment relief programs as a result of the
COVID-19
pandemic at March 31, 2021, as a percentage of the Company’s loans and loan balances:
    Percentage of Loan Accounts
in Payment Relief Programs		   Percentage of Loan Balances
in Payment Relief Programs		   Program Details
Commercial
   .07%    .03%   Primarily 3 month payment deferral up to a maximum of 6 months; interest continues to accrue with various payment options; may include short-term covenant waivers
Commercial real estate
   .30    .62   Primarily 3 month payment deferral up to a maximum of 6 months; interest continues to accrue with various payment options; may include short-term covenant waivers
Residential mortgages (a)
   2.28    2.99   Primarily 6 month payment forbearance, which may be extended up to 18 months; interest continues to accrue; cumulative payments suspended during forbearance period are either
paid-off
immediately or under a short-term repayment plan, or addressed through a permanent loan modification that either requires repayment at maturity or through restructured payments over time
Credit cards
   .10    .22   Primarily payment reduction up to 6 months; payment relief of up to 3 months; interest continues to accrue
Other retail
   .35    .65   Home equity loan programs are similar to residential mortgage programs; programs for other loan portfolios are primarily 2 month payment deferral up to a maximum of 4 months; interest continues to accrue
Total loans (a)
   .18%    .91%    
Note:
Payment relief generally includes payment deferrals, forbearances, extensions and
re-ages,
and excludes loans made under the Small Business Administration’s (“SBA”) Paycheck Protection Program, as amounts due under that program are expected to be fully forgiven by the SBA.
(a)
Excludes loans purchased from GNMA mortgage pools, whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. At March 31, 2021, 40.08 percent of the total number of accounts and 42.15 percent of the total loan balances of loans purchased from GNMA mortgage pools were to borrowers enrolled in payment relief programs as a result of the
COVID-19
pandemic. Including these loans, 11.15 percent of the total number of accounts and 9.07 percent of the total balances of residential mortgages were to borrowers enrolled in payment relief programs as a result of the
COVID-19
pandemic. Including these loans, .43 percent of the total number of accounts and 2.55 percent of the total balances of all loans were to borrowers enrolled in payment relief programs as a result of the
COVID-19
pandemic.
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Nonperforming Assets
The level of nonperforming assets represents another indicator of the potential for future credit losses. Nonperforming assets include nonaccrual loans, restructured loans not performing in accordance with modified terms and not accruing interest, restructured 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 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 March 31, 2021,2022, total nonperforming assets were $1.2 billion,$811 million, compared to $1.3 billion$878 million at December 31, 2020.2021. The $96$67 million (7.4(7.6 percent) decrease in nonperforming assets was driven by decreasesa decrease in nonperforming commercial real estate and commercial
loans, partially offset by an increase in nonperforming other retail loans. The ratio of total nonperforming assets to total loans and other real estate was 0.410.25 percent at March 31, 2021,2022, compared with 0.440.28 percent at December 31, 2020. The Company expects credit quality to return to more normalized levels throughout the remainder of 2021 as the economy rebounds and consumer spending resumes. However, some manageable levels of elevated nonperforming assets in certain industries and loan categories yet to recover from pandemic related impacts are expected.2021.
OREO was $19$23 million at March 31, 2021,2022, compared with $24$22 million at December 31, 2020,2021, 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.
 
The following table provides an analysis of OREO, as a percent of their related loan balances, including geographical location detail for residential (residential mortgage, home equity and second mortgage) and commercial (commercial and commercial real estate) loan balances:
  Amount       As a Percent of Ending
Loan Balances		 
(Dollars in Millions) March 31,
2021		  December 31,
2020		       March 31,
2021		  December 31,
2020		 
Residential
       
California
             $3              $2      .01%   .01% 
New York
  2   2      .16   .17 
Oregon
  2   2      .07   .07 
Illinois
  1   2      .02   .04 
Florida
  1   1      .03   .03 
All other states
  9   14        .02   .03 
Total residential
  18   23      .02   .03 
Commercial
       
Iowa
  1   1      .05   .04 
All other states
  –   –        –   – 
Total commercial
  1   1        –   – 
Total
             $19              $24        .01%   .01% 
U.S. Bancorp 
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Table 6
 
   Nonperforming Assets (a)
 
(Dollars in Millions) March 31,
2021		 December 31,
2020		  March 31,
2022		 December 31,
2021		 
Commercial
    
Commercial
         $298          $321          $139          $139 
Lease financing
 49  54  35  35 
Total commercial
 347  375  174  174 
Commercial Real Estate
    
Commercial mortgages
 266  411  178  213 
Construction and development
 90  39  38  71 
Total commercial real estate
 356  450  216  284 
Residential Mortgages (b)
 253  245  214  226 
Credit Card
  –   –   —   — 
Other Retail
    
Retail leasing
 14  13  10  10 
Home equity and second mortgages
 127  107  129  116 
Other
 31  34  22  24 
Total other retail
 172  154  161  150 
Total nonperforming loans(1)
 1,128  1,224  765  834 
Other Real Estate (c)
 19  24  23  22 
Other Assets
 55  50  23  22 
Total nonperforming assets
         $1,202          $1,298          $811          $878 
Accruing loans 90 days or more past due (b)
         $476          $477          $450          $472 
Nonperforming loans to total loans
 .38%  .41% 
Period-end
loans (2)
         $318,934          $312,028 
Nonperforming loans to total loans (1)/(2)
 .24%  .27% 
Nonperforming assets to total loans plus other real estate (c)
 .41%  .44%  .25%  .28% 
Changes in Nonperforming Assets
 
(Dollars in Millions)  Commercial and
Commercial
Real Estate		 Residential
Mortgages,
Credit Card and
Other Retail		 Total  
Commercial and
Commercial
Real Estate
 Residential
Mortgages,
Credit Card and
Other Retail		 Total 
Balance December 31, 2020
            $854              $444      $1,298 
Balance December 31, 2021
           $461            $417  $878 
Additions to nonperforming assets
       
New nonaccrual loans and foreclosed properties
   178  79  257  92  58  150 
Advances on loans
   3   –  3  4   —  4 
Total additions
   181  79  260  96  58  154 
Reductions in nonperforming assets
       
Paydowns, payoffs
   (80)  (21)  (101)  (134)  (15)  (149) 
Net sales
   (148)  (6)  (154)   —  (4)  (4) 
Return to performing status
   (24)  (19)  (43)  (9)  (35)  (44) 
Charge-offs (d)
   (52)  (6)  (58)  (21)  (3)  (24) 
Total reductions
   (304)  (52)  (356)  (164)  (57)  (221) 
Net additions to (reductions in) nonperforming assets
   (123)  27  (96)  (68)  1  (67) 
Balance March 31, 2021
            $731              $471      $1,202 
Balance March 31, 2022
           $393              $418      $811 
 
(a)
Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due.
(b)
Excludes $1.7$1.3 billion at March 31, 2021,2022, and $1.8$1.5 billion at December 31, 2020,2021, of loans purchased from GNMA mortgage pools 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 $29$27 million at March 31, 2021,2022, and $33$22 million at December 31, 2020,2021, 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 7
 
   Net Charge-offs as a Percent of Average Loans Outstanding
 
  Three Months Ended
March 31		  Three Months Ended March 31 
  2021 2020  2022      2021 
 Average           Average       
 Loan   Net       Loan   Net   
(Dollars in Millions) Balance   Charge-offs Percent      Balance   Charge-offs Percent 
Commercial
                     
Commercial
   .22%  .28%  $107,819   $26  .10%      $96,757   $52  .22% 
Lease financing
   .30  .36  5,003    6  .49      5,334    4  .30 
Total commercial
   .22  .28  112,822    32  .12       102,091    56  .22 
Commercial Real Estate
   
Commercial real estate
                  
Commercial mortgages
   (.17)  (.01)  28,826    —   —       27,968    (12)  (.17) 
Construction and development
   .19  (.04) 
Construction
 10,258    (5)  (.20)      10,818    5  .19 
Total commercial real estate
   (.07)  (.02)  39,084    (5)  (.05)       38,786    (7)  (.07) 
Residential Mortgages
   (.03)  .01 
Credit Card
   2.76  3.95 
Other Retail
   
Residential mortgages
 77,449    (6)  (.03)       75,201    (5)  (.03) 
Credit card
 21,842    112  2.08       21,144    144  2.76 
Other retail
                  
Retail leasing
   .05  .90  7,110    1  .06       7,975    1  .05 
Home equity and second mortgages
   (.07)  .03  10,394    (2)  (.08)       12,062    (2)  (.07) 
Other
   .40  .79  44,265    30  .27      36,730    36  .40 
Total other retail
   .25  .61  61,769    29  .19      56,767    35  .25 
Total loans
   .31%  .53%  $312,966   $162  .21%     $293,989   $223  .31% 
 
Analysis of Loan Net Charge-Offs
 Total loan net charge-offs were $162 million for the first quarter of 2022, compared with $223 million for the first quarter of 2021, compared2021. The $61 million (27.4 percent) decrease in net charge-offs reflected improvement across most loan categories, associated with $393 million forborrower liquidity and strong asset prices in the first quarter of 2020.market that support repayment and recovery on problem loans. The ratio of total loan net charge-offs to average loans outstanding on an annualized basis for the first quarter of 20212022 was 0.310.21 percent, compared with 0.530.31 percent for the first quarter of 2020. The decrease in net charge-offs for the first quarter of 2021, compared with the first quarter of 2020, was primarily due to lower credit card, commercial and other retail loan net charge-offs.2021.
Analysis and Determination of the Allowance for Credit Losses
 The allowance for credit losses is established for current expected credit losses on the Company’s loan and lease portfolio, including unfunded credit commitments. The allowance considers expected losses for the remaining lives of the applicable assets, inclusive of expected recoveries. The allowance for credit losses is increased through provisions charged to earnings and reduced by net charge-offs.
Management evaluates the appropriateness of the allowance for credit losses on a quarterly basis. Multiple economic scenarios are considered over a three-year reasonable and supportable forecast period, which includes increasing consideration of historical loss experience over years two and three. These economic scenarios are constructed with interrelated projections of multiple economic variables, and loss estimates are produced that consider the historical correlation of those economic variables with credit losses. After the forecast period, the Company fully reverts to long-term historical loss experience, adjusted for prepayments and characteristics of the current loan and lease portfolio, to estimate losses over the remaining life of the portfolio. The economic scenarios are updated at least quarterly and are designed to provide a range of reasonable estimates which are bothfrom better andto 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 consider uncertainties that exist.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 and corporate bondsbond spreads, and long-term interest rate forecasts, 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
U.S. Bancorp
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term of the loan, adjusted for expected prepayments. For each loan portfolio, 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. 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
U.S. Bancorp
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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 commercial TDRs individually evaluated for impairment, attributes of the borrower are the primary factors in determining the allowance for credit losses. However,For smaller commercial loans collectively evaluated for impairment, historical loss experience is also incorporated into the allowance methodology applied to this category of loans. Commercial lending segment TDR loans may be collectively evaluated for impairment where observed performance history, including defaults, is a primary driver of the loss allocation.
The allowance recorded for TDR loans in the consumer lending segment is determined on a homogenous pool basis utilizing expected cash flows discounted using the original effective interest rate of the pool. The expected cash flows on TDR loans consider subsequent payment defaults since modification, the borrower’s ability to pay under the restructured terms, and the timing and amount of payments. The allowance for collateral-dependent loans in the consumer lending segment is determined based on the current fair value of the collateral less costs to sell.
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 March 31, 2021,2022, the Company serviced the first lien on 3835 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 $243$205 million or 2.12.0 percent of its total home equity portfolio at March 31, 2021,2022, represented
non-delinquent
junior liens where the first lien was delinquent or modified, excluding loans in COVID-related forbearance programs.modified.
The Company considers historical loss experience on the loans and lines in a junior lien position to establish loss estimates for junior lien loans and lines the Company services that are current, but the first lien is delinquent or modified. The historical long-term average loss experience related to junior liens has been relatively limited (less than 1 percent of the total portfolio annually), and estimates are adjusted to consider current collateral support and portfolio risk characteristics. These include updated credit scores and collateral estimates obtained on the Company’s home equity portfolio each quarter. In its evaluation of the allowance for credit losses, the Company also considers the increased risk of loss associated with home equity lines that are contractually scheduled to convert from a revolving status to a fully amortizing payment.
Beginning January 1, 2020, whenWhen 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 purchased with more than insignificant credit deterioration. An allowance is established for each population and considers product mix, risk characteristics of the portfolio, bankruptcy experience, delinquency status and refreshed LTV 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. The Company did not have a material amount of PCD loans included in its loan portfolio at March 31, 2021.2022.
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.
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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 March 31, 2021,2022, the allowance for credit losses was $7.0$6.1 billion (2.36(1.91 percent of
period-end
loans), compared with an allowance of $8.0$6.2 billion (2.69(1.97 percent of
period-end
loans) at December 31, 2020.2021. The ratio of the allowance for credit losses to nonperforming loans was 617798 percent at March 31, 2021,2022, compared with 654738 percent at December 31, 2020.2021. The ratio of the allowance for credit losses to annualized loan net charge-offs was 770929 percent at March 31, 2021,2022, compared with 448902 percent of full year 20202021 net charge-offs at December 31, 2020.2021.
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The decrease in the allowance for credit losses of $1.1 billion (13.1$50 million (0.8 percent) at March 31, 2021,2022, compared with December 31, 2020, reflected factors affecting2021, was driven by continued strong credit quality, partially offset by loan growth and increasing economic conditions duringuncertainty. Economic uncertainty remains high associated with supply chain and rising inflationary concerns, market volatility, rising oil prices resulting from the first quarter of 2021, including the enactment ofRussia-Ukraine conflict and additional benefits from government stimulus programs, vaccine availability in the United States and reduced levels of new
COVID-19
cases.virus variants. In addition to these factors, expected loss estimates consider various factors including customer specific information impacting changes in risk ratings, projected delinquencies and the impact of industry-wide loan modification efforts designed to limit long-termdetrimental effects of inflationary pressures and rising interest rates which impact borrowers’ liquidity and ability to repay.
Economic conditions considered in estimating the
COVID-19
pandemic, among other factors. Currently, consumer allowance for credit trends continue to perform better than expected, although select commercial portfolios most impacted by COVID-19 continue to be monitored for structural shifts associated with the pandemic.
Changes in economic conditions during the first quarter of 2021losses at March 31, 2022 included improvementschanges in projected gross domestic product and unemployment levels for 2021, which reflected the additional government stimulus and availability of vaccines.levels. These factors are evaluated through a combination of quantitative calculations using economic scenarios and qualitative assessments that consider the high degree of economic uncertainty related toin the unprecedented levels of both economic stress and the stimulus response.current environment.
The following table summarizes the baseline forecast for key economic variables the Company used in its estimate of the allowance for credit losses at March 31, 20212022 and December 31, 2020:2021:
 
   March 31,
2021		  December 31,
2020		 
United States unemployment rate for the three months ending (a)
  
March 31, 2021
  6.3%   6.9% 
June 30, 2021
  6.0   7.1 
December 31, 2021
  5.0   6.8 
United States real gross domestic product for the three months ending (b)
  
March 31, 2021
  (1.3)%   (2.1)% 
June 30, 2021
  .2   (1.1) 
December 31, 2021
  3.7   1.5 
   
March 31,
2022
  
December 31,
2021
 
United States unemployment rate for the three months ending (a)
  
March 31, 2022
  3.9%   3.9% 
June 30, 2022
  3.7   3.6 
December 31, 2022
  3.5   3.5 
United States real gross domestic product for the three months ending (b)
  
March 31, 2022
  4.1%   5.2% 
June 30, 2022
  3.7   4.4 
December 31, 2022
  2.7   3.4 
 
(a)
Reflects quarterly average of forecasted reported United States unemployment rate.
(b)
Reflects cumulative change from December 31, 2019.year-over-year growth rates.
Baseline economic forecasts are used in combination with alternative scenarios and historical loss experience as is considered reasonable and supportable to inform the Company’s allowance for credit losses. Changes in the allowance for credit losses are based on a variety of factors, including loan balance changes, portfolio credit quality and mix changes, and changes in general economic conditions and expectations (including for unemployment and gross domestic product), among other factors. Based on economic conditions at March 31, 2021, it was difficult to estimate the length and severity of the economic downturn that may result from
COVID-19
and the impact of other factors that may influence the level of eventual losses and corresponding requirements for the allowance for credit losses, including the impact of economic stimulus programs and customer accommodation activity. While reserves consider the uncertainty in these estimates, the unpredictability of the
COVID-19
pandemic could result in the recognition of credit losses in the Company’s loan portfolios and increases in the allowance for credit losses. Scenarios worse than the Company’s expected outcome at March 31, 2021 include risks that government stimulus in response to the
COVID-19
pandemic is less effective than expected, or that a longer or more severe health crisis prolongs the downturn in economic activity, potentially reducing the number of businesses that are ultimately able to resume operations after the crisis has passed. Other factors considered include the potential of rising interest rates and unsupported increases in the values of certain assets.
The allowance for credit losses related to commercial lending segment loans decreased $503$62 million during the first quarter of 2021, as improvements in general economic conditions and2022, primarily due to portfolio credit quality that reflected further return of economic activity in certain industry sectors affected by the
COVID-19
pandemic, partially offset by the impact of
COVID-19
on certain industry sectors, including the retail loan growth and restaurants, energy, media and entertainment, lodging and airline industries that have been severely impacted by virus containment measures.
The following table summarizes the Company’s commercial lending segment credit exposure to customers within the industry sectors most impacted by
COVID-19,
as a percentage of total loans and legal commitments outstanding at March 31, 2021:
   Loans  Outstanding
Commitments		 
Retail
  3.6%   5.0% 
Energy (includes Oil and gas)
  .9   2.2 
Media and entertainment
  1.9   2.2 
Lodging
  1.2   .9 
Airline
  .3   .5 
rising economic uncertainty.
The allowance for credit losses related to consumer lending segment loans decreased $547increased $12 million during the first quarter of 2021,2022, mainly due to improvingloan growth and rising economic risks, including those due to decreased unemployment, along with continued strong underlying credit quality that supports expectations of long-term repayment.uncertainty.
 
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Table 8
 
   Summary of Allowance for Credit Losses
 
  Three Months Ended
March 31		 
(Dollars in Millions) 2021  2020 
Balance at beginning of period
 $8,010  $4,491 
Change in accounting principle (a)
  —   1,499 
Charge-Offs
  
Commercial
  
Commercial
  80   81 
Lease financing
  6   7 
Total commercial
  86   88 
Commercial real estate
  
Commercial mortgages
  5   — 
Construction and development
  5   — 
Total commercial real estate
  10   — 
Residential mortgages
  5   8 
Credit card
  190   274 
Other retail
  
Retail leasing
  11   25 
Home equity and second mortgages
  4   5 
Other
  68   91 
Total other retail
  83   121 
Total charge-offs
  374   491 
Recoveries
  
Commercial
  
Commercial
  28   12 
Lease financing
  2   2 
Total commercial
  30   14 
Commercial real estate
  
Commercial mortgages
  17   1 
Construction and development
  —   1 
Total commercial real estate
  17   2 
Residential mortgages
  10   7 
Credit card
  46   40 
Other retail
  
Retail leasing
  10   6 
Home equity and second mortgages
  6   4 
Other
  32   25 
Total other retail
  48   35 
Total recoveries
  151   98 
Net Charge-Offs
  
Commercial
  
Commercial
  52   69 
Lease financing
  4   5 
Total commercial
  56   74 
Commercial real estate
  
Commercial mortgages
  (12)   (1) 
Construction and development
  5   (1) 
Total commercial real estate
  (7)   (2) 
Residential mortgages
  (5)   1 
Credit card
  144   234 
Other retail
  
Retail leasing
  1   19 
Home equity and second mortgages
  (2)   1 
Other
  36   66 
Total other retail
  35   86 
Total net charge-offs
  223   393 
Provision for credit losses
  (827)   993 
Balance at end of period
 $6,960  $6,590 
Components
  
Allowance for loan losses
 $6,343  $6,216 
Liability for unfunded credit commitments
  617   374 
Total allowance for credit losses
 $6,960  $6,590 
Allowance for Credit Losses as a Percentage of
  
Period-end
loans
  2.36%   2.07% 
Nonperforming loans
  617   809 
Nonperforming and accruing loans 90 days or more past due
  434   473 
Nonperforming assets
  579   697 
Annualized net charge-offs
  770   417 
(a)
Effective January 1, 2020, the Company adopted accounting guidance which changed impairment recognition of financial instruments to a model that is based on expected losses rather than incurred losses.
  Three Months Ended 
  March 31 
(Dollars in Millions) 2022  2021 
Balance at beginning of period
 $6,155  $8,010 
Charge-Offs
        
Commercial
        
Commercial
  47   80 
Lease financing
  8   6 
Total commercial
  55   86 
Commercial real estate
        
Commercial mortgages
  —   5 
Construction and development
  1   5 
Total commercial real estate
  1   10 
Residential mortgages
  5   5 
Credit card
  158   190 
Other retail
        
Retail leasing
  5   11 
Home equity and second mortgages
  3   4 
Other
  53   68 
Total other retail
  61   83 
Total charge-offs
  280   374 
Recoveries
        
Commercial
        
Commercial
  21   28 
Lease financing
  2   2 
Total commercial
  23   30 
Commercial real estate
        
Commercial mortgages
  —   17 
Construction and development
  6   — 
Total commercial real estate
  6   17 
Residential mortgages
  11   10 
Credit card
  46   46 
Other retail
        
Retail leasing
  4   10 
Home equity and second mortgages
  5   6 
Other
  23   32 
Total other retail
  32   48 
Total recoveries
  118   151 
Net Charge-Offs
        
Commercial
        
Commercial
  26   52 
Lease financing
  6   4 
Total commercial
  32   56 
Commercial real estate
        
Commercial mortgages
  —   (12) 
Construction and development
  (5)   5 
Total commercial real estate
  (5)   (7) 
Residential mortgages
  (6)   (5) 
Credit card
  112   144 
Other retail
        
Retail leasing
  1   1 
Home equity and second mortgages
  (2)   (2) 
Other
  30   36 
Total other retail
  29   35 
Total net charge-offs
  162   223 
Provision for credit losses
  112   (827) 
Balance at end of period
 $6,105  $6,960 
Components
        
Allowance for loan losses
 $5,664  $6,343 
Liability for unfunded credit commitments
  441   617 
Total allowance for credit losses (1)
 $6,105  $6,960 
Period-end
loans (2)
 $318,934  $294,427 
Nonperforming loans (3)
  765   1,128 
Allowance for Credit Losses as a Percentage of
        
Period-end
loans (1)/(2)
  1.91%   2.36% 
Nonperforming loans (1)/(3)
  798   617 
Nonperforming and accruing loans 90 days or more past due
  502   434 
Nonperforming assets
  753   579 
Annualized net charge-offs
  929   770 
 
20
 U.S. Bancorp
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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 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. As of March 31, 2021,2022, no significant change in the amount of residual values or concentration of the portfolios had occurred since December 31, 2020.2021. Refer to “Management’s Discussion and Analysis — Residual Value Risk Management” in the Company’s Annual Report on
Form 10-K
for the year ended December 31, 2020,2021, for further discussion on residual value risk management.
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 the economic and financial disruptions, and the Company’s alternative working arrangements resulting from the
COVID-19
pandemic.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. Refer to “Management’s Discussion and Analysis — Operational Risk Management” in the Company’s Annual Report on
Form 10-K
for the year ended December 31, 2020,2021, for further discussion on operational risk management.
Compliance Risk Management
 The Company may suffer legal or regulatory sanctions, material financial loss, or damage to its reputation through failure 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 the economic and financial disruptions caused by the
COVID-19
pandemic.disruptions. Refer to “Management’s Discussion and Analysis — Compliance Risk Management” in the Company’s Annual Report on
Form 10-K
for the year ended December 31, 2020,2021, for further discussion on compliance risk management.
Interest Rate Risk Management
In the banking industry, changes in interest rates are a significant risk that can impact earnings and 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 ensuring compliance with the ALCO management policies, including interest rate risk exposure. One way the Company measures and analyzes its interest rate risk is through net interest income simulation analysis.
Simulation analysis incorporates substantially all of the Company’s assets and liabilities and
off-balance
sheet instruments, together with forecasted changes in the balance sheet and assumptions that reflect the current interest rate environment. Through this simulation, management estimates the impact on net interest income of various interest rate changes that differ in the direction, amount and speed of change over time, as well as the shape of the yield curve. This simulation includes assumptions about how the balance sheet is likely to be affected by changes in loan and deposit growth. Assumptions are made to project interest rates for new loans and deposits based on historical analysis, management’s outlook and
re-pricing
strategies. These assumptions are reviewed and validated on a periodic basis with sensitivity analysis being provided for key variables of the simulation. The results are reviewed monthly by the ALCO and are used to guide asset/liability management strategies.
The Company manages its interest rate risk position by holding assets with desired interest rate risk characteristics on its balance sheet, implementing certain pricing strategies for loans and deposits and selecting derivatives and various funding and investment portfolio strategies.
Table 9 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. While the Company utilizes models and assumptions based on historical information and expected behaviors, actual outcomes could vary significantly. Net interest income sensitivities reflect the impact of current market expectations for interest rates,
 
U.S. Bancorp 
21
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Table 9
 
   Sensitivity of Net Interest Income
 
  March 31, 2021       December 31, 2020 
   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
  (3.02)%   2.57%   *    3.23%        (4.48)%   4.58%   *    6.57% 
  March 31, 2022       December 31, 2021 
   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
  (2.47)%   2.15%   *    3.31%        (3.77)%   3.09%   *    5.39% 
*
Given the level of interest rates, downward rate scenario is not computed.
 
driving an increase in baseline projected net interest income. As market expectations are reflected in projected results, incremental interest rate sensitivity declines on a percentage basis.
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 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 and foreign exchange 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.
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.
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. At March 31, 2021,2022, the Company had $13.7$3.9 billion of forward commitments to sell, hedging $7.7$1.4 billion of MLHFS and $8.7$3.3 billion of unfunded mortgage loan commitments. 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, including consideration of the
COVID-19
pandemic.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.
For additional information on derivatives and hedging activities, refer to Notes 1213 and 1314 in the Notes to Consolidated Financial Statements.
LIBOR Transition
 In July 2017, the United Kingdom’s Financial Conduct Authority (the “FCA”) announced that it would no longer require banks to submit rates for the London InterBank Offered Rate (“LIBOR”) after 2021. In 2020,March 2021, the Intercontinental Exchange Benchmark Administration, which isFCA and the administrator of LIBOR proposedannounced that, with respect to cease the publication of all
non-United
States Dollar LIBOR rates and one week and two month United States Dollar LIBOR rates on December 31, 2021, but extend the publication of the remaindermost commonly used tenors of United States Dollar LIBOR, rates untilLIBOR will no longer be published on a representative basis after June 30, 2023. The Company holds financial instruments that willpublication of all other tenors of United States Dollar LIBOR ceased to be impacted by the discontinuance of LIBOR, including certain loans,
 
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 U.S. Bancorp
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provided or ceased to be representative after December 31, 2021. The Company holds financial instruments impacted by the discontinuance of LIBOR, including certain loans, investment securities, derivatives, borrowings and other financial instruments that use LIBOR as the benchmark rate. The Company also provides various services to customers in its capacitycapacities as trustee and servicer, which involve financial instruments that will be similarly impacted by the discontinuance of LIBOR.
The Company anticipates thesehas transitioned financial instruments associated to LIBOR currencies and tenors that ceased or became nonrepresentative on December 31, 2021 to alternative reference rates, with limited exceptions. The Company also anticipates that additional financial instruments associated to the remaining United States Dollar LIBOR tenors will require transition to a new reference rate. This transition will occur over time as manyrate by June 30, 2023. The Company is currently assessing the applicability and scope of these arrangementsthe Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”), which was enacted on March 15, 2022. The LIBOR Act establishes a process for replacing LIBOR on existing LIBOR contracts that do not have an alternative rate referenced in their contracts or a clear pathprovide for the partiesuse of a clearly defined or practicable replacement benchmark rate by providing that a benchmark replacement identified by the Federal Reserve Board that is based on the Secured Overnight Financing Rate (“SOFR”) will replace LIBOR as the benchmark for such contracts. The final implementation of the LIBOR Act currently remains uncertain, as the Federal Reserve has 180 days after its enactment to agree upon an alternative reference rate. issue any regulations that are necessary for its administration.
In order to facilitate the transition process, the Company has instituted a LIBOR Transition Office and commenced an enterprise-wide project to identify, assess, monitor and monitormitigate risks associated with the expected discontinuance or unavailability of LIBOR, actively engage with industry working groups and regulators, achieve operational readiness for the use of alternative reference rates and engage impacted customers. Startingcustomers to remediate and transition impacted instruments. The Company has also invested in 2020, the Company began modifyingupdating its systems, models, procedures and internal infrastructure as part of the transition program. Additionally, in alignment with guidance from United States banking agencies and the FCA, the Company has ceased the use of LIBOR as a reference rate in new contracts, with limited exceptions, and continues to be prepared to acceptincrease the usage of alternative reference rates.rates such as SOFR. The Company has also adopted industry best practice guidelines for fallback language for new transactions, converted its cleared interest rate swaps discounting to Secured Overnight Financing RateSOFR discounting, and distributed communications related to the transition to certain impacted parties, both inside and outside the Company, on the transition.Company. Refer to “Risk Factors” in the Company’s Annual Report on
Form
10-K
for the year ended December 31, 2020,2021, for further discussion on potential risks that could adversely affect the Company’s financial results as a result of the LIBOR transition.
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 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.
U.S. Bancorp
23
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The average, high, low and
period-end
one-day
VaR amounts for the Company’s Covered Positions were as follows:
 
Three Months Ended March 31
(Dollars in Millions)
 2021   2020  2022   2021 
Average
 $3   $2  $2   $3 
High
 4    3  2    4 
Low
 1    1  1    1 
Period-end
 2    3  2    2 
The Company did not experience any actual losses for its combined Covered Positions that exceeded VaR during the three months ended March 31, 2022 and 2021. Given the market volatility in the first quarter of 2020 resulting from effects of the
COVID-19
pandemic, the Company experienced actual losses for its combined Covered Positions that exceeded VaR five times during the three months ended March 31, 2020. The Company stress tests its market risk measurements to provide management with perspectives on market events that may not be captured by its VaR models, including worst case historical market movement combinations that have not necessarily occurred on the same date.
The Company calculates Stressed VaR using the same underlying methodology and model as VaR, except that a historical continuous
one-year
look-back period is utilized that reflects a period of significant financial stress
U.S. Bancorp
23
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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:
 
Three Months Ended March 31
(Dollars in Millions)
 2021   2020  2022   2021 
Average
 $7   $6  $7   $7 
High
 9    7  8    9 
Low
 5    4  6    5 
Period-end
 9    7  7    9 
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:
 
Three Months Ended March 31
(Dollars in Millions)
 2021   2020  2022   2021 
Residential Mortgage Loans Held For Sale and Related Hedges
        
Average
 $12   $5  $2   $12 
High
 19    12  5    19 
Low
 7    2  1    7 
Mortgage Servicing Rights and Related Hedges
        
Average
 $5   $13  $6   $5 
High
 11    34  13    11 
Low
 2    6  3    2 
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 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 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. At March 31, 2021,2022, the fair value of unencumbered investment securities totaled $116.8$143.2 billion, compared with $125.9$144.0 billion at December 31, 2020.2021. Refer to Note 34 of the Notes to Consolidated Financial Statements and “Balance Sheet
24
U.S. Bancorp
Table of Contents
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. At March 31, 2021,2022, the Company could have borrowed a total of an additional $94.5$96.3 billion from the FHLB and Federal Reserve Bank based on collateral available for additional borrowings.
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 $433.8$461.5 billion at March 31, 2021,2022, compared with $429.8$456.1 billion at December 31, 2020.2021. Refer to “Balance Sheet Analysis” for further information on the Company’s deposits.
Additional funding is provided by long-term debt and short-term borrowings. Long-term debt was $37.4$32.9 billion at March 31, 2021,2022, and is an important funding source because of its multi-year borrowing structure. Short-term borrowings were $12.1$21.0 billion at March 31, 2021,2022, and supplement the Company’s other funding sources. Refer to “Balance Sheet Analysis” for further information on the Company’s long-term debt and short-term borrowings.
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U.S. Bancorp
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In addition to assessing liquidity risk on a consolidated basis, the Company monitors the parent company’s liquidity. 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 markets. The parent company is currently well in excess of required liquidity minimums.
At March 31, 2021,2022, parent company long-term debt outstanding was $20.8$19.8 billion, compared with $20.9$18.9 billion at December 31, 2020.2021. The increase was primarily due to $2.1 billion of medium-term note issuances, partially offset by $1.0 billion of medium-term note repayments. As of March 31, 2021,2022, there was $1.5$1.3 billion of parent company debt scheduled to mature in the remainder of 2021.2022.
The Company is subject to a regulatory Liquidity Coverage Ratio (“LCR”) requirement which requires banks to maintain an adequate level of unencumbered high quality liquid assets to meet estimated liquidity needs over a
30-day
stressed period. At March 31, 2021,2022, the Company was compliant with this requirement.
The Company is also subject to a regulatory Net Stable Funding Ratio (“NSFR”) requirement which requires banks 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 March 31, 2022, the Company was compliant with this requirement.
Refer to “Management’s Discussion and Analysis — Liquidity Risk Management” in the Company’s Annual Report on
Form 10-K
for the year ended December 31, 2020,2021, for further discussion on liquidity risk management.
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 the three months ended March 31, 2021.2022. 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 March 31, 2021,2022, the Company had an aggregate amount on deposit with European banks of approximately $12.3$8.3 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 further deterioration in economic conditions in Europe, including the potential negative impact of the United Kingdom’s withdrawalimpacts resulting from the European Union (“Brexit”),Russia-Ukraine conflict, is not expected to have a significant effect on the Company related to these activities. The Company is focused on providing continuity of services, with minimal disruption resulting from Brexit, to customers with activities in European countries. The Company has made certain structural changes to its legal entities and operations in the United Kingdom and European Union, where needed, and migrated certain business activities to the appropriate jurisdictions to continue to provide such services and generate revenue.
Off-Balance
Sheet ArrangementsCommitments, Contingent Liabilities and Other Contractual Obligations
 Off-balance
sheet arrangements include any The Company participates in many different contractual arrangements to which an unconsolidated entity is a party,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. In the ordinary course of business, the Company enters into an array ofThese arrangements include commitments to extend credit, letters of credit and various forms of guarantees that may be considered
off-balance
sheet arrangements.guarantees. Refer to Note 1516 of the Notes to Consolidated Financial Statements for further information on these arrangements. The Company does not utilize private label asset securitizations as a source of funding.
Off-balance
sheetguarantees and contingent liabilities. 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. Refer to Note 56 of the Notes to Consolidated Financial Statements for further information related to the Company’s interests in variable interest entities.
U.S. Bancorp
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Table 10
   Regulatory Capital Ratios
(Dollars in Millions)  March 31,
2022		  December 31,
2021		 
Basel III standardized approach:
   
Common equity tier 1 capital
  $41,950  $41,701 
Tier 1 capital
   49,198   48,516 
Total risk-based capital
   57,403   56,250 
Risk-weighted assets
   427,174   418,571 
Common equity tier 1 capital as a percent of risk-weighted assets
   9.8%   10.0% 
Tier 1 capital as a percent of risk-weighted assets
   11.5   11.6 
Total risk-based capital as a percent of risk-weighted assets
   13.4   13.4 
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio)
   8.6   8.6 
Tier 1 capital as a percent of total
on-
and
off-balance
sheet leverage exposure (total leverage exposure ratio)
   7.0   6.9 
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. 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. Beginning in 2020,2022, the Company electedbegan to adopt a rule issued inphase into its regulatory capital requirements the cumulative deferred impact of its 2020 by its regulators which permits banking organizations who adoptadoption of the accounting guidance related to the impairment of financial instruments based on the current expected credit losses (“CECL”) methodology during 2020, the
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Table 10
   Regulatory Capital Ratios
(Dollars in Millions)  March 31,
2021		  December 31,
2020		 
Basel III standardized approach:
   
Common equity tier 1 capital
  $39,103  $38,045 
Tier 1 capital
   45,517   44,474 
Total risk-based capital
   53,625   52,602 
Risk-weighted assets
   396,351   393,648 
Common equity tier 1 capital as a percent of risk-weighted assets
   9.9%   9.7% 
Tier 1 capital as a percent of risk-weighted assets
   11.5   11.3 
Total risk-based capital as a percent of risk-weighted assets
   13.5   13.4 
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio)
   8.4   8.3 
Tier 1 capital as a percent of total
on-
and
off-balance
sheet leverage exposure (total leverage exposure ratio)
   7.4   7.3 
option to defer the impact of the effect of that guidance at adoption plus 25 percent of its quarterly credit reserve increases over the nextpast two years on itsyears. This cumulative deferred impact will be phased into the Company’s regulatory capital requirements, followed byover the next three years, culminating with a three-year transition period to phasefully phased in the cumulative deferred impact.regulatory capital calculation beginning in 2025. Table 10 provides a summary of statutory regulatory capital ratios in effect for the Company at March 31, 20212022 and December 31, 2020.2021. All regulatory ratios exceeded regulatory “well-capitalized” requirements.
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 6.66.0 percent and 9.18.0 percent, respectively, at March 31, 2021,2022, compared with 6.96.8 percent and 9.59.2 percent, respectively, at December 31, 2020.2021. In addition, the Company’s common equity tier 1 capital to risk-weighted assets ratio, reflecting the full implementation of the CECL methodology was 9.5 percent at March 31, 2021,2022, compared with 9.39.6 percent at December 31, 2020.2021. Refer to
“Non-GAAP
Financial Measures” beginning on page 30 for further information on these other capital ratios.
Total U.S. Bancorp shareholders’ equity was $51.7$51.2 billion at March 31, 2021,2022, compared with $53.1$54.9 billion at December 31, 2020.2021. The decrease was primarily the result of changes in unrealized gains and losses on
available-for-sale
investment securities included in other comprehensive income (loss), and dividends, and common share repurchases, partially offset by corporate earnings.earnings and the issuance of preferred stock.
Beginning in March of 2020 and continuing through the remainder of 2020, the Company suspended all common stock repurchases except for those done exclusively in connection with its stock-based compensation programs. This action was initially taken to maintain strong capital levels given the impact and uncertainties of
COVID-19
on the economy and global markets. Due to continued economic uncertainty, the Federal Reserve Board implemented measures beginning in the fourth quarter of 2020 and extending through 2021, restricting capital distributions of all large bank holding companies, including the Company. These restrictions limit the aggregate amount of common stock dividends and share repurchases to an amount that does not exceed the average net income of the four preceding calendar quarters. Based on the results of the December 2020 Federal Reserve Board Stress Test, theThe Company announced on December 22, 2020 that its Board of Directors had approved an authorization to repurchase up to $3.0 billion of its common stock beginning January 1, 2021.2021, and repurchased $1.5 billion of its common stock during the first six months of 2021 under this program. 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 pending acquisition of MUFG Union Bank’s core regional banking franchise. The Company expects to operate at a common equity tier 1 capital ratio between its target ratio of 8.5 percent and 9.0 percent after closing of the acquisition. The Company does not expect to commence repurchasing its common stock until after the acquisition closes and its common equity tier 1 capital ratio approximates 9.0 percent.
The following table provides a detailed analysis of all shares purchased by the Company or any affiliated purchaser during the first quarter of 2021:2022:
 
Period Total Number
of Shares
Purchased		 Average
Price Paid
Per Share		 Total Number of
Shares Purchased
as Part of Publicly
Announced
Program (a)		 Approximate Dollar
Value of Shares
that May Yet Be
Purchased Under
the Program
(In Millions)		  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)
 
January
 5,559,648(b)  $44.91  5,194,648  $2,767  208,269(a)  $56.22  8,269  $1,444 
February
 5,343,085  49.37  5,343,085  2,503  620,109  58.98  620,109  1,407 
March
 2,838,065  54.13  2,838,065  2,350  412,339(b)  55.54  312,339  1,390 
Total
 13,740,798(b)  $48.55  13,375,798  $2,350  1,240,717(c)  $57.37  940,717  $1,390 
 
(a)
All shares were purchased under the $3.0 billion common stock repurchase authorization program announced December 22, 2020.
(b)
Includes 365,000200,000 shares of common stock purchased, at an average price per share of $45.52,$56.24, in open-market transactions by U.S. Bank National Association, 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.
(b)
Includes 100,000 shares of common stock purchased, at an average price per share of $56.46, in open-market transactions by U.S. Bank National Association in its capacity as trustee of the U.S. Bank 401(k) Savings Plan.
(c)
Includes 300,000 shares of common stock purchased, at an average price per share of $56.31, in open-market transactions by U.S. Bank National Association in its capacity as trustee of the U.S. Bank 401(k) Savings Plan.
26
U.S. Bancorp
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The Company will continue to monitor the economic environmentits capital position and willmay adjust its capital distributions as circumstances warrant. Additional capitalbased on economic conditions and its financial performance. Capital distributions, including dividends and stock repurchases, are subject to the approval of the Company’s Board of Directors and will be consistentalign with regulatory requirements.
Refer to “Management’s Discussion and Analysis — Capital Management” in the Company’s Annual Report on
Form 10-K
for the year ended December 31, 2020,2021, for further discussion on capital management.
26
U.S. Bancorp
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LINE OF BUSINESS FINANCIAL REVIEW
The Company’s major lines of business are Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate resources and assess performance.
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 1617 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 2021,2022, certain organization and methodology changes were made and, accordingly, 20202021 results were restated and presented on a comparable basis.
Corporate and Commercial Banking
Corporate and Commercial Banking offers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets services, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution,
non-profit
and public sector clients. Corporate and Commercial Banking contributed $419$418 million of the Company’s net income in the first quarter of 2021,2022, or an increasea decrease of $278$51 million (10.9 percent) compared with the first quarter of 2020.2021.
Net revenue decreased $130$7 million (12.3(0.7 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020.2021. Noninterest income decreased $23 million (8.6 percent) in the first quarter of 2022, compared with the first quarter of 2021, primarily due to lower corporate bond fees and trading revenue within the capital markets business, partially offset by stronger treasury management fees due to core growth driven by the economic recovery. Net interest income, on a taxable-equivalent basis, decreased $118increased $16 million (15.1(2.2 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020.2021. The decreaseincrease was primarily due to the impact of declining interest rates on the margin benefit from depositshigher loan and lower loandeposit balances, partially offset by favorablethe impact of loan mix and related yields as well as unfavorable changes in deposit mix with higher noninterest-bearing deposit balances and higher loan fees. rates.
Noninterest income decreased $12expense increased $10 million (4.4(2.4 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020,2021, primarily due to an increase in net shared services expense driven by lower capital markets activities, including trading revenue,investment in infrastructure and lower commercial leasing fees,technology development as well as higher compensation expense primarily due to merit increases and hiring to support business growth, partially offset by higher
non-yield
loan fees on unused commitments.
Noninterest expense decreased $37lower performance-based incentives related to capital markets activity. The provision for credit losses increased $51 million (8.4 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020,2021, primarily due to lower net shared services expense and production incentives as well as lower marketing and business development expense driven by a reductionloan loss provisions supporting stronger growth in travel as a result of
COVID-19.
The provision for credit losses decreased $464 million in the first quarter of 2021, compared with the first quarter of 2020, primarily due to a favorable change in the reserve allocation drivenloan balances, partially offset by improving portfolio credit risk ratings.quality.
Consumer and Business Banking
 Consumer and Business Banking delivers products and services through banking offices, telephone servicing and sales,
on-line
services, direct mail, ATM processing and mobile devices. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking. Consumer and Business Banking contributed $671$393 million of the Company’s net income in the first quarter of 2021,2022, or an increasea decrease of $52$182 million (8.4(31.7 percent), compared with the first quarter of 2020.2021.
Net revenue decreased $46$96 million (2.0(4.6 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020. Net interest2021. Noninterest income on a taxable-equivalent basis, increased $94decreased $108 million (6.1(19.0 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020, reflecting continued strong growth in deposit balances and loan growth, driven by mortgage and indirect lending as well as by loans made under the SBA’s Paycheck Protection Program and GNMA buybacks. The increase in net interest income also reflected higher loan fees and favorable loan spreads, partially offset by the impact of declining interest rates on deposit spreads. Noninterest income decreased $140 million (18.5 percent) in the first quarter of 2021, compared with the first quarter of 2020, primarily due to lower mortgage banking revenue reflecting a reductionlower application volume, given declining refinance activities, and lower related gain on sale margins, partially offset by an increase in the fair value of MSRs, net of hedging activities, partially offset by higher production volume and related gain on sale margins compared with the prior year as well as higher performing loan sales. Noninterest income further decreased due to lower other noninterest income, driven by lower retail leasing
end-of-term
residual gains. Offsetting these decreases, deposit service charges.
Noninterest expensecharges increased $51 million (3.8 percent)driven by higher customer spend activity, net of the impact of the elimination of certain consumer
non-sufficient
funds fees in the first quarter of 2021, compared with the first quarter of 2020, primarily due to an increase in net shared services expense due to investments in digital capabilities and higher variable compensation related to mortgage banking origination activities. The provision for credit losses decreased $167 million in the first quarter of 2021, compared with the first quarter of 2020, due to2022. Net interest income, on a favorable change in the reserve allocation primarily reflecting lower delinquency rates in consumer portfolios and a reduction in end of period outstanding loan balances in the first quarter of 2021 compared with loan growth in the first quarter of 2020.
 
U.S. Bancorp 
27
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 Table 11
taxable-equivalent basis, increased $12 million (0.8 percent) in the first quarter of 2022, compared with the first quarter of 2021, reflecting strong growth in interest-bearing deposit balances and favorable funding mix, partially offset by lower loan fees related to the SBA Paycheck Protection Program.
   Line of Business Financial Performance
  
Corporate and
Commercial Banking
       
Consumer and
Business Banking
    
Three Month Ended March 31
(Dollars in Millions)
 2021  2020   Percent
Change		       2021  2020   Percent
Change		    
Condensed Income Statement
             
Net interest income (taxable-equivalent basis)
 $666  $784    (15.1)%     $1,625  $1,531    6.1%   
Noninterest income
  259   271    (4.4)      617   757    (18.5)   
Total net revenue
  925   1,055    (12.3)      2,242   2,288    (2.0)   
Noninterest expense
  406   443    (8.4)      1,388   1,336    3.9   
Other intangibles
  –   –    –      3   4    (25.0)   
Total noninterest expense
  406   443    (8.4)      1,391   1,340    3.8   
Income (loss) before provision and income taxes
  519   612    (15.2)      851   948    (10.2)   
Provision for credit losses
  (40)   424    *      (44)   123    *   
Income (loss) before income taxes
  559   188    *      895   825    8.5   
Income taxes and taxable-equivalent adjustment
  140   47    *      224   206    8.7   
Net income (loss)
  419   141    *      671   619    8.4   
Net (income) loss attributable to noncontrolling interests
  –   –    –      –   –    –   
Net income (loss) attributable to U.S. Bancorp
 $419  $141    *     $671  $619    8.4   
Average Balance Sheet
             
Commercial
 $74,055  $82,167    (9.9)%     $13,378  $8,860    51.0%   
Commercial real estate
  20,808   21,190    (1.8)      15,151   16,305    (7.1)   
Residential mortgages
  2   3    (33.3)      70,085   66,634    5.2   
Credit card
  –   –    –      –   –    –   
Other retail
  7   8    (12.5)      54,563   54,919    (.6)   
Total loans
  94,872   103,368    (8.2)      153,177   146,718    4.4   
Goodwill
  1,647   1,647    –      3,475   3,574    (2.8)   
Other intangible assets
  5   7    (28.6)      2,491   2,411    3.3   
Assets
  107,022   115,308    (7.2)      175,541   161,886    8.4   
Noninterest-bearing deposits
  51,020   29,370    73.7      39,186   27,866    40.6   
Interest checking
  13,024   14,064    (7.4)      69,785   53,017    31.6   
Savings products
  46,112   48,207    (4.3)      80,220   64,189    25.0   
Time deposits
  8,614   18,386    (53.1)      16,871   16,512    2.2   
Total deposits
  118,770   110,027    7.9      206,062   161,584    27.5   
Total U.S. Bancorp shareholders’ equity
  13,074   14,182    (7.8)        13,453   13,422    .2   
*
Not meaningful
Noninterest expense increased $61 million (4.5 percent) in the first quarter of 2022, compared with the first quarter of 2021, primarily due to increases in net shared services expense due to investments in digital capabilities and higher compensation expense related to merit increases and core business growth. The provision for credit losses increased $86 million in the first quarter of 2022, compared with the first quarter of 2021, reflecting higher ending loan balances, partially offset by credit quality improvement.
Wealth Management and Investment Services
 Wealth Management and Investment Services provides private banking, financial advisory services, investment management, retail brokerage services, insurance, trust, custody and fund servicing through four businesses: Wealth Management, Global Corporate Trust & Custody, U.S. Bancorp Asset Management and Fund Services. Wealth Management and Investment Services contributed $171$206 million of the Company’s net income in the first quarter of 2021,2022, or a decrease of $35$19 million (17.0(8.4 percent) compared with the first quarter of 2020.2021.
Net revenue decreased $54increased $71 million (7.2(8.9 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020.2021. Net interest income, on a taxable-equivalent basis, decreased $80increased $6 million (28.2(2.2 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020,2021, primarily due to the declining margin benefit from deposits given lower interest rates, partially offset by higher average noninterest-bearing deposit balances and favorable deposit mix.as well as higher average loan balances. Noninterest income increased $26$65 million (5.6(12.2 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020,2021, primarily due to core business growth in trust and investment management fees and investment products fees, both driven by favorable market conditions, as well as the impact of core business growththe PFM acquisition on trust and investment management fees, and favorable market conditions, partially offset by higher fee waivers related to money market funds.
Noninterest expense increased $9$93 million (2.0(18.8 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020,2021, reflecting increased other noninterestthe PFM acquisition, higher compensation expense and higher salary expense due toas a result of merit increases in the first quarter of 2021.and performance-based incentives, litigation settlements, fraud-related losses and core business growth. The provision for credit losses decreased $16increased $3 million (69.6(60.0 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020, reflecting a favorable change2021, primarily due to stronger growth in the reserve allocation primarily driven by stable credit quality relative to credit quality deterioration in the first quarter of 2020.ending loans.
Payment Services
 Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services, consumer lines of credit and merchant processing. Payment Services contributed $479$372 million of the Company’s net income in the first quarter of 2021,2022, or an increasea decrease of $176$115 million (58.1(23.6 percent) compared with the first quarter of 2020.2021.
Net revenue decreased $42increased $66 million (2.9(4.7 percent) in the first quarter of 2021,2022, compared with the first quarter of 2021. Noninterest income increased $73 million (9.3 percent) in the first quarter of 2022, compared with the first quarter of 2021, mainly due to continued strengthening of consumer and business spending across most sectors as local jurisdictions reduce pandemic related restrictions and consumer behaviors normalize. As a result, there was strong growth in merchant processing services revenue driven by higher sales volume and higher merchant fees, partially offset by higher rebates. There was also growth in corporate payment products revenue driven by improving business spending across nearly all product groups. Strong sales also drove an increase in credit and debit card revenue, mostly offset by declining prepaid processing fees as the beneficial impact of government stimulus programs continues to dissipate. Net interest income, on a taxable-equivalent basis, decreased $7 million (1.1 percent) in the first quarter of 2022, compared with the first quarter of 2021, primarily due to lower loan yields driven by declining customer revolve rates, mostly offset by higher loan balances due to investment in customer acquisition.
Noninterest expense increased $49 million (6.1 percent) in the first quarter of 2022, compared with the first quarter of 2021, reflecting higher net shared services expense driven by investment in infrastructure and technology development in addition to higher compensation expense as a result of merit increases, performance-based incentives and core business growth. The provision for credit losses increased $171 million in the first quarter of 2022, compared with the first quarter of 2021, primarily due to ending loan balance growth and relatively stable credit quality in the first quarter of 2022, compared with a decline in loan balances and delinquencies in the prior year.
 
28
 U.S. Bancorp
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 Table 11
    Line of Business Financial Performance
 
  
Corporate and
Commercial Banking
      
Consumer and
Business Banking
      
Wealth Management and
Investment Services
     
Three Month Ended March 31
(Dollars in Millions)
 2022  2021  Percent
Change		      2022  2021  Percent
Change		      2022  2021  Percent
Change		     
Condensed Income Statement
               
Net interest income (taxable-equivalent basis)
 $735  $719   2.2%    $1,517  $1,505   .8%    $274  $268   2.2%   
Noninterest income
  245   268   (8.6)     461   569   (19.0)     596   531   12.2   
Total net revenue
  980   987   (.7)     1,978   2,074   (4.6)     870   799   8.9   
Noninterest expense
  419   409   2.4     1,405   1,344   4.5     587   494   18.8   
Income (loss) before provision and income taxes
  561   578   (2.9)     573   730   (21.5)     283   305   (7.2)   
Provision for credit losses
  3   (48)   *     49   (37)   *     8   5   60.0   
Income (loss) before income taxes
  558   626   (10.9)     524   767   (31.7)     275   300   (8.3)   
Income taxes and taxable-equivalent adjustment
  140   157   (10.8)     131   192   (31.8)     69   75   (8.0)   
Net income (loss)
  418   469   (10.9)     393   575   (31.7)     206   225   (8.4)   
Net (income) loss attributable to noncontrolling interests
  —   —   —     —   —   —     —   —   —   
Net income (loss) attributable to U.S. Bancorp
 $418  $469   (10.9)    $393  $575   (31.7)    $206  $225   (8.4)   
Average Balance Sheet
               
Loans
 $115,634  $101,927   13.4    $141,106  $141,719   (.4)    $20,666  $16,846   22.7   
Goodwill
  1,912   1,647   16.1     3,261   3,475   (6.2)     1,761   1,619   8.8   
Other intangible assets
  4   5   (20.0)     3,176   2,493   27.4     265   42   *   
Assets
  127,651   114,069   11.9     157,696   164,131   (3.9)     24,446   20,120   21.5   
Noninterest-bearing deposits
  62,285   56,281   10.7     32,094   32,861   (2.3)     27,350   21,338   28.2   
Interest-bearing deposits
  86,618   71,377   21.4     166,765   151,406   10.1     69,909   83,474   (16.3)   
Total deposits
  148,903   127,658   16.6     198,859   184,267   7.9     97,259   104,812   (7.2)   
Total U.S. Bancorp shareholders’ equity
  13,710   14,354   (4.5)       12,275   12,496   (1.8)       3,595   3,034   18.5     
  
Payment
Services
  
Treasury and
Corporate Support
      
Consolidated
Company
     
Three Month Ended March 31
(Dollars in Millions)
 2022  2021  Percent
Change		      2022  2021  Percent
Change		      2022  2021  Percent
Change		     
Condensed Income Statement
               
Net interest income (taxable-equivalent basis)
 $622  $629   (1.1)%    $52  $(32)   *%    $3,200  $3,089   3.6%   
Noninterest income
  858   785   9.3     236   228   3.5     2,396   2,381   .6   
Total net revenue
  1,480   1,414   4.7     288   196   46.9     5,596   5,470   2.3   
Noninterest expense
  854   805   6.1     237   327   (27.5)     3,502   3,379   3.6   
Income (loss) before provision and income taxes
  626   609   2.8     51   (131)   *     2,094   2,091   .1   
Provision for credit losses
  130   (41)   *     (78)   (706)   89.0     112   (827)   *   
Income (loss) before income taxes
  496   650   (23.7)     129   575   (77.6)     1,982   2,918   (32.1)   
Income taxes and taxable-equivalent adjustment
  124   163   (23.9)     (40)   46   *     424   633   (33.0)   
Net income (loss)
  372   487   (23.6)     169   529   (68.1)     1,558   2,285   (31.8)   
Net (income) loss attributable to noncontrolling interests
  —   —   —     (1)   (5)   80.0     (1)   (5)   80.0   
Net income (loss) attributable to U.S. Bancorp
 $372  $487   (23.6)    $168  $524   (67.9)    $1,557  $2,280   (31.7)   
Average Balance Sheet
               
Loans
 $31,740  $29,630   7.1    $3,820  $3,867   (1.2)    $312,966  $293,989   6.5   
Goodwill
  3,325   3,173   4.8     —   —   —     10,259   9,914   3.5   
Other intangible assets
  464   542   (14.4)     —   —   —     3,909   3,082   26.8   
Assets
  38,540   35,091   9.8     229,069   215,323   6.4     577,402   548,734   5.2   
Noninterest-bearing deposits
  3,673   5,264   (30.2)     2,561   2,608   (1.8)     127,963   118,352   8.1   
Interest-bearing deposits
  160   132   21.2     2,761   1,623   70.1     326,213   308,012   5.9   
Total deposits
  3,833   5,396   (29.0)     5,322   4,231   25.8     454,176   426,364   6.5   
Total U.S. Bancorp shareholders’ equity
  8,019   7,658   4.7       15,867   15,187   4.5      
 
53,466
 
  52,729   1.4     
*
Not meaningful
 
    
Wealth Management and
Investment Services
   
Payment
Services
   
Treasury and
Corporate Support
   
Consolidated
Company
 
    2021  2020   Percent
Change		   2021  2020   Percent
Change		   2021  2020  Percent
Change		   2021  2020  Percent
Change		 
                    
 $204  $284    (28.2)%   $628  $661    (5.0)%   $(34)  $(13)   *%   $3,089  $3,247   (4.9)% 
     492   466    5.6    785   794    (1.1)    228   237   (3.8)    2,381   2,525   (5.7) 
  696   750    (7.2)    1,413   1,455    (2.9)    194   224   (13.4)    5,470   5,772   (5.2) 
  459   449    2.2    782   754    3.7    306   292   4.8    3,341   3,274   2.0 
     2   3    (33.3)    33   35    (5.7)    –   –   –    38   42   (9.5) 
     461   452    2.0    815   789    3.3    306   292   4.8    3,379   3,316   1.9 
  235   298    (21.1)    598   666    (10.2)    (112)   (68)   (64.7)    2,091   2,456   (14.9) 
     7   23    (69.6)    (41)   262    *    (709)   161   *    (827)   993   * 
  228   275    (17.1)    639   404    58.2    597   (229)   *    2,918   1,463   99.5 
     57   69    (17.4)    160   101    58.4    52   (139)   *    633   284   * 
  171   206    (17.0)    479   303    58.1    545   (90)   *    2,285   1,179   93.8 
     –   –    –    –   –    –    (5)   (8)   37.5    (5)   (8)   37.5 
    $171  $206    (17.0)   $479  $303    58.1   $540  $(98)   *   $2,280  $1,171   94.7 
                    
 $4,838  $4,189    15.5%   $8,266  $9,543    (13.4)%   $1,554  $1,228   26.5%   $102,091  $105,987   (3.7)% 
  514   536    (4.1)    –   –    –    2,313   2,047   13.0    38,786   40,078   (3.2) 
  5,114   4,255    20.2    –   –    –    –   –   –    75,201   70,892   6.1 
  –   –    –    21,144   23,836    (11.3)    –   –   –    21,144   23,836   (11.3) 
     1,977   1,628    21.4    220   309    (28.8)    –   –   –    56,767   56,864   (.2) 
  12,443   10,608    17.3    29,630   33,688    (12.0)    3,867   3,275   18.1    293,989   297,657   (1.2) 
  1,619   1,617    .1    3,173   2,856    11.1    –   –   –    9,914   9,694   2.3 
  42   44    (4.5)    544   557    (2.3)    –   –   –    3,082   3,019   2.1 
  15,662   13,950    12.3    35,095   38,285    (8.3)    215,414   165,378   30.3    548,734   494,807   10.9 
  20,277   13,232    53.2    5,264   1,471    *    2,605   2,203   18.2    118,352   74,142   59.6 
  13,829   10,027    37.9    –   –    –    747   251   *    97,385   77,359   25.9 
  56,398   56,646    (.4)    132   112    17.9    811   840   (3.5)    183,673   169,994   8.0 
     1,402   2,169    (35.4)    –   2    *    67   4,240   (98.4)    26,954   41,309   (34.8) 
  91,906   82,074    12.0    5,396   1,585    *    4,230   7,534   (43.9)    426,364   362,804   17.5 
     2,634   2,571    2.5    7,480   7,619    (1.8)    16,088   13,352   20.5    52,729   51,146   3.1 
U.S. Bancorp
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of 2020. Net interest income, on a taxable-equivalent basis, decreased $33 million (5.0 percent) in the first quarter of 2021, compared with the first quarter of 2020, primarily due to lower loan balances as a result of higher credit card payment rates, and lower loan fees, mostly offset by higher deposit balances as a result of state unemployment programs utilizing prepaid debit cards. Noninterest income decreased $9 million (1.1 percent) in the first quarter of 2021, compared with the first quarter of 2020, mainly due to the impact of
COVID-19
on consumer spending, particularly related to travel and entertainment activities. However, consumer spending continues to strengthen across most sectors driven by government stimulus, local jurisdictions reducing restrictions and consumer behaviors normalizing, resulting in payment services revenue being essentially flat compared with the prior year. Payment services revenue included higher credit and debit card revenue driven by higher net interchange revenue related to sales volumes and higher prepaid fees as a result of government stimulus programs, offset by lower corporate payment products revenue primarily due to lower business spending related to travel and entertainment and lower merchant processing services revenue driven by lower sales volume and merchant fees.
Noninterest expense increased $26 million (3.3 percent) in the first quarter of 2021, compared with the first quarter of 2020, reflecting incremental costs related to the prepaid card business. The provision for credit losses decreased $303 million in the first quarter of 2021, compared with the first quarter of 2020, primarily due to a favorable change in the reserve allocation due to lower delinquency rates in the first quarter of 2021.
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 net income of $540$168 million in the first quarter of 2021,2022, compared with a net loss of $98$524 million in the first quarter of 2020.2021.
Net revenue decreased $30increased $92 million (13.4(46.9 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020.2021. Net interest income, on a taxable-equivalent basis, decreased $21increased $84 million in the first quarter of 2021,2022, compared with the first quarter of 2020,2021, primarily due to higher premium amortization and lower reinvestment
U.S. Bancorp
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yields within the investment securities portfolio compared with the prior year.balances. Noninterest income decreased $9increased $8 million (3.8(3.5 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020,2021, primarily due to lower other noninterest income driven by lower gains on sales of businesses and
tax-advantaged
investment syndication revenue, mostly offset by the impact of favorable market conditions.COVID-related deposit service charges refunds in the first quarter of 2021.
Noninterest expense increased $14decreased $90 million (4.8(27.5 percent) in the first quarter of 2021,2022, compared with the first quarter of 2020,2021, primarily due to lower performance-based incentives and lower costs related to
tax-advantaged
investments, partially offset by higher costs of capital investments to support business growth and compensation expense as a result of merit increases, and higher performance-based incentives and stock-based compensation as well as related payroll taxes and benefits. These increases were mostly offset by lower
COVID-19
related accrualsincreases. The provision for credit losses increased $628 million (89.0 percent) in the first quarter of 2022, compared with the first quarter of 2020, including recognizing liabilities related to future delivery exposures for merchant and airline processing, and lower net shared services expense. The provision for credit losses decreased $870 million in the first quarter of 2021, compared with the first quarter of 2020, reflecting the residual impact of changes in the allowance for credit losses being impacted by rising economic uncertainty in the first quarter of 2022, compared to improving economic conditions.conditions in the first quarter of 2021.
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.
NON-GAAP
FINANCIAL MEASURES
In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:
Tangible common equity to tangible assets,
Tangible common equity to risk-weighted assets, and
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the CECL methodology.
These capital measures are viewed by management as useful additional methods of evaluating the Company’s utilization of its capital held and the level of capital available to withstand unexpected negative market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Company’s capital position relative to other financial services companies. These capital measures are not defined in generally accepted accounting principles (“GAAP”), or are not currently effective or defined in banking regulations. In addition, certain of these measures differ from currently effective capital ratios defined by banking regulations principally in that the currently effective ratios, which are subject to certain transitional provisions, temporarily exclude the impact of the 2020 adoption of accounting guidance related to impairment of financial instruments based on the CECL methodology. As a result, these capital measures disclosed by the Company may be considered
non-GAAP
financial measures. Management believes this information helps investors assess trends in the Company’s capital adequacy.
The Company also discloses net interest income and related ratios and analysis on a taxable-equivalent basis, which may also be considered
non-GAAP
financial measures. The Company believes this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable and
tax-exempt
sources. In addition, certain performance measures, including the efficiency ratio and net interest margin utilize net interest income on a taxable-equivalent basis.
There may be limits in the usefulness of these measures to investors. As a result, the Company encourages readers to consider the consolidated financial statements and other financial information contained in this report in their entirety, and not to rely on any single financial measure.
 
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 U.S. Bancorp
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The following table shows the Company’s calculation of these
non-GAAP
financial measures:
 
(Dollars in Millions) March 31,
2021		 December 31,
2020		  
March 31,
2022
 
December 31,
2021
 
Total equity
     $52,308  $53,725      $51,668  $55,387 
Preferred stock
 (5,968)  (5,983)  (6,808)  (6,371) 
Noncontrolling interests
 (630)  (630)  (468)  (469) 
Goodwill (net of deferred tax liability) (1)
 (8,992)  (9,014)  (9,304)  (9,323) 
Intangible assets, other than mortgage servicing rights
 (675)  (654)  (762)  (785) 
Tangible common equity (a)
 36,043  37,444  34,326  38,439 
Common equity tier 1 capital, determined in accordance with transitional regulatory capital requirements related to the CECL methodology implementation
 39,103  38,045  41,950  41,701 
Adjustments (2)
 (1,732)  (1,733)  (1,298)  (1,733) 
Common equity tier 1 capital, reflecting the full implementation of the CECL methodology (b)
 37,371  36,312  40,652  39,968 
Total assets
 553,375  553,905  586,517  573,284 
Goodwill (net of deferred tax liability) (1)
 (8,992)  (9,014)  (9,304)  (9,323) 
Intangible assets, other than mortgage servicing rights
 (675)  (654)  (762)  (785) 
Tangible assets (c)
 543,708  544,237  576,451  563,176 
Risk-weighted assets, determined in accordance with prescribed regulatory capital requirements effective for the Company (d)
 396,351  393,648  427,174  418,571 
Adjustments (3)
 (1,440)  (1,471)  (351)  (357) 
Risk-weighted assets, reflecting the full implementation of the CECL methodology (e)
 394,911  392,177  426,823  418,214 
Ratios
    
Tangible common equity to tangible assets (a)/(c)
 6.6%  6.9%  6.0%  6.8% 
Tangible common equity to risk-weighted assets (a)/(d)
 9.1  9.5  8.0  9.2 
Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the CECL methodology (b)/(e)
 9.5  9.3  9.5  9.6 
 
  Three Months Ended
March 31		  
Three Months Ended
March 31
 
  2021 2020  2022 2021 
Net interest income
  $3,063  $3,223  $ 3,173  $ 3,063 
Taxable-equivalent adjustment (4)
   26  24  27  26 
Net interest income, on a taxable-equivalent basis
   3,089  3,247  3,200  3,089 
Net interest income, on a taxable-equivalent basis (as calculated above)
   3,089  3,247  3,200  3,089 
Noninterest income
   2,381  2,525  2,396  2,381 
Less: Securities gains (losses), net
   25  50  18  25 
Total net revenue, excluding net securities gains (losses) (f)
   5,445  5,722  5,578  5,445 
Noninterest expense (g)
   3,379  3,316  3,502  3,379 
Efficiency ratio (g)/(f)
   62.1%  58.0%  62.8%  62.1% 
 
(1)
Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.
(2)
Includes the estimated increase in the allowance for credit losses related to the adoption of the CECL methodology net of deferred taxes.
(3)
Includes the impact of the estimated increase in the allowance for credit losses related to the adoption of the CECL methodology.
(4)
Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.
 
U.S. Bancorp 
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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. Management has discussed the development and the selection of critical accounting policies with the Company’s Audit Committee. Those policies considered to be critical accounting policies relate to the allowance for credit losses, fair value estimates, MSRs, and income taxes. These accounting policies are discussed in detail in “Management’s Discussion and Analysis — Critical Accounting Policies” and the Notes to Consolidated Financial Statements in the Company’s Annual Report on
Form 10-K
for the year ended December 31, 2020.2021.
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.
 
32
 U.S. Bancorp
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U.S. Bancorp
Consolidated Balance Sheet
 
(Dollars in Millions) March 31,
2021		  December 31,
2020		 
March 31,
2022
 
December 31,
2021
 
 (Unaudited)    (Unaudited)   
  
Assets
         
Cash and due from banks
 $  43,501  $  62,580 $44,303  $28,905 
Available-for-sale
investment securities ($596 and $402 pledged as collateral, respectively) (a)
 156,003  136,840
Loans held for sale (including $8,869 and $8,524 of mortgage loans carried at fair value, respectively)
 8,991  8,761
Investment securities
    
Held-to-maturity
(fair value $40,572 and $41,812, respectively)
 43,654  41,858 
Available-for-sale
($855 and $557 pledged as collateral, respectively) (a)
 123,593  132,963 
Loans held for sale (including $2,203 and $6,623 of mortgage loans carried at fair value, respectively)
 3,321  7,775 
Loans
         
Commercial
 104,158  102,871 117,470  112,023 
Commercial real estate
 38,432  39,311 39,191  39,053 
Residential mortgages
 73,624  76,155 78,487  76,493 
Credit card
 20,872  22,346 22,163  22,500 
Other retail
 57,341  57,024 61,623  61,959 
Total loans
 294,427  297,707 318,934  312,028 
Less allowance for loan losses
 (6,343)  (7,314) (5,664)  (5,724) 
Net loans
 288,084  290,393 313,270  306,304 
Premises and equipment
 3,388  3,468 3,207  3,305 
Goodwill
 9,905  9,918 10,250  10,262 
Other intangible assets
 3,462  2,864 4,194  3,738 
Other assets (including $1,313 and $1,255 of trading securities at fair value pledged as collateral, respectively) (a)
 40,041  39,081
Other assets (including $1,111 and $1,193 of trading securities at fair value pledged as collateral, respectively) (a)
 40,725  38,174 
Total assets
 $553,375  $553,905 $586,517  $573,284 
  
Liabilities and Shareholders’ Equity
         
Deposits
         
Noninterest-bearing
 $126,754  $118,089 $129,793  $134,901 
Interest-bearing (b)
 307,007  311,681
Interest-bearing
 331,753  321,182 
Total deposits
 433,761  429,770 461,546  456,083 
Short-term borrowings
 12,098  11,766 21,042  11,796 
Long-term debt
 37,419  41,297 32,931  32,125 
Other liabilities
 17,789  17,347 19,330  17,893 
Total liabilities
 501,067  500,180 534,849  517,897 
Shareholders’ equity
         
Preferred stock
 5,968  5,983 6,808  6,371 
Common stock, par value $0.01 a share—authorized: 4,000,000,000 shares; issued: 3/31/21 and 12/31/20—2,125,725,742 shares
 21  21
Common stock, par value $0.01 a share—authorized: 4,000,000,000 shares; issued: 3/31/22 and 12/31/21—2,125,725,742 shares
 21  21 
Capital surplus
 8,487  8,511 8,515  8,539 
Retained earnings
 65,740  64,188 69,987  69,201 
Less cost of common stock in treasury: 3/31/21—628,716,254 shares; 12/31/20—618,618,084 shares
 (26,443)  (25,930)
Less cost of common stock in treasury: 3/31/22 - 640,053,754 shares; 12/31/21—642,223,571 shares
 (27,193)  (27,271) 
Accumulated other comprehensive income (loss)
 (2,095)  322 (6,938)  (1,943) 
Total U.S. Bancorp shareholders’ equity
 51,678  53,095 51,200  54,918 
Noncontrolling interests
 630  630 468  469 
Total equity
 52,308  53,725 51,668  55,387 
Total liabilities and equity
 $553,375  $553,905 $586,517  $573,284 
 
(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.
(b)
U.S. Bancorp
Includes
 time deposits greater than $250,000 balances of $3.1 billion and $4.4 billion at March 31, 2021 and December 31, 2020, respectively.
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U.S. Bancorp
Consolidated Statement of Income
(Dollars and Shares in Millions, Except Per Share Data)
(Unaudited)
 
Three Months Ended
March 31
 
 2022  2021 
Interest Income
        
Loans
 $2,599  $2,724 
Loans held for sale
  60   67 
Investment securities
  717   517 
Other interest income
  42   33 
Total interest income
  3,418   3,341 
Interest Expense
        
Deposits
  80   85 
Short-term borrowings
  21   16 
Long-term debt
  144   177 
Total interest expense
  245   278 
Net interest income
  3,173   3,063 
Provision for credit losses
  112   (827) 
Net interest income after provision for credit losses
  3,061   3,890 
Noninterest Income
        
Credit and debit card revenue
  338   336 
Corporate payment products revenue
  158   126 
Merchant processing services
  363   318 
Trust and investment management fees
  500   444 
Deposit service charges
  177   161 
Treasury management fees
  156   147 
Commercial products revenue
  266   280 
Mortgage banking revenue
  200   299 
Investment products fees
  62   55 
Securities gains (losses), net
  18   25 
Other
  158   190 
Total noninterest income
  2,396   2,381 
Noninterest Expense
        
Compensation
  1,853   1,803 
Employee benefits
  396   384 
Net occupancy and equipment
  269   263 
Professional services
  114   98 
Marketing and business development
  80   48 
Technology and communications
  349   359 
Postage, printing and supplies
  72   69 
Other intangibles
  47   38 
Other
  322   317 
Total noninterest expense
  3,502   3,379 
Income before income taxes
  1,955   2,892 
Applicable income taxes
  397   607 
Net income
  1,558   2,285 
Net (income) loss attributable to noncontrolling interests
  (1)   (5) 
Net income attributable to U.S. Bancorp
 $1,557  $2,280 
Net income applicable to U.S. Bancorp common shareholders
 $1,466  $2,175 
Earnings per common share
 $.99  $1.45 
Diluted earnings per common share
 $.99  $1.45 
Average common shares outstanding
  1,485   1,502 
Average diluted common shares outstanding
  1,486   1,503 
See Notes to Consolidated Financial Statements.
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U.S. Bancorp
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U.S. Bancorp
Consolidated Statement of Comprehensive Income
(Dollars in Millions)
(Unaudited)
 Three Months Ended
March 31		 
 2022  2021 
Net income
 $1,558  $2,285 
Other Comprehensive Income (Loss)
        
Changes in unrealized gains (losses) on investment securities
available-for-sale
  (6,754)   (3,378) 
Changes in unrealized gains (losses) on derivative hedges
  –   99 
Foreign currency translation
  –   25 
Reclassification to earnings of realized (gains) losses
  67   18 
Income taxes related to other comprehensive income (loss)
  1,692   819 
Total other comprehensive income (loss)
  (4,995)   (2,417) 
Comprehensive income (loss)  (3,437)   (132) 
Comprehensive (income) loss attributable to noncontrolling interests
  (1)   (5) 
   
Comprehensive income (loss) attributable to U.S. Bancorp $(3,438)  $(137) 
See Notes to Consolidated Financial Statements.
 
U.S. Bancorp 
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U.S. Bancorp
Consolidated Statement of Income
(Dollars and Shares in Millions, Except Per Share Data)
(Unaudited)
 Three Months Ended
March 31		 
 2021  2020 
Interest Income
        
Loans
  $2,724   $3,311 
Loans held for sale
  67   44 
Investment securities
  517   692 
Other interest income
  33   69 
Total interest income
  3,341   4,116 
Interest Expense
        
Deposits
  85   525 
Short-term borrowings
  16   71 
Long-term debt
  177   297 
Total interest expense
  278   893 
Net interest income
  3,063   3,223 
Provision for credit losses
  (827)   993 
Net interest income after provision for credit losses
  3,890   2,230 
Noninterest Income
        
Credit and debit card revenue
  336   304 
Corporate payment products revenue
  126   145 
Merchant processing services
  318   337 
Trust and investment management fees
  444   427 
Deposit service charges
  161   209 
Treasury management fees
  147   143 
Commercial products revenue
  280   246 
Mortgage banking revenue
  299   395 
Investment products fees
  55   49 
Securities gains (losses), net
  25   50 
Other
  190   220 
Total noninterest income
  2,381   2,525 
Noninterest Expense
        
Compensation
  1,803   1,620 
Employee benefits
  384   352 
Net occupancy and equipment
  263   276 
Professional services
  98   99 
Marketing and business development
  48   74 
Technology and communications
  359   289 
Postage, printing and supplies
  69   72 
Other intangibles
  38   42 
Other
  317   492 
Total noninterest expense
  3,379   3,316 
Income before income taxes
  2,892   1,439 
Applicable income taxes
  607   260 
Net income
  2,285   1,179 
Net (income) loss attributable to noncontrolling interests
  (5)   (8) 
Net income attributable to U.S. Bancorp
  $2,280   $1,171 
Net income applicable to U.S. Bancorp common shareholders
  $2,175   $1,088 
Earnings per common share
  $  1.45   $    .72 
Diluted earnings per common share
  $  1.45   $    .72 
Average common shares outstanding
  1,502   1,518 
Average diluted common shares outstanding
  1,503   1,519 
See Notes to Consolidated Financial Statements.
34U.S. Bancorp
Table of Contents
U.S. Bancorp
Consolidated Statement of Comprehensive Income
(Dollars in Millions)
(Unaudited)
 Three Months Ended
March 31		 
 2021  2020 
Net income
 $2,285   $1,179 
Other Comprehensive Income (Loss)
        
Changes in unrealized gains and losses on investment securities
available-for-sale
  (3,378)   2,787 
Changes in unrealized gains and losses on derivative hedges
  99   (257) 
Foreign currency translation
  25   (13) 
Reclassification to earnings of realized gains and losses
  18   (6) 
Income taxes related to other comprehensive income (loss)
  819   (635) 
Total other comprehensive income (loss)
  (2,417)   1,876 
Comprehensive income (loss)
  (132)   3,055 
Comprehensive (income) loss attributable to noncontrolling interests
  (5)   (8) 
   
Comprehensive income (loss) attributable to U.S. Bancorp
 $(137)   $3,047 
See Notes to Consolidated Financial Statements.
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U.S. Bancorp
Consolidated Statement of Shareholders’ Equity
 
 U.S. Bancorp Shareholders       U.S. Bancorp Shareholders      
(Dollars and Shares in Millions, Except Per
Share Data) (Unaudited)		 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		  
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, 2019
 1,534  $5,984  $21  $8,475  $63,186  $(24,440)  $(1,373)  $51,853  $630  $52,483 
Change in accounting principle (a)
         (1,099)        (1,099)    (1,099) 
Net income (loss)
         1,171        1,171  8  1,179 
Other comprehensive income (loss)
               1,876  1,876    1,876 
Preferred stock dividends (b)
         (78)        (78)    (78) 
Common stock dividends ($.42 per share)
         (636)        (636)    (636) 
Issuance of common and treasury stock
 3      (108)    117    9    9 
Purchase of treasury stock
 (31)          (1,649)    (1,649)    (1,649) 
Distributions to noncontrolling interests
                  —  (8)  (8) 
Stock option and restricted stock grants
       85          85    85 
   
Balance March 31, 2020
 1,506  $5,984  $21  $8,452  $62,544  $(25,972)  $503  $51,532  $630  $52,162 
Balance December 31, 2020
 1,507  $5,983  $21  $8,511  $64,188  $(25,930)  $322  $53,095  $630  $53,725  1,507  $5,983  $21  $8,511  $64,188 $(25,930)  $322  $53,095  $630  $53,725 
Net income (loss)
         2,280        2,280  5  2,285          2,280      2,280  5  2,285 
Other comprehensive income (loss)
               (2,417)  (2,417)    (2,417)              (2,417)  (2,417)    (2,417) 
Preferred stock dividends (c)
         (90)        (90)    (90) 
Common stock dividends ($.42 per share)
         (633)        (633)    (633) 
Preferred stock dividends (a)
         (90)      (90)    (90) 
Common stock dividends ($.42 per share)
         (633)      (633)    (633) 
Issuance of preferred stock
   730              730    730    730            730    730 
Call of preferred stock
   (745)      (5)        (750)    (750)    (745)      (5)      (750)    (750) 
Issuance of common and treasury stock
 3      (119)    137    18    18  3      (119)    137    18    18 
Purchase of treasury stock
 (13)          (650)    (650)    (650)  (13)          (650)    (650)    (650) 
Distributions to noncontrolling interests
                  —  (5)  (5)                 —  (5)  (5) 
Stock option and restricted stock grants
       95          95    95        95        95    95 
      
Balance March 31, 2021
 1,497  $5,968  $21  $8,487  $65,740  $(26,443)  $(2,095)  $51,678  $630  $52,308  1,497  $5,968  $21  $8,487  $65,740  $(26,443)  $(2,095)  $51,678  $630  $52,308 
   
Balance December 31, 2021
 1,484  $6,371  $21  $8,539  $69,201 $(27,271)  $(1,943)  $54,918  $469  $55,387 
Net income (loss)
         1,557      1,557  1  1,558 
Other comprehensive income (loss)
             (4,995)  (4,995)    (4,995) 
Preferred stock dividends (b)
         (84)      (84)    (84) 
Common stock dividends ($.46 per share)
         (687)      (687)    (687) 
Issuance of preferred stock
   437            437    437 
Issuance of common and treasury stock
 3      (116)    132    16    16 
Purchase of treasury stock
 (1)          (54)    (54)    (54) 
Distributions to noncontrolling interests
                —  (2)  (2) 
Stock option and restricted stock grants
       92          92    92 
   
Balance March 31, 2022
 1,486  $6,808  $21  $8,515  $69,987  $(27,193)  $(6,938)  $51,200  $468  $51,668 
 
(a)
Effective January 1, 2020, the Company adopted accounting guidance which changed impairment recognition of financial instruments to a model that is based on expected losses rather than incurred losses. Upon adoption, the Company increased its allowance for credit losses and reduced retained earnings net of deferred taxes through a cumulative-effect adjustment.
(b)
Reflects dividends declared per share on the Company’s Series A, Series B, Series F, Series H, Series J and Series K
Non-Cumulative
Perpetual Preferred Stock of $884.722, $221.18, $406.25, $321.88, $662.50 and $343.75, respectively.
(c)
Reflects dividends declared per share on the Company’s Series A, Series B, Series F, Series I, Series J, Series K, Series L and Series M
Non-Cumulative
Perpetual Preferred Stock of $875.00, $218.75, $406.25, $232.953, $662.50, $343.75, $234.375, and $202.778 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 $875.00, $218.75, $662.50, $343.75, $234.375, $250.00, $231.25 and $206.25 respectively.
See Notes to Consolidated Financial Statements.
 
36
 U.S. Bancorp
Table of Contents
U.S. Bancorp
Consolidated Statement of Cash Flows
 
(Dollars in Millions)
(Unaudited)
 Three Months Ended
March 31		  
Three Months Ended
March 31
 
2021 2020  2022 2021 
Operating Activities
        
Net income attributable to U.S. Bancorp
 $2,280  $1,171  $1,557  $2,280 
Adjustments to reconcile net income to net cash provided by operating activities
            
Provision for credit losses
 (827)  993   112   (827) 
Depreciation and amortization of premises and equipment
 84  87   85   84 
Amortization of intangibles
 38  42   47   38 
(Gain) loss on sale of loans held for sale
 (213)  (303)   62   (213) 
(Gain) loss on sale of securities and other assets
�� (66)  (120)   (42)   (66) 
Loans originated for sale, net of repayments
 (20,928)  (10,882)   (9,827)   (20,928) 
Proceeds from sales of loans held for sale
 20,397  12,032   13,874   20,397 
Other, net
 172  (666)   2,609   172 
Net cash provided by operating activities
 937  2,354   8,477   937 
Investing Activities
            
Proceeds from sales of
available-for-sale
investment securities
 1,062  9,916   12,527   1,062 
Proceeds from maturities of
held-to-maturity
investment securities
  1,173   —   
Proceeds from maturities of
available-for-sale
investment securities
 12,550  5,649   5,498   12,550 
Purchases of
held-to-maturity
investment securities
  (2,932)   —   
Purchases of
available-for-sale
investment securities
 (36,182)  (14,937)   (15,989)   (36,182) 
Net decrease (increase) in loans outstanding
 3,562  (22,272) 
Net (increase) decrease in loans outstanding
  (7,278)   3,562 
Proceeds from sales of loans
 1,062  575   1,309   1,062 
Purchases of loans
  (1,600)  (893)   (1,073)   (1,600) 
Net (increase) decrease in securities purchased under agreements to resell
 (26)  788 
Net increase in securities purchased under agreements to resell  (147)   (26) 
Other, net
 106  (1,085)   (452)   106 
Net cash used in investing activities
 (19,466)  (22,259)   (7,364)   (19,466) 
Financing Activities
            
Net increase in deposits
 3,991  32,938   5,463   3,991 
Net increase in short-term borrowings
 332  2,621   9,246   332 
Proceeds from issuance of long-term debt
 69  11,271   2,153   69 
Principal payments or redemption of long-term debt
 (3,830)  (156)   (1,118)   (3,830) 
Proceeds from issuance of preferred stock
 730   –   437   730 
Proceeds from issuance of common stock
 17  9   15   17 
Repurchase of preferred stock
 (500)   –   (1,100)   (500) 
Repurchase of common stock
 (646)  (1,660)   (54)   (646) 
Cash dividends paid on preferred stock
 (76)  (71)   (70)   (76) 
Cash dividends paid on common stock
 (637)  (647)   (687)   (637) 
Net cash (used in) provided by financing activities
 (550)  44,305 
Net cash provided by (used in) financing activities
  14,285   (550) 
Change in cash and due from banks
 (19,079)  24,400   15,398   (19,079) 
Cash and due from banks at beginning of period
 62,580  22,405   28,905   62,580 
Cash and due from banks at end of period
 $43,501  $46,805  $ 44,303  $ 43,501 
See Notes to Consolidated Financial Statements.
 
U.S. Bancorp 
37
Table of Contents
Notes to Consolidated Financial Statements
(Unaudited)
 
 Note 1
 
   Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with the instructions to
Form
10-Q
and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States. In the opinion of management of U.S. Bancorp (the “Company”), all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of results for the interim periods have been made. These financial statements and notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on
Form 10-K
for the year ended December 31, 2020.2021. Certain amounts in prior periods have been reclassified to conform to the current period presentation.
 
current presentation.
 Note 2
 
   Accounting Changes
Reference Interest Rate Transition
In March 2020, the FASBFinancial 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, 2022. The Company is in the process of evaluating and applying, as applicable, the optional expedients and exceptions in accounting for eligible contract modifications, eligible existing hedging relationships and new hedging relationships available through December 31, 2022. The adoption of this guidance has not had, and is expected to continue to not have, a material impact on the Company’s financial statements.
Fair Value Hedging – Portfolio Layer Method
In March 2022, the FASB issued accounting guidance, effective for the Company no later than January 1, 2023, related to fair value hedge accounting of portfolios of financial assets. This guidance expands the current
last-of-layer
hedging method that permits a company to apply fair value hedging to a stated amount of a closed portfolio of prepayable financial assets, by allowing it 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 Company expects the adoption of this guidance will not be material to its financial statements.
Financial Instruments – Troubled Debt Restructurings and Vintage Disclosures
In March 2022, the FASB issued accounting guidance, effective for the Company no later than January 1, 2023, related to the recognition and measurement of troubled debt restructurings (“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 guidance can be adopted on a prospective or modified retrospective basis. The Company expects the adoption of this guidance will not be material to its financial statements.

 
Note 338
    Investment SecuritiesU.S. Bancorp
Table of Contents
 Note 3
   Business Combinations
In September 2021, the Company announced that it entered into a definitive agreement to acquire MUFG Union Bank’s core regional banking franchise from Mitsubishi UFJ Financial Group (“MUFG”), for an expected purchase price of approximately $8.0 billion, including $5.5 billion in cash and approximately 44 million shares of the Company’s common stock. The transaction excludes the purchase of MUFG Union Bank’s Global Corporate & Investment Bank, certain middle and back office functions, and other assets. MUFG Union Bank currently has approximately 300 branches in California, Washington and Oregon and is expected to add approximately $105 billion in total assets, $58 billion of loans and $90 billion of deposits to the Company’s consolidated balance sheet.
Closing of the transaction is subject to customary closing conditions, including regulatory approvals which are not within the Company’s control. The Company expects to close the transaction approximately 45 days after being granted U.S. regulatory approvals. At this time, it is uncertain whether such approvals will be received in time to allow for closing to occur in the first half of 2022; however, the parties continue to make significant progress in planning for closing and integration while awaiting regulatory approvals.
 Note 4
   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 Company had no outstanding investment securities classified as
held-to-maturity
at March 31, 2021 and December 31, 2020.     
The amortized cost, gross unrealized holding gains and losses, and fair value of
held-to-maturity
and
available-for-sale
investment securities were as follows:
 
  March 31, 2021   December 31, 2020 
(Dollars in Millions) Amortized
Cost		   Unrealized
Gains		   Unrealized
Losses		  
Fair
Value
   Amortized
Cost		   Unrealized
Gains		   Unrealized
Losses		  Fair Value 
U.S. Treasury and agencies
 $24,401   $288   $(372) $24,317    $21,954   $462   $(25)  $22,391 
Mortgage-backed securities
                                     
Residential agency
  116,629    1,230    (1,683)   116,176    98,031    1,950    (13)   99,968 
Commercial agency
  6,254    53    (221)   6,086    5,251    170    (15)   5,406 
Asset-backed securities
  197    5    –   202    200    5    –   205 
Obligations of state and political subdivisions
  8,687    546    (18)   9,215    8,166    695    –   8,861 
Other
  7    –    –   7    9    –    –   9 
Total
available-for-sale
 $156,175   $ 2,122   $(2,294)  $156,003   $133,611   $ 3,282   $(53)  $136,840 
  March 31, 2022   December 31, 2021 
(Dollars in Millions) Amortized
Cost		   Unrealized
Gains		   Unrealized
Losses		  
Fair
Value
   Amortized
Cost		   Unrealized
Gains		   Unrealized
Losses		  
Fair
Value
 
Held-to-maturity
                                     
Residential agency mortgage-backed securities
 $43,654   $–   $(3,082)  $40,572   $41,858   $2   $(48)  $41,812 
Total
held-to-maturity
 $43,654   $–   $(3,082)  $40,572   $41,858   $2   $(48)  $41,812 
Available-for-sale
                                     
U.S. Treasury and agencies
 $27,653   $28   $(1,331)  $26,350   $36,648   $205   $(244)  $36,609 
Mortgage-backed securities
                                     
Residential agency
  82,508    70    (3,586)   78,992    76,761    665    (347)   77,079 
Commercial agency
  8,769    –    (806)   7,963    8,633    53    (201)   8,485 
Asset-backed securities
  4    3    –   7    62    4    –   66 
Obligations of state and political subdivisions
  10,701    148    (575)   10,274    10,130    607    (20)   10,717 
Other
  7    –    –   7    7    –    –   7 
Total
available-for-sale
 $129,642   $249   $(6,298)  $123,593   $132,241   $1,534   $(812)  $132,963 
Investment securities with a fair value of $39.3$
21.0
 billion at March 31, 2021,2022, and $11.0$
30.7
 billion at December 31, 2020,2021, 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 $596$
855
 million at March 31, 2021,2022, and $402$
557
 million at December 31, 2020.2021.
38U.S. Bancorp
Table of Contents
The following table provides information about the amount of interest income from taxable and
non-taxable
investment securities:
 
 Three Months Ended
March 31		  Three Months Ended
March 31		 
(Dollars in Millions)     2021       2020          2022           2021 
Taxable
 $ 455   $ 640  $646   $455 
Non-taxable
  62    52  71    62 
Total interest income from investment securities
 $517   $692  $717   $517 
U.S. Bancorp
39
Table of Contents
The following table provides information about the amount of gross gains and losses realized through the sales of
available-for-sale
investment securities:
 
 Three Months Ended
March 31		  Three Months Ended
March 31		 
(Dollars in Millions)     2021       2020          2022         2021 
Realized gains
 $ 25   $ 73  $242  $25 
Realized losses
  –    (23)  (224)   – 
Net realized gains
 $25   $50  $18  $25 
Income tax on net realized gains
 $6   $13  $4  $6 
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 March 31, 20212022 and December 31, 2020.
2021.
At March 31, 2021,2022, certain investment securities had a fair value below amortized cost. The following table shows the gross unrealized losses 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 March 31, 2021:2022:
 
 Less Than 12 Months   12 Months or Greater   Total  Less Than 12 Months   12 Months or Greater   Total 
(Dollars in Millions) 
Fair
Value
   Unrealized
Losses		   Fair
Value		   Unrealized
Losses		   
Fair
Value
   Unrealized
Losses		  
Fair
Value
   Unrealized
Losses		   
Fair
Value
   Unrealized
Losses		   
Fair
Value
   Unrealized
Losses		 
U.S. Treasury and agencies
 $9,519   $(372)   $–           $ –   $9,519   $(372)  $18,851   $(982)   $3,784           $(349)   $22,635   $(1,331) 
Residential agency mortgage-backed securities
  59,916    (1,678)    150    (5)    60,066    (1,683)  66,323    (3,181)    5,090    (405)    71,413    (3,586) 
Commercial agency mortgage-backed securities
  4,130    (221)    6    –    4,136    (221)  5,105    (414)    2,856    (392)    7,961    (806) 
Asset-backed securities
  –    –    2    –    2    –   –    –    2    –    2    – 
Obligations of state and political subdivisions
  1,037    (18)    –    –    1,037    (18)  4,378    (514)    222    (61)    4,600    (575) 
Other
 4    –    –    –    4    – 
Total investment securities
 $74,602   $(2,289)   $158           $(5)  $74,760   $(2,294)  $94,661   $(5,091)   $11,954           $(1,207)   $106,615   $(6,298) 
These unrealized losses primarily relate to changes in interest rates and market spreads subsequent to purchase of the 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 March 31, 2021,2022, 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 three months ended March 31, 20212022 and 2020,2021, the Company did not purchase any
available-for-sale
investment securities that had more-than-insignificant credit deterioration.
All of the Company’s
held-to-maturity
investment securities are 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 0 allowance for credit losses recorded for these securities.
 
U.S. Bancorp
40
 39U.S. Bancorp
Table of Contents
The following table provides information about the amortized cost, fair value and yield by maturity date of the
available-for-sale
investment securities outstanding at March 31, 2021:2022:
 
(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
           
Mortgage-Backed Securities (a)
           
Maturing in one year or less
 $–   $–    –    –% 
Maturing after one year through five years
  –    –    –    – 
Maturing after five years through ten years
 30,703    28,569    9.5    1.58 
Maturing after ten years
 12,951    12,003    10.3    1.78 
Total
 $43,654   $40,572    9.7    1.64% 
Total
held-to-maturity
(d)
 $43,654   $40,572    9.7    1.64% 
Available-for-sale
           
U.S. Treasury and Agencies
                      
Maturing in one year or less
 $4,264   $4,292    .4    1.54%  $2,226   $2,236    .5    1.97% 
Maturing after one year through five years
 11,534    11,694    2.6    1.15  3,246    3,086    4.7    1.36 
Maturing after five years through ten years
 7,364    7,150    8.1    1.33  19,476    18,644    7.7    1.88 
Maturing after ten years
 1,239    1,181    13.0    1.78  2,705    2,384    12.0    1.99 
Total
 $24,401   $24,317    4.4    1.31%  $27,653   $26,350    7.2    1.83% 
Mortgage-Backed Securities (a)
                      
Maturing in one year or less
 $110   $112    .6    2.07%  $64   $65    .7    2.19% 
Maturing after one year through five years
 47,936    49,021    3.6    1.40  15,629    15,395    3.3    1.89 
Maturing after five years through ten years
 74,785    73,077    7.8    1.46  69,960    66,155    8.0    1.76 
Maturing after ten years
 52    52    11.9    1.13  5,624    5,340    10.4    2.09 
Total
 $122,883   $122,262    6.1    1.44%  $91,277   $86,955    7.3    1.80% 
Asset-Backed Securities (a)
                      
Maturing in one year or less
 $–   $–    .9    2.69%  $–   $–    .5    2.69% 
Maturing after one year through five years
 3    4    2.9    1.74  2    3    3.0    1.91 
Maturing after five years through ten years
 194    197    6.0    1.08  2    2    6.0    2.13 
Maturing after ten years
  –    1    13.6    2.41   –    2    13.0    2.41 
Total
 $197   $202    5.9    1.09%  $4   $7    4.1    2.00% 
Obligations of State and Political Subdivisions (b) (c)
                      
Maturing in one year or less
 $178   $182    .7    4.21%  $409   $412    .4    4.74% 
Maturing after one year through five years
 1,451    1,539    3.5    4.39  3,046    3,120    4.0    4.34 
Maturing after five years through ten years
 6,624    7,066    6.9    3.86  3,326    3,335    6.5    3.83 
Maturing after ten years
 434    428    17.4    2.57  3,920    3,407    17.1    2.82 
Total
 $8,687   $9,215    6.7    3.89%  $10,701   $10,274    9.5    3.64% 
Other
                      
Maturing in one year or less
 $7   $7    .1    2.07%  $7   $7    .1    2.07% 
Maturing after one year through five years
  –    –    –    –   –    –    –    – 
Maturing after five years through ten years
  –    –    –    –   –    –    –    – 
Maturing after ten years
  –    –    –    –   –    –    –    – 
Total
 $7   $7    .1    2.07%  $7   $7    .1    2.07% 
Total investment securities (d)
 $156,175   $156,003    5.9    1.55% 
Total
available-for-sale
(d)
 $129,642   $123,593    7.5    1.96% 
 
(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)
The weighted-average maturity of total
available-for-saleheld-to-maturity
investment securities was 3.47.4 years at December 31, 2020,2021, with a corresponding weighted-average yield of 1.611.45 percent. The weighted-average maturity of total
available-for-sale
investment securities was 5.5 years at December 31, 2021, with a corresponding weighted-average yield of 1.73 percent.
(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.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.
 
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 Note 45
 
   Loans and Allowance for Credit LossesLosses​​​​​​​
The composition of the loan portfolio, disaggregated by class and underlying specific portfolio type, was as follows:
 
 March 31, 2021      December 31, 2020  March 31, 2022      December 31, 2021 
(Dollars in Millions) Amount   Percent
of Total		      Amount   Percent
of Total		  Amount   Percent
of Total		      Amount   Percent
of Total		 
Commercial
                            
Commercial
 $98,847    33.6%      $97,315    32.7%  $112,479    35.3%      $106,912    34.3% 
Lease financing
 5,311    1.8       5,556    1.9  4,991    1.6       5,111    1.6 
Total commercial
 104,158    35.4       102,871    34.6  117,470    36.9       112,023    35.9 
Commercial Real Estate
                            
Commercial mortgages
 27,649    9.4       28,472    9.6  29,501    9.3       28,757    9.2 
Construction and development
 10,783    3.6       10,839    3.6  9,690    3.0       10,296    3.3 
Total commercial real estate
 38,432    13.0       39,311    13.2  39,191    12.3       39,053    12.5 
Residential Mortgages
                            
Residential mortgages
 64,238    21.8       66,525    22.4  69,680    21.8       67,546    21.6 
Home equity loans, first liens
 9,386    3.2       9,630    3.2  8,807    2.8       8,947    2.9 
Total residential mortgages
 73,624    25.0       76,155    25.6  78,487    24.6       76,493    24.5 
Credit Card
 20,872    7.1       22,346    7.5  22,163    6.9       22,500    7.2 
Other Retail
                            
Retail leasing
 7,880    2.7       8,150    2.7  6,941    2.2       7,256    2.3 
Home equity and second mortgages
 11,679    4.0       12,472    4.2  10,457    3.3       10,446    3.4 
Revolving credit
 2,536    .9       2,688    .9  2,652    .8       2,750    .9 
Installment
 14,562    4.9       13,823    4.6  16,732    5.2       16,514    5.3 
Automobile
 20,527    7.0       19,722    6.6  24,724    7.8       24,866    8.0 
Student
 157    –       169    .1  117    --       127    -- 
Total other retail
 57,341    19.5       57,024    19.1  61,623    19.3       61,959    19.9 
Total loans
 $294,427    100.0%      $297,707    100.0%  $318,934    100.0%      $312,028    100.0% 
The Company had loans of $94.4$91.8 billion at March 31, 2021,2022, and $96.1$92.1 billion at December 31, 2020,2021, pledged at the Federal Home Loan Bank, and loans of $65.4$79.7 billion at March 31, 2021,2022, and $67.8$76.9 billion at December 31, 2020,2021, pledged at the Federal Reserve Bank.
Originated loans are reported at the principal amount outstanding, net of unearned interest and deferred fees and costs, and any partial charge-offs recorded. Net unearned interest and deferred fees and costs amounted to $849$394 million at March 31, 20212022 and $763$475 million at December 31, 2020.2021. All purchased loans are recorded at fair value at the date of purchase. Beginning January 1, 2020, theThe 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
Beginning January 1, 2020, theThe 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, bothfrom better andto 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 consider uncertainties that exist.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.
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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 rate,rates, real estate prices, gross domestic product levels and corporate bonds spreads, and long-term interest rate forecasts, as well as loan and borrower characteristics, such as internal risk ratings on commercial loans and
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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, 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. 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.
The allowance recorded for Troubled Debt Restructuring (“TDR”) loans in the consumer lending segment is determined on a homogenous pool basis utilizing expected cash flows discounted using the original effective interest rate of the pool. TDRs generally do not include loan modifications granted to customers resulting directly from the economic effects of the
COVID-19
pandemic, who were otherwise in current payment status. The expected cash flows on TDR loans consider subsequent payment defaults since modification, the borrower’s ability to pay under the restructured terms, and the timing and amount of payments. The allowance for collateral-dependent loans in the consumer lending segment is determined based on the fair value of the collateral less costs to sell. With respect to the commercial lending segment, TDRs may be collectively evaluated for impairment where observed performance history, including defaults, is a primary driver of the loss allocation. For commercial TDRs individually evaluated for impairment, attributes of the borrower are the primary factors in determining the allowance for credit losses. However,For smaller commercial loans collectively evaluated for impairment, historical loss experience is also incorporated into the allowance methodology applied to this category of loans.
Beginning January 1, 2020, 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 purchased with more than insignificant credit deterioration. An allowance is established for each population and considers product mix, risk characteristics of the portfolio, bankruptcy experience, delinquency status and refreshed LTV 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. The Company did not have a material amount of PCD loans included in its loan portfolio at March 31, 2021.
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.
PriorThe results of the analysis are evaluated quarterly to January 1, 2020,confirm the estimates are appropriate for each specific loan portfolio, as well as the entire loan portfolio, as the entire allowance for credit losses was established based on an incurred loss model. The allowance recordedis available for loans in the commercial lending segment was based on the migration analysis of commercial loans and actual loss experience. The allowance recorded for loans in the consumer lending segment was determined on a homogenous pool basis and primarily included consideration of delinquency status and historical losses. In addition to the amounts determined under the methodologies described above, management also considered the potential impact of qualitative factors.entire loan portfolio.
 
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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		  Commercial Commercial
Real Estate		 Residential
Mortgages		 Credit
Card		 Other
Retail		 Total
Loans		 
Balance at December 31, 2021
 $1,849  $1,123  $565  $1,673  $   945  $6,155 
Add
            
Provision for credit losses
  19   (54)   29   78   40   112 
Deduct
            
Loans charged-off
  55   1   5   158   61   280 
Less recoveries of loans charged-off
  (23)   (6)   (11)   (46)   (32)   (118) 
Net loan charge-offs (recoveries)
  32   (5)   (6)   112   29   162 
Balance at March 31, 2022
  $1,836   $1,074   $600   $1,639   $956   $6,105 
Balance at December 31, 2020
 $2,423  $1,544  $573  $2,355  $1,115  $8,010  $2,423  $1,544  $573  $2,355  $1,115  $8,010 
Add
                        
Provision for credit losses
 (435)  (19)  (39)  (259)  (75)  (827)   (435)   (19)   (39)   (259)   (75)   (827) 
Deduct
                        
Loans
charged-off
 86  10  5  190  83  374   86   10   5   190   83   374 
Less recoveries of loans
charged-off
 (30)  (17)  (10)  (46)  (48)  (151)   (30)   (17)   (10)   (46)   (48)   (151) 
Net loan charge-offs (recoveries
)
 56  (7)  (5)  144  35  223 
Net loan charge-offs (recoveries)
  56   (7)   (5)   144   35   223 
Balance at March 31, 2021
 $1,932  $1,532  $539  $1,952  $1,005  $6,960   $1,932   $1,532   $539   $1,952   $1,005   $6,960 
Balance at December 31, 2019
 $1,484  $799  $433  $1,128  $647  $4,491 
Add
            
Change in accounting principle (a)
 378  (122)  (30)  872  401  1,499 
Provision for credit losses
 452  162  10  246  123  993 
Deduct
            
Loans
charged-off
 88   –  8  274  121  491 
Less recoveries of loans
charged-off
 (14)  (2)  (7)  (40)  (35)  (98) 
Net loan charge-offs (recoveries
)
 74  (2)  1  234  86  393 
Balance at March 31, 2020
 $2,240  $841  $412  $2,012  $1,085  $6,590 
(a)
Effective January 1, 2020, the Company adopted accounting guidance which changed impairment recognition of financial instruments to a model that is based on expected losses rather than incurred losses.
The decrease in the allowance for credit losses from December 31, 20202021 to March 31, 20212022 reflected factors affectingcontinued strong credit quality, partially offset by loan growth and increasing economic conditions during the first quarter of 2021, including the enactment of additional benefits from government stimulus programs, vaccine availability in the United States and reduced levels of newuncertainty.
COVID-19
cases.
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
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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.
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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 
March 31, 2021
                        
Commercial
 $103,557   $193   $61   $347   $104,158 
Commercial real estate
  37,953    119    4    356    38,432 
Residential mortgages (a)
  73,024    204    143    253    73,624 
Credit card
  20,486    188    198    –    20,872 
Other retail
  56,878    221    70    172    57,341 
Total loans
 $291,898   $925   $476   $1,128   $294,427 
December 31, 2020
                        
Commercial
 $102,127   $314   $55   $375   $102,871 
Commercial real estate
  38,676    183    2    450    39,311 
Residential mortgages (a)
  75,529    244    137    245    76,155 
Credit card
  21,918    231    197    –    22,346 
Other retail
  56,466    318    86    154    57,024 
Total loans
 $294,716   $1,290   $477   $1,224   $297,707 
  Accruing         
(Dollars in Millions) Current   
30-89 Days

Past Due		   90 Days or
More Past Due		   Nonperforming (b)   Total 
March 31, 2022
                        
Commercial
 $116,986    $   234    $  76    $  174    $117,470 
Commercial real estate
  38,888    86    1    216    39,191 
Residential mortgages (a)
  78,028    105    140    214    78,487 
Credit card
  21,804    194    165    —    22,163 
Other retail
  61,157    237    68    161    61,623 
Total loans
 $316,863    $   856    $450    $  765    $318,934 
December 31, 2021
                        
Commercial
 $111,270    $530    $49    $  174    $112,023 
Commercial real estate
  38,678    80    11    284    39,053 
Residential mortgages (a)
  75,962    124    181    226    76,493 
Credit card
  22,142    193    165    —    22,500 
Other retail
  61,468    275    66    150    61,959 
Total loans
 $309,520    $1,202    $472    $  834    $312,028 
 
(a)
At March 31, 2021, $1.5 billion2022, $662 million of loans 30–89 days past due and $1.7$1.3 billion of loans 90 days or more past due purchased from Government National Mortgage Association (“GNMA”) mortgage pools 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 $1.4 billion$791 million and $1.8$1.5 billion at December 31, 2020,2021, respectively.    
(b)
Substantially all nonperforming loans at March 31, 20212022 and December 31, 2020,2021, had an associated allowance for credit losses. The Company recognized interest income on nonperforming loans of $3 million and $5 
million for the three months ended March 31, 20212022 and 2020, respectively.    2021. 
At March 31, 2021,2022, the amount of foreclosed residential real estate held by the Company, and included in OREO,other real estate owned (“OREO”), was $18$23 million, compared with $23$22 million at December 31, 2020.2021. These amounts excluded $29$27 million and $33$22 million at March 31, 20212022 and December 31, 2020,2021, 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 March 31, 20212022 and December 31, 2020,2021, was $936$1.1 billion and $696 million, and $1.0 billion, respectively, of which $756$876 million and $812$555 million, respectively, related to loans purchased from Government National Mortgage Association (“GNMA”) mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.
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.​​​​​​​
 
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The following table provides a summary of loans by portfolio class and the Company’s internal credit quality rating:
  March 31, 2021        December 31, 2020 
     Criticized             Criticized    
(Dollars in Millions) Pass  
Special
Mention
  Classified (a)  Total
Criticized		  Total        Pass  Special
Mention		  Classified (a)  Total
Criticized		  Total 
Commercial
                                              
Originated in 2021
 $12,604  $313  $218  $531  $13,135        $–  $–  $–  $–  $– 
Originated in 2020
  28,890   1,003   1,302   2,305   31,195         34,557   1,335   1,753   3,088   37,645 
Originated in 2019
  15,710   351   223   574   16,284         17,867   269   349   618   18,485 
Originated in 2018
  10,909   372   151   523   11,432         12,349   351   176   527   12,876 
Originated in 2017
  4,658   81   181   262   4,920         5,257   117   270   387   5,644 
Originated prior to 2017
  4,133   168   73   241   4,374         4,954   128   115   243   5,197 
Revolving
  22,377   206   235   441   22,818         22,445   299   280   579   23,024 
Total commercial
  99,281   2,494   2,383   4,877   104,158         97,429   2,499   2,943   5,442   102,871 
            
Commercial real estate
                                              
Originated in 2021
  2,368   39   408   447   2,815         –   –   –   –   – 
Originated in 2020
  8,889   336   901   1,237   10,126         9,446   461   1,137   1,598   11,044 
Originated in 2019
  8,788   450   947   1,397   10,185         9,514   454   1,005   1,459   10,973 
Originated in 2018
  5,296   373   499   872   6,168         6,053   411   639   1,050   7,103 
Originated in 2017
  2,375   141   350   491   2,866         2,650   198   340   538   3,188 
Originated prior to 2017
  4,272   151   161   312   4,584         4,762   240   309   549   5,311 
Revolving
  1,457   5   226   231   1,688         1,445   9   238   247   1,692 
Total commercial real estate
  33,445   1,495   3,492   4,987   38,432         33,870   1,773   3,668   5,441   39,311 
            
Residential mortgages (b)
                                              
Originated in 2021
  4,208   –   –   –   4,208         –   –   –   –   – 
Originated in 2020
  22,053   –   5   5   22,058         23,262   1   3   4   23,266 
Originated in 2019
  12,084   1   23   24   12,108         13,969   1   17   18   13,987 
Originated in 2018
  4,989   1   25   26   5,015         5,670   1   22   23   5,693 
Originated in 2017
  6,091   1   22   23   6,114         6,918   1   24   25   6,943 
Originated prior to 2017
  23,782   3   335   338   24,120         25,921   2   342   344   26,265 
Revolving
  1   –   –   –   1         1   –   –   –   1 
Total residential mortgages
  73,208   6   410   416   73,624         75,741   6   408   414   76,155 
            
Credit card (c)
  20,674   –   198   198   20,872         22,149   –   197   197   22,346 
            
Other retail
                                              
Originated in 2021
  5,690   –   1   1   5,691         –   –   –   –   – 
Originated in 2020
  15,954   –   6   6   15,960         17,589   –   7   7   17,596 
Originated in 2019
  10,351   –   16   16   10,367         11,605   –   23   23   11,628 
Originated in 2018
  5,822   –   20   20   5,842         6,814   –   27   27   6,841 
Originated in 2017
  3,106   –   14   14   3,120         3,879   –   22   22   3,901 
Originated prior to 2017
  3,134   –   18   18   3,152         3,731   –   29   29   3,760 
Revolving
  12,536   –   135   135   12,671         12,647   –   110   110   12,757 
Revolving converted to term
  495   –   43   43   538         503   –   38   38   541 
Total other retail
  57,088   –   253   253   57,341         56,768   –   256   256   57,024 
Total loans
 $283,696  $3,995  $6,736  $10,731  $294,427        $285,957  $4,278  $7,472  $11,750  $297,707 
Total outstanding commitments
 $629,280  $8,140  $9,239  $17,379  $646,659        $627,606  $8,772  $9,374  $18,146  $645,752 
  March 31, 2022        December 31, 2021 
     Criticized             Criticized    
(Dollars in Millions) Pass  
Special
Mention
  Classified (a)  
Total
Criticized
  Total        Pass  
Special
Mention
  Classified (a)  
Total
Criticized
  Total 
Commercial
              
Originated in 2022
  $   13,554   $     8   $     45   $         53   $   13,607         $          –   $       –   $       –   $         –   $          – 
Originated in 2021
  47,131   378   283   661   47,792           51,155   387   287   674   51,829 
Originated in 2020
  11,779   38   312   350   12,129         14,091   304   133   437   14,528 
Originated in 2019
  8,761   24   99   123   8,884         10,159   151   54   205   10,364 
Originated in 2018
  4,475   11   44   55   4,530         5,122   3   36   39   5,161 
Originated prior to 2018
  4,251   17   49   66   4,317         4,923   30   81   111   5,034 
Revolving
  25,756   261   194   455   26,211         24,722   268   117   385   25,107 
Total commercial
  115,707   737   1,026   1,763   117,470         110,172   1,143   708   1,851   112,023 
            
Commercial real estate
                                              
Originated in 2022
  3,170   110   185   295   3,465         –   –   –   –   – 
Originated in 2021
  12,419   17   705   722   13,141         13,364   6   990   996   14,360 
Originated in 2020
  6,907   78   241   319   7,226         7,459   198   263   461   7,920 
Originated in 2019
  5,750   310   556   866   6,616         6,368   251   610   861   7,229 
Originated in 2018
  2,847   42   213   255   3,102         2,996   29   229   258   3,254 
Originated prior to 2018
  3,898   19   152   171   4,069         4,473   55   224   279   4,752 
Revolving
  1,530   –   42   42   1,572         1,494   1   43   44   1,538 
Total commercial real estate
  36,521   576   2,094   2,670   39,191         36,154   540   2,359   2,899   39,053 
            
Residential mortgages (b)
                                              
Originated in 2022
  6,431   –   –   –   6,431         –   –   –   –   – 
Originated in 2021
  29,721   –   4   4   29,725         29,882   –   3   3   29,885 
Originated in 2020
  14,850   –   10   10   14,860         15,948   1   8   9   15,957 
Originated in 2019
  6,154   –   23   23   6,177         6,938   –   36   36   6,974 
Originated in 2018
  2,553   –   20   20   2,573         2,889   –   30   30   2,919 
Originated prior to 2018
  18,407   –   313   313   18,720         20,415   –   342   342   20,757 
Revolving
  1   –   –   –   1         1   –   –   –   1 
Total residential mortgages
  78,117   –   370   370   78,487         76,073   1   419   420   76,493 
            
Credit card (c)
  21,998   –   165   165   22,163         22,335   –   165   165   22,500 
            
Other retail
                                              
Originated in 2022
  4,644   –   –   –   4,644         –   –   –   –   – 
Originated in 2021
  20,495   –   7   7   20,502         22,455   –   6   6   22,461 
Originated in 2020
  10,972   –   9   9   10,981         12,071   –   9   9   12,080 
Originated in 2019
  6,327   –   14   14   6,341         7,223   –   17   17   7,240 
Originated in 2018
  2,675   –   12   12   2,687         3,285   –   14   14   3,299 
Originated prior to 2018
  3,174   –   20   20   3,194         3,699   –   24   24   3,723 
Revolving
  12,644   –   127   127   12,771         12,532   –   112   112   12,644 
Revolving converted to term
  460   –   43   43   503         472   –   40   40   512 
Total other retail
  61,391   –   232   232   61,623         61,737   –   222   222   61,959 
Total loans
  $313,734   $1,313   $3,887   $  5,200   $318,934         $306,471   $1,684   $3,873   $ 5,557   $312,028 
Total outstanding commitments
  $678,366   $2,372   $5,684   $8,056   $686,422         $662,363   $3,372   $5,684   $ 9,056   $671,419 
 
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)
Classified rating on consumer loans primarily based on delinquency status.
(b)
At March 31, 2021, $1.72022, $1.3 billion of GNMA loans 90 days or more past due and $1.3 billion$978 million of restructured 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 $1.8$1.5 billion and $1.4$1.1 billion at December 31, 2020,2021, respectively.
(c)
All credit card loans are considered revolving loans.
Troubled Debt Restructurings
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. Concessionary modifications are classified as TDRs unless the modification results in only an insignificant delay in payments to be received. The Company recognizes interest on TDRs if the borrower complies with the revised terms and conditions as agreed upon with the Company and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles, which is generally six months or greater. To the extent a previous restructuring was insignificant, the Company considers the cumulative effect of past restructurings related to the receivable when determining whether a current restructuring is a TDR.
 
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The following table provides a summary of loans modified as TDRs for the periods presented by portfolio class:
 2021        2020  2022        2021 
Three Months Ended March 31
(Dollars in Millions)
 Number
of Loans		   
Pre-Modification

Outstanding
Loan Balance		   
Post-Modification

Outstanding
Loan Balance		        Number
of Loans		   
Pre-Modification

Outstanding
Loan Balance		   
Post-Modification

Outstanding
Loan Balance		  Number
of Loans		   
Pre-Modification

Outstanding
Loan Balance		   
Post-Modification

Outstanding
Loan Balance		        Number
of Loans		   
Pre-Modification

Outstanding
Loan Balance		   
Post-Modification

Outstanding
Loan Balance		 
Commercial
 704   $75   $60        999   $99   $ 101  509    $     38    $  32        704    $   75    $   60 
Commercial real estate
 56    86    71        27    21    21  9    11    10        56    86    71 
Residential mortgages
 336    104    104        90    10    10  840    228    226        336    104    104 
Credit card
 5,786    33    34        8,415    46    47  9,339    50    50        5,786    33    34 
Other retail
 1,325    37    32        655    15    14  728    37    37        1,325    37    32 
Total loans, excluding loans purchased from GNMA mortgage pools
 8,207    335    301        10,186    191    193  11,425    364    355        8,207    335    301 
Loans purchased from GNMA mortgage pools
 559    87    89        1,904    266    260  390    55    55        559    87    89 
Total loans
 8,766   $422   $390        12,090   $457   $453  11,815    $   419    $410        8,766    $   422    $   390 
Residential mortgages, home equity and second mortgages, and loans purchased from GNMA mortgage pools in the table above include trial period arrangements offered to customers during the periods presented. The post-modification balances for these loans reflect the current outstanding balance until a permanent modification is made. In addition, the post-modification balances typically include capitalization of unpaid accrued interest and/or fees under the various modification programs. At March 31, 2021, 892022, 6 residential mortgages, 331 home equity and second mortgage loansloan and 30499 loans purchased from GNMA mortgage pools with outstanding balances of $28less than $1 million, $2less than $1 million and $52$14 million, respectively, were in a trial period and have estimated post-modification balances of $28less than $1 million, $2less than $1 million and $53$15 million, respectively, assuming permanent modification occurs at the end of the trial period.
The Company has implemented certain restructuring programs that may result in TDRs. However, many of the Company’s TDRs are also determined on a
case-by-case
basis in connection with ongoing loan collection processes.
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, which may not be deemed a market 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 waive contractual principal. The Company classifies all of the above concessions as TDRs to the extent the Company determines that the borrower is experiencing financial difficulty.
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 by providing loan concessions. These concessions may include adjustments to interest rates, conversion of adjustable rates to fixed rates, extension of maturity dates or deferrals of payments, capitalization of accrued interest and/or outstanding advances, or in limited situations, partial forgiveness of loan principal. In most instances, participation in residential mortgage loan restructuring programs requires the customer to complete a short-term trial period. A permanent loan modification is contingent on the customer successfully completing the trial period arrangement, and the loan documents are not modified until that time. The Company reports loans in a trial period arrangement as TDRs and continues to report them as TDRs after the trial period.
Credit card and other retail loan TDRs are generally part of distinct restructuring 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.
In addition, the Company considers secured loans to consumer borrowers that have debt discharged through bankruptcy where the borrower has not reaffirmed the debt to be TDRs.
Loan modifications or concessions granted to borrowers resulting directly from the effects of the
COVID-19
pandemic, who were otherwise in current payment status, are generally not considered to be TDRs. As of March 31, 2021, approximately $7.3 billion of loan modifications included on the Company’s consolidated balance sheet related to borrowers impacted by the
COVID-19
pandemic, consisting primarily of payment deferrals.
 
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The following table provides a summary of TDR loans that defaulted (fully or partially
charged-off
or became 90 days or more past due) for the periods presented, that were modified as TDRs within 12 months previous to default:
  2021        2020 
Three Months Ended March 31
(Dollars in Millions)
 Number
of Loans		   Amount
Defaulted		        Number
of Loans		   Amount
Defaulted		 
Commercial
  285   $16         287   $20 
Commercial real estate
  7    5         16    10 
Residential mortgages
  15    2         13    1 
Credit card
  1,764    9         2,070    10 
Other retail
  280    5         108    1 
Total loans, excluding loans purchased from GNMA mortgage pools
  2,351    37         2,494    42 
Loans purchased from GNMA mortgage pools
  30    4         304    41 
Total loans
  2,381   $41         2,798   $83 
Three Months Ended March 31
(Dollars in Millions)
 2022        2021 
 Number
of Loans		   Amount
Defaulted		        Number
of Loans		   Amount
Defaulted		 
Commercial
  214    $  3         285    $  16 
Commercial real estate
  3    1         7    5 
Residential mortgages
  34    3         15    2 
Credit card
  1,634    9         1,764    9 
Other retail
  83    1         280    5 
Total loans, excluding loans purchased from GNMA mortgage pools
  1,968    17         2,351    37 
Loans purchased from GNMA mortgage pools
  49    8         30    4 
Total loans
  2,017    $25         2,381    $  41 
In addition to the defaults in the table above, the Company had a total of 1916 residential mortgage loans, home equity and second mortgage loans and loans purchased from GNMA mortgage pools for the three months ended March 31, 2021,2022, where borrowers did not successfully complete the trial period arrangement and, therefore, are no longer eligible for a permanent modification under the applicable modification program. These loans had aggregate outstanding balances of $4$2 million for the three months ended March 31, 2021.2022.
As of March 31, 2021,2022, the Company had $134$105 million of commitments to lend additional funds to borrowers whose terms of their outstanding owed balances have been modified in TDRs.
 
 Note 5
6		    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 government-sponsored enterprises (“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 15.16.
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 mortgage servicing rights (“MSRs”), refer to Note 6.7. 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.
sheet.
The Company also provides 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 provided $47$58 million and $8$47 million of support to the funds during the three months ended March 31, 20212022 and 2020,2021, respectively.
The Company is involved in various entities that are considered to be variable interest entities (“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 $133$113 million and $150$133 million for the three months ended March 31, 2021 and 2020, respectively. The Company also recognized $37 million and $99 million of investment tax
 
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March 31, 2022 and 2021, respectively. The Company also recognized $13 million and $37 million of investment tax credits for the three months ended March 31, 20212022 and 2020,2021, respectively. The Company recognized $126$102 million and $142$126 million of expenses related to all of these investments for the three months ended March 31, 20212022 and 2020,2021, respectively, of which $92$91 million and $101$92 million, respectively, were included in tax expense and the remaining amounts were included in noninterest 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:
 
(Dollars in Millions) March 31,
2021		   December 31,
2020		  March 31,
2022		   December 31,
2021		 
Investment carrying amount
 $5,161   $5,378  $5,106   $4,484 
Unfunded capital and other commitments
 2,236    2,334  2,331    1,890 
Maximum exposure to loss
 10,903    11,219  9,764    9,899 
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 $35$41 million at March 31, 20212022 and $40 million at December 31, 2020.2021. The maximum exposure to loss related to these VIEs was $58$84 million at March 31, 20212022 and $57 million at December 31, 2020,2021, representing the Company’s investment balance and its unfunded commitments to invest additional amounts.
The Company’s individual net investments in unconsolidated VIEs, which exclude any unfunded capital commitments, ranged from less than $1 million to $78$74 million at March 31, 2021 and2022, compared with less than $1 million to $75 million at December 31, 2020.2021.
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 March 31, 2021,2022, approximately $4.8$4.9 billion of the Company’s assets and $3.6$3.3 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 $4.9$5.0 billion and $3.7$3.4 billion, respectively, at December 31, 2020.2021. 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 March 31, 2021, $1.72022, $1.6 billion of
available-for-sale
investment securities and $1.2 billion of short-term borrowings on the Consolidated Balance Sheet were related to the tender option bond program, compared with $2.4$1.7 billion of
available-for-sale
investment securities and $1.5$1.2 billion of short-term borrowings at December 31, 2020.2021.
 
48U.S. Bancorp U.S. Bancorp
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Table of Contents
 Note 67
 
   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 $211.6$227.2 billion of residential mortgage loans for others at March 31, 2021,2022, and $211.8$222.4 billion at December 31, 2020,2021, 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 a net loss of $120$29 million and a net gain of $25$120 million for the three months ended March 31, 20212022 and 2020,2021, respectively. Loan servicing and ancillary fees, not including valuation changes, included in mortgage banking revenue were $175$185 million and $186$175 million for the three months ended March 31, 20212022 and 2020,2021, respectively.
Changes in fair value of capitalized MSRs are summarized as follows:
 
 Three Months Ended
March 31		  
Three Months Ended
March 31
 
(Dollars in Millions) 2021 2020  2022 2021 
Balance at beginning of period
 $2,210  $2,546  $ 2,953  $ 2,210 
Rights purchased
 16  5  3  16 
Rights capitalized
 319  201  237  319 
Rights sold (a)
  —  1  1   — 
Changes in fair value of MSRs
        
Due to fluctuations in market interest rates (b)
 486  (743)  368  486 
Due to revised assumptions or models (c)
 (102)  17  (27)  (102) 
Other changes in fair value (d)
 (142)  (140)  (103)  (142) 
Balance at end of period
 $2,787  $1,887  $3,432  $2,787 
 
(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 r
e
latedrelated derivative instruments was as follows:
 
 March 31, 2021      December 31, 2020  March 31, 2022      December 31, 2021 
(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		  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
 $(563)  $(293)  $(149)  $143  $272  $483      $(442)  $(271)  $(150)  $169  $343  $671  $(485)  $(227)  $(109)  $99  $189  $338      $(636)  $(324)  $(160)  $150  $287  $511 
Derivative instrument hedges
 611  299  146  (136)  (266)  (513)       523  281  145  (149)  (304)  (625)  485  224  106  (94)  (180)  (333)       614  309  152  (142)  (278)  (536) 
Net sensitivity
 $48  $6  $(3)  $7  $6  $(30)      $81  $10  $(5)  $20  $39  $46  $0  $(3)  $(3)  $5  $9  $5      $(22)  $(15)  $(8)  $8  $9  $(25) 
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.
 
U.S. Bancorp
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 49U.S. Bancorp
Table of Contents
A summary of the Company’s MSRs and related characteristics by portfolio was as follows:
 
 March 31, 2021    December 31, 2020  March 31, 2022    December 31, 2021 
(Dollars in Millions) HFA Government Conventional (d) Total     HFA Government Conventional (d) Total  HFA Government Conventional (d) Total     HFA Government Conventional (d) Total 
Servicing portfolio (a)
 $39,757  $23,734  $145,171  $208,662     $40,396  $25,474  $143,085  $208,955  $41,430  $21,619  $160,611  $223,660     $40,652  $21,919  $156,382  $218,953 
Fair value
 $499  $312  $1,976  $2,787     $406  $261  $1,543  $2,210  $628  $365  $2,439  $3,432     $527  $308  $2,118  $2,953 
Value (bps) (b)
 126  131  136  134     101  102  108  106  152  169  152  153     130  141  135  135 
Weighted-average servicing fees (bps)
 35  40  30  32     35  40  30  32  36  41  30  32     36  41  30  32 
Multiple (value/servicing fees)
 3.56  3.31  4.47  4.12     2.87  2.56  3.55  3.26  4.23  4.12  5.02  4.75     3.63  3.43  4.50  4.18 
Weighted-average note rate
 4.33%  3.88%  3.64%  3.80%     4.43%  3.91%  3.78%  3.92%  4.02%  3.66%  3.38%  3.53%     4.07%  3.70%  3.41%  3.56% 
Weighted-average age (in years)
 3.8  5.9  3.8  4.0     3.8  5.6  4.2  4.3  3.8  6.0  3.3  3.7     3.8  5.9  3.3  3.7 
Weighted-average expected prepayment (constant prepayment rate)
 11.2%  13.3%  9.5%  10.3%     14.1%  18.0%  13.8%  14.4%  9.6%  10.6%  8.1%  8.6%     11.5%  13.2%  9.6%  10.3% 
Weighted-average expected life (in years)
 6.8  5.6  6.9  6.7     5.6  4.3  5.5  5.4  7.5  6.5  7.5  7.4     6.5  5.6  6.9  6.7 
Weighted-average option adjusted spread (c)
 7.7%  7.3%  6.3%  6.7%     7.7%  7.3%  6.2%  6.6%  6.8%  6.7%  6.0%  ��6.2%     7.3%  7.3%  6.3%  6.6% 
(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 78 
    Preferred Stock
At March 31, 20212022 and December 31, 2020,2021, the Company had authority to issue 50 million shares of preferred stock. The number of shares issued and outstanding and the carrying amount of each outstanding series of the Company’s preferred stock were as follows:​​​​​​​
 
 March 31, 2021        December 31, 2020  March 31, 2022        December 31, 2021 
(Dollars in Millions) Shares
Issued and
Outstanding		   Liquidation
Preference		   Discount   Carrying
Amount		        Shares
Issued and
Outstanding		   Liquidation
Preference		   Discount   Carrying
Amount		 
At December 31 (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  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  40,000    1,000    —    1,000        40,000    1,000    —    1,000 
Series F
 44,000    1,100    12    1,088        44,000    1,100    12    1,088 
Series I
  —      —      —      —          30,000    750    5    745 
Series J
 40,000    1,000    7    993        40,000    1,000    7    993  40,000    1,000    7    993        40,000    1,000    7    993 
Series K
 23,000    575    10    565        23,000    575    10    565  23,000    575    10    565        23,000    575    10    565 
Series L
 20,000    500    14    486        20,000    500    14    486  20,000    500    14    486        20,000    500    14    486 
Series M
 30,000    750    20    730        —      —      —      —    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        —    —    —    — 
Total preferred stock (a)
 209,510   $6,176   $208   $5,968        209,510   $6,176   $193   $5,983  243,510   $7,026   $218   $6,808        225,510   $6,576   $205   $6,371 
 
(a)
The par value of all shares issued and outstanding at March 31, 20212022 and December 31, 2020,2021, was $1.00 per share.
During the first quarterthree months of 2021,2022, the Company issued depositary shares representing an ownership interest in 30,00018,000 shares of Series MO
Non-Cumulative
Perpetual Preferred Stock with a liquidation preference of $25,000 per share (the “Series MO Preferred Stock”). The Series MO 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 4.004.50 percent. The Series MO Preferred Stock is redeemable at the Company’s option, in whole or in part, on or after April 15, 2026.2027. The Series MO Preferred Stock is redeemable at the Company’s option, in whole, but not in part, prior to April 15, 20262027 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 MO Preferred Stock as Tier 1 capital for purposes of the capital adequacy guidelines of the Federal Reserve Board.
During the first quarter of 2021, the Company provided notice of its intent to redeem all outstanding shares of the Series I
Non-Cumulative
Perpetual Preferred Stock (the “Series I Preferred Stock”) during the second quarter of 2021. The Company removed the outstanding liquidation preference amount of the Series I Preferred Stock from shareholders’ equity and included it in other liabilities on the Consolidated Balance Sheet as of March 31, 2021, because upon the notification date it became mandatorily redeemable. The liquidation preference amount equals the redemption price for all outstanding shares of the Series I Preferred Stock. The Company included a $5 million loss in the computation of earnings per diluted common share for the first quarter of 2021, which represents the stock issuance costs recorded in preferred stock upon the issuance of the Series I Preferred Stock that were reclassified to retained earnings on the notification date. On April 15, 2021, the Company redeemed all outstanding shares of the Series I Preferred Stock.
 
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 Note 89 
 
   Accumulated Other Comprehensive Income (Loss)
Shareholders’ equity is affected by transactions and valuations of asset and liability positions that r
e
quirerequire adjustments to accumulated other comprehensive income (loss). The reconciliation of the transactions affecting accumulated other comprehensive income (loss) included in shareholders’ equity for the three months ended March 31, is as follows:
 
(Dollars in Millions) Unrealized Gains
(Losses) on
Investment
Securities
Available-For-

Sale		 
Unrealized Gains
(Losses) on
Derivative Hedges
 Unrealized Gains
(Losses) on
Retirement Plans		 Foreign
Currency
Translation		 Total  
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 
2022
            
Balance at beginning of period
 $540  $(935)  $(85)  $(1,426)  $(37)  $(1,943) 
Changes in unrealized gains (losses)
 (6,754)   —   —   —   — (6,754) 
Foreign currency translation adjustment (a)
  —   —   —   —   — — 
Reclassification to earnings of realized (gains) losses
 (18)  42  11  32   — 67 
Applicable income taxes
 1,714  (11)  (3)  (8)   — 1,692 
Balance at end of period
 $(4,518)  $(904)  $(77)  $(1,402)  $(37)  $(6,938) 
2021
                      
Balance at beginning of period
 $2,417  $(189)  $(1,842)  $(64)  $322  $ 2,417  $—  $(189)  $(1,842)  $(64)  $322 
Changes in unrealized gains and losses
 (3,378)  99   0   —  (3,279) 
Changes in unrealized gains (losses)
 (3,378)   —  99   —   — (3,279) 
Foreign currency translation adjustment (a)
  —   —   —  25  25   —   —   —   —  25 25 
Reclassification to earnings of realized gains and losses
 (25)  4  39   —  18 
Reclassification to earnings of realized (gains) losses
 (25)   —  4  39   — 18 
Applicable income taxes
 861  (26)  (10)  (6)  819  861   —  (26)  (10)  (6)  819 
Balance at end of period
 $(125)  $(112)  $(1,813)  $(45)  $(2,095)  $(125)  $—  $(112)  $(1,813)  $(45)  $(2,095) 
2020
            
Balance at beginning of period
 $379  $(51)  $(1,636)  $(65)  $(1,373) 
Changes in unrealized gains and losses
 2,787  (257)   —   —  2,530 
Foreign currency translation adjustment (a)
  —   —   —  (13)  (13) 
Reclassification to earnings of realized gains and losses
 (50)  13  31   —  (6) 
Applicable income taxes
 (692)  62  (8)  3  (635) 
Balance at end of period
 $2,424  $(233)  $(1,613)  $(75)  $503 
 
(a)
Represents the impact of changes in foreign currency exchange rates on the Company’s investment in foreign operations and related hedges.
Additional detail about the impact to net income for items reclassified out of accumulated other comprehensive income (loss) and into earnings for the three months ended March 31, is as follows:
 
 Impact to Net Income  Affected Line Item in the
Consolidated Statement of Income		 Impact to Net Income  Affected Line Item in the
Consolidated Statement of Income
(Dollars in Millions) 2021      2020  2022 2021 
Unrealized gains (losses) on investment securities
available-for-sale
Unrealized gains (losses) on investment securities
available-for-sale
               
Realized gains (losses) on sale of investment securities
 $25      $50  Securities gains (losses), net $ 18  $ 25  Securities gains (losses), net
 (5)  (6)  Applicable income taxes
 13  19  
Net-of-tax
Unrealized gains (losses) on investment securities transferred from
available-for-sale
to
held-to-maturity
       
Amortization of unrealized gains (42)   —  Interest income
 (6)       (13)  Applicable income taxes 11   —  Applicable income taxes
 19       37  
Net-of-tax
 (31)   —  
Net-of-tax
Unrealized gains (losses) on derivative hedges
                
Realized gains (losses) on derivative hedges
 (4)       (13)  Interest expense (11)  (4)  Interest expense
 1       3  Applicable income taxes 3  1  Applicable income taxes
 (3)       (10)  
Net-of-tax
 (8)  (3)  
Net-of-tax
Unrealized gains (losses) on retirement plans
                
Actuarial gains (losses) and prior service cost (credit) amortization
 (39)       (31)  Other noninterest expense (32)  (39)  Other noninterest expense
 10       8  Applicable income taxes 8  10  Applicable income taxes
 (29)       (23)  
Net-of-tax
 (24)  (29)  
Net-of-tax
    
Total impact to net income
 $(13)      $4    $(50)  $(13)   
 
52
U.S. Bancorp
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 Note 910
 
   Earnings Per Share
The components of earnings per share were:
 
 
Three Months
 
Ended 
March 31
  Three Months Ended
March 31		 
(Dollars and Shares in Millions, Except Per Share Data)     2021            2020  2022 2021 
Net income attributable to U.S. Bancorp
 $2,280��     $1,171  $1,557  $2,280 
Preferred dividends
 (90)       (78)   (84)   (90) 
Impact of preferred stock call (a)
 (5)       —   —   (5) 
Earnings allocated to participating stock awards
 (10)       (5)   (7)   (10) 
Net income applicable to U.S. Bancorp common shareholders
 $2,175      $1,088  $1,466  $2,175 
Average common shares outstanding
 1,502       1,518   1,485   1,502 
Net effect of the exercise and assumed purchase of stock awards
 1       1   1   1 
Average diluted common shares outstanding
 1,503       1,519   1,486   1,503 
Earnings per common share
 $1.45      $.72  $.99  $1.45 
Diluted earnings per common share
 $1.45      $.72  $.99  $1.45 
 
(a)
Represents stock issuance costs originally recorded in preferred stock upon issuance of the Company’s Series I Preferred Stock that were reclassified to retained earnings on the date the Company announced its intent to redeem the outstanding shares.
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Options outstanding at March 31, 2021 and 2020, to purchase 1 million common shares, were not included in the computation of diluted earnings per share for the three months ended March 31, 2021 and 2020, because they were antidilutive.
 Note 1011
 
   Employee Benefits
The components of net periodic benefit cost for the Company’s retirement p
l
ansplans were:
 
 Three Months Ended March 31  Three Months Ended March 31 
 Pension Plans   Postretirement
Welfare Plan		  Pension Plans      Postretirement
Welfare Plan		 
(Dollars in Millions) 2021 2020   2021 2020  2022 2021      2022 2021 
Service cost
 $66  $59   $—  $—  $69  $66      $—  $— 
Interest cost
 55  58    —  1   61   55       —   — 
Expected return on plan assets
 (112)  (101)    —  (1)   (119)   (112)       —   — 
Prior service cost (credit) amortization
  —   —    (1)  (1)   (1)   —       —   (1) 
Actuarial loss (gain) amortization
 42  34    (2)  (2)   35   42       (2)   (2) 
Net periodic benefit cost (a)
 $51  $50   $(3)  $(3)  $45  $51      $(2)  $(3) 
 
(a)
Service cost is included in employee benefits expense on the Consolidated Statement of Income. All other components are included in other noninterest expense on the Consolidated Statement of Income.
Note 1112
 
   Income Taxes
The components of income tax expense were:
 
  
  Three Months Ended  
March 31
  Three Months Ended
March 31		 
(Dollars in Millions)  2021   2020      2022     2021 
Federal
          
Current
  $353   $315  $404  $353 
Deferred
   130    (106)  (102)  130 
Federal income tax
   483    209  302  483 
State
          
Current
   94    70  89  94 
Deferred
   30    (19)  6  30 
  
State income tax
   124    51  95  124 
Total income tax provision
  $607   $260  $397  $607 
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A reconciliation of expected income tax expense at the federal statutory rate of 21 percent to the Company’s applicable income tax expense follows:
 
  
  Three Months Ended  
March 31
  Three Months Ended
March 31		 
(Dollars in Millions)  2021 2020      2022     2021 
Tax at statutory rate
  $607  $302  $411  $607 
State income tax, at statutory rates, net of federal tax benefit
   114  59  84  114 
Tax effect of
         
Tax credits and benefits, net of related expenses
   (93)  (102)  (106)  (93) 
Tax-exempt
income
   (28)  (29)  (28)  (28) 
Other items
   7  30  36  7 
Applicable income taxes
  $607  $260  $397  $607 
The Company’s income tax returns are subject to review and examination by federal, state, local and foreign government authorities. On an ongoing basis, numerous federal, state, local and foreign examinations are in progress and cover multiple tax years. As of March 31, 2021,2022, federal tax examinations for all years ending through December 31, 2014 are completed and resolved. The Company’s tax returns for the years ended December 31, 2015, 2016, 2017 and 2018 are under examination by the Internal Revenue Service. The years open to examination by foreign, state and local government authorities vary by jurisdiction.
The Company’s net deferred tax asset was $1.3$2.6 billion at March 31, 20212022 and $597$785 million at December 31, 2020.2021.
 
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 Note 1213
 
   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 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 March 31, 2021,2022, the Company had $112 $77 
million
(net-of-tax)
of realized and unrealized losses on derivatives classified asdiscontinued cash flow hedges recorded in other comprehensive income (loss), compared with $189
$85 million
(net-of-tax)
of realized and unrealized losses at December 31, 2020.2021. The estimated amount to be reclassified from other comprehensive income (loss) into earnings during the remainder of 2021 and the next 12 months are lossesis a loss of $31$27 million
(net-of-tax).
and $39 millionThere were 0
(net-of-tax), derivatives held as
respectively. All
cash flow hedges were highly effective for the three months endedat March 31, 2022 and December 31, 2021.
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 $1.4$1.3 billion at March 31, 20212022, and December 31, 2020.2021.
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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
to-be-announced
securities (“TBAs”) and other commitments to sell residential mortgage loans, which are used to economically hedge the interest rate risk related to mortgage loans held for sale (“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 also enters into foreign currency forwards to economically hedge remeasurement gains and losses the Company recognizes on foreign currency denominated assets and liabilities. In addition, the Company acts as a seller and buyer of interest rate derivatives and foreign exchange 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 1415 for further information on these swap agreements.
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The following table summarizes the asset and liability management derivative positions of the Company:
 
 March 31, 2022        December 31, 2021 
 Asset Derivatives        Liability Derivatives  
Notional
Value
   Fair Value        
Notional
Value
   Fair Value 
(Dollars in Millions) 
Notional
Value
   
Fair
Value
   
Weighted-
Average
Remaining
Maturity
In Years
        
Notional
Value
   
Fair
Value
   
Weighted-
Average
Remaining
Maturity
In Years
   Assets   Liabilities        Assets   Liabilities 
March 31, 2021
                     
Fair value hedges
                                          
Interest rate contracts
                                          
Receive fixed/pay floating swaps
 $6,600   $–    1.96       $–   $–    –  $2,250   $—   $—       $12,350   $—   $— 
Cash flow hedges
                     
Interest rate contracts
                     
Pay fixed/receive floating swaps
  –    –    –        3,250    –    4.34  8,600    —    —        16,650    —    — 
Net investment hedges
                                      
Foreign exchange forward contracts
 781    10    .05        –    –    –  807    —    7        793    —    4 
Other economic hedges
                                          
Interest rate contracts
                                          
Futures and forwards
                                          
Buy
 6,044    31    .06        11,179    107    .10  16,432    54    179        9,322    10    16 
Sell
 30,218    349    .19        9,364    66    .04  12,509    193    60        29,348    25    27 
Options
                                          
Purchased
 18,370    290    3.68        –    –    –  9,310    281    —        18,570    256    — 
Written
 4,373    109    .12        6,740    300    2.33  10,783    15    165        9,662    52    231 
Receive fixed/pay floating swaps
 4,333    –    4.72        6,373    –    10.03  10,829    —    —        9,653    —    — 
Pay fixed/receive floating swaps
 3,379    –    4.20        4,389    –    4.85  13,666    —    —        7,033    —    — 
Foreign exchange forward contracts
 270    1    .06        344    2    .04  647    1    5        735    2    6 
Equity contracts
 117    –    .33        74    2    .19  212    4    1        209    5    — 
Other (a)
 311    5    .03        2,096    172    1.92  2,753    5    100        1,792    —    125 
Total
 $74,796   $795          $43,809   $649     $  88,798   $   553   $   517       $116,117   $   350   $409 
December 31, 2020
                     
Fair value hedges
                     
Interest rate contracts
                     
Receive fixed/pay floating swaps
 $8,400   $–    1.76       $–   $–    – 
Pay fixed/receive floating swaps
  –    –    –        100    –    9.63 
Cash flow hedges
                     
Interest rate contracts
                     
Pay fixed/receive floating swaps
  –    –    –        3,250    –    4.59 
Net investment hedges
                     
Foreign exchange forward contracts
 479    –    .06        336    3    .06 
Other economic hedges
                     
Interest rate contracts
                     
Futures and forwards
                     
Buy
 16,431    73    .50        1,925    5    .07 
Sell
 10,440    48    .04        28,976    157    .07 
Options
                     
Purchased
 11,610    121    4.11        –    –    – 
Written
 5,073    202    .13        7,770    198    2.53 
Receive fixed/pay floating swaps
 11,064    –    7.31        907    –    23.43 
Pay fixed/receive floating swaps
 78    –    13.68        8,538    –    5.67 
Foreign exchange forward contracts
 292    1    .04        341    2    .05 
Equity contracts
 127    3    .39        45    –    .46 
Other (a)
 47    1    .11        1,832    183    2.44 
Total
 $64,041   $449          $54,020   $548    
 
(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 and weighted-average remaining maturity of $1.8 billion $167and $95 million and 2.25 years at March 31, 2021,2022, respectively, compared to $1.8 billion $182and $125 million and 2.50 years at December 31, 2020,2021, respectively. In addition, includes short-term underwriting purchase and sale commitments with total asset and liability notional values of $311$973 million at March 31, 2021,2022, and $47$8 million at December 31, 2020.2021.
 
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The following table summarizes the customer-related derivative positions of the Company:
 
 March 31, 2022        December 31, 2021 
 Asset Derivatives        Liability Derivatives  
Notional
Value
   Fair Value        
Notional
Value
   Fair Value 
(Dollars in Millions) Notional
Value		   Fair
Value		   Weighted-
Average
Remaining
Maturity In
Years		        Notional
Value		   Fair
Value		   Weighted-
Average
Remaining
Maturity In
Years		   Assets   Liabilities        Assets   Liabilities 
March 31, 2021
                     
Interest rate contracts
                                          
Receive fixed/pay floating swaps
 $121,392   $2,416    4.42       $40,305   $494    7.50  $189,323   $752   $2,028       $178,701   $2,007   $438 
Pay fixed/receive floating swaps
 39,173    115    7.22        115,251    801    4.32  181,909    831    341        174,176    134    670 
Other (a)
 9,128    2    3.74        6,901    2    4.73  17,471    1    3        16,267    1    2 
Options
                                          
Purchased
 80,134    204    1.32        1,465    31    2.71  87,564    667    2        89,679    194    36 
Written
 1,391    31    2.77        75,365    195    1.25  84,177    2    649        85,211    36    176 
Futures
                                          
Buy
 921    –    .95        1,628    –    1.14  291    —    —        3,607    —    — 
Sell
 1,468    –    1.10        1,310    –    .45  5,185    —    —        3,941    —    — 
Foreign exchange rate contracts
                                          
Forwards, spots and swaps
 41,612    1,307    1.09        41,887    1,284    1.25  102,688    1,468    1,473        89,321    1,145    1,143 
Options
                                          
Purchased
 650    23    .98        –    –    –  910    25    —        805    19    — 
Written
  –    –    –        650    20    .98  910    —    25        805    —    19 
Credit contracts
 2,906    1    2.68        7,495    10    4.45  9,537    1    10        9,331    1    5 
Total
 $298,775   $4,099          $292,257   $2,837     $679,965   $3,747   $4,531       $651,844   $3,537   $2,489 
December 31, 2020
                     
Interest rate contracts
                     
Receive fixed/pay floating swaps
 $144,859   $3,782    4.93       $12,027   $99    8.72 
Pay fixed/receive floating swaps
 15,048    2    8.43        134,963    1,239    4.71 
Other (a)
 9,921    6    3.75        6,387    3    4.22 
Options
                     
Purchased
 72,655    111    1.40        1,454    46    2.96 
Written
 1,736    46    2.76        68,205    81    1.25 
Futures
                     
Buy
 1,851    –    1.22        924    –    .05 
Sell
  –    –    –        4,090    –    .72 
Foreign exchange rate contracts
                     
Forwards, spots and swaps
 44,845    1,590    .96        45,992    1,565    1.13 
Options
                     
Purchased
 519    14    .90        –    –    – 
Written
  –    –    –        519    14    .90 
Credit contracts
 2,876    1    2.75        7,479    7    3.81 
Total
 $294,310   $5,552          $282,040   $3,054    
 
(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 three months ended March 31:
 
 
Gains (Losses)
Recognized in
Other
  Comprehensive  
Income
(Loss)
 Gains (Losses)
Reclassified from
Other
Comprehensive
Income
  (Loss) into Earnings  		  
Gains (Losses)
Recognized in
Other
Comprehensive
Income
(Loss)
        
Gains (Losses)
Reclassified
from Other
Comprehensive
Income (Loss)
into Earnings
 
(Dollars in Millions) 2021   2020  2021 2020  2022 2021        2022 2021 
Asset and Liability Management Positions
                         
Cash flow hedges
                         
Interest rate contracts
 $74   $(192)  $ (3)  $(10)  $—  $74       $(8)  $(3) 
Net investment hedges
                         
Foreign exchange forward contracts
  7    16    –   –  (1)  7        —   — 
Non-derivative
debt instruments
  48    25    –   –  20  48        —   — 
 
Note:
The Company does not exclude components from effectiveness testing for cash flow and net investment hedges.
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The table below shows the effect of fair value and cash flow hedge accounting on the Consolidated Statement of I
n
comeIncome for the three months ended March 31:
 
 Interest Income        Interest Expense  Interest Income      Interest Expense 
(Dollars in Millions) 2021 2020        2021 2020  2022 2021      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
 $3,341  $4,116       $278  $893  $3,418  $3,341      $245  $278 
       
Asset and Liability Management Positions
                           
Fair value hedges
                           
Interest rate contract derivatives
 (1)   –        55  (1,035)  517  (1)       72  55 
Hedged items
 1   –        (55)  1,028  (518)  1       (71)  (55) 
Cash flow hedges
                           
Interest rate contract derivatives
  –   –        4  13   —   —       11  4 
 
Note:
The Company does not exclude components from effectiveness testing for fair value and cash flow hedges. The Company reclassified losses of $11 million and $15 million into earnings during the three months ended March 31, 2022 and 2021, respectively, as a result of the discontinuance ofrealized cash flows on discontinued cash flow hedges. The Company did 0t reclassify gains or lossesNo amounts were reclassified into earnings as a result of the discontinuance ofon discontinued cash flow hedges duringbecause it is probable the three months ended March 31, 2020.original hedged forecasted cash flows will not occur.
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The table below shows cumulative hedging adjustments and the carrying amount of assets and liabilities designated in fair value hedges:
 
 Carrying Amount of the Hedged Assets
and Liabilities		        Cumulative Hedging Adjustment (a)  Carrying Amount of the Hedged Assets and
Liabilities		        Cumulative Hedging Adjustment (a) 
(Dollars in Millions) March 31, 2021   December 31, 2020        March 31, 2021 December 31, 2020 
At December 31 (Dollars in Millions) March 31, 2022   December 31, 2021        March 31, 2022 December 31, 2021 
Line Item in the Consolidated Balance Sheet
                       
Available-for-sale
investment securities
 $–   $99       $(4)  $(1)  $7,962   $16,445       $(579)  $(26) 
Long-term debt
 6,713    8,567        800  903  2,148    12,278        382  585 
 
(a)
The cumulative hedging adjustment related to the discontinued hedging relationships on available-for-sale investment securities and long-term debt was
$(4) million and $678
million, respectively, at March 31, 2021. The cumulative hedging adjustment related to discontinued hedging relationships on
available-for-sale
investment securities and long-term debt was $726$
(40
) million and $509 million, respectively, at March 31, 2022, compared with $(6) million and $640 million at December 31, 2020. 
2021, respectively.
The table below shows the gains (losses) recognized in earnings for other economic hedges and the customer-related positions for the three months ended March 31:
 
(Dollars in Millions)  Location of Gains (Losses)
Recognized in Earnings		   2021 2020  
Location of Gains (Losses)
Recognized in Earnings
     2022   2021 
Asset and Liability Management Positions
               
Other economic hedges
               
Interest rate contracts
               
Futures and forwards
   Mortgage banking revenue/
other noninterest income
 		  $430  $(75)  Mortgage banking revenue   $223 $430 
Purchased and written options
   Mortgage banking revenue    12  280  Mortgage banking revenue    (47)  12 
Swaps
   Mortgage banking revenue    (390)  729  Mortgage banking revenue    (204)  (390) 
Foreign exchange forward contracts
   Other noninterest income    (3)  17  Other noninterest income    (3)  (3) 
Equity contracts
   Compensation expense    4  (4)  Compensation expense    (2)  4 
Other
   Other noninterest income    –  (1)  Other noninterest income    (1)  — 
Customer-Related Positions
        
Customer-Related Position
s
         
Interest rate contracts
                 
Swaps
   Commercial products revenue    27  (22)  Commercial products revenue    17 27 
Purchased and written options
   Commercial products revenue    (7)  17  Commercial products revenue    4 (7) 
Futures
   Commercial products revenue    –  (18)  Commercial products revenue    16 — 
Foreign exchange rate contracts
                 
Forwards, spots and swaps
   Commercial products revenue    19  17  Commercial products revenue    15 19 
Purchased and written options
   Commercial products revenue    –   – 
Credit contracts
   Commercial products revenue    2  18  Commercial products revenue    5  2 
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.
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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 March 31, 2021,2022, was $1.0$1.2 billion. At March 31, 2021,2022, the Company had $783$841 million of cash posted as collateral against this net liability position.
 
 
Note 1314
 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 $709.6$768.8 billion total notional amount of derivative positions at March 31, 2021, $375.42022, $413.4 billion related to bilateral
over-the-counter
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bilateral over-the-counter trades, $319.4$349.3 billion related to those centrally cleared through clearinghouses and $14.8$6.1 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 1213 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 or corporate debt securities. The securities loaned or borrowed typically are corporate debt securities traded by the Company’s 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  
Overnight and
Continuous
   
Less Than
30 Days
   
30-89
Days
   
Greater Than
90 Days
   Total 
 
March 31, 2021
              
March 31, 2022
              
Repurchase agreements
                            
U.S. Treasury and agencies
 
$
272
   
$
–
   
$
–
   
$
–
   
$
272
  $499   $–   $–   $–   $499 
Residential agency mortgage-backed securities
  
588
    
–
    
–
    
–
    
588
  843    –    –    –    843 
Corporate debt securities
  
814
    
–
    
–
    
–
    
814
  537    –    –    –    537 
Total repurchase agreements
  
1,674
    
–
    
–
    
–
    
1,674
  1,879    –    –    –    1,879 
Securities loaned
                            
Corporate debt securities
  
230
    
–
    
–
    
–
    
230
  70    –    –    –    70 
Total securities loaned
  
230
    
–
    
–
    
–
    
230
  70    –    –    –    70 
Gross amount of recognized liabilities
 
$
1,904
   
$
–
   
$
–
   
$
–
   
$
1,904
  $1,949   $–   $–   $–   $1,949 
December 31, 2020
              
December 31, 2021
              
Repurchase agreements
                            
U.S. Treasury and agencies
 
$
472
   
$
–
   
$
–
   
$
–
   
$
472
  $378   $–   $–   $–   $378 
Residential agency mortgage-backed securities
  
398
    
–
    
–
    
–
    
398
  551    –    –    –    551 
Corporate debt securities
  
560
    
–
    
–
    
–
    
560
  646    –    –    –    646 
Total repurchase agreements
  
1,430
    
–
    
–
    
–
    
1,430
  1,575    –    –    –    1,575 
Securities loaned
                            
Corporate debt securities
  
218
    
–
    
–
    
–
    
218
  169    –    –    –    169 
Total securities loaned
  
218
    
–
    
–
    
–
    
218
  169    –    –    –    169 
Gross amount of recognized liabilities
 
$
1,648
   
$
–
   
$
–
   
$
–
   
$
1,648
  $1,744   $–   $–   $–   $1,744 
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.
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		  Net Amount  
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		  Net Amount 
Financial
Instruments (b)		 Collateral
Received (c)		 
Financial
Instruments (b)
 
Collateral
Received (c)
 
March 31, 2021
              
March 31, 2022
              
Derivative assets (d)
 
$
4,776
   
$
(1,938
) 
 
$
2,838
   
$
(159
) 
 
$
(147
) 
 
$
2,532
  $4,279   $(2,313)  $1,966   $(168)  $(24)  $1,774 
Reverse repurchase agreements
  
403
    
–
   
403
    
(207
) 
  
(196
) 
  
–
  506    –  506    (405)  (101)   – 
Securities borrowed
  
1,915
    
–
   
1,915
    
–
   
(1,862
) 
  
53
  1,452    –  1,452    –  (1,412)  40 
Total
 
$
7,094
   
$
(1,938
) 
 
$
5,156
   
$
(366
) 
 
$
(2,205
) 
 
$
2,585
  $6,237   $(2,313)  $3,924   $(573)  $(1,537)  $1,814 
December 31, 2020
              
December 31, 2021
              
Derivative assets (d)
 
$
5,744
   
$
(1,874
) 
 
$
3,870
   
$
(109
) 
 
$
(287
) 
 
$
3,474
  $3,830   $(1,609)  $2,221   $(142)  $(106)  $1,973 
Reverse repurchase agreements
  
377
    
–
   
377
    
(262
) 
  
(115
) 
  
–
  359    –  359    (249)  (110)   – 
Securities borrowed
  
1,716
    
–
   
1,716
    
–
   
(1,670
) 
  
46
  1,868    –  1,868    –  (1,818)  50 
Total
 
$
7,837
   
$
(1,874
) 
 
$
5,963
   
$
(371
) 
 
$
(2,072
) 
 
$
3,520
  $6,057   $(1,609)  $4,448   $(391)  $(2,034)  $2,023 
 
(a)
Includes $637 million$1.1 billion and $898$528 million of cash collateral related payables that were netted against derivative assets at March 31, 20212022 and December 31, 2020,2021, 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 $118$21 million and $257$57 million at March 31, 20212022 and December 31, 2020,2021, respectively, of derivative assets not subject to netting arrangements.
 
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(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  
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		  Net Amount 
Financial
Instruments (b)		 Collateral
Pledged (c)		 
Financial
Instruments (b)
 
Collateral
Received (c)
 
March 31, 2021
              
March 31, 2022
              
Derivative liabilities (d)
 
$
3,280
   
$
(2,084
) 
 
$
1,196
   
$
(159
) 
 
$
–
  
$
1,037
  $4,908   $(2,084)  $2,824   $(168)  $–  $2,656 
Repurchase agreements
  
1,674
    
—
   
1,674
    
(207
) 
  
(1,465
) 
  
2
  1,879    –  1,879    (405)  (1,474)   – 
Securities loaned
  
230
    
—
   
230
    
—
   
(227
) 
  
3
  70    –  70    –  (69)  1 
Total
 
$
5,184
   
$
(2,084
) 
 
$
3,100
   
$
(366
) 
 
$
(1,692
) 
 
$
1,042
  $6,857   $(2,084)  $4,773   $(573)  $(1,543)  $2,657 
December 31, 2020
              
December 31, 2021
              
Derivative liabilities (d)
 
$
3,419
   
$
(2,312
) 
 
$
1,107
   
$
(109
) 
 
$
–
  
$
998
  $2,761   $(1,589)  $1,172   $(142)  $–  $1,030 
Repurchase agreements
  
1,430
    
—
   
1,430
    
(262
) 
  
(1,168
) 
  
—
  1,575    –  1,575    (249)  (1,326)   – 
Securities loaned
  
218
    
—
   
218
    
—
   
(215
) 
  
3
  169    –  169    –  (167)  2 
Total
 
$
5,067
   
$
(2,312
) 
 
$
2,755
   
$
(371
) 
 
$
(1,383
) 
 
$
1,001
  $4,505   $(1,589)  $2,916   $(391)  $(1,493)  $1,032 
 
(a)
Includes $783$841 million and $1.3 billion$508 million of cash collateral related receivables that were netted against derivative liabilities at March 31, 20212022 and December 31, 2020,2021, 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 $206$140 million and $183$137 million at March 31, 20212022 and December 31, 2020,2021, respectively, of derivative liabilities not subject to netting arrangements.
 
 Note 1415
    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 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.
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, 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
 
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assets or liabilities are classified. Where appropriate, the descriptions include information about the valuation models and key inputs to those models. During the three months ended March 31, 20212022 and 2020,2021, 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 partythird-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 was awere net
loss losses of
of $215$234 
million and a net gain of 
$93215 million for the three months ended March 31, 20212022 and 2020,2021, respectively, from the changes to fair value of these MLHFS under fair value option accounting guidance. Changes in fair value due to instrument specific credit risk were immaterial. Interest income for MLHFS is measured based on contractual interest rates and reported as interest income on the Consolidated Statement of Income. Electing to measure MLHFS at fair value reduces certain timing differences and better matches changes in fair value of these assets with changes in the value of the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting.
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 67 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
 
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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 1516 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.
The following table shows the significant valuation assumption ranges for MSRs at March 31, 2021:
2022:
 
 Minimum Maximum 
Weighted-
average (a)
  Minimum Maximum Weighted-
Average (a)		 
Expected prepayment
  4%   15%   10%  7%  12%  9% 
Option adjusted spread
  6   11   7  5  11  6 
 
(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 March 31, 2021:
2022:
 
 Minimum Maximum 
Weighted-
average (a)
  Minimum Maximum Weighted-
Average (a)		 
Expected loan close rate
  4%   100%   76%  6%  100%  82% 
Inherent MSR value (basis points per loan)
  53   201   123  38  207  110 
 
(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 March 31, 2021,2022, the minimum, maximum and weighted
-
averageweighted-average credit valuation adjustment as a percentage of the net fair value of the counterparty’s derivative contracts prior to adjustment was 0 percent, 95798 percent and 12 percent, respectively.
 
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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.
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  Level 1   Level 2   Level 3   Netting Total 
March 31, 2021
          
March 31, 2022
             
Available-for-sale
securities
                          
U.S. Treasury and agencies
 $21,406   $2,911   $–   $–  $24,317  $20,924   $5,426   $–   $– $26,350 
Mortgage-backed securities
                            
Residential agency
  –    116,176    –    –  116,176   –    78,992    –    – 78,992 
Commercial agency
  –    6,086    –    –  6,086   –    7,963    –    – 7,963 
Asset-backed securities
  –    195    7    –  202   –    –    7    – 7 
Obligations of state and political subdivisions
  –    9,214    1    –  9,215   –    10,273    1    – 10,274 
Other
  –    7    –    –  7   –    7    –    –  7 
Total
available-for-sale
 21,406    134,589    8    –  156,003  20,924    102,661    8    – 123,593 
Mortgage loans held for sale
  –    8,869    –    –  8,869   –    2,203    –    – 2,203 
Mortgage servicing rights
  –    –    2,787    –  2,787   –    –    3,432    – 3,432 
Derivative assets
 7    3,066    1,821    (1,938)  2,956  5    3,385    910    (2,313)  1,987 
Other assets
 120    2,029    –    –  2,149  256    1,589    –    –  1,845 
Total
 $21,533   $148,553   $4,616   $(1,938)  $172,764  $21,185   $109,838   $4,350   $(2,313)  $133,060 
Derivative liabilities
 $–   $2,821   $665   $(2,084)  $1,402  $–   $3,127   $1,921   $(2,084)  $2,964 
Short-term borrowings and other liabilities (a)
 199    1,890    –    –  2,089  215    1,429    –    –  1,644 
Total
 $199   $4,711   $665   $(2,084)  $3,491  $215   $4,556   $1,921   $(2,084)  $4,608 
December 31, 2020
             
December 31, 2021
               
Available-for-sale
securities
                            
U.S. Treasury and agencies
 $19,251   $3,140   $–   $–  $22,391  $30,917   $5,692   $–   $– $36,609 
Mortgage-backed securities
                            
Residential agency
  –    99,968    –    –  99,968 
Residential agenc
y
  –    77,079    –    – 77,079 
Commercial agency
  –    5,406    –    –  5,406   –    8,485    –    – 8,485 
Asset-backed securities
  –    198    7    –  205   –    59    7    – 66 
Obligations of state and political subdivisions
  –    8,860    1    –  8,861   –    10,716    1    – 10,717 
Other
  –    9    –    –  9   –    7    –    –  7 
Total
available-for-sale
 19,251    117,581    8    –  136,840  30,917    102,038    8    – 132,963 
Mortgage loans held for sale
  –    8,524    –    –  8,524   –    6,623    –    – 6,623 
Mortgage servicing rights
  –    –    2,210    –  2,210   –    –    2,953    – 2,953 
Derivative assets
 4    3,235    2,762    (1,874)  4,127  8    2,490    1,389    (1,609)  2,278 
Other assets
 302    1,601    –    –  1,903  278    1,921    –    –  2,199 
Total
 $19,557   $130,941   $4,980   $(1,874)  $153,604  $31,203   $113,072   $4,350   $(1,609)  $147,016 
Derivative liabilities
 $–   $3,166   $436   $(2,312)  $1,290  $–   $2,308   $590   $(1,589)  $1,309 
Short-term borrowings and other liabilities (a)
 85    1,672    –    –  1,757  209    1,837    –    –  2,046 
Total
 $85   $4,838   $436   $(2,312)  $3,047  $209   $4,145   $590   $(1,589)  $3,355 
 
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 $71$80 million and $85$79 million at March 31, 20212022 and December 31, 2020,2021, respectively. The Company has not recorded impairments or adjustments for observable price changes on these equity investments during the first three months of 20212022 and 2020,2021, 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 three months ended March 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   Issuances  Settlements  End
of Period
Balance		   Net Change
in Unrealized
Gains (Losses)
Relating to
Assets and
Liabilities
Held at End
of Period		 
2021
                                         
Available-for-sale
securities
                                         
Asset-backed securities
 $7   $–  $–   $–   $–   $–  $–  $7   $– 
Obligations of state and political subdivisions
  1    –   –    –    –    –   –   1    – 
Total
available-for-sale
  8    –   –    –    –    –   –   8    – 
Mortgage servicing rights
  2,210    242  (a)   –    16    –    319 (c)   –   2,787    242  (a) 
Net derivative assets and liabilities
  2,326    (935) (b)   –    2    –    –   (237)   1,156    (900) (d) 
          
2020
                                         
Available-for-sale
securities
                                         
Asset-backed securities
 $8   $–  $–   $–   $–   $–  $–  $8   $– 
Obligations of state and political subdivisions
  1    –   1    –    –    –   –   2    1 
Total
available-for-sale
  9    –   1    –    –    –   –   10    1 
Mortgage servicing rights
  2,546    (866) (a)   –    5    1    201 (c)   –   1,887    (866) (a) 
Net derivative assets and liabilities
  810    1,742  (e)   –    4    –    –   (60)   2,496    1,726  (f) 
(Dollars in Millions) Beginning
of Period
Balance		  Net Gains
(Losses)
Included in
Net Income		  Purchases  Sales  Issuances  Settlements  
End
of Period
Balance
  
Net Change
in Unrealized
Gains (Losses)
Relating to
Assets and
Liabilities
Held at End
of Period
 
2022
                                
Available-for-sale
securities
                                
Asset-backed securities
 $7 
 
$–  $–  $–  $–  $–  $7  $– 
Obligations of state and political subdivisions
  1 
 
 –   –   –   –   –   1   – 
Total
available-for-sale
  8 
 
 –   –   –   –   –   8   – 
Mortgage servicing rights
  2,953 
 
 238  (a)   3   1   237 (c)   –   3,432   238  (a) 
Net derivative assets and liabilities
 ��799 
 
 (1,867) (b)   11   (1)   –  $47   (1,011)   (1,697) (d) 
  
 
         
2021
    
 
                           
Available-for-sale
securities
    
 
                           
Asset-backed securities
 $7 
 
$–  $–  $–  $–  $–  $7  $– 
Obligations of state and political subdivisions
  1 
 
 –   –   –   –   –   1   – 
Total
available-for-sale
  8 
 
 –   –   –   –   –   8   – 
Mortgage servicing rights
  2,210 
 
 242  (a)   16   –   319 (c)   –   2,787   242 (a) 
Net derivative assets and liabilities
  2,326 
 
 (935) (e)   2   –   –   (237)   1,156   (900) (f) 
 
(a)
Included in mortgage banking revenue.
(b)
Approximately $60$(83) million, $(1.8) billion and $(1) million included in mortgage banking revenue, and $(995) million included in commercial products revenue.revenue and other noninterest income, respectively.
(c)
Represents MSRs capitalized during the period.
(d)
Approximately $78 
$(24) million, included in mortgage banking revenue and $(978) million included in commercial products revenue.
(e)
Approximately $357 million, $1.4$(1.7) billion and $(1) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(f)(e)
Approximately $214 million, $1.5 billion and $(1)$60 million included in mortgage banking revenue and $(995) million included in commercial products revenue.
(f)
Approximately $78 million included in mortgage banking revenue and other noninterest income, respectively.$(978) million included in commercial products revenue.
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 the reporting date:
 
 March 31, 2021        December 31, 2020  March 31, 2022   December 31, 2021 
(Dollars in Millions) Level 1   Level 2   Level 3   Total        Level 1   Level 2   Level 3   Total  Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total 
   
Loans (a)
 $–   $–   $81   $81       $–   $–   $385   $385  $ –   $–   $28   $28   $–   $–   $59   $59 
      
Other assets (b)
  –    –    9    9        –    –    30    30   –    –    3    3    –    –    77    77 
 
(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.
The following table summarizes losses recognized related to nonrecurring fair value measurements of individual assets or portfolios for the three months ended March 31:
 
(Dollars in Millions) 2021   2020      2022       2021 
 
Loans (a)
 $31   $5  $11   $31 
  
Other assets (b)
 1    3  1    1 
 
(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.
 
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Fair Value Option
The following table summarizes the differences between the aggregate fair value carrying amount of MLHFS for which the fair value option has been elected and the aggregate unpaid principal amount that the Company is contractually obligated to receive at maturity:
 
  March 31, 2021        December 31, 2020 
(Dollars in Millions) Fair
Value
Carrying
Amount		   Aggregate
Unpaid
Principal		   Carrying
Amount Over
(Under) Unpaid
Principal		        Fair
Value
Carrying
Amount		   Aggregate
Unpaid
Principal		   Carrying
Amount Over
(Under) Unpaid
Principal		 
Total loans
 $8,869   $8,685   $184        $8,524   $8,136   $388 
Nonaccrual loans
  1    1    –         1    1    – 
Loans 90 days or more past due
  1    1    –         2    2    – 
  March 31, 2022        December 31, 2021 
(Dollars in Millions) Fair
Value
Carrying
Amount		   Aggregate
Unpaid
Principal		   Carrying
Amount Over
(Under) Unpaid
Principal		        Fair
Value
Carrying
Amount		   Aggregate
Unpaid
Principal		   Carrying
Amount Over
(Under) Unpaid
Principal		 
Total loans $2,203   $2,200   $3        $6,623   $6,453   $170 
Nonaccrual loans
  1    1    –         1    1    – 
Loans 90 days or more past due
  2    2    –         2    2    – 
Fair Value of Financial Instruments
The following section summarizes the estimated fair value for financial instruments accounted for at amortized cost as of March 31, 20212022 and December 31, 2020.2021. 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 are shown in the table below:
 
  March 31, 2021   December 31, 2020 
  
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
 $43,501      $43,501  $–  $–  $43,501       $62,580       $62,580   $–   $–   $62,580 
Federal funds sold and securities purchased under resale agreements
  403       –   403   –   403        377        –    377    –    377 
Loans held for sale (a)
  122       –   –   122   122        237        –    –    237    237 
Loans
  288,084       –   –   296,703   296,703        290,393        –    –    300,419    300,419 
Other (b)
  1,877       –   899   978   1,877        1,772        –    731    1,041    1,772 
              
Financial Liabilities
                                                         
Time deposits
  23,711       –   23,834   –   23,834        30,694        –    30,864    –    30,864 
Short-term borrowings (c)
  10,009       –   9,963   –   9,963        10,009        –    9,956    –    9,956 
Long-term debt
  37,419       –   38,086   –   38,086        41,297        –    42,485    –    42,485 
Other (d)
  3,905       –   1,175   2,730   3,905        4,052        –    1,234    2,818    4,052 
  March 31, 2022   December 31, 2021 
  
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
 $44,303       $44,303   $–   $–   $44,303       $28,905       $28,905   $–   $–   $28,905 
Federal funds sold and securities purchased under resale agreements
  513        –    513    –    513        359        –    359    –    359 
Investment securities
held-to-maturity
  43,654        –    40,572    –    40,572        41,858        –    41,812    –    41,812 
Loans held for sale (a)
  1,118        –    –    1,118    1,118        1,152        –    –    1,152    1,152 
Loans
  313,270        –    –    311,120    311,120        306,304        –    –    312,724    312,724 
Other (b)
  1,941        –    1,129    812    1,941        1,521        –    630    891    1,521 
Financial Liabilities
                                                             
Time deposits
  24,304        –    23,952    –    23,952        22,665        –    22,644    –    22,644 
Short-term borrowings (c)
  19,398        –    19,140    –    19,140        9,750        –    9,646    –    9,646 
Long-term debt
  32,931        –    32,228    –    32,228        32,125        –    32,547    –    32,547 
Other (d)
  3,797        –    1,151    2,646    3,797        3,862        –    1,170    2,692    3,862 

(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 the Company’s obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance.
(d)
Includes operating lease liabilities and liabilities related to
tax-advantaged
investments.
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 $691$504 million and $774$495 million at March 31, 20212022 and December 31, 2020,2021, respectively. The carrying value of other guarantees was $
288
$212 million and $362$245 million at March 31, 20212022 and December 31, 2020,2021, respectively.
 
 Note  1516
 
   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
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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”).
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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 as a direct offset to the related Visa Litigation contingent liability.
In October 2012, Visa signed a settlement agreement to resolve class action claims associated with the multi-districtmultidistrict 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 was approved by the United States District Court for the Eastern District of New York, but is now on appeal. The Injunctive Action, which generally seeks changes to Visa rules, is still pending.
Other Guarantees and Contingent Liabilities
The following table is a summary of other guarantees and contingent liabilities of the Company at March 31, 2022: 
 
The following table is a summary of other guarantees and contingent liabilities of the Company at March 31, 2021:
 
(Dollars in Millions) Collateral
Held		   Carrying
Amount		   Maximum
Potential
Future
Payments		  Collateral
Held		   Carrying
Amount		   Maximum
Potential
Future
Payments		 
Standby letters of credit
 $–   $68   $9,789  $–   $55   $9,705 
Third party borrowing arrangements
  –    –    3   –    –    6 
Securities lending indemnifications
 8,254    –    8,106  10,342    –    9,933 
Asset sales
  –    82    6,132 (a)   –    85    7,382 (a) 
Merchant processing
 559    179    91,183  968    106    121,205 
Tender option bond program guarantee
 1,720    –    1,493  1,615    –    1,488 
Other
  –    27    1,214   –    21    1,331 
 
(a)
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.
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.
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 March 31, 2021,2022, the value of airline tickets purchased to be delivered at a future date through card transactions processed by the Company was
$4.9 $7.7 billion. The Company held collateral of $367$714 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 March 31, 2021,2022, the liability was $155$90 million primarily related to these airline processing arrangements.
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Asset Sales
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
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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 March 31, 2021 and December 31, 2020,2022, the Company had reserved $19$15 million for potential losses from representation and warranty obligations.obligations, compared with $18 million at December 31, 2021. 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.
As of March 31, 20212022 and December 31, 2020,2021, the Company had $10$27 million and $13$19 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.
Litigation and Regulatory Matters
The Company is subject to various litigation and regulatory matters that arise in the ordinary course of its business. The Company establishes reserves for such matters when potential losses become probable and can be reasonably estimated. The Company believes the ultimate resolution of existing legal and regulatory matters will not have a material adverse effect on the financial condition, results of operations or cash flows of the Company. However, in light of the uncertainties inherent in these matters, it is possible that the ultimate resolution of one or more of these matters may have a material adverse effect on the Company’s results from 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 from 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. In the lawsuits brought against the Company, the investors allege that the Company’s banking subsidiary, U.S. Bank National Association (“U.S. Bank”), 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 and investigations in areas of heightened regulatory scrutiny, such as compliance, risk management, third-party risk management and consumer protection. For example, the Consumer Financial Protection Bureau (“CFPB”) ishas been investigating certain of the Company’s consumer sales practices and is now considering a potential enforcement action. The Company is engaged
in discussions
with the Company has respondedCFPB on this matter and continues to respond to the CFPB.does not believe an enforcement action is warranted, but there can be no assurance that these discussions will result in a resolution. 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).
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.

 
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Note  1617
 
   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 five reportable operating segments:
Corporate and Commercial Banking
Corporate and Commercial Banking offers lending, equipment finance and
small-ticket
leasing, depository services, treasury management, capital markets services, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution,
non-profit
and public sector clients.
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Consumer and Business Banking
Consumer and Business Banking delivers products and services through banking offices, telephone servicing and sales,
on-line
services, direct mail, ATM processing and mobile devices. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking.
Wealth Management and Investment Services
Wealth Management and Investment Services provides private banking, financial advisory services, investment management, retail brokerage services, insurance, trust, custody and fund servicing through four businesses: Wealth Management, Global Corporate Trust & Custody, U.S. Bancorp Asset Management and Fund Services.
Payment Services
Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services, consumer lines of credit 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 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 is 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.
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Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Company’s diverse customer base. During 2021,2022, certain organization and methodology changes were made and, accordingly, 20202021 results were restated and presented on a comparable basis.
 
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Business segment results for the three months ended March 31 were as follows:
 
 Corporate and Commercial
Banking		      Consumer and
Business Banking		      Wealth Management and
Investment Services		  Corporate and Commercial
Banking		      
Consumer and
Business Banking
      Wealth Management and
Investment Services		 
(Dollars in Millions) 2021 2020      2021 2020      2021 2020  2022 2021      2022 2021      2022   2021 
Condensed Income Statement
                                           
Net interest income (taxable-equivalent basis)
 $666  $784      $1,625  $1,531      $204  $284  $735  $719      $1,517  $1,505      $274   $268 
Noninterest income
 259  271       617  757       492  466  245  268      461  569      596    531 
Total net revenue
 925  1,055       2,242  2,288       696  750  980  987       1,978  2,074       870    799 
Noninterest expense
 406  443       1,388  1,336       459  449 
Other intangibles
  –   –       3  4       2  3 
Total noninterest expense
 406  443       1,391  1,340       461  452 
Nointerest expense
 419  409      1,405  1,344      587    494 
Income (loss) before provision and income taxes
 519  612       851  948       235  298  561  578       573  730       283    305 
Provision for credit losses
 (40)  424       (44)  123       7  23  3  (48)      49  (37)      8    5 
Income (loss) before income taxes
 559  188       895  825       228  275  558  626       524  767       275    300 
Income taxes and taxable-equivalent adjustment
 140  47       224  206       57  69  140  157      131  192      69    75 
Net income (loss)
 419  141       671  619       171  206  418  469       393  575       206    225 
Net (income) loss attributable to noncontrolling interests
  –   –       –   –       –   –   –   –       –   –       –    – 
Net income (loss) attributable to U.S. Bancorp
 $419  $141      $671  $619      $171  $206  $418  $469     $393  $575     $206   $225 
      
Average Balance Sheet
                                           
Loans
 $94,872  $103,368      $153,177  $146,718      $12,443  $10,608  $115,634  $101,927      $141,106  $141,719      $20,666   $16,846 
Other earning assets
 4,308  4,555       10,203  4,967       279  281  4,676  4,321       4,381  10,177       259    279 
Goodwill
 1,647  1,647       3,475  3,574       1,619  1,617  1,912  1,647       3,261  3,475       1,761    1,619 
Other intangible assets
 5  7       2,491  2,411       42  44  4  5       3,176  2,493       265    42 
Assets
 107,022  115,308       175,541  161,886       15,662  13,950  127,651  114,069       157,696  164,131       24,446    20,120 
            
Noninterest-bearing deposits
 51,020  29,370       39,186  27,866       20,277  13,232  62,285  56,281       32,094  32,861       27,350    21,338 
Interest-bearing deposits
 67,750  80,657       166,876  133,718       71,629  68,842  86,618  71,377      166,765  151,406      69,909    83,474 
Total deposits
 118,770  110,027       206,062  161,584       91,906  82,074  148,903  127,658       198,859  184,267       97,259    104,812 
            
Total U.S. Bancorp shareholders’ equity
 13,074  14,182       13,453  13,422       2,634  2,571  13,710  14,354      12,275  12,496      3,595    3,034 
          
 Payment
Services		      Treasury and
Corporate Support		      Consolidated
Company		  
Payment
Services
      
Treasury and
Corporate Support
      
Consolidated
Company
 
(Dollars in Millions) 2021 2020      2021 2020      2021 2020  2022 2021      2022 2021      2022   2021 
Condensed Income Statement
                                           
Net interest income (taxable-equivalent basis)
 $628  $661      $(34)  $(13)      $3,089  $3,247  $622  $629      $52  $(32)      $3,200   $3,089 
Noninterest income
 785 (a)  794 (a)       228  237       2,381  (b)  2,525  (b)  858 (a)  785 (a)      236  228      2,396 (b)    2,381 (b) 
Total net revenue
 1,413  1,455       194  224       5,470  (c)  5,772  (c)  1,480  1,414       288  196       5,596 (c)    5,470 (c) 
Noninterest expense
 782  754       306  292       3,341  3,274  854  805      237  327      3,502    3,379 
Other intangibles
 33  35       –   –       38  42 
Total noninterest expense
 815  789       306  292       3,379  3,316 
Income (loss) before provision and income taxes
 598  666       (112)  (68)       2,091  2,456  626  609       51  (131)       2,094    2,091 
Provision for credit losses
 (41)  262       (709)  161       (827)  993  130  (41)      (78)  (706)      112    (827) 
Income (loss) before income taxes
 639  404       597  (229)       2,918  1,463  496  650       129  575       1,982    2,918 
Income taxes and taxable-equivalent adjustment
 160  101       52  (139)       633  284  124  163      (40)  46      424    633 
Net income (loss)
 479  303       545  (90)       2,285  1,179  372  487       169  529       1,558    2,285 
Net (income) loss attributable to noncontrolling interests
  –   –       (5)  (8)       (5)  (8)   –   –       (1)  (5)       (1)    (5) 
Net income (loss) attributable to U.S. Bancorp
 $479  $303      $540  $(98)      $2,280  $1,171  $372  $487     $168  $524     $1,557   $2,280 
      
Average Balance Sheet
                                           
Loans
 $29,630  $33,688      $3,867  $3,275      $293,989  $297,657  $31,740  $29,630      $3,820  $3,867      $312,966   $293,989 
Other earning assets
 5  6       188,927  140,256       203,722  150,065  1,023  5       206,532  188,940       216,871    203,722 
Goodwill
 3,173  2,856       –   –       9,914  9,694  3,325  3,173       –   –       10,259    9,914 
Other intangible assets
 544  557       –   –       3,082  3,019  464  542       –   –       3,909    3,082 
Assets
 35,095  38,285       215,414  165,378       548,734  494,807  38,540  35,091       229,069  215,323       577,402    548,734 
            
Noninterest-bearing deposits
 5,264  1,471       2,605  2,203       118,352  74,142  3,673  5,264       2,561  2,608       127,963    118,352 
Interest-bearing deposits
 132  114       1,625  5,331       308,012  288,662  160  132      2,761  1,623      326,213    308,012 
Total deposits
 5,396  1,585       4,230  7,534       426,364  362,804  3,833  5,396       5,322  4,231       454,176    426,364 
            
Total U.S. Bancorp shareholders’ equity
 7,480  7,619       16,088  13,352       52,729  51,146  8,019  7,658      15,867  15,187      53,466    52,729 
 
(a)
Presented net of related rewards and rebate costs and certain partner payments of $
535
$671 million and $
530
$535 million for the three months ended March 31, 20212022 and 2020,2021, respectively.
(b)
Includes revenue generated from certain contracts with customers of $1.9 billion and $1.7 billion for the three months ended March 31, 2022 and 2021, and 2020.respectively.    
(c)
The Company, as a lessor, originates retail and commercial leases either directly to the consumer or indirectly through dealer networks. Under these
arrangements, 
arrangments, the Company recorded $228$204 million and $238$228 million of revenue for the three months ended March 31, 20212022 and 2020,2021, respectively, primarily consisting of interest income on sales-type and direct financing leases.
 
68U.S. Bancorp U.S. Bancorp
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 Note 1718
 
   Subsequent Events
The Company has evaluated the impact of events that have occurred subsequent to March 31, 20212022 through the date the consolidated financial statements were filed with the United States Securities and Exchange Commission. 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)
 
 For the Three Months Ended March 31  For the Three Months Ended March 31   
    2021                     2020                          2022                        2021                      
(Dollars in Millions)
(Unaudited)
 Average
Balances		 Interest        Yields and
Rates		      Average
Balances		      Interest        Yields and
Rates		         % Change
Average
Balances		  Average
Balances		 Interest        Yields and
Rates		      Average
Balances		      Interest        Yields and
Rates		         
% Change
Average
Balances
 
Assets
                                              
Investment securities
 $145,520  $534      1.47%     $120,843    $706      2.34%      20.4%  $174,762  $736      1.68%     $145,520    $534      1.47%      20.1% 
Loans held for sale
 10,032  67      2.69      4,748     44      3.75      *  5,479  60      4.40      10,032     67      2.69      (45.4) 
Loans (b)
                                              
Commercial
 102,091  673      2.67      105,987     941      3.57      (3.7)  112,822  629      2.26      102,091     673      2.67      10.5 
Commercial real estate
 38,786  305      3.19      40,078     428      4.30      (3.2)  39,084  295      3.06      38,786     305      3.19      .8 
Residential mortgages
 75,201  645      3.44      70,892     663      3.74      6.1  77,449  612      3.17      75,201     645      3.44      3.0 
Credit card
 21,144  578      11.08      23,836     659      11.11      (11.3)  21,842  562      10.44      21,144     578      11.08      3.3 
Other retail
 56,767  532      3.80      56,864      632      4.47      (.2)  61,769  509      3.34      56,767     532      3.80      8.8 
Total loans
 293,989  2,733      3.76      297,657     3,323      4.49      (1.2)  312,966  2,607      3.37      293,989     2,733      3.76      6.5 
Interest-bearing deposits with banks
 29,851  14      .19      41,784     9      .08      (28.6) 
Other earning assets
 48,170  33      .27      24,474      69      1.14      96.8  6,779  28      1.68      6,386     24      1.53      6.2 
Total earning assets
 497,711  3,367      2.73      447,722     4,142      3.71      11.2  529,837  3,445      2.62      497,711     3,367      2.73      6.5 
Allowance for loan losses
 (7,272)           (5,588)             (30.1)  (5,701)           (7,272)             21.6 
Unrealized gain (loss) on investment securities
 1,838           1,426             28.9  (2,551)           1,838             * 
Other assets
 56,457           51,247             10.2  55,817           56,457             (1.1) 
Total assets
 $548,734          $494,807             10.9  $577,402          $548,734             5.2 
Liabilities and Shareholders’ Equity
                                              
Noninterest-bearing deposits
 $118,352          $74,142             59.6%  $127,963          $118,352             8.1% 
Interest-bearing deposits
                                              
Interest checking
 97,385  6      .02      77,359     39      .21      25.9  115,062  9      .03      97,385     6      .02      18.2 
Money market savings
 124,825  50      .16      121,946     311      1.02      2.4  119,588  52      .18      124,825     50      .16      (4.2) 
Savings accounts
 58,848  2      .01      48,048     26      .22      22.5  66,978  2      .01      58,848     2      .01      13.8 
Time deposits
 26,954  27      .41      41,309      149      1.46      (34.8)  24,585  17      .28      26,954     27      .41      (8.8) 
Total interest-bearing deposits
 308,012  85      .11      288,662     525      .73      6.7  326,213  80      .10      308,012     85      .11      5.9 
Short-term borrowings
 13,107  16      .51      20,253     73      1.45      (35.3)                        
Federal funds purchased
 1,236   —      .04      1,471     —      .02      (16.0) 
Securities sold under agreements to repurchase
 1,895  1      .03      1,673     1      .04      13.3 
Commercial paper
 6,473   —      .01      6,145     —      —      5.3 
Other short-term borrowings
 9,434  20      .21      3,818     15      .40      * 
Total short- term borrowings
 19,038  21      .46      13,107     16      .51      45.3 
Long-term debt
 39,463  177      1.81      43,846      297      2.73      (10.0)  32,972  144      1.77      39,463     177      1.81      (16.4) 
Total interest-bearing liabilities
 360,582  278      .31      352,761     895      1.02      2.2  378,223  245      .26      360,582     278      .31      4.9 
Other liabilities
 16,441           16,128             1.9  17,282           16,441             5.1 
Shareholders’ equity
                                              
Preferred equity
 6,213           5,984             3.8  6,619           6,213             6.5 
Common equity
 46,516           45,162             3.0  46,847           46,516             .7 
Total U.S. Bancorp shareholders’ equity
 52,729           51,146             3.1  53,466           52,729             1.4 
Noncontrolling interests
 630           630              –  468           630             (25.7) 
Total equity
 53,359           51,776             3.1  53,934           53,359             1.1 
Total liabilities and equity
 $548,734          $494,807             10.9  $577,402          $548,734             5.2 
Net interest income
  $3,089            $3,247            $3,200            $3,089          
Gross interest margin
       2.42%              2.69%              2.36%             2.42%      
Gross interest margin without taxable-equivalent increments
       2.40%              2.67%              2.34%             2.40%      
Percent of Earning Assets
                                            
Interest income
       2.73%             3.71%             2.62%             2.73%      
Interest expense
       .23              .80              .18             .23      
Net interest margin
       2.50%              2.91%              2.44%             2.50%      
Net interest margin without taxable-equivalent increments
          2.48%                  2.89%              2.42%               2.48%      
 
*
Not meaningful
(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.
 
70
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Part II — Other Information
Item 1. Legal Proceedings
— See the information set forth in “Litigation and Regulatory Matters” in Note 1516 in the Notes to Consolidated Financial Statements under Part I, Item 1on page 67 of this Report, which is incorporated herein by reference.
Item 1A. Risk Factors
— There are a number of factors that may adversely affect the Company’s business, financial results or stock price. Refer to “Risk Factors” in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2020,2021, for discussion of these risks.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
— Refer toSee the information set forth in the “Capital Management” section within Management’s Discussion and Analysis in Part I, Item 2on page 26 of this Report for information regarding shares repurchased by the Company during the first quarter of 2021.2022, which is incorporated herein by reference.
Item 6. Exhibits
 
     3.1  Restated Certificate of Incorporation as amended(incorporated by reference to Exhibit 3.4 to the Company’s Form 8-K filed on April 20, 2022).
    3.2Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Annual ReportForm 8-K filed on Form 10-K for the year ended December 31, 2020)April 20, 2021).
   31.1  Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
   31.2  Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
   32  Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
 101.INSXBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
104101  The cover page of U.S. Bancorp’sfollowing financial statements from the Company’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2021,2022, formatted in Inline XBRL (includedXBRL: (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.
104Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101 attachments)101).
 
U.S. Bancorp
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
  U.S. BANCORP
  By: /s/    L
ISA
R. S
TARK
  
 
Dated: May 4, 20213, 2022   
Lisa R. Stark
Controller
(Principal Accounting Officer and Duly Authorized Officer)
 
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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 Quarterly Report on Form
10-Q
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 officersofficer 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 officers 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
/    A
NDREW
C
ECERE
Andrew Cecere
Chief Executive Officer
Dated: May 4, 2021
3, 2022
 
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EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Terrance R. Dolan, certify that:
 
(1)
I have reviewed this Quarterly Report on Form
10-Q
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 officersofficer 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 officers 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/s/    T
ERRANCE
R. D
OLAN
Terrance R. Dolan
Chief Financial Officer
Dated: May 4, 2021
3, 2022
 
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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 Quarterly Report on Form
10-Q
for the quarter ended March 31, 20212022 (the “Form
10-Q”)
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-Q
fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/    A
NDREW
C
ECERE
 
  /s/    T
ERRANCE
R. D
OLAN
Andrew Cecere
Chief Executive Officer
Dated: May 4, 20213, 2022
   
Terrance R. Dolan
Chief Financial Officer
 
U.S. Bancorp
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U.S. Bancorp
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Corporate Information
Executive Offices
U.S. Bancorp
800 Nicollet Mall
Minneapolis, MN 55402
Common Stock Transfer Agent and Registrar
Computershare acts as our transfer agent and registrar, dividend paying agent and dividend reinvestment plan administrator, and maintains all shareholder records for the Company. Inquiries related to shareholder records, stock transfers, changes of ownership, lost stock certificates, changes of address and dividend payment should be directed to the transfer agent at:
Computershare
P.O. Box 505000
Louisville, KY 40233
Phone:
888-778-1311 or 201-680-6578 (international calls)
or
201-680-6578
(international calls)
Internet: www.computershare.com/investor
Registered or Certified Mail:
Computershare
462 South 4
th
4th Street, Suite 1600
Louisville, KY 40202
Telephone representatives are available weekdays from 8 a.m. to 6 p.m., Central Time, and automated support is available 24 hours a day, seven days a week. Specific information about your account is available on Computershare’s Investor Center website.
Independent Auditor
Ernst & Young LLP serves as the independent auditor for U.S. Bancorp’s financial statements.
Common Stock Listing and Trading
U.S. Bancorp common stock is listed and traded on the New York Stock Exchange under the ticker symbol USB.
Dividends and Reinvestment Plan
U.S. Bancorp currently pays quarterly dividends on our common stock on or about the 15th day of January, April, July and October, subject to approval by our Board of Directors. U.S. Bancorp shareholders can choose to participate in a plan that provides automatic reinvestment of dividends and/or optional cash purchase of additional shares of U.S. Bancorp common stock. For more information, please contact our transfer agent, Computershare.
Investor Relations Contact
Jennifer A. Thompson, CFA
Executive Vice President, Investor Relations
jen.thompson@usbank.com
Phone:
612-303-0778
or
866-775-9668
Financial Information
U.S. Bancorp news and financial results are available through our website and by mail.
Website
For information about U.S. Bancorp, including news, financial results, annual reports and other documents filed with the Securities and Exchange Commission, visit usbank.com and click on
About Us
.
Mail
At your request, we will mail to you our quarterly earnings, news releases, quarterly financial data reported on
Form 10-Q,
Form 10-K
and additional copies of our annual reports. Please contact:
U.S. Bancorp Investor Relations
800 Nicollet Mall
Minneapolis, MN 55402
investorrelations@usbank.com
Phone:
866-775-9668
Media Requests
David R. Palombi
Global Chief Communications Officer
Public Affairs and Communications
david.palombi@usbank.com
Phone:
612-303-3167
Privacy
U.S. Bancorp is committed to respecting the privacy of our customers and safeguarding the financial and personal information provided to us. To learn more about the U.S. Bancorp commitment to protecting privacy, visit usbank.com and click on
Privacy
.
Code of Ethics
At U.S. Bancorp, our commitment to high ethical standards guides everything we do. Demonstrating this commitment through our words and actions is how each of us does the right thing every day for our customers, shareholders, communities and each other. Our ethical culture has been recognized by the Ethisphere Institute, which again named us to its World’s Most Ethical Companies
®
list.
For details about our Code of Ethics and Business Conduct, visit usbank.com and click on
About Us
and then
Investor Relations
and then
Corporate Governance
, and then
Governance Documents
.
Diversity and Inclusion
At U.S. Bancorp, embracing diversity, championing equity and fostering inclusion are business imperatives. We view everything we do through a diversity, equity and inclusion lens to deepen our relationships with our stakeholders: our employees, customers, shareholders and communities.
Our employees bring their whole selves to work. We respect and value each other’s differences, strengths and perspectives, and we strive to reflect the communities we serve. This makes us stronger, more innovative and more responsive to our diverse customers’ needs.
Equal Opportunity and Affirmative Action
U.S. Bancorp and our subsidiaries are committed to providing Equal Employment Opportunity to all employees and applicants for employment. In keeping with this commitment, employment decisions are made based on abilities, not race, color, religion, creed, citizenship, national origin or ancestry, gender, age, disability, veteran status, sexual orientation, marital status, gender identity or expression, genetic information or any other factors protected by law. The Company complies with municipal, state and federal fair employment laws, including regulations applying to federal contractors.
U.S. Bancorp, including each of our subsidiaries, is an equal opportunity employer committed to creating a diverse workforce.
Accessibility
U.S. Bancorp is committed to providing ready access to our products and services so all of our customers, including people with disabilities, can succeed financially. To learn more, visit usbank.com and click on
Accessibility.Accessibility
.
 

 

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