US BANCORP DE

Overview

Earnings Summary U.S. Bancorp and its subsidiaries (the “Company”) reported net income attributable to U.S. Bancorp of $1.7 billion for the third quarter of 2024, or $1.03 per diluted common share, compared with $1.5 billion, or $0.91 per diluted common share, for the third quarter of 2023. Return on average assets and return on average common equity were 1.03 percent and 12.4 percent, respectively, for the third quarter of 2024, compared with 0.91 percent and 11.9 percent, respectively, for the third quarter of 2023. The results for the third quarter of 2023 included the impact of $284 million ($213 million net-of-tax) of merger and integration charges associated with the acquisition of MUFG Union Bank, N.A. (“MUB”), which decreased diluted earnings per common share for the third quarter of 2023 by $0.14.

Total net revenue for the third quarter of 2024 was $168 million (2.4 percent) lower than the third quarter of 2023, reflecting a 2.4 percent decrease in net interest income and a 2.4 percent decrease in noninterest income. The decrease in net interest income from the third quarter of 2023 was primarily due to the impact of higher interest rates on deposit mix and pricing, partially offset by higher rates on earning assets and changes in balance sheet composition. The decrease in noninterest income was driven by net losses on the sales of investment securities, lower service charges and lower other noninterest income, partially offset by higher fee revenue across all other categories.

Noninterest expense in the third quarter of 2024 was $326 million (7.2 percent) lower than the third quarter of 2023, primarily due to the impact of merger and integration charges in the prior year and lower other noninterest expense, partially offset by higher compensation and employee benefits expense.

The provision for credit losses for the third quarter of 2024 was $42 million (8.2 percent) higher than the third quarter of 2023, driven by higher net charge-offs. Net charge-offs in the third quarter of 2024 were $564 million, compared with $420 million in the third quarter of 2023. 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.

Net income attributable to U.S. Bancorp for the first nine months of 2024 was $4.6 billion, or $2.77 per diluted common share, compared with $4.6 billion, or $2.79 per diluted common share, for the first nine months of 2023. Return on average assets and return on average common equity were 0.94 percent and 11.6 percent, respectively, for the first nine months of 2024, compared with 0.92 percent and 12.3 percent, respectively, for the first nine months of 2023. The results for the first nine months of 2024 included the impact of $291 million ($218 million net-of-tax) of notable items, including $155 million of merger and integration charges and a $136 million charge for an increase in the FDIC special assessment to recover losses to the Deposit Insurance Fund related to certain 2023 bank failures. Combined, these items

decreased diluted earnings per common share for the first nine months of 2024 by $0.14. The results for the first nine months of 2023 included the impact of $1.1 billion ($828 million net-of-tax) of notable items, including $838 million of merger and integration charges, and $243 million of provision for credit losses and an additional $22 million of losses related to balance sheet repositioning and capital management actions. Combined, these items decreased diluted earnings per common share for the first nine months of 2023 by $0.53.

Total net revenue for the first nine months of 2024 was $936 million (4.4 percent) lower than the first nine months of 2023, reflecting an 8.6 percent decrease in net interest income, partially offset by a 2.7 percent increase in noninterest income. The decrease in net interest income from the first nine months of 2023 was primarily due to the impact of higher interest rates on deposit mix and pricing, partially offset by higher rates on earning assets and changes in balance sheet composition. The increase in noninterest income was driven by higher fee revenue across most categories, partially offset by higher net losses on the sales of investment securities, lower service charges and lower other noninterest income.

Noninterest expense in the first nine months of 2024 was $777 million (5.7 percent) lower than the first nine months of 2023, primarily due to lower merger and integration charges, partially offset by higher compensation and employee benefits expense and the impact of the FDIC special assessment.

The provision for credit losses for the first nine months of 2024 was $85 million (4.8 percent) lower than the first nine months of 2023, driven by the impacts of balance sheet repositioning and capital management actions taken in the second quarter of 2023, partially offset by higher net charge-offs in the current year. Net charge-offs in the first nine months of 2024 were $1.6 billion, compared with $1.4 billion in the first nine months of 2023. 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.

Statement of Income Analysis

Net Interest Income Net interest income, on a taxable-equivalent basis, was $4.2 billion in the third quarter and $12.2 billion in the first nine months of 2024, representing decreases of $102 million (2.4 percent) and $1.2 billion (8.6 percent), respectively, compared with the same periods of 2023. The decreases were primarily due to the impact of higher interest rates on deposit mix and pricing, partially offset by higher rates on earning assets and changes in balance sheet composition. Average earning assets for the third quarter of 2024 were $1.9 billion (0.3 percent) higher than the third quarter of 2023, reflecting increases in investment securities and other earning assets, partially offset by decreases in loans and interest-bearing deposits with banks. Average earning assets for the first nine months of 2024 were $4.8 billion (0.8 percent) lower than the first nine months of 2023, reflecting a

decrease in loans, partially offset by increases in investment securities and interest-bearing deposits with banks. The net interest margin, on a taxable-equivalent basis, in the third quarter and first nine months of 2024 was 2.74 percent and 2.70 percent, respectively, compared with 2.81 percent and 2.94 percent in the third quarter and first nine months of 2023, respectively. The decreases in net interest margin from the same periods of the prior year were primarily due to the impact of higher interest rates on deposit mix and pricing, partially offset by higher rates on earning assets and changes in balance sheet composition. Refer to the “Consolidated Daily Average Balance Sheet and Related Yields and Rates” table for further information on net interest income.

Average total loans in the third quarter and first nine months of 2024 were $2.8 billion (0.7 percent) and $10.8 billion (2.8 percent) lower, respectively, than the same periods of 2023. The decreases were primarily due to lower other retail loans, commercial loans and commercial real estate loans, partially offset by higher credit card loans and residential mortgages. The decreases in average other retail loans were driven by lower automobile loans. The decreases in average commercial loans were primarily due to decreased demand as corporate customers accessed the capital markets. The decreases in average commercial real estate loans were primarily due to payoffs exceeding a reduced level of new originations. The increases in average credit cards loans were primarily driven by higher spend volume. The increases in residential mortgages were primarily driven by originations.

Average investment securities in the third quarter and first nine months of 2024 were $3.7 billion (2.2 percent) and $2.0 billion (1.2 percent) higher, respectively, than the same periods of 2023, primarily due to balance sheet positioning and liquidity management.

Average total deposits for the third quarter and first nine months of 2024 were $3.5 billion (0.7 percent) lower and $1.9 billion (0.4 percent) higher, respectively, than the same periods of 2023. Average noninterest-bearing deposits for the third quarter and first nine months of 2024 were $16.6 billion (17.0 percent) and $30.5 billion (26.9 percent) lower, respectively, than the same periods of 2023, driven by decreases in Wealth, Corporate, Commercial and Institutional Banking, and Consumer and Business Banking balances. Average total savings deposits for the third quarter and first nine months of 2024 were $9.0 billion (2.5 percent) and $20.0 billion (5.7 percent) higher, respectively, than the same periods of 2023, driven by increases in Wealth, Corporate, Commercial and Institutional Banking, and Consumer and Business Banking balances. Average time deposits for the third quarter and first nine months of 2024 were $4.1 billion (7.5 percent) and $12.5 billion (28.0 percent) higher, respectively, than the same periods of 2023, mainly due to increases in Consumer and Business Banking balances. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.

Provision for Credit Losses The provision for credit losses was $557 million in the third quarter of 2024, representing an

increase of $42 million (8.2 percent) from the third quarter of 2023, driven by higher net charge-offs in the current year. Net charge-offs increased $144 million (34.3 percent) in the third quarter of 2024, compared with the third quarter of 2023, reflecting higher credit card, commercial and commercial real estate loan net charge-offs. The provision for credit losses was $1.7 billion in the first nine months of 2024, representing a decrease of $85 million (4.8 percent) from the first nine months of 2023. The decrease was primarily driven by the impacts of balance sheet repositioning and capital management actions in the second quarter of 2023, partially offset by higher net charge-offs in the current year. Net charge-offs increased $148 million (10.3 percent) in the first nine months of 2024, compared with the first nine months of 2023, reflecting higher credit card and commercial loan net charge-offs, partially offset by the impacts of charge-offs in the prior year related to acquired loans and balance sheet repositioning and capital management actions. 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 $2.7 billion in the third quarter and $8.2 billion in the first nine months of 2024, representing a decrease of $66 million (2.4 percent) and an increase of $216 million (2.7 percent), respectively, compared with the same periods of 2023. The decrease in noninterest income in the third quarter of 2024, compared with the third quarter of 2023, was driven by net losses on the sales of investment securities, lower service charges and lower other noninterest income, partially offset by higher commercial products revenue, trust and investment management fees and payment services revenue. The increase in noninterest income in the first nine months of 2024, compared with the first nine months of 2023, was driven by higher commercial products revenue, trust and investment management fees, payment services revenue and mortgage banking revenue, partially offset by higher net losses on the sales of investment securities, lower service charges and lower other noninterest income. Commercial products revenue increased in the current year primarily due to higher corporate bond fees and new product growth. Trust and investment management fees increased primarily due to business growth and favorable market conditions. Payment services revenue increased primarily due to higher merchant processing services revenue due to business volume growth and favorable rates, along with increased card revenue due to favorable rates. Mortgage banking revenue increased in the first nine months of 2024, compared with the first nine months of 2023, primarily driven by a gain on the sale of mortgage servicing rights in the second quarter of 2024, along with the impact of balance sheet repositioning and capital management actions taken in the second quarter of 2023.

(a)See Non-GAAP Financial Measures beginning on page 29.

Noninterest Expense Noninterest expense was $4.2 billion in the third quarter and $12.9 billion in the first nine months of 2024, representing decreases of $326 million (7.2 percent) and $777 million (5.7 percent), respectively, from the same periods of 2023. The decreases from the prior year reflected lower merger and integration charges and lower other noninterest expense, partially offset by higher compensation and employee benefits expense. The decrease in noninterest expense in the first nine months of 2024, compared with the first nine months of 2023, was further offset by the impact of the FDIC special assessment in the current year. Compensation and employee benefits expense increased in the current year primarily due to higher commissions and performance-based incentives. Marketing and business development expense increased in the first nine months of 2024, compared with the first nine months of 2023, primarily due to the timing of campaigns. Professional services expense decreased in the first nine months of 2024, compared with the

first nine months of 2023, primarily due to synergies from the MUB acquisition.

Income Tax Expense The provision for income taxes was $350 million (an effective rate of 16.9 percent) for the third quarter and $1.1 billion (an effective rate of 19.7 percent) for the first nine months of 2024, compared with $431 million (an effective rate of 22.0 percent) and $1.3 billion (an effective rate of 21.6 percent) for the same periods of 2023, respectively. The tax rate in the third quarter and first nine months of 2024 reflected the impact of favorable settlements. For further information on income taxes, refer to Note 11 of the Notes to Consolidated Financial Statements.

Balance Sheet Analysis

Loans The Company’s loan portfolio was $374.2 billion at September 30, 2024, compared with $373.8 billion at December 31, 2023, an increase of $329 million (0.1 percent). The increase was driven by higher residential mortgages and commercial loans, partially offset by lower commercial real estate loans and other retail loans.

Residential mortgages held in the loan portfolio increased $2.5 billion (2.2 percent) at September 30, 2024, compared with December 31, 2023, driven by originations. Residential mortgages originated and placed in the Company’s loan portfolio include jumbo mortgages and branch-originated first lien home equity loans to borrowers with high credit quality.

Commercial loans increased $1.8 billion (1.3 percent) at September 30, 2024, compared with December 31, 2023, primarily due to growth in corporate banking.

Credit card loans increased $477 million (1.7 percent) at September 30, 2024, compared with December 31, 2023, primarily driven by higher spend volume.

Commercial real estate loans decreased $2.8 billion (5.3 percent) at September 30, 2024, compared with December 31, 2023, primarily due to payoffs exceeding a reduced level of new originations.

Other retail loans decreased $1.6 billion (3.5 percent) at September 30, 2024, compared with December 31, 2023, primarily due to a decrease in auto 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 $3.2 billion at September 30, 2024, compared with $2.2 billion at December 31, 2023. The increase in loans held for sale was principally due to a higher level of mortgage loan closings in the third quarter of 2024, compared with the fourth

quarter of 2023. 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 $161.7 billion at September 30, 2024, compared with $153.8 billion at December 31, 2023. The $8.0 billion (5.2 percent) increase was primarily due to net investment purchases driven by balance sheet positioning and liquidity management, along with a $1.2 billion favorable 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 September 30, 2024, the Company’s net unrealized losses on available-for-sale investment securities were $5.7 billion ($4.3 billion net-of-tax), compared with $6.9 billion ($5.2 billion net-of-tax) at December 31, 2023. The favorable change in net unrealized gains (losses) was primarily due to increases in the fair value of mortgage-backed securities as a result of changes in interest rates. Gross unrealized losses on available-for-sale investment securities totaled $5.9 billion at September 30, 2024, compared with $7.1 billion at December 31, 2023. When evaluating credit losses, the Company considers various factors such as the nature of the investment security, the credit ratings or financial condition of the issuer, the extent of the unrealized loss, expected cash flows of the underlying collateral, the existence of any government or agency guarantees, and market conditions. At September 30, 2024, the Company had no plans to sell securities with unrealized losses, and believed it was more likely than not that it would not be required to sell such securities before recovery of their amortized cost.

Refer to Notes 3 and 14 in the Notes to Consolidated Financial Statements for further information on investment securities.

(a)Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities that take into account anticipated future prepayments.

(b)Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, and yield to maturity if the security is purchased at par or a discount.

(c)Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and the contractual maturity date for securities with a fair value equal to or below par.

(d)Amortized cost excludes portfolio level basis adjustments of $525 million at September 30, 2024 and $335 million at December 31, 2023.

(e)Weighted-average yields for obligations of state and political subdivisions are presented on a fully-taxable equivalent basis based on a federal income tax rate of 21 percent. Yields on investment securities are computed based on amortized cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity.

Deposits Total deposits were $521.1 billion at September 30, 2024, compared with $512.3 billion at December 31, 2023. The $8.8 billion (1.7 percent) increase in total deposits reflected increases in time deposits and total savings deposits, partially offset by a decrease in noninterest-bearing deposits. Time deposits increased $7.1 billion (13.5 percent) at September 30, 2024, compared with December 31, 2023, driven by higher Consumer and Business Banking balances. Changes in time deposits are primarily related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics. Money market deposit balances increased $11.6 billion (5.8 percent), primarily due to higher Consumer and Business Banking, and Wealth, Corporate, Commercial and Institutional Banking balances. Savings account balances decreased $6.2 billion (14.3 percent), driven by lower Consumer and Business Banking balances. Interest checking balances decreased $485 million (0.4 percent), primarily due to lower Consumer and Business Banking balances, partially offset by higher Wealth, Corporate, Commercial and Institutional Banking balances. Noninterest-bearing deposits decreased $3.2 billion (3.5 percent) at September 30, 2024, compared with December 31, 2023, primarily driven by a decrease in Wealth, Corporate, Commercial and Institutional Banking balances due to the impact of higher interest rates.

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 $23.7 billion at

September 30, 2024, compared with $15.3 billion at December 31, 2023. The $8.4 billion (55.2 percent) increase in short-term borrowings was primarily due to increases in short-term Federal Home Loan Bank (“FHLB”) advances and repurchase agreement balances, partially offset by lower commercial paper balances. Long-term debt was $54.8 billion at September 30, 2024, compared with $51.5 billion at December 31, 2023. The $3.4 billion (6.5 percent) increase was primarily due to $6.1 billion of medium-term note issuances and a $2.5 billion increase in FHLB advances, partially offset by $4.6 billion of medium-term note and $1.0 billion of subordinated note repayments. Refer to the “Liquidity Risk Management” section for discussion of liquidity management of the Company.