US Bancorp : 2Q 2021 Earnings Release

U.S. Bancorp Reports Second Quarter 2021 Results

• Net income of $2.0 billion and net revenue of $5.8 billion
• Return on average assets of 1.44% and return on average common equity of 16.3%
• Common Equity Tier 1 capital ratio of 9.9% and strong levels of liquidity

2Q21 Key Financial Data

PROFITABILITY METRICS	2Q21	1Q21	2Q20
Return on average assets (%)	1.44	1.69	.51
Return on average common equity (%)	16.3	19.0	5.3
Return on tangible common equity (%) (a)	20.9	24.3	7.1
Net interest margin (%)	2.53	2.50	2.62
Efficiency ratio (%) (a)	59.0	62.1	57.6
INCOME STATEMENT (b)	2Q21	1Q21	2Q20
Net interest income (taxable-equivalent basis)	$3,164	$3,089	$3,224
Noninterest income	$2,619	$2,381	$2,614
Net income attributable to U.S. Bancorp	$1,982	$2,280	$689
Diluted earnings per common share	$1.28	$1.45	$.41
Dividends declared per common share	$.42	$.42	$.42
BALANCE SHEET (b)	2Q21	1Q21	2Q20
Average total loans	$294,284	$293,989	$318,107
Average total deposits	$429,210	$426,364	$403,303
Net charge-off ratio	.25%	.31%	.55%
Book value per common share (period end)	$31.74	$30.53	$30.46
Basel III standardized CET1 (c)	9.9%	9.9%	9.0%

1. See Non-GAAP Financial Measures reconciliation on page 16
2. Dollars in millions, except per share data
3. CET1 = Common equity tier 1 capital ratio

2Q21 Highlights

• Net income of $1,982 million and diluted earnings per common share of $1.28
• Return on average assets of 1.44% and return on average common equity of 16.3%
• Net revenue of $5,783 million, including $3,164 million of net interest income and $2,619 million of noninterest income
• Returned 79% of 2Q earnings to shareholders through dividends and share buybacks
• Average total earning assets growth of 1.3% year-over-year
• Average total deposits growth of 6.4% year-over-year
• Net charge-off ratio of 0.25% in 2Q21 compared with 0.31% in 1Q21 and 0.55% in 2Q20
• Allowance for credit losses declined $350 million during the quarter given improving economic outlook and credit trends
• Nonperforming assets decreased 11.9% on a linked quarter basis and 9.7% year-over year
• CET1 capital ratio increased to 9.9% at June 30, 2021, compared with 9.0% at June 30, 2020

CEO Commentary

"Our second quarter results were indicative of steadily improving economic conditions and continued execution of our strategic growth plan across our business lines and markets. As of late June, total sales volumes for each of our three payments businesses exceeded 2019 levels for the first time since the beginning of the pandemic. For a second consecutive quarter, credit quality was better than expected as our net charge-off ratio set another record low. Our capital and liquidity positions remain strong and following the results of the Federal Reserve's stress test in late June we announced that we will recommend that our Board of Directors approve a 9.5% increase in our common dividend payable in the third quarter. As we head into the second half of 2021, we are well positioned to benefit from improving economic conditions; however, we are even more excited about the significant secular growth opportunities we see driving industry leading returns over the longer term. I want to thank our employees for their continued dedication to help our clients, communities, and shareholders."

• Andy Cecere, Chairman, President and CEO, U.S. Bancorp

In the Spotlight

2021 Annual Stress Test

The Company's results for the 2021 stress test reflected a strong financial profile and well-established financial discipline which allowed the Company to maintain strong capital and liquidity positions throughout the recent adverse economic conditions. Based on the stress test results, the Company will be subject to a stress capital buffer of 2.5 percent for the period beginning October 1, 2021 and ending on September 30, 2022. As a result, the Company will recommend that its Board of Directors approve a 9.5 percent increase to its third quarter dividend payable in October 2021.

Focus on Diversity, Equity and Inclusion

U.S. Bank has again been named to DiversityInc's list of Top 50 Companies for Diversity. The company ranked No. 18 (up from No. 40 last year) on the overall Top 50 List, tying for the largest jump on the list in 2021.The assessment collects data across six key areas: Leadership Accountability, Human Capital Diversity Metrics, Talent Programs, Workforce Practices, Supplier Diversity, and Philanthropy.

U.S. Bank Access Commitment

U.S. Bank recently established the U.S. Bank Access Fund, a $25 million fund supporting more than 30,000 women of color microbusiness owners over three years, prioritizing Black women business owners. The fund will help sustain and create new job opportunities, provide access to capital, technical assistance and networking opportunities. U.S. Bank leaders will also share expertise with business owners through seminars and roundtables.

U.S. Bank to Acquire the Asset Management Division of PFM

U.S. Bank has entered into a definitive agreement to purchase PFM Asset Management LLC, which is expected to close in the fourth quarter of

2021. Based on March 31, 2021 balances, this transaction will nearly double U.S. Bancorp Asset Management's market share to more than $325 billion assets under management and administration, increasing U.S. Bank's presence nationally and solidifying our position as a leading provider of investment solutions.

Investor contact: Jennifer Thompson, 612.303.0778 | Media contact: Jeff Shelman, 612.422.1423

U.S. Bancorp Second Quarter 2021 Results

INCOME STATEMENT HIGHLIGHTS

	($ in millions, except per-share data)					Percent Change
		2Q	1Q	2Q		2Q21 vs	2Q21 vs	YTD	YTD Percent
		2021	2021	2020		1Q21	2Q20	2021	2020	Change
	Net interest income	$3,137	$3,063	$3,200		2.4	(2.0)		$6,200	$6,423	(3.5)
	Taxable-equivalent adjustment	27	26	24		3.8	12.5		53	48	10.4
	Net interest income (taxable-equivalent basis)	3,164	3,089	3,224		2.4	(1.9)		6,253	6,471	(3.4)
	Noninterest income	2,619	2,381	2,614		10.0	.2		5,000	5,139	(2.7)
	Total net revenue	5,783	5,470	5,838		5.7	(.9)		11,253	11,610	(3.1)
	Noninterest expense	3,387	3,379	3,318		.2	2.1		6,766	6,634	2.0
	Income before provision and income taxes	2,396	2,091	2,520		14.6	(4.9)		4,487	4,976	(9.8)
	Provision for credit losses	(170)	(827)	1,737		79.4	nm	(997)	2,730	nm
	Income before taxes	2,566	2,918	783		(12.1)	nm		5,484	2,246	nm
	Income taxes and taxable-equivalent
	adjustment	578	633	88		(8.7)	nm	1,211	372	nm
	Net income	1,988	2,285	695		(13.0)	nm		4,273	1,874	nm
	Net (income) loss attributable to
	noncontrolling interests	(6)	(5)	(6)		(20.0)	--		(11)	(14)	21.4
	Net income attributable to U.S. Bancorp	$1,982	$2,280	$689		(13.1)	nm		$4,262	$1,860	nm
	Net income applicable to U.S. Bancorp
	common shareholders	$1,914	$2,175	$614		(12.0)	nm	$4,089	$1,702	nm
	Diluted earnings per common share	$1.28	$1.45	$.41		(11.7)	nm		$2.73	$1.12	nm

Net income attributable to U.S. Bancorp was $1,982 million for the second quarter of 2021, which was $1,293 million higher than the $689 million for the second quarter of 2020, and $298 million lower than the $2,280 million for the first quarter of 2021. Diluted earnings per common share were $1.28 in the second quarter of 2021, compared with $0.41 in the second quarter of 2020 and $1.45 in the first quarter of 2021.

The increase in net income year-over-year was primarily due to lower provision for credit losses driven by a reserve release as a result of improvement in the global economy combined with government stimulus programs compared with a reserve build during 2020. Net interest income decreased 1.9 percent on a year-over-yeartaxable-equivalent basis, primarily due to the impact of lower rates compared with a year ago and declining average loan balances, partially offset by the benefit of deposit and funding mix as well as higher loan fees related to the Small Business Administration ("SBA") Paycheck Protection Program. The net interest margin declined from a year ago to 2.53 percent in the second quarter of 2021 primarily due to the mix of earning assets and higher premium amortization within the investment portfolio, partially offset by the net benefit of funding composition and higher loan fees. Noninterest income increased 0.2 percent compared with a year ago driven by improvements in payment services revenue, deposit service charges, and other noninterest income, mostly offset by lower commercial products revenue, mortgage banking revenue, and securities gains. Noninterest expense increased 2.1 percent reflecting increases in personnel expense, primarily related to performance-based incentive compensation and employee benefits expense driven by substantially improving financial results, as well as higher marketing and business development expense and technology and communications expense, partially offset by lower net occupancy and equipment expense and other noninterest expense.

Net income decreased on a linked quarter basis primarily due to higher provision for credit losses as a result of a larger reserve release in the first quarter of 2021, partially offset by 5.7 percent growth in total revenue including increasing net interest income and stronger noninterest income. Net interest income on a taxable-equivalent basis increased 2.4 percent primarily due to higher yields and volumes in the investment portfolio, favorable earning asset mix, higher loan fees, one more day in the quarter, and favorable deposit and funding mix, partially offset by lower loan yields. The net interest margin increased on a linked quarter basis primarily reflecting changes in the investment portfolio mix, favorable funding and deposit mix, and higher loan fees, partially offset by lower loan yields. Noninterest income increased 10.0 percent compared with the first quarter of 2021 driven by increases in payment services revenue, mortgage banking revenue, securities gains, and other noninterest income. Noninterest expense was relatively flat on a linked quarter basis reflecting costs of investments in marketing and business development expense offset by lower personnel expense.

2

U.S. Bancorp Second Quarter 2021 Results

NET INTEREST INCOME

(Taxable-equivalent basis; $ in millions)	2Q	1Q	2Q	Change	YTD	YTD
	2Q21 vs	2Q21 vs
	2021	2021	2020	1Q21	2Q20	2021	2020	Change
Components of net interest income
Income on earning assets	$3,409	$3,367	$3,697	$42	$(288)	$6,776	$7,839	$(1,063)
Expense on interest-bearing liabilities	245	278	473	(33)	(228)	523	1,368	(845)
Net interest income	$3,164	$3,089	$3,224	$75	$(60)	$6,253	$6,471	$(218)
Average yields and rates paid
Earning assets yield	2.73%	2.73%	3.00%	-- %	(.27)%	2.73%	3.34%	(.61)%
Rate paid on interest-bearing liabilities	.28	.31	.50	(.03)	(.22)	.29	.75	(.46)
Gross interest margin	2.45%	2.42%	2.50%	.03%	(.05)%	2.44%	2.59%	(.15)%
Net interest margin	2.53%	2.50%	2.62%	.03%	(.09)%	2.52%	2.76%	(.24)%
Average balances
Investment securities (a)	$160,615	$145,520	$120,867	$15,095	$39,748	$153,109	$120,856	$32,253
Loans	294,284	293,989	318,107	295	(23,823)	294,138	307,882	(13,744)
Earning assets	500,751	497,711	494,119	3,040	6,632	499,239	470,921	28,318
Interest-bearing liabilities	356,565	360,582	380,320	(4,017)	(23,755)	358,562	366,540	(7,978)

(a) Excludes unrealized gain (loss)

Net interest income on a taxable-equivalent basis in the second quarter of 2021 was $3,164 million, a decrease of $60 million (1.9 percent) compared with the second quarter of 2020. The decrease was primarily due to the impact of lower rates compared with a year ago and lower loan volumes, partially offset by the benefit of deposit and funding mix as well as higher loan fees. Average earning assets were $6.6 billion (1.3 percent) higher than the second quarter of 2020, reflecting an increase of $39.7 billion (32.9 percent) in average investment securities, while average total loans decreased $23.8 billion (7.5 percent) due to continued paydowns by corporate customers that accessed the capital markets last year and average other earning assets decreased $10.8 billion (22.1 percent) primarily driven by lower cash balances as the Company continues to purchase mortgage-backed, U.S. Treasury and state and political securities.

Net interest income on a taxable-equivalent basis increased $75 million (2.4 percent) on a linked quarter basis primarily due to higher yields and volumes in the investment portfolio, favorable earning asset mix, higher loan fees, one more day in the quarter, and favorable deposit and funding mix, partially offset by lower loan yields. Average earning assets were $3.0 billion (0.6 percent) higher on a linked quarter basis, reflecting increases of $15.1 billion (10.4 percent) in average investment securities and a slight increase in average loans, partially offset by a decrease of $10.1 billion (21.1 percent) in average other earning assets driven by lower cash balances as the Company deployed liquidity to purchase mortgage-backed, U.S. Treasury and state and political securities.

The net interest margin in the second quarter of 2021 was 2.53 percent, compared with 2.62 percent in the second quarter of 2020 and 2.50 percent in the first quarter of 2021. The decrease in the net interest margin from the prior year was primarily due to the mix of earning assets and higher premium amortization within the investment portfolio, partially offset by the net benefit of funding composition and higher loan fees. The increase in the net interest margin on a linked quarter basis reflected changes in the investment portfolio mix, favorable funding and deposit mix, and higher loan fees, partially offset by lower loan yields.

The increase in average investment securities on a year-over-year and linked quarter basis was due to purchases of mortgage- backed, U.S. Treasury and state and political securities, net of prepayments and maturities.

3

U.S. Bancorp Second Quarter 2021 Results

AVERAGE LOANS

($ in millions)					Percent Change
		2Q	1Q	2Q		2Q21 vs	2Q21 vs	YTD	YTD	Percent
		2021	2021	2020		1Q21	2Q20	2021	2020	Change
Commercial	$97,713	$96,757	$122,442		1.0	(20.2)		$97,237	$111,385	(12.7)
Lease financing	5,261	5,334	5,597		(1.4)	(6.0)		5,298	5,628	(5.9)
Total commercial	102,974	102,091	128,039		.9	(19.6)		102,535	117,013	(12.4)
Commercial mortgages	27,721	27,968	30,194		(.9)	(8.2)		27,844	29,858	(6.7)
Construction and development	10,843	10,818	10,894		.2	(.5)		10,831	10,725	1.0
Total commercial real estate		38,564	38,786	41,088		(.6)	(6.1)		38,675	40,583	(4.7)
Residential mortgages	73,351	75,201	71,122		(2.5)	3.1		74,271	71,007	4.6
Credit card	21,116	21,144	21,510		(.1)	(1.8)		21,130	22,673	(6.8)
Retail leasing	7,873	7,975	8,412		(1.3)	(6.4)		7,924	8,443	(6.1)
Home equity and second mortgages	11,368	12,062	14,386		(5.8)	(21.0)		11,713	14,612	(19.8)
Other	39,038	36,730	33,550		6.3	16.4		37,890	33,551	12.9
Total other retail		58,279	56,767	56,348		2.7	3.4		57,527	56,606	1.6
Total loans	$294,284	$293,989	$318,107		.1	(7.5)		$294,138	$307,882	(4.5)

Average total loans for the second quarter of 2021 were $23.8 billion (7.5 percent) lower than the second quarter of 2020. The decrease was primarily due to lower total commercial loans (19.6 percent) driven by continued paydowns by corporate customers that accessed the capital markets last year, lower home equity and second mortgages (21.0 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, and lower total commercial real estate (6.1 percent) as a result of paydowns. These decreases were partially offset by growth in residential mortgages (3.1 percent) driven by loan repurchases from the Government National Mortgage Association ("GNMA"), as well as growth in other retail loans (16.4 percent) driven by growth in installment loans due to the impact of COVID-19 on recreational vehicle sales.

Average total loans were $295 million (0.1 percent) higher than the first quarter of 2021 primarily driven by higher total commercial loans (0.9 percent) and higher other retail loans (6.3 percent) driven by growth in installment loans, partially offset by lower residential mortgages (2.5 percent) as a result of customer paydowns.

4

U.S. Bancorp Second Quarter 2021 Results

AVERAGE DEPOSITS

($ in millions)					Percent Change
	2Q	1Q	2Q		2Q21 vs	2Q21 vs	YTD	YTD	Percent
	2021	2021	2020		1Q21	2Q20	2021	2020	Change
Noninterest-bearing deposits	$125,297	$118,352	$95,106		5.9	31.7		$121,844	$84,624	44.0
Interest-bearing savings deposits
Interest checking	103,356	97,385	83,789		6.1	23.4		100,387	80,573	24.6
Money market savings	113,673	124,825	129,692		(8.9)	(12.4)		119,218	125,819	(5.2)
Savings accounts	62,102	58,848	51,237		5.5	21.2		60,484	49,643	21.8
Total savings deposits	279,131	281,058	264,718		(.7)	5.4		280,089	256,035	9.4
Time deposits	24,782	26,954	43,479		(8.1)	(43.0)		25,862	42,394	(39.0)
Total interest-bearing deposits	303,913	308,012	308,197		(1.3)	(1.4)		305,951	298,429	2.5
Total deposits	$429,210	$426,364	$403,303		.7	6.4		$427,795	$383,053	11.7

Average total deposits for the second quarter of 2021 were $25.9 billion (6.4 percent) higher than the second quarter of 2020, including approximately $7 billion related to the acquisition of deposit balances from State Farm Bank in the fourth quarter of 2020. Average noninterest-bearing deposits increased $30.2 billion (31.7 percent) across all business lines. Average total savings deposits were $14.4 billion (5.4 percent) higher year-over-year driven by Consumer and Business Banking. Average time deposits were $18.7 billion (43.0 percent) lower than the prior year quarter primarily within Corporate and Commercial Banking. Changes in time deposits are largely related to those deposits managed as an alternative to other funding sources, based largely on relative pricing and liquidity characteristics.

Average total deposits increased $2.8 billion (0.7 percent) from the first quarter of 2021. On a linked quarter basis, average noninterest-bearing deposits increased $6.9 billion (5.9 percent) driven by Corporate and Commercial Banking, Wealth Management and Investment Services and Consumer and Business Banking. Average total savings deposits decreased $1.9 billion (0.7 percent) compared with the first quarter of 2021 primarily due to decreases in Wealth Management and Investment Services, partially offset by increases in Consumer and Business Banking. Average time deposits, which are managed based on funding needs, relative pricing and liquidity characteristics, decreased $2.2 billion (8.1 percent) on a linked quarter basis across all business lines.

The growth in average noninterest-bearing deposits and total average savings deposits year-over-year was primarily a result of the actions by the federal government to increase liquidity in the financial system and government stimulus programs.

5