Business Segments

6 Months Ended

Jun. 30, 2022

Text Block [Abstract]

Business Segments

Note  17    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.

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/liability management is a central function, funds transfer-pricing methodologies are utilized to allocate a cost of funds used or credit for funds provided to all business segment assets and liabilities, respectively, using a matched funding concept. Also, each business unit is allocated the taxable-equivalent benefit of tax-exempt products. The residual effect on net interest income of asset/ liability management activities is included in Treasury and Corporate Support. Noninterest income and expenses directly managed by each business segment, including fees, service charges, salaries and benefits, and other direct revenues and costs are accounted for within each segment’s financial results in a manner similar to the consolidated financial statements. Occupancy costs are allocated based on utilization of facilities by the business segments. Generally, operating losses are charged to the business segment when the loss event is realized in a manner similar to a loan charge-off. Noninterest expenses incurred by centrally managed operations or business segments that directly support another business segment’s operations are charged to the applicable business segment based on its utilization of those services, primarily measured by the volume of customer activities, number of employees or other relevant factors. These allocated expenses are reported as net shared services expense within noninterest expense. Certain activities that do not directly support the operations of the business segments or for which the business segments are not considered financially accountable in evaluating their performance are not charged to the business segments. The income or expenses associated with these corporate activities, including merger and integration charges, are reported within the Treasury and Corporate Support business segment. Income taxes are assessed to each business segment at a standard tax rate with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in Treasury and Corporate Support.

Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Company’s diverse customer base. During 2022, certain organization and methodology changes were made and, accordingly, 2021 results were restated and presented on a comparable basis.

Business segment results for the three months ended June 30 were as follows:

	Corporate and Commercial Banking							Consumer and Business Banking						Wealth Management and Investment Services
(Dollars in Millions)	2022			2021				2022			2021			2022			2021
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	784		$	726			$	1,617		$	1,534		$	352		$	246
Noninterest income		272			265				395			634			652			549
Total net revenue		1,056			991				2,012			2,168			1,004			795
Nointerest expense		453			433				1,419			1,375			581			521
Income (loss) before provision and income taxes		603			558				593			793			423			274
Provision for credit losses		100			—				(75	)		(68	)		(4	)		(4	)
Income (loss) before income taxes		503			558				668			861			427			278
Income taxes and taxable-equivalent adjustment		126			140				167			215			107			70
Net income (loss)		377			418				501			646			320			208
Net (income) loss attributable to noncontrolling interests		—			—				—			—			—			—
Net income (loss) attributable to U.S. Bancorp	$	377		$	418			$	501		$	646		$	320		$	208
Average Balance Sheet
Loans	$	123,210		$	102,275			$	141,135		$	140,826		$	22,320		$	17,442
Other earning assets		4,161			4,409				2,579			8,018			251			237
Goodwill		1,912			1,647				3,244			3,476			1,718			1,618
Other intangible assets		4			5				3,634			2,828			300			84
Assets		137,773			114,186				156,132			161,695			25,786			20,470
Noninterest-bearing deposits		58,266			60,696				31,642			33,702			25,019			23,288
Interest-bearing deposits		93,678			70,019				168,486			158,164			71,759			73,347
Total deposits		151,944			130,715				200,128			191,866			96,778			96,635
Total U.S. Bancorp shareholders’ equity		13,989			13,816				12,366			12,337			3,618			3,089
	Payment Services							Treasury and Corporate Support						Consolidated Company
(Dollars in Millions)	2022			2021				2022			2021			2022			2021
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	619		$	595			$	92		$	63		$	3,464		$	3,164
Noninterest income		994	(a)		913	(a	)		235			258			2,548	(b)		2,619 (b)
Total net revenue		1,613			1,508				327			321			6,012 (c)			5,783 (c)
Noninterest expense		871			829				400			229			3,724			3,387
Income (loss) before provision and income taxes		742			679				(73	)		92			2,288			2,396
Provision for credit losses		221			91				69			(189	)		311			(170	)
Income (loss) before income taxes		521			588				(142	)		281			1,977			2,566
Income taxes and taxable-equivalent adjustment		130			147				(87	)		6			443			578
Net income (loss)		391			441				(55	)		275			1,534			1,988
Net (income) loss attributable to noncontrolling interests		—			—				(3	)		(6	)		(3	)		(6	)
Net income (loss) attributable to U.S. Bancorp	$	391		$	441			$	(58	)	$	269		$	1,531		$	1,982
Average Balance Sheet
Loans	$	33,854		$	30,030			$	3,668		$	3,711		$	324,187		$	294,284
Other earning assets		1,023			5				204,560			193,798			212,574			206,467
Goodwill		3,318			3,176				—			—			10,192			9,917
Other intangible assets		438			518				—			—			4,376			3,435
Assets		41,054			35,618				219,166			219,396			579,911			551,365
Noninterest-bearing deposits		3,396			5,030				2,504			2,581			120,827			125,297
Interest-bearing deposits		167			141				1,599			2,242			335,689			303,913
Total deposits		3,563			5,171				4,103			4,823			456,516			429,210
Total U.S. Bancorp shareholders’ equity		8,115			7,413				11,078			16,307			49,166			52,962

(a) Presented net of related rewards and rebate costs and certain partner payments of $772 million and $633 million for the three months ended June 30, 2022 and 2021, respectively.

(b) Includes revenue generated from certain contracts with customers of $2.0 billion and $1.9 billion for the three months ended June 30, 2022 and 2021, respectively.

(c) The Company, as a lessor, originates retail and commercial leases either directly to the consumer or indirectly through dealer networks. Under these arrangments, the Company recorded $188 million and $238 million of revenue for the three months ended June 30, 2022 and 2021, respectively, primarily consisting of interest income on sales-type and direct financing leases.

Business segment results for the six months ended June 30 were as follows:

	Corporate and Commercial Banking							Consumer and Business Banking						Wealth Management and Investment Services
(Dollars in Millions)	2022		2021					2022			2021			2022			2021
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	1,523	$	1,448				$	3,129		$	3,035		$	627		$	514
Noninterest income		517		533					856			1,203			1,248			1,080
Total net revenue		2,040		1,981					3,985			4,238			1,875			1,594
Nointerest expense		878		853					2,839			2,731			1,174			1,020
Income (loss) before provision and income taxes		1,162		1,128					1,146			1,507			701			574
Provision for credit losses		104		(46	)				(28	)		(108	)		4			1
Income (loss) before income taxes		1,058		1,174					1,174			1,615			697			573
Income taxes and taxable-equivalent adjustment		265		294					294			404			175			144
Net income (loss)		793		880					880			1,211			522			429
Net (income) loss attributable to noncontrolling interests		—		—					—			—			—			—
Net income (loss) attributable to U.S. Bancorp	$	793	$	880				$	880		$	1,211		$	522		$	429
Average Balance Sheet
Loans	$	119,557	$	102,201				$	140,984		$	141,170		$	21,521		$	17,147
Other earning assets		4,416		4,364					3,475			9,092			255			258
Goodwill		1,912		1,647					3,252			3,476			1,739			1,618
Other intangible assets		4		5					3,406			2,661			283			63
Assets		132,856		114,229					156,770			162,803			25,124			20,297
Noninterest-bearing deposits		60,298		58,524					31,807			33,244			26,204			22,339
Interest-bearing deposits		90,336		70,943					167,279			154,450			71,024			78,489
Total deposits		150,634		129,467					199,086			187,694			97,228			100,828
Total U.S. Bancorp shareholders’ equity		13,859		14,092					12,311			12,407			3,607			3,062
	Payment Services							Treasury and Corporate Support						Consolidated Company
(Dollars in Millions)	2022		2021					2022			2021			2022			2021
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	1,241	$	1,224				$	144		$	32		$	6,664		$	6,253
Noninterest income		1,852 (a)		1,698		(a	)		471			486			4,944 (b)			5,000 (b)
Total net revenue		3,093		2,922					615			518			11,608 (c)			11,253 (c)
Noninterest expense		1,726		1,627					609			535			7,226			6,766
Income (loss) before provision and income taxes		1,367		1,295					6			(17	)		4,382			4,487
Provision for credit losses		351		50					(8	)		(894	)		423			(997	)
Income (loss) before income taxes		1,016		1,245					14			877			3,959			5,484
Income taxes and taxable-equivalent adjustment		254		311					(121	)		58			867			1,211
Net income (loss)		762		934					135			819			3,092			4,273
Net (income) loss attributable to noncontrolling interests		—		—					(4	)		(11	)		(4	)		(11	)
Net income (loss) attributable to U.S. Bancorp	$	762	$	934				$	131		$	808		$	3,088		$	4,262
Average Balance Sheet
Loans	$	32,802	$	29,831				$	3,744		$	3,789		$	318,608		$	294,138
Other earning assets		1,023		5					205,541			191,382			214,710			205,101
Goodwill		3,322		3,175					—			—			10,225			9,916
Other intangible assets		450		530					—			—			4,143			3,259
Assets		39,803		35,356					224,110			217,372			578,663			550,057
Noninterest-bearing deposits		3,534		5,146					2,532			2,591			124,375			121,844
Interest-bearing deposits		164		137					2,174			1,932			330,977			305,951
Total deposits		3,698		5,283					4,706			4,523			455,352			427,795
Total U.S. Bancorp shareholders’ equity		8,067		7,535					13,460			15,750			51,304			52,846

(a) Presented net of related rewards and rebate costs and certain partner payments of $1.4 billion and $1.2 billion for the six months ended June 30, 2022 and 2021, respectively.

(b) Includes revenue generated from certain contracts with customers of $3.9 billion and $3.6 billion for the six months ended June 30, 2022 and 2021, respectively.

(c) The Company, as a lessor, originates retail and commercial leases either directly to the consumer or indirectly through dealer networks. Under these arrangments, the Company recorded $392 million and $466 million of revenue for the six months ended June 30, 2022 and 2021, respectively, primarily consisting of interest income on sales-type and direct financing leases.