Business Segments

9 Months Ended

Sep. 30, 2023

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 the following reportable operating segments:

Wealth, Corporate, Commercial and Institutional Banking Wealth, Corporate, Commercial and Institutional Banking provides core banking, specialized lending, transaction and payment processing, capital markets, asset management, and brokerage and investment related services to wealth, middle market, large corporate, government and institutional clients.

Consumer and Business Banking Consumer and Business Banking comprises consumer banking, small business banking and consumer lending. Products and services are delivered through banking offices, telephone servicing and sales, on-line services, direct mail, ATM processing, mobile devices, distributed mortgage loan officers, and intermediary relationships including auto dealerships, mortgage banks, and strategic business partners.

Payment Services Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services and merchant processing.

Treasury and Corporate Support Treasury and Corporate Support includes the Company’s investment portfolios, funding, capital management, interest rate risk management, income taxes not allocated to business segments, including most investments in tax-advantaged projects, and the residual aggregate of those expenses associated with corporate activities that are managed on a consolidated basis.

Basis of Presentation Business segment results are derived from the Company’s business unit profitability reporting systems by specifically attributing managed balance sheet assets, deposits and other liabilities and their related income or expense. The allowance for credit losses and related provision expense are allocated to the business segments according to the volume and credit quality of the loan balances managed, but with the impact of changes in economic forecasts recorded in Treasury and Corporate Support. Goodwill and other intangible assets are assigned to the business segments based on the mix of business of an entity acquired by the Company. Within the Company, capital levels are evaluated and managed centrally; however, capital is allocated to the business segments to support evaluation of business performance. Business segments are allocated capital on a risk-adjusted basis considering economic and regulatory capital requirements. Generally, the determination of the amount of capital allocated to each business segment includes credit allocations following a Basel III regulatory framework. Interest income and expense is determined based on the assets and liabilities managed by the business segment. Because funding and asset/liability management is a central function, funds transfer-pricing methodologies are utilized to allocate a cost of funds used or credit for funds provided to all business segment assets and liabilities, respectively, using a matched funding concept. Also, each business unit is allocated the taxable-equivalent benefit of tax-exempt products. The residual effect on net interest income of asset/liability management activities is included in Treasury and Corporate Support. Noninterest income and expenses directly managed by each business segment, including fees, service charges, salaries and benefits, and other direct revenues and costs are accounted for within each segment’s financial results in a manner similar to the consolidated financial statements. Occupancy costs are allocated based on utilization of facilities by the business segments. Generally, operating losses are charged to the business segment when the loss event is realized in a manner similar to a loan charge-off. Noninterest expenses incurred by centrally managed operations or business segments that directly support another business segment’s operations are charged to the applicable business segment based on its utilization of those services, primarily measured by the volume of customer activities, number of employees or other relevant factors. These allocated expenses are reported as net shared services expense within noninterest expense. Certain activities that do not directly support the operations of the business segments or for which the business segments are not considered financially accountable in evaluating their performance are not charged to the business segments. The income or expenses associated with these corporate activities, including merger and integration charges, are reported within the Treasury and Corporate Support business segment. Income taxes are assessed to each business segment at a standard tax rate with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in Treasury and Corporate Support.

Designations, assignments and allocations change from time to time as management systems are enhanced, methods of evaluating performance or product lines change or business segments are realigned to better respond to the Company’s diverse customer base. During 2023, certain organization and methodology changes were made, including the Company combining its Wealth Management and Investment Services and Corporate and Commercial Banking lines of businesses to create the Wealth, Corporate, Commercial and Institutional Banking line of business during the third quarter. Prior period results were restated and presented on a comparable basis.

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

	Wealth, Corporate, Commercial and Institutional Banking						Consumer and Business Banking						Payment Services
(Dollars in Millions)	2023			2022			2023			2022			2023			2022
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	1,472		$	1,439		$	2,045		$	1,693		$	692		$	629
Noninterest income		1,031			906			430			332			1,039	(a)		994	(a)
Total net revenue		2,503			2,345			2,475			2,025			1,731			1,623
Noninterest expense		1,258			1,014			1,734			1,405			967			892
Income (loss) before provision and income taxes		1,245			1,331			741			620			764			731
Provision for credit losses		128			71			8			41			399			285
Income (loss) before income taxes		1,117			1,260			733			579			365			446
Income taxes and taxable-equivalent adjustment		279			315			183			145			91			112
Net income (loss)		838			945			550			434			274			334
Net (income) loss attributable to noncontrolling interests		—			—			—			—			—			—
Net income (loss) attributable to U.S. Bancorp	$	838		$	945		$	550		$	434		$	274		$	334
Average Balance Sheet
Loans	$	175,579		$	154,473		$	157,357		$	142,640		$	38,954		$	35,819
Other earning assets		6,458			4,737			2,688			3,043			5			392
Goodwill		4,638			3,612			4,515			3,241			3,333			3,292
Other intangible assets		921			314			5,154			3,726			339			405
Assets		203,784			174,077			174,788			158,057			44,774			42,053
Noninterest-bearing deposits		66,083			77,471			25,590			30,829			2,796			3,312
Interest-bearing deposits		206,622			178,080			196,374			161,778			101			171
Total deposits		272,705			255,551			221,964			192,607			2,897			3,483
Total U.S. Bancorp shareholders’ equity		22,831			18,334			15,763			12,431			9,442			8,255
	Treasury and Corporate Support						Consolidated Company
(Dollars in Millions)	2023			2022			2023			2022
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	59		$	96		$	4,268		$	3,857
Noninterest income		264			237			2,764	(b)		2,469	(b)
Total net revenue		323			333			7,032	(c)		6,326	(c)
Noninterest expense		571			326			4,530			3,637
Income (loss) before provision and income taxes		(248	)		7			2,502			2,689
Provision for credit losses		(20	)		(35	)		515			362
Income (loss) before income taxes		(228	)		42			1,987			2,327
Income taxes and taxable-equivalent adjustment		(90	)		(61	)		463			511
Net income (loss)		(138	)		103			1,524			1,816
Net (income) loss attributable to noncontrolling interests		(1	)		(4	)		(1	)		(4	)
Net income (loss) attributable to U.S. Bancorp	$	(139	)	$	99		$	1,523		$	1,812
Average Balance Sheet
Loans	$	4,987		$	3,846		$	376,877		$	336,778
Other earning assets		219,217			196,716			228,368			204,888
Goodwill		—			—			12,486			10,145
Other intangible assets		11			—			6,425			4,445
Assets		240,653			214,577			663,999			588,764
Noninterest-bearing deposits		3,055			2,432			97,524			114,044
Interest-bearing deposits		11,670			2,696			414,767			342,725
Total deposits		14,725			5,128			512,291			456,769
Total U.S. Bancorp shareholders’ equity		5,781			10,800			53,817			49,820

(a) Presented net of related rewards and rebate costs and certain partner payments of $762 million and $754 million for the three months ended September 30, 2023 and 2022, respectively.

(b) Includes revenue generated from certain contracts with customers of $2.2 billion and $2.1 billion for the three months ended September 30, 2023 and 2022, 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, the Company recorded $185 million and $190 million of revenue for the three months ended September 30, 2023 and 2022, respectively, primarily consisting of interest income on sales-type and direct financing leases.

Business segment results for the nine months ended September 30 were as follows:

	Wealth, Corporate, Commercial and Institutional Banking						Consumer and Business Banking						Payment Services
(Dollars in Millions)	2023			2022			2023			2022			2023			2022
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	4,691		$	3,650		$	6,413		$	4,752		$	1,991		$	1,870
Noninterest income		3,122			2,672			1,256			1,177			3,027	(a)		2,844	(a)
Total net revenue		7,813			6,322			7,669			5,929			5,018			4,714
Noninterest expense		3,844			3,020			5,295			4,210			2,795			2,601
Income (loss) before provision and income taxes		3,969			3,302			2,374			1,719			2,223			2,113
Provision for credit losses		264			180			30			15			933			636
Income (loss) before income taxes		3,705			3,122			2,344			1,704			1,290			1,477
Income taxes and taxable-equivalent adjustment		927			781			586			426			322			370
Net income (loss)		2,778			2,341			1,758			1,278			968			1,107
Net (income) loss attributable to noncontrolling interests		—			—			—			—			—			—
Net income (loss) attributable to U.S. Bancorp	$	2,778		$	2,341		$	1,758		$	1,278		$	968		$	1,107
Average Balance Sheet
Loans	$	177,081		$	145,594		$	163,905		$	141,276		$	37,942		$	33,820
Other earning assets		6,386			4,682			2,462			3,330			126			810
Goodwill		4,634			3,638			4,512			3,248			3,328			3,312
Other intangible assets		972			295			5,378			3,515			361			435
Assets		203,358			163,392			181,595			156,904			43,928			40,536
Noninterest-bearing deposits		74,003			84,200			33,638			30,722			3,052			3,459
Interest-bearing deposits		198,702			169,892			185,476			162,528			104			166
Total deposits		272,705			254,092			219,114			193,250			3,156			3,625
Total U.S. Bancorp shareholders’ equity		22,246			17,758			16,236			12,324			9,181			8,129
	Treasury and Corporate Support						Consolidated Company
(Dollars in Millions)	2023			2022			2023			2022
Condensed Income Statement
Net interest income (taxable-equivalent basis)	$	290		$	249		$	13,385		$	10,521
Noninterest income		592			720			7,997	(b)		7,413	(b)
Total net revenue		882			969			21,382	(c)		17,934	(c)
Noninterest expense		1,720			1,032			13,654			10,863
Income (loss) before provision and income taxes		(838	)		(63	)		7,728			7,071
Provision for credit losses		536			(46	)		1,763			785
Income (loss) before income taxes		(1,374	)		(17	)		5,965			6,286
Income taxes and taxable-equivalent adjustment		(467	)		(199	)		1,368			1,378
Net income (loss)		(907	)		182			4,597			4,908
Net (income) loss attributable to noncontrolling interests		(15	)		(8	)		(15	)		(8	)
Net income (loss) attributable to U.S. Bancorp	$	(922	)	$	174		$	4,582		$	4,900
Average Balance Sheet
Loans	$	5,184		$	4,041		$	384,112		$	324,731
Other earning assets		215,805			202,578			224,779			211,400
Goodwill		—			—			12,474			10,198
Other intangible assets		19			—			6,730			4,245
Assets		238,600			221,235			667,481			582,067
Noninterest-bearing deposits		2,863			2,512			113,556			120,893
Interest-bearing deposits		8,795			2,350			393,077			334,936
Total deposits		11,658			4,862			506,633			455,829
Total U.S. Bancorp shareholders’ equity		5,777			12,593			53,440			50,804

(a) Presented net of related rewards and rebate costs and certain partner payments of $2.2 billion for both the nine months ended September 30, 2023 and 2022.

(b) Includes revenue generated from certain contracts with customers of $6.6 billion and $6.0 billion for the nine months ended September 30, 2023 and 2022, 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, the Company recorded $554 million and $582 million of revenue for the nine months ended September 30, 2023 and 2022, respectively, primarily consisting of interest income on sales-type and direct financing leases.