# US BANCORP \DE\ (USB) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from US BANCORP \DE\'s 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/36104/000003610424000018/usb-20231231.htm
Accession: 0000036104-24-000018
Filing date: 2024-02-20
Report date: 2023-12-31
Extracted from a later financial-section MD&A body after the formal Item 7 span was a short reference. Source document followed from filing index: usb-20231231_d2.htm.
Confidence: high

Company profile: /company/USB/
All MD&A years: /company/USB/mda/
Previous year: /company/USB/mda/fy2022/ (FY 2022)
Next year: /company/USB/mda/fy2024/ (FY 2024)

Management’s Discussion and Analysis

Overview

U.S. Bancorp and its subsidiaries (the “Company”) continued to demonstrate financial strength and stability as 2023 financial results showcased solid fee revenue growth, prudent expense management, and the accretion of common equity tier 1 capital of 150 basis points. Disruption in the banking industry in early 2023 reinforced the Company's focus of maintaining a well-diversified business with an appropriate risk profile and diversified deposit base. During 2023, the Company continued to prudently manage its balance sheet by reducing its exposure to certain capital-intensive assets and focusing on capital-efficient growth.

MUFG Union Bank Acquisition On December 1, 2022, the Company acquired MUFG Union Bank N.A.’s core regional banking franchise (“MUB”) from Mitsubishi UFJ Financial Group, Inc. ("MUFG"). Pursuant to the terms of the Share Purchase Agreement, the Company acquired all of the issued and outstanding shares of common stock of MUB for a purchase price consisting of $5.5 billion in cash and approximately 44 million shares of the Company’s common stock. The Company also received additional MUB cash of $3.5 billion upon completion of the acquisition, which is required to be repaid to MUFG on or prior to the fifth anniversary date of the completion of the purchase. On August 3, 2023, the Company completed a debt/equity conversion with MUFG. As a result, the Company repaid $936 million of its debt obligation from the proceeds of the issuance of 24 million shares of common stock of the Company to an affiliate of MUFG (the “Debt/Equity Conversion”). After the Debt/Equity Conversion, the Company had a remaining repayment obligation to MUFG of $2.6 billion. On May 26, 2023, the Company merged MUB into U.S. Bank National Association ("USBNA"), the Company’s primary banking subsidiary. During 2023, the Company successfully completed the integration of the MUB business and system conversion. Additionally, as a condition of the regulatory approval, the Company committed to meet requirements applicable to Category II banking organizations by the earlier of (i) the date required under the federal banking regulators' Tailoring Rules; and (ii) December 31, 2024, if the Federal Reserve notified the Company by January 1, 2024, that the Company must comply with those requirements. During 2023, the Company took several actions to optimize the balance sheet and reduce risk-weighted assets to enhance capital and reduce the risk profile of the balance sheet. As a result, on October 16, 2023, the Federal Reserve granted the Company full relief from this commitment. The Company’s 2023 results reflect the impacts of balance sheet and capital management actions and the full financial results of the acquired business.

Financial Performance The Company earned $5.4 billion in 2023, or $3.27 per diluted common share, compared with $5.8 billion, or $3.69 per diluted common share in 2022.

Financial performance for 2023, compared with 2022, included the following:

•Net interest income increased $2.7 billion (18.1 percent) due to higher interest rates on earning assets and the MUB acquisition, partially offset by the impact of deposit mix and pricing;

•Noninterest income increased $1.2 billion (12.3 percent) primarily due to higher commercial products revenue, payment services revenue, trust and investment management fees and other noninterest income, partially offset by losses on investment securities;

•Noninterest expense increased $4.0 billion (26.6 percent), reflecting increased merger and integration charges and operating expenses related to the MUB acquisition, including core deposit intangible amortization expense, as well as increases in compensation and employee benefits expense to support business growth and higher other noninterest expense due to a Federal Deposit Insurance Corporation ("FDIC") special assessment;

•The provision for credit losses increased $298 million (15.1 percent), driven by normalizing credit losses and stress in commercial real estate, partially offset by relative stability in the economic outlook;

•Average loans increased $47.7 billion (14.3 percent) primarily driven by the impact of the MUB acquisition and growth in most loan categories; and

•Average deposits increased $43.3 billion (9.4 percent), driven by increases in average total savings deposits and time deposits including the impact of the MUB acquisition, partially offset by a decrease in average noninterest bearing deposits.

Credit Quality The Company continues to prudently manage credit underwriting.

•The allowance for credit losses was $7.8 billion at December 31, 2023, an increase of $435 million compared with December 31, 2022. The increase was primarily driven by normalizing credit losses, credit card balance growth and commercial real estate credit quality.

•Nonperforming assets were $1.5 billion at December 31, 2023, an increase of $478 million compared with December 31, 2022. The increase was primarily due to higher nonperforming commercial real estate and commercial loans, partially offset by a decrease in nonperforming residential mortgages.

•Net charge-offs were $1.9 billion in 2023, an increase of $842 million compared with 2022. The increase reflected higher charge-offs in most loan categories consistent with normalizing credit conditions and adverse conditions in commercial real estate.

22 U.S. Bancorp 2023 Annual Report

[[GREPCENT_TABLE]]
[["TABLE 1","","Selected Financial Data"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Year Ended December 31(Dollars and Shares in Millions, Except Per Share Data)","2023","2022","2021"],["Condensed Income Statement"],["Net interest income","$","17,396","","$","14,728","","$","12,494"],["Taxable-equivalent adjustment(a)","131","","118","","106"],["Net interest income (taxable-equivalent basis)(b)","17,527","","14,846","","12,600"],["Noninterest income","10,617","","9,456","","10,227"],["Total net revenue","28,144","","24,302","","22,827"],["Noninterest expense","18,873","","14,906","","13,728"],["Provision for credit losses","2,275","","1,977","","(1,173)"],["Income before taxes","6,996","","7,419","","10,272"],["Income taxes and taxable-equivalent adjustment","1,538","","1,581","","2,287"],["Net income","5,458","","5,838","","7,985"],["Net (income) loss attributable to noncontrolling interests","(29)","","(13)","","(22)"],["Net income attributable to U.S. Bancorp","$","5,429","","$","5,825","","$","7,963"],["Net income applicable to U.S. Bancorp common shareholders","$","5,051","","$","5,501","","$","7,605"],["Per Common Share"],["Earnings per share","$","3.27","","$","3.69","","$","5.11"],["Diluted earnings per share","3.27","","3.69","","5.10"],["Dividends declared per share","1.93","","1.88","","1.76"],["Book value per share(c)","31.13","","28.71","","32.71"],["Market value per share","43.28","","43.61","","56.17"],["Average common shares outstanding","1,543","","1,489","","1,489"],["Average diluted common shares outstanding","1,543","","1,490","","1,490"],["Financial Ratios"],["Return on average assets",".82","%",".98","%","1.43","%"],["Return on average common equity","10.8","","12.6","","16.0"],["Net interest margin (taxable-equivalent basis)(a)","2.90","","2.72","","2.49"],["Efficiency ratio(b)","66.7","","61.4","","60.4"],["Net charge-offs as a percent of average loans outstanding",".50","",".32","",".23"],["Average Balances"],["Loans","$","381,275","","$","333,573","","$","296,965"],["Loans held for sale","2,461","","3,829","","8,024"],["Investment securities(d)","162,757","","169,442","","154,702"],["Earning assets","605,199","","545,343","","506,141"],["Assets","663,440","","592,149","","556,532"],["Noninterest-bearing deposits","107,768","","120,394","","127,204"],["Deposits","505,663","","462,384","","434,281"],["Short-term borrowings","34,141","","25,740","","14,774"],["Long-term debt","44,142","","33,114","","36,682"],["Total U.S. Bancorp shareholders\u2019 equity","53,660","","50,416","","53,810"],["Period End Balances"],["Loans","$","373,835","","$","388,213","","$","312,028"],["Investment securities","153,751","","161,650","","174,821"],["Assets","663,491","","674,805","","573,284"],["Deposits","512,312","","524,976","","456,083"],["Long-term debt","51,480","","39,829","","32,125"],["Total U.S. Bancorp shareholders\u2019 equity","55,306","","50,766","","54,918"],["Asset Quality"],["Nonperforming assets","$","1,494","","$","1,016","","$","878"],["Allowance for credit losses","7,839","","7,404","","6,155"],["Allowance for credit losses as a percentage of period-end loans","2.10","%","1.91","%","1.97","%"],["Capital Ratios"],["Common equity tier 1 capital","9.9","%","8.4","%","10.0","%"],["Tier 1 capital","11.5","","9.8","","11.6"],["Total risk-based capital","13.7","","11.9","","13.4"],["Leverage","8.1","","7.9","","8.6"],["Total leverage exposure","6.6","","6.4","","6.9"],["Tangible common equity to tangible assets(b)","5.3","","4.5","","6.8"],["Tangible common equity to risk-weighted assets(b)","7.7","","6.0","","9.2"],["Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the current expected credit losses methodology(b)","9.7","","8.1","","9.6"]]
[[/GREPCENT_TABLE]]

(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 59.

(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.

23

Capital Management At December 31, 2023, all of the Company’s regulatory capital ratios exceeded regulatory “well-capitalized” requirements.

•The Company’s common equity tier 1 capital ratio was 9.9 percent at December 31, 2023.

The Company's financial strength, diversified business model and strong credit quality position it well for 2024. The Company believes it is well positioned to continue to deliver strong returns on tangible common equity, is appropriately reserved for a potential macroeconomic slowdown, and remains confident in its strategy for future growth and expansion. The Company is seeing positive momentum across its fee-based businesses, as it deepens its most profitable client relationships and further executes on revenue growth opportunities resulting from the MUB acquisition. The Company is working to effectively manage its balance sheet for continued capital-efficient growth as it maintains its disciplined, through-the-cycle approach to credit risk management. The Company's growth strategy remains focused on supporting the needs of and creating value for its customers, communities and shareholders.

Earnings Summary The Company reported net income attributable to U.S. Bancorp of $5.4 billion in 2023, or $3.27 per diluted common share, compared with $5.8 billion, or $3.69 per diluted common share, in 2022. Return on average assets and return on average common equity were 0.82 percent and 10.8 percent, respectively, in 2023, compared with 0.98 percent and 12.6 percent, respectively, in 2022. The results for 2023 included the full financial results of the acquisition of MUB, while the results for 2022 reflected one month of operating results of MUB. The results for 2023 included the impacts of $1.0 billion of merger and integration charges, $734 million of FDIC special assessment charges, $243 million of provision for credit losses related to balance sheet repositioning and capital management actions, $140 million of securities losses related to balance sheet repositioning, a $110 million charitable contribution to support a community benefit plan related to the acquisition, and a $70 million discrete tax benefit. Combined, these items decreased 2023 diluted earnings per common share by $1.04. The results for 2022 included $399 million of losses primarily resulting from interest rate economic hedges related to the MUB acquisition, $329 million of merger and integration charges, and $791 million of provision for credit losses related to acquired loans and balance sheet repositioning and capital management actions. Combined, these items decreased 2022 diluted earnings per common share by $0.76.

Total net revenue for 2023 was $3.8 billion (15.8 percent) higher than 2022, reflecting an 18.1 percent increase in net interest income and a 12.3 percent increase in noninterest income. The increase in net interest income from the prior year was primarily due to higher interest rates on earning assets and the MUB acquisition, partially offset by the impact of deposit mix and pricing. The increase in noninterest income reflected higher commercial products revenue, payment services revenue, trust and investment management fees and other noninterest income, partially offset by losses on investment securities.

Noninterest expense in 2023 was $4.0 billion (26.6 percent) higher than 2022, reflecting increased merger and integration charges and operating expenses related to the MUB acquisition, including core deposit intangible amortization expense, as well as increases in compensation and employee benefits expense to support business growth and higher other noninterest expense due to the FDIC special assessment charges.

Results for 2022 Compared With 2021 For discussion related to changes in financial condition and results of operations for 2022 compared with 2021, refer to “Management’s Discussion and Analysis” in the Company’s Annual Report for the year ended December 31, 2022, included as Exhibit 13 to the Company’s Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 27, 2023.

Statement of Income Analysis

Net Interest Income Net interest income, on a taxable-equivalent basis, was $17.5 billion in 2023, compared with $14.8 billion in 2022. The $2.7 billion (18.1 percent) increase in 2023 compared with 2022 was primarily due to higher interest rates on earning assets and the acquisition of MUB, partially offset by the impact of deposit mix and pricing. Average earning assets were $59.9 billion (11.0 percent) higher in 2023, compared with 2022, reflecting increases in loans and interest-bearing deposits with banks, partially offset by a decrease in investment securities. The net interest margin, on a taxable-equivalent basis, in 2023 was 2.90 percent, compared with 2.72 percent in 2022. The increase in the net interest margin in 2023, compared with 2022, was primarily due to the impact of higher rates on earning assets and the acquisition of MUB, partially offset by the impact of deposit mix and pricing. Refer to the “Interest Rate Risk Management” section for further information on the sensitivity of the Company’s net interest income to changes in interest rates.

24 U.S. Bancorp 2023 Annual Report

[[GREPCENT_TABLE]]
[["TABLE 2","","Analysis of Net Interest Income(a)"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Year Ended December 31 (Dollars in Millions)","2023","2022","2021","2023 v 2022","2022 v 2021"],["Components of Net Interest Income"],["Income on earning assets (taxable-equivalent basis)","$","30,144","","$","18,066","","$","13,593","","$","12,078","","$","4,473"],["Expense on interest-bearing liabilities (taxable-equivalent basis)","12,617","","3,220","","993","","9,397","","2,227"],["Net interest income (taxable-equivalent basis)(b)","$","17,527","","$","14,846","","$","12,600","","$","2,681","","$","2,246"],["Net interest income, as reported","$","17,396","","$","14,728","","$","12,494","","$","2,668","","$","2,234"],["Average Yields and Rates Paid"],["Earning assets yield (taxable-equivalent basis)","4.98","%","3.31","%","2.69","%","1.67","%",".62","%"],["Rate paid on interest-bearing liabilities (taxable-equivalent basis)","2.65","",".80","",".28","","1.85","",".52"],["Gross interest margin (taxable-equivalent basis)","2.33","%","2.51","%","2.41","%","(.18)","%",".10","%"],["Net interest margin (taxable-equivalent basis)","2.90","%","2.72","%","2.49","%",".18","%",".23","%"],["Average Balances"],["Investment securities(c)","$","162,757","","$","169,442","","$","154,702","","$","(6,685)","","$","14,740"],["Loans","381,275","","333,573","","296,965","","47,702","","36,608"],["Earning assets","605,199","","545,343","","506,141","","59,856","","39,202"],["Noninterest-bearing deposits","107,768","","120,394","","127,204","","(12,626)","","(6,810)"],["Interest-bearing deposits","397,895","","341,990","","307,077","","55,905","","34,913"],["Total deposits","505,663","","462,384","","434,281","","43,279","","28,103"],["Interest-bearing liabilities","476,178","","400,844","","358,533","","75,334","","42,311"]]
[[/GREPCENT_TABLE]]

(a)Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent.

(b)See Non-GAAP Financial Measures beginning on page 59.

(c)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.

Average total loans were $381.3 billion in 2023, compared with $333.6 billion in 2022. The $47.7 billion (14.3 percent) increase was due to growth in the Company's legacy loan portfolio as well as balances from the MUB acquisition. Increases in residential mortgages, commercial real estate loans, commercial loans and credit card loans were partially offset by a decrease in other retail loans. Average residential mortgages increased $31.2 billion (36.8 percent), driven by the impact of the MUB acquisition, partially offset by the impact of a sale of residential mortgages in the second quarter of 2023 as part of balance sheet repositioning and capital management actions. Average commercial real estate loans increased $13.5 billion (33.0 percent), primarily due to the impact of the MUB acquisition. Average commercial loans increased $11.1 billion (9.0 percent), primarily due to higher utilization driven by working capital needs of corporate customers, slower payoffs given higher volatility in the capital markets, as well as core growth and the impact related to the MUB acquisition. Average credit card loans increased $3.1 billion (13.2 percent) primarily due to higher spend volume and lower payment rates. Average other retail loans decreased $11.2 billion (18.5 percent), driven by lower auto loans

primarily due to balance sheet repositioning and capital management actions, along with lower installment loans.

Average investment securities in 2023 were $6.7 billion (3.9 percent) lower than in 2022, primarily due to balance sheet repositioning and liquidity management.

Average total deposits for 2023 were $43.3 billion (9.4 percent) higher than 2022. Average total savings deposits were $39.8 billion (12.8 percent) higher in 2023, compared with 2022, driven by increases in Wealth, Corporate, Commercial and Institutional Banking, and Consumer and Business Banking balances, including the impact of the MUB acquisition. Average time deposits for 2023 were $16.1 billion (52.7 percent) higher than 2022, mainly due to the acquisition of MUB and 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. Average noninterest-bearing deposits were $12.6 billion (10.5 percent) lower in 2023, compared with 2022, driven by decreases in Wealth, Corporate, Commercial and Institutional Banking balances, partially offset by the impact of the MUB acquisition.

25

[[GREPCENT_TABLE]]
[["TABLE 3","","Net Interest Income \u2014 Changes Due to Rate and Volume(a)"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","2023 v 2022","2022 v 2021"],["Year Ended December 31 (Dollars in Millions)","Volume","Yield/Rate","Total","Volume","Yield/Rate","Total"],["Increase (decrease) in"],["Interest Income"],["Investment securities","$","(136)","","$","1,245","","$","1,109","","$","231","","$","792","","$","1,023"],["Loans held for sale","(72)","","18","","(54)","","(121)","","90","","(31)"],["Loans"],["Commercial","389","","3,933","","4,322","","547","","1,109","","1,656"],["Commercial real estate","546","","1,183","","1,729","","73","","363","","436"],["Residential mortgages","1,019","","511","","1,530","","336","","(38)","","298"],["Credit card","340","","506","","846","","193","","112","","305"],["Other retail","(424)","","731","","307","","50","","116","","166"],["Total loans","1,870","","6,864","","8,734","","1,199","","1,662","","2,861"],["Interest-bearing deposits with banks","313","","1,709","","2,022","","(8)","","525","","517"],["Other earning assets","76","","191","","267","","8","","95","","103"],["Total earning assets","2,051","","10,027","","12,078","","1,309","","3,164","","4,473"],["Interest Expense"],["Interest-bearing deposits"],["Interest checking","28","","1,029","","1,057","","3","","250","","253"],["Money market savings","388","","4,046","","4,434","","16","","1,005","","1,021"],["Savings accounts","(2)","","82","","80","","1","","2","","3"],["Time deposits","192","","1,140","","1,332","","23","","252","","275"],["Total interest-bearing deposits","606","","6,297","","6,903","","43","","1,509","","1,552"],["Short-term borrowings","186","","1,223","","1,409","","52","","446","","498"],["Long-term debt","259","","826","","1,085","","(59)","","236","","177"],["Total interest-bearing liabilities","1,051","","8,346","","9,397","","36","","2,191","","2,227"],["Increase (decrease) in net interest income","$","1,000","","$","1,681","","$","2,681","","$","1,273","","$","973","","$","2,246"]]
[[/GREPCENT_TABLE]]

(a)This table shows the components of the change in net interest income by volume and rate on a taxable-equivalent basis based on a federal income tax rate of 21 percent. This table does not take into account the level of noninterest-bearing funding, nor does it fully reflect changes in the mix of assets and liabilities. The change in interest not solely due to changes in volume or rates has been allocated on a pro-rata basis to volume and yield/rate.

Provision for Credit Losses The provision for credit losses reflects changes in economic conditions and the size and credit quality of the entire portfolio of loans. The Company maintains an allowance for credit losses considered appropriate by management for expected losses, based on factors discussed in the “Analysis and Determination of Allowance for Credit Losses” section.

The provision for credit losses was $2.3 billion in 2023, compared with $2.0 billion in 2022. The $298 million (15.1 percent) increase was driven by normalizing credit losses and stress in commercial real estate, partially offset by relative stability in the economic outlook. The provision for credit losses in 2023 included the impact of balance sheet repositioning and capital management actions taken in the second quarter of 2023. The provision for credit losses in

2022 included the impacts of recognizing an initial provision for credit losses related to the MUB acquisition and balance sheet optimization activities in the fourth quarter of 2022, along with strong loan growth in the legacy portfolio and increasing economic uncertainty. Net charge-offs increased $842 million (79.2 percent) in 2023, compared with 2022, reflecting higher charge-offs in most loan categories consistent with normalizing credit conditions and adverse conditions in commercial real estate.

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.

26 U.S. Bancorp 2023 Annual Report

[[GREPCENT_TABLE]]
[["TABLE 4","","Noninterest Income"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Year Ended December 31 (Dollars in Millions)","2023","","2022","","2021","2023 v 2022","2022 v 2021"],["Card revenue","$","1,630","","","$","1,512","","","$","1,507","","7.8","%",".3","%"],["Corporate payment products revenue","759","","","698","","","575","","8.7","","21.4"],["Merchant processing services","1,659","","","1,579","","","1,449","","5.1","","9.0"],["Trust and investment management fees","2,459","","","2,209","","","1,832","","11.3","","20.6"],["Service charges","1,306","","","1,298","","","1,338","",".6","","(3.0)"],["Commercial products revenue","1,372","","","1,105","","","1,102","","24.2","",".3"],["Mortgage banking revenue","540","","","527","","","1,361","","2.5","","(61.3)"],["Investment products fees","279","","","235","","","239","","18.7","","(1.7)"],["Securities gains (losses), net","(145)","","","20","","","103","","*","(80.6)"],["Other","758","","","273","","","721","","*","(62.1)"],["Total noninterest income","$","10,617","","","$","9,456","","(a)","$","10,227","","12.3","%","(7.5)","%"]]
[[/GREPCENT_TABLE]]

*Not meaningful

(a)Includes $399 million of losses primarily related to interest rate economic hedges, entered into after regulatory approval for the MUB acquisition was obtained, to manage the impact of interest rate volatility on capital prior to closing the transaction.

Noninterest Income Noninterest income in 2023 was $10.6 billion, compared with $9.5 billion in 2022. The $1.2 billion (12.3 percent) increase in 2023 from 2022 reflected higher commercial products revenue, payment services revenue, trust and investment management fees and other noninterest income, partially offset by losses on the sale of investment securities related to balance sheet repositioning. Commercial products revenue increased 24.2 percent primarily due to higher trading revenue, commercial loan fees, corporate bond fees and the acquisition of MUB. Payment services revenue increased in 2023, compared

with 2022, driven by a 7.8 percent increase in card revenue and a 5.1 percent increase in merchant processing services revenue, both due to higher spend volume. Corporate payment products revenue increased 8.7 percent due to product mix. Trust and investment management fees increased 11.3 percent primarily due to the acquisition of MUB and core business growth. Other noninterest income was higher in 2023, compared with 2022, primarily due to the impact in 2022 of interest rate economic hedges related to the MUB acquisition.

[[GREPCENT_TABLE]]
[["TABLE 5","","Noninterest Expense"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Year Ended December 31 (Dollars in Millions)","2023","2022","2021","2023 v 2022","2022 v 2021"],["Compensation and employee benefits","$","10,416","","$","9,157","","$","8,728","","13.7","%","4.9","%"],["Net occupancy and equipment","1,266","","1,096","","1,048","","15.5","","4.6"],["Professional services","560","","529","","492","","5.9","","7.5"],["Marketing and business development","726","","456","","366","","59.2","","24.6"],["Technology and communications","2,049","","1,726","","1,728","","18.7","","(.1)"],["Other intangibles","636","","215","","159","","*","35.2"],["Other","2,211","","1,398","","1,207","","58.2","","15.8"],["Total before merger and integration charges","17,864","","14,577","","13,728","","22.5","","6.2"],["Merger and integration charges","1,009","","329","","\u2014","","*","*"],["Total noninterest expense","$","18,873","","$","14,906","","$","13,728","","26.6","%","8.6","%"],["Efficiency ratio(a)","66.7","%","61.4","%","60.4","%"]]
[[/GREPCENT_TABLE]]

*Not meaningful

(a)See Non-GAAP Financial Measures beginning on page 59.

27

Noninterest Expense Noninterest expense in 2023 was $18.9 billion, compared with $14.9 billion in 2022. The Company’s efficiency ratio was 66.7 percent in 2023, compared with 61.4 percent in 2022. The $4.0 billion (26.6 percent) increase in noninterest expense in 2023 over 2022 reflected the impact of increased merger and integration charges, as well as operating expenses related to the MUB acquisition, higher compensation and employee benefits expense, and higher other intangibles and other noninterest expense. Compensation and employee benefits expense increased 13.7 percent in 2023 over 2022, primarily due to MUB expense as well as merit increases and hiring to support business growth. Other intangibles expense increased primarily due to the core deposit intangible created as a result of the MUB acquisition. Other noninterest expense increased 58.2 percent primarily due to the $734 million FDIC special assessment charge.

Income Tax Expense The provision for income taxes was $1.4 billion (an effective rate of 20.5 percent) in 2023, compared with $1.5 billion (an effective rate of 20.0 percent) in 2022.

For further information on income taxes, refer to Note 19 of the Notes to Consolidated Financial Statements.

Balance Sheet Analysis

Average earning assets were $605.2 billion in 2023, compared with $545.3 billion in 2022. The increase in average earning assets of $59.9 billion (11.0 percent) was primarily due to increases in loans of $47.7 billion (14.3 percent) and interest-bearing deposits with banks of $17.6 billion (55.9 percent), partially offset by a decrease in investment securities of $6.7 billion (3.9 percent).

For average balance information, refer to the "Net Interest Income" section in Statement of Income Analysis and Consolidated Daily Average Balance Sheet and Related Yields and Rates on page 138.

Loans The Company’s loan portfolio was $373.8 billion at December 31, 2023, compared with $388.2 billion at December 31, 2022, a decrease of $14.4 billion (3.7 percent). The decrease was driven by decreases in other retail loans of $10.5 billion (19.1 percent), commercial loans of $3.8 billion (2.8 percent), commercial real estate loans of $2.0 billion (3.7 percent) and residential mortgages of $315 million (0.3 percent), partially offset by an increase in credit card loans of $2.3 billion (8.6 percent). Table 6 provides a summary of the loan distribution by product type, while Table 7 provides a summary of the selected loan maturity distribution by loan category.

28 U.S. Bancorp 2023 Annual Report

[[GREPCENT_TABLE]]
[["TABLE 6","","Loan Portfolio Distribution"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","2023","2022"],["At December 31 (Dollars in Millions)","Amount","Percent of Total","Amount","Percent of Total"],["Commercial"],["Commercial","$","127,676","","34.2","%","$","131,128","","33.8","%"],["Lease financing","4,205","","1.1","","4,562","","1.2"],["Total commercial","131,881","","35.3","","135,690","","35.0"],["Commercial Real Estate"],["Commercial mortgages","41,934","","11.2","","43,765","","11.3"],["Construction and development","11,521","","3.1","","11,722","","3.0"],["Total commercial real estate","53,455","","14.3","","55,487","","14.3"],["Residential Mortgages"],["Residential mortgages","108,605","","29.0","","107,858","","27.8"],["Home equity loans, first liens","6,925","","1.9","","7,987","","2.0"],["Total residential mortgages","115,530","","30.9","","115,845","","29.8"],["Credit Card","28,560","","7.6","","26,295","","6.8"],["Other Retail"],["Retail leasing","4,135","","1.1","","5,519","","1.4"],["Home equity and second mortgages","13,056","","3.5","","12,863","","3.3"],["Revolving credit","3,668","","1.0","","3,983","","1.0"],["Installment","13,889","","3.7","","14,592","","3.8"],["Automobile","9,661","","2.6","","17,939","","4.6"],["Total other retail","44,409","","11.9","","54,896","","14.1"],["Total loans","$","373,835","","100.0","%","$","388,213","","100.0","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["TABLE 7","","Selected Loan Maturity Distribution"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["At December 31, 2023 (Dollars in Millions)","One Year or Less","Over One Through Five Years","Over Five Through Fifteen Years","Over Fifteen Years","","Total"],["Commercial","$","37,097","","$","85,548","","$","9,055","","$","181","","","$","131,881"],["Commercial real estate","14,724","","23,149","","6,870","","8,712","","(a)","53,455"],["Residential mortgages","182","","2,125","","6,572","","106,651","","","115,530"],["Credit card","28,560","","\u2014","","\u2014","","\u2014","","","28,560"],["Other retail","2,367","","12,561","","13,342","","16,139","","","44,409"],["Total loans","$","82,930","","$","123,383","","$","35,839","","$","131,683","","","$","373,835"],["Total of loans due after one year with:"],["","","","","Predetermined Interest Rates","","Floating Interest Rates"],["Commercial","$","13,786","","","$","80,998"],["Commercial real estate","12,585","","","26,147"],["Residential mortgages","63,080","","","52,267"],["Credit card","\u2014","","","\u2014"],["Other retail","29,359","","","12,683"],["Total","$","118,810","","","$","172,095"]]
[[/GREPCENT_TABLE]]

(a)Primarily represents construction loans for single-family residences or loans guaranteed by the Small Business Administration.

29

[[GREPCENT_TABLE]]
[["TABLE 8","","Commercial Loans by Industry Group and Geography"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","2023","2022"],["At December 31 (Dollars in Millions)","Loans","Percent of Total","Loans","Percent of Total"],["Industry Group"],["Financial institutions","$","20,016","","15.2","%","$","17,381","","12.8","%"],["Real-estate related","19,108","","14.5","","19,539","","14.4"],["Personal, professional and commercial services","10,273","","7.8","","10,106","","7.5"],["Healthcare","8,240","","6.2","","8,536","","6.3"],["Automotive","6,678","","5.1","","7,154","","5.3"],["Media and entertainment","6,265","","4.8","","5,867","","4.3"],["Capital goods","5,315","","4.0","","5,332","","3.9"],["Retail","4,970","","3.8","","5,128","","3.8"],["Transportation","4,467","","3.4","","4,988","","3.7"],["Food and beverage","4,053","","3.1","","5,574","","4.1"],["Technology","3,963","","3.0","","5,425","","4.0"],["Energy","3,744","","2.8","","3,811","","2.8"],["Power","3,435","","2.6","","4,945","","3.6"],["Metals and mining","3,332","","2.5","","3,700","","2.7"],["Education and non-profit","3,330","","2.5","","3,609","","2.7"],["State and municipal government","3,217","","2.4","","3,240","","2.4"],["Building materials","3,008","","2.3","","3,293","","2.4"],["Agriculture","1,778","","1.3","","1,909","","1.4"],["Other","16,689","","12.7","","16,153","","11.9"],["Total","$","131,881","","100.0","%","$","135,690","","100.0","%"],["Geography"],["California","$","21,275","","16.1","%","$","23,736","","17.5","%"],["New York","9,393","","7.1","","8,989","","6.6"],["Texas","9,092","","6.9","","10,244","","7.6"],["Illinois","6,861","","5.2","","7,626","","5.6"],["Minnesota","6,365","","4.8","","6,707","","4.9"],["Ohio","4,291","","3.3","","4,497","","3.3"],["Wisconsin","4,129","","3.1","","4,112","","3.0"],["Colorado","3,675","","2.8","","3,613","","2.7"],["Washington","3,604","","2.7","","3,721","","2.7"],["Missouri","3,454","","2.6","","3,503","","2.6"],["All other states","59,742","","45.4","","58,942","","43.5"],["Total","$","131,881","","100.0","%","$","135,690","","100.0","%"]]
[[/GREPCENT_TABLE]]

Commercial Commercial loans, including lease financing, decreased $3.8 billion (2.8 percent) at December 31, 2023, compared with December 31, 2022, primarily due to

decreased demand as corporate customers accessed the capital markets.

30 U.S. Bancorp 2023 Annual Report

[[GREPCENT_TABLE]]
[["TABLE 9","","Commercial Real Estate Loans by Property Type and Geography"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","2023","2022"],["At December 31 (Dollars in Millions)","Loans","Percent of Total","Loans","Percent of Total"],["Property Type"],["Multi-family","$","17,786","","33.3","%","$","16,722","","30.1","%"],["Business owner occupied","10,795","","20.2","","11,487","","20.7"],["Office","6,948","","13.0","","7,239","","13.1"],["Industrial","5,608","","10.5","","5,258","","9.5"],["Residential land and development","4,419","","8.3","","4,454","","8.0"],["Retail","3,806","","7.1","","4,011","","7.2"],["Lodging","1,661","","3.1","","1,932","","3.5"],["Other","2,432","","4.5","","4,384","","7.9"],["Total","$","53,455","","100.0","%","$","55,487","","100.0","%"],["Geography"],["California","$","20,130","","37.7","%","$","22,250","","40.1","%"],["Washington","4,245","","7.9","","4,235","","7.6"],["Texas","2,669","","5.0","","2,337","","4.2"],["Florida","1,843","","3.4","","1,276","","2.3"],["Oregon","1,809","","3.4","","1,622","","2.9"],["Illinois","1,516","","2.8","","1,830","","3.3"],["Minnesota","1,497","","2.8","","1,470","","2.7"],["Colorado","1,476","","2.8","","1,648","","3.0"],["New York","1,273","","2.4","","2,547","","4.6"],["Wisconsin","1,266","","2.4","","1,236","","2.2"],["All other states","15,731","","29.4","","15,036","","27.1"],["Total","$","53,455","","100.0","%","$","55,487","","100.0","%"]]
[[/GREPCENT_TABLE]]

Commercial Real Estate The Company’s portfolio of commercial real estate loans, which includes commercial mortgages and construction and development loans, decreased $2.0 billion (3.7 percent) at December 31, 2023, compared with December 31, 2022. The decrease was primarily due to payoffs exceeding a reduced level of new originations. Table 9 provides a summary of commercial real estate loans by property type and geographical location.

The Company’s commercial mortgage and construction and development loans had unfunded commitments of

$10.6 billion and $13.8 billion at December 31, 2023 and 2022, respectively.

The Company also finances the operations of real estate developers and other entities with operations related to real estate. These loans are not secured directly by real estate but have similar characteristics to commercial real estate loans. These loans were included in the commercial loan category and totaled $19.1 billion and $19.5 billion at December 31, 2023 and 2022, respectively.

31

[[GREPCENT_TABLE]]
[["TABLE 10","","Residential Mortgages by Geography"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","2023","2022"],["At December 31 (Dollars in Millions)","Loans","Percent of Total","Loans","Percent of Total"],["California","$","52,584","","45.5","%","$","53,967","","46.6","%"],["Washington","6,678","","5.8","","6,343","","5.5"],["Colorado","3,881","","3.4","","4,192","","3.6"],["Florida","3,767","","3.3","","3,946","","3.4"],["Illinois","3,630","","3.1","","3,592","","3.1"],["Minnesota","3,600","","3.1","","3,692","","3.2"],["Texas","3,287","","2.8","","2,801","","2.4"],["Arizona","3,134","","2.7","","3,178","","2.7"],["New York","2,726","","2.4","","2,315","","2.0"],["Massachusetts","2,680","","2.3","","2,536","","2.2"],["All other states","29,563","","25.6","","29,283","","25.3"],["Total","$","115,530","","100.0","%","$","115,845","","100.0","%"]]
[[/GREPCENT_TABLE]]

Residential Mortgages Residential mortgages held in the loan portfolio at December 31, 2023, decreased $315 million (0.3 percent) compared to December 31, 2022, driven by a sale of residential mortgages in the second quarter of 2023 as part of balance sheet repositioning and capital management actions, partially offset 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.

Credit Card Total credit card loans increased $2.3 billion (8.6 percent) at December 31, 2023, compared with December 31, 2022, primarily driven by higher spend volume and lower payment rates.

Other Retail Total other retail loans, which include retail leasing, home equity and second mortgages and other retail loans, decreased $10.5 billion (19.1 percent) at December 31, 2023, compared with December 31, 2022, driven by decreases in auto loans, retail leasing balances and installment loans. The decrease in auto loans was primarily driven by a sale of indirect auto loans as part of balance sheet repositioning and capital management actions taken in the second quarter of 2023. Tables 10, 11 and 12 provide a geographic summary of residential mortgages, credit card loans and other retail loans outstanding, respectively, as of December 31, 2023 and 2022.

[[GREPCENT_TABLE]]
[["TABLE 11","","Credit Card Loans by Geography"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","2023","2022"],["At December 31 (Dollars in Millions)","Loans","Percent of Total","Loans","Percent of Total"],["California","$","2,928","","10.3","%","$","2,609","","9.9","%"],["Texas","1,719","","6.0","","1,584","","6.0"],["Illinois","1,472","","5.2","","1,330","","5.1"],["Ohio","1,406","","4.9","","1,320","","5.0"],["Florida","1,363","","4.8","","1,252","","4.8"],["Minnesota","1,333","","4.7","","1,257","","4.8"],["Wisconsin","1,177","","4.1","","1,029","","3.9"],["Colorado","964","","3.3","","862","","3.3"],["Michigan","948","","3.3","","925","","3.5"],["Missouri","918","","3.2","","850","","3.2"],["All other states","14,332","","50.2","","13,277","","50.5"],["Total","$","28,560","","100.0","%","$","26,295","","100.0","%"]]
[[/GREPCENT_TABLE]]

32 U.S. Bancorp 2023 Annual Report

[[GREPCENT_TABLE]]
[["TABLE 12","","Other Retail Loans by Geography"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","2023","2022"],["At December 31 (Dollars in Millions)","Loans","Percent of Total","Loans","Percent of Total"],["California","$","9,506","","21.4","%","$","11,098","","20.2","%"],["Texas","3,505","","7.9","","5,149","","9.4"],["Florida","2,729","","6.1","","3,449","","6.3"],["Minnesota","1,943","","4.4","","2,527","","4.6"],["Washington","1,800","","4.1","","1,999","","3.6"],["Ohio","1,752","","3.9","","2,083","","3.8"],["Illinois","1,704","","3.8","","2,180","","4.0"],["New York","1,444","","3.3","","1,878","","3.4"],["Colorado","1,440","","3.2","","1,673","","3.0"],["Oregon","1,313","","3.0","","1,414","","2.6"],["All other states","17,273","","38.9","","21,446","","39.1"],["Total","$","44,409","","100.0","%","$","54,896","","100.0","%"]]
[[/GREPCENT_TABLE]]

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 $2.2 billion at December 31, 2023 and December 31, 2022. 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”).

[[GREPCENT_TABLE]]
[["TABLE 13","","Investment Securities"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","2023","2022"],["At December 31 (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"],["U.S. Treasury and agencies","$","1,345","","$","1,310","","2.3","2.85","%","$","1,344","","$","1,293","","3.3","2.85","%"],["Mortgage-backed securities(a)","82,692","","72,770","","8.8","2.21","","87,396","","76,581","","9.3","2.17"],["Other","8","","8","","2.8","2.56","","\u2014","","\u2014","","\u2014","","\u2014"],["Total held-to-maturity","$","84,045","","$","74,088","","8.7","2.22","%","$","88,740","","$","77,874","","9.2","2.18","%"],["Available-for-sale"],["U.S. Treasury and agencies","$","21,768","","$","19,542","","5.9","2.19","%","$","24,801","","$","22,033","","7.1","2.43","%"],["Mortgage-backed securities(a)","36,895","","33,427","","6.3","3.09","","40,803","","36,423","","6.6","2.83"],["Asset-backed securities(a)","6,713","","6,724","","2.2","5.33","","4,356","","4,323","","1.3","4.59"],["Obligations of state and political subdivisions(b)(c)","10,867","","9,989","","9.9","3.75","","11,484","","10,125","","13.6","3.76"],["Other","24","","24","","1.7","4.51","","6","","6","","0.1","1.99"],["Total available-for-sale (d)","$","76,267","","$","69,706","","6.3","3.12","%","$","81,450","","$","72,910","","7.4","2.94","%"]]
[[/GREPCENT_TABLE]]

(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 $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.

33

Investment Securities The Company uses its investment securities portfolio to manage interest rate risk, provide liquidity (including the ability to meet regulatory requirements), generate interest and dividend income, and as collateral for public deposits and wholesale funding sources. While the Company intends to hold its investment securities indefinitely, it may sell available-for-sale investment securities in response to structural changes in the balance sheet and related interest rate risk and to meet liquidity requirements, among other factors.

Investment securities totaled $153.8 billion at December 31, 2023, compared with $161.7 billion at December 31, 2022. The $7.9 billion (4.9 percent) decrease was primarily due to $10.5 billion of net investment sales and maturities, partially offset by a $1.6 billion favorable change in net unrealized gains (losses) on available-for-sale investment securities. Investment securities by type are shown in Table 13.

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 December 31, 2023, the Company’s net unrealized losses on available-for-sale investment securities were $6.9 billion ($5.2 billion net-of-tax), compared with net unrealized losses of $8.5 billion ($6.4 billion net-of-tax) at December 31, 2022. The favorable change in net unrealized gains (losses) was primarily due to increases in the fair value of mortgage-backed, U.S. Treasury and agencies and state and political subdivisions securities as a result of changes in interest rates. Gross unrealized losses on available-for-sale investment securities totaled $7.1 billion at December 31, 2023, compared with $8.6 billion at December 31, 2022. 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 December 31, 2023, 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 5 and 22 in the Notes to Consolidated Financial Statements for further information on investment securities.

Deposits Total deposits were $512.3 billion at December 31, 2023, compared with $525.0 billion at December 31, 2022. The $12.7 billion (2.4 percent) decrease in total deposits reflected a decrease in noninterest-bearing deposits, partially offset by increases in time deposits and total savings deposits.

Noninterest-bearing deposits at December 31, 2023, decreased $47.8 billion (34.7 percent) from December 31, 2022. The decrease was driven by lower Wealth, Corporate, Commercial and Institutional Banking, and Consumer and Business Banking balances.

Time deposits at December 31, 2023, increased $19.3 billion (58.7 percent), compared with December 31, 2022, 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.

Interest-bearing savings deposits increased $15.8 billion (4.4 percent) at December 31, 2023, compared with December 31, 2022. The increase was related to higher money market deposit balances, partially offset by lower savings account and interest checking deposit balances. Money market deposit balances increased $51.4 billion (34.7 percent), primarily due to higher Consumer and Business Banking, and Wealth, Corporate, Commercial and Institutional Banking balances. Savings account balances decreased $28.6 billion (39.8 percent), driven by lower Consumer and Business Banking balances. Interest checking balances decreased $7.0 billion (5.2 percent) primarily due to lower Wealth, Corporate, Commercial and Institutional Banking balances.

34 U.S. Bancorp 2023 Annual Report

[[GREPCENT_TABLE]]
[["TABLE 14","","Deposits"]]
[[/GREPCENT_TABLE]]

The composition of deposits was as follows:

[[GREPCENT_TABLE]]
[["","2023","2022"],["At December 31 (Dollars in Millions)","Amount","Percent of Total","Amount","Percent of Total"],["Noninterest-bearing deposits","$","89,989","","17.6","%","$","137,743","","26.2","%"],["Interest-bearing deposits"],["Interest checking","127,453","","24.9","","134,491","","25.6"],["Money market savings","199,378","","38.9","","148,014","","28.2"],["Savings accounts","43,219","","8.4","","71,782","","13.7"],["Total savings deposits","370,050","","72.2","","354,287","","67.5"],["Domestic time deposits less than $250,000","35,700","","7.0","","16,329","","3.1"],["Domestic time deposits greater than $250,000","15,336","","3.0","","11,999","","2.3"],["Foreign time deposits","1,237","",".2","","4,618","",".9"],["Total interest-bearing deposits","422,323","","82.4","","387,233","","73.8"],["Total deposits(a)","$","512,312","","100.0","%","$","524,976","","100.0","%"]]
[[/GREPCENT_TABLE]]

(a)Includes $260.7 billion and $289.3 billion of deposits at December 31, 2023 and 2022, respectively, that are not subject to any federal, state or foreign deposit insurance program.

The maturity of domestic time deposits in excess of the insurance limit and those time deposits not subject to any federal, state or foreign deposit insurance program at December 31, 2023 was as follows:

[[GREPCENT_TABLE]]
[["(Dollars in Millions)","Domestic Time DepositsGreater Than $250,000","Foreign TimeDeposits","Total"],["Three months or less","$","5,538","","$","1,237","","$","6,775"],["Three months through six months","3,624","","\u2014","","3,624"],["Six months through one year","4,247","","\u2014","","4,247"],["Thereafter","1,927","","\u2014","","1,927"],["Total","$","15,336","","$","1,237","","$","16,573"]]
[[/GREPCENT_TABLE]]

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 $15.3 billion at December 31, 2023, compared with $31.2 billion at December 31, 2022. The $15.9 billion (51.1 percent) decrease in short-term borrowings at December 31, 2023, compared with December 31, 2022, was primarily due to decreases in short-term Federal Home Loan Bank (“FHLB”) advances.

Long-term debt was $51.5 billion at December 31, 2023, compared with $39.8 billion at December 31, 2022. The $11.7 billion (29.3 percent) increase was primarily due to $8.2 billion of medium-term note issuances, a $7.1 billion increase in FHLB advances, partially offset by $2.8 billion of bank note repayments and maturities and a $936 million repayment of the Company's debt obligation to MUFG.

Refer to Notes 13 and 14 of the Notes to Consolidated Financial Statements for additional information regarding short-term borrowings and long-term debt, and the “Liquidity Risk Management” section for discussion of liquidity management of the Company.

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.

Upon closing of the MUB acquisition, the Company’s risk management framework applied to the legal entities

35

acquired from MUFG, including MUB, up until its merger into USBNA. Updates were made to align the acquired entities with the Company’s risk appetite and connect the elements of their respective risk governance and reporting into the Company’s existing risk management framework. Upon completing the merger of MUB into USBNA, which occurred on May 26, 2023, the MUB risk governance and reporting framework is no longer applicable.

The Company’s most prominent risk exposures are credit, interest rate, market, liquidity, operational, compliance, strategic, and reputation. 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 current or prospective risk to earnings and capital, or market valuations, arising 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 investment securities, mortgage loans held for sale (“MLHFS”), mortgage servicing rights ("MSRs") and derivatives that are accounted for on a fair value basis. Liquidity risk is the risk that financial condition or overall safety and soundness is adversely affected by the Company’s inability, or perceived inability, to meet its cash flow obligations in a timely 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” beginning on page 140 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 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. The strategy also emphasizes diversification on a geographic, industry and customer level, regular credit examinations and management reviews of loans exhibiting deterioration of credit quality. 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

36 U.S. Bancorp 2023 Annual Report

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 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 Notes 1 and 6 in the Notes to Consolidated Financial Statements for further discussion of the Company’s loan portfolios including internal credit quality ratings.

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. 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 mortgages, credit card loans, and other retail loans such as revolving consumer lines, auto loans and leases and home equity loans and lines. 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-

year draw period during which a minimum payment is equivalent to the monthly interest, followed by a 20-year amortization period. At December 31, 2023, substantially all of the Company’s home equity lines were in the draw period. 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 market conditions on real estate-based loans. These and other risk characteristics 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.

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. The Company also engages in non-lending activities that may give rise to credit risk, including derivative transactions for balance sheet hedging purposes, foreign exchange transactions, deposit overdrafts and interest rate contracts for customers, investments in securities and other financial assets, and settlement risk, including Automated Clearing House transactions and the processing of credit card transactions for merchants. These activities are subject to credit review, analysis and approval processes.

Economic and Other Factors In evaluating its credit risk, the Company considers changes, if any, in underwriting activities, the loan portfolio composition (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, inflation, interest rates and consumer bankruptcy filings.

During 2023, economic uncertainty and recession risk stabilized as inflation began to subside. Borrowers continued to experience the lagged impact of elevated interest rates on earnings potential. In addition to these broad economic factors, expected loss estimates consider various factors including customer specific information impacting changes in risk ratings, projected delinquencies and the impact of economic deterioration on selected borrowers’ liquidity and ability to repay.

Credit Diversification 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 traditional commercial lending products and specialized products such as asset-based lending, commercial lease financing, agricultural credit, warehouse

37

mortgage lending, small business lending, commercial real estate lending, health care lending and correspondent banking financing. The Company also offers an array of consumer lending products, including residential mortgages, credit card loans, auto loans, retail leases, home equity loans and lines, revolving credit arrangements and other consumer loans. These consumer lending products are primarily offered through the branch office network, home mortgage and loan production offices, mobile and online banking, and indirect distribution channels, such as auto and recreational vehicle dealers. The Company monitors and manages the portfolio diversification by industry, customer and geography. The Company has significant loan exposure within California given its strategic position in those markets and size of the economy. Table 6 provides information with respect to the overall product diversification and changes in the mix during 2023.

The commercial loan class is diversified among various industries with higher concentrations in financial institutions and real estate. Table 8 provides a summary of significant industry groups and geographical locations of commercial loans outstanding at December 31, 2023 and 2022.

The commercial real estate loan class reflects the Company’s focus on serving business owners within its local network, as well as regional and national investment-based real estate owners and developers. Within the commercial real estate loan class, different property types have varying degrees of credit risk. Table 9 provides a summary of the significant property types and geographical locations of commercial real estate loans outstanding at December 31, 2023 and 2022. Commercial real estate loans are diversified among various property types with higher concentrations in multi-family, business owner-occupied and office properties. The commercial real estate office sector, which represented 13.0 percent of commercial real estate loans and 1.9 percent of total loans at December 31, 2023, is driving stress in this sector. The Company believes it has prudently monitored this portfolio and established an allowance to loan coverage ratio of approximately 10 percent as of December 31, 2023. Office nonperforming loans represented 7.6 percent of total office loans at December 31, 2023. The Company's commercial real estate multi-family portfolio is underwritten on the basis of current in place cash flows without consideration to any potential net benefits of the ability to convert rent-stabilized units to market rate. The Company's exposure to rent-stabilized properties in the New York City market is de minimis.

The Company’s consumer lending segment utilizes several distinct business processes and channels to originate consumer credit, including traditional branch lending, mobile and online banking, indirect lending, alliance partnerships and correspondent 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 online 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 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 December 31, 2023:

[[GREPCENT_TABLE]]
[["Residential Mortgages(Dollars in Millions)","InterestOnly","Amortizing","Total","Percent of Total"],["Loan-to-Value"],["Less than or equal to 80%","$","13,945","","$","86,758","","$","100,703","","87.2","%"],["Over 80% through 90%","255","","6,326","","6,581","","5.7"],["Over 90% through 100%","30","","1,062","","1,092","",".9"],["Over 100%","6","","370","","376","",".3"],["No LTV available","1","","10","","11","","\u2014"],["Loans purchased from GNMA mortgage pools(a)","\u2014","","6,767","","6,767","","5.9"],["Total","$","14,237","","$","101,293","","$","115,530","","100.0","%"]]
[[/GREPCENT_TABLE]]

(a)Represents loans purchased and loans that could be purchased from Government National Mortgage Association (“GNMA”) mortgage pools under delinquent loan repurchase options whose payments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.

38 U.S. Bancorp 2023 Annual Report

[[GREPCENT_TABLE]]
[["Home Equity and Second Mortgages(Dollars in Millions)","Lines","Loans","Total","Percent of Total"],["Loan-to-Value / Combined Loan-to-Value"],["Less than or equal to 80%","$","10,406","","$","1,904","","$","12,310","","94.3","%"],["Over 80% through 90%","492","","103","","595","","4.5"],["Over 90% through 100%","70","","16","","86","",".7"],["Over 100%","32","","4","","36","",".3"],["No LTV/CLTV available","29","","\u2014","","29","",".2"],["Total","$","11,029","","$","2,027","","$","13,056","","100.0","%"]]
[[/GREPCENT_TABLE]]

Home equity and second mortgages were $13.1 billion at December 31, 2023, compared with $12.9 billion at December 31, 2022, and included $2.6 billion of home equity lines in a first lien position and $10.5 billion of home equity and second mortgage loans and lines in a junior lien position. Loans and lines in a junior lien position at December 31, 2023, included approximately $3.1 billion of loans and lines for which the Company also serviced the related first lien loan, and approximately $7.4 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.

The following table provides a summary of delinquency statistics and other credit quality indicators for the Company’s junior lien positions at December 31, 2023:

[[GREPCENT_TABLE]]
[["","Junior Liens Behind"],["(Dollars in Millions)","Company Owned or Serviced First Lien","Third Party First Lien","Total"],["Total","$","3,108","","$","7,351","","$","10,459"],["Percent 30 - 89 days past due",".38","%",".58","%",".52","%"],["Percent 90 days or more past due",".05","%",".08","%",".07","%"],["Weighted-average CLTV","70","%","68","%","69","%"],["Weighted-average credit score","784","785","785"]]
[[/GREPCENT_TABLE]]

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.

Credit card and other retail loans are diversified across customer segments and geographies. Diversification in the credit card portfolio is achieved with broad customer relationship distribution through the Company’s and financial institution partners’ branches, retail and affinity partners, and digital channels.

Tables 10, 11 and 12 provide a geographical summary of the residential mortgage, credit card and other retail loan portfolios, respectively.

The following table provides a summary of the Company’s credit card loan balances disaggregated based upon updated credit score at December 31, 2023:

[[GREPCENT_TABLE]]
[["","Percent of Total(a)"],["Credit score 660","86","%"],["Credit score 660","14"],["No credit score","\u2014"]]
[[/GREPCENT_TABLE]]

(a)Credit score distribution excludes loans serviced by others.

39

[[GREPCENT_TABLE]]
[["TABLE 15","","Delinquent Loan Ratios as a Percent of Ending Loan Balances"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["At December 3190 days or more past due","2023","2022"],["Commercial"],["Commercial",".09","%",".07","%"],["Lease financing","\u2014","","\u2014"],["Total commercial",".09","",".07"],["Commercial Real Estate"],["Commercial mortgages","\u2014","","\u2014"],["Construction and development",".03","",".03"],["Total commercial real estate",".01","",".01"],["Residential Mortgages(a)",".12","",".08"],["Credit Card","1.31","",".88"],["Other Retail"],["Retail leasing",".05","",".04"],["Home equity and second mortgages",".26","",".28"],["Other",".11","",".08"],["Total other retail",".15","",".12"],["Total loans",".19","%",".13","%"],["At December 3190 days or more past due and nonperforming loans","2023","2022"],["Commercial",".37","%",".19","%"],["Commercial real estate","1.46","",".62"],["Residential mortgages(a)",".25","",".36"],["Credit card","1.31","",".88"],["Other retail",".46","",".37"],["Total loans",".57","%",".38","%"]]
[[/GREPCENT_TABLE]]

(a)Delinquent loan ratios exclude $2.0 billion and $2.2 billion at December 31, 2023 and 2022, respectively, of loans purchased and loans that could be purchased from GNMA mortgage pools under delinquent loan repurchase options 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 and nonperforming to total residential mortgages was 2.00 percent and 2.28 percent at December 31, 2023 and 2022, respectively.

Loan Delinquencies Trends in delinquency ratios are an indicator, among other considerations, of credit risk within the Company’s loan portfolios. The entire balance of a loan account is considered delinquent if the minimum payment contractually required to be made is not received by the date specified on the billing statement. Delinquent loans purchased and loans that could be purchased from GNMA mortgage pools under delinquent loan repurchase options whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, are excluded from delinquency statistics. In addition, in certain situations, a consumer lending customer’s account may be re-aged to remove it from delinquent status. Generally, the purpose of re-aging accounts is to assist customers who have recently overcome temporary financial difficulties and have demonstrated both the ability and willingness to resume regular payments. In addition, the Company may re-age the consumer lending account of a customer who has experienced longer-term financial difficulties and apply modified, concessionary terms and conditions to the account. Commercial lending loans are generally not subject to re-aging policies.

Accruing loans 90 days or more past due totaled $698 million at December 31, 2023, compared with $491 million at December 31, 2022. 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 0.19 percent at December 31, 2023, compared with 0.13 percent at December 31, 2022.

40 U.S. Bancorp 2023 Annual Report

The following table provides summary delinquency information for residential mortgages, credit card and other retail loans included in the consumer lending segment:

[[GREPCENT_TABLE]]
[["At December 31(Dollars in Millions)","Amount","As a Percent of Ending Loan Balances"],["2023","2022","2023","2022"],["Residential Mortgages(a)"],["30-89 days","$","169","","$","201","",".15","%",".17","%"],["90 days or more","136","","95","",".12","",".08"],["Nonperforming","158","","325","",".14","",".28"],["Total","$","463","","$","621","",".40","%",".54","%"],["Credit Card"],["30-89 days","$","406","","$","283","","1.42","%","1.08","%"],["90 days or more","375","","231","","1.31","",".88"],["Nonperforming","\u2014","","1","","\u2014","","\u2014"],["Total","$","781","","$","515","","2.73","%","1.96","%"],["Other Retail"],["Retail Leasing"],["30-89 days","$","25","","$","27","",".60","%",".49","%"],["90 days or more","2","","2","",".05","",".04"],["Nonperforming","8","","8","",".19","",".14"],["Total","$","35","","$","37","",".85","%",".67","%"],["Home Equity and Second Mortgages"],["30-89 days","$","77","","$","65","",".59","%",".51","%"],["90 days or more","34","","36","",".26","",".28"],["Nonperforming","113","","110","",".87","",".86"],["Total","$","224","","$","211","","1.72","%","1.64","%"],["Other(b)"],["30-89 days","$","176","","$","217","",".65","%",".59","%"],["90 days or more","31","","28","",".11","",".08"],["Nonperforming","17","","21","",".06","",".06"],["Total","$","224","","$","266","",".82","%",".73","%"]]
[[/GREPCENT_TABLE]]

(a)Excludes $595 million of loans 30-89 days past due and $2.0 billion of loans 90 days or more past due at December 31, 2023, purchased and that could be purchased from GNMA mortgage pools under delinquent loan repurchase options that continue to accrue interest, compared with $647 million and $2.2 billion at December 31, 2022.

(b)Includes revolving credit, installment and automobile loans.

Modified 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.

Modified loans 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.

The Company continues to work with customers to modify loans for borrowers who are experiencing financial difficulties. Many of the Company’s loan modifications 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 modifications 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 modification programs. 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. These modifications 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 modification 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.

Credit card and other retail loan modifications are generally part of distinct modification programs providing customers modification solutions over a specified time period, generally up to 60 months.

The Company also makes short-term modifications, in limited circumstances, to assist borrowers experiencing temporary hardships, including previously offering payment relief to borrowers that 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.

Nonperforming Assets The level of nonperforming assets represents another indicator of the potential for future credit losses. Nonperforming assets include nonaccrual loans, modified loans not performing in accordance with modified terms and not accruing interest, modified 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

41

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 December 31, 2023, total nonperforming assets were $1.5 billion, compared with $1.0 billion at December 31, 2022. The $478 million (47.0 percent) increase in nonperforming assets, from December 31, 2022 to December 31, 2023, was primarily due to higher nonperforming commercial real estate and commercial loans, partially offset by a decrease in nonperforming residential mortgages. The ratio of total nonperforming

assets to total loans and other real estate was 0.40 percent at December 31, 2023, compared with 0.26 percent at December 31, 2022.

OREO was $26 million at December 31, 2023, compared with $23 million at December 31, 2022, 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.

42 U.S. Bancorp 2023 Annual Report

[[GREPCENT_TABLE]]
[["TABLE 16","","Nonperforming Assets(a)"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["At December 31 (Dollars in Millions)","2023","2022"],["Commercial"],["Commercial","$","349","","$","139"],["Lease financing","27","","30"],["Total commercial","376","","169"],["Commercial Real Estate"],["Commercial mortgages","675","","251"],["Construction and development","102","","87"],["Total commercial real estate","777","","338"],["Residential Mortgages(b)","158","","325"],["Credit Card","\u2014","","1"],["Other Retail"],["Retail leasing","8","","8"],["Home equity and second mortgages","113","","110"],["Other","17","","21"],["Total other retail","138","","139"],["Total nonperforming loans(1)","1,449","","972"],["Other Real Estate(c)","26","","23"],["Other Assets","19","","21"],["Total nonperforming assets","$","1,494","","$","1,016"],["Accruing loans 90 days or more past due(b)","$","698","","$","491"],["Period-end loans(2)","$","373,835","","$","388,213"],["Nonperforming assets to total loans(1)/(2)",".39","%",".25","%"],["Nonperforming assets to total loans plus other real estate(c)",".40","%",".26","%"]]
[[/GREPCENT_TABLE]]

Changes in Nonperforming Assets

[[GREPCENT_TABLE]]
[["(Dollars in Millions)","Commercial andCommercialReal Estate","ResidentialMortgages,Credit Card andOther Retail","Total"],["Balance December 31, 2022","$","509","","$","507","","$","1,016"],["Additions to nonperforming assets"],["New nonaccrual loans and foreclosed properties","1,403","","174","","1,577"],["Advances on loans","49","","1","","50"],["Acquired nonperforming assets","\u2014","","\u2014","","\u2014"],["Total additions","1,452","","175","","1,627"],["Reductions in nonperforming assets"],["Paydowns, payoffs","(415)","","(109)","","(524)"],["Net sales","(51)","","(23)","","(74)"],["Return to performing status","(32)","","(199)","","(231)"],["Charge-offs(d)","(308)","","(12)","","(320)"],["Total reductions","(806)","","(343)","","(1,149)"],["Net additions to (reductions in) nonperforming assets","646","","(168)","","478"],["Balance December 31, 2023","$","1,155","","$","339","","$","1,494"]]
[[/GREPCENT_TABLE]]

(a)Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due.

(b)Excludes $2.0 billion and $2.2 billion at December 31, 2023 and 2022, respectively, of loans purchased and loans that could be purchased from GNMA mortgage pools under delinquent loan repurchase options 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 $47 million and $53 million at December 31, 2023 and 2022, respectively, 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.

43

[[GREPCENT_TABLE]]
[["TABLE 17","","Net Charge-offs as a Percent of Average Loans Outstanding"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","2023","2022","2021"],["Year Ended December 31 (Dollars in Millions)","AverageLoanBalance","NetCharge-offs","Percent","AverageLoanBalance","NetCharge-offs","Percent","AverageLoanBalance","NetCharge-offs","Percent"],["Commercial"],["Commercial","$","130,544","","$","293","",".22","%","$","118,967","","$","211","",".18","%","$","97,649","","$","97","",".10","%"],["Lease financing","4,339","","21","",".48","","4,830","","16","",".33","","5,206","","6","",".12"],["Total commercial","134,883","","314","",".23","","123,797","","227","",".18","","102,855","","103","",".10"],["Commercial real estate"],["Commercial mortgages","42,894","","265","",".62","","30,890","","17","",".06","","27,997","","(14)","","(.05)"],["Construction","11,752","","(2)","","(.02)","","10,208","","20","",".20","","10,784","","16","",".15"],["Total commercial real estate","54,646","","263","",".48","","41,098","","37","",".09","","38,781","","2","",".01"],["Residential mortgages","115,922","","109","",".09","","84,749","","(23)","","(.03)","","74,629","","(32)","","(.04)"],["Credit card","26,570","","849","","3.20","","23,478","","524","","2.23","","21,645","","512","","2.37"],["Other retail"],["Retail leasing","4,665","","6","",".13","","6,459","","3","",".05","","7,710","","2","",".03"],["Home equity and second mortgages","12,829","","(2)","","(.02)","","11,051","","(7)","","(.06)","","11,228","","(10)","","(.09)"],["Other","31,760","","366","","1.15","","42,941","","302","",".70","","40,117","","105","",".26"],["Total other retail","49,254","","370","",".75","","60,451","","298","",".49","","59,055","","97","",".16"],["Total loans","$","381,275","","$","1,905","",".50","%","$","333,573","","$","1,063","",".32","%","$","296,965","","$","682","",".23","%"]]
[[/GREPCENT_TABLE]]

Analysis of Loan Net Charge-offs Total loan net charge-offs were $1.9 billion in 2023, compared with $1.1 billion in 2022. The $842 million (79.2 percent) increase in total net charge-offs in 2023, compared with 2022, reflected higher charge-offs in most loan categories consistent with normalizing credit conditions and adverse conditions in commercial real estate, along with the impacts of balance sheet repositioning and capital management actions in 2023 and 2022. Net charge-offs in 2023 included charge-offs related to balance sheet repositioning and capital management actions taken in the second quarter of 2023, along with charge-offs in the first quarter of 2023 related to the uncollectible amount of acquired loans, which were considered purchased credit deteriorated as of the date of the MUB acquisition. Net charge-offs in 2022 included charge-offs in the fourth quarter of 2022 related to uncollectible amounts on acquired loans and balance sheet optimization activities. The ratio of total loan net charge-offs to average loans outstanding was 0.50 percent in 2023, compared with 0.32 percent in 2022. Excluding the impact of charge-offs related to the MUB acquisition and balance sheet repositioning and capital management actions, the ratio of total loan net charge-offs to average loans outstanding was 0.39 percent in 2023, compared with 0.21 percent in 2022. See "Non-GAAP Financial Measures" for additional information.

Commercial and commercial real estate loan net charge-offs for 2023 were $577 million (0.30 percent of average loans outstanding), compared with $264 million (0.16 percent of average loans outstanding) in 2022. The increase in net charge-offs in 2023, compared with 2022, was driven primarily by normalizing credit conditions and adverse conditions in commercial real estate.

Residential mortgage loan net charge-offs for 2023 were $109 million (0.09 percent of average loans outstanding), compared with a net recovery of $23 million (0.03 percent of average loans outstanding) in 2022. Credit card loan net charge-offs in 2023 were $849 million (3.20 percent of average loans outstanding), compared with $524 million (2.23 percent of average loans outstanding) in 2022. Other retail loan net charge-offs for 2023 were $370 million (0.75 percent of average loans outstanding), compared with $298 million (0.49 percent of average loans outstanding) in 2022. The increase in total residential mortgage, credit card and other retail loan net charge-offs in 2023, compared with 2022, was driven by normalizing credit conditions along with charge-offs related to balance sheet repositioning and capital management actions taken in 2023.

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

44 U.S. Bancorp 2023 Annual Report

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 from better to 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 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, inflation, interest rates, and corporate bond spreads, 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 term of the loan, adjusted for expected prepayments. For each loan portfolio, including those loans modified under various loan modification programs, 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 at fair value less selling costs. 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.

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 December 31, 2023,

the Company serviced the first lien on 30 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 $204 million or 1.6 percent of its total home equity portfolio at December 31, 2023, represented non-delinquent junior liens where the first lien was delinquent or modified.

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 PCD. An allowance is established for each population and considers product mix, risk characteristics of the portfolio and delinquency status and refreshed LTV ratios when possible. PCD loans also consider whether the loan has experienced a charge-off, bankruptcy or significant deterioration since origination. 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 had a total net book balance of $3.1 billion of PCD loans, primarily related to the MUB acquisition, included in its loan portfolio at December 31, 2023.

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.

The results of the analysis are evaluated quarterly to confirm the estimates are appropriate for each loan portfolio. Table 19 shows the amount of the allowance for credit losses by loan class and underlying portfolio category.

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 December 31, 2023, the allowance for credit losses was $7.8 billion, compared with an allowance of $7.4 billion

45

at December 31, 2022. The allowance for credit losses at December 31, 2023 included a $62 million decrease due to a change in accounting principle adopted on January 1, 2023 related to discontinuing the separate recognition and measurement of troubled debt restructurings ("TDRs"). The increase in the allowance for credit losses of $435 million (5.9 percent) at December 31, 2023, compared with December 31, 2022, was primarily driven by normalizing credit losses, credit card balance growth and commercial real estate credit quality.

The ratio of the allowance for credit losses to period-end loans was 2.10 percent at December 31, 2023, compared with 1.91 percent at December 31, 2022. The ratio of the allowance for credit losses to nonperforming loans was 541 percent at December 31, 2023, compared with 762 percent at December 31, 2022. The ratio of the allowance for credit

losses to annual loan net charge-offs at December 31, 2023, was 411 percent, compared with 697 percent at December 31, 2022. Management determined the allowance for credit losses was appropriate on December 31, 2023 and 2022.

Economic conditions considered in estimating the allowance for credit losses at December 31, 2023 included changes in projected gross domestic product and unemployment levels. These factors are evaluated through a combination of quantitative calculations using multiple economic scenarios and additional qualitative assessments that consider the degree of economic uncertainty in the current environment. The projected unemployment rates for 2024 considered in the estimate range from 3.0 percent to 8.2 percent.

The following table summarizes the baseline forecast for key economic variables the Company used in its estimate of the allowance for credit losses at December 31, 2023 and 2022:

[[GREPCENT_TABLE]]
[["","December 31, 2023","December 31, 2022"],["United States unemployment rate for the three months ending(a)"],["December 31, 2023","3.8","%","4.2","%"],["June 30, 2024","3.9","","4.1"],["December 31, 2024","4.0","","3.9"],["United States real gross domestic product for the three months ending(b)"],["December 31, 2023","2.5","%","1.0","%"],["June 30, 2024","2.0","","1.9"],["December 31, 2024","1.3","","2.5"]]
[[/GREPCENT_TABLE]]

(a)Reflects quarterly average of forecasted reported United States unemployment rate.

(b)Reflects year-over-year growth rates.

The allowance for credit losses related to commercial lending segment loans increased $251 million during the year ended December 31, 2023, reflecting the impact of normalizing credit conditions and select commercial real estate loan deterioration, partially offset by declining commercial exposures.

The allowance for credit losses related to consumer lending segment loans increased $184 million during the year ended December 31, 2023, due to the impacts of normalizing credit performance, partially offset by reduced portfolio exposures and a decrease related to a change in accounting principle.

46 U.S. Bancorp 2023 Annual Report

[[GREPCENT_TABLE]]
[["TABLE 18","","Summary of Allowance for Credit Losses"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(Dollars in Millions)","2023","2022","2021"],["Balance at beginning of year","$","7,404","","$","6,155","","$","8,010"],["Change in accounting principle(a)","(62)","","\u2014","","\u2014"],["Allowance for acquired credit losses(b)","127","","336","","\u2014"],["Charge-Offs"],["Commercial"],["Commercial","357","","294","","206"],["Lease financing","32","","25","","16"],["Total commercial","389","","319","","222"],["Commercial real estate"],["Commercial mortgages","278","","28","","9"],["Construction and development","3","","26","","20"],["Total commercial real estate","281","","54","","29"],["Residential mortgages","129","","13","","18"],["Credit card","1,014","","696","","686"],["Other retail"],["Retail leasing","18","","18","","26"],["Home equity and second mortgages","12","","9","","12"],["Other","448","","391","","215"],["Total other retail","478","","418","","253"],["Total charge-offs(c)","2,291","","1,500","","1,208"],["Recoveries"],["Commercial"],["Commercial","64","","83","","109"],["Lease financing","11","","9","","10"],["Total commercial","75","","92","","119"],["Commercial real estate"],["Commercial mortgages","13","","11","","23"],["Construction and development","5","","6","","4"],["Total commercial real estate","18","","17","","27"],["Residential mortgages","20","","36","","50"],["Credit card","165","","172","","174"],["Other retail"],["Retail leasing","12","","15","","24"],["Home equity and second mortgages","14","","16","","22"],["Other","82","","89","","110"],["Total other retail","108","","120","","156"],["Total recoveries","386","","437","","526"],["Net Charge-Offs"],["Commercial"],["Commercial","293","","211","","97"],["Lease financing","21","","16","","6"],["Total commercial","314","","227","","103"],["Commercial real estate"],["Commercial mortgages","265","","17","","(14)"],["Construction and development","(2)","","20","","16"],["Total commercial real estate","263","","37","","2"],["Residential mortgages","109","","(23)","","(32)"],["Credit card","849","","524","","512"],["Other retail"],["Retail leasing","6","","3","","2"],["Home equity and second mortgages","(2)","","(7)","","(10)"],["Other","366","","302","","105"],["Total other retail","370","","298","","97"],["Total net charge-offs","1,905","","1,063","","682"],["Provision for credit losses(d)","2,275","","1,977","","(1,173)"],["Other changes","\u2014","","(1)","","\u2014"],["Balance at end of year","$","7,839","","$","7,404","","$","6,155"],["Components"],["Allowance for loan losses","$","7,379","","$","6,936","","$","5,724"],["Liability for unfunded credit commitments","460","","468","","431"],["Total allowance for credit losses(1)","$","7,839","","$","7,404","","$","6,155"],["Period-end loans(2)","$","373,835","","$","388,213","","$","312,028"],["Nonperforming loans(3)","1,449","","972","","834"],["Allowance for Credit Losses as a Percentage of"],["Period-end loans(1)/(2)","2.10","%","1.91","%","1.97","%"],["Nonperforming loans(1)/(3)","541","","762","","738"],["Nonperforming and accruing loans 90 days or more past due","365","","506","","471"],["Nonperforming assets","525","","729","","701"],["Net charge-offs","411","","697","","902"]]
[[/GREPCENT_TABLE]]

(a)Effective January 1, 2023, the Company adopted accounting guidance which removed the separate recognition and measurement of troubled debt restructurings.

(b)Allowance for purchased credit deteriorated and charged-off loans acquired from MUB.

(c)2023 includes $91 million of charge-offs related to uncollectible amounts on acquired loans, as well as $309 million of charge-offs related to balance sheet repositioning and capital management actions. 2022 includes $179 million of charge-offs related to uncollectible amounts on acquired loans, as well as $189 million of charge-offs related to balance sheet repositioning and capital management actions.

(d)2023 includes provision for credit losses of $243 million related to balance sheet repositioning and capital management actions. 2022 includes provision for credit losses of $662 million related to the acquisition of MUB and $129 million related to balance sheet repositioning and capital management actions.

47

[[GREPCENT_TABLE]]
[["TABLE 19","","Allocation of the Allowance for Credit Losses"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Allowance Amount","Allowance as a Percent of Loans"],["At December 31 (Dollars in Millions)","2023","2022","2023","2022"],["Commercial"],["Commercial","$","2,038","","$","2,087","","1.60","%","1.59","%"],["Lease financing","81","","76","","1.91","","1.67"],["Total commercial","2,119","","2,163","","1.61","","1.59"],["Commercial Real Estate"],["Commercial mortgages","1,068","","878","","2.55","","2.01"],["Construction and development","552","","447","","4.79","","3.81"],["Total commercial real estate","1,620","","1,325","","3.03","","2.39"],["Residential Mortgages","827","","926","",".72","",".80"],["Credit Card","2,403","","2,020","","8.41","","7.68"],["Other Retail"],["Retail leasing","95","","127","","2.30","","2.30"],["Home equity and second mortgages","321","","298","","2.46","","2.32"],["Other","454","","545","","1.67","","1.49"],["Total other retail","870","","970","","1.96","","1.77"],["Total allowance","$","7,839","","$","7,404","","2.10","%","1.91","%"]]
[[/GREPCENT_TABLE]]

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 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. Lease originations are subject to the same well-defined underwriting standards referred to in the “Credit Risk Management” section, which includes an evaluation of the residual value risk. Retail lease residual value risk is mitigated further by effective end-of-term marketing of off-lease vehicles.

Included in the retail leasing portfolio was approximately $3.4 billion of retail leasing residuals at December 31, 2023, compared with $4.4 billion at December 31, 2022. The Company monitors concentrations of leases by manufacturer and vehicle type. As of December 31, 2023, vehicle lease residuals related to sport utility vehicles were 53.5 percent of the portfolio, while truck and crossover utility vehicle classes represented approximately 21.4 percent and 13.7 percent of the portfolio, respectively. At year-end 2023, the individual vehicle model with the largest residual value outstanding represented 27.0 percent of the aggregate residual value of all vehicles in the portfolio. At December 31, 2023, the weighted-average origination term of the portfolio was 41 months, compared with 42 months at December 31, 2022. At December 31, 2023, the commercial leasing portfolio had $491 million of residuals, compared with $500 million at December 31, 2022. At year-end 2023, lease residuals related to trucks and other transportation equipment represented 38.0 percent of the total residual portfolio, while business and office equipment represented 28.5 percent.

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 economic and financial 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. The Company also maintains a cybersecurity risk program which provides centralized planning and management of related and interdependent work with a focus on risks from cybersecurity threats. The Company's cybersecurity risk program is integrated into the Company's overall business and operational strategies and requires that the Company allocate appropriate resources to maintain the program. Refer to “Item 1C. Cybersecurity” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, for further discussion on the Company's cybersecurity risk program.

Business continuation and disaster recovery planning is also critical to effectively managing operational risks. Each business unit of the Company is required to develop, maintain and test these plans at least annually to ensure that recovery activities, if needed, can support mission critical functions, including technology, networks and data

48 U.S. Bancorp 2023 Annual Report

centers supporting customer applications and business operations.

While the Company strives to design processes to minimize operational risks, there is no absolute assurance that business disruption or operational losses would not occur from an external event or internal control breakdown. On an ongoing basis, management makes process changes and investments to enhance its systems of internal controls and business continuity and disaster recovery plans.

Compliance Risk Management The Company may suffer legal or regulatory sanctions, material financial loss, or damage to its reputation if it fails 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 economic and financial disruptions. Refer to “Supervision and Regulation” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, for further discussion of the regulatory framework applicable to bank holding companies and their subsidiaries.

Interest Rate Risk Management In the banking industry, changes in interest rates are a significant risk that can impact earnings as well as 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 overseeing compliance with the ALCO management policies, including interest rate risk exposure. One way the Company measures and analyzes its interest rate risk is through analysis of net interest income sensitivities across a range of scenarios.

Net interest income sensitivity analysis includes evaluating all of the Company’s assets and liabilities and off-balance sheet instruments, inclusive of new business activity under various interest rate scenarios that differ in the direction, amount and speed of change over time, as well as the overall shape of the yield curve. The balance sheet includes assumptions regarding loan and deposit volumes and pricing which are based on quantitative analysis, historical trends and management outlook and strategies. Deposit balances and mix are dynamic across interest rate scenarios and will change both with the absolute level of rates as well as the assumed interest rate shock. Base case and net interest income sensitivities are reviewed monthly by the ALCO and are used to guide asset/liability management strategies.

The Company also manages interest rate sensitivity by utilizing market value of equity modeling, which measures the degree to which the market values of the Company’s assets and liabilities and off-balance sheet instruments will change given a change in interest rates. Management

measures the impact of changes in market values due to interest rates under a number of scenarios, including immediate and sustained parallel shifts, and flattening or steepening of the yield curve. The Company manages its interest rate risk position by holding assets with desired interest rate risk characteristics on its balance sheet, executing certain pricing strategies for loans and deposits and deploying investment portfolio, funding and derivative strategies .

Table 20 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. From December 31, 2022 to December 31, 2023, interest rate sensitivity decreased, primarily due to changes in deposit composition and rates paid on deposits as interest rate hikes materialized throughout 2023. As of December 31, 2023, the Company continues to be slightly asset sensitive to a parallel upward move in interest rates with most of that impact coming from the short end of the yield curve. While the Company utilizes models and assumptions based on historical information and expected behaviors, actual outcomes could vary significantly.

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 loans and 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, foreign exchange and commodity 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.

49

[[GREPCENT_TABLE]]
[["TABLE 20","","Sensitivity of Net Interest Income"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","December 31, 2023","December 31, 2022"],["","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","(.19)","%",".71","%","(.15)","%",".91","%","(.58)","%",".95","%","(2.02)","%","1.44","%"]]
[[/GREPCENT_TABLE]]

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. Refer to Note 10 of the Notes to Consolidated Financial Statements for additional information regarding MSRs, including management of the changes in fair value.

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. 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. 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. The Company also mitigates the credit risk of its derivative positions, as well as the credit risk on loans or lending portfolios, through the use of credit contracts.

For additional information on derivatives and hedging activities, refer to Notes 20 and 21 in the Notes to Consolidated Financial Statements.

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, commodities 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. VaR amounts reflected MUB beginning December 1, 2022, the day the acquisition transaction closed.

The average, high, low and period-end one-day VaR amounts for the Company’s Covered Positions were as follows:

[[GREPCENT_TABLE]]
[["Year Ended December 31(Dollars in Millions)","2023","2022"],["Average","$","4","","$","2"],["High","7","","7"],["Low","2","","1"],["Period-end","3","","5"]]
[[/GREPCENT_TABLE]]

The Company did not experience any actual losses for its combined Covered Positions that exceeded VaR during the years ended December 31, 2023 and 2022. 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

50 U.S. Bancorp 2023 Annual Report

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 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:

[[GREPCENT_TABLE]]
[["Year Ended December 31(Dollars in Millions)","2023","2022"],["Average","$","10","","$","10"],["High","16","","19"],["Low","6","","6"],["Period-end","8","","13"]]
[[/GREPCENT_TABLE]]

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:

[[GREPCENT_TABLE]]
[["Year Ended December 31(Dollars in Millions)","2023","2022"],["Residential Mortgage Loans Held For Sale and Related Hedges"],["Average","$","1","","$","2"],["High","2","","5"],["Low","\u2014","","\u2014"],["Mortgage Servicing Rights and Related Hedges"],["Average","$","7","","$","8"],["High","12","","20"],["Low","2","","3"]]
[[/GREPCENT_TABLE]]

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 credit ratings and 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’s liquidity policy requires it to maintain diversified wholesale funding sources to avoid maturity, entity and market concentrations. The Company operates a Cayman Islands branch for issuing Eurodollar time deposits. In addition, the Company has relationships with dealers to issue national market retail and institutional savings certificates and short-term and medium-term notes. The Company also maintains a significant correspondent banking network and relationships. Accordingly, the Company has access to national federal funds, funding through repurchase agreements and sources of stable certificates of deposit and commercial paper.

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. Unencumbered liquid assets in the Company’s investment securities portfolio provide asset liquidity through the Company’s ability to sell the securities or pledge and borrow against them. Refer to Note 5 of the Notes to Consolidated Financial Statements and “Balance Sheet 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.

51

The following table summarizes the Company's total available liquidity from on-balance sheet and off-balance sheet funding sources:

[[GREPCENT_TABLE]]
[["(Dollars in millions)","December 31, 2023","December 31, 2022"],["Cash held at the Federal Reserve Bank and other central banks","$","52,403","","$","44,428"],["Available investment securities","34,220","","131,962"],["Borrowing capacity from the Federal Reserve Bank and FHLB","215,763","","114,775"],["Total available liquidity","$","302,386","","$","291,165"]]
[[/GREPCENT_TABLE]]

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 $512.3 billion at December 31, 2023, compared with $525.0 billion at December 31, 2022. Refer to Note 12 of the Notes to Consolidated Financial Statements and “Balance Sheet Analysis” for further information on the maturities, terms and trends of the Company’s deposits.

Additional funding is provided by long-term debt and short-term borrowings. Long-term debt was $51.5 billion at December 31, 2023, and is an important funding source because of its multi-year borrowing structure. Refer to Note 14 of the Notes to Consolidated Financial Statements for information on the terms and maturities of the Company’s long-term debt issuances and “Balance Sheet Analysis” for discussion on long-term debt trends. Short-term borrowings were $15.3 billion at December 31, 2023, and supplement the Company’s other funding sources. Refer to Note 13 of the Notes to Consolidated Financial Statements and “Balance Sheet Analysis” for further information on the terms and trends of the Company’s short-term borrowings.

The Company’s ability to raise negotiated funding at competitive prices is influenced by rating agencies’ views of the Company’s credit quality, liquidity, capital and earnings. Table 21 details the rating agencies’ most recent assessments as of December 31, 2023.

[[GREPCENT_TABLE]]
[["TABLE 21","","Credit Ratings"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Moody's","S&P Global Ratings","Fitch Ratings","DBRS Morningstar"],["U.S. Bancorp"],["Long-term issuer rating","A3","A","A+","AA"],["Short-term issuer rating","N/A","A-1","F1","R-1 (middle)"],["Senior unsecured debt","A3","A","A","AA"],["Subordinated debt","A3","A-","A-","AA (low)"],["Junior subordinated debt","Baa1","N/A","N/A","N/A"],["Preferred stock","Baa2","BBB","BBB","A"],["Commercial paper","P-2","N/A","F1","N/A"],["U.S. Bank National Association"],["Long-term issuer rating","A2","A+","A+","AA (high)"],["Short-term issuer rating","P-1","A-1","F1","R-1 (high)"],["Long-term deposits","Aa3","N/A","AA-","AA (high)"],["Short-term deposits","P-1","N/A","F1+","N/A"],["Senior unsecured debt","A2","A+","A+","AA (high)"],["Subordinated debt","A2","A","N/A","AA"],["Commercial paper","P-1","A-1","N/A","R-1 (high)"],["Counterparty risk assessment","A1(cr)/P-1(cr)"],["Counterparty risk rating","A2/P-1"],["Baseline credit assessment","a2"]]
[[/GREPCENT_TABLE]]

In addition to assessing liquidity risk on a consolidated basis, the Company monitors the parent company’s liquidity. The parent company’s routine funding requirements consist primarily of operating expenses, dividends paid to shareholders, debt service, repurchases of common stock and funds used for acquisitions. The parent company obtains funding to meet its obligations from dividends collected from its subsidiaries and the issuance of debt and capital securities. 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

52 U.S. Bancorp 2023 Annual Report

markets. The parent company is currently in excess of required liquidity minimums.

Under SEC rules, the parent company is classified as a “well-known seasoned issuer,” which allows it to file a registration statement that does not have a limit on issuance capacity. “Well-known seasoned issuers” generally include those companies with outstanding common securities with a market value of at least $700 million held by non-affiliated parties or those companies that have issued at least $1 billion in aggregate principal amount of non-convertible securities, other than common equity, in the last three years. However, the parent company’s ability to issue debt and other securities under a registration statement filed with the SEC under these rules is limited by the debt issuance authority granted by the Company’s Board of Directors and/or the ALCO policy.

At December 31, 2023, parent company long-term debt outstanding was $34.3 billion, compared with $27.0 billion at December 31, 2022. The increase was primarily due to $8.2 billion of medium-term note issuances, partially offset by a $936 million repayment of the Company's debt obligation to MUFG. As of December 31, 2023, there was $5.6 billion of parent company debt scheduled to mature in 2024. Future debt maturities may be met through medium-term note and capital security issuances and dividends from subsidiaries, as well as from parent company cash and cash equivalents.

Dividend payments to the Company by its subsidiary banks are subject to regulatory review and statutory limitations and, in some instances, regulatory approval. In general, dividends to the parent company from its banking subsidiaries are limited by rules which compare dividends to net income for regulatorily-defined periods. For further information, see Note 25 of the Notes to Consolidated Financial Statements.

The Company is subject to a regulatory Liquidity Coverage Ratio (“LCR”) requirement which requires large banking organizations to maintain an adequate level of unencumbered high quality liquid assets to meet estimated liquidity needs over a 30-day stressed period. At December 31, 2023, the Company was compliant with this requirement.

The Company is also subject to a regulatory Net Stable Funding Ratio (“NSFR”) requirement which requires large banking organizations 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 December 31, 2023, the Company was compliant with this requirement.

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 2023. 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 December 31, 2023, the Company had an aggregate

amount on deposit with European banks of approximately $7.3 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 deterioration in economic conditions in Europe, including the impacts resulting from the Russia-Ukraine conflict, is not expected to have a significant effect on the Company related to these activities.

Commitments, Contingent Liabilities and Other Contractual Obligations The Company participates in many different contractual arrangements which 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. 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.

In the ordinary course of business, the Company enters into contractual obligations that may require future cash payments, including funding for customer loan requests, customer deposit maturities and withdrawals, debt service, leases for premises and equipment, and other cash commitments. Refer to Notes 7, 12, 14, 17 and 23 in the Notes to Consolidated Financial Statements for information on the Company’s operating lease obligations, deposits, long-term debt, benefit obligations and guarantees and other commitments, respectively.

Commitments to extend credit are legally binding and generally have fixed expiration dates or other termination clauses. Many of the Company’s commitments to extend credit expire without being drawn and, therefore, total commitment amounts do not necessarily represent future liquidity requirements or the Company’s exposure to credit loss. Commitments to extend credit also include consumer credit lines that are cancellable upon notification to the consumer. Total contractual amounts of commitments to extend credit at December 31, 2023 were $400.5 billion. The Company also issues and confirms various types of letters of credit, including standby and commercial. Total contractual amounts of letters of credit at December 31, 2023 were $11.6 billion. For more information on the Company’s commitments to extend credit and letters of credit, refer to Note 23 in the Notes to Consolidated Financial Statements.

The Company’s off-balance sheet arrangements with unconsolidated entities primarily consist of private investment funds or partnerships that make equity investments, provide debt financing or support community-based investments in tax-advantaged projects. In addition to providing investment returns, these arrangements in many cases assist the Company in complying with requirements of the Community Reinvestment Act. The investments in these entities generate a return primarily through the realization of federal and state income tax credits and other

53

tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. The entities in which the Company invests are generally considered variable interest entities (“VIEs”). The Company’s recorded investment in these entities, net of contractual equity investment commitments of $3.6 billion, was $3.0 billion at December 31, 2023.

The Company also has non-controlling financial investments in private funds and partnerships considered VIEs. The Company’s recorded investment in these entities was approximately $219 million at December 31, 2023, and the Company had unfunded commitments to invest an additional $100 million. For more information on the Company’s interests in unconsolidated VIEs, refer to Note 8 in the Notes to Consolidated Financial Statements.

Guarantees are contingent commitments issued by the Company to customers or other third parties requiring the Company to perform if certain conditions exist or upon the occurrence or nonoccurrence of a specified event, such as a scheduled payment to be made under contract. The Company’s primary guarantees include commitments from securities lending activities in which indemnifications are provided to customers; indemnification or buy-back provisions related to sales of loans and tax credit investments; and merchant charge-back guarantees through the Company’s involvement in providing merchant processing services. For certain guarantees, the Company may have access to collateral to support the guarantee, or through the exercise of other recourse provisions, be able to offset some or all of any payments made under these guarantees.

The Company and certain of its subsidiaries, along with other Visa U.S.A. Inc. member banks, have a contingent guarantee obligation to indemnify Visa Inc. for potential losses arising from antitrust lawsuits challenging the practices of Visa U.S.A. Inc. and MasterCard International. The indemnification by the Company and other Visa U.S.A. Inc. member banks has no maximum amount. Refer to Note 23 in the Notes to Consolidated Financial Statements for further details regarding guarantees, other commitments, and contingent liabilities, including maximum potential future payments and current carrying amounts.

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. To achieve its capital goals, the Company employs a variety of capital management tools, including dividends, common share repurchases, and the issuance of subordinated debt, non-cumulative perpetual preferred stock, common stock and other capital instruments.

The Company announced on December 12, 2023 that its Board of Directors had approved a regular quarterly dividend of $0.49 per common share. This represented a 2.1 percent increase over the previous dividend rate per common share of $0.48 per quarter.

The Company announced on December 22, 2020 that its Board of Directors had approved an authorization to repurchase $3.0 billion of its common stock beginning

January 1, 2021. 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 acquisition of MUB. The Company will evaluate its share repurchases in connection with the potential capital requirements given proposed regulatory capital rules and related landscape.

Capital distributions, including dividends and stock repurchases, are subject to the approval of the Company’s Board of Directors and compliance with regulatory requirements. For a more complete analysis of activities impacting shareholders’ equity and capital management programs, refer to Note 15 of the Notes to Consolidated Financial Statements.

Total U.S. Bancorp shareholders’ equity was $55.3 billion at December 31, 2023, compared with $50.8 billion at December 31, 2022. The increase was primarily the result of corporate earnings, the issuance of shares of common stock and changes in unrealized gains and losses on available-for-sale investment securities included in other comprehensive income (loss), partially offset by dividends paid. In the third quarter of 2023, the Company issued 24 million shares of common stock of the Company to an affiliate of MUFG for a purchase price of $936 million. The proceeds of the issuance were used to repay a portion of the Company’s $3.5 billion debt obligation to MUFG. See “MUFG Union Bank Acquisition” on page 22 for further information.

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. Under Basel III, banking regulators define minimum capital requirements for banks and financial services holding companies. These requirements are expressed in the form of a minimum common equity tier 1 capital ratio, tier 1 capital ratio, total risk-based capital ratio, tier 1 leverage ratio and a tier 1 total leverage exposure, or supplementary leverage, ratio. The Company’s minimum required level for these ratios at December 31, 2023, which include a stress capital buffer of 2.5 percent for the common equity tier 1 capital, tier 1 capital and total capital ratios, was 7.0 percent, 8.5 percent, 10.5 percent, 4.0 percent, and 3.0 percent, respectively. The Company targets its regulatory capital levels, at both the bank and bank holding company level, to exceed the “well-capitalized” threshold for these ratios under the FDIC Improvement Act prompt corrective action provisions that are applicable to all banks. At December 31, 2023, the minimum “well-capitalized” thresholds under the prompt corrective action framework for the common equity tier 1 capital ratio, tier 1 capital ratio, total risk-based capital ratio, tier 1 leverage ratio, and tier 1 total leverage exposure ratio was 6.5 percent, 8.0 percent, 10.0 percent, 5.0 percent, and 3.0 percent, respectively. Beginning in 2022, the Company began to phase into its regulatory capital requirements the cumulative deferred impact of its 2020 adoption of the accounting guidance related to the impairment of financial instruments based on the current expected credit losses (“CECL”) methodology plus 25 percent of its quarterly credit reserve increases during 2020

54 U.S. Bancorp 2023 Annual Report

and 2021. This cumulative deferred impact will continue to be phased into the Company’s regulatory capital over the next year, culminating with a fully phased in regulatory capital calculation beginning in 2025. As of December 31, 2023, USBNA met all regulatory capital ratios to be

considered “well-capitalized”. There are no conditions or events since December 31, 2023 that management believes have changed the risk-based category of USBNA.

[[GREPCENT_TABLE]]
[["TABLE 22","","Regulatory Capital Ratios"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["At December 31 (Dollars in Millions)","2023","2022"],["Basel III standardized approach:"],["Common shareholders\u2019 equity","$","48,498","","$","43,958"],["Less intangible assets"],["Goodwill (net of deferred tax liability)","(11,480)","","(11,395)"],["Other disallowed intangible assets (net of deferred tax liability)","(2,278)","","(2,792)"],["Other(a)","10,207","","11,789"],["Common equity tier 1 capital","44,947","","41,560"],["Qualifying preferred stock","6,808","","6,808"],["Noncontrolling interests eligible for tier 1 capital","450","","450"],["Other(b)","(6)","","(5)"],["Tier 1 capital","52,199","","48,813"],["Eligible portion of allowance for credit losses","5,645","","5,682"],["Subordinated debt and noncontrolling interests eligible for tier 2 capital","4,077","","4,520"],["Tier 2 capital","9,722","","10,202"],["Total risk-based capital","$","61,921","","$","59,015"],["Risk-weighted assets","$","453,390","","$","496,500"],["Common equity tier 1 capital as a percent of risk-weighted assets","9.9","%","8.4","%"],["Tier 1 capital as a percent of risk-weighted assets","11.5","","9.8"],["Total risk-based capital as a percent of risk-weighted assets","13.7","","11.9"],["Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio)","8.1","","7.9"],["Tier 1 capital as a percent of total on- and off-balance sheet leverage exposure (total leverage exposure ratio)","6.6","","6.4"]]
[[/GREPCENT_TABLE]]

(a)Includes the impact of items included in other comprehensive income (loss), such as unrealized gains (losses) on available-for-sale securities, accumulated net gains on cash flow hedges, pension liability adjustments, etc., and the portion of deferred tax assets related to net operating loss and tax credit carryforwards not eligible for common equity tier 1 capital.

(b)Includes the remaining portion of deferred tax assets not eligible for total tier 1 capital.

Table 22 provides a summary of statutory regulatory capital ratios in effect for the Company at December 31, 2023 and 2022. All regulatory ratios exceeded regulatory “well-capitalized” requirements.

In July 2023, the U.S. federal bank regulatory authorities proposed a rule implementing the Basel Committee’s finalization of the post-crisis regulatory capital reforms. The proposal provides for a July 1, 2025 effective date, subject to a three-year transition period. The proposal includes the Fundamental Review of the Trading Book, which replaces the market risk rule, and introduces new standardized approaches for credit risk, operational risk and credit valuation adjustment (CVA) risk, which would replace the current models-based approaches. The Company is currently evaluating the impact of the proposed rule and expects that any final rule would result in the Company being required to maintain increased levels of regulatory capital.

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 5.3 percent and 7.7 percent, respectively, at December 31, 2023, compared with 4.5 percent and 6.0 percent at December 31, 2022, respectively. In addition, the Company’s common equity tier 1 capital to risk-weighted assets ratio, reflecting the full implementation of the CECL methodology was 9.7 percent at December 31, 2023, compared with 8.1 percent at December 31, 2022. Refer to “Non-GAAP Financial Measures” beginning on page 59 for further information on these other capital ratios.

As an approved mortgage seller and servicer, USBNA, through its mortgage banking division, is required to maintain various levels of shareholder’s equity, as specified by various agencies, including the United States Department of Housing and Urban Development, Government National Mortgage Association, Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association. At December 31, 2023, USBNA met these requirements.

55

Line of Business Financial Review

The Company’s major lines of business are Wealth, Corporate, Commercial and Institutional Banking, Consumer and Business Banking, Payment Services, and Treasury and Corporate Support.

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 24 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 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. 2022 results were restated and presented on a comparable basis.

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. Wealth, Corporate, Commercial and Institutional Banking contributed $3.6 billion of the Company’s net income in 2023, or an increase of $202 million (6.0 percent), compared with 2022.

Net revenue increased $1.5 billion (17.1 percent) in 2023, compared with 2022. Net interest income, on a taxable-equivalent basis, increased $916 million (17.6 percent) in 2023, compared with 2022, primarily due to the impact of higher rates on the margin benefit from deposits and the acquisition of MUB, partially offset by the impact of deposit mix and pricing. Noninterest income increased $582 million (16.3 percent) in 2023, compared with 2022, primarily due to higher trust and investment management fees driven by the acquisition of MUB and core business growth, and higher commercial products revenue mainly due to higher trading revenue and corporate bond fees.

Noninterest expense increased $1.0 billion (25.3 percent) in 2023, compared with 2022, primarily due to higher FDIC insurance expense driven by an increase in the assessment base and rate along with the inclusion of MUB in the current year. Compensation and employee benefits expense and net shared services expense were also higher, driven by investment in support of business growth and the impact of the MUB acquisition, including intangible amortization driven by the core deposit intangible. The provision for credit losses increased $180 million in 2023, compared with 2022, primarily due to commercial real estate credit quality.

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, online services, direct mail, ATM processing, mobile devices, distributed mortgage loan officers, and intermediary relationships including auto dealerships, mortgage banks, and strategic business partners. Consumer and Business Banking contributed $2.2 billion of the Company’s net income in 2023, or an increase of $378 million (20.6 percent), compared with 2022.

Net revenue increased $1.7 billion (20.4 percent) in 2023, compared with 2022. Net interest income, on a taxable-equivalent basis, increased $1.6 billion (23.2 percent) in 2023, compared with 2022, reflecting the favorable impact of higher rates on the margin benefit of deposits and the acquisition of MUB, partially offset by the impact of deposit mix and pricing. Noninterest income increased $126 million (8.2 percent) in 2023, compared with 2022, primarily due to higher mortgage banking revenue driven by increases in MSR valuations, net of hedging activities, along with the impact of the MUB acquisition.

Noninterest expense increased $1.2 billion (20.5 percent) in 2023, compared with 2022, primarily due to increases in compensation and employee benefits expense and net shared services expense due to investments in digital capabilities, and the impact of the MUB acquisition, including intangible amortization driven by the core deposit intangible. The provision for credit losses increased $4 million (5.3 percent) in 2023, compared with 2022, due to normalizing credit conditions, partially offset by declining loan balances.

Payment Services Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services and merchant processing. Payment Services contributed $1.2 billion of the Company’s net income in 2023, or a decrease of $150 million (11.2 percent), compared with 2022.

Net revenue increased $460 million (7.3 percent) in 2023, compared with 2022. Net interest income, on a taxable-equivalent basis, increased $198 million (7.9 percent) in 2023, compared with 2022, primarily due to higher loan yields driven by higher interest rates and lower payment rates, along with higher loan balances, partially offset by higher funding costs. Noninterest income increased $262 million (6.9 percent) in 2023, compared with 2022, driven by higher card revenue and merchant processing services revenue due to higher spend volume, along with higher corporate payment products revenue due to product mix.

Noninterest expense increased $247 million (7.0 percent) in 2023, compared with 2022, reflecting higher net shared services expense driven by investment in infrastructure and technology development, in addition to higher compensation and employee benefits expense as a result of merit increases and core business growth. The provision for credit losses increased $414 million (42.2 percent) in 2023, compared with 2022, primarily due to normalizing credit conditions exhibited through increasing delinquency and credit loss rates.

Treasury and Corporate Support Treasury and Corporate Support includes the Company’s investment portfolios,

56 U.S. Bancorp 2023 Annual Report

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 a net loss of $1.5 billion in 2023, compared with a net loss of $716 million in 2022.

Net revenue increased $191 million (20.5 percent) in 2023, compared with 2022. Noninterest income increased $191 million (33.8 percent) in 2023, compared with 2022, primarily due to the impacts of balance sheet repositioning and capital management actions taken in the fourth quarter of 2022, partially offset by losses on the sale of investment securities in the fourth quarter of 2023 related to balance sheet repositioning. Net interest income, on a taxable-equivalent basis, was unchanged in 2023, compared with 2022, driven by higher funding costs, offset by higher yields on the investment portfolio and cash balances.

Noninterest expense increased $1.5 billion in 2023, compared with 2022, primarily due to merger and integration charges and operating expenses related to the acquisition of MUB, the FDIC special assessment charge, higher compensation and employee benefits expense reflecting merit increases and hiring to support business growth, and higher marketing and business development expense as the Company continues to invest in its national brand and global reach. These increases were partially offset by lower net shared services expense. The provision for credit losses was $300 million (39.1 percent) lower in 2023, compared with 2022, primarily due to the initial provision for credit losses recorded in the fourth quarter of 2022 related to the MUB acquisition.

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.

57

[[GREPCENT_TABLE]]
[["TABLE 23","","Line of Business Financial Performance"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Wealth, Corporate, Commercial and Institutional Banking","Consumer andBusiness Banking","Payment Services"],["Year Ended December 31(Dollars in Millions)","2023","2022","Percent Change","2023","2022","Percent Change","2023","2022","Percent Change"],["Condensed Income Statement"],["Net interest income (taxable-equivalent basis)","$","6,129","","$","5,213","","17.6","%","$","8,331","","$","6,764","","23.2","%","$","2,702","","$","2,504","","7.9","%"],["Noninterest income","4,143","","3,561","","16.3","","1,662","","1,536","","8.2","","4,056","","3,794","","6.9"],["Total net revenue","10,272","","8,774","","17.1","","9,993","","8,300","","20.4","","6,758","","6,298","","7.3"],["Noninterest expense","5,183","","4,135","","25.3","","6,964","","5,779","","20.5","","3,772","","3,525","","7.0"],["Income (loss) before provision and income taxes","5,089","","4,639","","9.7","","3,029","","2,521","","20.2","","2,986","","2,773","","7.7"],["Provision for credit losses","334","","154","","*","79","","75","","5.3","","1,394","","980","","42.2"],["Income (loss) before income taxes","4,755","","4,485","","6.0","","2,950","","2,446","","20.6","","1,592","","1,793","","(11.2)"],["Income taxes and taxable-equivalent adjustment","1,190","","1,122","","6.1","","738","","612","","20.6","","398","","449","","(11.4)"],["Net income (loss)","3,565","","3,363","","6.0","","2,212","","1,834","","20.6","","1,194","","1,344","","(11.2)"],["Net (income) loss attributable to noncontrolling interests","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014"],["Net income (loss) attributable to U.S. Bancorp","$","3,565","","$","3,363","","6.0","","$","2,212","","$","1,834","","20.6","","$","1,194","","$","1,344","","(11.2)"],["Average Balance Sheet"],["Loans","$","175,780","","$","150,512","","16.8","","$","161,862","","$","144,441","","12.1","","$","38,471","","$","34,627","","11.1"],["Goodwill","4,682","","3,634","","28.8","","4,466","","3,250","","37.4","","3,327","","3,305","",".7"],["Other intangible assets","1,007","","365","","*","5,265","","3,784","","39.1","","350","","423","","(17.3)"],["Assets","202,642","","169,554","","19.5","","179,103","","160,174","","11.8","","44,292","","41,072","","7.8"],["Noninterest-bearing deposits","70,977","","82,671","","(14.1)","","31,082","","31,719","","(2.0)","","2,981","","3,410","","(12.6)"],["Interest-bearing deposits","199,780","","175,345","","13.9","","189,148","","163,190","","15.9","","103","","162","","(36.4)"],["Total deposits","270,757","","258,016","","4.9","","220,230","","194,909","","13.0","","3,084","","3,572","","(13.7)"],["Total U.S. Bancorp shareholders\u2019 equity","22,362","","18,159","","23.1","","16,016","","12,678","","26.3","","9,310","","8,233","","13.1"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Treasury andCorporate Support","ConsolidatedCompany"],["Year Ended December 31(Dollars in Millions)","2023","2022","Percent Change","2023","2022","Percent Change"],["Condensed Income Statement"],["Net interest income (taxable-equivalent basis)","$","365","","$","365","","\u2014","%","$","17,527","","$","14,846","","18.1","%"],["Noninterest income","756","","565","","33.8","","10,617","","9,456","","12.3"],["Total net revenue","1,121","","930","","20.5","","28,144","","24,302","","15.8"],["Noninterest expense","2,954","","1,467","","*","18,873","","14,906","","26.6"],["Income (loss) before provision and income taxes","(1,833)","","(537)","","*","9,271","","9,396","","(1.3)"],["Provision for credit losses","468","","768","","(39.1)","","2,275","","1,977","","15.1"],["Income (loss) before income taxes","(2,301)","","(1,305)","","(76.3)","","6,996","","7,419","","(5.7)"],["Income taxes and taxable-equivalent adjustment","(788)","","(602)","","(30.9)","","1,538","","1,581","","(2.7)"],["Net income (loss)","(1,513)","","(703)","","*","5,458","","5,838","","(6.5)"],["Net (income) loss attributable to noncontrolling interests","(29)","","(13)","","*","(29)","","(13)","","*"],["Net income (loss) attributable to U.S. Bancorp","$","(1,542)","","$","(716)","","*","$","5,429","","$","5,825","","(6.8)"],["Average Balance Sheet"],["Loans","$","5,162","","$","3,993","","29.3","","$","381,275","","$","333,573","","14.3"],["Goodwill","\u2014","","\u2014","","\u2014","","12,475","","10,189","","22.4"],["Other intangible assets","17","","5","","*","6,639","","4,577","","45.1"],["Assets","237,403","","221,349","","7.3","","663,440","","592,149","","12.0"],["Noninterest-bearing deposits","2,728","","2,594","","5.2","","107,768","","120,394","","(10.5)"],["Interest-bearing deposits","8,864","","3,293","","*","397,895","","341,990","","16.3"],["Total deposits","11,592","","5,887","","96.9","","505,663","","462,384","","9.4"],["Total U.S. Bancorp shareholders\u2019 equity","5,972","","11,346","","(47.4)","","53,660","","50,416","","6.4"]]
[[/GREPCENT_TABLE]]

*Not meaningful

58 U.S. Bancorp 2023 Annual Report

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 discloses the return on tangible common equity ratio and tangible book value per share as it believes they are useful financial measures to assess the Company's use of equity.

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.

The Company also discloses the net charge-off ratio and return on tangible common equity ratio excluding notable items related to the acquisition of MUB, and other balance sheet repositioning and capital management actions taken by the Company. Management believes these measures enhance comparability with prior periods.

The Company also discloses percent of net revenue for its business lines excluding Treasury and Corporate Support to highlight the contributions to net revenue from the Company's core revenue-producing businesses.

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.

59

The following tables show the Company’s calculation of these non-GAAP financial measures:

[[GREPCENT_TABLE]]
[["At December 31 (Dollars in Millions)","2023","2022","2021"],["Total equity","$","55,771","","$","51,232","","$","55,387"],["Preferred stock","(6,808)","","(6,808)","","(6,371)"],["Noncontrolling interests","(465)","","(466)","","(469)"],["Goodwill (net of deferred tax liability)(a)","(11,480)","","(11,395)","","(9,323)"],["Intangible assets (net of deferred tax liability), other than mortgage servicing rights","(2,278)","","(2,792)","","(785)"],["Tangible common equity(1)","34,740","","29,771","","38,439"],["Common equity tier 1 capital, determined in accordance with transitional regulatory capital requirements related to the CECL methodology implementation","44,947","","41,560","","41,701"],["Adjustments(b)","(866)","","(1,299)","","(1,733)"],["Common equity tier 1 capital, reflecting the full implementation of the CECL methodology(2)","44,081","","40,261","","39,968"],["Total assets","663,491","","674,805","","573,284"],["Goodwill (net of deferred tax liability)(a)","(11,480)","","(11,395)","","(9,323)"],["Intangible assets (net of deferred tax liability), other than mortgage servicing rights","(2,278)","","(2,792)","","(785)"],["Tangible assets(3)","649,733","","660,618","","563,176"],["Risk-weighted assets, determined in accordance with prescribed regulatory capital requirements effective for the Company(4)","453,390","","496,500","","418,571"],["Adjustments(c)","(736)","","(620)","","(357)"],["Risk-weighted assets, reflecting the full implementation of the CECL methodology(5)","452,654","","495,880","","418,214"],["Ratios"],["Tangible common equity to tangible assets(1)/(3)","5.3","%","4.5","%","6.8","%"],["Tangible common equity to risk-weighted assets(1)/(4)","7.7","","6.0","","9.2"],["Common equity tier 1 capital to risk-weighted assets, reflecting the full implementation of the CECL methodology(2)/(5)","9.7","","8.1","","9.6"]]
[[/GREPCENT_TABLE]]

(a)Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.

(b)Includes the estimated increase in the allowance for credit losses related to the adoption of the CECL methodology net of deferred taxes.

(c)Includes the impact of the estimated increase in the allowance for credit losses related to the adoption of the CECL methodology.

[[GREPCENT_TABLE]]
[["Year Ended December 31 (Dollars in Millions)","2023","2022","2021"],["Net interest income","$","17,396","","$","14,728","","$","12,494"],["Taxable-equivalent adjustment(a)","131","","118","","106"],["Net interest income, on a taxable-equivalent basis","17,527","","14,846","","12,600"],["Net interest income, on a taxable-equivalent basis (as calculated above)","17,527","","14,846","","12,600"],["Noninterest income","10,617","","9,456","","10,227"],["Less: Securities gains (losses), net","(145)","","20","","103"],["Total net revenue, excluding net securities gains (losses)(1)","28,289","","24,282","","22,724"],["Noninterest expense(2)","18,873","","14,906","","13,728"],["Efficiency ratio(2)/(1)","66.7","%","61.4","%","60.4","%"]]
[[/GREPCENT_TABLE]]

(a)Based on federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.

[[GREPCENT_TABLE]]
[["Year Ended December 31, 2023 (Dollars in Millions)","Net Revenue","Net Revenue as a Percent of the Consolidated Company","Net Revenue as a Percent of the Consolidated Company Excluding Treasury and Corporate Support"],["Wealth, Corporate, Commercial and Institutional Banking","$","10,272","","36","%","38","%"],["Consumer and Business Banking","9,993","","36","","37"],["Payment Services","6,758","","24","","25"],["Treasury and Corporate Support","1,121","","4"],["Consolidated Company","28,144","","100","%"],["Less: Treasury and Corporate Support","1,121"],["Consolidated Company excluding Treasury and Corporate Support","$","27,023","","","100","%"]]
[[/GREPCENT_TABLE]]

60 U.S. Bancorp 2023 Annual Report

[[GREPCENT_TABLE]]
[["Year Ended December 31 (Dollars in Millions)","2023"],["Net income applicable to U.S. Bancorp common shareholders","$","5,051"],["Intangible amortization (net-of-tax)","502"],["Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization(1)","5,553"],["Less: Notable items(a)","(1,597)"],["Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization and notable items(2)","7,150"],["Average total equity","54,125"],["Average preferred stock","(6,808)"],["Average noncontrolling interests","(465)"],["Average goodwill (net of deferred tax liability)(b)","(11,485)"],["Average intangible assets (net of deferred tax liability), other than mortgage servicing rights","(2,480)"],["Average tangible equity(3)","32,887"],["Return on tangible common equity(1)/(3)","16.9","%"],["Return on tangible common equity, excluding notable items(2)/(3)","21.7","%"]]
[[/GREPCENT_TABLE]]

(a)Notable items of $2.2 billion ($1.6 billion net-of-tax, including a $70 million discrete tax benefit) for the year ended December 31, 2023 included $(140) million of noninterest income related to investment securities balance sheet repositioning and capital management actions, $1.0 billion of merger and integration-related charges, $734 million of FDIC special assessment charges, a $110 million charitable contribution and $243 million of provision for credit losses related to balance sheet repositioning and capital management actions.

(b)Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.

[[GREPCENT_TABLE]]
[["Year Ended December 31 (Dollars in Millions)","2023","2022"],["Net charge-offs","$","1,905","","$","1,063"],["Less: Notable items(a)","400","","368"],["Net charge-offs, excluding notable items(1)","1,505","","695"],["Average loan balances(2)","381,275","","333,573"],["Net charge-off ratio, excluding notable items(1)/(2)",".39","%",".21","%"]]
[[/GREPCENT_TABLE]]

(a) Notable items for the year ended December 31, 2023 included $309 million of net charge-offs related to balance sheet repositioning and capital management actions and $91 million of net charge-offs related to the uncollectible amount of acquired MUB loans, which were considered purchased credit deteriorated as of the date of acquisition. Notable items for the year ended December 31, 2022 included $179 million of net charge-offs related to uncollectible MUB acquired loans as well as $189 million of net charge-offs related to balance sheet repositioning and capital management actions.

[[GREPCENT_TABLE]]
[["At December 31 (Dollars in Millions, Except Per Share Data)","2023","2022","Percent Change"],["Common equity","$","48,498","","$","43,958"],["Goodwill (net of deferred tax liability)(a)","(11,480)","","(11,395)"],["Intangible assets (net of deferred tax liability), other than mortgage servicing rights","(2,278)","","(2,792)"],["Tangible common equity(1)","34,740","","29,771"],["Common shares outstanding(2)","1,558","","1,531"],["Tangible book value per common share(1)/(2)","$","22.30","","$","19.45","","14.7","%"]]
[[/GREPCENT_TABLE]]

(a)Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.

Accounting Changes

Note 2 of the Notes to Consolidated Financial Statements discusses accounting standards recently issued but not yet required to be adopted and the expected impact of these changes in accounting standards. To the extent the adoption of new accounting standards materially affects the Company’s financial condition or results of operations, the impacts are discussed in the applicable section(s) of the Management’s Discussion and Analysis and the Notes to Consolidated Financial Statements.

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. Several factors are considered in determining whether or not a policy is critical in the preparation of financial statements. These factors include, among other things, whether the estimates are significant to the financial statements, the nature of the estimates, the ability to readily validate the estimates with other information (including third-party

61

sources or available prices), sensitivity of the estimates to changes in economic conditions and whether alternative accounting methods may be utilized under GAAP. Management has discussed the development and the selection of critical accounting policies with the Company’s Audit Committee.

Significant accounting policies are discussed in Note 1 of the Notes to Consolidated Financial Statements. Those policies considered to be critical accounting policies are described below.

Allowance for Credit Losses Management’s evaluation of the appropriate allowance for credit losses is often the most critical of all the accounting estimates for a banking institution. It is an inherently subjective process impacted by many factors as discussed throughout the Management’s Discussion and Analysis section of the Annual Report.

The methods utilized to estimate the allowance for credit losses, key assumptions and quantitative and qualitative information considered by management in determining the appropriate allowance for credit losses at December 31, 2023 are discussed in the “Credit Risk Management” section. Although methodologies utilized to determine each element of the allowance reflect management’s assessment of credit risk, imprecision exists in these measurement tools due in part to subjective judgments involved and an inherent lag in the data available to quantify current conditions and events that affect credit loss reserve estimates.

Given the many quantitative variables and subjective factors affecting the credit portfolio, changes in the allowance for credit losses may not directly coincide with changes in risk ratings or delinquency status within loan and lease portfolios. This is in part due to the timing of the risk rating process in relation to changes in the business cycle, the exposure and mix of loans within risk rating categories, levels of nonperforming loans and the timing of charge-offs and expected recoveries. The allowance for credit losses measures the expected loss content on the remaining portfolio exposure, while nonperforming loans and net charge-offs are measures of specific impairment events that have already been confirmed. Therefore, the degree of change in the forward-looking expected loss in the allowance may differ from the level of changes in nonperforming loans and net charge-offs. Management maintains an appropriate allowance for credit losses by updating allowance rates to reflect changes in expected losses, including expected changes in economic or business cycle conditions. Some factors considered in determining the appropriate allowance for credit losses are more readily quantifiable while other factors require extensive qualitative judgment in determining the overall level of the allowance for credit losses.

The Company considers a range of economic scenarios in its determination of the allowance for credit losses. These 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, and also the expectation that conditions will eventually normalize over the longer run. Scenarios worse than the Company’s expected outcome at December 31, 2023 include risks of later than expected cuts in the federal funds rate, persisting

inflationary pressures, continually elevated high interest rates, declines in residential and commercial real estate prices, high unemployment rates, supply shortages, geopolitical risks, bank tightening and lingering concerns of future bank failures, which could all precipitate a moderate to severe recession and result in increased credit losses.

Under the range of economic scenarios considered, the allowance for credit losses would have been lower by $1.1 billion or higher by $2.3 billion. This range reflects the sensitivity of the allowance for credit losses specifically related to the scenarios and weights considered as of December 31, 2023, and does not consider other potential adjustments that could increase or decrease loss estimates calculated using alternative economic scenarios.

Because several quantitative and qualitative factors are considered in determining the allowance for credit losses, these sensitivity analyses do not necessarily reflect the nature and extent of future changes in the allowance for credit losses. They are intended to provide insights into the impact of adverse changes in the economy on the Company’s modeled loss estimates for the loan portfolio and do not imply any expectation of future deterioration in the risk rating or loss rates. Given current processes employed by the Company, management believes the risk ratings and loss model estimates currently assigned are appropriate. It is possible that others, given the same information, may at any point in time reach different reasonable conclusions that could be significant to the Company’s financial statements. Refer to the “Analysis and Determination of the Allowance for Credit Losses” section for further information.

Fair Value Estimates A portion of the Company’s assets and liabilities are carried at fair value on the Consolidated Balance Sheet, with changes in fair value recorded either through earnings or other comprehensive income (loss) in accordance with applicable accounting principles generally accepted in the United States. These include all of the Company’s available-for-sale investment securities, derivatives and other trading instruments, MSRs and MLHFS. The estimation of fair value also affects other loans held for sale, which are recorded at the lower-of-cost-or-fair value. The determination of fair value is important for certain other assets that are periodically evaluated for impairment using fair value estimates, including goodwill. Refer to Note 3 of the Notes to Consolidated Financial Statements for additional information on fair value estimates of assets and liabilities assumed in the MUB acquisition.

Fair value is generally defined as the exit price at which an asset or liability could be exchanged in a current transaction between willing, unrelated parties, other than in a forced or liquidation sale. Fair value is based on quoted market prices in an active market, or if market prices are not available, is estimated using models employing techniques such as matrix pricing or discounting expected cash flows. The significant assumptions used in the models, which include assumptions for interest rates, discount rates, prepayments and credit losses, are independently verified against observable market data where possible. Where observable market data is not available, the estimate of fair value becomes more subjective and involves a high degree of judgment. In this circumstance, fair value is estimated

62 U.S. Bancorp 2023 Annual Report

based on management’s judgment regarding the value that market participants would assign to the asset or liability. This valuation process takes into consideration factors such as market illiquidity. Imprecision in estimating these factors can impact the amount recorded on the balance sheet for a particular asset or liability with related impacts to earnings or other comprehensive income (loss).

When available, trading and available-for-sale securities are valued based on quoted market prices. However, certain securities are traded less actively and, therefore, quoted market prices may not be available. The determination of fair value may require benchmarking to similar instruments or performing a discounted cash flow analysis using estimates of future cash flows and prepayment, interest and default rates. For more information on investment securities, refer to Note 5 of the Notes to Consolidated Financial Statements.

As few derivative contracts are listed on an exchange, the majority of the Company’s derivative positions are valued using valuation techniques that use readily observable market inputs. Certain derivatives, however, must be valued using techniques that include unobservable inputs. For these instruments, the significant assumptions must be estimated and, therefore, are subject to judgment. Note 20 of the Notes to Consolidated Financial Statements provides a summary of the Company’s derivative positions.

Refer to Note 22 of the Notes to Consolidated Financial Statements for additional information regarding estimations of fair value.

Mortgage Servicing Rights MSRs are capitalized as separate assets when loans are sold and servicing is retained, or may be purchased from others. The Company records MSRs at fair value. Because MSRs do not trade in an active market with readily observable prices, the Company determines the fair value by estimating the present value of the asset’s future cash flows utilizing market-based prepayment rates, option adjusted spread, and other assumptions validated through comparison to trade information, industry surveys and independent third-party valuations. Changes in the fair value of MSRs are recorded in earnings during the period in which they occur. Risks inherent in the valuation of MSRs include higher than expected prepayment rates and/or delayed receipt of cash flows. The Company utilizes derivatives, including interest rate swaps, swaptions, forward commitments to buy TBAs, U.S. Treasury and Eurodollar futures and options on U.S. Treasury futures, to mitigate the valuation risk. Refer to Notes 10 and 22 of the Notes to Consolidated Financial Statements for additional information on the assumptions used in determining the fair value of MSRs and an analysis of the sensitivity to changes in interest rates of the fair value of the MSRs portfolio and the related derivative instruments used to mitigate the valuation risk.

Income Taxes The Company estimates income tax expense based on amounts expected to be owed to the various tax jurisdictions in which it operates, including federal, state and local domestic jurisdictions, and an insignificant amount to foreign jurisdictions. The estimated income tax expense is reported in the Consolidated Statement of Income. Accrued taxes are reported in other

assets or other liabilities on the Consolidated Balance Sheet and represent the net estimated amount due to or to be received from taxing jurisdictions either currently or deferred to future periods. Deferred taxes arise from differences between assets and liabilities measured for financial reporting purposes versus income tax reporting purposes. Deferred tax assets are recognized if, in management’s judgment, their realizability is determined to be more likely than not. Uncertain tax positions that meet the more likely than not recognition threshold are measured to determine the amount of benefit to recognize. An uncertain tax position is measured at the largest amount of benefit management believes is more likely than not to be realized upon settlement. In estimating accrued taxes, the Company assesses the relative merits and risks of the appropriate tax treatment considering statutory, judicial and regulatory guidance in the context of the tax position. Because of the complexity of tax laws and regulations, interpretation can be difficult and subject to legal judgment given specific facts and circumstances. It is possible that others, given the same information, may at any point in time reach different reasonable conclusions regarding the estimated amounts of accrued taxes.

Changes in the estimate of accrued taxes occur periodically due to changes in tax rates, interpretations of tax laws, the status of examinations being conducted by various taxing authorities, and newly enacted statutory, judicial and regulatory guidance that impacts the relative merits and risks of tax positions. These changes, when they occur, affect accrued taxes and can be significant to the operating results of the Company. Refer to Note 19 of the Notes to Consolidated Financial Statements for additional information regarding income taxes.