USB U.S. Bancorp 10-K 2024-12-31 section summaries

Business and operating profile

U.S. Bancorp is a Minneapolis-based financial holding company offering banking, lending, payments, wealth management, capital markets, mortgage, insurance, brokerage, leasing and fund-administration services. Its principal banking subsidiary, U.S. Bank National Association (USBNA), held all consolidated deposits: $518.3 billion at December 31, 2024. Lending is primarily domestic, with targeted exposure to industries including healthcare, utilities, oil and gas, and state and municipal government. Foreign operations—including merchant processing in Canada and parts of Europe, and corporate trust and fund administration in Europe—are not significant.

At year-end 2024, the company operated 2,165 branches across 26 states and 4,489 ATMs; a significant share of consumer transactions took place through online and mobile banking. Its four segments are Wealth, Corporate, Commercial and Institutional Banking; Consumer and Business Banking; Payment Services; and Treasury and Corporate Support. The latter includes investment portfolios, funding, capital management, interest-rate risk management, unallocated taxes and corporate expenses.

U.S. Bancorp employed 70,263 people globally at December 31, 2024. Its workforce strategy emphasizes in-person engagement across more than 20 corporate hubs, branches and business centers. Employees completed over 1.8 million hours of enterprise training in 2024, and the company introduced or enhanced development programs, including Skills Academy. Talent attraction and retention, competitive compensation and benefits, and workforce development remain priorities.

Competition and principal risks

Competition comes from banks and nonbanks, particularly fintechs that may face different regulatory restrictions. Technology, convenience, product breadth and pricing are increasingly important, as are the ability to retain talent and manage compensation and other costs. Rapid changes in mobile payments, digital wallets and digital currencies create both opportunities to serve customers and execution challenges.

The company is exposed to deterioration in economic conditions or financial markets, deposit outflows or reduced funding access, higher FDIC assessments, interest-rate changes, inflation, recession and unemployment. Credit risks include weaker borrower performance and collateral values, including commercial real estate occupancy. Other material exposures include changing capital, liquidity and resolution requirements; mortgage repurchase and indemnity demands; litigation; cybersecurity, privacy and third-party operational disruptions; climate-related physical and transition risks; geopolitical events; and failure to execute strategic plans or integrate acquisitions.

Consumer-protection violations can lead to litigation, restitution, damages, regulatory sanctions, penalties and reputational harm. CFPB rulemaking and enforcement may constrain products and reduce revenue; a proposed rule to significantly reduce permissible credit-card late fees could affect revenue, but the filing does not quantify the impact.

Regulation, capital and funding

U.S. Bancorp and USBNA are subject to extensive Federal Reserve, OCC and FDIC oversight and are Category III institutions because consolidated assets exceed $100 billion. The company remains subject to Category III requirements unless it reaches $700 billion in four-quarter average consolidated assets or $75 billion in average cross-jurisdictional activity. Growth or acquisitions could lead to Category II or advanced-approaches treatment, with stricter liquidity requirements and reporting and more frequent company-run stress tests. As Category III institutions with less than $75 billion of weighted short-term wholesale funding, USB and USBNA currently qualify for LCR and NSFR requirements calibrated at 85% of full requirements.

At December 31, 2024, USB exceeded applicable minimum capital requirements. Its CET1 minimum is 4.5%; its stress capital buffer rose to 3.1% from 2.5% at December 31, 2023, subject to a 2.5% floor and annual recalibration. A countercyclical CET1 buffer of up to 2.5% could also apply but remained at zero; USBNA has a 2.5% capital conservation buffer. Falling below effective requirements can limit distributions and certain executive compensation. Proposed Basel III Endgame changes could increase capital requirements and expose capital ratios to unrealized available-for-sale securities gains and losses; proposed minimum long-term-debt requirements also remain subject to rulemaking. USB and USBNA elected to phase in CECL’s regulatory-capital impact through January 2025.

The company conducts annual capital planning and is subject to annual Federal Reserve supervisory stress tests. Regulators may restrict dividends or other distributions, and deficiencies in capital, management, CRA compliance or other standards could constrain acquisitions and new activities, limit dividends and repurchases, or ultimately require business changes or divestiture. USB must act as a source of strength to USBNA and may have to provide it financial support during distress; loans from USB to USBNA would be subordinate to deposits and certain other bank liabilities.

The FDIC raised base assessment rates by two basis points beginning in 2023 and may further adjust USBNA’s premiums based on risk. Domestic deposit claims and receiver administrative expenses have priority over other unsecured claims, including publicly issued bank debt and deposits in non-domestic offices.

Regulatory developments and compliance

As a Category III banking organization, USB must periodically submit resolution plans. Its next full plan deadline was extended to October 2025; USBNA’s next interim supplement is due July 1, 2025, and its next full plan July 1, 2026. USBNA’s most recent OCC-reviewed recovery plan was approved in December 2024. Weak resolution plans could lead to higher capital, leverage or liquidity requirements, restrictions on growth or activities, or divestitures.

Other significant compliance requirements include BSA/AML and sanctions obligations, Regulation W restrictions on transactions between USBNA and affiliates, and federal and state privacy laws, GDPR and evolving Canadian requirements. USBNA received an “Outstanding” rating in its latest CRA examination, covering 2016–2020. The 2023 CRA modernization rule is subject to a court-ordered injunction, and most provisions are not expected to apply before January 1, 2026. The CFPB’s October 2024 personal-financial-data rule would require electronic access to covered data through detailed interfaces without charging for access or transfer; compliance is due April 1, 2026, unless the rule is overturned or rescinded.

Qualifying cybersecurity incidents that materially disrupt or are reasonably likely to disrupt services, key operations or the financial sector must be reported to primary federal regulators within 36 hours; Canadian operations also face incident-reporting requirements. The company also faces evolving climate-related requirements: federal banking-agency principles apply to institutions over $100 billion, while SEC climate-disclosure rules adopted in March 2024 were stayed during litigation. State, international and anti-ESG measures add uncertainty and potential compliance conflicts.

Capital-securities covenants

Replacement Capital Covenants restrict repayment, redemption or purchase of specified securities before applicable dates unless qualifying replacement capital is raised and required regulatory approvals are obtained. Securities identified as remaining outstanding at February 21, 2025 include: USB Capital IX’s $675.378 million of 6.189% fixed-to-floating-rate Normal Income Trust Securities issued March 17, 2006, related to Series A preferred stock; 40 million Series B preferred depositary shares issued March 27, 2006, at $25 each, each representing a 1/1,000 interest; and USB Realty Corp.’s 4,500 shares of Series A exchangeable preferred stock issued December 22, 2006. Each is associated with U.S. Bancorp’s 2.491% fixed-rate-reset subordinated notes due November 3, 2036.

Cybersecurity risk and materiality

During FY2024, U.S. Bancorp had not identified cybersecurity threats that materially affected, or were reasonably likely to affect, its business strategy, results of operations, or financial condition, other than risks discussed in the 2024 Annual Report’s “Operations and Business Risk” section. The company cautions that it may not successfully prevent or mitigate a future incident, which could materially adversely affect its business, strategy, results, or financial condition.

Risk management, controls, and third parties

Cybersecurity is integrated into U.S. Bancorp’s enterprise risk framework and three-lines-of-defense model. First-line Information Security Services (ISS) implements cybersecurity controls. Second-line Cybersecurity Risk Oversight, within Operational Risk Management, monitors and escalates emerging risks. Third-line internal audit independently assesses governance, risk management, and controls.

The Information Security Risk Committee (ISRC), co-chaired by the Chief Information Security Officer (CISO) and Chief Technology Risk Officer, oversees the information-security framework, controls, significant events, mitigation, policies, emerging risks, and issue resolution. The ISRC and the Executive Risk Committee, chaired by the Chief Risk Officer, generally meet at least monthly. ISS tracks issues through remediation or closure and escalates them when required timeframes cannot be met. External assessors, consultants, and auditors periodically review the program and recommend improvements. Practices align with frameworks and standards including NIST CSF and PCI DSS, and employee and contractor awareness training is part of the program.

A risk-based third-party program addresses cybersecurity risks involving service providers and outsourced operations. U.S. Bancorp conducts due diligence when selecting and monitoring providers; obtains contractual assurances regarding security responsibilities, controls, reporting, incident response, and notification; and, as appropriate, reviews independent audit reports and testing and validates providers’ processes for identifying, mitigating, monitoring, and reporting risks.

Board oversight and incident response

The Board annually reviews and approves the risk management framework. Its Risk Management Committee, supported by the Cybersecurity and Technology Subcommittee, has primary cybersecurity oversight, including cyber resilience and certain technology matters. Management reports quarterly on cybersecurity issues and threats. The Risk Management and Audit Committees jointly receive an annual briefing from the CISO on threats and preparedness, and the full Board receives periodic cybersecurity education.

An annual executive-level crisis exercise typically tests cyber resilience, response playbooks, and communications, involving Board and management members and, as appropriate, third parties and regulators. The Board-approved risk appetite statement includes cybersecurity metrics and limits. Management monitors these through a quantitative scorecard reported quarterly to the Risk Management Committee; breaches and significant matters are escalated through management, committees, and/or the Board.

The Cyber Security Incident Response Team (CSIRT) leads incident response and internal communications. It manages low- and moderate-severity incidents, while Enterprise Crisis Management handles high- and very-high-severity incidents. Severity ratings may change as investigations progress. Communications are distributed according to severity and may include the CEO, Chief Risk Officer, the Board or relevant committee, and regulators. Formal security-related Risk Management Issues follow established processes, with remediation reviewed biweekly by the Chief Risk Officer and Chief Information and Technology Officer.

Responsible executives

Key executives responsible for cybersecurity risk include CISO Timothy J. Held, Chief Risk Officer Jodi L. Richard, and Chief Information and Technology Officer Venkatachari Dilip. Held has more than 27 years of IT and cybersecurity experience, has served as CISO since 2018, and previously held roles as Deputy CISO and Head of Cyber Defense, Threat Intelligence, and Incident Response. Richard has been Vice Chair and Chief Risk Officer since October 2018 and previously held operational-risk leadership roles at U.S. Bancorp and HSBC. Dilip has been Chief Information and Technology Officer since joining in September 2018 and oversees technology-risk controls aligned with NIST CSF.

The CISO and leadership team generally meet each business day to triage security matters and review threat-intelligence findings. The CISO shares relevant information with the Chief Risk Officer.

Item 15 — Exhibits and Financial Statement Schedules

Item 15 is primarily an exhibit index. It identifies U.S. Bancorp’s 2024 annual report financial statements and notes, including audited consolidated balance sheets, income statements, statements of comprehensive income, shareholders’ equity and cash flows, as well as unaudited daily average balance and yield data and supplemental financial data. No separate financial statement schedules were required.

The exhibits include U.S. Bancorp’s 2024 Stock Incentive Plan and related award forms, 2025 amendments to executive and outside-director deferred compensation plans, and award forms for grants made after January 1, 2025. The filing also lists the company’s insider-trading policy and incentive-compensation recovery policy.

Instruments defining the rights of long-term debt holders are not included as exhibits; the company states that it will furnish copies to the SEC upon request.

The Form 10-K was signed on February 21, 2025, by CEO Andrew Cecere, CFO John C. Stern, Controller Lisa R. Stark, and the company’s directors.

U.S. Bancorp — FY2024 MD&A

Consolidated results

Revenue declined 2.4% as higher interest expense more than offset growth in interest income and fees. The 6.4% decline in taxable-equivalent NII reflected interest expense rising $2.763B, exceeding the $1.645B increase in interest income. Net interest margin contracted to 2.70% from 2.90%: earning-asset yield rose to 5.24% from 4.98%, but the rate paid on interest-bearing liabilities increased to 3.09% from 2.65%. Average earning assets were nearly flat at $606.641B versus $605.199B.

Noninterest income grew 4.0%, supported by trust and investment fees, commercial products, payment activity and mortgage banking; service charges and other income declined. The 8.9% expense reduction primarily reflected lower merger-integration costs and FDIC assessments. Compensation increased 1.3% to $10.554B from $10.416B, while technology expense rose to $2.074B from $2.049B.

Earnings comparisons include substantial one-off items. FY2024 notable pretax charges totaled $400M ($300M after tax) and reduced diluted EPS by $0.19. FY2023 notable pretax items totaled $2.2B ($1.6B after tax) and reduced EPS by $1.04; they included $1.0B of merger-integration costs and a $734M FDIC special assessment. Thus, lower exceptional charges contributed materially to the year-over-year earnings increase. The effective tax rate was 20.0%, versus 20.5%.

Business segments

Wealth banking’s revenue growth came from noninterest income, up $407M, which more than offset a $217M NII decline; provision rose to $385M from $340M. Consumer and Business Banking revenue fell 10.6%, primarily from a $1.025B NII decline tied to deposit pricing and mix; expenses fell $300M, but provision increased to $182M from $78M. Payment Services grew on higher NII and payment fees, while provision increased to $1.614B from $1.394B. Treasury and Corporate Support’s loss narrowed mainly because noninterest expense fell to $1.115B from $2.640B, as merger and FDIC charges declined; its provision fell to $57M from $463M.

Balance sheet, funding and capital

Period-end loans increased 1.6%, though average loans declined 1.9% to $373.875B. Commercial loans were $139.484B (up 5.8%), CRE $48.859B (down 8.6%), residential mortgages $118.813B (up 2.8%), credit cards $30.350B (up 6.3%) and other retail loans $42.326B (down 4.7%). CRE payoffs and workouts exceeded new originations. Notable concentrations included California residential mortgages of $53.682B and California CRE of $17.990B; office CRE was $5.601B.

Deposit growth masked a shift in funding mix: average noninterest-bearing deposits fell 23.0% to $83.007B, while average savings and time deposits increased. About half of year-end deposits, $259.9B, were uninsured. Available liquidity totaled $286.570B, down from $302.386B; borrowing capacity declined mainly after the Federal Reserve’s Bank Term Funding Program expired. Average daily Q4 liquidity coverage ratio was 106.6%, versus 109.2%; the company complied with LCR and NSFR requirements.

All regulatory capital ratios exceeded “well-capitalized” requirements. The board authorized up to $5.0B of share repurchases in September 2024; the company resumed repurchases in Q4. The quarterly common dividend increased 2% to $0.50 per share from $0.49. Year-end common shares outstanding were 1.560B, versus 1.558B.

Credit quality and risk

Nonperforming assets increased 22.6%, mainly from commercial and CRE deterioration. Commercial nonperforming loans rose to $670M from $376M; CRE nonperforming loans reached $824M from $777M. Office CRE nonperforming loans increased to 10.9% of office loans from 7.6%; office allowance coverage was 11%, versus 10%. Credit-card net charge-offs rose to $1.227B (4.28%) from $849M (3.20%), and commercial net charge-offs to $552M from $314M. CRE charge-offs declined to $165M from $263M. The allowance was $7.583B for loans and $342M for unfunded commitments; coverage of nonperforming loans declined to 442% from 541%.

The allowance relies on probability-weighted economic scenarios, expected-loss models and qualitative adjustments. Management cited inflation, elevated rates and CRE office values among its judgment factors; under scenarios considered at year-end, the allowance could be $1.1B lower or $2.0B higher. The auditor identified the allowance as a critical audit matter and concluded it appropriately reflected expected losses.

U.S. Bancorp remained asset-sensitive to higher rates, but estimated NII sensitivity to upward shocks declined year over year as customers migrated deposits to higher-yielding products. It uses derivatives for risk management, not speculation. Other risks include cybersecurity, operational disruption, compliance and model-based valuation, including MSR exposure to prepayments. Parent liquidity was expected to cover 24 months of obligations under normal conditions and 12 months under adverse conditions.

Management and EY concluded internal control over financial reporting was effective as of year-end; EY issued unqualified opinions on the financial statements and controls.

U.S. Bancorp — FY2024 financial statements

Consolidated results

Total interest income increased, but faster growth in interest expense—especially deposit costs—contributed to a 6.4% decline in net interest income. Lower noninterest expense, including substantially reduced merger and integration charges, supported higher pretax income and net income.

Noninterest income categories

Noninterest income increased 4.0%. Among the larger expense items, compensation and benefits were $10,554 million versus $10,416 million, and technology and communications were $2,074 million versus $2,049 million. Merger and integration charges declined to $155 million from $1,009 million; other expense declined to $1,480 million from $2,211 million.

Balance sheet and funding

Held-to-maturity securities had a $78,634 million carrying value and a $66,275 million fair value at year-end 2024, a $12,359 million fair-value shortfall. Deposits increased overall, while noninterest-bearing deposits declined and interest-bearing deposits rose. Commercial real estate loans decreased even as total loans and the allowance increased.

Cash flows, shares and distributions

FY2024 investing cash use included $35,886 million of available-for-sale securities purchases. Other comprehensive income was $332 million, compared with $1,311 million in FY2023; year-end accumulated other comprehensive loss improved to $(9,764) million from $(10,096) million. FY2024 OCI included a $676 million derivative-hedge loss and a $60 million available-for-sale securities loss, partly offset by $245 million of retirement-plan gains and a $910 million reclassification of realized gains and losses to earnings.

Significant Accounting Policies

U.S. Bancorp is a diversified financial-services holding company, with banking operations concentrated in the Midwest and West and additional lending, payments, mortgage, capital-markets, wealth-management, insurance and leasing businesses. Its policies involve significant estimates, particularly for credit losses and fair-value measurements that can affect earnings and equity.

Credit losses and loan accounting

The allowance for credit losses (ACL) covers expected lifetime losses on loans and leases, including expected recoveries, and reserves for unfunded credit commitments. Management updates estimates quarterly using multiple economic scenarios over a three-year reasonable-and-supportable forecast period, with increasing reliance on historical loss experience in years two and three, followed by reversion to adjusted long-term historical experience. Scenario weights reflect management’s expectations and uncertainty; qualitative adjustments address model imprecision, forecast uncertainty, emerging risks and concentrations. Estimates incorporate macroeconomic assumptions—including unemployment, real-estate prices, GDP, inflation and interest rates—as well as borrower and loan characteristics, prepayments, collateral values and portfolio changes.

Loans are grouped into commercial and consumer segments. Commercial classes are commercial loans and commercial real estate; consumer classes are residential mortgages, credit cards and other retail loans. Internal pass, special-mention and classified ratings are reviewed quarterly and inform credit-risk management and ACL evaluation. Loans without similar risk characteristics are assessed individually. Individual commercial nonperforming loans over $5 million are evaluated using expected cash flows discounted at the original effective interest rate, observable market price or collateral fair value less selling costs, as appropriate. Reserves for unfunded commitments are estimated using processes similar to those for loans.

Commercial loans generally enter nonaccrual at 90 days past due, or earlier if collection is doubtful. Residential mortgages and other retail loans secured by one-to-four-family property are generally charged down to collateral fair value less selling costs at 180 days past due. Junior-lien residential loans generally enter nonaccrual at 120 days past due or when the senior lien reaches specified delinquency or nonaccrual status. Credit cards and revolving consumer lines are generally charged off at 180 days past due; unsecured other retail loans at 120 days. Nonaccrual interest is generally applied against the loan balance, subject to collectibility exceptions.

Purchased loans are initially recorded at purchase-date fair value. For loans acquired on or after January 1, 2020, the initial allowance for purchased credit-deteriorated (PCD) loans increases loan basis, while the initial allowance for non-PCD loans is recognized through provision expense. Subsequent allowance changes for both categories flow through provision expense.

Valuation, securities and derivatives

Trading securities are carried at fair value, with changes and realized gains or losses recognized in noninterest income. Available-for-sale debt securities are carried at fair value, with unrealized gains and losses in other comprehensive income (OCI) and credit-related declines recognized through an allowance. Held-to-maturity debt securities are carried at amortized historical cost. Resale and repurchase agreements are treated as collateralized financing transactions, with collateral monitored continuously.

Loans held for sale are generally carried at the lower of cost or fair value, assessed in aggregate by loan type; substantially all mortgage loans held for sale are under the fair-value option. Fair-value changes on loans under that option affect noninterest income. For lower-of-cost-or-fair-value loans, increases above cost are not recognized until sale; transfer-date write-downs are recorded as loan charge-offs. Other real estate owned (OREO) is initially recorded at fair value less estimated selling costs, with subsequent valuation declines and holding costs, including taxes and insurance, recognized in noninterest expense.

Derivatives are carried at fair value, with changes generally recognized in earnings unless hedge accounting applies. Effective cash-flow and net-investment hedge changes are recorded in OCI. If a forecasted transaction is no longer probable, accumulated cash-flow-hedge gains or losses are recognized immediately in earnings. Mortgage servicing rights (MSRs) are measured at fair value using estimates including prepayment rates and option-adjusted spreads; changes affect mortgage banking revenue and expose results to market assumptions and mortgage behavior.

Leasing also creates residual-value exposure, particularly for automobiles. U.S. Bancorp reviews residual values regularly and manages the risk through initial valuation, diversification, disposition monitoring, residual-value insurance for retail leases and end-of-term marketing.

Revenue recognition and other estimates

Payment Services revenues include card interchange and fees, corporate card and proprietary-network revenue, and merchant-processing fees net of interchange, assessments and revenue sharing. They are generally recognized as services are provided; merchant transaction revenue is recognized when processing occurs. Trust and investment-management fees are generally recognized over the service period and often depend on assets under management or administration. Deposit service charges and treasury-management fees are recognized as services are delivered. Mortgage banking revenue includes mortgage-sale gains and losses, servicing revenue, MSR and mortgage-loan fair-value changes, and related risk-management effects.

Pension accounting defers certain actuarial gains and losses. Amounts exceeding 10% of the greater of the projected benefit obligation or market-related plan assets are amortized over future service periods or inactive participants’ remaining life expectancies. Differences between actual and expected asset returns are recognized over approximately 15 years for active employees and 30 years for inactive participants. Plan funded status is recorded on the balance sheet, with changes in OCI. Goodwill is not amortized and is tested for impairment at least annually; acquired intangible assets are amortized and assessed for impairment when indicators arise.

Operating-lease extension periods are included in right-of-use assets and lease liabilities when exercise is reasonably certain. Internal-use software is generally amortized over 3–5 years, with useful lives up to 7 years. Stock-based compensation is recognized over vesting, except awards for employees meeting retirement eligibility are expensed immediately. Earnings per share uses the two-class method for participating securities; diluted EPS includes potentially dilutive securities.

Adoption of segment-disclosure guidance was retrospective for 2024 and was not material; adoption of LIBOR-transition guidance was also not material. New income-tax disclosure requirements apply beginning with annual periods after December 15, 2024, and are expected to have no material financial-statement impact.

Reserve balances

Investment securities — FY2024

Portfolio size and composition

HTM’s fair-value shortfall to amortized cost widened to $12.359B from $9.957B, primarily reflecting unrealized losses on agency residential MBS. AFS amortized cost included $13M of portfolio-level hedge basis adjustments, compared with $335M in 2023. The portfolio was predominantly government-supported U.S. Treasury, agency and highly rated agency MBS securities.

The long maturities and fair-value discounts leave the portfolio exposed to interest-rate and market-spread movements.

Unrealized losses and credit assessment

At year-end 2024, AFS securities in unrealized-loss positions had fair value of $75.016B and gross unrealized losses of $6.846B. Securities that had been in loss positions for at least 12 months accounted for $48.677B of fair value and $6.522B of losses. The largest aged losses were in U.S. Treasury and agency securities ($2.053B), residential agency MBS ($2.015B), commercial agency MBS ($1.322B), and state and municipal obligations ($1.130B).

The company attributed the losses primarily to interest-rate and market-spread changes since purchase, rather than credit deterioration. It had no plans to sell the securities and believed it was more likely than not that it would not be required to sell them before amortized cost recovery. The AFS credit-loss allowance was immaterial at year-end 2024 and 2023, and no HTM allowance was recorded. The company made no purchases of securities with more-than-insignificant credit deterioration in FY2024 or FY2023.

Investment income and realized sales

Pledged securities

Loan portfolio and collateral

Total loans increased 1.6% year over year to $379.832B at December 31, 2024. Growth in commercial, residential mortgage and credit card balances was partly offset by declines in CRE and other retail loans.

Loans pledged to the FHLB increased to $127.6B from $123.1B; loans pledged to the Federal Reserve rose to $85.1B from $82.8B.

Allowance and credit losses

The allowance for credit losses (ACL) increased to $7.925B from $7.839B, primarily reflecting loan portfolio growth. Provision expense declined slightly, while net loan charge-offs and gross charge-offs increased.

Credit card was the largest loss contributor. For 2024, provision / net charge-offs / ending ACL by loan class were:

Delinquencies, nonperforming loans and criticized exposure

Nonperforming loans and accruing loans at least 90 days past due increased year over year; loans 30–89 days past due and internally criticized loans declined.

Nonperforming loans were concentrated in commercial ($670M versus $376M) and CRE ($824M versus $777M). Criticized commercial loans declined to $4.227B from $4.878B, and criticized CRE loans to $5.529B from $6.370B. Certain GNMA-pool residential loans past due but insured or guaranteed by the FHA or VA are classified as current; this included $2.3B of loans 90+ days past due at year-end 2024.

Loan modifications

Total loan modifications increased to $4.423B, or 1.2% of class balances, in 2024 from $3.726B, or 1.0%, in 2023. Excluding loans purchased from GNMA pools, modifications rose to $2.508B from $1.887B; GNMA-pool modifications were $1.915B versus $1.839B. Term extensions were the most common modification, totaling $2.067B versus $1.356B.

At year-end 2024, $537M of loans modified during the prior 12 months were 90+ days past due, compared with $347M in 2023; $3.153B were current, versus $2.548B. Loans modified in the prior 12 months that subsequently defaulted totaled about $750M in 2024. The company also had $510M of additional lending commitments to borrowers with modified loans at December 31, 2024.

Loan accounting

Originated loans are carried at principal outstanding, net of unearned interest, deferred fees and costs, and partial charge-offs; purchased loans are initially recorded at fair value. Net unearned interest and deferred fees and costs on originated loans, together with unamortized premiums and discounts on purchased loans, totaled $2.5B at year-end 2024, down from $2.7B in 2023. Commercial and CRE collateral can include securities, receivables, inventory, equipment or real estate.

Lease activities and obligations

USB is both a lessor and a lessee. Its lease portfolio includes sales-type and direct financing leases, while its own leases are primarily for branches, operations centers and other corporate locations.

Lessor portfolio and lease revenue

Lease revenue increased about 5% in FY2024 after declining in FY2023. The net investment edged down year over year as higher lease receivables were more than offset by lower unguaranteed residual values.

At December 31, 2024, scheduled payments on sales-type and direct financing leases totaled $8.173B. The schedule was $2.758B in 2025, $2.142B in 2026, $1.804B in 2027, $865M in 2028, $269M in 2029 and $335M thereafter. After $845M representing interest, these payments reconcile to $7.328B of lease receivables. Additional operating-lease receipts totaled $462M: $143M in 2025, $104M in 2026, $77M in 2027, $52M in 2028, $32M in 2029 and $54M thereafter.

Lessee costs, assets and liabilities

Lessee lease costs continued to rise, though growth slowed in FY2024 compared with FY2023.

At December 31, 2024, undiscounted lessee payments were $1.587B for operating leases and $167M for finance leases. After $218M and $18M of interest, respectively, recognized liabilities were $1.369B for operating leases and $149M for finance leases.

Lease cash flows and terms

FY2024 cash paid included $389M of operating cash flows for operating leases, $7M of operating cash flows for finance leases and $62M of financing cash flows for finance leases. New lease liabilities were accompanied by $268M of operating-lease ROU assets and $59M of finance-lease ROU assets. Remaining lease terms averaged 6.7 years for operating leases and 8.1 years for finance leases; weighted-average discount rates were 4.0% and 7.3%, respectively. USB states that its leases impose no significant covenants or other restrictions.

Transfers, servicing and variable-interest entities

U.S. Bancorp’s financial-asset transfers primarily involve residential mortgage loan sales to government-sponsored enterprises, tax-advantaged investment transfers, commercial loan participations, and other loan and securities sales. Continuing involvement is generally limited to servicing, certain performance-based guarantees, and customary representations and warranties. The Company reports no other off-balance-sheet securitizations or similar asset-backed financing arrangements. It regularly issues GNMA securities. Servicing assets and other retained interests are initially recorded at fair value.

The Company stopped supporting certain unconsolidated money market funds in Q3 2022 as interest rates rose; it had provided $65 million of support during FY2022.

Tax-advantaged investments and unconsolidated VIEs

Tax-advantaged VIE investments principally support affordable housing, community development, renewable energy, and certain Community Reinvestment Act obligations. Their returns are mainly federal and state tax credits and other tax benefits.

The Company considers potential losses on these investments remote. Maximum exposure assumes project failure and tax-credit recapture, and includes recorded investment net of unfunded commitments and previously recognized tax credits potentially subject to recapture. Individual net investments ranged from less than $1 million to $79 million at year-end 2024, compared with less than $1 million to $86 million a year earlier.

Other unconsolidated private investment fund and partnership VIE investments were $264 million at December 31, 2024, versus $219 million at December 31, 2023; maximum exposure, including unfunded commitments, was $382 million versus $319 million.

Available-for-sale senior notes issued by third-party securitization VIEs were $3.2 billion at year-end 2024, down from $5.3 billion a year earlier. Those vehicles held $3.6 billion of indirect auto loans collateralizing the notes, compared with $6.1 billion at year-end 2023.

Consolidated VIEs and program changes

These VIE assets are primarily reported in other assets, and their liabilities in long-term debt and other liabilities. Creditors have no recourse to the Company’s general credit; the VIEs’ assets are the primary source for settling their obligations.

During 2024, the Company ended its sponsored municipal-bond tender-option-bond program, which it had previously consolidated. At December 31, 2023, the program contributed $607 million of available-for-sale securities and $381 million of short-term borrowings to the balance sheet. The Company had controlled the program entities, received residual returns, and provided liquidity and remarketing arrangements.

Premises and equipment

Mortgage servicing rights

U.S. Bancorp’s mortgage servicing portfolio contracted year over year. Loans serviced for others include subserviced mortgages that do not have a corresponding MSR asset.

MSR fair-value movement

After economic hedges, net MSR valuation changes were losses of $2M in 2024, $41M in 2023 and $45M in 2022. Loan servicing and ancillary fees, excluding valuation changes, were $699M in 2024, down from $733M in 2023 and $754M in 2022.

Portfolio composition and valuation assumptions

Overall MSR value was 156 basis points of serviced principal, compared with 150 basis points in 2023. The expected prepayment rate declined to 8.6% from 9.6%, while expected life increased to 7.4 years from 7.0. The portfolio is predominantly fixed-rate agency loans, making MSR valuations sensitive to prepayment assumptions and model inputs.

Interest-rate sensitivity

At year-end 2024, derivative hedges substantially offset the MSR portfolio’s modeled interest-rate exposure.

Other disclosed financial items

Goodwill acquisitions added $80M in 2024, partly offset by $33M of foreign-exchange translation and other reductions. Amortization was $569M in 2024, comprising $432M of core deposit benefits and $137M of other identified intangibles. Estimated amortization declines from $489M in 2025 to $223M in 2029.

Deposit growth included an increase in money-market savings, while noninterest-bearing deposits declined. Within short-term borrowings, repurchase-agreement borrowings rose and commercial paper declined.

Long-term debt

U.S. Bancorp’s long-term debt increased 12.7% to $58.002B at December 31, 2024, from $51.480B a year earlier. The increase was concentrated in subsidiary funding, particularly FHLB advances.

Parent-company medium-term notes increased to $27.939B from $26.618B. Subordinated notes declined to $4.799B from $5.799B, primarily because $1.000B of 3.600% notes matured and was repaid in 2024. Parent debt also included $519M of floating-rate medium-term notes due 2028, compared with none in 2023. “Other” parent-company debt included $2.2B at year-end 2024 ($2.1B in 2023) related to discounted, noninterest-bearing cash received in the 2022 MUB acquisition. This amount is payable to MUFG on or before December 1, 2027, and is discounted at the Company’s five-year unsecured borrowing rate at the acquisition date.

Subsidiary FHLB advances rose to $15.550B from $12.051B, comprising $12.550B of fixed-rate and $3.000B of floating-rate advances. Subsidiary bank notes increased to $5.218B from $3.613B, comprising $3.405B of fixed-rate and $1.813B of floating-rate notes.

Weighted-average rates were 4.40% for medium-term notes, 4.63% for FHLB advances, and 3.08% for bank notes.

Debt maturities

Available additional borrowing capacity through FHLB and Federal Reserve Bank arrangements was $171.2B at December 31, 2024, down from $215.8B a year earlier.

U.S. Bancorp shareholders’ equity and regulatory capital

Common and preferred shares

At year-end 2024, 59 million common shares were reserved for future issuance, primarily under stock incentive plans. Approximately $4.9 billion of repurchase authorization remained, subject to board approval and regulatory requirements.

Preferred shares outstanding were unchanged at 243,510. Their liquidation preference was $7.026 billion, with a $218 million discount and a $6.808 billion carrying amount. The preferred securities are perpetual and generally non-cumulative. Series N’s 3.70% rate is scheduled to reset on January 15, 2027, to the five-year Treasury rate plus 2.541%; Series J’s 5.30% rate is scheduled to reset on April 15, 2027, to three-month CME Term SOFR plus 2.914% and a 0.26161% credit spread adjustment. Series O carries a 4.50% dividend rate and is generally redeemable beginning April 15, 2027. Certain series have early-redemption provisions if regulatory changes prevent their full liquidation value from qualifying as Tier 1 capital.

Regulatory capital

U.S. Bancorp’s capital ratios strengthened in 2024, reflecting higher capital alongside lower risk-weighted assets.

U.S. Bancorp’s capital conservation buffer requirement increased to 3.1% from 2.5% following the 2024 stress-test determination; the bank subsidiary’s requirement remained 2.5%. The company completed the phase-in of deferred CECL regulatory-capital effects during 2024, with regulatory-capital calculations fully phased in beginning in 2025.

Accumulated other comprehensive loss

AOCI improved modestly year over year. During 2024, activity included $490 million of net unrealized losses, $910 million reclassified to earnings, $106 million of applicable tax effects, and an $18 million favorable foreign-currency translation adjustment. Reclassifications, mainly related to investment securities, transferred-security amortization, and derivative hedges, reduced net income by $678 million in 2024, compared with $558 million in 2023 and $388 million in 2022.

Earnings and dilution

Antidilutive options for 1 million shares were excluded from 2024 diluted EPS.

Pension and postretirement benefit plans

Pension obligations, assets and funded status

The projected benefit obligation declined primarily because the measurement discount rate increased. FY2024’s obligation change also included a $443M actuarial gain, $376M interest cost, $219M service cost, $118M of lump-sum settlements and $243M of benefit payments. Plan assets’ actual return was $381M, compared with $658M in FY2023. In FY2023, the obligation had increased from $6.617B, primarily due to a lower discount rate; FY2023 plan assets also included $25M from the MUB acquisition.

A subset of plans had obligations exceeding their assets and no plan assets to fund them:

Recognized amounts and pension cost

Net periodic pension cost fell sharply:

FY2024 pension-cost components were $219M of service cost, $376M of interest cost, $585M of expected return on assets, $9M of actuarial-loss amortization and $4M of prior-service-credit amortization.

Postretirement welfare plans

Net periodic benefits were $9M in FY2022. No 2025 contribution is expected for the welfare plan.

Funding, expected benefit payments and assumptions

The qualified defined-benefit plans received no company contributions in FY2024 or FY2023, and no contributions are expected in 2025. Separately, the plan-asset roll-forward reports employer contributions of $35M in FY2024 and $28M in FY2023. The company expects to contribute approximately $49M to unfunded nonqualified pension plans in 2025, equal to expected benefit payments.

The pension-obligation measurement discount rate rose to 5.77% at FY2024 year-end from 5.12% in FY2023; the cash-balance interest-crediting rate increased to 3.71% from 3.04%. For pension expense, the expected asset-return assumption was 7.00% in FY2024, 6.75% in FY2023 and 6.50% in FY2022; the discount-rate assumptions for those years were 5.12%, 5.55% and 3.00%, respectively.

Pension assets and retirement savings plan

The pension portfolio’s target allocation is 35% long-duration bonds, 30% global equities, 10% real assets, 10% private equity, and 5% each in domestic mid-small-cap equities, emerging-markets equities and hedge funds. At FY2024 year-end, assets included $1.958B of fixed income, $1.788B of domestic equity, $1.325B of private equity, $968M of international equity, $733M of real estate funds, $474M of mid-small-cap equity, $354M of hedge funds, $171M of real-estate securities and $63M of cash. Equity and alternative investments provide long-term return potential but involve market volatility and valuation considerations; some funds lack readily determinable fair values and are valued using trustee or administrator net asset values.

The 401(k) plan matches 100% of employee contributions up to 4% of eligible compensation, with immediate vesting. Matching expense was $262M in FY2024, compared with $254M in FY2023 and $211M in FY2022.

Stock-based compensation

U.S. Bancorp’s stock-based compensation expense rose to $232 million in FY2024 from $224 million in FY2023 and $202 million in FY2022. At December 31, 2024, $169 million of compensation cost remained unrecognized, expected to be expensed over a weighted-average 1.8 years.

Restricted stock and unit awards

Most awards vest over three to five years and may be forfeited if vesting requirements are not met.

Stock options

No stock options were granted in FY2024, FY2023, or FY2022. All options outstanding at FY2024 year-end were exercisable. The company predominantly uses treasury stock to satisfy option exercises.

At December 31, 2024, 46 million shares, subject to forfeiture adjustments, remained available for grant under the stock incentive plan.

Income taxes

Income tax provision and effective-rate drivers

The 2024 provision increased $173 million, or 12.3%, from 2023; the 2023 provision had declined $56 million from 2022. At the 21% federal statutory rate, tax would have been $1.661 billion in 2024, compared with the $1.580 billion applicable provision—an implied effective rate of approximately 20.0%. The 2022 MUFG Union Bank (MUB) acquisition increased the state tax rate and generated a $79 million benefit from revaluing state deferred tax assets and liabilities.

Deferred taxes

Major 2024 deferred tax assets were $3.129 billion for securities and financial instruments, $2.772 billion for NOL, credit and other carryforwards, and $2.086 billion for the allowance for credit losses. Major deferred tax liabilities were $1.362 billion for goodwill and other intangibles and $1.273 billion for leasing activities.

U.S. Bancorp has approximately $3.0 billion of federal, state and foreign NOL carryforwards, with expirations beginning in 2025. A substantial portion consists of state-only NOLs whose deferred tax assets are fully valuation-allowed because management does not expect realization within the carryforward period. Management considers other net deferred tax assets more likely than not realizable. Separately, $1.2 billion of federal credit carryforwards, expiring through 2044, are not valuation-allowed and are expected to be used.

Uncertain tax positions and other tax matters

Uncertain tax positions declined principally due to $131 million of exam resolutions in 2024, following $302 million in 2023. The 2024 balance included $27 million of accrued interest and penalties. Interest and penalties recorded were approximately $(13) million in 2024, $(11) million in 2023 and $7 million in 2022. Federal examinations through 2020 are resolved; IRS examinations for tax years 2021–2022 remain ongoing, creating potential exposure from differing interpretations of tax rules and allocation methods.

Approximately $102 million of acquired thrift-institution base-year reserves in retained earnings has no recognized deferred federal tax liability. Recapture could be triggered if relevant subsidiaries lose bank tax status or certain stock-redemption or excess-distribution conditions occur. Tax effects of specified securities, hedging, foreign-currency and pension items are recorded through other comprehensive income rather than income tax expense.

Derivative instruments

U.S. Bancorp uses derivatives to manage interest-rate, foreign-exchange, mortgage-servicing-rights, credit and other risks, and to meet customer needs. Derivatives are carried at fair value. Customer positions are generally offset with broker-dealers or other instruments, but the company remains exposed to counterparty, collateral, market, funding and liquidity risks.

Derivative balances at December 31

Customer derivative notional increased year over year, while total customer fair-value assets and liabilities declined modestly. Commodity swap notional more than tripled.

Hedge accounting and earnings effects

Cash-flow hedge derivatives were highly effective throughout 2024. Accumulated realized and unrealized cash-flow hedge losses in OCI were $553M net of tax at year-end 2024, compared with $242M net of tax in 2023; $222M net of tax was estimated to be reclassified into earnings over the next 12 months.

Separately, $28M of losses from realized cash flows on discontinued cash-flow hedges was reclassified into earnings in both 2024 and 2023.

Fair-value hedge derivative and hedged-item effects largely offset.

Other economic hedge results

Hedged balances and risk management

Securities designated in fair-value hedges had a year-end carrying amount of $29.005B in 2024 versus $23.924B in 2023, with cumulative hedging adjustments of $(464)M versus $(93)M. Designated long-term debt had a carrying amount of $10.632B versus $12.034B, and cumulative adjustments of $39M versus $(32)M. Portfolio-layer hedges covered $11.6B of $17.5B amortized cost in closed securities portfolios at year-end 2024, compared with $9.6B of $15.6B in 2023.

The company manages counterparty exposure through diversification, central clearing, master netting and collateral requirements. Bilateral collateral terms may require immediate additional collateral, potentially up to full coverage of net-liability positions, if the company’s credit rating falls below specified thresholds. Derivatives under collateral arrangements had an aggregate net-liability fair value of $2.3B at December 31, 2024, against which U.S. Bancorp had posted $1.9B of cash collateral.

Netting arrangements and securities financing

At December 31, 2024, U.S. Bancorp had approximately $1.3 trillion of derivative notional. Derivatives are measured daily for collateral purposes; master netting arrangements allow daily net settlement and close-out netting upon default.

Derivative notional

Securities-financing liabilities

Recognized liabilities from repurchase agreements and securities loaned approximately doubled year over year. These are collateralized financings; cash received under repurchase agreements is recorded in short-term borrowings, while cash paid under reverse-repurchase agreements is recorded in other assets.

Nearly all repurchase agreements were overnight or continuous.

Netting and collateral exposure

Amounts below are at December 31. “Residual” is the amount remaining after applicable eligible financial-instrument offsets and collateral.

Total residual across the asset categories was $3.348B in 2024 versus $2.769B in 2023. Derivative balance-sheet offsets included cash-collateral-related payables of $1.9B against derivative assets in 2024 ($1.6B in 2023), and cash-collateral-related receivables of $1.9B against derivative liabilities ($1.7B in 2023).

Counterparty risk is inherent in derivatives and securities-financing transactions. U.S. Bancorp mitigates it through independent counterparty assessments, concentration limits, daily fair-value measurement, and collateral maintenance. Securities pledged by the Company remain recognized on its balance sheet; securities received as collateral generally are not recognized unless the counterparty defaults. The Company offsets most derivative-counterparty balances for presentation, but does not offset repurchase/reverse-repurchase or securities-loaned/borrowed balances.

Fair-value measurements

At Dec. 31, 2024, recurring fair-value assets totaled $97.259B, up from $80.500B a year earlier; recurring fair-value liabilities were $13.291B, versus $9.710B. Most measurements used observable Level 2 inputs. Level 3 assets declined to $4.571B from $4.830B, and Level 3 liabilities declined to $3.002B from $3.338B.

MSRs are valued using Level 3 discounted cash flows. Their fair-value change resulted in a $97M loss in mortgage banking revenue in 2024, improved from a $316M loss in 2023; MSRs capitalized were $276M and $373M, respectively. At year-end 2024, expected prepayments were 6%–18% (weighted average 9%) and option-adjusted spreads were 5%–11% (weighted average 6%); increases in either assumption reduce estimated MSR fair value.

Level 3 derivative assets and liabilities were $1.202B and $3.002B, respectively, leaving a $1.800B net liability, compared with a $1.885B net liability in 2023. Level 3 derivative fair-value losses were:

The 2024 loss included approximately $3.9B of commercial-products revenue losses, partly offset by approximately $200M of mortgage-banking revenue gains; commercial-products losses were approximately $2.9B in 2023 and $5.6B in 2022. Visa Class B share swaps are Level 3 and depend on estimates of litigation outcomes, losses and resolution timing; higher estimated losses or delayed resolution increase the liability. Counterparty nonperformance assessments also require judgment: credit valuation adjustments ranged from 0% to 6,313% of pre-adjustment net fair value, with a 2% weighted average.

Fair-value-option mortgage loans held for sale produced net mortgage-banking losses of $15M in 2024, $46M in 2023 and $450M in 2022. Fair-value-option time deposits generated $4M net gains in interest expense in both 2024 and 2023. Structured long-term notes generated $17M net gains in interest expense and $1M of net DVA gains in OCI in 2024.

Nonrecurring measurements and fair-value-option positions

Loan write-downs remained elevated relative to 2022; nonrecurring loan amounts exclude fully charged-off loans.

Fair-value-option loans were $8M above contractual principal in 2024 ($17M above in 2023); time deposits were $8M below principal ($4M below in 2023), and long-term debt was $18M below principal in 2024. Fair-value-option loans included only $1M of nonaccrual loans and $4M of loans 90 or more days past due in each year, matching contractual principal in each case.

Estimated fair values of instruments carried at amortized cost

These are disclosure estimates, not balance-sheet carrying values remeasured at fair value. Figures below show carrying amount / estimated fair value at Dec. 31.

The held-to-maturity securities fair-value shortfall widened to $12.359B from $9.957B; 2024 fair value included $1.275B Level 1 and $65.000B Level 2. Loans had a $6.621B fair-value shortfall in 2024, versus $3.607B in 2023, and were classified entirely as Level 3. Other financial assets included $1.767B Level 2 and $715M Level 3 in 2024, versus $1.863B Level 2 and $514M Level 3 in 2023. Other liabilities’ fair value included $3.851B Level 3 in 2024 and $4.026B in 2023.

The disclosure excludes nonfinancial items, including goodwill, purchased intangibles, premises and equipment, and deferred taxes, as well as specified financial items such as deposits without defined or contractual maturities. Fair value of unfunded commitments, deferred non-yield-related loan fees, standby letters of credit and other guarantees approximated carrying value. The first three categories totaled $376M in 2024, down from $489M in 2023; other guarantees were $194M and $198M, respectively. Valuation techniques were unchanged in 2024, 2023 and 2022; MSRs, certain mortgage commitments, counterparty credit adjustments and Visa litigation-related swaps remain areas requiring significant judgment.

Guarantees and contingent liabilities

At December 31, 2024, U.S. Bancorp’s contractual guarantees and credit commitments represented substantial maximum or notional exposures, but these amounts are not estimates of expected losses or likely funding needs. Many commitments expire unused, and payments under guarantees generally depend on a borrower, merchant, or counterparty failing to perform. The company uses credit underwriting, collateral, contractual controls, and other mitigants to manage these risks.

Unfunded commitments to extend credit

Contractual commitments to extend credit, excluding derivatives, totaled $409.391 billion.

Card commitments are primarily cancelable at USB’s discretion; consumer lines are generally cancelable on notice. Commitment amounts indicate potential exposure if borrowers default, not expected drawdowns. USB applies its loan credit policies and obtains collateral based on borrower risk.

Other guarantees and contingent exposures

These are contractual maximum exposures, not expected losses. For securities lending, the maximum potential payment represents the fair value of securities lent; cash collateral held was greater than that amount. Standby letters of credit totaled $10.522 billion, comprising $7.105 billion due within one year and $3.417 billion thereafter; their weighted-average term was about 14 months, and estimated fair value was $23 million. Commercial letters of credit totaled $462 million—$441 million due within one year and $21 million thereafter. Funding depends on customer or counterparty nonperformance, so expected liquidity needs are below total commitments.

Merchant processing and asset-sale guarantees

Merchant processing was USB’s largest disclosed guarantee exposure. The $144.713 billion maximum charge-back exposure approximated eligible transactions processed during the final four months of 2024; USB considers actual losses unlikely to approach that maximum. Future-delivery transactions, including airline tickets, carry greater risk. Future-dated airline ticket sales processed by USB totaled $12.0 billion at year-end, supported by $689 million of collateral, including escrow deposits, letters of credit, financial-institution indemnities, and liens. USB recorded a $40 million liability primarily for implied guarantees related to airline processing. For unresolved charge-backs, it held $127 million in merchant escrow deposits and recorded a $21 million liability for potential losses. Risk controls include collateral, transaction-volume limits, and contractual protections triggered by merchant deterioration.

Asset-sale guarantees, mainly related to loan portfolios and tax-advantaged investments, had maximum potential payments of $12.650 billion. USB reserved $103 million for potential losses associated with tax-advantaged investment sales or syndications. For GSE representation-and-warranty obligations, reserves declined to $9 million at December 31, 2024, from $13 million a year earlier; unresolved claims fell to $15 million from $18 million. Maximum exposure on certain loan-sale obligations can equal the unpaid principal balance of loans sold, although USB expects actual losses to be substantially lower because only some loans involve breaches and collateral may mitigate repurchase losses.

Other arrangements and Visa-related matters

USB ended its tender-option bond program guarantee arrangement during 2024, effectively eliminating outstanding related guarantees. USB Capital IX, a wholly owned unconsolidated trust, had $685 million of assets, primarily USB Series A Preferred Stock, and $684 million of third-party investor payment obligations effectively guaranteed by USB on a junior subordinated basis. All Company debentures originally issued to the trust had matured or been retired. Other subsidiary-related financial performance guarantees and commitments had $2.6 billion of maximum potential payments.

Visa U.S.A. member banks’ indemnification obligation for potential Visa Litigation losses has no specific maximum. Visa-funded escrow receivables fully offset USB’s related contingent liability, and USB had sold substantially all of its Visa Class B shares by year-end. The merchant Damages Action settlement is resolved, although some opt-out merchant suits remain. Visa’s March 2024 proposed settlement of the Injunctive Action, which included lower interchange fees and rule changes, was denied preliminary approval in June 2024; the action continues.

Litigation and regulatory risk

USB believes existing legal and regulatory matters will not materially adversely affect its overall financial condition, results, or cash flows, while acknowledging that an individual matter could materially affect results in a particular period. Additional accruals or outcomes above established reserves remain possible. Litigation includes RMBS trustee claims alleging failures to enforce loan repurchase obligations and meet trustee standards, with unspecified damages and equitable relief sought.

Regulatory scrutiny includes compliance, risk management, third-party risk, and consumer protection. The SEC Enforcement Division preliminarily determined it may recommend an action against USBFS over fund-administration services to a third-party fund whose adviser committed fraud; USBFS was not affiliated with the adviser and provided no advisory services. Potential remedies—including fines, restitution, or business-practice changes—could increase expenses or reduce revenue. For matters with estimable losses, USB believes aggregate reasonably possible losses above reserves for probable matters will not be material to its financial condition, results, or cash flows, though estimates remain subject to significant uncertainty.

FY2024 segment performance

Dollar amounts in billions; 2023 figures are recast on a comparable basis. Segment revenue components are on a taxable-equivalent basis where applicable.

Consumer and Business Banking was the primary source of weakness: lower net interest and noninterest income, together with a higher provision for credit losses, contributed to its declines in revenue and net income. Its provision rose to $182 million from $78 million. Payment Services revenue increased and net income was nearly flat, despite its provision increasing to $1.614 billion from $1.394 billion. Payment Services noninterest income is reported net of rewards, rebates and certain partner payments, which totaled $3.1 billion in 2024 versus $3.0 billion in 2023.

Treasury and Corporate Support includes centrally managed funding, investment and asset/liability management activities, unallocated income taxes, and corporate costs, including merger and integration charges. Its provision for credit losses decreased to $57 million from $463 million, and noninterest expense fell to $1.115 billion from $2.640 billion.

Consolidated results

Lower net interest income was partly offset by higher noninterest income. Reduced noninterest expense and a slightly lower provision accompanied the increase in net income. Segment net income, including Treasury and Corporate Support, reconciles to consolidated net income attributable to U.S. Bancorp.

Average balances and segment methodology

Average loans declined overall and fell in the other two reportable segments, while Payment Services’ average loans increased. Average deposits rose and average assets were nearly unchanged.

Management revised its deposit- and loan-related funds transfer-pricing methodology in Q2 2024. Segment profitability also reflects allocated funding costs and credits, shared-service expenses, credit-loss provisions and centrally determined capital, so changes in allocation methods can affect segment comparisons. In Q3 2023, the company combined Wealth Management and Investment Services with Corporate and Commercial Banking to create the current Wealth, Corporate, Commercial and Institutional Banking segment; prior periods were recast.

U.S. Bancorp parent company only

These results are for the parent company, not the consolidated company. Parent-company net income rose 16.0% in FY2024, supported in part by higher interest income from subsidiaries and increased equity in undistributed subsidiary income.

Income statement

Interest income from subsidiaries more than doubled to $1.224 billion from $606 million. Dividends from bank subsidiaries were $4.800 billion, compared with $4.869 billion. Interest expense increased to $1.663 billion from $1.336 billion.

Balance sheet

Cash flows

Investing activities included $5.500 billion of long-term advances to subsidiaries, partly offset by $1.500 billion of principal collections. Financing included $6.516 billion of long-term debt issuance and $5.618 billion of principal payments and redemptions. The parent also paid $3.092 billion in common dividends and repurchased $173 million of common stock. Cash and due from banks ended FY2024 at $9.377 billion.

Parent liquidity constraints

The parent’s access to subsidiary-bank funds is restricted. Intercompany loans generally must be secured, and loans to the company or an individual affiliate are generally limited to 10% of each bank’s unimpaired capital and surplus; loans to the company and affiliates are subject to a 20% aggregate cap. Bank-subsidiary dividends are also subject to statutory limits, regulatory review or approval, and minimum-capital requirements. These restrictions may constrain parent liquidity and debt service.

2024 daily-average balance sheet and earnings trends

Interest income, expense, and margins are on a fully taxable-equivalent basis unless noted. Balance-sheet amounts below are daily averages, not period-end balances.

Interest results

Interest income increased 5.5%, but interest expense rose 21.9%, contributing to a 6.4% decline in net interest income. Net interest margin narrowed from 2023 but remained near 2022’s level; gross interest margin continued to decline.

Average balance-sheet and funding measures

Loans

Average loans declined 1.9%, while the overall loan yield increased. Credit cards had the highest stated yield and residential mortgages the lowest. Loan interest and yields include fees; average loan balances include nonaccrual loans.

Deposits and borrowings

Funding shifted toward higher-cost interest-bearing deposits: money-market savings and time deposits increased, while noninterest-bearing deposits declined. Short-term borrowings fell substantially, mainly due to the decrease in other short-term borrowings; the reported interest expense and rate for that category include interest paid on collateral associated with derivative positions. Long-term debt and its average rate increased.

Per-share results, dividends, and shares

Year-end common shares outstanding were 1.560B in 2024 versus 1.558B in 2023; average diluted shares were 1.561B versus 1.543B.

Over the five years ended December 31, 2024, the cumulative total-return index (initial value $100, with dividends reinvested) was 100 for USB, 197 for the S&P 500, and 133 for the KBW Bank Index. Historical performance is not indicative of future results.

U.S. Bancorp — Company Information

U.S. Bancorp is a Minneapolis-based financial services holding company. Its offerings include banking, lending, payments, capital markets, mortgage, trust and investment, insurance, brokerage, and leasing services. Its banking subsidiary, USBNA, held all of the company’s consolidated deposits, totaling $518.3 billion at December 31, 2024.

The company operates primarily in the Midwest and West, with 2,165 branches across 26 states and 4,489 ATMs at year-end 2024. It serves customers through online and mobile banking as well as its branch network. U.S. Bancorp is also a major U.S. provider of corporate and purchasing card services and corporate trust services. Its merchant processing business operates in the U.S., Canada, and parts of Europe; corporate trust and fund administration services are also provided in Europe. Foreign operations are not significant.

Lending is principally focused on domestic markets, domestic customers with foreign operations, and selected national industries, including healthcare, utilities, oil and gas, and state and municipal government. The company employed more than 70,000 people at December 31, 2024.

U.S. Bancorp — 2024 Risk Factors

U.S. Bancorp’s principal risks are interconnected: economic and market changes can weaken borrowers and asset values, increase credit losses, and drive deposit outflows or higher funding costs. Cybersecurity, technology, operational, regulatory, and reputational exposures could compound those effects, constrain the Company’s strategic choices, and harm its financial condition and results.

Credit, economic, and market risks

Because lending is central to the business and loans are a high proportion of assets, recession, inflation, unemployment, weaker household or corporate income, geopolitical disruption, policy uncertainty, or tariffs could reduce demand for credit and fee-based services while impairing borrowers’ repayment capacity. Deterioration may increase delinquencies, defaults, nonperforming assets, charge-offs, and credit-loss provisions, and reduce the value of loans and debt securities. Elevated rates and commercial real estate vacancies may further pressure borrowers’ refinancing capacity and collateral values. Credit losses could be amplified by concentrations in particular loan types, industries, borrowers, or geographies; the MUB acquisition increased exposure to California, where economic or real-estate deterioration, including wildfire impacts, could raise losses. Lifetime-loss allowances under CECL depend on complex forecasts and judgments that may prove inaccurate.

Trade measures, including U.S. tariffs and possible retaliatory tariffs affecting China, Canada, and Mexico, could increase costs, reduce demand or margins, disrupt business planning, and weaken borrowers’ debt-service capacity; the scope and effects of future policy changes remain uncertain. Natural disasters, pandemics, terrorism, civil unrest, and international conflicts—including the wars in Ukraine and the Middle East—could disrupt operations, damage collateral, or weaken counterparties and borrowers.

Climate risks include physical damage from severe weather, wildfires, floods, tornadoes, and hurricanes, as well as transition risks from changing technology, consumer preferences, policies, and regulation. These exposures could impair collateral and borrower creditworthiness, raise costs, reduce asset values or market share, and increase insurance costs or limit its availability. The Company expects climate risks to evolve and increase, and notes that they are difficult to assess.

Market volatility or illiquidity may make securities, derivatives, and other instruments difficult to value; eventual valuations or sale proceeds could be materially below current fair value. Losses or concerns about the value of USB’s portfolio or capital could undermine confidence and prompt rapid withdrawals, including by uninsured or uncollateralized depositors. Stress or failures elsewhere in the financial system can also trigger contagion, funding and settlement disruption, volatility, deposit withdrawals, and higher deposit-insurance assessments. USB’s broad counterparty relationships expose it to defaults, particularly if collateral cannot be realized at sufficient value.

Interest rates, deposits, liquidity, and mortgage exposure

Net interest income is sensitive to rates and customer deposit behavior. During 2022–2023, higher rates supported net interest income but coincided with fewer mortgage originations and higher funding costs. In H1 2024, elevated rates continued to push funding costs higher; in H2 2024, net interest income began to expand as funding costs stabilized and started to decline. Competition, a shift from noninterest-bearing to interest-bearing deposits, quantitative tightening, or customers moving funds to higher-return investments could require USB to raise deposit rates, lose deposits, or rely on more expensive funding, pressuring net interest margin and net interest income. Rapid transfers through digital channels and rumors or perceived losses could accelerate outflows. Lower rates or a compressed yield curve can also pressure net interest income, while higher rates may impair variable-rate or maturing borrowers’ repayment capacity.

Liquidity is needed to meet withdrawals, maturities, obligations, and business-funding needs. Market stress, a threatened or actual U.S. sovereign default, or unexpected outflows could restrict access to funding or raise its cost. Federal Reserve and FHLB facilities may be unavailable if USB or USBNA does not meet financial-condition or supervisory requirements. The 2023 systemic-risk exception for uninsured deposits is not assured in a future crisis. The parent depends significantly on subsidiary dividends to pay its own dividends and debt service, but laws and regulations constrain distributions without regulatory approval, and subsidiary creditors have priority claims.

Mortgage servicing rights were valued at $3.4 billion at fair value as of December 31, 2024. Rate changes affect prepayments and MSR value: falling rates may prompt refinancing and reduce MSR value and earnings. Weaker housing conditions, reduced GSE purchases, or limited secondary-market access could also constrain originations, funding, origination fees, and servicing revenue. Mortgage-loan sale representation and warranty claims may require repurchases or indemnification; servicing may bring unrecoverable advances, higher costs, contract termination, or reputational damage.

Operational, technology, privacy, and talent risks

The Company faces increasing cyber threats, including AI-enabled attacks, deepfakes, phishing, malware, denial-of-service attacks, and extortion. Digital activity and dependence on vendors, cloud providers, payment networks, and other interconnected systems broaden exposure; subcontractor incidents may be identified or disclosed late. Breaches can cause fraud, reimbursement and card-replacement costs, service disruption, data loss, litigation, regulatory action, fines, remediation expense, and reputational damage. USB has incurred costs related to compromised card accounts and expects attacks and related losses to continue; investigation and remediation can be lengthy, and insurance may not cover all losses.

Technology failures, outages, transaction surges, power or telecommunications interruptions, natural disasters, employee or third-party misconduct, processing errors, and inadequate continuity or disaster-recovery arrangements could disrupt services. Privacy requirements, including state laws such as the CCPA/CPRA and cross-border data-transfer rules, may require significant compliance investment; misuse or breaches can trigger litigation, fines, oversight, and customer losses. AI and machine-learning systems used in customer service, marketing, fraud detection, code development, and decision processes may be flawed, biased, or opaque, creating liability, regulatory, and reputational risks as regulation evolves. Technology investments and new products may fail to achieve customer acceptance or expected returns; falling behind banks, fintechs, or other lower-cost competitors could reduce revenue and margins. Competition for skilled employees and changing workplace expectations may also increase turnover or impede recruitment.

Regulation, strategy, and other risks

Banking regulation and enforcement can constrain lending, capital and investment decisions, dividends, buybacks, acquisitions, products, and fees, while raising compliance costs. The Company expects regulatory priorities to shift with U.S. political leadership; the effects of changing agency leadership, rulemaking, and enforcement are uncertain. The Supreme Court’s June 2024 reversal of Chevron deference may increase challenges to agency rules. Investigations can overlap across agencies and jurisdictions, and enforcement may involve penalties, restitution, business restrictions, monitors, or other sanctions. Scrutiny includes consumer compliance, fair lending, mortgage servicing, fees, sales practices, BSA/AML, and sanctions; USB and USBNA faced BSA/AML- and sanctions-related enforcement actions in 2018. Cryptocurrency and other new payment methods add monitoring and compliance challenges.

If adopted, proposed Basel III Endgame rules could increase required regulatory capital and constrain distributions, lending, investment, or growth. A separate August 2023 proposal would require certain Category III bank holding companies, including USB, and subsidiaries such as USBNA to maintain minimum outstanding long-term debt, potentially requiring a changed funding mix or additional debt. Regulatory changes may also limit capital distributions. The OCC’s 2024 merger policy may increase scrutiny and delay approval for mergers resulting in institutions with at least $50 billion in assets. Acquisitions may require divestitures and may fail to deliver expected benefits; integration can divert management, disrupt technology and operations, and lead to customer, deposit, or employee attrition. Stock-funded acquisitions could dilute shareholders.

Litigation and governmental proceedings may result in claims exceeding accruals, while evolving or conflicting environmental, social, and sustainability requirements can create legal and operational uncertainty. Negative perceptions about lending, cybersecurity, privacy, sales practices, employee conduct, or public commitments may damage customer, investor, and employee relationships. Lease results also depend on realized residual values, which may fall below recorded asset values. Finally, accounting estimates—including credit-loss allowances, MSR valuations, fair values, and taxes—may prove inaccurate; tax-advantaged investments may fail to deliver expected credits or benefits. Risk models and controls may not anticipate every exposure, and a credit-rating downgrade could raise funding costs, limit capital-markets access, and reduce counterparties’ willingness to transact.

Leadership succession and organization

U.S. Bancorp’s planned leadership handoff is the section’s central development. Andrew Cecere, CEO since April 2017 and Chairman since April 2018, became President in May 2024 as part of the succession arrangement. He is expected to become Executive Chairman in April 2025. Gunjan Kedia, President since May 2024 and a director, is expected to become CEO in April 2025, shifting executive leadership to Kedia while Cecere remains in a board leadership role.

The company also refreshed leadership across major banking and payments businesses. In June 2024, Stephen Philipson became head of Wealth, Corporate, Commercial and Institutional Banking (WCIB), and Felicia La Forgia became head of the Institutional Client Group after leading Corporate Banking. Payments responsibilities were divided between consumer and small-business payments, led by Courtney Kelso following her February 2025 hire, and merchant and institutional payments, led by Mark Runkel beginning in January 2025. Sekou Kaalund leads Branch and Small Business Banking; Arijit Roy leads Consumer and Business Banking Products.

Executive oversight and governance

John Stern has served as CFO since September 2023. Terrance Dolan, formerly CFO, became Vice Chair and Chief Administration Officer that month; Jodi Richard is Vice Chair and Chief Risk Officer. Other committee leaders oversee operations, technology, human resources, legal, digital, and social responsibility.

The 15-member Board includes Cecere and Kedia and directors with experience across financial services, technology, energy, insurance, transportation, and other industries. Board committees oversee executive matters, audit, compensation and human resources, governance, public responsibility, and risk management.