U.S. Bancorp

Welcome to the U.S. Bancorp third quarter 2023 earnings conference call. Following a review of the results, there will be a formal question and answer session. If you would like to ask a question, please press 1 then 0 on your phone. If you'd like to withdraw, please press 1 then 0 again. This call will be recorded and available for replay beginning today at approximately 9 o'clock a.m. Central Time. I will now turn the conference call over to George Anderson, Senior Vice President and Director of Investor Relations for U.S. Bancorp.

Thank you, Brad, and good morning, everyone. With me today are Andy Cesari, our Chairman, President, and Chief Executive Officer, Terry Dolan, Vice Chair and Chief Administration Officer, and John Stern, Senior Executive Vice President and Chief Financial Officer. During their initial prepared remarks, Andy and John will be referencing a slide presentation. A copy of the presentation, our earnings release, and supplemental analyst schedules are available on our website at usbank.com. Please note that any forward-looking statements made during today's call are subject to risk and uncertainty. Factors that can materially change our current forward-looking assumptions are described on page two of today's presentation, our press release, our Form 10-K, and in subsequent reports on file with the SEC. Following our prepared remarks, Andy, Terry, and John will take any questions that you have. I will now turn the call over to Andy.

Thanks, George. Good morning, everyone, and thank you for joining our call. I'll begin on slide three. In the third quarter, we reported earnings per share of $0.91, which included $0.14 per share of notable items related to merger and integration charges. Excluding those notable items, we delivered earnings per share of $1.05 for the quarter. Third quarter results were highlighted by link quarter and year-over-year fee revenue growth that benefited from our acquisition of Union Bank, deepening client relationships, and strong underlying business activity. We are achieving the cost synergies we anticipated from Union Bank and continue to prudently manage core expense as we identify operational efficiencies across the business. As of September 30th, our common equity tier one capital ratio was 9.7%, an increase of 60 basis points this quarter. This is the same level it was prior to our acquisition of Union Bank. Total average deposits increased 3% or $15 billion on a link quarter basis. Credit quality continues to normalize this quarter, in line with expectations, and we further strengthen the balance sheet by adding $95 million to our loan loss reserve, reflective of an evolving credit environment. On October 16th, the Federal Reserve granted us full relief from certain Category 2 commitments made in connection with the Union Bank acquisition, given our balance sheet reduction and capital actions. As a result, we are now subject to existing capital rules or, if adopted, the same transition rules as all other Category 3 banks related to enhanced capital requirements under the Basel III endgame proposal. As proposed, this would include a three-year transition period for the expanded risk-based approach and AOCI regulatory capital adjustments starting in the third quarter of 2025. I will discuss the impacts of this decision further in my closing remarks. Slide four provides income statement results as reported and on an adjusted basis, ending in average balances and other key metrics. Slide five provides key performance metrics. Excluding notable volumes, our return on average assets was 1.04 percent, and our return on tangible common equity was 21 percent. While net interest margin declined nine basis points to 281 this quarter, in line with our expectations, we continue to expect the NIM to bottom in the fourth quarter as we reach the end of the current rate hiking cycle. Turning to slide six, a great benefit of our business model includes a balance between our spread and fee income businesses that helps us reduce earnings volatility through a business cycle. On a year-over-year basis, non-interest income grew approximately 12%. Within payment services, we continue to invest in our digital capabilities, expanding our payments ecosystem, and optimizing our distributions. Emphasis on expanded partnerships and integrated capabilities will continue to support tech-led growth across merchant processing and increase opportunities across other areas of our payment services businesses. Additionally, we are continuing to make investments that leverage our scale and strategic market positioning across our corporate trust, mortgage banking, and capital markets businesses, which should enhance our already strong annualized growth trajectories. Slide seven highlights a few of our many post-conversion revenue opportunities and expected cost synergies with Union Bank. Early indications of the potential to deepen relationships with legacy Union Bank loyal, affluent, and diversified client base are promising, and we continue to be on track to realize approximately $900 million in cost synergies, which we expect to be fully reflected in our run rate as we head into the year 2024. Let me now turn the call over to John, who will provide more details on the balance sheet and results for the quarter.