U.S. Bancorp

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 earnings presentation, our press release, and in reports on file with the SEC. Following our prepared remarks, Gunjan and John will take any questions that you have. I will now turn the call over to Gunjan.

Thank you, George, and good morning, everyone. If I could please turn your attention to slide three. In the second quarter, we reported earnings per share of $1.11 on net income of $1.8 billion. Core growth across our diversified fee income businesses and continued expense discipline more than offset a lighter spread of income. We delivered strong year-over-year EPS growth as adjusted of approximately 13%. Total fee revenue growth of 4.6% year-over-year reflected broad-based strength across our businesses and ongoing focus on execution and organic growth. John will discuss how we are navigating the current higher for longer interest rate environment and taking action to strategically position our balance sheet for near-term margin expansion. Notably, on an adjusted basis, we delivered 250 basis points of year-over-year positive operating leverage, the fourth consecutive quarter of revenue growth outpacing expense growth. We generated an 18% return on tangible common equity, a return on average assets of 1.08%, and improved to a high 50s efficiency ratio. Asset quality trends and credit metrics remain stable, and capital levels came in well above regulatory capital minimums. Turning to slide four, we provide a high-level view of U.S. Bancorp today. A few things to highlight for this quarter. Free income now represents approximately 42% of total net revenue. We saw good sequential growth in total purchase volumes within payment services, and a Fortune 500 ranking improved from a year ago. Slide 5 provides an update on expense stabilization. This is one of our three major priorities. On the left, you will see that we have successfully delivered now seven consecutive quarters of stable expenses on an adjusted basis. We are driving meaningful productivity while also self-funding our investments in the franchise. For example, increases in payments and technology expenses were offset by reductions in personnel and occupancy costs. On the right, we have highlighted a few of the digital investments we have made over the last five years to create modern, secure, and scalable platforms. We are now harvesting these investments to drive long-term productivity and sustainable positive operating leverage. Slide six, profiles of businesses and the strategies we are deploying to drive organic growth, our second major priority. The businesses highlighted in light blue represent areas where we are pursuing new strategies or transformative approaches. In our capital markets business, we are focused on introducing new product capabilities that leverage our existing balance sheet, such as ABS bonds, commodity hedging, and repo. The structured lending capabilities we are building are also delivering attractive growth in our CNI loans. In our payments business, which is our third key priority, consumer spend remains resilient, especially in the non-discretionary spend where we are slightly overweight. Corporate and government spend was muted this quarter, reflecting questions around economic uncertainty. Merchant payment services revenue, which is less than 7% of total firm-wide revenue, grew 4.4% year over year. supported by our tech-led strategy and strong focus on five strategic verticals. The businesses highlighted in dark blue are areas where we expect continued growth through a sharper and more urgent execution focus. Finally, the mortgage, auto, and commercial real estate business portfolios highlighted on the slide in gray are core to our long-term growth strategies, and are well positioned to grow when macro pressures ease. On slide 7, we provide a snapshot of how our fee mix has evolved over the last 10 years in a positive way. While fee revenue as a percentage of total revenue was slightly higher a decade ago at about 45%, our revenue was skewed towards consumer fees. which have elevated exposure to market volatility and regulatory pressure. These dynamics contributed to fee income as a percentage of total revenue falling to 38% in 2023. We have been quite intentional in our strategy to invest in growing our trust and investment, wealth and capital market advisory services. And today, Institutional wealth and payments businesses collectively represent more than 75% of fee revenue. These are stable and profitable fees with underlying positive macro growth drivers, which support our sustainable revenue growth objectives. Turning to slide eight, We are approaching the evolution of a balance sheet in an equally deliberate manner. At quarter end, CNI and credit card portfolios represented 47% of the balance sheet. This is up from 43% at the end of 2023. This quarter, these average loans grew 6.6% year over year, vastly outpacing total loan growth. These portfolios also support a higher percentage of multi-service clients at 51%, and we are prioritizing growth in these segments. To further optimize our balance sheet, we divested approximately $6 billion in mortgage and auto loans this quarter, taking advantage of a favorable rate environment for these asset sales to strategically reposition the balance sheet, both for stronger growth and in support of deeper client relationships. Let me now turn the call over to John, who will provide more details on the quarter and forward-looking guidance.

Thanks, Gunjan. Good morning, everyone. This is a good quarter for us as we made meaningful progress towards achieving our medium-term financial targets and work to position ourselves for future growth. If you turn to slide 9, I'll start with some highlights followed by a discussion of second quarter earnings trends. We reported earnings per share of $1.11 and generated $7 billion of net revenue on flat expenses. Ending assets of $686 billion were impacted by seasonally elevated quarter end deposit flows. Credit quality metrics remain stable. A modest reserve release of $53 million this quarter was largely reflective of favorable loan portfolio sales we executed to reposition the balance sheet. As of June 30th, our CET1 capital level was 10.7%. Slide 10 provides key performance metrics. As the slide shows, we are making steady progress on our medium-term profitability and efficiency targets. One quarter, we delivered an improved return on average assets of 1.08%, and saw our efficiency ratio fall to 59.2%. While net interest margin declined six basis points sequentially, approximately half of the decline was temporary in nature and will not carry into the third quarter. This decline was driven by strategic loan portfolio sales as well as high residential mortgage paydown activity in April. The remaining impact was was driven by elevated deposit pricing pressures and rotation into higher-rate products. Importantly, we remain focused on action and initiatives to strengthen net interest income, and those efforts are fully reflected in our guidance. Slide 11 provides a balance sheet summary. Total average deposits decreased 0.7% link quarter to $503 billion, in line with seasonal tax payment outflows and our emphasis on relationship-based deposits. Balance sheet management supported a funding mix that prioritized both non-interest-bearing and low-cost consumer deposits. Average consumer deposit balances increased $2.4 billion, or 1.1% linked quarter, while the percentage of non-interest-bearing to total deposits remained stable at approximately 16%, and the deposit beta was 42%. Average loans totaled $379 billion, a decrease of 0.1% on a linked quarter basis. Balances were impacted by the sale of approximately $4.5 billion of residential mortgages and approximately $1 billion of auto loans. Excluding these sales, average loan growth was approximately 0.4% sequentially and 1.6% year-over-year. Notably, we strategically grew our C&I and credit card average loan portfolios 7.1% and 4.4% respectively on a year-over-year basis. At June 30th, the ending balance on our investment securities portfolio was $174 billion, an increase of $3 billion from the prior quarter end. Fixed asset repricing and reinvestment of proceeds from our residential mortgage sale into investment securities resulted in an eight basis point increase, to the average investment portfolio yield. Consistent with efforts to reposition the balance sheet, we opportunistically restructured approximately $1.25 billion of investment securities this quarter, resulting in a $57 million loss. The payback period on this transaction was less than two years and enhanced our net interest income trajectory. Turning to slide 12, net interest income on a fully taxable equivalent basis totaled $4.08 billion. Linked quarter, the competitive deposit environment more than offset the benefits of fixed asset repricing. Slide 13 highlights trends in non-interest income. Total non-interest income totaled $2.9 billion, reflecting security losses of $57 million from the repositioning of the securities portfolio. Excluding security losses, total fee revenue of approximately $3 billion increased by 4.6% year-over-year. This was driven by core growth and new business momentum across payments, trust and investment management, and other fee revenue. Turning to slide 14, non-interest expense was $4.18 billion, as we prudently managed expenses and further captured operational efficiencies across the business. Slide 15 highlights our credit quality performance. The ratio of non-performing assets to loans and other real estate was 0.44% at June 30th, an improvement of one basis point, linked quarter, and five basis points better than a year ago. The second quarter net charge-off ratio of 0.59% and allowance for credit losses of $7.9 billion, or 2.07% of period end loans, remained stable sequentially. Turning to slide 16. As of June 30th, our CET1 capital ratio was 10.7%, a two basis point decline length quarter. Given strong capital levels and earnings accretion, we elected not to replenish a maturing credit risk transfer, keeping our CET1 capital ratio flat sequentially. Results of this year's stress test, which revised our preliminary stress capital buffer to 2.6%, further demonstrated the company's ability to withstand a severe economic downturn, which is a testament to the strength, quality, and diversity of our balance sheet and prudent approach to risk management. Importantly, our CET1 capital ratio, including AOCI, improved to 8.9%. At the top of slide 17, we show a comparison of second quarter results to our earlier guidance. As expected, slightly lower net interest income was more than offset by better than expected fee income of approximately $3 billion and prudent expense management. I'll now provide forward-looking guidance for the third quarter and full year 2025. Starting with the third quarter 2025 guidance, we expect net interest income for the third quarter on a fully taxable equivalent basis to be in the range of $4.1 to $4.2 billion. Total fee revenue is expected to be approximately $3 billion. This compares to the second quarter total fee revenue of $2.98 billion. Total non-interest expense is expected to be $4.2 billion or lower in the third quarter. We expect to deliver positive operating leverage of 200 basis points or more on an adjusted basis. I'll now provide full-year 2025 guidance, which is consistent with our previous guidance. Compared to full-year 2024, we expect total net revenue growth on an adjusted basis at the lower end of our 3% to 5% range. Our guidance assumes two rate cuts in 2025. For the full year, we expect to deliver positive operating leverage of 200 basis points or more on an adjusted basis. Turning to slide 18, we continue to make measurable progress toward achieving our medium-term targets. As you can see on this slide, year over year, we have improved both our return on average assets and efficiency ratio while delivering high teens return on tangible common equity and mid-single-digit fee growth. Let me now hand it back to Gunjan for closing remarks.